-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IhOaDRpLyi5fpq6LR/Ft5P/QmdU9ad7sJbwhA3iMiC+eU7Ezpny0lv2kzDP3yJfz ETHqkURmIzHryOnTwfYgog== 0000950135-05-003246.txt : 20050611 0000950135-05-003246.hdr.sgml : 20050611 20050610171122 ACCESSION NUMBER: 0000950135-05-003246 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050610 DATE AS OF CHANGE: 20050610 EFFECTIVENESS DATE: 20050610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS FUNDS TRUST CENTRAL INDEX KEY: 0001097519 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-09645 FILM NUMBER: 05890651 BUSINESS ADDRESS: STREET 1: ONE BANK OF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003217854 MAIL ADDRESS: STREET 1: ONE BANKOF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 N-CSR 1 b55414nfnvcsr.txt NATIONS FUNDS TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-09645 Nations Funds Trust -------------------------------------------------- (Exact name of registrant as specified in charter) One Bank of America Plaza, NC1-002-12-01, Charlotte NC 28255 ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Corporation Trust Company Corporation Trust Center 1209 Orange Street Wilmington, DE 19801 --------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-704-388-9174 Date of fiscal year end: 03/31/05 Date of reporting period: 03/31/05 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [BACKGROUND IMAGE] Nations Short-Term Municipal Income Fund Nations Intermediate Municipal Bond Fund Nations Municipal Income Fund Nations CA Intermediate Municipal Bond Fund Nations CA Municipal Bond Fund Nations FL Intermediate Municipal Bond Fund Nations FL Municipal Bond Fund Nations GA Intermediate Municipal Bond Fund Nations KS Municipal MUNICIPAL BOND FUNDS Income Fund Nations MD Intermediate Annual report for the year ended Municipal Bond Fund March 31, 2005 Nations NC Intermediate Municipal Bond Fund Nations SC Intermediate Municipal Bond Fund Nations TN Intermediate Municipal Bond Fund Nations TX Intermediate Municipal Bond Fund Nations VA Intermediate Municipal Bond Fund [NATIONS FUNDS LOGO] A description of the policies and procedures that the funds use to determine how to vote proxies and a copy of the funds' voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website atwww.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment advisor to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [CHRISTOPHER WILSON PHOTO] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to help maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have also reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the better has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS DISCLOSURE OF FUND EXPENSES AND PORTFOLIO HOLDINGS Nations Short-Term Municipal Income Fund 3 Nations Intermediate Municipal Bond Fund 9 Nations Municipal Income Fund 15 Nations CA Intermediate Municipal Bond Fund 21 Nations CA Municipal Bond Fund 28 Nations FL Intermediate Municipal Bond Fund 35 Nations FL Municipal Bond Fund 42 Nations GA Intermediate Municipal Bond Fund 49 Nations KS Municipal Income Fund 56 Nations MD Intermediate Municipal Bond Fund 63 Nations NC Intermediate Municipal Bond Fund 70 Nations SC Intermediate Municipal Bond Fund 77 Nations TN Intermediate Municipal Bond Fund 84 Nations TX Intermediate Municipal Bond Fund 91 Nations VA Intermediate Municipal Bond Fund 98 FINANCIAL STATEMENTS Investment portfolios 105 Statements of assets and liabilities 190 Statements of operations 194 Statements of changes in net assets 198 Schedules of capital stock activity 204 Financial highlights 220 Notes to financial statements 250 Report of independent registered public accounting firm 262 Tax information 263 Fund governance 264 Board consideration and re-approval of investment advisory agreement 267 Shareholder meeting results 271
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. NATIONS SHORT-TERM MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS SHORT-TERM MUNICIPAL INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income tax consistent with minimal fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Short-Term Municipal Income Fund Investor A Shares provided shareholders with a total return of 0.07%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, which add yield potential. By maintaining a well-diversified portfolio, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies that include duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit review. We also seek to limit the distribution of capital gains when appropriate. As a short-term portfolio, the fund seeks to maintain an average dollar-weighted maturity shorter than three years. HOW DID THE FUND PERFORM FOR THE PERIOD?*** With a total return of 0.07%, Nations Short-Term Municipal Income Fund (Investor A Shares) performed in line with its primary benchmark index, the Lehman Brothers 3-Year Municipal Bond Index, which returned 0.09% for the 12-month period ended March 31, 2005. The fund underperformed the 0.27% return of its secondary benchmark, the Blended 50% Lehman Brothers 1-Year Municipal Bond Index/50% Lehman Brothers 3-Year Municipal Bond Index. The *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 1.00%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers 3-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of greater than 2 years and less than 4 years. The Lehman Brothers 1-Year Municipal Bond Index is an unmanaged index of tax-free bonds with maturities between 1 and 2 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds included in the Lipper Short Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of less than three years. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 NATIONS SHORT-TERM MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY (continued) fund also underperformed the average return of its peer group, the Lipper Short Municipal Debt Funds Category, which was 0.33%. The fund's duration was longer than that of its benchmark, and, we believe, longer than its peer group, which expanded with the introduction of ultra-short maturity funds during the period. Since the fund's duration was longer than that of its benchmark and peers, the fund was more sensitive to changes in interest rates. And because interest rates within the maturity range of the fund rose, the fund's longer duration detracted from performance. The fund benefited from an increased weight in industrial development revenue bonds. These economically sensitive issues gained value when the yield spread between them and AAA-rated municipal bonds narrowed during the period. HOW DID ECONOMIC AND MARKET FACTORS AFFECT FUND PERFORMANCE? Since the first quarter of 2004, rising short-term interest rates have had the greatest impact on the fund's total return. The Federal Reserve (the Fed) raised the target fed funds rate from a historically low 1.0% on June 30, 2004 to 2.75% at the period's end. In response to higher interest rates, we shortened the duration of the fund so that it was shorter than that of its benchmark index. However, it remained longer than the duration of the ultra-short maturity funds included in our peer group. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? Based on our projections for moderate economic growth and relatively low inflation, we believe the Fed will continue to raise short-term interest rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. If US state and local budgets improve because of continued economic growth, new municipal bond issuance could decline in 2005. Higher interest rates would also slow refunding issues, which could further reduce outstanding municipal bond supply. We believe that these two factors, along with the fund's relatively short duration, could help cushion the impact of price erosion going forward. We have maintained the fund's position in higher yielding bonds and have raised the fund's cash and cash equivalent positions to 29% of assets. We believe this higher cash position could provide us with the flexibility to capture higher yields on future purchases for the fund. --------------------------------------------------- John Trentacoste has managed Nations Short-Term Municipal Income Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 4 NATIONS SHORT-TERM MUNICIPAL INCOME FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,000.50 1,022.94 2.00 2.02 0.40 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 999.30 1,021.69 3.24 3.28 0.65 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 995.56 1,017.95 6.97 7.04 1.40 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 995.56 1,017.95 6.97 7.04 1.40
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 5 NATIONS SHORT-TERM MUNICIPAL INCOME FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 6 NATIONS SHORT-TERM MUNICIPAL INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.3% Other revenue 2.3% Housing 2.6% Resource recovery 4.4% Health care 6.1% Industrials 7.3% Education 12.4% Transportation 21.1% Utilities 39.3% Tax-backed 4.2% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 IL Development Finance Authority, Pollution Control Revenue Refunding Commonwealth Edison Company, Series 1996 Insured: AMBAC 4.400% 12/01/06 1.5% ------------------------------------------------- 2 CO Public Highway Authority Highway Revenue Series 1997 B Insured: MBIA 09/01/07 1.4% ------------------------------------------------- 3 NM Farmington New Mexico Pollution Control Revenue Public Service Refunding San Juan Project 2003 B, 2.100% 04/01/33 1.3% ------------------------------------------------- 4 TN Memphis Tennessee Electric System Revenue Subordinated Series 2003 A Insured: MBIA 5.000% 12/01/09 1.1% ------------------------------------------------- 5 OH State Higher Educational Capital Facilities Revenue, Series 2002A-II 5.000% 12/01/07 1.1% ------------------------------------------------- 6 ID Housing and Finance Association Single Family Mortgage Project, Series 2002 B-1 Bayerische Landesbank, Girozentrale, 2.320% 07/01/33 1.1% ------------------------------------------------- 7 HI State Airports System Revenue AMT Insured: FGIC 5.000% 07/01/08 1.1% ------------------------------------------------- 8 AK North Slope Borough, Alaska, GO, Series 1996: Insured: MBIA Zero Coupon 06/30/07 1.0% ------------------------------------------------- 9 GA Burke County Georgia Development Authority Pollution Control Revenue Oglethorpe Power Corp., Series 1993 A Insured: FGIC 2.270% 01/01/16 1.0% ------------------------------------------------- 10 KS Burlington Kansas Environmental Improvement Revenue Refunding Power and Light Project, Series 1998 C Mandatory Put 10/1/2007 @100 4.750% 09/01/15 1.0% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
7 NATIONS SHORT-TERM MUNICIPAL INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
BLENDED 50% LEHMAN BROTHERS 1-YEAR MUNICIPAL BOND INDEX/50% LEHMAN NATIONS SHORT-TERM LEHMAN BROTHERS 3-YEAR BROTHERS 3-YEAR MUNICIPAL MUNICIPAL INCOME FUND MUNICIPAL BOND INDEX BOND INDEX --------------------- ---------------------- ------------------------- Mar. 31 1995 $ 9,900 $ 10,000 $ 10,000 1996 10,445 10,649 10,597 10,859 11,105 11,054 1998 11,415 11,787 11,668 11,929 12,409 12,244 2000 12,209 12,641 12,545 12,983 13,643 13,439 2002 13,408 14,242 14,014 14,078 15,251 14,785 2004 14,372 15,672 15,125 Mar. 31 2005 14,381 15,687 15,166
[INVESTOR A SHARES AT NAV** (AS IF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
BLENDED 50% LEHMAN BROTHERS 1-YEAR MUNICIPAL BOND INDEX/50% LEHMAN NATIONS SHORT-TERM LEHMAN BROTHERS 3-YEAR BROTHERS 3-YEAR MUNICIPAL MUNICIPAL INCOME FUND MUNICIPAL BOND INDEX BOND INDEX --------------------- ---------------------- ------------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,551 10,649 10,597 10,969 11,105 11,054 1998 11,530 11,787 11,668 12,049 12,409 12,244 2000 12,332 12,641 12,545 13,114 13,643 13,439 2002 13,543 14,242 14,014 14,220 15,251 14,785 2004 14,518 15,672 15,125 Mar. 31 2005 14,527 15,687 15,166
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 3.80% 3.70%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Short-Term Municipal Income Fund over the last 10 years. The Lehman Brothers 3-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of greater than 2 years and less than 4 years. The Lehman Brothers 1-Year Municipal Bond Index is an unmanaged index of tax-free bonds with maturities between 1 and 2 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** NAV** CDSC*** Inception date 10/7/93 11/2/93 10/12/93 5/19/94 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.31% 0.07% -0.98% -0.68% -0.68% -1.66% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 2.62% 2.36% 2.03% 1.60% 1.60% 1.60% 5 YEARS 3.59% 3.33% 3.12% 2.56% 2.55% 2.55% 10 YEARS 4.04% 3.80% 3.70% 3.32% 3.27% 3.27% SINCE INCEPTION 3.91% 3.70% 3.61% 3.23% 3.36% 3.36%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 1.00%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 8 NATIONS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HER VIEWS ON NATIONS INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HER OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income tax consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.72%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, which add yield potential. By maintaining a well-diversified portfolio, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity of between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** During the 12-month period ending March 31, 2005, Nations Intermediate Municipal Bond Fund (Investor A Shares) returned 0.72%. Its benchmark, the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Bond Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years. Source for all statistical data -- Banc of America Capital Management, LLC. ON MARCH 21, 2005, THE BOARD OF TRUSTEES APPROVED A PROPOSAL TO REORGANIZE THE NATIONS INTERMEDIATE MUNICIPAL BOND FUND INTO THE COLUMBIA INTERMEDIATE TAX-EXEMPT FUND, SUBJECT TO SHAREHOLDER APPROVAL AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. IF APPROVED, THE EFFECTIVE DATE OF THE REORGANIZATION IS EXPECTED TO OCCUR IN SEPTEMBER OR OCTOBER 2005 OR ON SUCH A DATE TO WHICH PARTIES MAY AGREE. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 9 NATIONS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Lehman Brothers Quality Intermediate Municipal Bond Index, posted a return of 0.81% for the same period. The average return of its peer group, the Lipper Intermediate Municipal Debt Funds Category, was 0.60%. We reduced the number of high quality securities with a maturity of five years during this period. Fund performance benefited from the reduced exposure, since these bonds were poor performers. Although the fund had an overweight position in AAA-rated long-term securities (20-year maturities), weak performance from these bonds did not hinder performance as much as the short-term bonds. The fund was overweight in BBB-rated securities, which had a positive impact on performance. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED FUND PERFORMANCE? As a result of an improving economy and a rise in government tax revenues, many municipalities significantly reduced the amount of money borrowed for the long term. The number of long-term municipals issued in 2004 decreased by 6%. That decline, coupled with an already tight supply of long-term bonds, added pressure to long-term bond prices. Long-term municipals outperformed short-term municipals during the period. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? The US economy grew at an annualized rate of approximately 3.9% in 2004. For the first quarter of 2005, the annualized rate was approximately 3.1%. The unemployment rate declined to 5.2% by March 31, 2005. At the beginning of this 12-month reporting period the rate was 5.7%. Interest rates began to rise. The federal funds rate -- a key interest rate of the Federal Reserve -- rose 1.75 percentage points during this reporting period from 1.0% in April 2004 to 2.75% by the period end. Future rate increases may depend on the following: oil prices, inflation and future job growth. With a general rise in revenues from state and local taxes, fewer municipalities will need to issue long-term bonds. This may mean that fewer attractive securities will be available for investment. In light of this anticipated decline, we are focusing on non-callable long-term securities to maintain a defensive position within the fund. --------------------------------------------------- Wendy Norman has managed Nations Intermediate Municipal Bond Fund since December 15, 2004. Ms. Norman is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 10 NATIONS INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE END EXPENSES PAID DURING FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) OF THE PERIOD ($) THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,001.25 1,022.44 2.49 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 999.05 1,021.19 3.74 3.78 0.75 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 995.31 1,017.45 7.46 7.54 1.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 995.31 1,017.45 7.46 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 11 NATIONS INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 12 NATIONS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.3% Other revenue 1.4% Industrials 1.6% Resource recovery 3.4% Education 5.3% Housing 6.1% Short-term investment 7.7% Health care 10.1% Transportation 11.3% Utilities 39.4% Tax-backed 13.4% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 NY City Municipal Water Finance Authority Water and Sewer System Revenue, Series 1996B, Escrowed to Maturity, Insured: MBIA, 5.750% 06/15/26 1.2% ------------------------------------------------- 2 GA Atlanta Water and Wastewater Revenue, Series 199A, Insured FGIC, 5.500% 11/01/18 1.0% ------------------------------------------------- 3 PA Delaware Valley Regional Financing Authority Local Government Revenue, Series 2002, 5.500% 07/01/12 1.0% ------------------------------------------------- 4 NJ State Transportation Trust Fund Authority Revenue, Series C, Insured: FGIC, 5.250% 06/15/12 1.0% ------------------------------------------------- 5 CA San Francisco, GO, Refunding, Series 2002, 5.000% 06/15/11 1.0% ------------------------------------------------- 6 HI State, GO, Series 2001CV, Insured: FGIC, 5.500% 08/01/09 0.9% ------------------------------------------------- 7 AR State Federal Highway Grant Anticipation, GO, Series 2001A, 5.250% 08/01/09 0.9% ------------------------------------------------- 8 MD State Transportation Department Revenue, Series 2002, 5.500% 02/01/10 0.7% ------------------------------------------------- 9 AK State Housing Finance Corporation Revenue, GO of Corporation, Series 1997A Insured: MBIA, 6.000% 06/01/27 0.7% ------------------------------------------------- 10 CO Denver City and County Airport Revenue, Refunding: Series 1995C, Insured: MBIA, 6.500% 11/15/12 0.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
13 NATIONS INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
LEHMAN BROTHERS QUALITY NATIONS INTERMEDIATE MUNICIPAL INTERMEDIATE MUNICIPAL BOND FUND BOND INDEX ------------------------------ ---------------------------- Mar. 31 1995 $ 9,675 $ 10,000 1996 10,393 10,786 10,852 11,274 1998 10,722 12,225 12,322 12,935 2000 12,261 13,065 13,308 14,327 2002 13,696 14,868 14,801 16,281 2004 15,440 17,065 Mar. 31 2005 15,548 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
LEHMAN BROTHERS QUALITY NATIONS INTERMEDIATE MUNICIPAL INTERMEDIATE MUNICIPAL BOND FUND BOND INDEX ------------------------------ ---------------------------- Mar. 31 1995 $ 10,000 $ 10,000 1996 10,742 10,786 11,217 11,274 1998 12,115 12,225 12,736 12,935 2000 12,673 13,065 13,755 14,327 2002 14,156 14,868 15,298 16,281 2004 15,959 17,065 Mar. 31 2005 16,073 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.86% 4.51%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers Quality Intermediate Municipal Bond Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. It is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 7/30/93 8/17/93 12/2/93 11/3/94 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.07% 0.72% -2.56% -0.03% -2.94% -0.03% -1.00% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.62% 4.33% 3.17% 3.55% 3.24% 3.54% 3.54% 5 YEARS 5.15% 4.87% 4.18% 4.09% 4.09% 4.08% 4.08% 10 YEARS 5.10% 4.86% 4.51% 4.22% 4.22% 4.25% 4.25% SINCE INCEPTION 4.85% 4.53% 4.23% 3.91% 3.91% 4.72% 4.72%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 14 NATIONS MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MUNICIPAL INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income tax consistent with the potential for principal fluctuation associated with investments in long-term municipal securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Municipal Income Fund Investor A Shares provided shareholders with a total return of 1.57%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, for their additional yield potential. By maintaining a well-diversified portfolio, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rate), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As a long-term portfolio, the fund normally seeks to maintain an average dollar-weighted maturity greater than seven years. HOW DID THE FUND PERFORM FOR THE PERIOD?*** With a total return of 1.57%, Nations Municipal Income Fund (Investor A Shares) underperformed its benchmark index, the Lehman Brothers Municipal Bond Index, which returned 2.67% for the 12-month period ended March 31, 2005. The fund also trailed the average return of its peer group, the Lipper General Municipal Debt Funds Category, which was 2.03%. Two factors accounted for the fund's underperformance relative to its benchmark. It held a position in a distressed junior college project. The fund took a loss and sold the position. In addition, we kept the fund's duration shorter than its benchmark throughout most of the period because we expected interest rates to rise. (Duration is a measure of the fund's sensitivity to changing interest rates.) That hurt the fund *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Municipal Bond Index is an unmanaged index of 8,000 investment grade bonds with long-term maturities. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper General Municipal Debt Funds Category invest in municipal debt issues with the top four credit ratings. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 15 NATIONS MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY (continued) when all but the shortest interest rates declined earlier in the period. In 2005, we added some longer-term bonds to the portfolio, but this also hurt performance, because interest rates reversed course and rose sharply in the middle of the first quarter. The fund benefited from an overweight in the hospital and general obligation sectors. The tobacco and resource recovery sectors also made positive contributions to performance. However, these sectors represented a relatively small portion of the fund's assets. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED FUND PERFORMANCE? The recent up tick in economic activity has led to a rise in short term interest rates as the Federal Reserve attempts to tighten the supply of money by raising the Fed Funds target rate (the rate at which banks can borrow money overnight) from a historically low 1% on June 30th, 2004 to 2.75% at the end of the first quarter of 2005. This action, coupled with a rally in long-term rates driven mainly by the market's expectation of relativity tame inflation going forward, has led to a dramatic flattening of the yield curve. The positioning of the fund was largely focused on somewhat short to intermediate term securities which under performed longer term securities dramatically during the period. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? If US state and local budgets improve because of economic growth, new municipal bond issuance could decline in 2005. Higher interest rates could also slow refunding issues and further reduce outstanding municipal bond supply. Based on our projections for moderate economic growth and relatively low inflation, we believe the Fed will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. In this environment, we plan to keep the fund's duration in line with its benchmark and to maintain or increase the fund's exposure to higher-yielding securities. --------------------------------------------------- Chris Eckstrom has managed Nations Municipal Income Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 16 NATIONS MUNICIPAL INCOME FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,007.68 1,021.94 3.00 3.02 0.60 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,006.43 1,020.69 4.25 4.28 0.85 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,002.69 1,016.95 7.99 8.05 1.60 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,001.80 1,016.95 7.99 8.05 1.60
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 17 NATIONS MUNICIPAL INCOME FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 18 NATIONS MUNICIPAL INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.4% Resource recovery 2.9% Housing 5.3% Education 5.8% Industrials 9.0% Transportation 13.9% Utilities 14.5% Health care 34.7% Tax-backed 13.5% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 WA GO, Series 1990A, 6.750% 02/01/15 2.6% ------------------------------------------------- 2 AK North Slope Borough Capital Appreciation, GO, Series 2000B, Insured: MBIA Zero Coupon 06/30/11 2.0% ------------------------------------------------- 3 WA GO, Series 2000A, 5.625% 07/01/21 1.8% ------------------------------------------------- 4 WY Student Loan Corporation Revenue, Refunding, Series 1999A, 6.250% 06/01/29 1.8% ------------------------------------------------- 5 DC Hospital Revenue Mediantic Healthcare Group, Refunding, Series A, Pre-refunded 08/15/07, Insured: MBIA 5.375% 08/15/15 1.6% ------------------------------------------------- 6 SC Western Carolina Regional Sewer Authority, Insured: FSA 5.250% 03/01/18 1.5% ------------------------------------------------- 7 IL Metropolitan Pier and Exposition Authority, Dedicated State Tax Revenue Unrefunded Balance, Series 1993A Insured FGIC Zero Coupon 06/15/13 1.4% ------------------------------------------------- 8 IL Chicago O'Hare International Airport Revenue Second Lien, Refunding, Series 1999, AMT Insured: AMBAC 5.500% 01/01/10 1.3% ------------------------------------------------- 9 AL Phoenix County, Industrial Development Board, Environmental Import Revenue Refunding, Mead Coated Board Project, Series 1998B, 5.250% 04/01/28 1.1% ------------------------------------------------- 10 MI University of Michigan, Hospital Revenue Refunding, Series 2002, 5.250% 12/01/20 1.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
19 NATIONS MUNICIPAL INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS MUNICIPAL BOND NATIONS MUNICIPAL INCOME FUND INDEX ----------------------------- ------------------------------ Mar. 31 1995 9525 10000 1996 10354 10838 10956 11429 1998 12152 12654 12785 13438 2000 12493 13428 13686 14894 2002 13953 15461 14906 16990 2004 15693 17986 Mar. 31 2005 15945 18465
ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS. [INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MUNICIPAL INCOME FUND LEHMAN MUNICIPAL BOND INDEX ----------------------------- --------------------------- Mar. 31 1995 10000 10000 1996 10870 10838 11503 11429 1998 12758 12654 13422 13438 2000 13116 13428 14369 14894 2002 14649 15461 15650 16990 2004 16476 17986 Mar. 31 2005 16734 18465
ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS. AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.28% 4.78%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Municipal Income Fund over the last 10 years. The Lehman Brothers Municipal Bond Index is an unmanaged index of 8,000 investment grade bonds with long-term maturities. It is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 2/1/91 2/1/91 6/7/93 6/17/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.82% 1.57% -3.28% 0.81% -4.05% 0.82% -0.16% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.80% 4.54% 2.86% 3.76% 2.82% 3.73% 3.73% 5 YEARS 5.25% 4.99% 3.98% 4.21% 3.87% 4.21% 4.21% 10 YEARS 5.52% 5.28% 4.78% 4.57% 4.57% 4.62% 4.62% SINCE INCEPTION 6.16% 5.96% 5.59% 4.28% 4.28% 4.87% 4.87%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. * Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. ** Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. *** Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 20 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HER VIEWS ON NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HER OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and California state individual income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations California Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.34%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues which add yield potential. By maintaining a well-diversified portfolio generally within the universe of California municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity of three to ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** During the 12-month period ended March 31, 2005, Nations California Intermediate Municipal Bond Fund (Investor A shares) returned 0.34%. Fund performance trailed both its benchmark and peer group. The fund's benchmark, the Lehman Brothers Quality Intermediate Municipal Bond Index, returned 0.81% for the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper California Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation in California. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 21 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) period. The average return for its peer group, the Lipper California Intermediate Municipal Debt Funds Category, was 0.83%. At the beginning of the period, the fund's duration was significantly shorter than its peer group. Expressed in years, duration is a measure of the portfolio's sensitivity to changes in interest rates. Having a short duration hurt the fund's overall performance, as the better-performing securities during this reporting period were those with long-term maturities. During the past 12 months, we increased duration by selling securities with short-term maturities (5 years) and purchasing bonds with maturities ranging from 10 to 20 years. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS IN CALIFORNIA? California's economy continued its recovery from the severe economic conditions of the past four fiscal years. From 2001 to 2003, California lost approximately 200,000 jobs. Although employment losses cut across all industries, job loss was particularly acute in northern California where the high tech industry is concentrated. Also, during this time, California experienced a 17% decline in total tax revenue. To offset the lost revenue, the state turned, in large part, to non-recurring or one-time measures to achieve a balanced budget. The largest single measure was the issuing of $15.0 billion of Economic Recovery Bonds. Without these bonds, the state would not have been able to meet its obligations. It was this looming liquidity crisis that prompted the rating agencies to lower California's rating to the BBB level. With the liquidity crisis averted and a budding economic recovery fueling revenue growth, the state's credit ratings have all been raised back into the A category. California has approximately $52.7 billion of outstanding tax-supported debt, including general obligations bonds ($45 billion) and General Fund lease-backed debt ($7 billion). For fiscal 2004 the state ended the year with a $3.0 billion surplus reflecting the issuance of $11.2 billion of deficit bonds during the year. This surplus, combined with modest spending restraint and improving revenue performance, should allow the state to end the current year with a surplus of approximately $1.5 billion. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? We are maintaining our focus on seeking high quality securities with good yield potential. California's economy is enjoying healthy growth, and the state's progressive tax system is producing substantial additional resources, which are necessary to help stabilize the state's financial position. However, state policymakers still face sizeable gaps between ongoing revenues and expenditures that may worsen in coming years as temporary measures enacted previously are scheduled to expire. Also, the state's long history of constitutional initiatives and the two-thirds majority requirement for budget passage are likely to hamstring lawmakers as they try to close persistent financial imbalances. Despite the 2004 budget gap and eventual need to issue debt to cover the shortfall, debt levels in the state remain in the moderate range. Even though California, like the rest of the nation, is seeing slow and gradual growth, positive economic indicators within the state indicate the potential for increased tax revenues. The state's high tech industry is enjoying a turn-around. A declining US dollar may help those industries, such as entertainment, keep more jobs in the state rather than 22 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) outsourcing overseas. Tourism is also benefiting from a weak dollar. We believe that a boost in manufacturing will continue to stimulate international trade, which has become a major source of economic activity. --------------------------------------------------- Wendy Norman has managed Nations California Intermediate Municipal Bond Fund since December 15, 2004. Ms. Norman is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 23 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 998.80 1,022.44 2.49 2.52 0.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 997.56 1,021.19 3.74 3.78 0.75 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 993.87 1,017.45 7.46 7.54 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 993.87 1,017.45 7.46 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 24 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 25 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.9% Resource recovery 1.8% Transportation 2.6% Education 3.3% Housing 4.1% Short-term investment 7.3% Health care 18.5% Utilities 54.7% Tax-backed 6.8% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 CA Inland Empire Solid Waste Authority Revenue Landfill Improvement Financing Project, Series 1996B, AMT, Insured: FSA Prerefunded 08/01/11 6.250% 08/01/11 4.4% ------------------------------------------------- 2 CA Statewide Communities Development Authority Revenue Series E Kaiser Permanente 3.875% 04/01/32 4.0% ------------------------------------------------- 3 CA Oakland Redevelopment Agency Tax Allocation Refunding Center District Redevelopment Project Series 1992, Insured: AMBAC 5.500% 02/01/14 3.2% ------------------------------------------------- 4 CA Los Angeles, California, Unified School District, GO, Series 2000D 5.500% 07/01/09 3.1% ------------------------------------------------- 5 CA San Francisco California Bay Area Rapid Transportation District Sales Tax Revenue Series 1998 5.500% 07/01/09 3.0% ------------------------------------------------- 6 CA Southern California Public Power Authority Power Project Revenue Series 1989, 6.750% 07/01/13 2.8% ------------------------------------------------- 7 CA Santa Margarita/Dana Point Authority Revenue Series 1997A Insured: AMBAC 5,500% 08/01/11 2.8% ------------------------------------------------- 8 CA Oakland California J.T. Powers Financing Authority Lease Revenue Refunding Oakland Convention Centers Series 2001 Insured: AMBAC 5.500% 10/01/11 2.7% ------------------------------------------------- 9 CA Kings River Conservative District Revenue Certificates Participation Peaking Project Series 2004 5.000% 05/01/14 2.7% ------------------------------------------------- 10 CA Metropolitan Water District of Southern California Waterworks Revenue 5.000% 07/01/14 2.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
26 NATIONS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS CALIFORNIA INTERMEDIATE LEHMAN BROTHERS QUALITY MUNICIPAL BOND FUND INTERMEDIATE MUNICIPAL INDEX ------------------------------- ---------------------------- Sep. 9 2002 $ 9,675 $ 10,000 9,768 10,000 9,772 10,026 9,811 10,137 10,007 10,367 10,017 10,419 2003 10,078 10,491 10,176 10,626 9,930 10,403 10,235 10,736 2004 10,312 10,808 Mar. 31 2005 10,213 10,712
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS CALIFORNIA INTERMEDIATE LEHMAN BROTHERS QUALITY MUNICIPAL BOND FUND INTERMEDIATE MUNICIPAL INDEX ------------------------------- ---------------------------- Sep. 9 2002 $ 10,000 $ 10,000 10,096 10,000 10,100 10,026 10,141 10,137 10,343 10,367 10,353 10,419 2003 10,416 10,491 10,517 10,626 10,264 10,403 10,579 10,736 2004 10,658 10,808 Mar. 31 2005 10,556 10,712
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (9/9/02 through 3/31/05) 2.13% 0.82%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations California Intermediate Municipal Bond Fund from the inception of the share class. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. It is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. Index performance is from 9/30/02. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 8/19/02 9/9/02 8/29/02 9/11/02 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.59% 0.34% -2.95% -0.41% -3.29% -0.40% -1.37% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS SINCE INCEPTION 2.86% 2.13% 0.82% 1.71% 0.98% 1.36% 1.36%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 27 NATIONS CALIFORNIA MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HER VIEWS ON NATIONS CALIFORNIA MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HER OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks as high a level of current interest income free of federal income tax and California state individual income tax as is consistent with prudent investment management and preservation of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations California Municipal Bond Fund Investor A Shares provided shareholders with a total return of 2.33%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of California municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity greater than seven years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** During the 12-month period ended March 31, 2005, Nations California Municipal Bond Fund (Investor A Shares) returned 2.33%. Fund performance trailed both its *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Municipal Bond Index is an unmanaged index of 8,000 investment grade bonds with long-term maturities. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper California Municipal Debt Funds Category limit their assets to those securities that are exempt from taxation in California. Source for all statistical data -- Banc of America Capital Management, LLC. ON MARCH 21, 2005, THE BOARD OF TRUSTEES APPROVED A PROPOSAL TO REORGANIZE THE NATIONS CALIFORNIA MUNICIPAL BOND FUND INTO THE COLUMBIA CALIFORNIA TAX-EXEMPT FUND, SUBJECT TO SHAREHOLDER APPROVAL AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. IF APPROVED, THE EFFECTIVE DATE OF THE REORGANIZATION IS EXPECTED TO OCCUR IN SEPTEMBER OR OCTOBER 2005 OR ON SUCH A DATE TO WHICH PARTIES MAY AGREE. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 28 NATIONS CALIFORNIA MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) benchmark and peer group. The fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 2.67% for the period. The average return for its peer group, the Lipper California Municipal Debt Funds Category, was 2.86%. During the reporting period, we tried to increase the fund's yields by adding more A-rated bonds, which had higher yields. The fund's underweight in non-rated securities hindered relative performance, as these were among the better-performing securities during the period. A lack of available non-rated securities prevented the fund from participating in the higher yields offered by these bonds. The fund's relative underperformance was also due to the number of securities that either were called or had matured during the period. The principal amounts on more than 5% of the fund's portfolio were paid during this 12-month period. In the case of the bonds that were called, many of the municipalities in which the fund invests took advantage of low interest rates to refund existing debt. Our efforts to replace these assets were thwarted by a lack of high quality securities with intermediate maturities. Most of the proceeds were reinvested in bonds with 15- to 20-year maturities. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS IN CALIFORNIA? California's economy continued its recovery from the severe economic conditions of the past four fiscal years. From 2001 to 2003, California lost approximately 200,000 jobs. Although employment losses cut across all industries, job loss was particularly acute in northern California where the high tech industry is concentrated. Also, during this time, California experienced a 17% decline in total tax revenue. To offset the lost revenue, the state turned, in large part, to non-recurring or one-time measures to achieve a balanced budget. The largest single measure was the issuing of $15.0 billion of Economic Recovery Bonds. Without these bonds, the state would not have been able to meet its obligations. It was this looming liquidity crisis that prompted the rating agencies to lower California's rating to the BBB level. With the liquidity crisis averted and a budding economic recovery fueling revenue growth, the state's credit ratings have all been raised back into the A category. California has approximately $52.7 billion of outstanding tax-supported debt, including general obligations bond ($45 billion) and General Fund lease-backed debt ($7 billion). For fiscal 2004 the state ended the year with a $3.0 billion surplus reflecting the issuance of $11.2 billion of deficit bonds during the year. This surplus, combined with modest spending restraint and improving revenue performance, should allow the state to end the current year with a surplus of approximately $1.5 billion. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? We are maintaining our focus on seeking high quality securities with good yield potential. California's economy is enjoying healthy growth, and the state's progressive tax system is producing substantial additional resources, which are necessary to help stabilize the state's financial position. However, state policymakers still face sizeable gaps between ongoing revenues and expenditures that may worsen in coming years as temporary measures enacted previously are scheduled to expire. Also, the state's long history of constitutional initiatives and 29 NATIONS CALIFORNIA MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) the two-thirds majority requirement for budget passage are likely to hamstring lawmakers as they try to close persistent financial imbalances. Despite the 2004 budget gap and eventual need to issue debt to cover the shortfall, debt levels in the state remain in the moderate range. Even though California, like the rest of the nation, is seeing slow and gradual growth, positive economic indicators within the state indicate the potential for increased tax revenues. The state's high tech industry is enjoying a turn-around. A declining US dollar may help those industries, such as entertainment, keep more jobs in the state rather than outsourcing overseas. Tourism is also benefiting from a weak dollar. We believe that a boost in manufacturing will continue to stimulate international trade, which has become a major source of economic activity. --------------------------------------------------- Wendy Norman has managed Nations California Municipal Bond Fund since December 15, 2004. Ms. Norman is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 30 NATIONS CALIFORNIA MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,013.91 1,021.94 3.01 3.02 0.60 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,011.32 1,020.69 4.26 4.28 0.85 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,008.88 1,016.95 8.01 8.05 1.60 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,007.53 1,016.95 8.01 8.05 1.60
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 31 NATIONS CALIFORNIA MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 32 NATIONS CALIFORNIA MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.1% Other revenue 1.4% Education 8.0% Housing 8.8% Health care 10.8% Transportation 23.2% Utilities 30.1% Tax-backed 16.6% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 CA Statewide Communities Development Authority Apartment Development Revenue Refunding, Irvine Apartment Communities Project Series 1998A-4, Mandatory Put 05/15/13, 5.250% 05/15/25 2.4% ------------------------------------------------- 2 CA Fresno California Sewer Revenue Series 1993A-1 Insured: AMBAC 6.250% 09/01/14 2.3% ------------------------------------------------- 3 CA West Covina California Redevelopment Agency Community Facilities District Special Tax Refunding Fashion Plaza Project, Series 1996, 6.000% 09/01/17 2.2% ------------------------------------------------- 4 PR Electric Power Authority Power Revenue Series 2000HH Insured: FSA 5.250% 07/01/29 2.1% ------------------------------------------------- 5 CA Health Facilities Financing Authority, Revenue Refunding Insured Health Facilities Mark Twain Project, Series 1996 Insured: MBIA 6.000% 07/01/16 2.0% ------------------------------------------------- 6 CA Southern California Public Power Authority Power Project Revenue Series 1989, 6.750% 07/01/13 1.8% ------------------------------------------------- 7 CA Metropolitan Water District of Southern California Waterworks Revenue Refunding Series 1993A 5.750% 07/01/21 1.6% ------------------------------------------------- 8 CA Lompoc California Unified School District GO Election of 2002 Project, Series 2003A Insured: FGIC 5.000% 08/01/27 1.6% ------------------------------------------------- 9 CA Foothill/Eastern Corridor Agency California Toll Road Revenue Refunding Series 1999, 5.750% 01/15/40 1.6% ------------------------------------------------- 10 CA Health Facilities Finance Authority Revenue Cedars-Sinai Medical Center Project, Series 1999A 6.125% 12/01/19 1.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
33 NATIONS CALIFORNIA MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS CALIFORNIA MUNICIPAL BOND LEHMAN BROTHERS MUNICIPAL BOND FUND INDEX --------------------------------- ------------------------------ Mar. 31 1995 $ 9,525 $ 10,000 1996 10,176 10,838 10,681 11,429 1998 11,823 12,654 12,606 13,438 2000 12,433 13,428 13,668 14,894 2002 14,003 15,461 15,275 16,990 2004 16,036 17,986 Mar. 31 2005 16,402 18,465
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS CALIFORNIA MUNICIPAL BOND LEHMAN BROTHERS MUNICIPAL BOND FUND INDEX --------------------------------- ------------------------------ Mar. 31 1995 $ 10,000 $ 10,000 1996 10,683 10,838 11,214 11,429 1998 12,413 12,654 13,234 13,438 2000 13,053 13,428 14,349 14,894 2002 14,701 15,461 16,037 16,990 2004 16,836 17,986 Mar. 31 2005 17,228 18,465
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.59% 5.07%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations California Municipal Bond Fund over the last 10 years. The Lehman Brothers Municipal Bond Index is an unmanaged index of 8,000 investment grade bonds with long-term maturities. It is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B++ INVESTOR C PRIMARY A+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 3/30/84 7/15/98 7/29/99 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 2.59% 2.33% -2.55% 1.57% -3.28% 1.58% 0.61% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.71% 5.43% 3.75% 4.69% 3.77% 4.66% 4.66% 5 YEARS 5.98% 5.71% 4.67% 4.95% 4.62% 4.93% 4.93% 10 YEARS 5.73% 5.59% 5.07% 5.05% 5.05% -- -- SINCE INCEPTION 7.15% 7.08% 6.84% 6.83% 6.83% 4.39% 4.39%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. +Primary A Shares commenced operations on May 21, 1999 and have no performance prior to that date. Performance prior to May 21, 1999 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. These 12b-1 fees are not applicable to Primary A Shares. Inception date for Investor A Shares is March 30, 1984. ++Investor B Shares commenced operations on July 15, 1998 and have no performance prior to that date. Performance prior to July 15, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. Inception date for Investor A Shares is March 30, 1984. 34 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income and Florida state intangibles taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Florida Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of negative 0.18%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of Florida municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of negative 0.18%, Nations Florida Intermediate Municipal Bond Fund (Investor A Shares) underperformed its benchmark index, the Lehman *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax free-bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Florida Intermediate Municipal Debt Funds Category invest at least 65% of their assets in municipal debt issues that are exempt from taxation in Florida, with dollar-weighted average maturities of five to ten years. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 35 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Brothers Quality Intermediate Municipal Bond Index, which returned 0.81% for the 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index. We consider the new benchmark to be a better match with the fund because it includes a broader spectrum of maturities. The fund also trailed the average return of its peer group, the Lipper Florida Intermediate Municipal Debt Funds Category, which was negative 0.13%. The fund underperformed its benchmark primarily because of a position it held in a distressed housing project. We sold the position during the period. The fund benefited from an overweight in the hospital and special tax sectors. The top performing sectors were industrial development revenue, pollution control revenue and education. However, these sectors represented only a small portion of the fund's assets. Because we expect interest rates to rise modestly in 2005, we kept the fund's duration shorter than its benchmark throughout most of the period. Duration is a measure of the fund's sensitivity to changing interest rates. That helped the fund late in the period when interest rates moved higher, but it hurt the fund when all but the shortest interest rates declined earlier in the period. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE FLORIDA MUNICIPAL BOND MARKET DURING THE PERIOD? Florida has emerged from the most recent national recession with strong financial reserves, healthy revenue growth, a robust economy and a relatively small debt burden. The state revised its fiscal 2005 revenues upward from $22 billion to $23.6 billion in November of 2004. We expect reserves at fiscal year-end 2005 to total a healthy $3 billion, or 12.7% of revenues. In addition, Florida's overall debt burden has remained relatively small compared to its revenues. Tax-supported debt now equals 3.4% of personal income. The fund's outstanding debt represents approximately 6.0% of revenues, which falls within the state's targeted 7.0% cap. As a result of these improved conditions, Moody's Investors Service raised Florida's general obligation rating from Aa2 to Aa1 during the first quarter of 2005. Standard & Poor's raised its rating from AA+ to AAA and Fitch Ratings followed suit, raising its rating from AA to AA+. In addition, tourism, the state's leading source of sales tax revenue, has rebounded from the downturn following Sept. 11 and last summer's hurricanes. Once again, Florida has become an attractive destination for tourists and retirees. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR FLORIDA AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? The key challenge facing Florida is rapid population growth requiring infrastructure spending, particularly for schools and Medicaid. Ideally, these needs should be met without impairing state finances. To address this challenge, the state has established a public education bond program that is funded with a first and second lien on the utility gross receipts tax. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) will continue to raise short-term 36 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. In light of this environment, we plan to maintain the fund's duration in line with its benchmark. Because we are generally optimistic in our assessment of the current credit environment, we plan to maintain or increase the fund's exposure to higher-yielding securities. --------------------------------------------------- Chris Eckstrom has managed Nations Florida Intermediate Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 37 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 996.36 1,022.44 2.49 2.52 0.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 995.11 1,021.19 3.73 3.78 0.75 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 991.42 1,017.45 7.45 7.54 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 991.42 1,017.45 7.45 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 38 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 39 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.6% Industrials 0.8% Other revenue 0.9% Resource recovery 2.2% Education 2.3% Transportation 5.3% Housing 16.9% Health care 21.6% Utilities 37.5% Tax-backed 11.9% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 FL Orlando Utilities Commission Water and Electric Revenue Refunding, Series 2001, 5.000%, 10/01/09 3.4% ------------------------------------------------- 2 FL Orlando Utilities Commission Water and Electric Revenue Refunding, Series C, 5.250% 10/01/18 2.9% ------------------------------------------------- 3 FL State Department of Environmental Protection and Preservation Revenue Florida Forever Project, Refunding, Series 2001B, Insured: MBIA 5.000% 07/01/09 2.9% ------------------------------------------------- 4 FL Orange County Health Facilities Authority Revenue Orlando Regional Healthcare Project, Series 1996A, Insured: MBIA Pre-refunded 10/01/08 6.250% 10/01/08 2.7% ------------------------------------------------- 5 FL Manatee County School District Sales Tax Revenue Series 2003, Insured: AMBAC 5.000% 10/01/12 2.5% ------------------------------------------------- 6 VA Arlington County Industrial Development Authority Revenue Virginia Hospital Arlington Health Systems Project, Series 2001, 5.500% 07/01/14 2.4% ------------------------------------------------- 7 FL South Broward Hospital District Revenue Series 2003A, Insured: MBIA 5.250% 05/01/12 2.3% ------------------------------------------------- 8 FL Orange County Tourist Development Tax Authority Revenue Refunding, Series 1998A, Insured: AMBAC 5.000% 10/01/15 2.3% ------------------------------------------------- 9 FL Tallahassee Blue Print 2000 Intern Government Revenue Series 2003, Insured: FSA 5.000% 10/01/13 2.2% ------------------------------------------------- 10 FL Collier County Gas Tax Revenue Series 2003, Insured: AMBAC 5.250% 06/01/13 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
40 NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS FLORIDA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,351 10,806 10,786 10,766 11,305 11,274 1998 11,664 12,325 12,225 12,217 13,055 12,935 2000 12,244 13,132 13,065 13,264 14,464 14,327 2002 13,666 14,974 14,868 14,579 16,555 16,281 2004 15,187 17,482 17,065 Mar. 31 2005 15,164 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS FLORIDA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,699 10,806 10,786 11,128 11,305 11,274 1998 12,056 12,325 12,225 12,628 13,055 12,935 2000 12,655 13,132 13,065 13,710 14,464 14,327 2002 14,125 14,974 14,868 15,068 16,555 16,281 2004 15,697 17,482 17,065 Mar. 31 2005 15,669 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.59% 4.25%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Florida Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distribution or the redemption of fund share. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/11/92 12/14/92 6/7/93 12/17/92 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.07% -0.18% -3.38% -0.92% -3.81% -0.92% -1.88% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 3.77% 3.52% 2.40% 2.74% 2.43% 2.73% 2.73% 5 YEARS 4.62% 4.36% 3.67% 3.58% 3.58% 3.54% 3.54% 10 YEARS 4.84% 4.59% 4.25% 3.96% 3.96% 3.95% 3.95% SINCE INCEPTION 4.98% 4.75% 4.47% 3.89% 3.89% 4.14% 4.14%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 41 NATIONS FLORIDA MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS FLORIDA MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income and Florida state intangibles taxes with potential for principal fluctuation associated with investments in long-term municipal securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Florida Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.33%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment grade issues, through which it seeks to reduce credit and liquidity risk, and lower quality investment grade issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of Florida municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As a long-term portfolio, the fund seeks to maintain an average dollar-weighted maturity greater than seven years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of 0.33%, Nations Florida Municipal Bond Fund (Investor A Shares) underperformed its benchmark index, the Lehman Brothers Municipal Bond *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Municipal Bond Index is an unmanaged index of 8,000 investment grade bonds with long-term maturities. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Florida Municipal Debt Funds Category invest at least 65% of their assets in municipal debt issues that are exempt from taxation in Florida, with dollar-weighted average maturities of five to ten years. Source for all statistical data -- Banc of America Capital Management, LLC. ON MARCH 21, 2005, THE BOARD OF TRUSTEES APPROVED A PROPOSAL TO REORGANIZE THE NATIONS FLORIDA MUNICIPAL BOND FUND INTO THE NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND, SUBJECT TO SHAREHOLDER APPROVAL AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. IF APPROVED, THE EFFECTIVE DATE OF THE REORGANIZATION IS EXPECTED TO OCCUR AT THE END OF SEPTEMBER OR THE BEGINNING OF OCTOBER 2005 OR ON SUCH A DATE ON WHICH THE PARTIES MAY AGREE. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 42 NATIONS FLORIDA MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Index, which returned 2.67% for the 12-month period ended March 31, 2005. The fund also trailed the average of its peer group, the Lipper Florida Municipal Debt Funds Category, which returned 2.15%. The fund's return fell short of its benchmark because it maintained a shorter duration throughout most of the period. Duration is a measure of interest rate sensitivity. We generally shorten duration when we think that interest rates are going to rise. If we are right, this defensive approach can help stem losses. However, long-term interest rates declined and the fund's shorter duration detracted from performance. In 2005, we lengthened duration, but this move hurt performance because interest rates rose sharply in the middle of the first quarter. The fund benefited from an overweight in the transportation and state general obligation sectors, as the spread between those sectors and triple "A" municipals narrowed during the period. The education sector, including a position in Embry-Riddle Aeronautical University bonds, contributed positive returns. The lease sector was the largest detractor from performance during the period. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE FLORIDA MUNICIPAL BOND MARKET DURING THE PERIOD? Florida has emerged from the most recent national recession with strong financial reserves, healthy revenue growth, a robust economy and a relatively small debt burden. The state revised its fiscal 2005 revenues upward from $22 billion to $23.6 billion in November of 2004. We expect reserves at fiscal year-end 2005 to total a healthy $3 billion, or 12.7% of revenues. Florida's overall debt burden has remained relatively small compared to its revenues. Tax-supported debt now equals 3.4% of personal income. The fund's outstanding debt represents approximately 6.0% of revenues, which falls within the state's targeted 7.0% cap. As a result of these improved conditions, Moody's Investors Service raised Florida's general obligation rating from Aa2 to Aa1 during the first quarter of 2005. Standard and Poor's raised its rating from AA+ to AAA and Fitch Ratings followed suit, raising its rating from AA to AA+. In addition, tourism, the state's leading source of sales tax revenue, has rebounded from the downturn following Sept. 11 and last summer's hurricanes. Once again, Florida has become an attractive destination for tourists and retirees. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR FLORIDA AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? The key challenge facing Florida is rapid population growth requiring infrastructure spending, particularly for schools and Medicaid. Ideally, these needs should be met without impairing state finances. To address this challenge, the state has established a public education bond program that is funded with a first and second lien on the utility gross receipts tax. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) is likely to continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to 43 NATIONS FLORIDA MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. In light of this environment, we plan to keep the fund's duration in line with its benchmark. Because we are generally optimistic in our assessment of the current credit environment, we plan to maintain or increase the fund's exposure to higher-yielding securities. --------------------------------------------------- Chris Eckstrom has managed Nations Florida Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 44 NATIONS FLORIDA MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 997.21 1,021.94 2.99 3.02 0.60 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 995.96 1,020.69 4.23 4.28 0.85 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 993.32 1,016.95 7.95 8.05 1.60 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 993.32 1,016.95 7.95 8.05 1.60
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 45 NATIONS FLORIDA MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 46 NATIONS FLORIDA MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.2% Other revenue 1.7% Industrials 4.5% Education 5.3% Health care 6.2% Housing 6.4% Resource recovery 9.6% Transportation 23.7% Utilities 26.5% Tax-backed 14.9% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 FL Palm Beach County Solid Waste Authority, Revenue, Unrefunded Balance, Series 1997A Insured: AMBAC 6.000% 10/01/10 6.4% ------------------------------------------------- 2 PR Commonwealth GO, Series 1997, Insured: MBIA 6.500% 07/01/15 5.8% ------------------------------------------------- 3 FL Jacksonville Guaranteed Entitlement Improvement Revenue Refunding, Series 2002, Insured: FGIC 5.375% 10/01/19 4.6% ------------------------------------------------- 4 FL Orange County Health Facilities Authority Revenue Orlando Regional Healthcare System, Series 1996A, Escrowed to Maturity, Insured: MBIA 6.250% 10/01/16 4.5% ------------------------------------------------- 5 FL Miami-Dade County, Aviation Revenue Series 1998C, AMT Insured: MBIA 5.250% 10/01/15 4.2% ------------------------------------------------- 6 FL Gainesville, Utility Systems Revenue Series 1992B, 6.500% 10/01/11 4.0% ------------------------------------------------- 7 FL State Board of Education Capital Outlay GO, Series 1997A, 5.000% 01/01/17 3.5% ------------------------------------------------- 8 FL Tampa Sports Authority Sales Tax Revenue Tampa Bay Arena Project, Series 1995 Insured: MBIA 5.750% 10/01/15 3.2% ------------------------------------------------- 9 FL Dade County Aviation Revenue Series 1996A, AMT Insured: MBIA 5.750% 10/01/12 3.0% ------------------------------------------------- 10 FL Leon County Capital Improvement Revenue Series 1997, Insured: AMBAC Pre-refunded 10/01/07 5.250% 10/01/17 2.9% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
47 NATIONS FLORIDA MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS FLORIDA MUNICIPAL BOND LEHMAN BROTHERS MUNICIPAL BOND FUND INDEX ------------------------------ ------------------------------ Mar. 31 1995 $ 9,525 $ 10,000 1996 10,275 10,838 10,798 11,429 1998 11,918 12,654 12,477 13,438 2000 12,482 13,428 13,713 14,894 2002 14,164 15,461 15,508 16,990 2004 16,160 17,986 Mar. 31 2005 16,211 18,465
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART] ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
NATIONS FLORIDA MUNICIPAL BOND LEHMAN BROTHERS MUNICIPAL BOND FUND INDEX ------------------------------ ------------------------------ Mar. 31 1995 $ 10,000 $ 10,000 1996 10,787 10,838 11,336 11,429 1998 12,513 12,654 13,100 13,438 2000 13,105 13,428 14,397 14,894 2002 14,871 15,461 16,282 16,990 2004 16,966 17,986 Mar. 31 2005 17,019 18,465
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.46% 4.95%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Florida Municipal Bond Fund over the last 10 years. The Lehman Brothers Municipal Bond Index is an unmanaged index of 8,000 investment grade bonds with long-term maturities. It is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/13/93 12/10/93 10/22/93 11/3/94 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.58% 0.33% -4.44% -0.32% -5.09% -0.32% -1.27% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.86% 4.60% 2.92% 3.83% 2.92% 3.83% 3.83% 5 YEARS 5.63% 5.37% 4.34% 4.59% 4.25% 4.56% 4.56% 10 YEARS 5.70% 5.46% 4.95% 4.75% 4.75% 4.77% 4.77% SINCE INCEPTION 5.03% 4.74% 4.29% 4.04% 4.04% 5.66% 5.66%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 48 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and Georgia state income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Georgia Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.80%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment grade issues, through which it seeks to reduce credit and liquidity risk, and lower quality investment grade issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of Georgia municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of 0.80%, Nations Georgia Intermediate Municipal Bond Fund (Investor A Shares) performed in line with its benchmark index, the Lehman *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers 7-Year Municipal Bond Index is a broad-based, unmanaged index of investment grade bonds with maturities of seven to eight years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 49 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Brothers Quality Intermediate Municipal Bond Index, which returned 0.81% for the 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index. We consider the new benchmark to be a better match with the fund because it includes a broader spectrum of maturities. The fund outperformed the average of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, which returned 0.35%. The fund benefited from an overweight in the general obligation and hospital sectors, which appreciated as the spread between those sectors and AAA-rated municipals narrowed during the period. Tobacco and electric utility bonds were the top-performing sectors. However, these sectors represented a relatively small percentage of the fund's assets. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE GEORGIA MUNICIPAL BOND MARKET DURING THE PERIOD? After two years of significant revenue declines, which forced the state to dip into its financial reserves, Georgia's financial operations have stabilized. Revenues posted healthy gains in 2004. Georgia's 2005 budget is in balance and the state appears to be well positioned to rebuild its reserves. As a result of these and other factors, the state of Georgia earned the highest possible credit rating from Moody's Investors Service (Aaa), Standard & Poor's (AAA) and Fitch Ratings (AAA). Georgia's economy is diversified. Many large companies, including BellSouth, Coca Cola, Delta Airlines, Home Depot and United Parcel Service, are headquartered in the state and rank among its largest employers. Georgia is at risk of further job losses in the textile-related manufacturing sector, especially now that US textile import quotas have been lifted. However, we expect that strength in other areas of the economy to keep statewide employment numbers strong. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR GEORGIA AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? Georgia's key challenge is to meet the needs of a growing population, including transportation issues, while maintaining stable financial performance. This will require conservative budgeting practices, moderate debt ratios and adequate reserve levels. The state stands to benefit from its diversified economy and relatively low cost of doing business as it continues to recover from the recent economic downturn. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. In this environment, we plan to keep the fund's duration in line with its benchmark and to maintain or increase the fund's exposure to higher-yielding securities. --------------------------------------------------- 50 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Chris Eckstrom has managed Nations Georgia Intermediate Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 51 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 999.25 1,022.44 2.49 2.52 0.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 998.01 1,021.19 3.74 3.78 0.75 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 995.21 1,017.45 7.46 7.54 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 994.32 1,017.45 7.46 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 52 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 53 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 5.7% Industrials 6.2% Education 6.3% Housing 6.3% Transportation 13.9% Health care 15.1% Utilities 28.0% Tax-backed 18.5% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 GA Cobb and Marietta County Water Authority Revenue Series 2000, 5.125% 11/01/20 3.8% ------------------------------------------------- 2 GA Atlanta Airport Facilities Revenue Refunding, Series 2000A, Insured: FGIC Pre-refunded 01/01/10 5.600% 01/01/30 3.8% ------------------------------------------------- 3 GA Monroe County Georgia Development Authority Pollution Control Revenue Georgia Power Company Plant Scherer Project, Series 2001 Mandatory Put 12/01/08 @ 100 4.200% 01/01/12 3.5% ------------------------------------------------- 4 GA Fulton County Building Authority Revenue Judicial Center Facilities Project, Series 2002B, Insured: MBIA 4.000% 01/01/08 3.5% ------------------------------------------------- 5 MI Detroit GO Refunding, Series 2001B, Insured: MBIA 5.375% 04/01/14 2.7% ------------------------------------------------- 6 GA Clayton County Georgia Housing Authority Multi-Family Housing Revenue Refunding Tara Court II Apartments Project, Series 2001 Mandatory Put 12/01/11 @ 100 4.350% 12/01/31 2.7% ------------------------------------------------- 7 GA Clayton County Hospital Authority Revenue Anticipation Certificates, Southern Regional Medical Center Project, Series 1998A, Insured: MBIA 5.250% 08/01/09 2.3% ------------------------------------------------- 8 GA State GO, Series 1999D, Prerefunded 11/01/09 5.800% 11/01/13 2.3% ------------------------------------------------- 9 GA Henry County Hospital Authority Revenue Henry Medical Center Project, Series 1997, Insured: AMBAC Pre-refunded 07/01/07 6.000% 07/01/29 2.3% ------------------------------------------------- 10 GA Chatham County Hospital Medical Authority Revenue Memorial Health Medical Center Project, Series 2001A, 6.125% 01/01/24 2.2% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
54 NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS GEORGIA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNCIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,352 10,806 10,786 10,779 11,305 11,274 1998 11,667 12,325 12,225 12,249 13,055 12,935 2000 12,216 13,132 13,065 13,274 14,464 14,327 2002 13,704 14,974 14,868 14,600 16,555 16,281 2004 15,253 17,482 17,065 Mar. 31 2005 15,373 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS GEORGIA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNCIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,700 10,806 10,786 11,141 11,305 11,274 1998 12,059 12,325 12,225 12,661 13,055 12,935 2000 12,626 13,132 13,065 13,720 14,464 14,327 2002 14,164 14,974 14,868 15,091 16,555 16,281 2004 15,765 17,482 17,065 Mar. 31 2005 15,891 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.74% 4.39%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Georgia Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The chart and table do no reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 3/1/92 5/4/92 6/7/93 6/17/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.05% 0.80% -2.49% 0.05% -2.87% 0.05% -0.92% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.17% 3.91% 2.77% 3.17% 2.86% 3.13% 3.13% 5 YEARS 4.97% 4.71% 4.02% 3.95% 3.95% 3.94% 3.94% 10 YEARS 4.98% 4.74% 4.39% 4.11% 4.11% 4.09% 4.09% SINCE INCEPTION 5.32% 5.11% 4.84% 3.96% 3.96% 4.37% 4.37%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 55 NATIONS KANSAS MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HER VIEWS ON NATIONS KANSAS MUNICIPAL INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HER OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and Kansas state income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Kansas Municipal Income Fund Investor A Shares provided shareholders with a total return of 0.26%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment-grade issues, which reduce credit and liquidity risk, and lower quality, investment-grade issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of Kansas municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** During the 12-month period ended March 31, 2005, Nations Kansas Municipal Income Fund (Investor A Shares) returned 0.26%. The fund trailed both its *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. ON MARCH 21, 2005, THE BOARD OF TRUSTEES APPROVED A PROPOSAL TO REORGANIZE THE NATIONS KANSAS MUNICIPAL INCOME FUND INTO THE COLUMBIA INTERMEDIATE TAX-EXEMPT FUND, SUBJECT TO SHAREHOLDER APPROVAL AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. IF APPROVED, THE EFFECTIVE DATE OF THE REORGANIZATION IS EXPECTED TO OCCUR IN SEPTEMBER OR OCTOBER 2005 OR ON SUCH A DATE TO WHICH PARTIES MAY AGREE. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 56 NATIONS KANSAS MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY (continued) benchmark and its peer group. The fund's benchmark, the Lehman Brothers Quality Intermediate Municipal Bond Index, returned 0.81% for the period. The average return for its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, was 0.35%. During the reporting period, we aimed to increase the fund's yield by adding more AA-rated bonds, where yields were higher. However, the fund's overweight position in AAA-rated securities hindered relative performance. AAA-rated bonds underperformed AA-rated securities. The fund also underperformed because of the high number of securities that were called during the latter half of the 12-month period. Many of the municipalities the fund invests in decided to take advantage of low interest rates to refund existing debt. The principal amounts on almost 10% of the fund's portfolio were paid during this 12-month period. We tried to purchase high quality intermediate-term securities to replace these assets. However, our efforts were hampered by a limited supply of such securities. We invested most of the proceeds in bonds with longer maturities, those in the 15-to 20-year range. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS IN KANSAS? Although much of Kansas is rural, agriculture now accounts for only a small part of the state's overall economy. Airplane manufacturing is a major component of the state's economy and accounts for 20% of the state's manufacturing jobs. In Wichita, this industry accounts for 80% of the manufacturing jobs. With economic development aid from the state, Boeing has announced that portions of its new 7E7 construction will be based in Wichita. Kansas has a long history of sound finances, but the recent recession, tax cuts and rising expenditures have led to budget deficits. Like many states in similar circumstances, Kansas has had to employ a variety of measures to balance its budget. Those measures have included tax hikes, expenditure cuts, shifting of funds among various state accounts and borrowing. It has also elected to ignore a requirement to maintain a general fund balance equal to 7.5% of expenditures. The state is also wrestling with a court mandate for equitable school funding. The governor has proposed various tax increases to address the challenge, but the plan is meeting stiff resistance from tax-averse legislators. The state is struggling with balancing the need to provide government services, bring the budget back into balance and maintain strong cash reserves while keeping the tax burden low so as not to choke off economic growth. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? An expected weakening in its airplane manufacturing and telecommunication sectors may hamper the state's economic recovery. In addition, individual local economies may continue to struggle due to their heavy reliance on agriculture. On a positive note, revenues appear to have stabilized. Approximately 40% of the state's manufacturing jobs are in food processing, which tends to be a stable industry. Progress has been made on passing a budget with a minimum of fuss, although a separate school funding package remains a serious note of contention. In this environment, we will continue to maintain our focus on finding high quality securities with good yield potential and non-callable structures. 57 NATIONS KANSAS MUNICIPAL INCOME FUND PORTFOLIO MANAGER COMMENTARY (continued) --------------------------------------------------- Wendy Norman has managed Nations Kansas Municipal Income Fund since December 15, 2004. Ms. Norman is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 58 NATIONS KANSAS MUNICIPAL INCOME FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 995.76 1,021.94 2.99 3.02 0.60 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 994.52 1,020.69 4.23 4.28 0.85 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 990.78 1,016.95 7.94 8.05 1.60 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 990.78 1,016.95 7.94 8.05 1.60
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 59 NATIONS KANSAS MUNICIPAL INCOME FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 60 NATIONS KANSAS MUNICIPAL INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 2.0% Short-term investment 4.9% Housing 5.6% Transportation 6.0% Utilities 9.0% Education 13.1% Health care 43.2% Tax-backed 16.2% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 SC Calhoun County Solid Waste Disposal Facility Revenue Carolina Eastman Company Project, Series 1992, AMT, Pre-refunded 05/01/17 3.4% ------------------------------------------------- 2 KS Regents-Wichita University Project: Series 2000 B, Insured: AMBAC 5.900% 04/01/15 3.1% ------------------------------------------------- 3 KS State Development Finance Authority Revenue, Board of Regents Scientific Research Series 2003, Insured: AMBAC 5.000% 10/01/19 3.0% ------------------------------------------------- 4 KS Wyandotte County, Kansas City Utility System Revenue Insured: FSA 5.000% 09/01/32 2.9% ------------------------------------------------- 5 KS State Turnpike Authority Revenue, Series 2002, Insured: FSA 5.250% 09/01/15 2.9% ------------------------------------------------- 6 KS Wyandotte County, Unified School District Series 2002, Insured: FSA 5.000% 09/01/20 2.8% ------------------------------------------------- 7 KS State Development Water Supply Revolving Loan Pre-refunded 10/01/10 Insured: AMBAC 5.750% 04/01/15 2.7% ------------------------------------------------- 8 KS Shawnee County, GO, Refunding and Improvement, Series 1998 A, 5.250% 09/01/17 2.5% ------------------------------------------------- 9 KS Ford County Dodge Unified School District Number 443, GO, Refunding, Series 2002, Insured: FGIC 5.000% 03/01/13 2.4% ------------------------------------------------- 10 AK North Slope Borough Capital Appreciation, GO, Series B, Insured: MBIA Zero Coupon 06/30/09 2.4% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
61 NATIONS KANSAS MUNICIPAL INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS KANSAS MUNICIPAL INCOME LEHMAN BROTHERS QUALITY FUND INTERMEDIATE MUNICIPAL INDEX ------------------------------- ---------------------------- Aug. 14 2000 $ 9,675 $ 10,000 9,690 9,975 10,021 10,288 10,222 10,551 10,288 10,633 10,474 10,924 2001 10,402 10,855 10,477 10,950 10,836 11,372 11,174 11,827 2002 11,153 11,858 11,230 11,990 11,450 12,262 11,449 12,323 2003 11,537 12,408 11,647 12,568 11,403 12,304 11,741 12,698 2004 11,816 12,783 Mar. 31 2005 11,675 12,669
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS KANSAS MUNICIPAL INCOME LEHMAN BROTHERS QUALITY FUND INTERMEDIATE MUNICIPAL INDEX ------------------------------- ---------------------------- Aug. 14 2000 $ 10,000 $ 10,000 10,015 9,975 10,358 10,288 10,566 10,551 10,633 10,633 10,826 10,924 2001 10,751 10,855 10,828 10,950 11,200 11,372 11,549 11,827 2002 11,527 11,858 11,607 11,990 11,834 12,262 11,837 12,323 2003 11,928 12,408 12,041 12,568 11,790 12,304 12,139 12,698 2004 12,216 12,783 Mar. 31 2005 12,071 12,669
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (8/14/00 through 3/31/05) 4.15% 3.40%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Kansas Municipal Income Fund from the inception of the share class. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. It is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. Index performance is from 8/31/00. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 7/17/00 8/14/00 8/29/00 7/9/02 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.41% 0.26% -3.01% -0.49% -3.36% -0.50% -1.45% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 3.91% 3.69% 2.55% 2.91% 2.60% -- -- SINCE INCEPTION 4.50% 4.15% 3.40% 3.30% 3.30% 2.02% 2.02%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 62 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and Maryland state income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Maryland Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of negative 0.43%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment grade issues, through which it seeks to reduce credit and liquidity risk, and lower quality investment grade issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of Maryland municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years and a duration between three and six years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of negative 0.43%, Nations Maryland Intermediate Municipal Bond Fund (Investor A Shares) underperformed its benchmark index, the Lehman Brothers Quality Intermediate Municipal Bond Index, which returned 0.81% for the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 63 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index. We consider the new benchmark to be a better match with the fund because it includes a broader spectrum of maturities. The fund also underperformed the average return of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, which was 0.35%. The fund trailed its benchmark primarily because it had exposure to two distressed credits that detracted from performance. We sold both positions, one in a distressed junior college project and the other in a distressed housing project. By contrast, the fund benefited from an overweight in the pre-refunded and general obligation sectors. The hospital, industrial development and pollution control sectors also contributed positively to performance. However, these sectors represented a relatively small portion of the fund's assets. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE MARYLAND MUNICIPAL BOND MARKET DURING THE PERIOD? It has been a good year for Maryland. The state has a wealthy population compared to the rest of the country. Per capita income in 2003 was 118% of the national level and ranks within the top five states in the nation. Services, with 41.7% of total non-farm jobs, represented the largest sector in the state's economy, followed by government at 18.6%, trade, transportation and utilities at 18.6%, and manufacturing at 5.9%. A strong economy in 2004 generated a $304 million increase in the state's general fund balance. In addition, Maryland's debt is structured conservatively with a rapid amortization schedule, due to a constitutional provision that requires tax-supported debt to be retired within 15 years. This policy has helped replenish the state's debt capacity rapidly. As a result of these positive factors, the state of Maryland is currently rated Aaa/ Stable by Moody's Investors Service, AAA/Stable by Standard & Poor's Corporation and AAA by Fitch Ratings. These ratings reflect the state's history of excellent finances and a diverse economy with a large federal government presence but also recognize its significant debt. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR MARYLAND AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? Future increases to educational spending and Medicaid funding will pose challenges for the state. However, the state has a solid history of successfully managing deficits and we expect Maryland to meet these anticipated spending pressures. Estimated revenues for the fiscal 2005 budget total $11.2 billion, an increase of 7.6% over the fiscal 2004 budget. With a continued strong financial performance in 2005, the state could potentially end the year with a healthy surplus. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the 64 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. In this environment, we plan to maintain the fund's duration in line with its benchmark and to maintain or increase the fund's exposure to higher-yielding securities in light of that view. --------------------------------------------------- Chris Eckstrom has managed Nations Maryland Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 65 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 997.01 1,022.44 2.49 2.52 0.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 995.76 1,021.19 3.73 3.78 0.75 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 991.17 1,017.45 7.45 7.54 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 992.07 1,017.45 7.45 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 66 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 67 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.0% Industrials 2.4% Education 2.7% Health care 5.5% Utilities 5.8% Resources recovery 6.5% Transportation 8.5% Housing 46.2% Tax-backed 21.4% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 MD State Department of Transportation, Revenue Series 2002 5.500% 02/01/14 3.4% ------------------------------------------------- 2 MD State and Local Facilities Loan, GO, Series 2000, 5.500% 08/01/09 3.0% ------------------------------------------------- 3 PR Public Buildings Authority Revenue Guaranteed Refunding, Government Facilities Series 2003H, Insured: AMBAC 5.500% 07/01/18 2.9% ------------------------------------------------- 4 MD State Health & Higher Education, Series 1999, Pre-refunded 07/01/09 6.000% 07/01/39 2.8% ------------------------------------------------- 5 MD Prince Georges County Consolidated Public Improvement Series 2001, Insured: FGIC 5.250% 12/01/11 2.7% ------------------------------------------------- 6 MD Prince Georges County Construction Public Improvements GO, Series 2001 Insured: FGIC 5.250% 12/01/12 2.6% ------------------------------------------------- 7 MD Anne Arundel County Consolidated General Improvement, GO, Refunding, Series 2003, 5.000% 03/01/13 2.2% ------------------------------------------------- 8 MD Prince Georges County Solid Waste Management System Revenue Insured: MBIA 5.000% 06/15/08 2.2% ------------------------------------------------- 9 MD Howard County Consolidated Public Improvement GO, Series 2002A, 5.000% 08/15/09 2.1% ------------------------------------------------- 10 MD Montgomery County, GO, Refunding, Series 2001, 5.250% 10/01/10 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
68 NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS MARYLAND LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNCIPAL BOND FUND MUNICIPAL BOND INDEX INDEX --------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,355 10,806 10,786 10,730 11,305 11,274 1998 11,547 12,325 12,225 12,120 13,055 12,935 2000 12,113 13,132 13,065 13,180 14,464 14,327 2002 13,544 14,974 14,868 14,586 16,555 16,281 2004 15,125 17,482 17,065 Mar. 31 2005 15,066 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MARYLAND LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNCIPAL BOND FUND MUNICIPAL BOND INDEX INDEX --------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,703 10,806 10,786 11,090 11,305 11,274 1998 11,934 12,325 12,225 12,528 13,055 12,935 2000 12,520 13,132 13,065 13,623 14,464 14,327 2002 13,999 14,974 14,868 15,076 16,555 16,281 2004 15,633 17,482 17,065 Mar. 31 2005 15,566 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.52% 4.18%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Maryland Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/1/90 9/1/90 6/8/93 6/17/92 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -0.27% -0.43% -3.69% -1.26% -4.14% -1.26% -2.22% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 3.86% 3.60% 2.48% 2.83% 2.51% 2.83% 2.83% 5 YEARS 4.71% 4.45% 3.76% 3.67% 3.67% 3.67% 3.67% 10 YEARS 4.76% 4.52% 4.18% 3.89% 3.89% 3.87% 3.87% SINCE INCEPTION 5.47% 5.27% 5.03% 3.75% 3.75% 4.06% 4.06%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 69 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and North Carolina state income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations North Carolina Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.93%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of North Carolina municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of 0.93%, Nations North Carolina Intermediate Municipal Bond Fund (Investor A Shares) outperformed its benchmark index, the Lehman Brothers Quality Intermediate Municipal Bond Index, which returned 0.81% for the 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index because *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 70 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) we consider the new benchmark to be a better match with the fund because it includes a broader spectrum of maturities. The fund also outperformed the average of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, which returned 0.35%. The fund benefited from an overweight in general obligation and hospital revenue bonds. To a lesser degree, resource recovery, industrial development revenue and pollution control revenue issues generated positive returns for the fund. These economically sensitive issues benefited when the spread between them and AAA-rated municipal bonds narrowed during the period. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS IN NORTH CAROLINA? Just as it did in 2003, North Carolina balanced its 2004-2005 budget using one-time revenue sources in combination with budget cuts. The state has had a negative general fund balance since 2000. However, it has substantial reserves in other non-general fund accounts that the governor is empowered to use. In addition, the state extended its 4.5% sales tax rate increase. Structural balance (using recurring revenue and expenses) is not expected in the short term. What's more, employment in the manufacturing sector, particularly textiles, has continued to fall. More than 100,000 textile jobs remain, but 85% of these are at risk now that international textile quotas have been removed. As a result of these factors, the state of North Carolina is currently rated Aa1/Positive by Moody's Investors Service, AAA/Stable by Standard & Poor's Corporation and AAA by Fitch Ratings. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR NORTH CAROLINA AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? We believe it is highly likely that North Carolina will successfully manage the current period of financial stress and return to its historical pattern of significant job growth and a structurally balanced budget. One challenge is the state's ability to pay for infrastructure projects, such as roads, water and sewer projects, without damaging financial operations. Due to a historically low unemployment rate, the state also needs to continue funding education initiatives to attract new employees from out of state. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. If US state and local budgets benefit from improving economic conditions, new municipal bond issuance could drop in 2005. Higher interest rates could also slow refunding issues, which would further reduce supply. These are both positive factors for the municipal bond market. 71 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) In this environment, we maintained the fund's duration in line with its benchmark and plan to maintain or increase the fund's exposure to higher-yielding securities in light of that view. --------------------------------------------------- John Trentacoste has managed Nations North Carolina Intermediate Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 72 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,000.65 1,022.44 2.49 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 999.40 1,021.19 3.74 3.78 0.75 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 995.66 1,017.45 7.46 7.54 1.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 995.61 1,017.45 7.46 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 73 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 74 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.2% Transportation 4.5% Education 4.7% Industrials 6.2% Housing 7.8% Utilities 15.6% Health care 37.5% Tax-backed 22.5% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 NC State GO, Series 2001A, 4.750% 03/01/14 2.8% ------------------------------------------------- 2 NC Orange County GO, Series 2000, 5.300% 04/01/18 2.7% ------------------------------------------------- 3 NC Haywood County Industrial Facilities and Pollution Control Financing Authority, Solid Waste Disposal Revenue, Champion International Corporation Project, Series 1999, AMT, 6.400% 11/01/24 2.3% ------------------------------------------------- 4 Novant Health Obligation Group, Series 2003A, 5.000% 11/01/17 2.0% ------------------------------------------------- 5 NC Wake County Hospital Revenue Series 1993, Pre-refunded 10/01/05, Insured: MBIA 5.125% 10/01/26 1.7% ------------------------------------------------- 6 NC Raleigh North Carolina State University Revenue Series 2002B, 5.000% 12/01/06 1.7% ------------------------------------------------- 7 NC Charlotte-Mecklenburg Hospital Authority Revenue Carolinas Healthcare Systems Project, Series 1997A, 5.125% 01/15/22 1.6% ------------------------------------------------- 8 NC State GO, Series 1997A, 5.100% 03/01/06 1.6% ------------------------------------------------- 9 NC Johnson County GO, Series 2000, Pre-refunded 03/01/10, Insured: FGIC 5.500% 03/01/16 1.6% ------------------------------------------------- 10 NC Housing Finance Agency Revenue Home Ownership Project, Series 1998A-1, AMT 5.350% 01/01/17 1.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
75 NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS NORTH CAROLINA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,331 10,806 10,786 10,770 11,305 11,274 1998 11,650 12,325 12,225 12,211 13,055 12,935 2000 12,189 13,132 13,065 13,206 14,464 14,327 2002 13,608 14,974 14,868 14,725 16,555 16,281 2004 15,318 17,482 17,065 Mar. 31 2005 15,461 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS NORTH CAROLINA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,678 10,806 10,786 11,132 11,305 11,274 1998 12,041 12,325 12,225 12,622 13,055 12,935 2000 12,599 13,132 13,065 13,650 14,464 14,327 2002 14,065 14,974 14,868 15,219 16,555 16,281 2004 15,833 17,482 17,065 Mar. 31 2005 15,981 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.80% 4.45%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations North Carolina Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/11/92 12/14/92 6/7/93 12/16/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.19% 0.93% -2.39% 0.18% -2.73% 0.17% -0.80% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.64% 4.35% 3.21% 3.61% 3.30% 3.56% 3.56% 5 YEARS 5.13% 4.87% 4.19% 4.09% 4.09% 4.08% 4.08% 10 YEARS 5.04% 4.80% 4.45% 4.16% 4.16% 4.15% 4.15% SINCE INCEPTION 5.08% 4.85% 4.56% 4.01% 4.01% 4.24% 4.24%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 76 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and South Carolina state income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations South Carolina Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 1.11%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment grade issues, through which it seeks to reduce credit and liquidity risk, and lower quality investment grade issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of South Carolina municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of 1.11%, Nations South Carolina Intermediate Municipal Bond Fund (Investor A Shares) outperformed its benchmark index, the Lehman Brothers *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. *** The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 77 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Quality Intermediate Municipal Bond Index, which returned 0.81% for the 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index. We consider the new benchmark to be a better match with the fund because it includes a broader spectrum of maturities. The fund also did better than the average return of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, which was 0.35%. The fund outperformed its benchmark, and also its peer group, largely because it was overweight in the hospital and general obligation sectors, which appreciated during the period. The tobacco and housing sectors also made positive contributions to the fund's performance. However, these sectors represented a relatively small portion of the fund's assets. The South Carolina state general obligation sector detracted from the fund's performance, as the bonds failed to gain ground during the period. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE SOUTH CAROLINA MUNICIPAL BOND MARKET DURING THE PERIOD? Fiscal year 2004 marked the fourth consecutive time that South Carolina ended the year with a deficit in its general fund. However, the state did make progress towards reducing the overall general fund deficit in 2004. The state expects to repay 2004 deficits totaling $177 million by fiscal year-end 2005. These factors, along with growing expenditures for education and healthcare, present challenges for South Carolina. However, recently the state has shown signs of economic improvement even though the economy is dominated by manufacturing, including the textile sector, which has been shedding jobs due to overseas competition. As a result of these factors, South Carolina is currently rated Aaa/Negative Outlook by Moody's Investors Service, AAA/CreditWatch-Negative from Standard & Poor's Corporation, and AAA from Fitch Ratings. We believe that proposed legislation to reduce the state's income tax rate without a long-term plan to balance the revenue reduction has contributed to the state's negative credit rating. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR SOUTH CAROLINA AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? We believe that South Carolina needs to diversify its economy away from its reliance on the manufacturing sector, particularly the textile industry. The state must also balance its budget without using non-recurring revenues (tobacco debt) and increase its reserve fund levels. We believe the state can meet these long-term challenges if it focuses on diversifying its economy and continuing its long history of sound financial management. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. 78 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) In this environment, we plan to keep the fund's duration in line with its benchmark and we plan to maintain or increase the fund's exposure to higher-yielding securities. --------------------------------------------------- Chris Eckstrom has managed Nations South Carolina Intermediate Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 79 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,002.44 1,022.44 2.50 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,001.20 1,021.19 3.74 3.78 0.75 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 997.46 1,017.45 7.47 7.54 1.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 998.40 1,017.45 7.47 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 80 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 81 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 2.0% Resource recovery 2.6% Industrials 5.9% Education 8.5% Transportation 13.0% Health care 19.3% Tax-backed 27.2% Utilities 21.5% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 IL Educational Facilities Revenue, Series 2003C, Insured: AMBAC 5.000% 09/01/18 4.1% ------------------------------------------------- 2 SC Columbia, Waterworks and Sewer Systems Revenue, Refunding, Series 1993 5.500% 02/01/09 3.5% ------------------------------------------------- 3 SC Western Carolina, Regional Sewer Authority, 5.250% 03/01/16 3.2% ------------------------------------------------- 4 SC Charleston County, Hospital Facilities Revenue, Care Alliance Health Services Project, Series 1999A, Insured: FSA 5.125% 08/15/15 3.1% ------------------------------------------------- 5 SC Jobs Economic Development Authority, Hospital Facilities Revenue, Palmetto Health Alliance Project, Series 2000A, Pre-refunded 12/12/10, 7.125% 12/15/15 3.0% ------------------------------------------------- 6 SC Capital Improvement, GO, Series 1996A, 3.500% 07/01/06 2.8% ------------------------------------------------- 7 SC Charleston, Waterworks and Sewer Capital Improvement Revenue, Refunding, Series 1998, 5.250% 01/01/08 2.5% ------------------------------------------------- 8 SC Georgetown County, Pollution Control Revenue, International Paper Company Project, Refunding, Series 1999A, 5.125% 02/01/12 2.4% ------------------------------------------------- 9 SC Piedmont Municipal Power Agency, Electric Revenue, Refunding, Series 2001A, Pre-refunded 01/01/07, Insured: MBIA 5.250% 01/01/09 2.4% ------------------------------------------------- 10 SC Greenville County, School District, Installment Purchase Revenue, Building Equity Sooner Tomorrow Project, Refunding, Series 2003, 5.250% 12/01/16 2.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
82 NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS SOUTH CAROLINA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,349 10,806 10,786 10,816 11,305 11,274 1998 11,646 12,325 12,225 12,229 13,055 12,935 2000 12,212 13,132 13,065 13,260 14,464 14,327 2002 13,709 14,974 14,868 14,640 16,555 16,281 2004 15,431 17,482 17,065 Mar. 31 2005 15,596 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS SOUTH CAROLINA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,697 10,806 10,786 11,179 11,305 11,274 1998 12,037 12,325 12,225 12,640 13,055 12,935 2000 12,622 13,132 13,065 13,705 14,464 14,327 2002 14,170 14,974 14,868 15,132 16,555 16,281 2004 15,949 17,482 17,065 Mar. 31 2005 16,126 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.89% 4.54%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations South Carolina Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 1/6/92 5/5/92 6/8/93 6/17/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.36% 1.11% -2.16% 0.35% -2.55% 0.36% -0.61% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.67% 4.41% 3.27% 3.63% 3.32% 3.62% 3.62% 5 YEARS 5.28% 5.02% 4.34% 4.24% 4.24% 4.26% 4.26% 10 YEARS 5.13% 4.89% 4.54% 4.25% 4.25% 4.25% 4.25% SINCE INCEPTION 5.35% 5.15% 4.88% 4.13% 4.13% 4.47% 4.47%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 83 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income tax and the Tennessee Hall Income Tax on unearned income consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Tennessee Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 1.01%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality issues, which reduce credit and liquidity risk, and lower quality issues, which add yield potential. By maintaining a well-diversified portfolio, generally within the universe of Tennessee municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM FOR THE PERIOD?*** With a total return of 1.01%, Nations Tennessee Intermediate Municipal Bond Fund (Investor A Shares) outperformed its benchmark index, the Lehman Brothers *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. ON MARCH 21, 2005, THE BOARD OF TRUSTEES APPROVED A PROPOSAL TO REORGANIZE THE NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND INTO THE COLUMBIA INTERMEDIATE TAX-EXEMPT FUND, SUBJECT TO SHAREHOLDER APPROVAL AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. IF APPROVED, THE EFFECTIVE DATE OF THE REORGANIZATION IS EXPECTED TO OCCUR IN SEPTEMBER OR OCTOBER 2005 OR ON SUCH A DATE TO WHICH PARTIES MAY AGREE. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 84 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Quality Intermediate Municipal Bond Index, which returned 0.81% for the 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index because we consider the new benchmark to be a better match with the fund because it includes a broader spectrum of maturities. The fund also outperformed the average return of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, which was 0.35%. The fund benefited from an overweight in the hospital and general obligation sectors. The industrial development, pollution control and transportation sectors also helped performance. However, these sectors represented a relatively small portion of the fund's assets. The education sector detracted from the fund's performance. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE TENNESSEE MUNICIPAL BOND MARKET DURING THE PERIOD? Tennessee's economy and state finances have struggled in recent years. The principal problem has been the skyrocketing cost of the state's TennCare health care program. Meanwhile, the state's non-durable manufacturing sector has been contracting and sales tax revenues have not kept pace with expenditures. The state has resorted to using one-time, non-recurring sources of money to balance the budget. This is generally viewed as a weakness because it permits the state to sustain programs for which there is no recurring revenue support. Efforts to raise additional revenues through the creation of a state income tax have failed. To address the situation, the state cut payments to local governments and in January, the governor scaled back the TennCare program. This will save an estimated $600 million in fiscal year 2006. As a result of these factors, the state of Tennessee is rated Aa2 with a stable outlook by Moody's Investor Services, AA with a stable outlook by Standard & Poor's Corporation and AA by Fitch Ratings. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR TENNESSEE AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? Financial stresses have eased somewhat as Tennessee's economy has begun to turn around and revenues have exceeded conservative projections. We believe the state's economy -- despite drops in the manufacturing sector -- remains strong and well diversified. The state should benefit from new revenue sources and cost containment reforms to TennCare. However, the attempts to scale back TennCare are subject to federal approval and face various court challenges. The success of these reforms will be crucial to the state's effort to achieve and maintain a structurally balanced budget. Based on our projections for moderate economic growth and relatively low inflation, we believe the Federal Reserve (the Fed) will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. 85 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) In this environment, we have kept the fund's duration in line with its benchmark, and we plan to maintain or increase the fund's exposure to higher-yielding securities. --------------------------------------------------- Chris Eckstrom has managed Nations Tennessee Intermediate Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 86 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,001.99 1,022.44 2.50 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,000.75 1,021.19 3.74 3.78 0.75 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 997.06 1,017.45 7.47 7.54 1.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 997.06 1,017.45 7.47 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 87 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 88 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.8% Resource recovery 1.9% Transportation 3.2% Education 3.3% Industrials 6.7% Utilities 9.8% Housing 11.3% Health care 44.6% Tax-backed 17.4% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 TN Memphis GO, Series 2000, 5.000% 04/01/17 4.7% ------------------------------------------------- 2 Home Ownership Program, Series 1997-3A, AMT Zero Coupon 01/01/08 3.9% ------------------------------------------------- 3 TN Metropolitan Government, Nashville and Davidson County Electric Revenue Series 1998B, 5.500% 05/15/13 3.9% ------------------------------------------------- 4 TN State GO, Series 1999B, Pre-refunded 05/01/09, Insured: FSA 5.250% 05/01/17 3.8% ------------------------------------------------- 5 Health, Educational and Housing Facilities Board Revenue, Hospital Facilities Improvement Revenue, Baptist Health System of East Tennessee, Inc. Project, Refunding, Series 1996, Insured: CON 5.500% 04/15/11 3.7% ------------------------------------------------- 6 TN Rutherford County 5.000% 04/01/14 3.0% ------------------------------------------------- 7 Public Improvement GO, Series 1996, 6.000% 04/01/06 3.0% ------------------------------------------------- 8 TN Anderson County GO, Refunding, Series 2001, Insured: FSA 5.000% 04/01/13 2.9% ------------------------------------------------- 9 TN Tennergy Corp. Gas Revenue, Insured: MBIA 5.000% 06/01/07 2.8% ------------------------------------------------- 10 Health, Educational and Housing Facilities Board Revenue, University Health Systems Inc. Project, Series 1993, 5.750% 04/01/19 2.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
89 NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS TENNESSEE LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,349 10,806 10,786 10,797 11,305 11,274 1998 11,636 12,325 12,225 12,215 13,055 12,935 2000 12,105 13,132 13,065 13,225 14,464 14,327 2002 13,658 14,974 14,868 14,803 16,555 16,281 2004 15,385 17,482 17,065 Mar. 31 2005 15,541 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS TENNESSEE LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,697 10,806 10,786 11,160 11,305 11,274 1998 12,027 12,325 12,225 12,625 13,055 12,935 2000 12,511 13,132 13,065 13,669 14,464 14,327 2002 14,117 14,974 14,868 15,300 16,555 16,281 2004 15,901 17,482 17,065 Mar. 31 2005 16,062 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.85% 4.51%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Tennessee Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distribution or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/13/93 4/2/93 6/10/93 11/3/94 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.26% 1.01% -2.28% 0.25% -2.66% 0.26% -0.71% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.66% 4.40% 3.27% 3.58% 3.27% 3.60% 3.60% 5 YEARS 5.39% 5.12% 4.44% 4.34% 4.34% 4.33% 4.33% 10 YEARS 5.09% 4.85% 4.51% 4.21% 4.21% 4.18% 4.18% SINCE INCEPTION 4.85% 4.67% 4.38% 4.05% 4.05% 4.68% 4.68%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 90 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HER VIEWS ON NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HER OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal income tax consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Texas Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.70%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment-grade issues, which have the potential to reduce credit and liquidity risk, and lower quality investment-grade issues, which add yield potential. By maintaining a well-diversified portfolio generally within the universe of Texas municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** During the 12-month period ended March 31, 2005, Nations Texas Intermediate Municipal Bond Fund (Investor A Shares) returned 0.70%. The fund's new benchmark, the Lehman Brothers Quality Intermediate Municipal Index returned 0.81% during the same period. Prior to August 1, 2004, the fund compared its performance to the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 91 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Lehman Brothers 7-Year Municipal Bond Index. This index returned 0.80%. We changed the fund's benchmark. We felt that the Lehman Brothers Quality Intermediate Municipal Index was a better match with the fund because it includes a broader spectrum of maturities. Fund performance for the reporting period was better than the 0.35% average return of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category. An overweight position in AAA-rated securities hampered fund performance, as did an underweight position in A- and BBB-rated securities. Higher quality AAA-rated securities underperformed lower quality A- and BBB-rated bonds, especially longer- term bonds. With its underweight in A- and BBB-rated bonds, the fund did not fully capture the higher yields these securities offered. In addition, during the latter part of the reporting period, Texas called or refunded a number of its bonds to take advantage of lower interest rates. While we sought to replace these bonds with higher-yielding securities in the seven- to eight-year maturity range, their performance by the end of the reporting period was disappointing. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS IN TEXAS? The year 2004 marked the beginning of renewed growth as Texas recorded increases in employment and personal income as well as a 1 percentage point drop in its unemployment rate. Total employment grew at a rate of 0.9% in 2004 following two consecutive years of job losses. While Texas continues to struggle with a weak manufacturing industry, offsetting this has been a healthy rebound in business service and retail payrolls. State revenues have begun to rebound after the recent recession. By the end of fiscal year 2002, the unreserved fund balance had dropped to negative $369.4 million -- the first deficit balance since 1996. The fund balance declined further in fiscal year 2003 to negative $2.3 billion. The improved economy, expenditure reductions and increased federal aid helped return balances to positive territory in the 2004-2005 biennium. By the end of fiscal year 2005, the general revenue fund balance is projected at $1.1 billion and the revenue stabilization fund is projected at $482 million, making steady progress towards the state's goal of restoring the stabilization balance to $800 million by fiscal year 2008. The 2006-07 biennium forecast projected the Texas economy will move with the national economy over the next two years. The Comptroller's Office projects tax revenue growth of 4.5% and sales tax growth of 8.2%. Energy activity continues to expand in Texas due to high oil and natural gas prices. However, the state is projecting prices to come down from recent historic highs, with revenue collections falling 16.1% and 19%, respectively. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? Texas' population is growing rapidly. This growth may require additional capital spending in key essential services including education, transportation and criminal justice. If states gain the ability to tax Internet commerce, that should be a boon to state coffers since Texas derives half of its revenues from sales tax. We will focus on adding securities with higher yields and non-callable structures. We are positioning the fund by maintaining duration slightly longer than its 92 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) benchmark. Expressed in years, duration is a measure of the portfolio's sensitivity to changes in interest rates. Even though we anticipate a modest increase in interest rates over the next 12 months, we believe the supply of securities with long-term maturities will continue to tighten. While yields tend to rise when interest rates do, with the current lack of attractive high quality long-term securities, we don't believe that yields will go up sufficiently to offset any potential refundings. Should the supply of high quality long-term securities ease, we would adjust the portfolio's duration accordingly. --------------------------------------------------- Wendy Norman has managed Nations Texas Intermediate Municipal Bond Fund since December 15, 2004. Ms. Norman is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 93 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 997.91 1,022.44 2.49 2.52 0.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 996.66 1,021.19 3.73 3.78 0.75 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 992.92 1,017.45 7.45 7.54 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 992.92 1,017.45 7.45 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. 94 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 95 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.9% Resource recovery 1.1% Housing 1.7% Industrials 4.4% Transportation 6.9% Education 8.5% Health care 15.3% Utilities 44.2% Tax-backed 17.0% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 TX Round Rock Independent School District, GO, Series 2000, Insured: PSFG 5.000% 08/01/18 2.6% ------------------------------------------------- 2 TX North Central Texas Health Facilities Development Corp. Revenue Presbyterian Healthcare Residential Project, Refunding, Series 1996B, Pre-refunded 06/01/06, Insured: MBIA 5.500% 06/01/16 2.5% ------------------------------------------------- 3 TX Houston, Water and Sewer Systems Revenue Junior Lien, Refunding, Series 1997A, Pre-refunded 12/01/07, Insured: FGIC 5.375% 12/01/27 2.4% ------------------------------------------------- 4 TX Harlandale Independent School District, GO, Refunding, Series 2004, Insured: PSFG 5.250% 08/15/16 2.4% ------------------------------------------------- 5 TX University of Texas, Permanent University Funds Revenue Series 2002A, 5.000% 07/01/07 2.3% ------------------------------------------------- 6 TX Water Development GO, Series 1997, 5.250% 08/01/28 2.3% ------------------------------------------------- 7 TX Austin Independent School District, GO, Refunding, Series 2004, Insured: PSFG 5.000% 08/01/12 1.9% ------------------------------------------------- 8 TX Houston, Water and Sewer Systems Revenue Junior Lien, Refunding, Series 1996A, Pre-refunded 12/01/06, Insured: FGIC 5.250% 12/01/25 1.9% ------------------------------------------------- 9 TX Redeemable River Authority Pollution Control Revenue Southwestern Public, Insured: AMBAC 5.200% 07/01/11 1.8% ------------------------------------------------- 10 TX Travis County GO, Limited Tax, Refunding, Series 2004, 5.000% 03/01/15 1.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
96 NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS QUALITY NATIONS TEXAS INTERMEDIATE LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX -------------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 10,316 10,806 10,786 10,747 11,305 11,274 1996 11,592 12,325 12,225 12,145 13,055 12,935 1998 12,138 13,132 13,065 13,172 14,464 14,327 2002 13,581 14,974 14,868 14,606 16,555 16,281 2004 15,311 17,482 17,065 Mar. 31 2005 15,413 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS QUALITY NATIONS TEXAS INTERMEDIATE LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNICIPAL MUNICIPAL BOND FUND MUNICIPAL BOND INDEX INDEX -------------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 10,663 10,806 10,786 11,108 11,305 11,274 1996 11,982 12,325 12,225 12,553 13,055 12,935 1998 12,546 13,132 13,065 13,615 14,464 14,327 2002 14,037 14,974 14,868 15,097 16,555 16,281 2004 15,826 17,482 17,065 Mar. 31 2005 15,937 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.77% 4.42%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Texas Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 1/12/93 2/4/93 6/22/93 11/3/94 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.86% 0.70% -2.60% -0.14% -3.04% -0.05% -1.02% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.58% 4.32% 3.19% 3.55% 3.23% 3.61% 3.61% 5 YEARS 5.16% 4.90% 4.20% 4.12% 4.12% 4.12% 4.12% 10 YEARS 5.01% 4.77% 4.42% 4.13% 4.13% 4.12% 4.12% SINCE INCEPTION 4.96% 4.60% 4.32% 3.92% 3.92% 4.59% 4.59%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 97 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income exempt from federal and Virginia state income taxes consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Virginia Intermediate Municipal Bond Fund Investor A Shares provided shareholders with a total return of 0.69%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund balances its investments between high quality investment grade issues, through which it seeks to reduce credit and liquidity risk, and lower quality investment-grade issues, which add yield potential. By maintaining a well-diversified portfolio, generally within the universe of Virginia municipal securities, we aim to limit the fund's exposure to any single credit or market sector. In addition, we use a combination of investment strategies, including duration management (managing the fund's sensitivity to interest rates), market sector selection and individual credit reviews. We also seek to limit the distribution of capital gains when appropriate. As an intermediate-term portfolio, the fund seeks to maintain an average dollar-weighted maturity between three and ten years. HOW DID THE FUND PERFORM DURING THE PERIOD?*** With a total return of 0.69%, Nations Virginia Intermediate Municipal Bond Fund (Investor A Shares) slightly underperformed its benchmark index, the Lehman Brothers Quality Intermediate Municipal Bond Index, which returned 0.81% for the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Other States Intermediate Municipal Debt Funds Category invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified state basis. Source for all statistical data -- Banc of America Capital Management, LLC. TAX-EXEMPT INVESTING OFFERS CURRENT TAX-EXEMPT INCOME, BUT IT ALSO INVOLVES SPECIAL RISKS. THE VALUE OF THE FUND WILL BE AFFECTED BY INTEREST RATE CHANGES AND THE CREDITWORTHINESS OF ISSUES HELD IN THE FUND. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP AND VICE VERSA. INTEREST INCOME FROM CERTAIN TAX-EXEMPT BONDS MAY BE SUBJECT TO CERTAIN STATE AND LOCAL TAXES AND, IF APPLICABLE, THE ALTERNATIVE MINIMUM TAX. CAPITAL GAINS ARE NOT EXEMPT FROM INCOME TAXES. SINGLE-STATE MUNICIPAL BOND FUNDS POSE ADDITIONAL RISKS DUE TO LIMITED GEOGRAPHICAL DIVERSIFICATION. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 98 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) 12-month period ended March 31, 2005. Investors should note that we changed the fund's benchmark from the Lehman Brothers 7-Year Municipal Bond Index because we consider the new benchmark to be more appropriate. The fund outperformed the average of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Category, which returned 0.35%. The fund benefited from an overweight in the water sector and from the positive performance of the electric and resource recovery sectors. However, these sectors represented a relatively small portion of the fund's assets. Investments in the state's general obligation sector detracted from the fund's performance, because of an increase in supply, which caused some municipal bond prices to remain flat during the period. Holdings in the education sector also hurt performance as the fund sold its position in a distressed junior college project during the period. HOW DID ECONOMIC AND MARKET CONDITIONS AFFECT THE VIRGINIA MUNICIPAL BOND MARKET DURING THE PERIOD? Virginia benefits from a broadly diversified economy. The services sector is the Commonwealth's largest, with 40.1% of total non-farm jobs, followed by government at 18.2%; trade, transportation, and utilities at 18.1%; and manufacturing at 8.7%. Virginia's economy remained robust in 2004, with personal income growth of 6.1% and a low unemployment rate of 3.4%. Because of these and other factors, the Commonwealth of Virginia is currently rated Aaa/Stable by Moody's Investors Service, AAA/Stable by Standard & Poor's Corporation, and AAA by Fitch Ratings. These credit ratings are also due, in part, to Virginia's strong financial operations in 2004 and the state's low debt burden. The Commonwealth ended fiscal year 2004 with a general fund balance of more than $247 million and a stabilization fund of $341 million. HOW IS THE FUND POSITIONED TO REFLECT YOUR OUTLOOK FOR VIRGINIA AND THE MUNICIPAL BOND MARKET FOR THE COMING YEAR? The 2005-2006 budget seeks to restore structural balance by implementing spending controls and tax-reform to create recurring revenue sources. Increases to the sales and use tax, cigarette tax and deed recording tax are expected to increase revenues by $616 million in fiscal year 2005 and $776 million in fiscal year 2006. We believe that these measures, along with proactive fiscal management and a manageable debt burden, should help Virginia continue to generate operating surpluses and rebuild reserves. Based on our projections for moderate economic growth and relatively low inflation, we believe the Fed will continue to raise short-term rates gradually throughout 2005 as it moves toward its goal of a more neutral monetary policy. The rate of job growth continues to be the key to determining the Fed's future actions. Inflation and the direction of oil prices could also figure into the Fed's decisions. In this environment, we plan to keep the fund's duration in line with its benchmark and to maintain or increase the fund's exposure to higher-yielding securities. Duration is a measure of the fund's interest rate sensitivity. ------------------------------------------------ Chris Eckstrom has managed Nations Virginia Intermediate Municipal Bond Fund since December 15, 2004. He is affiliated with Banc of America Capital 99 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Management, LLC, investment advisor to the fund. Prior to December 15, 2004, the Fund was managed by the Municipal Fixed Income Management Team. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 100 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 998.25 1,022.44 2.49 2.52 0.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 997.01 1,021.19 3.73 3.78 0.75 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 993.27 1,017.45 7.45 7.54 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 993.27 1,017.45 7.45 7.54 1.50
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the advisor and/or administrator not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange. Therefore, the 101 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in the shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 102 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.9% Industrials 2.0% Transportation 2.0% Education 3.5% Housing 5.4% Health care 7.2% Resource recovery 10.1% Utilities 47.6% Tax-backed 20.3% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 VA State GO, Series 2002, 4.000% 06/01/09 3.1% ------------------------------------------------- 2 VA Fairfax County Economic Development Authority Resource Recovery Revenue Refunding Series 1998A AMT Insured: AMBAC 5.95% 02/01/07 3.0% ------------------------------------------------- 3 VA State GO, Series 2004 B, 5.000% 06/01/16 2.9% ------------------------------------------------- 4 Virginia State, GO Refunding, Series 2004 B, 5.000% 06/01/15 2.4% ------------------------------------------------- 5 VA Chesapeake Virginia, GO Refunding Series 1993 5.125% 12/01/05 1.8% ------------------------------------------------- 6 VA Suffolk Virginia, Redevelopment and Housing Authority Multi-Family Housing Revenue Refunding Windsor Ltd. Partnership Project, Series 2001 Mandatory Put 7/1/2011 @ 100, 4.850% 07/01/31 1.8% ------------------------------------------------- 7 VA Norfolk Virginia Capital Improvement Series 2002 B Insured: FSA 5.250% 07/01/11 1.6% ------------------------------------------------- 8 VA Fairfax County Virginia GO, Series 2002 A State Aid Withholding 5.00% 06/01/10 1.6% ------------------------------------------------- 9 VA Southeastern Public Service Authority Revenue Refunding Series 1993A Insured: MBIA 5.10% 07/01/08 1.5% ------------------------------------------------- 10 VA State GO Series 2003 A, 5.000% 06/01/08 1.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
103 NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS VIRGINIA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNCIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 9,675 $ 10,000 $ 10,000 1996 10,351 10,806 10,786 10,735 11,305 11,274 1998 11,584 12,325 12,225 12,164 13,055 12,935 2000 12,171 13,132 13,065 13,224 14,464 14,327 2002 13,644 14,974 14,868 14,729 16,555 16,281 2004 15,439 17,482 17,065 Mar. 31 2005 15,456 17,621 17,203
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS VIRGINIA LEHMAN BROTHERS QUALITY INTERMEDIATE MUNICIPAL LEHMAN BROTHERS 7-YEAR INTERMEDIATE MUNCIPAL BOND FUND MUNICIPAL BOND INDEX INDEX ---------------------- ---------------------- ----------------------- Mar. 31 1995 $ 10,000 $ 10,000 $ 10,000 1996 10,699 10,806 10,786 11,096 11,305 11,274 1998 11,974 12,325 12,225 12,572 13,055 12,935 2000 12,580 13,132 13,065 13,668 14,464 14,327 2002 14,103 14,974 14,868 15,224 16,555 16,281 2004 15,865 17,482 17,065 Mar. 31 2005 15,973 17,621 17,203
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 4.79% 4.45%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Virginia Intermediate Municipal Bond Fund over the last 10 years. The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index of investment grade bonds with maturities of 7 to 8 years. The Lehman Brothers Quality Intermediate Municipal Index is an unmanaged index of tax-free bonds with a minimum quality rating of A3 from Moody's Investors Service, Inc. and having a maturity range between 2 and 11 years. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do no reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/20/89 12/5/89 6/7/93 6/17/92 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.94% 0.69% -2.61% -0.15% -3.06% -0.06% -1.03% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.50% 4.24% 3.10% 3.46% 3.15% 3.46% 3.46% 5 YEARS 5.15% 4.89% 4.21% 4.11% 4.11% 4.11% 4.11% 10 YEARS 5.03% 4.79% 4.45% 4.15% 4.15% 4.14% 4.14% SINCE INCEPTION 5.58% 5.37% 5.15% 3.95% 3.95% 4.26% 4.26%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 104 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- MUNICIPAL BONDS -- 99.1% EDUCATION -- 7.3% EDUCATION -- 6.0% $ 2,855 GA Private Colleges and Universities Authority Revenue, Emory University Project, Series 2002 A, 5.000% 09/01/06............................................. $ 2,945 6,955 IL Educational Facilities Authority Revenue, National Louis University, Series 1999 A, 2.300% 06/01/29............................................. 6,955 5,000 University of Chicago, Series 2001 B-2, 4.000% 07/01/36............................................. 5,119 5,000 IL University of Illinois Certificates of Partnerships University of Illinois - Integrate Project Insured: AMBAC 5.250% 10/01/06............................................. 5,178 5,330 MI Oakland Michigan University of Michigan Revenue, Series 2001 Insured: FGIC 2.270% 03/01/31............................................. 5,330 2,800 NC University of North Carolina Series 2002 B, 5.000% 12/01/06............................................. 2,904 8,450 PA Chester County Revenue Floater 2.340% 04/01/31............................................. 8,450 1,030 PA State Higher Educational Facilities 5.000% 05/01/08............................................. 1,081 4,425 SC University of South Carolina Athletics 3.500% 03/16/06............................................. 4,457 1,100 TX Tech University Revenue Financing System Seventh Series Insured: MBIA 5.250% 08/15/09............................................. 1,186 3,030 TX Texas A&M University Revenue Series 1996, 5.750% 05/15/05............................................. 3,043 TX University of Texas Permian University Revenue Refunding Series 2002 A, 4,000 5.000% 07/01/06............................................. 4,113 3,500 5.000% 07/01/08............................................. 3,706 2,555 Series 2001 C, 4.000% 08/15/05............................................. 2,570 -------- 57,037 -------- PREP SCHOOL -- 0.8% 2,840 DC Private Schools Revenue Field School Project, Series 2001 A LOC: First Union National Bank 2.290% 07/01/31............................................. 2,840 5,000 TX Red River Authority Texas Education Financing Revenue Parish Day School Project Series 2001 A LOC: Allied Irish Bank PLC 3.100% 12/01/31............................................. 4,942 -------- 7,782 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- STUDENT LOAN -- 0.5% $ 2,500 AK Student Loan Corp. Student Loan Revenue Series 1999 A, AMT Insured: AMBAC 4.900% 07/01/08............................................. $ 2,620 2,370 SC State Education Assistance Authority Revenue Refunding Guaranteed Student Loan Senior Lien Project Series 1993A-3, AMT 5.200% 09/01/05............................................. 2,396 -------- 5,016 -------- 69,835 -------- HEALTH CARE -- 4.4% HEALTH SERVICES -- 0.2% 1,500 MN Minneapolis and St. Paul Housing and Redevelopment Authority Health Care HealthPartners Obligation Group Project, 4.500% 12/01/07............................................. 1,539 -------- 1,539 -------- HOSPITALS -- 4.1% AZ University Medical Center Corp. Hospital Revenue Revenue Refunding, GO, 300 5.000% 07/01/07............................................. 311 700 5.000% 07/01/06............................................. 717 1,700 FL Escambia County Florida Health Facilities Authority Revenue, Ascension Health Credit Project, Series 2003 A, 5.000% 11/15/07............................................. 1,776 950 GA Gainesville and Hall County Georgia Hospital Authority Revenue Refunding Northeast Georgia Health System, Inc., Project, Series 2000, AMT, 4.000% 05/15/07............................................. 961 MI State Hospital Finance Authority Revenue Ascension Health Credit Project, Series 1999 B 1,000 Mandatory Put 11/15/05 @ 100, 5.200% 11/15/33............................................. 1,016 1,800 Mandatory Put 11/15/06 @ 100, 5.300% 11/15/33............................................. 1,867 MO State Health and Educational Facilities Authority Revenue, Saint Lukes Episcopal-Presbyterian Hospital Project, Series 2001 Insured: FSA 2,250 3.850% 12/01/05............................................. 2,269 2,470 4.000% 12/01/06............................................. 2,515 4,000 MO State Health and Educational Facilities Revenue, SSM Health Care Project, Series 2002 A, 5.000% 06/01/07............................................. 4,152 1,340 NC Charlotte-Mecklenburg North Carolina Hospital Authority Health Care System Revenue Refunding, (a) 01/01/06................................................ 1,314
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 105 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- HOSPITALS -- (CONTINUED) NC Medical Care Commission $ 4,000 Health Care Facilities Revenue, Novant Health Obligation Project, Series 2003 A, 4.000% 11/01/06............................................. $ 4,068 1,675 Health System Revenue Mission St. Josephs Health System, Series 2001, 5.000% 10/01/08............................................. 1,770 2,900 NM State Hospital Equipment Loan Council Hospital Revenue, Presbyterian Healthcare Project, Series 2001 A, 4.600% 08/01/08............................................. 2,995 SC Florence County South Carolina Hospital Revenue, McLeord Regional Medical Center Project, 1,330 Series 1998 A Insured: MBIA 5.500% 11/01/07............................................. 1,410 1,155 Series 2004A Insured: FSA 5.000% 11/01/09............................................. 1,233 TX Harris County Texas Health Facilities Development Authority Hospital Revenue, 4,000 Memorial Hospital Systems Project, Series 1997 A Insured: MBIA 4.875% 06/01/05............................................. 4,017 2,000 St. Luke's Episcopal Hospital Project, Series 2001 A, 5.250% 02/15/06............................................. 2,039 2,000 UT County Hospital Revenue IHC Health Services, Inc., Project, Series 2002, 5.000% 05/15/05............................................. 2,006 2,000 VA Arlington County, Virginia Industrial Development Authority Hospital Facilities Revenue, Virginia Hospital Center Project, Series 2001, 5.500% 07/01/05............................................. 2,015 1,005 WI State Health and Educational Facilities Authority Revenue Gundersen Lutheran Hospital Project Series 2003 A Insured: FSA 5.000% 02/15/07............................................. 1,041 -------- 39,492 -------- NURSING HOMES -- 0.1% 1,500 CO Health Facilities Authority Revenue, Evangelical Lutheran Series 2004 B, 3.750% 06/01/34............................................. 1,478 -------- 1,478 -------- 42,509 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- HOUSING -- 2.3% MULTI-FAMILY -- 0.9% $ 3,330 GA Clayton County Georgia Housing Authority Multi-Family Housing Revenue Refunding, Tara Court II Apartments Project, Series 2001 Mandatory Put 12/01/11 @ 100 4.350% 12/01/31............................................. $ 3,421 4,800 MI State Housing Development Authority Rental Housing Revenue, Series 2000 B Insured: MBIA 2.250% 04/01/24............................................. 4,800 -------- 8,221 -------- SINGLE FAMILY -- 1.4% 10,495 ID Housing and Finance Association Single Family Mortgage Project, Series 2002 B-1, LOC: Bayerische Landesbank Girozentrale, 2.320% 07/01/33............................................. 10,495 1,040 IL Chicago Illinois Single Family Mortgage Revenue, Series 2001, Insured: FNMA 2.370% 04/01/07............................................. 1,040 2,000 OK Housing Development Authority Revenue Obligation Lease Purchase Program, Series 2000A 5.100% 11/01/05............................................. 2,028 -------- 13,563 -------- 21,784 -------- INDUSTRIALS -- 6.1% CHEMICALS -- 0.2% 2,440 TX Red River Authority Texas Pollution Control Revenue Refunding Hoechst Celanese Corporation Project, Series 1994, 5.200% 05/01/07............................................. 2,458 -------- 2,458 -------- FOREST PRODUCTS & PAPER -- 2.8% 2,000 AL Butler Alabama Industrial Development Board Pollution Control Revenue Refunding, James River Project, Series 1993, 5.500% 12/01/05............................................. 2,016 7,000 GA Richmond County Development Authority Industrial Development Revenue Refunding, Archer Daniels Midland Project, Series 1993, 5.300% 05/01/05............................................. 7,017 1,900 ME Baileyville Maine Pollution Control Revenue, Georgia-Pacific Corporation Project, Series 1998, 4.750% 06/01/05............................................. 1,903
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 106 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- FOREST PRODUCTS & PAPER -- (CONTINUED) $ 2,830 SC Jobs Economic Development Revenue, Shannon Forest Project, Series 2003, 2.270% 04/01/23............................................. $ 2,830 7,750 SC Richland County South Carolina Environmental Improvement Revenue Refunding, International Paper Co. Project, Series 2002 A 4.250% 10/01/07............................................. 7,910 5,000 WI Kaukauna Wisconsin Pollution Control Revenue Refunding International Paper Project, Series 1997 A, 5.150% 07/01/06............................................. 5,120 -------- 26,796 -------- MANUFACTURING -- 0.8% 2,300 GA De Kalb County Georgia Development Authority Industrial Development Revenue Rock-Tenn Converting Company Project, Series 1995, LOC: SunTrust Bank, Atlanta 2.340% 04/01/10............................................. 2,300 2,000 GA Gwinnett County, Georgia Development Authority Industrial Development Revenue, Maltese Signs, Inc. Project Series 2000, AMT, LOC: SunTrust Bank 2.390% 02/01/15............................................. 2,000 SC Jobs Economic Development Authority, Valley Proteins, Inc. Project, Series 1995, 510 2.340% 04/01/10............................................. 510 1,760 2.340% 09/01/10............................................. 1,760 1,030 Series 1998 2.440% 09/01/19............................................. 1,030 -------- 7,600 -------- OIL & GAS -- 2.3% 5,000 LA Calcasieu Parish Louisiana Industrial Development Board Pollution Control Revenue Occidental Petroleum Project, Series 2001, 4.800% 12/01/06............................................. 5,122 1,000 LA State Offshore Term Authority Deepwater Port Revenue Refunding Loop LLC Project, Series 2003, Mandatory Put 09/01/08 @ 100 4.000% 09/01/23............................................. 1,009 3,800 PA Philadelphia Pennsylvania Industrial Development Authority, IDR Refunding Ashland Oil Inc. Project, Series 1993, 5.700% 06/01/05............................................. 3,817
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- OIL & GAS -- (CONTINUED) $ 4,000 TX Gulf Coast Waste Disposal Authority Environmental Facility Revenue Refunding, Occidental Chemical Corporation Project, Series 2001, 4.200% 11/01/06............................................. $ 4,087 8,350 WY Uinta County Wyoming Pollution Control Revenue Amoco Project Remarketing 12/01/03, 2.250% 07/01/26............................................. 8,188 -------- 22,223 -------- 59,077 -------- OTHER -- 3.3% POOL/BOND BANK -- 0.5% 845 AK Municipal Bond Bank Authority Revenue, AMT, Series 2003 A Insured: MBIA 3.500% 12/01/05............................................. 851 1,900 MI Municipal Bond Authority Revenue, Clean Water Revolving Fund, Series 2001, 5.000% 10/01/08............................................. 2,021 1,615 WI State Clean Water Revenue, Series 1, 4.500% 06/01/06............................................. 1,648 -------- 4,520 -------- REFUNDED/ESCROWED(b) -- 2.6% 2,010 AZ Maricopa County Arizona Unified High School District Number 210 Phoenix GO Unrefunded Balance, Series 2009 Pre-refunded 07/01/06, 5.000% 07/01/09............................................. 2,087 2,000 FL Jacksonville Florida Sales Tax Revenue River City Renaissance Project, Series 1995 Insured: FGIC Pre-refunded 10/01/05, 5.375% 10/01/18............................................. 2,049 5,075 PA Chester County Pennsylvania GO Refunding Series 1995B, Pre-refunded 11/15/05, 5.625% 11/15/16............................................. 5,175 355 TX Austin Texas Airport System Revenue Series 1995 Insured: MBIA Pre-refunded 11/15/05, 5.500% 11/15/06............................................. 368 2,830 TX Austin Texas, GO, Series 1995 Pre-refunded 09/01/05 5.500% 09/01/12............................................. 2,867 4,920 TX Dallas Texas Independent School District GO Series 1995 Insured: PSFG Pre-refunded 08/15/05, 5.750% 08/15/13............................................. 4,982
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 107 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- REFUNDED/ESCROWED(b) -- (CONTINUED) $ 6,445 TX Keller Texas Independent School District GO Series 1993 Insured: PSFG Pre-refunded 02/15/06, 5.500% 08/15/13............................................. $ 6,608 1,145 TX Midlothian Texas Independent School District GO Series 1995 Insured: PSFG Pre-refunded 02/15/07, (a) 02/15/07................................................ 1,084 -------- 25,220 -------- TOBACCO -- 0.2% 2,000 AL 21st Century Authority Settlement Revenue 5.250% 12/01/07............................................. 2,081 -------- 2,081 -------- 31,821 -------- OTHER REVENUE -- 0.3% RECREATION -- 0.3% 2,500 GA George L. Smith II World Congress Center Authority Revenue Refunding Domed Stadium Project, Series 2000, AMT Insured: MBIA 6.000% 07/01/05............................................. 2,522 -------- 2,522 -------- 2,522 -------- RESOURCE RECOVERY -- 2.6% DISPOSAL -- 1.3% 3,500 AR State Development Finance Authority Facilities Revenue, Waste Management, Inc., Project, Series 2001, AMT Mandatory Put 08/01/04 @ 100, 2.850% 08/01/21............................................. 3,495 1,450 FL Broward County Florida Solid Waste System Revenue Refunding, Series 2003 B, 4.000% 07/01/06............................................. 1,474 2,000 SC Jobs Economic Development Authority Economic Development Revenue Refunding, Republic Services, Inc., Project Series 2004, AMT 3.250% 04/01/34............................................. 1,980 5,500 SC Jobs Economic Development Authority Economic Development Revenue Waste Management South Carolina Inc., Project, Series 2001 AMT, Mandatory Put 11/01/04 3.300% 11/01/16............................................. 5,444 -------- 12,393 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- RESOURCE RECOVERY -- 1.3% $ 2,000 MI State Strategic Fund Solid Waste Disposal Revenue Refunding, Waste Management Project, Series 2002 Mandatory Put 12/01/05 @ 100, 4.200% 12/01/12............................................. $ 2,011 3,000 MS Business Finance Corporation Mississippi Solid Waste Disposal Revenue, Waste Management, Inc., 3.350% 03/01/29............................................. 2,902 3,650 NY State Environmental Facilities Corporation Solid Waste Disposal Revenue, Waste Management Project, Series 2002 A, 2.900% 05/01/12............................................. 3,622 4,000 VA Fairfax County Virginia Economic Development Authority Resource Recovery Revenue Refunding, Series 1998 A, AMT Insured: AMBAC 5.950% 02/01/07............................................. 4,201 -------- 12,736 -------- 25,129 -------- TAX-BACKED -- 39.3% LOCAL APPROPRIATED -- 1.7% 2,000 GA Dalton Georgia Building Authority Revenue, Series 2001, 5.000% 07/01/05............................................. 2,013 2,000 IL Chicago Illinois Public Building Commission Building Revenue, Series 1999 A Insured: FGIC 5.500% 02/01/06............................................. 2,047 1,000 NC Charlotte North Carolina Certificates of Participation, Equipment Acquisition Project, Series 2003 C, 5.000% 03/01/07............................................. 1,039 NC Fayetteville North Carolina Installment Payment Revenue, Municipal Building Project, Series 2005 Insured: MBIA 1,240 4.000% 02/01/07............................................. 1,265 1,465 4.000% 02/01/08............................................. 1,503 1,285 NC Lincoln County North Carolina Lease Revenue, Series 2003 Insured: FSA 4.500% 06/01/07............................................. 1,327 1,125 NC Rutherford County North Carolina Certificates of Participation, Series 2002 Insured: AMBAC 4.500% 09/01/06............................................. 1,152 1,920 NC Winston Salem North Carolina Risk Acceptance Management Corporation Certificates of Participation, Series 1988, 2.270% 07/01/09............................................. 1,920
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 108 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- LOCAL APPROPRIATED -- (CONTINUED) $ 4,345 VA Loudoun County Virginia Industrial Development Authority Public Safety Facility Lease Revenue, Series 2003 B, 5.000% 12/15/08............................................. $ 4,498 -------- 16,764 -------- LOCAL GENERAL OBLIGATIONS -- 15.5% 4,890 AK Anchorage Alaska GO Series 2002 A Insured: MBIA 4.000% 06/01/06............................................. 4,963 AK North Slope Borough Alaska GO 10,700 Series 1996, Insured: MBIA (a) 06/30/07................................................ 9,982 1,500 Series 2000 B Insured: MBIA (a) 06/30/06................................................ 1,449 1,500 Series 2001 A Insured: MBIA (a) 06/30/07................................................ 1,399 2,100 AL Hoover Alabama, GO, Series 2003 Insured: MBIA 5.000% 03/01/08............................................. 2,214 1,000 AL Huntsville Alabama, GO, Refunding Series 2002 F, 4.000% 08/01/05............................................. 1,005 1,030 AZ Maricopa County Arizona School District Number 014, Creighton Unrefunded Balance School Improvement Project C, Insured: FGIC 7.875% 07/01/06............................................. 1,094 2,925 AZ Maricopa County Arizona Unified School District Number 97, GO, Refunding, Series 2003 Insured: FGIC 5.000% 07/01/07............................................. 3,058 5,225 AZ Phoenix Arizona, GO, Refunding Series 1993 A, 5.300% 07/01/06............................................. 5,393 1,000 CO Denver Colorado City And County Colorado Board Water Commission Refunding Revenue, Series 2001 B, 5.000% 09/01/06............................................. 1,031 GA Coweta County 2,000 School District GO, Series 2002, 5.000% 08/01/07............................................. 2,094 1,200 School District Sales Tax, GO, Series 2002, 4.000% 08/01/07............................................. 1,230 2,600 GA Fayette County Georgia School District, GO, Series 2001, 5.250% 03/01/09............................................. 2,794 3,000 GA Houston County School District, GO, Series 2002, 4.000% 09/01/06............................................. 3,053 6,000 GA Richmond County, GO, Board of Education, Series 2002, 5.000% 11/01/05............................................. 6,088
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 1,000 IA Des Moines Iowa GO Refunding, Series 1996 F, 5.000% 06/01/06............................................. $ 1,005 2,000 IL Chicago Illinois Metropolitan Water Reclamation District, Greater Chicago Capital Improvement Bonds, Series 2002 D, 5.000% 12/01/07............................................. 2,103 5,000 IL Chicago Illinois Capital Appreciation-Central Loop Project Refunding GO, Series 2003 A Insured: XLCA (a) 12/01/08................................................ 4,418 2,300 IL Chicago LOC: State Street Bank & Trust Co., 2.200% 01/27/06............................................. 2,294 IL Cook County GO Refunding, 1,885 High School District Number 209 Proviso Township GO, Series 2004 Insured: FSA (a) 12/01/09................................................ 1,729 4,545 Series 2003 B Insured: MBIA 5.000% 11/15/07............................................. 4,775 5,580 Township High School District Number 211 Palatine and Schaumb GO, Series 2001, 5.000% 12/01/05............................................. 5,672 1,400 IL Evanston Illinois GO Refunding, Series 2002 C, 5.000% 01/01/06............................................. 1,425 1,000 IL Schaumberg Illinois GO, Series 2002 A, 5.000% 01/01/07............................................. 1,037 7,110 LA New Orleans Louisiana Public Improvement GO, Series 1997 A Insured: AMBAC (a) 09/01/07................................................ 6,601 5,160 MA Boston Massachusetts GO Refunding, Series 2002 C, 5.000% 02/01/08............................................. 5,442 3,450 MD Baltimore Maryland Refunding and Consolidated Public Improvement GO, Series 2003 A Insured: FSA 2.050% 10/15/20............................................. 3,450 1,520 MN Lake Superior Minnesota Independent School District Number 381 GO, Series 2002 A Insured: FSA 5.000% 04/01/09............................................. 1,624 2,200 MN Minneapolis Minnesota GO Convention Center, Series 2002, 4.000% 12/01/07............................................. 2,264 1,300 NC Guilford County North Carolina GO, Series 2004 C, 4.000% 10/01/20............................................. 1,331 3,000 NJ Essex County New Jersey GO Refunding, Series 1996 A-1 Insured: FGIC 6.000% 11/15/07............................................. 3,231
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 109 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 3,300 NV Clark County Nevada School District GO Refunding, Series 1996 Insured: FGIC 4.750% 06/15/09............................................. $ 3,405 1,035 NV Henderson Nevada GO Refunding, Series 2001, 4.000% 06/01/05............................................. 1,038 2,000 NV Las Vegas Nevada GO Refunding Series 2002 B, 4.000% 01/01/08............................................. 2,050 1,500 OK Tulsa Oklahoma, GO Series 2001 4.250% 03/01/09............................................. 1,557 6,600 PA Berks County Insured: MBIA 2.260% 11/01/23............................................. 6,600 3,000 PA Philadelphia Pennsylvania School District GO Refunding, Series 1998B Insured: MBIA 5.000% 10/01/06............................................. 3,099 1,335 TN Franklin Tennessee Special School District GO Refunding, Series 2002 4.500% 06/01/06............................................. 1,363 1,125 TN Maury County Tennessee, GO Series 2004A Insured: MBIA 4.000% 04/01/08............................................. 1,156 2,700 TN Metropolitan Government Nashville and Davidson County GO, Series 2004 5.000% 11/15/07............................................. 2,842 3,000 TX Austin Texas, GO Series 2001 5.250% 09/01/08............................................. 3,207 4,110 TX Austin Texas GO Refunding, 5.250% 09/01/08............................................. 4,394 1,555 TX Carrollton Texas Farmers Branch Independent School (a) 02/15/07................................................ 1,467 1,245 TX Carrollton Texas Farmers Branch Independent School District, GO Series 2000 Insured: PSFG 5.000% 02/15/07............................................. 1,292 1,330 TX Fort Bend Texas Independent School District GO Series 2002 Insured: PSFG 5.000% 08/15/07............................................. 1,392 1,725 TX Socorro Texas Independent School District GO Refunding Series 2002 Insured: PSFG 5.000% 08/15/06............................................. 1,777 2,000 TX Tarrant County Texas GO Refunding Series 2004, 4.000% 07/15/09............................................. 2,060 4,220 WA King County Washington School District Number 408, Auburn GO Series 1992 A, 6.375% 12/01/06............................................. 4,381 2,605 WA Seattle Washington GO, Series 2001, 4.000% 08/01/05............................................. 2,619
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) WI Milwaukee Wisconsin GO Refunding $ 2,080 Series 2002 W Insured: FSA 4.500% 03/15/09............................................. $ 2,178 2,070 Series 2002 5.000% 09/01/07............................................. 2,169 1,695 WI Oshkosh Wisconsin Area School District GO Refunding, Series 1996 B Insured: MBIA 4.900% 03/01/06............................................. 1,730 2,300 WY Campbell County Wyoming School District Number 001-Gillette, GO Series 1996, 5.550% 06/01/06............................................. 2,373 -------- 149,397 -------- SPECIAL NON-PROPERTY TAX -- 6.4% 1,000 AL State Public School And College Authority Revenue, Series 1996 Insured: MBIA 5.250% 11/01/05............................................. 1,016 6,250 AZ State Transportation Board Excise Tax Revenue Maricopa County Regional Area Road Fund Project, Series 2002, 5.000% 12/15/05............................................. 6,360 1,370 AZ State Transportation Board Highway Revenue Refunding, Series 1993 A, 5.000% 07/01/09............................................. 1,465 2,370 CO Regional Transportation District Sales Tax Revenue Refunding Series 2003 A Insured: FSA 5.000% 11/01/07............................................. 2,491 2,000 CT State Special Tax Obligation Revenue Refunding Transportation Infrastructure Project Series 1993 A, 5.375% 09/01/08............................................. 2,147 5,000 FL Jea Florida St. Johns River Power Park Systems Revenue Refunding, Series 2002, 5.000% 10/01/06............................................. 5,165 4,250 FL Pinellas County Capital Improvement Revenue, Series 2000 4.500% 01/01/06............................................. 4,312 3,000 FL Tampa Florida Utility Tax and Special Revenue Refunding, Series 2001 Insured: AMBAC 6.000% 10/01/05............................................. 3,053 1,260 IL Broadview Illinois Tax Increment Revenue, Series 1999, 4.750% 07/01/05............................................. 1,264 3,680 MD State Economic Development Corporation Lease Revenue Aviation Administration Facilities, Series 2003 Insured: FSA 5.000% 06/01/07............................................. 3,830
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 110 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- (CONTINUED) $ 2,000 MI State Trunk Line Capital Appreciation Revenue, Series 1992 A Insured: AMBAC (a) 10/01/05................................................ $ 1,976 NM State Severance Tax Revenue Series 2002, 3,500 4.500% 07/01/05............................................. 3,519 5,000 5.000% 07/01/07............................................. 5,224 NV State Highway Improvement Revenue Motor Vehicle Fuel Tax, Series 2000 A, 3,250 5.000% 12/01/06............................................. 3,366 7,000 5.000% 12/01/08............................................. 7,442 4,325 Series 2003 Insured: MBIA 5.000% 12/01/07............................................. 4,547 2,000 NY City New York Transitional Finance Authority Revenue Refunding, Future Tax Secondary Project, Series 2002 A, 5.000% 11/01/05............................................. 2,030 1,000 NY State Urban Development Corporation Revenue Personal Income Tax, Series 2002 D, Insured: FSA 5.000% 12/15/07............................................. 1,054 1,100 SD Rapid City South Dakota Sales Tax Revenue Refunding, Series 2002 Insured: AMBAC 5.500% 06/01/05............................................. 1,106 -------- 61,367 -------- SPECIAL PROPERTY TAX -- 0.7% 6,185 GA De Kalb County Georgia Special Recreation Tax District GO, Series 2001, 5.000% 12/01/06............................................. 6,418 -------- 6,418 -------- STATE APPROPRIATED -- 5.6% 3,085 AL Montgomery Alabama Downtown Redevelopment Authority Lease Revenue Refunding, State of Alabama Project, Series 2002 Insured: MBIA 5.000% 10/01/07............................................. 3,236 1,550 IN State Office Building Commission Facilities Revenue, Indiana State Museum Facility, Series 2003 Insured: MBIA 5.000% 07/01/07............................................. 1,619 2,250 KY Asset/Liability Commission General Fund Revenue Refunding, Series 2003 A Insured: AMBAC 5.000% 07/15/10............................................. 2,421
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- STATE APPROPRIATED -- (CONTINUED) $ 1,945 KY State Property and Buildings Community Revenue Refunding, Number 74 Project, Series 2002 Insured: FSA 5.000% 08/01/05............................................. $ 1,962 5,765 MO State Board of Public State Office Buildings Special Obligation Revenue Refunding, Series 2001 B, 4.000% 12/01/05............................................. 5,824 2,070 NC Infrastructure Finance Corporation Lease Purchase Revenue, Correctional Facilities Project, Series 2003, 5.000% 10/01/06............................................. 2,138 4,000 OH State Building Authority Revenue, Arts Facilities Building Project Series 1996 5.000% 10/01/06............................................. 4,132 10,000 OH State Higher Educational Capital Facilities Revenue, Series 2002A-II 5.000% 12/01/07............................................. 10,525 5,000 OH State Public Facilities Commission Revenue Higher Education Capital Facilities, Project Series 1996 II-A Insured: MBIA 4.375% 11/01/05............................................. 5,056 6,000 OK State Capital Improvement Authority State Highway Capital Improvement Revenue Insured: MBIA 5.000% 12/01/09............................................. 6,439 5,635 VA Commonwealth Transportation Board Federal Highway Reimbursement Notes Revenue Series 2002, 4.000% 10/01/05............................................. 5,680 1,730 VA Port Authority Commonwealth Revenue, Series 1996, AMT, 5.750% 07/01/05............................................. 1,745 VA Port Authority Port Facility Revenue, Series 2003 Insured: MBIA 1,120 4.000% 07/01/09............................................. 1,144 1,015 5.000% 07/01/07............................................. 1,058 1,065 VA Port Authority Port Facility Revenue Series 2003 Insured: MBIA 5.000% 07/01/08............................................. 1,123 -------- 54,102 -------- STATE GENERAL OBLIGATIONS -- 9.4% FL State Board of Education GO, 2,195 Series 2003 D, 5.000% 06/01/07............................................. 2,292 2,000 Series 2003 I, 5.000% 06/01/08............................................. 2,117 2,500 HI State GO Refunding, Series 2002 CY Insured: FSA 5.250% 02/01/07............................................. 2,605
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 111 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- STATE GENERAL OBLIGATIONS -- (CONTINUED) IL State GO Refunding, $ 5,205 Series 2001 Insured: FSA 5.250% 10/01/06............................................. $ 5,395 GO, Series 2001, 1,500 5.000% 04/01/05............................................. 1,500 4,500 5.000% 11/01/05............................................. 4,566 1,680 5.000% 05/01/07............................................. 1,750 5,000 LA State GO Refunding, Series 2005 A Insured: MBIA 5.000% 08/01/08............................................. 5,304 MS State Gaming County Highway Improvements GO 6,750 Series 2001 B, 5.000% 10/01/06............................................. 6,975 2,000 Refunding, Series 1996, 5.100% 12/01/09............................................. 2,070 2,265 Series 2002, 5.500% 11/01/05............................................. 2,305 2,000 NC State School Improvement GO Series 1998 A, 4.750% 04/01/11............................................. 2,108 5,915 NM State GO Refunding Series 2001 B, 5.000% 09/01/06............................................. 6,102 OR State Pension GO 2,055 3.312% 06/01/07............................................. 2,016 2,000 3.742% 06/01/08............................................. 1,960 2,270 PA State First Series 5.000% 01/15/09............................................. 2,417 7,375 PR Commonwealth of Puerto Rico, Public Improvement Refunding GO, Series 2003C 5.000% 07/01/18............................................. 7,723 PR Public Buildings Authority Revenue Guaranteed Government Facilities 6,470 Series 2002C, 5.250% 07/01/08............................................. 6,866 3,000 Series 2004K, 4.500% 07/01/22............................................. 3,086 5,000 TX State GO Refunding, Series 1992 A, 8.000% 10/01/07............................................. 5,600 1,000 TX State Public Finance Authority GO Refunding, Series 1997, 5.250% 10/01/09............................................. 1,057 1,500 WA State GO Refunding Series 2002 R-A, 5.000% 09/01/06............................................. 1,547 WA State GO 5,000 Series 2001 R-A, 5.250% 09/01/05............................................. 5,059 3,655 Series 2001 B, 5.000% 09/01/06............................................. 3,769 WI State GO Refunding 2,250 Series 1993, 4.900% 11/01/06............................................. 2,324 2,000 Series 1998, 5.000% 05/01/05............................................. 2,004 -------- 90,517 -------- 378,565 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- TRANSPORTATION -- 12.4% AIR TRANSPORTATION -- 1.7% $ 2,000 OH Dayton Ohio Facilities Revenue Funding, Series 1993 6.050% 10/01/09............................................. $ 2,198 3,000 OH Dayton Ohio Special Facilities Revenue Refunding, Air Freight Corp. Project, Series 1993F 6.050% 10/01/09............................................. 3,298 2,575 OH Dayton, Special Facilities Revenue, Air Freight Corp. Project, Series 1988 D, AMT 6.200% 10/01/09............................................. 2,839 7,710 TN Memphis Shelby County Airport Authority Special Facilities Revenue, Federal Express Corp. Project, Refunding, Series 2001, 5.000% 09/01/09............................................. 8,241 -------- 16,576 -------- AIRPORTS -- 5.8% 2,275 CO Denver City and County Colorado Airport Revenue Refunding, Series 2001 D, AMT Insured: FSA 5.000% 11/15/05............................................. 2,309 1,000 CO Denver Colorado City And County Special Facilities Airport Revenue, Rental Car Project, Series 1999 A Insured: MBIA 5.500% 01/01/08............................................. 1,054 4,000 DC Metropolitan Washington District of Columbia Airports Authority Virginia General Airport Revenue, Series 1997 B Insured: FGIC 6.000% 10/01/06............................................. 4,179 4,000 FL Broward County Florida Airport Systems Revenue Refunding, Series 2003 K Insured: FGIC 5.000% 10/01/07............................................. 4,191 1,240 FL Greater Orlando Aviation Authority Airport Facilities Revenue Refunding, Series 2002 C, Insured: MBIA 5.250% 10/01/07............................................. 1,307 FL Hillsborough County Aviation Authority Revenue Refunding, Tampa International Airport Project, AMT, Series 2003 D Insured: MBIA 1,795 4.000% 10/01/05............................................. 1,808 1,870 5.000% 10/01/06............................................. 1,928 7,305 FL Miami Dade County Aviation Revenue Refunding, Series 1998 A, AMT Insured: FGIC 5.250% 10/01/07............................................. 7,673
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 112 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- AIRPORTS -- (CONTINUED) $ 1,300 FL Miami-Dade County Florida Aviation Revenue, Miami International Airport Project, Series 2002 Insured: MBIA 5.000% 10/01/06............................................. $ 1,341 2,870 FL Miami-Dade County Florida Aviation Revenue, Series 2000-SG141, Societe Generale SPA Insured: FGIC 2.310% 10/01/29............................................. 2,870 3,975 GA Atlanta Georgia Airport Facilities Revenue Capital Appreciation, Series 1991 Insured: MBIA (a) 01/01/10................................................ 3,087 9,815 HI State Airports System Revenue AMT Insured: FGIC 5.000% 07/01/08............................................. 10,294 OK Tulsa Oklahoma Airports Improvement Trust General Revenue Tulsa International Airport, AMT, Series 2004A Insured: FGIC 1,165 5.000% 06/01/09............................................. 1,227 1,220 5.000% 06/01/10............................................. 1,289 1,405 TN Memphis-Shelby County Airport Authority Revenue Refunding, AMT, Series 2002 Insured: MBIA 4.000% 11/15/05............................................. 1,417 1,645 TX Austin Texas Airport System Revenue, Series 1995A Insured: MBIA 5.500% 11/15/06............................................. 1,702 5,265 TX Dallas-Forth Worth Texas International Airport Revenue, Series 2002 A Insured: MBIA 5.500% 11/01/08............................................. 5,617 2,750 WA Seattle Washington Port of Seattle Revenue, AMT, Series 2001 B Insured: FGIC 5.500% 04/01/08............................................. 2,917 -------- 56,210 -------- PORTS -- 0.7% NY Port Authority New York and New Jersey Revenue Series 2004, 1,300 4.000% 12/01/05............................................. 1,312 1,400 4.000% 12/01/06............................................. 1,425 1,600 4.000% 12/01/07............................................. 1,634 1,900 4.000% 12/01/08............................................. 1,940 -------- 6,311 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- TOLL FACILITIES -- 2.4% $ 14,895 CO Public Highway Authority Highway Revenue Series 1997 B Insured: MBIA (a) 09/01/07................................................ $ 13,807 1,000 DE Transportation Authority Transportation System Revenue, Series 1998 Insured: FGIC 4.500% 07/01/09............................................. 1,048 2,450 TX Dallas Texas Revenue Refunding, Series 2003 C Mandatory Put 07/01/05 Insured: FSA 5.000% 01/01/18............................................. 2,588 5,000 TX Harris County Texas Toll Road, Series 2004 B-2 Insured: FGIC 5.000% 08/15/21............................................. 5,299 -------- 22,742 -------- TRANSPORTATION -- 1.8% AR State GO, Series 2001 A, 8,550 4.000% 08/01/05............................................. 8,597 2,100 4.500% 08/01/06............................................. 2,149 2,190 OH State Highway Revenue Major New State Infrastructure, Series 2002 4.500% 06/15/06............................................. 2,237 4,500 SC Transition Infrastructure Bank Revenue, Series 1998A Insured: MBIA 5.000% 10/01/06............................................. 4,648 -------- 17,631 -------- 119,470 -------- UTILITIES -- 21.1% INVESTOR OWNED -- 9.9% 3,000 AR Pope County Revenue Refunding Entergy Arkansas, Inc., Project, Series 2001, AMT Mandatory Put 09/01/05 @ 100, 5.050% 09/01/28............................................. 3,025 7,000 FL Hillsborough County Industrial Development Authority Pollution Control Revenue Refunding, Tampa Electric Company Project, Series 1993 Mandatory Put 08/01/07 @ 100, 4.250% 11/01/20............................................. 7,084 9,800 GA Burke County Development Authority Pollution Control Revenue, Oglethorpe Power Corp., Series 1993 A Insured: FGIC 2.270% 01/01/16............................................. 9,800 3,750 GA Monroe County Development Authority Pollution Control Revenue, Georgia Power Company Plant Scherer Project, Series 2001 Mandatory Put 12/01/08 @ 100 4.200% 01/01/12............................................. 3,854
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 113 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- INVESTOR OWNED -- (CONTINUED) $ 14,350 IL Development Finance Authority Pollution Control Revenue Refunding, Commonwealth Edison Company, Series 1996 Insured: AMBAC 4.400% 12/01/06............................................. $ 14,680 IN Rockport Indiana Pollution Control Revenue Refunding, AEP Generating Company Project 1,500 Series 1995 A Mandatory Put 07/13/06 @ 100 Insured: AMBAC 4.050% 07/01/25............................................. 1,524 6,000 Series 1995 B Mandatory Put 07/13/06 @ 100 4.050% 07/01/25............................................. 6,097 3,000 IN Michigan Power Company Project Series 2003 C, 2.625% 04/01/25............................................. 2,968 9,000 KS Burlington Kansas Environmental Improvement Revenue Refunding, Power and Light Project, Series 1998 C Mandatory Put 10/01/07 @ 100 4.750% 09/01/15............................................. 9,264 3,000 NH State Business Finance Authority Pollution Control Revenue Refunding, United Illuminating Company Project, Series 1999A Mandatory Put 12/03/07 @ 100 3.250% 12/01/29............................................. 2,997 12,330 NM Farmington New Mexico Pollution Control Revenue Public Service Refunding, San Juan Project 2003 B, 2.100% 04/01/33............................................. 12,183 5,000 OH Hamilton County Local District Cooling Facilities Revenue, Trigen Cinergy 4.600% 06/01/23............................................. 5,006 TX Brazos River Authority Pollution Control Revenue Refunding, TXU Electric Co. Project Series 2001 B Mandatory Put 11/01/06 @ 100 6,910 4.750% 05/01/29............................................. 7,087 4,000 5.400% 04/01/30............................................. 4,100 5,000 VA Louisa Virginia Industrial Development Authority Solid Waste & Sewage Disposal Revenue, Virginia Electric & Power Company Project, Series 2000 A, 2.350% 09/01/30............................................. 4,894 1,000 WV Putnam County West Virginia Pollution Control Revenue Refunding, Appalachian Power Company Project, Series 2003 E, 2.800% 05/01/19............................................. 988 -------- 95,551 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- JOINT POWER AUTHORITY -- 1.8% $ 2,400 AZ Electric Systems Revenue Refunding, Salt River Project Series 2002 D, 5.000% 01/01/08............................................. $ 2,526 5,000 CO Platte River Power Authority Power Revenue, Series 2003 FF, 5.000% 06/01/06............................................. 5,130 1,130 GA Municipal Electric Authority Power Revenue Unrefunded, Series 1998-W, 6.400% 01/01/06............................................. 1,161 5,000 NC Eastern Municipal Power Agency Power Systems Revenue Refunding Series 1993-B, Insured: MBIA 7.000% 01/01/08............................................. 5,507 3,000 NC Municipal Power Agency Number 1 Series 1992, Insured: MBIA 7.250% 01/01/07............................................. 3,218 -------- 17,542 -------- MUNICIPAL ELECTRIC -- 4.9% 4,600 AK Anchorage Alaska Electric Utility Revenue Refunding, Senior Lien, Series 1999 Insured: MBIA 5.000% 06/01/06............................................. 4,720 1,150 CA State Department of Water Resources Power Supply Revenue, Series 2002 A, 5.500% 05/01/05............................................. 1,153 5,000 FL Gainesville Florida Utilities System Revenue, Series 2003 C, 5.000% 10/01/08............................................. 5,315 1,380 FL Kissimmee Florida Utility Authority Electric System Revenue Refunding, Series 2001 Insured: AMBAC 5.000% 10/01/06............................................. 1,427 3,000 LA State Energy and Power Authority Revenue Refunding, Power Project, Series 2000 Insured: FSA 5.250% 01/01/06............................................. 3,059 1,000 MO Sikeston Missouri Electric Revenue Refunding, Series 1992, 6.100% 06/01/07............................................. 1,066 3,000 PR Electric Power Authority Power Revenue, Series 2002 5.000% 07/01/06............................................. 3,080 10,000 TN Memphis Tennessee Electric System Revenue Subordinated, Series 2003A Insured: MBIA 5.000% 12/01/09............................................. 10,701 4,000 TX Austin Texas Utility System Revenue Refunding, Series 1992A Insured: MBIA 6.000% 11/15/06............................................. 4,202
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 114 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- MUNICIPAL ELECTRIC -- (CONTINUED) $ 1,720 TX Austin, Texas Utilities System Revenue Refunding, Series 1993A Insured: FGIC 5.375% 05/15/05............................................. $ 1,726 3,990 TX Sam Rayburn Texas Municipal Power Agency Taxable Revenue Refunding, Series 2002, 5.600% 10/01/05............................................. 4,008 3,265 TX Sam Rayburn Municipal Power Agency, Series 2002, 5.000% 10/01/07............................................. 3,422 2,000 WA Lewis County Washington Public Utilities District Number 001 Revenue Refunding Series 2003, 5.000% 10/01/06............................................. 2,065 1,000 WA Seattle Washington Municipal Light and Power Revenue, Series 2001 Insured: FSA 5.250% 03/01/06............................................. 1,023 -------- 46,967 -------- WATER & SEWER -- 4.5% AL Birmingham Alabama Waterworks and Sewer Board Water and Sewer Revenue, Series 2004 B Insured: FGIC 1,110 2.880% 01/01/07............................................. 1,084 1,145 3.420% 01/01/08............................................. 1,113 1,185 3.890% 01/01/09............................................. 1,153 5,000 AL Jefferson County Alabama Sewer Revenue, Series 2003 C-10 Insured: FSA 2.250% 02/01/42............................................. 5,000 3,775 FL Jea Florida Water and Sewer Revenue, Series 2002 B, Insured: FSA 5.250% 10/01/07............................................. 3,984 1,585 IN Fort Wayne Indiana Sewer Works Improvements Revenue Refunding, Series 2002 B Insured: AMBAC 5.000% 08/01/06............................................. 1,631 1,100 KS Johnson County Kansas Water District Number 001 Water Revenue Series 1996 A, 5.250% 12/01/06............................................. 1,145 1,260 NJ Economic Development Authority Revenue New Jersey Port District Project Revenue Insured: AMBAC 7.100% 02/15/07............................................. 1,328
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------------- WATER & SEWER -- (CONTINUED) $ 1,175 New Jersey Port District Project, Insured: AMBAC 7.050% 02/15/06............................................. $ 1,208 1,445 New Jersey Port District Revenue, Insured: AMBAC 7.150% 02/15/09............................................. 1,580 5,000 PA Philadelphia Pennsylvania Water and Wastewater Revenue Refunding, Insured: MBIA 5.500% 06/15/06............................................. 5,165 1,000 SC York County South Carolina Pollution Control Revenue, Series 2000B-1 2.100% 09/15/24............................................. 1,000 3,000 TX Austin Texas Water and Waste Water System Revenue Refunding, Series 2001A&B Insured: FSA 6.500% 05/15/05............................................. 3,015 TX Corpus Christi Texas Utilities System Revenue Refunding, 1,000 Series 2002 Insured: FSA 4.000% 07/15/07............................................. 1,023 1,000 Series 1999 Insured: FSA 5.000% 07/15/07............................................. 1,044 1,000 TX Dallas Texas Waterworks and Sewer System Revenue Refunding, Series 2001, 5.000% 10/01/06............................................. 1,032 TX Houston Texas Water and Sewer Systems Revenue Refunding, Series 1991 C Insured: AMBAC 6,485 (a) 12/01/06................................................ 6,178 2,400 (a) 12/01/08................................................ 2,122 1,000 TX San Antonio Texas Water System Revenue Series 2002 A Insured: FSA 5.000% 05/15/06............................................. 1,025 WI Appleton Wisconsin Waterworks Revenue Refunding, Series 2001 Insured: FGIC 4,375 4.000% 01/01/07............................................. 1,402 1,000 4.000% 01/01/08............................................. 1,026 -------- 43,258 -------- 203,318 -------- TOTAL MUNICIPAL BONDS (Cost of $955,698).......................................... 954,030 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 115 NATIONS FUNDS Nations Short-Term Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 0.1% 1,014,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $1,014)........................... $ 1,014 -------- TOTAL INVESTMENTS (Cost of $956,712)(d)............................. 99.2% 955,044 -------- OTHER ASSETS & LIABILITIES, NET..................... 0.8% 7,776 -------- NET ASSETS.......................................... 100.0% $962,820 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Zero coupon bond. (b) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $956,548.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FHLMC Federal Home Loan Mortgage Corp. FNMA Federal National Mortgage Association FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association GO General Obligation GTD Guaranteed IDR Industrial Development Revenue LOC Letter of Credit/Line of Credit MBIA MBIA Insurance Corp. PSFG Permanent School Fund Guaranteed SPA Stand-by Purchase Agreement XLCA XL Capital Assurance
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 39.3% Utilities................................... 21.1 Transportation.............................. 12.4 Education................................... 7.3 Industrials................................. 6.1 Health care................................. 4.4 Other....................................... 3.3 Resource recovery........................... 2.6 Housing..................................... 2.3 Other revenue............................... 0.3 Investment management company............... 0.1 Other assets and liabilities, net........... 0.8 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 116 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- MUNICIPAL BONDS -- 95.7% EDUCATION -- 3.4% EDUCATION -- 2.1% DC Revenue, Georgetown University Project, Series 1988C, Insured: MBIA, $ 1,375 4.850% 04/01/09................................... $ 1,450 3,050 5.050% 04/01/11................................... 3,227 IL Finance Authority Revenue, DePaul University, Refunding, Series 2004A, 2,000 5.375% 10/01/18................................... 2,155 1,000 5.375% 10/01/17................................... 1,080 1,670 IL University Housing and Auxiliary Facilities Systems Revenue, Series 1996, Insured: MBIA, 5.000% 10/01/07................................... 1,750 IN Ivy Tech State College Revenue, Series 1997E, Insured: AMBAC, 1,035 5.000% 07/01/07................................... 1,077 1,000 5.050% 07/01/09................................... 1,051 IN University Revenue, Series 1998L, 1,520 5.000% 08/01/09................................... 1,610 2,510 5.000% 08/01/10................................... 2,656 1,000 MA State Industrial Finance Agency Revenue, Babson College Issue Project, Series 1998A, Insured: MBIA, 5.000% 10/01/18................................... 1,049 MS State University Educational Building Corp. Revenue, Series 1998,: Insured: MBIA, 1,000 5.250% 08/01/12................................... 1,076 1,000 5.250% 08/01/13................................... 1,076 1,000 TN Metropolitan Government, Nashville and Davidson County, Health and Educational Facilities Board Improvement Revenue, Meharry Medical College Project, Refunding, Series 1996, Insured: AMBAC, 6.000% 12/01/08................................... 1,098 2,190 TX Fort Worth, Higher Education Financial Corporation, Higher Education Revenue, Texas Christian University Project, Series 1997, 5.000% 03/15/17................................... 2,270 2,000 TX Southwest Higher Education Authority Inc. Revenue, Southern Methodist University Project, Series 1995, Insured: FSA, 5.125% 10/01/16................................... 2,078 TX University Revenue, Refunding, 7,600 Series 2003B, 5.250% 08/15/12................................... 8,327 2,000 Series 2004B, 5.250% 08/15/16................................... 2,207 ---------- 35,237 ----------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- STUDENT LOAN -- 1.3% $ 1,250 AK Student Loan Corp. Revenue, Series 1997A, AMT, Insured: AMBAC, 5.200% 07/01/06................................... $ 1,286 1,500 AZ Educational Loan Marketing Corp. Revenue, Series 1993, 6.300% 12/01/08................................... 1,516 9,650 IA Student Loan Liquidity Corp. Student Loan Revenue, Refunding, Series 1998J, AMT, Insured: AMBAC, 4.800% 06/01/09................................... 10,044 2,050 MA Educational Financing Authority Education Loan Revenue, Refunding, Series 1999A, Insured: AMBAC, 4.100% 07/01/05................................... 2,057 2,210 MA Educational Financing Authority Educational Loan Revenue, Refunding, Series 1999A, AMT, Insured: AMBAC, 4.750% 07/01/11................................... 2,224 1,825 MA Educational Financing Authority Revenue, Series 1998C, Insured: MBIA, 4.700% 12/01/09................................... 1,845 2,500 UT State Student Loan Revenue, Series 1995N, AMT, Insured: AMBAC, 5.900% 11/01/07................................... 2,584 ---------- 21,556 ---------- 56,793 ---------- HEALTH CARE -- 7.7% HOSPITALS -- 7.7% 2,500 AL Birmingham Baptist Medical Centers Special Care Facilities Financing Authority Revenue, Baptist Medical Centers Project, Refunding, Series 1993A, Insured: MBIA, 5.500% 08/15/05................................... 2,506 5,500 CA Statewide Communities Development Authority Revenue, Certificates of Participation Series 1993, 5.400% 11/01/15................................... 5,534 1,630 CO Denver Health and Hospital Authority Healthcare Revenue, Series 2001A, 6.000% 12/01/23................................... 1,693 4,075 FL North Broward Hospital District Revenue, Refunding, Series 1997, Insured: MBIA, 5.250% 01/15/11................................... 4,251 FL Tampa Health Systems Revenue, Catholic Health East Project, Series 1998A-1, Insured: MBIA, 6,000 5.500% 11/15/14................................... 6,675 6,080 5.500% 11/15/13................................... 6,735
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 117 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 5,000 KS Wichita Hospital Revenue, Refunding, Series 2001III, 6.250% 11/15/18................................... $ 5,539 5,000 NC Care Community Hospital Revenue, Duke University Hospital Project, Series 1996C, Insured: MBIA, 5.250% 06/01/26................................... 5,044 4,000 NC Medical Care Commission Health Care Facilities Revenue, Carolina Medicorp Inc. Project, Series 1996, 5.125% 05/01/16................................... 4,124 3,505 NC Medical Care Community Healthcare Revenue, Series 2003A, 5.000% 11/01/11................................... 3,741 NC Medical Care Commission Hospital Revenue, Pitt County Memorial Hospital Project, 3,135 Series 1998A, 4.400% 12/01/08................................... 3,254 3,000 Series 1998B, 5.000% 12/01/18................................... 3,093 OH Lorain County Hospital Revenue, Catholic Healthcare Partnerships Project, Series 2001A, 3,000 5.625% 10/01/16................................... 3,216 3,000 5.625% 10/01/15................................... 3,222 6,135 5.625% 10/01/14................................... 6,620 6,060 OH Montgomery County Hospital Revenue, Kettering Medical Center Project, Series 1999, 6.500% 04/01/13................................... 6,632 3,210 SC Greenville Hospital Systems Hospital Facilities Revenue, Series 1996B, 5.500% 05/01/08................................... 3,343 3,000 TN Knox County Health Educational and Housing Facilities Board Revenue, University Health Systems Inc. Project Series 1999, 5.625% 04/01/29................................... 3,055 8,000 TN Shelby County, Health, Educational and Housing Facilities Board Revenue, St. Jude's Children's Research Project, Series 1999, 5.375% 07/01/24.... 8,293 TX Harris County Health Facilities Development Authority Revenue, Series 1999A, Insured: MBIA 5,000 5.375% 07/01/19................................... 5,283 5,790 5.625% 07/01/11................................... 6,262 3,490 TX Jefferson County Health Facilities Development Corp. Revenue, Baptist Hospitals Project, Refunding, Series 2001, Insured: AMBAC, 5.200% 08/15/21................................... 3,624
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 5,210 TX North Central Health Facilities Development Corp. Revenue, Baylor Healthcare Systems Project, Series 1995, Insured: AMBAC, 5.500% 05/15/13................................... $ 5,455 TX Tarrant County Health Facilities Development Corp. Health Systems Revenue, Texas Health Resources Systems Project, Series 1997A, Insured: MBIA, 3,805 5.750% 02/15/10................................... 4,112 5,000 5.250% 02/15/17................................... 5,257 7,615 WI State Health and Educational Facilities Authority Revenue, Aurora Health Care, Inc. Project, Series 1999A, 5.600% 02/15/29................................... 7,729 WV State Hospital Finance Authority Hospital Revenue, Charleston Area Medical Center Project, 1,000 Series 1995A Insured: MBIA, 5.750% 09/01/13................................... 1,032 1,265 Series 2000, 6.750% 09/01/22...................... 1,395 2,535 WY Natrona County Hospital Revenue, Wyoming Medical Center Project, Refunding, Series 1998, Insured: AMBAC, 5.250% 09/15/06................................... 2,592 ---------- 129,311 ---------- HOUSING -- 5.3% ASSISTED LIVING/SENIOR -- 0.2% 3,715 AZ Maricopa County Industrial Development Authority Health Facilities Revenue, Series 1999A, Insured: GNMA, 6.300% 09/20/38................................... 4,012 ---------- MULTI-FAMILY -- 1.9% 8,000 CA ABAG Finance Authority for Non-Profit Corporations, Multi-Family Revenue, Refunding, Series 2000B, 6.250% 08/15/30................................... 8,610 1,000 CA ABAG Finance Authority for Non-Profit Corporations, Multi-Family Revenue, Refunding, Series 2000A, AMT, 6.400% 08/15/30................................... 1,072 1,750 CA Statewide Communities Development Authority Apartment Development Revenue, Refunding, Irvine Apartment Communities Project Series 1998A-4, Mandatory Put 05/15/13, 5.250% 05/15/25................................... 1,811 2,700 FL Duval County Housing Finance Authority Multi Family Housing Revenue, United Dominion Realty Trust-Greentree Place Project, Refunding, Series 1995, 6.750% 04/01/25................................... 2,754
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 118 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- MULTI-FAMILY -- (CONTINUED) $ 2,000 FL Housing Finance Agency Multi-Family Housing Revenue, United Dominion Realty Trust-Andover Project, Refunding Series 1996E, AMT, 6.350% 05/01/26................................... $ 2,045 IL Chicago Housing Authority Capital Program Revenue, Series 2001, 5,000 5.375% 07/01/13................................... 5,364 5,975 5.250% 07/01/12................................... 6,409 3,785 WY Community Development Authority Multifamily Revenue Housing, Aspen Court Apartments Project, Series 1999A, 4.750% 12/01/30................................... 3,795 ---------- 31,860 ---------- SINGLE FAMILY -- 3.2% AK State Housing Finance Corp. Revenue, 3,000 Series 1992A, 6.000% 12/01/05................................... 3,064 Series 1995A, Insured: MBIA, 1,505 5.400% 06/01/08................................... 1,549 1,965 5.800% 12/01/12................................... 2,018 11,500 AK State Housing Finance Corporation Revenue, GO, Series 1997A Insured: MBIA, 6.000% 06/01/27................................... 11,918 5 AZ Maricopa County Industrial Development Authority, Series 2001B, AMT, Insured: GNMA, 6.100% 09/01/28................................... 5 825 AZ Tucson and Pima County Industrial Development Authority Revenue, Series 2001A-1, AMT, Insured: GNMA, 6.000% 07/01/21................................... 832 545 AZ Tuscon and Pima County Industrial Development Authority Revenue, Series 2001A-1, AMT, Insured: GNMA, 6.350% 01/01/34................................... 567 2,945 FL Escambia County Housing Finance Authority Single-Family Mortgage Revenue, Series 1999, AMT, Insured: FSA, 4.500% 10/01/09................................... 3,015 7,000 FL Pinellas County Housing Authority Housing Revenue, Affordable Housing Project, Series 2001, Insured: FSA, 4.600% 12/01/10................................... 7,287 1,430 NC Housing Finance Agency, Single-Family Program, Series 1997RR, Insured: FHA, 5.850% 09/01/28................................... 1,468
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- SINGLE FAMILY -- (CONTINUED) NM Mortgage Finance Authority Single-Family Mortgage Revenue, $ 375 Series 1997C-2, AMT, Insured: GNMA, 5.950% 07/01/17................................... $ 389 2,175 Series 2001B-2, AMT, Insured: GNMA, 6.200% 09/01/32................................... 2,235 1,790 Series 2002B-2, AMT, Insured: GNMA, 6.350% 03/01/33................................... 1,893 1,455 Series 2002PG-A-2, Insured: GNMA, 6.450% 03/01/33................................... 1,501 840 NM Mortgage Finance Authority Single-Family Mortgage Revenue, Series 1997E-2, AMT, Insured: GNMA, 5.600% 07/01/17................................... 868 945 OH Housing Finance Agency Mortgage Revenue, Residential Project, Series 1998B-2, AMT, Insured: GNMA, 4.800% 09/01/07................................... 957 OR State Housing and Community Services Department Mortgage Revenue, Single-Family Mortgage Project, 5 Series 1996A, 5.500% 07/01/08................................... 5 95 Series 1997H, 5.150% 07/01/09................................... 98 15 Series 1998D, 4.600% 07/01/07................................... 15 185 Series 2000H, Insured: FHA, 5.550% 07/01/21................................... 194 9,180 PA Housing Finance Agency Single-Family Mortgage Revenue, Series 1997A-31, AMT, 5.450% 10/01/21................................... 9,438 1,190 TN Housing Development Agency Revenue, Series 1998, AMT, 4.950% 07/01/10................................... 1,236 2,735 WI Housing and Economic Development Authority Revenue, Series 1997G, 5.350% 03/01/12................................... 2,851 ---------- 53,403 ---------- 89,275 ---------- INDUSTRIALS -- 1.4% CHEMICALS -- 0.7% 10,650 TX Guadalupe Blanco River Authority Sewer and Solid Waste Disposal Facility Revenue, E.I. duPont de Nemours and Company Project, Series 1999, AMT, 5.500% 05/01/29................................... 10,995 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 119 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- FOOD PRODUCTS -- 0.2% $ 3,500 GA Cartersville Development Authority Sewer Facilities Revenue, Anheuser-Busch Companies, Inc. Project, Refunding, Series 1997, AMT, 5.625% 05/01/09................................... $ 3,754 ---------- FOREST PRODUCTS AND PAPER -- 0.4% 5,750 TX Gulf Coast Waste Disposal Authority Revenue, Refunding, Series 2002A, 6.100% 08/01/24................................... 6,098 ---------- OIL AND GAS -- 0.1% 2,500 PA Philadelphia Pennsylvania Industrial Development Authority, IDR Refunding, Ashland Oil, Inc., Project Series 1993, 5.700% 06/01/05................................... 2,512 ---------- 23,359 ---------- OTHER -- 15.2% POOL/BOND BANK -- 1.9% 895 AK Industrial Development and Export Authority Revenue, GO, Series 1995A, 6.000% 04/01/05................................... 895 3,345 AK Industrial Development & Export Authority Refunding, Series 1998A, AMT, Insured: MBIA, 5.250% 04/01/12................................... 3,516 2,920 MA State Water Pollution Abatement Trust Revenue, Refunding, Series 2004A, 5.250% 08/01/17................................... 3,245 6,570 NV State, GO, Series 1998A, 5.250% 05/15/16................................... 6,923 15,000 PA Delaware Valley Regional Financing Authority Local Government Revenue, Series 2002, 5.500% 07/01/12................................... 16,364 1,000 VT Municipal Bond Bank, Series 1996-1, Insured: AMBAC, 5.700% 12/01/10................................... 1,064 ---------- 32,007 ---------- REFUNDED/ESCROWED(a) -- 12.5% 2,500 AL Birmingham Industrial Water Board Industrial Water Supply Revenue, Series 1978, Pre-refunded 07/01/07, 6.000% 07/01/07................................... 2,645 685 AL Birmingham Medical Clinic Board Revenue, Baptist Medical Centers Project, Series 1979, Pre-refunded 07/01/05, 8.300% 07/01/08................................... 749 3,265 AL Special Care Facilities Financing Authority Hospital Revenue, Charity Obligation Group Project, Series 1999A, Pre-refunded 05/01/09, 4.625% 11/01/10................................... 3,420
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 1,500 AZ Health Facilities Authority Hospital Systems Revenue, Samaritan Health Systems Project, Refunding, Series 1993, Insured: MBIA, Pre-refunded 06/01/05, 5.400% 12/01/05................................... $ 1,529 10,000 AZ School Facility Board, Certificate of Participation, Series 2003A, Insured: MBIA, Pre-refunded 03/01/13, 5.250% 09/01/14................................... 11,010 1,000 AZ Tucson, GO, Refunding, Series 1995, Insured: FGIC, Pre-refunded 07/01/05, 5.600% 07/01/07................................... 1,018 1,000 CO Adams County School District No. 012, GO, Series 1997, Insured FGIC, Pre-refunded 12/15/07, 5.250% 12/15/09................................... 1,069 7,385 CO Douglas County School District No. RE-1, Douglas and Elbert Counties, GO, Series 2001, Insured: MBIA, Pre-refunded 12/15/11, 5.250% 12/15/13................................... 8,088 2,445 CO State Boulder Larimer and Weld Counties Vrain Valley School District, GO, Series 1997, Insured: FGIC, Pre-refunded 12/15/07, 5.000% 12/15/10................................... 2,574 DC Hospital Revenue, Medlantic Healthcare Group Project, Refunding, Series 1997A, Insured: MBIA, 1,000 Pre-refunded 08/15/06, 6.000% 08/15/06................................... 1,043 1,350 Pre-refunded 08/15/07, 6.000% 08/15/07................................... 1,442 2,500 FL State Board Education Capital Outlay, GO, Refunding, Public Education Series 1995D, Pre-refunded 06/01/05, 4.750% 06/01/07................................... 2,535 1,275 FL Tampa Water and Sewer Revenue, Series 1987, Pre-refunded 04/11/05, 6.800% 10/01/07................................... 1,343 1,000 IL Chicago Emergency Telephone Systems, GO, Series 1998, Insured: FGIC, Pre-refunded 01/01/08, 5.550% 01/01/08................................... 1,067 605 IL Chicago GO, Refunding, Series 1999A, Insured: FGIC, Pre-refunded 01/01/08, 5.000% 01/01/08................................... 637
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 120 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 1,500 IL Galesburg Cottage Hospital Project, Series 2000, Insured: RAD, Pre-refunded 05/01/10, 6.000% 05/01/15................................... $ 1,679 635 IL Health Facilities Authority Revenue, Franciscan Sisters Health Care Hospital, Series 1994A, Insured: MBIA, Pre-refunded 09/01/05, 6.500% 09/01/05................................... 646 6,320 IL Highland Park Hospital Project, Series 1991B, Insured: FGIC, Pre-refunded 10/01/07, 5.900% 10/01/12................................... 6,880 IL State, GO, 6,850 Series 2000, Insured: MBIA, Pre-refunded 06/01/10, 5.750% 06/01/15................................... 7,614 10,000 Series 2002, Insured: FSA, Pre-refunded 12/01/12, 5.375% 12/01/13................................... 11,050 1,140 IN Hamilton North Del School Building Corp. Revenue, Series 1996, Insured: AMBAC, Pre-refunded 01/15/07, 5.300% 07/15/11................................... 1,204 1,000 IN Plymouth Multi School Building Revenue, Refunding, Series 1995, Insured: MBIA, Pre-refunded 07/01/05, 5.550% 07/01/09................................... 1,017 IN Transportation Financing Authority Highway Revenue, Series 1998A, Insured: MBIA, Pre-refunded 12/01/08, 1,000 5.250% 12/01/13................................... 1,083 1,500 5.250% 12/01/14................................... 1,624 2,175 KS Labette County Single Family Mortgage Revenue, Zero Coupon Capital Accumulator Bonds, Series 1998A, Pre-refunded 12/01/14, (b) 12/01/14...................................... 1,446 4,500 KS State Development Finance Authority Revenue, Series 1998A, Pre-refunded 06/01/08, 4.800% 06/01/13................................... 4,737 180 KY State Turnpike Authority Toll Road Revenue, Series 1986A, Pre-refunded 07/01/06, 5.500% 07/01/07................................... 184 295 MA University Lowell Building Authority Guaranteed, Series 1995A, Insured: AMBAC, Pre-refunded 11/01/05, 5.700% 11/01/09................................... 306 1,850 MI South Lake Schools, GO, Series 1997, Insured: FGIC, Pre-refunded 05/01/08, 5.250% 05/01/12................................... 1,952
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 5,000 MI State Hospital Finance Authority Revenue, Ascension Health Credit Project, Series 1999A, Insured: MBIA, Pre-refunded 11/15/09, 5.750% 11/15/18................................... $ 5,548 1,000 MI Ypsilanti School District Refunding, Series 1996, Insured: FGIC, Pre-refunded 05/01/07, 5.400% 05/01/09................................... 1,050 2,150 MN Southern Municipal Power Agency Power Supply Systems, Series 1992B, Pre-refunded 04/11/05, 5.800% 01/01/07................................... 2,150 4,000 MT State Board Inventory Payroll Tax Revenue, Workers Compensation Project, Series 1991, Insured: MBIA, Pre-refunded 04/11/05, 6.750% 06/01/07................................... 4,259 10,000 NJ State Transportation Trust Fund Authority Transportation Systems Revenue, Series 1997A, Pre-refunded 06/15/08, 5.000% 06/15/14................................... 10,592 3,840 NJ State Transportation Trust Fund Authority, Unrefunded Balance, Series 1995A, Insured: MBIA, Pre-refunded 06/15/05, 5.500% 06/15/11................................... 3,942 1,765 NJ State Turnpike Authority Revenue, Series 1972G, Pre-refunded 04/11/05, 5.750% 01/01/09................................... 1,873 1,365 NV Clark County Passenger Facility Charge Revenue, Las Vegas/ MaCarran International Airport, Series 1995A, Insured: MBIA.............................. 1,402 1,180 NV Henderson, Series 1997A, Insured: MBIA, Pre-refunded 06/01/07, 5.100% 06/01/08................................... 1,245 18,800 NY City Municipal Water Finance Authority Water and Sewer System Revenue, Series 1996B, Escrowed to Maturity, Insured: MBIA, 5.750% 06/15/26................................... 19,675 PA Central Duaphin School District, GO, Series 1998AA, Insured: MBIA, Pre-refunded 12/01/08, 205 5.000% 12/01/13................................... 223 1,295 5.000% 12/01/13................................... 1,365 PA Saucon Valley School District, GO, Series 1998, Insured: AMBAC, Pre-refunded 04/15/08, 835 5.150% 10/15/13................................... 886 880 5.200% 10/15/14................................... 935
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 121 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) PA Scranton School District, GO, Series 1998, Insured: AMBAC, Pre-refunded 04/01/08, $ 780 4.750% 04/01/08................................... $ 819 1,895 5.200% 04/01/11................................... 2,013 PA State, GO, 1,000 Series 1995, Insured: AMBAC, Pre-refunded 11/15/05, 5.000% 11/15/09................................... 1,031 10,000 Series 2001, Pre-refunded 01/15/11, 5.125% 01/15/16................................... 10,918 1,000 PR Electric Power Authority Power Revenue, Refunding, Series 1995Z, Pre-refunded 07/01/05, 5.250% 07/01/07................................... 1,027 3,600 SC Cherokee County School District No. 001, GO, Series 1997, Pre-refunded 03/01/07, 5.000% 03/01/16................................... 3,777 1,050 SD State Health and Educational Facilities Authority Revenue, Rapid City Regional Hospital Project, Series 1996, Pre-refunded 04/11/05, 7.750% 09/01/07................................... 1,118 1,050 TX Galena Park Independent School District, GO, Series 1997, Insured: PSFG, Pre-refunded 08/15/07, 5.000% 08/15/21................................... 1,081 3,120 TX Garland Certificates of Obligation, GO, Series 2000, Pre-refunded 02/15/09, 5.500% 02/15/12................................... 3,375 1,055 TX Harris County Criminal Justice Center, GO, Series 1996, Pre-refunded 10/01/06, 5.400% 10/01/10................................... 1,097 1,000 TX Harris County, GO, Certificates of Obligation: Series 1992, Pre-refunded 12/15/10, 6.000% 12/15/10................................... 1,129 2,730 GO, Series 1996, Pre-refunded 10/01/06, 5.150% 10/01/07................................... 2,828 1,000 5.375% 10/01/09................................... 1,039 5,565 TX Houston Water Systems Revenue, Series 1979, Pre-refunded 06/01/05, 6.400% 12/01/14................................... 6,287 1,485 TX Midlothian Independent School District, GO, Refunding, Series 1995, Insured: PSFG, Pre-refunded 02/15/06, 5.200% 02/15/13................................... 1,519
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 5,000 TX North Central, Health Facilities Development Corp. Revenue, Presbyterian Healthcare Residential Project, Refunding, Series 1996B, Insured: MBIA, Pre-refunded 06/01/06, 5.500% 06/01/16................................... $ 5,665 1,245 TX Pasadena Independent School District, GO, Series 1998, Insured: PSFG, Pre-refunded 02/15/06, 5.000% 02/15/11................................... 1,269 145 TX San Antonio Electric and Gas Revenue, Refunding, Series 2002, Pre-refunded 08/01/10, 5.000% 08/01/10................................... 156 4,500 TX Travis County, Health Facilities Development Corp. Revenue, Ascension Health Credit Project, Series 1999A, Insured: AMBAC, Pre-refunded 11/15/09, 5.875% 11/15/24................................... 5,015 500 TX United Independent School District, GO, Series 1995, Insured: PSFG, Pre-refunded 08/15/06, 5.500% 08/15/08................................... 519 2,500 WA Energy Northwest Wind Project Revenue, Series 2001B, Pre-refunded 01/01/07, 6.000% 07/01/23................................... 2,697 970 WA King County Baseball Stadium, GO, Series 2002, Pre-refunded 12/01/13, 5.500% 12/01/13................................... 1,090 1,000 WA King County, GO, Series 1997D, Pre-refunded 12/01/07, 5.750% 12/01/11................................... 1,090 WA Port Seattle Pre-refunded Revenue, Series 1996B, Insured: FGIC, 170 Pre-refunded 09/01/05, 5.100% 09/01/05................................... 172 200 Pre-refunded 09/01/08 6.000% 09/01/08................................... 215 1,000 WA Vancouver Water and Sewer Revenue, Series 1995, Insured: FGIC, Pre-refunded 06/01/05, 5.850% 06/01/11................................... 1,006 4,745 WI State, GO, Series 1996A, Pre-refunded 05/01/06, 5.000% 05/01/16................................... 4,861
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 122 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 3,980 WV State Hospital Finance Authority Hospital Revenue, Charleston Area Medical Center Project, Series 1993A, Pre-refunded 09/01/23, 6.500% 09/01/23................................... $ 4,818 5,235 WV State Hospital Finance Authority Revenue, Charleston Medical Center Project, Series 2000, Pre-refunded 09/01/10, 6.750% 09/01/22................................... 6,123 ---------- 210,490 ---------- TOBACCO -- 0.8% 3,500 CA Golden State Tobacco Securitization Corporations, Tobacco Settlement Revenue, Series 2003A, 6.250% 06/01/33................................... 3,583 4,000 NJ Tobacco Settlement Financing Corp., Series 2003, 6.750% 06/01/39................................... 4,209 5,000 WI Badger Tobacco Asset Securitization Corp. Asset Backed Revenue, Series 2002, 6.000% 06/01/17................................... 5,053 ---------- 12,845 ---------- 255,342 ---------- OTHER REVENUE -- 0.3% RECREATION -- 0.3% 2,000 DC Revenue, The Smithsonian Institute Project, Series 1997, 5.000% 02/01/17................................... 2,100 IL Educational Facilities Authority Revenue, Shedd Aquarium Project Series 1997 Insured: AMBAC, 1,025 5.250% 07/01/10................................... 1,090 1,145 5.300% 07/01/11................................... 1,218 1,030 Shedd Aquarium Society Project, Series 1997, Insured: AMBAC, 5.150% 07/01/09................................... 1,093 ---------- 5,501 ---------- RESOURCE RECOVERY -- 1.6% DISPOSAL -- 0.7% 5,525 IL Development Finance Authority, Waste Management, Inc., Series 1997, AMT, 5.050% 01/01/10................................... 5,706 5,900 PA Westmoreland County Industrial Development Authority Revenue, Valley Landfill Expansion Project, Series 1993, 5.100% 05/01/18................................... 6,105 ---------- 11,811 ----------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- RESOURCE RECOVERY -- 0.9% $ 6,800 MA State Industrial Financing Agency Recovery Revenue, Ogden Haverhill Project, Series 1998A, 5.350% 12/01/10................................... $ 6,942 8,000 NY Niagara County Individual Development Agency Solid Waste Disposal Revenue, Series 2001B, AMT, 5.550% 11/15/24................................... 8,513 ---------- 15,455 ---------- 27,266 ---------- TAX-BACKED -- 39.4% LOCAL APPROPRIATED -- 1.0% 580 IN Pike Township School Building Corp. Revenue, Refunding, First Mortgage, Series 1993, 4.800% 08/01/05................................... 581 IN Shelby County Jail Building Corp. Revenue, Refunding, Series 1996, Insured: MBIA, 1,005 5.300% 07/15/07................................... 1,045 1,045 5.400% 07/15/08................................... 1,087 MI Grand Rapids Building Authority Revenue, Series 1998, 1,205 5.000% 04/01/12................................... 1,300 1,000 5.000% 04/01/13................................... 1,079 1,415 5.000% 04/01/14................................... 1,529 9,060 MO St. Louis Municipal Financial Corp. Lease Hold Revenue, Convention Center Project, Series 2003, Insured: AMBAC, 5.250% 07/15/11................................... 9,876 ---------- 16,497 ---------- LOCAL GENERAL OBLIGATIONS -- 18.2% 5,000 AK Anchorage Schools, GO, Refunding, Series 2004B, Insured: AMBAC, 5.250% 12/01/15................................... 5,489 10,600 AK Anchorage, GO, Refunding, Series 2002, Insured: MBIA, 5.250% 07/01/10................................... 11,519 1,000 AK Fairbanks North Star Borough, GO, Refunding, Series 1993S, Insured: MBIA, 5.500% 03/01/08................................... 1,067 6,300 AZ Maricopa County Unified High School District No. 210, GO, Series 2003, Insured: MBIA, 5.000% 07/01/15................................... 6,825 910 AZ Mohave County Elementary School District No. 016 Mohave Valley, GO, Series 1997, Insured: MBIA, 6.900% 07/01/07................................... 987 4,760 AZ Tucson, GO, Refunding, Series 1998, 5.500% 07/01/18................................... 5,364 10,000 CA Los Angeles County Unified School District, Series 1998B, Insured: FGIC, 5.000% 07/01/18................................... 10,515
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 123 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 14,750 CA San Francisco, GO, Refunding, Series 2002, 5.000% 06/15/11................................... $ 16,097 3,635 CO Aurora Centretech Metropolitan District, GO, Refunding, Series 1998C, LOC: Banque Nationale De Paris, 4.875% 12/01/28................................... 3,784 2,500 HI Honolulu City and County, GO, Refunding, Series 1990A, 7.350% 07/01/07................................... 2,733 5,195 IL Chicago City Colleges Chicago Capital Improvement, GO, Series 1999, Insured: FGIC, 6.000% 01/01/11................................... 5,789 2,000 IL Chicago Equipment Notes, GO, Series 1998, Insured: FGIC, 5.000% 01/01/08................................... 2,102 1,135 IL Chicago Park District, GO, Series 1997, Insured: AMBAC, 5.250% 01/01/09................................... 1,194 Series 1997, Insured: AMBAC, 1,195 5.250% 01/01/10................................... 1,255 1,260 5.250% 01/01/11................................... 1,322 1,325 5.250% 01/01/12................................... 1,390 IL Chicago, GO, Refunding, Series 1999, Insured: FGIC, 7,540 5.250% 01/01/18................................... 8,276 5,650 5.000% 01/01/15................................... 5,927 1,000 IL Cook County Capital Improvement, GO, Series 1996, Insured: FGIC, 5.400% 11/15/07................................... 1,048 IL Cook County School District No. 135, GO, Refunding, Series 1995, Insured: FGIC, 2,265 5.450% 12/01/08................................... 2,351 2,350 5.550% 12/01/09................................... 2,438 1,145 IL Du Page County School District, GO, Refunding, Series 1997, Insured: FGIC, 6.750% 02/01/11................................... 1,331 IN Westfield Housing Building Corp. Revenue, Refunding, Series 1998, Insured: AMBAC, 1,085 5.100% 01/05/12................................... 1,146 1,185 5.100% 07/05/12................................... 1,251 1,745 5.250% 01/05/14................................... 1,849 2,000 MI Detroit City School District, GO, School Building and Site Improvements Series 2002A, Insured: FGIC, 6.000% 05/01/19................................... 2,368 1,000 MI Van Dyke Public Schools, GO, Refunding, Series 1996, Insured: FGIC, 5.100% 05/01/09................................... 1,034 4,300 NC Cary Water and Public Improvement, GO, Series 2001, 5.000% 03/01/13................................... 4,611
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 2,000 NC Cumberland County, GO, Series 1998, Insured: FGIC, 5.000% 03/01/17................................... $ 2,120 NH Manchester School Facilities Revenue, Refunding, Series 2004, Insured: MBIA, 4,215 5.500% 06/01/18................................... 4,778 4,450 5.500% 06/01/19................................... 5,052 NV Clark County School District, GO, Refunding, 8,895 Series 2001C, Insured: FGIC, 5.375% 06/15/13................................... 9,806 10,760 Series 2003, Insured: MBIA, 5.000% 06/15/16................................... 11,511 1,350 NV Washoe County, Reno/Sparks Convention Project, GO, Refunding, Series 1995, Insured: MBIA, 5.375% 07/01/08................................... 1,373 NY New York, GO, 1,700 Series 1997L, Insured: MBIA, 8.000% 08/01/06................................... 1,814 3,500 Series 1997, Insured: MBIA, 6.250% 04/15/07................................... 3,731 7,710 OH Cleveland, Refunding, Insured: AMBAC, 5.500% 10/01/16................................... 8,730 1,055 PA Central Dauphin School District, GO, Series 1998, Insured: FGIC, 5.000% 06/01/12................................... 1,101 1,350 PA Ligonier Valley School District, GO, Refunding, Series 1998 Insured: FSA, 5.000% 03/01/13................................... 1,412 PA Saucon Valley School District, GO, 905 Series 1998, Insured: AMBAC, 5.150% 10/15/13................................... 952 950 Unrefunded Balance, Series 1998, Insured: AMBAC, 5.200% 10/15/14................................... 1,001 PA Scranton School District, GO, Series 1998, Insured: AMBAC, 235 4.750% 04/01/08................................... 247 595 5.200% 04/01/11................................... 627 PA Tunkhannock Area School District, GO, Series 1998, Insured: AMBAC, 1,175 5.100% 07/15/12................................... 1,230 1,245 5.150% 07/15/14................................... 1,305 1,845 PA Tyrone Area School District, GO, Series 1998, Insured: MBIA, 5.000% 09/15/13................................... 1,941 5,000 TN Knox County, GO, Refunding, Series 2001, 5.000% 04/01/09................................... 5,335 TN Metropolitan Government Nashville and Davidson County, GO, Refunding, 5,875 Series 2001A, 5.250% 10/15/07................................... 6,209 1,595 Series 2001B, 5.250% 10/15/07................................... 1,686
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 124 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 6,450 TN Shelby County, GO, Refunding, Series 1997B, 5.500% 08/01/08................................... $ 6,945 2,175 TX Aldine Independent School District, GO, Refunding, Series 1997, Insured: PSFG, (b) 02/15/07...................................... 2,054 8,150 TX Austin Independent School District, GO, Refunding, Series 2004, Insured: PSFG, 5.250% 08/01/15................................... 8,975 1,500 TX Birdville Independent School District, GO, Refunding, Series 1997B, Insured: PSFG, 5.000% 02/15/07................................... 1,556 1,485 TX Duncanville Independent School District, GO, Refunding, Series 1993, Insured: PSFG, 5.200% 02/15/09................................... 1,589 10,990 TX Harris County, GO, Series 2001, 5.000% 10/01/12................................... 11,766 7,320 TX Houston, GO, Series 2001A, Insured: FSA, 5.500% 03/01/10................................... 8,001 1,000 TX Lewisville Independent School District, GO, Series 1997, Insured: PSFG, 6.750% 08/15/08................................... 1,113 4,000 TX McKinney Independent School District, Refunding, Insured: PSFG, 5.000% 02/15/14................................... 4,307 215 TX Midlothian Independent School District, GO, Refunding, Series 1995, Insured: PSFG, 5.200% 02/15/13................................... 220 4,000 TX Plano Independent School District, GO, Refunding, Series 2001, Insured: PSFG, 5.000% 02/15/09................................... 4,254 2,110 TX Richardson, GO, Refunding, Series 1998, 5.250% 02/15/07................................... 2,200 7,855 TX San Antonio, GO, Refunding, Series 2001, 5.000% 08/01/10................................... 8,429 1,060 TX San Benito Consolidated Independent School, GO, Refunding, Series 1996, Insured: PSFG, 5.000% 08/01/07................................... 1,088 1,900 TX West University Place, GO, Refunding, Series 1998, Insured: FSA, 5.100% 02/01/12................................... 1,988 2,145 UT Cache County School District, Utah School Board Guaranty Program, GO, Refunding, Series 1997, 5.500% 06/15/07................................... 2,263
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 975 VA Chesterfield County, GO, Refunding and Improvement, Series 1991, 6.250% 07/15/05................................... $ 978 10,145 WA Clark County School District No. 037 Vancouver GO, Refunding Insured: FGIC, 5.500% 06/01/15................................... 11,327 1,805 WA Clark County School District No. 117 Camas, GO, Refunding, Series 1998, Insured: AMBAC, 5.000% 12/01/12................................... 1,945 1,140 WA Jefferson County School District No. 49, GO, Series 1998, Insured: FSA, 5.000% 12/01/07................................... 1,188 6,150 WA King and Snohomish Counties School District, GO, Refunding Series 1993, Insured: FGIC, 5.600% 12/01/10................................... 6,767 WA King County, GO, Refunding, 3,000 Series 1997D, 5.550% 12/01/08................................... 3,233 1,000 Series 1998B, 4.750% 01/01/17................................... 1,025 8,000 WA Snohomish County School District No. 002 Everett, GO, Series 1998A, Insured: MBIA, 5.500% 12/01/11................................... 8,852 WA Spokane County School District No. 354 Mead, GO, Series 1998, Insured: FGIC, 1,975 5.000% 12/01/09................................... 2,114 1,600 5.250% 12/01/11................................... 1,747 7,800 5.500% 12/01/10................................... 8,598 WI Milwaukee County, GO, Series 2001A, 2,500 5.000% 10/01/12................................... 2,675 2,500 5.000% 10/01/13................................... 2,661 WI Winneconne Community School District, GO, Refunding, Series 1998, Insured: FSA, 1,000 4.900% 04/01/10................................... 1,043 1,050 5.000% 04/01/11................................... 1,100 1,100 5.000% 04/01/12................................... 1,152 ---------- 306,176 ---------- SPECIAL NON-PROPERTY TAX -- 6.9% 1,000 AZ Phoenix Civic Improvement Corp. Excise Tax Revenue, Senior Lien, Municipal Courthouse Project, Series 1999A, 5.500% 07/01/12................................... 1,089 1,235 AZ Yuma County Jail District Revenue, Series 1996, Insured: AMBAC, 5.300% 07/01/09................................... 1,256
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 125 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- (CONTINUED) CA Los Angeles County Metropolitan Transportation Authority Sales Tax Revenue, Property A First Tier Senior, Series 2003A Insured: FSA, $ 6,280 5.000% 07/01/17................................... $ 6,664 7,700 5.000% 07/01/18................................... 8,144 CA State Economic Recovery, GO, 1,000 Series 2004A, 4.500% 01/01/07................................... 1,028 5,000 Series 2004A, Insured: MBIA, 5.000% 07/01/15................................... 5,391 5,570 CO Denver City and County Excise Tax Revenue, Refunding, Series 1999A, Insured: FSA, 5.375% 09/01/11................................... 5,999 1,750 FL Jacksonville Excise Taxes Revenue, Refunding, Series 2003C, Insured: MBIA, 5.250% 10/01/19................................... 1,861 1,580 IL Metropolitan Pier and Exposition Authority Revenue Series 1996A, Insured: AMBAC, 6.000% 12/15/06................................... 1,664 1,750 IL Regional Transportation Authority, Series 1994C, Insured: FGIC, 7.750% 06/01/11................................... 2,143 10,000 IL State Sales Tax Revenue, First Series 2002, 5.250% 06/15/19................................... 11,035 1,575 IN Hamilton County Option Income Tax Revenue, Series 1998, Insured: FSA, 5.250% 07/10/12................................... 1,670 5,500 MA Bay Transportation Authority Sales Tax Revenue, Refunding Series 2004B, 5.250% 07/01/21................................... 6,092 10,925 MD State Transportation Department Revenue, Series 2002, 5.500% 02/01/10................................... 11,991 5,500 NJ Economic Development Authority Revenue Cigarette Tax, Series 2004, 5.500% 06/15/16................................... 5,958 3,000 NM Bernalillo County Gross Receipts Tax Revenue, Refunding, Series 1998, 5.250% 04/01/27................................... 3,308 2,000 NM Santa Fe Gross Receipts Tax Revenue, Series 1997A, Insured: AMBAC, 5.000% 06/01/08................................... 2,116 NM State Highway Commission Tax Revenue, 6,000 Series 2000A, 6.000% 06/15/10................................... 6,736 5,000 Series 2001A, 5.000% 06/15/06................................... 5,136
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- (CONTINUED) $ 3,500 NY New York City Transitional Finance Authority Revenue Series C, 5.250% 02/01/18................................... $ 3,763 NY New York City Transitional Finance Authority Revenue, Refunding, 10,000 Series 2002A, 5.500% 11/01/26................................... 10,939 10,000 Series A-1, 5.000% 11/01/14................................... 10,820 ---------- 114,803 ---------- SPECIAL PROPERTY TAX -- 0.5% 4,195 CA Santa Clara Redevelopment Agency Tax Allocation, Bayshore North Project, Series 2002, Insured: AMBAC, 5.500% 06/01/13................................... 4,623 3,685 NV Las Vegas Redevelopment Agency Tax Increment Revenue, Sub Lien-Fremont Street Project, Series 2003A, 5.000% 06/15/13................................... 3,788 ---------- 8,411 ---------- STATE APPROPRIATED -- 5.1% 2,000 CA State Public Works Board Lease Revenue, Department of Health - Colinga, Series 2004A, 5.500% 06/01/19................................... 2,182 6,155 KY State Property and Buildings Commission Revenue, Project No. 84, Refunding, Insured: MBIA, 5.000% 08/01/19................................... 6,667 15,000 NJ State Transportation Trust Fund Authority Revenue, Series C, Insured: FGIC, 5.250% 06/15/12................................... 16,333 4,000 NJ State Transportation System, Series 2004B, Insured: MBIA, 5.500% 12/15/15................................... 4,485 5,000 NY State Dormitory Authority Revenue, City University Project, Series 1993B, 5.250% 07/01/06................................... 5,142 7,685 NY State Dormitory Authority Revenue, Refunding, Insured: FGIC, 5.500% 07/01/21................................... 8,726 5,850 State University Educational Facilities Project, Series 1993A, 5.250% 05/15/15................................... 6,335 4,510 NY State Tollway Authority Service Contract Revenue, Local Highway and Bridge Project, Series 2002, 5.500% 04/01/13................................... 4,948 4,000 NY State Urban Development Corp. Correctional and Youth Facilities Services Revenue, Series 2002A, 5.000% 01/01/17................................... 4,233
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 126 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- STATE APPROPRIATED -- (CONTINUED) $ 7,185 OH State Building Authority, Audit Correction, Refunding, Series 2004C, Insured: MBIA, 5.250% 10/01/15................................... $ 7,920 10,000 OR State Department Administrative Services, Certificates of Participation, Series 2002C, Insured: MBIA, 5.250% 11/01/10................................... 10,919 2,500 PR Public Finance Corp. Revenue, Commonwealth Appropriation Refunding, Series A, 5.750% 08/01/27................................... 2,731 5,000 UT State Building Ownership Authority Lease Revenue, Refunding, Series 1998, Insured: FSA, 5.500% 05/15/14................................... 5,570 ---------- 86,191 ---------- STATE GENERAL OBLIGATIONS -- 7.7% 3,265 CA State, GO, Series 2000, 5.000% 12/01/16................................... 3,421 3,990 FL State Board of Education Capital Outlay, GO, Refunding, Series 1998B, 5.250% 06/01/11................................... 4,360 7,290 FL State Department of Transportation, GO, Refunding, Series 2002, 5.250% 07/01/13................................... 7,992 4,400 GA State, GO, Series 1997C, 6.250% 08/01/09................................... 4,929 13,745 HI State, GO, Series 2001CV, Insured: FGIC, 5.500% 08/01/09................................... 14,966 10,000 IL State, GO, Refunding, Series 2004B, 5.000% 03/01/14................................... 10,769 3,000 MA Bay Transportation Authority Revenue, Refunding, Series 1993A, Insured: MBIA, 5.500% 03/01/09................................... 3,250 MA State, GO, Refunding, 3,900 Series 2003D, Insured: AMBAC, 5.500% 10/01/19................................... 4,424 10,000 Series 2004 B, 5.250% 08/01/16................................... 10,948 1,705 MA University Lowell Building Authority Guaranteed, Series 1995A, Insured: AMBAC, Pre-refunded 11/01/05, 5.700% 11/01/09................................... 1,769 7,000 MS State, GO, Refunding, Series 2000, 5.000% 12/01/08................................... 7,459 5,000 NJ State, GO, Refunding, Series 2001H, 5.250% 07/01/14................................... 5,491
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- STATE GENERAL OBLIGATIONS -- (CONTINUED) OH State Common Schools, GO, $ 5,000 Series 2001A, 5.000% 06/15/12................................... $ 5,316 8,150 Series 2002B, 4.000% 09/15/08................................... 8,392 OR State, Elderly and Disabled Housing Project, GO, 295 Series 1996B, 5.700% 08/01/16................................... 305 100 Series 1997A, 5.050% 08/01/11................................... 103 8,050 PR Commonwealth Public Improvement, GO, Refunding, Series 2001A, Insured: MBIA, 5.500% 07/01/16................................... 9,158 10,910 TX State Water Development, GO, Series 1997D, 5.000% 08/01/19................................... 11,273 10,000 UT State, GO, Refunding, Series 2002B, 5.375% 07/01/11................................... 11,044 3,330 WA State, GO, Series 1998C, 5.500% 07/01/09................................... 3,618 ---------- 128,987 ---------- 661,065 ---------- TRANSPORTATION -- 10.1% AIR TRANSPORTATION -- 1.0% 5,000 PA Allegheny County Airport Revenue, Pittsburgh International Airport Project, Refunding, Series 1997A-1, AMT, Insured: MBIA, 5.750% 01/01/08................................... 5,276 6,180 TN Memphis Shelby County Airport Authority Special Facilities and Project Revenue, Federal Express Corp. Project, Refunding, Series 1997, 5.350% 09/01/12................................... 6,727 5,000 TN Memphis Shelby County Airport Authority Special Facilities Revenue, Federal Express Corp. Project, Refunding, Series 2001, 5.000% 09/01/09................................... 5,345 ---------- 17,348 ---------- AIRPORTS -- 5.3% 500 AZ Tucson Airport Authority Inc. Revenue, Series 2001, AMT, Insured: AMBAC, 5.500% 06/01/12................................... 537 3,075 CO Denver City and County Airport Revenue, Refunding, Series 2000A, AMT, Insured: AMBAC, 6.000% 11/15/15................................... 3,390 10,300 Series 1995C, Insured: MBIA, 6.500% 11/15/12................................... 11,845 10,000 IL Chicago O'Hare International Airport Revenue, Refunding, Series 1999, Insured: AMBAC, 5.500% 01/01/12................................... 10,681
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 127 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- AIRPORTS -- (CONTINUED) $ 5,640 IL Chicago O'Hare International Airport Revenue, Refunding, Series 1993C, Insured: MBIA, 5.000% 01/01/11................................... $ 6,037 6,285 MN Minneapolis and St Paul Metro Airport Commission Airport Revenue, Series 2001D, AMT, Insured: FGIC, 5.750% 01/01/13................................... 6,818 4,600 MN Minneapolis and St. Paul Metro Airport Commission Airport Revenue, Series 1999B, AMT, Insured: FGIC, 5.000% 01/01/07................................... 4,748 3,000 NC Charlotte Airport Revenue, Series 1999B, AMT, Insured: MBIA, 6.000% 07/01/24................................... 3,276 4,670 OK Airport Trust Revenue, Series 2000B, AMT, Insured: FSA, 5.375% 07/01/11................................... 4,976 TX Dallas Fort Worth International Airport Revenue, 1,565 Series 2004B, Insured: FSA, 5.000% 11/01/14................................... 1,643 5,000 Series 2003A, Insured: FSA, 5.500% 11/01/17................................... 5,364 7,000 TX Houston Airport System Revenue, Sub-Lien, Series 1998B, AMT, Insured: FGIC, 5.250% 07/01/12................................... 7,352 5,000 Series 2002, Insured: FSA, 5.000% 07/01/27................................... 5,109 6,755 Series 2000A, AMT, Insured: FSA, 6.000% 07/01/09................................... 7,360 5,000 WA Port Seattle Passenger Facility Charge Revenue, Series 1998, AMT, Insured: AMBAC, 5.250% 12/01/09................................... 5,312 3,580 WA Port Seattle Revenue, Series 1996B, AMT, Insured: FGIC, 6.000% 09/01/08................................... 3,871 ---------- 88,319 ---------- TOLL FACILITIES -- 1.0% 10,000 CO E-470 Public Highway Authority Revenue, Refunding, Series 1997B, Insured: MBIA, (b) 09/01/12...................................... 7,333 4,000 CO Northwest Parkway Public Highway Authority Revenue, Series 2001 C, Insured: AMBAC, (b) 06/15/21...................................... 3,183 5,000 NY Triborough Bridge and Tunnel Authority, Series 2002, Insured: MBIA, 5.500% 11/15/18................................... 5,697 ---------- 16,213 ----------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- TRANSPORTATION -- 2.8% $ 13,725 AR State Federal Highway Grant Anticipation, GO, Series 2001A, 5.250% 08/01/09................................... $ 14,812 10,000 AR State, GO, Series 2000A, 5.500% 08/01/11................................... 10,810 6,725 NJ State Transit Corp., Federal Transit Administration Grants, Series 2002A, Insured: AMBAC, 5.500% 09/15/15................................... 7,504 2,500 OH Scioto County Marine Terminal Revenue, Norfolk Southern Corp. Project, Refunding, Series 1998, 5.300% 08/15/13................................... 2,577 10,695 OH State Highway Revenue, Major New State Infrastructure, Series 2002, 5.000% 06/15/10................................... 11,502 ---------- 47,205 ---------- 169,085 ---------- UTILITIES -- 11.3% INVESTOR OWNED -- 2.1% 9,100 IN State Development Finance Authority Pollution Control Revenue, Southern Indiana Gas and Electric Project, Refunding, Series 1998C, 5.000% 03/01/30................................... 9,227 5,195 TX Brazos River Authority Pollution Control Revenue, TXU Electric Co. Project, Series 2001, AMT, 5.750% 05/01/36................................... 5,519 6,000 TX Redeemable River Authority Pollution Control Revenue, Southwestern Public, Insured: AMBAC, 5.200% 07/01/11................................... 6,133 2,995 TX Sabine River Authority Pollution Control Revenue, TXU Electric Company Project, Refunding, Series 2001B, 5.750% 05/01/30................................... 3,181 10,000 TX San Antonio Electric and Gas Revenue, Refunding, 5.000% 02/01/18................................... 10,589 ---------- 34,649 ---------- JOINT POWER AUTHORITY -- 0.8% 1,210 AZ Salt River Agricultural Improvement and Power District Electric Systems Revenue, Refunding, Salt River Project, Series 1993B, 5.200% 01/01/08................................... 1,280 5,160 SC Piedmont Municipal Power Agency Electric Revenue, Refunding, Series 1996B, Insured: FGIC, 6.000% 01/01/07................................... 5,419
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 128 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- JOINT POWER AUTHORITY -- (CONTINUED) WA State Public Power Supply Systems Revenue, Nuclear Project No. 2, Refunding, Series 1990A, Insured: FSA, $ 6,000 7.250% 07/01/06................................... $ 6,327 1,150 5.800% 07/01/07................................... 1,220 ---------- 14,246 ---------- MUNICIPAL ELECTRIC -- 3.1% 2,000 AK Anchorage Electric Utility Revenue, Senior Lien, Municipal Light and Power Project, Series 1996C, Insured: AMBAC, 5.300% 12/01/11................................... 2,085 500 AZ State Power Reserves Authority Revenue, Series 2001, 5.000% 10/01/10................................... 539 CA State Department of Water Resources Power Supply Revenue, Series 2002A, 2,000 6.000% 05/01/13................................... 2,273 10,000 5.500% 05/01/11................................... 10,972 2,250 IL Springfield Electric Revenue, Senior Lien, Series 1991, 6.500% 03/01/07................................... 2,395 5,045 MN Southern Municipal Power Agency Power Supply Systems Revenue, Refunding, Series 2002A, Insured: AMBAC, 5.000% 01/01/06................................... 5,135 8,355 TX Sam Rayburn Municipal Power Agency Revenue, Series 2002, 5.500% 10/01/11................................... 9,212 5,000 TX San Antonio Electric and Gas Revenue, Refunding, Series 2002, 5.000% 02/01/10................................... 5,349 2,655 WA Chelan County Public Utilities District No. 1 Hydro Conservative Systems Revenue, Series 1997A, AMT, Mandatory Put 07/01/07, 4.850% 07/01/32................................... 2,732 10,365 WA Seattle Municipal Light and Power Revenue, Refunding, Series 2001, Insured: FSA, 5.250% 03/01/11................................... 11,269 ---------- 51,961 ---------- WATER AND SEWER -- 5.3% 1,800 CA Citrus Heights Water District Revenue, Series 2000, Insured: FGIC, 5.250% 10/01/20................................... 1,924 3,000 CA Pico Rivera California Water Authority Revenue, Water System Project, Series 1999A, Insured: MBIA, 5.500% 05/01/29................................... 3,367 2,000 DC Water and Sewer Authority Public Utility Revenue, Series 1998, Insured: FSA, 5.500% 10/01/11................................... 2,210
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- WATER AND SEWER -- (CONTINUED) $ 15,305 GA Atlanta Water and Wastewater Revenue, Series 1999A, Insured: FGIC, 5.500% 11/01/18................................... $ 17,382 1,490 IL Chicago Water Revenue, Refunding, Insured: FGIC, 5.100% 11/01/08................................... 1,587 6,985 IL Northwest Municipal Junction Action Water Agency and Supply Systems Revenue, Series 1997, Insured: MBIA, 5.125% 05/01/11................................... 7,367 7,555 KS Wyandotte County Unified Government Utility System Revenue, Refunding, Series 2004, Insured: AMBAC, 5.650% 09/01/16................................... 8,643 8,635 KS Wyandotte County Unified Government Utility System Revenue, Refunding, Series 2004, Insured: AMBAC, 5.650% 09/01/17................................... 9,918 1,000 MI Detroit Water Supply Systems Revenue, Refunding, Series 1995B, Insured: MBIA, 5.300% 07/01/09................................... 1,079 1,590 MO Kansas City Water Revenue, Series 1994, 5.900% 12/01/05................................... 1,594 1,200 NC Winston-Salem, Water and Sewer System Revenue, Refunding, Series 1997, 4.600% 06/01/11................................... 1,239 7,000 NY New York City Municipal Water Finance Authority, Water and Sewer System Revenue, Series 2000B, 5.125% 06/15/31................................... 7,192 4,030 TX Colorado River Municipal Water Revenue, Refunding, Series 2003, Insured: AMBAC, 5.000% 01/01/12................................... 4,333 1,455 TX Coppell Tex Waterworks and Sewer Systems Revenue, Series 2001, Insured: FSA, 5.000% 09/01/09................................... 1,514 7,300 TX Dallas Waterworks and Sewer Systems Revenue, Refunding, Series 2001, 5.000% 10/01/16................................... 7,679 5,000 TX Houston Utility System Revenue, Refunding, Combination First Lien, Series 2004A, Insured: FGIC, 5.250% 05/15/24................................... 5,293
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 129 NATIONS FUNDS Nations Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------------------- WATER AND SEWER -- (CONTINUED) $ 1,000 WA Kitsap County Sewer Revenue, Series 1996, Insured: MBIA, 5.600% 07/01/08.................... $ 1,034 5,790 WI Milwaukee Metropolitan Sewer District, GO, Refunding, Series 1997A, 5.125% 10/01/16................................... 6,038 ---------- 89,393 ---------- 190,249 ---------- TOTAL MUNICIPAL BONDS (Cost of $1,560,939).............................. 1,607,246 ----------
SHARES ------ INVESTMENT MANAGEMENT COMPANY -- 6.1% 102,761,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $102,761)........................................ 102,761 ---------- TOTAL INVESTMENTS (Cost of $1,663,700)(d)......................... 101.8% 1,710,007 ---------- OTHER ASSETS AND LIABILITIES, NET................. (1.8)% (30,775) ---------- NET ASSETS........................................ 100.0% $1,679,232 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a)The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b)Zero coupon bond. (c)Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d)Cost for federal income tax purposes is $1,662,903.
ACRONYM NAME - ------- ---- ABAG Association of Bay Area Government AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association GO General Obligation IDR Industrial Development Revenue MBIA MBIA Insurance Corp. PSFG Permanent School Fund Guaranteed RAD Radian Asset Assurance, Inc.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ------------------------------------------------------------- Tax-backed..................................... 39.4% Other.......................................... 15.2 Utilities...................................... 11.3 Transportation................................. 10.1 Health care.................................... 7.7 Housing........................................ 5.3 Education...................................... 3.4 Resource recovery.............................. 1.6 Industrials.................................... 1.4 Other revenue.................................. 0.3 Investment management company.................. 6.1 Other assets and liabilities, net.............. (1.8) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 130 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- MUNICIPAL BONDS -- 100.6% EDUCATION -- 5.3% EDUCATION -- 3.0% $ 3,985 DC Howard University Revenue Insured: MBIA 5.750% 10/01/17........................... $ 4,219 4,500 IL Educational Facilities Authority, Student Housing Advancement Funding Revenue University Center Project, 6.625% 05/01/17........................... 5,031 2,000 IN Ivy Tech State College Revenue Series 1997E, Insured: AMBAC 5.125% 07/01/12........................... 2,110 2,000 IN St. Joseph County Educational Facilities Revenue University of Notre Dame - Du Lac Project, Series 1996, 5.500% 03/01/26........................... 2,081 2,500 TX University of Texas, Permanent University Fund Finance Department Revenue Refunding, Series 2004B, 5.000% 07/01/26........................... 2,586 1,500 TX University System Financing Revenue Refunding, Series 2002, Insured: FSA 5.000% 03/15/17........................... 1,576 --------- 17,603 --------- STUDENT LOAN -- 2.3% 2,750 IA Student Loan Liquidity Corp. Student loan Revenue Refunding, Series 1998J, AMT, Insured: AMBAC 4.800% 06/01/09........................... 2,862 10,000 WY Student Loan Corporation Revenue, Refunding, Series 1999A, 6.250% 06/01/29........................... 10,674 --------- 13,536 --------- 31,139 --------- HEALTH CARE -- 14.5% HEALTH SERVICES -- 0.5% MN Minneapolis and St. Paul Housing and Redevelopment Authority Health Care Systems, Health Partners Obligation Group Project, 1,250 5.250% 12/01/16........................... 1,304 1,650 6.000% 12/01/17........................... 1,789 --------- 3,093 --------- HOSPITALS -- 14.0% 5,000 AL Huntsville, Health Care Authority Revenue Series 2003A, 5.750% 06/01/31........................... 5,205 1,000 AZ University Medical Center Corporation Hospital Revenue Refunding, Series 2004, 5.250% 07/01/13........................... 1,063 1,350 CO Health Facilities Authority Revenue Catholic Health Initiatives, Series 2002A, 5.000% 03/01/11........................... 1,432
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 5,000 CT Health And Educational Facilities Authority Revenue Eastern Connecticut Health Network Project, Refunding, Series 2000A Insured: RAD 6.000% 07/01/25........................... $ 5,504 4,200 DC Association of American Medical Colleges Revenue Insured: AMBAC 5.375% 02/15/17........................... 4,475 3,450 FL Highlands County, Health Facilities Authority Revenue Hospital Adventist Health Systems, 2003D, 5.375% 11/15/35........................... 3,565 3,000 GA Chatham County Hospital Medical Authority Revenue Memorial Health Medical Center Project, Series 2001A, 6.125% 01/01/24........................... 3,240 2,500 GA Chatham County Hospital Authority, Hospital Improvement-Memorial Health University, Series 2004A, 5.500% 01/01/34........................... 2,600 GA Gainesville and Hall County, Hospital Authority Revenue Anticipation Certificates, Northeast Georgia Health System Income Project, Series 2001, 1,435 5.000% 05/15/11........................... 1,508 1,610 5.000% 05/15/12........................... 1,679 1,560 5.000% 05/15/13........................... 1,611 2,000 IN Health Facility Financing Authority Hospital Revenue Refunding Clarian Health Partners, Inc., Series A, 5.500% 02/15/16........................... 2,076 6,310 MI University of Michigan, Hospital Revenue Refunding, Series 2002, 5.250% 12/01/20........................... 6,656 MO Health and Educational Facilities Authority Revenue SSM Health Care Project, Refunding, Series 2002A, 2,000 5.000% 06/01/11........................... 2,123 2,500 Series 2003A, 5.250% 06/01/12........................... 2,693 SC Greenville Hospital Facilities Revenue, 5,000 Series 2001, Insured: AMBAC 5.500% 05/01/26........................... 5,405 2,000 Refunding, Series 1996B, 5.250% 05/01/17........................... 2,072 5,500 TN Knox County Health, Educational and Housing Facilities Board Revenue, University Health Systems Inc. Project, Series 1993, 5.750% 04/01/19........................... 5,701 3,335 TX Harris County, Health Facilities Development Authority, Hospital Revenue Memorial Herman Hospital Systems Project, Series 1998, Insured: FSA 5.500% 06/01/11........................... 3,655
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 131 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 1,000 TX Harris County, Health Facilities Development Corporation, Hospital Revenue St. Luke's Episcopal Hospital Project, Series 2001A 5.500% 02/15/11........................... $ 1,080 4,000 UT Murray City Hospital Revenue, IHC Health Services Inc. Project, Refunding Series 1996, Insured: MBIA 5.000% 05/15/22........................... 4,083 1,325 VA Augusta County, Industrial Development Authority Revenue, Augusta Health Care, Inc., Series 2003, 5.250% 09/01/20........................... 1,413 1,000 VA Danville, Industrial Development Authority, Hospital Revenue Danville Regional Medical Center, Insured: AMBAC 5.200% 10/01/18........................... 1,084 5,500 WI Health and Educational Facilities Authority Revenue, Aurora Health Care Project, Series 1999B, 5.625% 02/15/20........................... 5,627 3,500 WI Health and Educational Facilities Authority Revenue, Aurora Health Care Project, Series 1999B, 5.500% 02/15/15........................... 3,602 4,000 WI State Health and Educational Facilities Authority Revenue, Aurora Health Care, Inc. Project, Series 1999A, 5.600% 02/15/29........................... 4,060 --------- 83,212 --------- 86,305 --------- HOUSING -- 2.9% MULTI-FAMILY -- 1.8% CA ABAG Finance Authority for Non-Profit Corporations, Multi-Family Revenue, Refunding, Series 2000B, 2,000 6.250% 08/15/30........................... 2,152 Series 2000A, AMT 5,000 6.400% 08/15/30........................... 5,359 3,000 MD State Economic Development Corp. Student Housing Revenue Salisbury Collegiate Housing Project, Series 1999A, 6.000% 06/01/30........................... 3,111 --------- 10,622 --------- SINGLE FAMILY -- 1.1% 440 GA Housing and Finance Authority Single- Family Mortgage Revenue Series 1999B-2, AMT, 6.100% 06/01/31........................... 455 25 MO Housing Development Commission, Mortgage Revenue Single Family Homeowner Loan Project, Series 1995A, AMT Insured: GNMA 6.100% 09/01/14........................... 25
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- SINGLE FAMILY -- (CONTINUED) $ 600 NM Mortgage Finance Authority, Single- Family Mortgage Revenue Series 1997C, AMT Insured: GNMA 6.050% 07/01/28........................... $ 616 620 SC Housing Finance and Development Authority Revenue Homeownership Mortgage Purchase Project, Series 1994A, 6.375% 07/01/16........................... 633 4,580 SD Housing Development Authority Revenue Series 2002E 5.550% 05/01/31........................... 4,638 --------- 6,367 --------- 16,989 --------- INDUSTRIALS -- 5.8% CHEMICALS -- 0.9% 2,000 SC York County Exempt Facility Industrial Development Revenue, Hoechst Celanese Corporation Project, Series 1994, AMT 5.700% 01/01/24........................... 1,984 3,000 TX Port of Bay City Authority, Matagorda County Revenue, Hoechst Celanese Corporation Project, Series 1996, AMT 6.500% 05/01/26........................... 3,060 --------- 5,044 --------- FOREST PRODUCTS AND PAPER -- 2.7% 6,750 AL Phoenix County, Industrial Development Board, Environmental Import Revenue Refunding, Mead Coated Board Project, Series 1998B, 5.250% 04/01/28........................... 6,657 1,000 MI Cornell Township, Economic Development Corporation Revenue, Meadwestvaco- Escanaba Project, Refunding, Series 2002, 5.875% 05/01/18........................... 1,092 2,470 MS Lowndes County Solid Waste Disposal, Pollution Control Revenue, Weyerhaeuser Company Project, Refunding, Series 1992A, 6.800% 04/01/22........................... 2,946 4,000 SC Georgetown County, Environmental Improvement Revenue International Paper Company Project, Refunding, Series 2000A, 5.950% 03/15/14........................... 4,461 1,000 SC Richland County, Environmental Improvement Revenue International Paper, Refunding, Series 2003, 6.100% 04/01/23........................... 1,066 --------- 16,222 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 132 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- MANUFACTURING -- 1.0% $ 1,000 AL McIntosh, Industrial Development Board, Environmental Improvement Revenue Series 1998C, 5.375% 06/01/28........................... $ 1,022 1,400 MO Saint Louis Missouri, Industrial Development Authority, Pollution Control Revenue, Anheuser-Busch Company Project, Series 1991, 6.650% 05/01/16........................... 1,695 3,000 TN Maury County Industrial Development Board Multi-Model Pollution Control Revenue Refunding, General Motors Corporation - Saturn Corporation Project, Series 1997, 6.500% 09/01/24........................... 3,058 --------- 5,775 --------- OIL AND GAS -- 1.2% 4,000 TN Maury County, Industrial Development Board, Solid Waste Disposal Revenue Occidental Petroleum Corporation, Series 2001A, 6.250% 08/01/18........................... 4,424 2,000 TX Texas City Industrial Development Corp. Arco Pipe Line Co. Project, Series 1990, 7.375% 10/01/20........................... 2,564 --------- 6,988 --------- 34,029 --------- OTHER -- 14.1% POOL/BOND BANK -- 0.5% 1,000 MI Municipal Bond Authority Revenue Series 2001, 5.250% 10/01/19........................... 1,074 1,985 VT Municipal Bond Bank, Revenue Series 1996, Insured: AMBAC 5.750% 12/01/15........................... 2,111 --------- 3,185 --------- REFUNDED/ESCROWED(a) -- 12.4% 1,300 AR Development Finance Authority, Revolving Loan Fund, Wastewater Systems Revenue Series 1996A, Pre-refunded 06/01/06, 5.700% 12/01/12........................... 1,358 5,000 AZ Tucson And Pima County, Industrial Development Authority, Single Family Mortgage Revenue Series 1983A, Pre-refunded 12/01/14, (b) 12/01/14.............................. 3,299 9,000 DC Hospital Revenue Medlantic Healthcare Group, Refunding, Series A, Pre-refunded 08/15/07, Insured: MBIA 5.375% 08/15/15........................... 9,628 5,000 GA Atlanta Airport Facilities Revenue Refunding, Series 2000A, Insured: FGIC Pre-refunded 01/01/10, 5.600% 01/01/30........................... 5,547 1,000 GA De Kalb County School District, GO, Series 1993A, Escrowed to Maturity, 6.250% 07/01/09........................... 1,119
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 3,000 IL Chicago Metropolitan Water Reclamation District, GO, Series 1993, Escrowed to Maturity, 5.500% 12/01/12........................... $ 3,308 1,515 IL Glendale Heights Hospital Revenue Glendale Heights Project, Refunding, Series 1985B, Escrowed to Maturity, 7.100% 12/01/15........................... 1,794 8,750 IL Metropolitan Pier and Exposition Authority, Dedicated State Tax Revenue Unrefunded Balance, Series 1993, Pre-refunded 06/15/13, Insured: FGIC (b) 06/15/13.............................. 6,223 IN Hamilton/Southeastern Indiana, North Delaware School Building Corporation, First Mortgage Revenue Series 1996, Pre-refunded 01/15/07, Insured: AMBAC 1,000 5.000% 07/15/07........................... 1,041 1,000 5.100% 07/15/09........................... 1,053 3,395 IN Health Facility Financing Authority Hospital Revenue Charity Obligation Group, Series 1997 D, Pre-refunded 11/01/07, 5.000% 11/01/26........................... 3,546 1,600 NE Omaha, Public Power District, Electric Revenue Series 1992B, Escrowed to Maturity, 6.200% 02/01/17........................... 1,870 665 NJ State, Highway Authority, Garden State Parkway General Revenue, Series 1971, 6.500% 01/01/11........................... 727 1,250 NY New York City, Municipal Water Finance Authority, Water and Sewer Systems Revenue Series 1997B, Pre-refunded 06/15/07, 5.750% 06/15/29........................... 1,338 PA Philadelphia, Hospital and Higher Education Facilities Authority, Hospital Revenue Frankford Hospital Project, Series 1993A, 3,125 Escrowed to Maturity, 6.000% 06/01/23........................... 3,139 1,570 Pre-refunded 01/01/05, 6.000% 06/01/14........................... 1,576 3,750 SC Berkeley County School District, GO, Series 2000, Pre-refunded 04/01/08, 5.000% 04/01/21........................... 4,030 2,470 TX Beaumont Independent School District, GO, Series 1996, Pre-refunded 02/15/06, Insured: PSFG 5.000% 02/15/17........................... 2,522 2,000 TX North Central, Health Facilities Development Corporation, Hospital Revenue Presbyterian Healthcare Project, Series 1991A, Escrowed to Maturity, 6.625% 06/01/11........................... 2,248
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 133 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) $ 2,500 UT County Hospital Revenue Series 1997, Pre-refunded 08/15/07, Insured: MBIA 5.250% 08/15/26........................... $ 2,556 1,650 UT Provo, Electric Revenue, Series 1980, Pre-refunded 04/01/05, 10.125% 04/01/15.......................... 2,168 1,000 WA King County School District No. 403, Renton, GO, Series 1998, Pre-refunded 06/01/08, 5.250% 06/01/15........................... 1,066 1,120 WA Public Power Supply Systems Revenue Nuclear Project Number 1, Refunding, Series 1990B, Pre-refunded 07/01/04, 7.250% 07/01/09........................... 1,236 WA Seattle GO, Pre-refunded 01/15/06, 4,365 Series 1996A 5.625% 01/15/10........................... 4,470 1,795 Series 1997, 5.300% 08/01/17........................... 1,892 WV Jefferson County Board of Education, Escrowed to Maturity, Insured: FGIC 1,450 6.850% 07/01/07........................... 1,574 1,560 6.850% 07/01/08........................... 1,742 1,000 WV West Virginia University, State University Systems Revenue Marshal University Library Project, Series 1996, Pre-refunded 04/01/06, Insured: AMBAC 5.750% 04/01/16........................... 1,041 --------- 73,111 --------- TOBACCO -- 1.2% 4,500 SC Tobacco Settlement Management Revenue Series 2001B, 6.375% 05/15/28........................... 4,588 2,450 WI Badger TOB Asset Securitization Corporation, Asset Backed Revenue Series 2002, 5.750% 06/01/12........................... 2,573 --------- 7,161 --------- 83,457 --------- RESOURCE RECOVERY -- 0.4% DISPOSAL -- 0.4% 2,425 NC Haywood County Industrial Facilities and Pollution Control Financing Authority, Solid Waste Disposal Revenue, Champion International Corporation Project, Series 1999, AMT, 6.400% 11/01/24........................... 2,599 --------- TAX-BACKED -- 34.7% LOCAL GENERAL OBLIGATIONS -- 14.0% 15,000 AK North Slope Borough Capital Appreciation, GO, Series 2000B, Insured: MBIA (b) 06/30/11.............................. 11,725 2,130 AL Birmingham GO, Refunding, Series 2003, Insured: AMBAC 5.250% 06/01/17........................... 2,316
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 2,790 AL Jefferson County School Revenue, Series 2004A 5.250% 01/01/19,.......................... $ 2,930 CA Clovis Unified School District, GO, Capital Appreciation - Election 2004, Series 2004A, Insured: FGIC 7,000 (b) 08/01/20.............................. 3,283 8,350 (b) 08/01/19.............................. 4,160 1,180 HI Honolulu City and County GO, Refunding, Series 1993B, 8.000% 10/01/10........................... 1,440 IL Cook County GO, 5,000 Series 1997A, Insured: MBIA 5.625% 11/15/22........................... 5,321 2,000 Series 2004, Insured: AMBAC 5.250% 11/15/21........................... 2,148 1,750 IL Cook County, High School District No. 209, Provisional Township, GO, Series 2004, Insured; FSA (b) 12/01/15.............................. 1,636 2,565 IL Du Page County GO, Series 1993, 5.600% 01/01/21........................... 2,924 1,750 IL Du Page County GO School District No. 41, Glen Ellyn, GO, Series 2004, Insured: FSA 5.000% 02/01/17........................... 1,879 3,165 IL Kane and De Kalb Counties Community Unit School District Number 302, GO, Insured: FGIC (b) 02/01/21.............................. 1,439 1,535 IL McHenry County Community Unit School District Number 200, GO, Series 1996A Insured: FSA 5.750% 01/01/13........................... 1,635 2,260 IN Marion County Public Library, GO, Series 2002A, 4.700% 07/01/19........................... 2,299 1,000 MI Detroit GO, Refunding, Series 1995B, 6.375% 04/01/07........................... 1,010 1,950 MN Elk River Independent School District Number 728, GO, Series 2004A, Insured: FGIC 5.000% 02/01/19........................... 2,071 1,000 MO Independence School District, GO, Series 1991, 6.250% 03/01/11........................... 1,106 1,450 MO Jefferson City School District, GO, Series 1991A, 6.700% 03/01/11........................... 1,641 2,500 NC New Hanover County, GO, Series 2001, 5.000% 06/01/20........................... 2,639 2,100 SC Darlington County School District, Insured: FSA 5.000% 03/01/24........................... 2,200 1,150 TX Brazosport Independent School District, Series 2003C, Insured: PSFG 5.000% 02/15/16........................... 1,222
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 134 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 1,750 TX Dallas County, GO, Series 1996, 5.250% 08/15/16........................... $ 1,825 2,220 TX Grande Prairie Independent School District, GO, Refunding, Series 2002, Insured: PSFG 5.000% 02/15/22........................... 2,301 8,000 TX Harris County GO, Refunding, Series 2002, Insured: MBIA (b) 08/15/19.............................. 3,990 1,900 TX Leander Independent School District, GO, Refunding, Series 2002, Insured: PSFG 5.375% 08/15/17........................... 2,058 4,155 TX McKinney Independent School District, GO, Series 2001, Insured: PSFG 5.125% 02/15/17........................... 4,395 3,490 TX Williamson County GO, Refunding, Series 2004, Insured: MBIA 5.000% 02/15/16........................... 3,711 3,000 WA King County Sewer, GO, Refunding, Series 1996C, 5.250% 01/01/17........................... 3,136 2,405 WA Port Seattle, Revenue Series 1999 B, 6.000% 12/01/11........................... 2,641 1,525 WA Skagit County School District Number 320, GO, Refunding, Series 1996, Insured: FGIC 5.500% 12/01/12........................... 1,586 --------- 82,667 --------- SPECIAL NON-PROPERTY TAX -- 8.1% 2,500 CA San Francisco, Bay Area Rapid Transit District, Sales Tax Revenue Refunding, Series 1990, Insured: AMBAC 6.750% 07/01/11........................... 2,969 2,500 CO Douglas County, Sales and Use Tax Revenue, Series 1996, Insured: MBIA 5.500% 10/15/11........................... 2,596 FL Leon County, Capital Improvement Revenue, Insured: AMBAC 4,440 5.000% 10/01/14........................... 4,817 5,000 5.000% 10/01/15........................... 5,423 2,000 FL Orange County, Tourist Development Tax Revenue Refunding, Series 1998A, Insured: AMBAC 4.750% 10/01/24........................... 2,019 5,000 Series 2000, Insured: AMBAC 5.250% 10/01/17........................... 5,344 1,000 FL Tallahassee Blue Print 2000 Intern Government Revenue, Series 2003, Insured: FSA 5.000% 10/01/13........................... 1,073 11,640 IL Metropolitan Pier and Exposition Authority, Dedicated State Tax Revenue Unrefunded Balance, Series 1993A Insured: FGIC (b) 06/15/13.............................. 8,167
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- (CONTINUED) $ 3,000 IL Metropolitan Pier And Exposition Authority, IL Dedicated Tax Revenue McCormick Place Expansion Project, Refunding, Series 2002B Insured: MBIA 5.000% 06/15/21........................... $ 3,135 3,000 MI Comprehensive Transportation Revenue, Refunding Series 1996A, Insured: MBIA 5.250% 08/01/13........................... 3,121 5,000 NY New York City Transitional Finance Authority Revenue Refunding, Series 2002A, 5.500% 11/01/26........................... 5,470 3,950 NY Sales Tax Asset Receivable Corporation Refunding, Series 2004A, Insured: AMBAC 5.000% 10/15/32........................... 4,099 --------- 48,233 --------- STATE APPROPRIATED -- 2.1% 5,435 MI Environmental Protection Program GO, Series 1992, 6.250% 11/01/12........................... 6,198 1,000 NY Dormitory Authority Revenue Series 2002B, 5.250% 11/15/23........................... 1,081 5,000 NY State Urban Development Corp. Correctional and Youth Facilities Services Revenue, Series 2002A, 5.000% 01/01/17........................... 5,291 --------- 12,570 --------- STATE GENERAL OBLIGATIONS -- 10.5% 1,735 FL Board of Education Capital Outlay GO, Unrefunded Balance, Series 1985, 9.125% 06/01/14........................... 2,268 4,425 FL Transportation Department, GO, Series 2002, 5.000% 07/01/23........................... 4,601 GA GO, Series 1992B, 3,000 6.250% 03/01/11........................... 3,437 2,000 Refunding, Series C, 5.500% 07/01/16........................... 2,238 3,000 IL GO, Series 2004A, 5.000% 03/01/34........................... 3,069 3,650 MA House Room 227 GO, Series 2004A, 5.250% 08/01/20........................... 4,015 2,000 MA GO, Refunding, Series 2004A, 5.250% 08/01/22........................... 2,197 2,625 NV GO, Series 1995A, 5.500% 11/01/17........................... 2,689 2,000 PR Public Buildings Authority Revenue Guaranteed, Government Facilities, Series 2002F, 5.250% 07/01/20........................... 2,171 1,000 SC State School Facilities GO, Series 2001A 3.500% 01/01/16........................... 952 1,000 TX GO, Series 1996, 5.500% 08/01/15........................... 1,032 12,700 WA GO, Series 1990A, 6.750% 02/01/15........................... 15,111
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 135 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- STATE GENERAL OBLIGATIONS -- (CONTINUED) $ 10,000 WA GO, Series 2000A, 5.625% 07/01/21........................... $ 10,856 2,955 WA GO, Unrefunded Balance, Series 1992-93A, 5.750% 10/01/12........................... 3,284 1,000 WI GO, Refunding, Series 1993-1, 5.800% 11/01/08........................... 1,090 3,000 WI GO, Refunding, Series 2004-2, Insured: MBIA 5.000% 05/01/16........................... 3,208 --------- 62,218 --------- 205,688 --------- TRANSPORTATION -- 9.0% AIR TRANSPORTATION -- 2.1% 1,000 IN Indianapolis Airport Authority FedEx Corp., Series 2004, AMT, 5.100% 01/15/17........................... 1,051 5,250 OH Dayton, Special Facilities Revenue Air Freight Corp. Project, Series 1988D, AMT 6.200% 10/01/09........................... 5,788 5,000 TN Memphis Shelby County Airport Authority Special Facilities Revenue Federal Express Corp. Project, Refunding, Series 2001, 5.000% 09/01/09........................... 5,345 --------- 12,184 --------- AIRPORTS -- 5.3% 1,250 AK Alaska State, International Airport Revenue, Series 2002B, Insured: AMBAC 5.500% 10/01/11........................... 1,377 2,095 FL Miami Dade County, Aviation Revenue Miami International Airport, Insured: FGIC 5.750% 10/01/20........................... 2,277 3,000 IL Chicago Illinois, O'Hare International Airport Revenue Second Lien, Refunding, Series 1993C, Insured: MBIA 5.000% 01/01/18........................... 3,051 7,000 IL Chicago O'Hare International Airport Revenue Second Lien, Refunding, Series 1999, AMT, Insured: AMBAC 5.500% 01/01/10........................... 7,525 2,640 IL Chicago, O'Hare International Airport Revenue Senior Lien, Refunding, Series 1993A, 5.000% 01/01/16........................... 2,647 1,960 NV Clark County, Passenger Facility Revenue, Refunding Series 2002, Insured: MBIA 5.250% 07/01/11........................... 2,096 3,210 TX Dallas-Fort Worth, International Airport Revenue Series 2003A, Insured: AMBAC 5.500% 11/01/15........................... 3,454 5,000 TX Houston, Airport System Revenue Series 1998B, AMT, Insured: FGIC 5.000% 07/01/16.................................. 5,101 3,885 WA Port Seattle, Revenue Series 1999B, Insured: FGIC 5.500% 09/01/13........................... 4,183 --------- 31,711 ---------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- PORTS -- 0.3% $ 1,505 VA Port Authority, Port Facility Revenue Series 2003, Insured: MBIA 5.250% 07/01/16........................... $ 1,613 --------- TOLL FACILITIES -- 0.7% 7,000 TX Turnpike Authority Central Texas Turnpike Systems Revenue Capital Appreciation-First Tier, Series 2002A Insured: AMBAC (b) 08/15/16.............................. 4,132 --------- TRANSPORTATION -- 0.6% 2,000 GA Metropolitan Atlanta, Rapid Transit Authority of Georgia Revenue Refunding, Series 1992P, Insured: AMBAC 6.250% 07/01/20........................... 2,376 1,000 SC Transportation Infrastructure Bank Revenue Refunding, Series 2004B, Insured: AMBAC 5.250% 10/01/15........................... 1,104 --------- 3,480 --------- 53,120 --------- UTILITIES -- 13.9% INVESTOR OWNED -- 1.1% 2,000 GA Monroe County, Development Authority, Pollution Control Revenue Oglethorpe Power Corporation Project, Series 1992A, 6.800% 01/01/11........................... 2,295 1,900 TX Brazos River Authority, Pollution Control Revenue, Texus Energy Company LLC Project, Refunding, Series 2003A, 6.750% 04/01/38........................... 2,196 2,000 UT Emery County, Pollution Control Revenue Pacificorp Project, Refunding, Series 1993A, Insured: AMBAC 5.650% 11/01/23........................... 2,024 --------- 6,515 --------- JOINT POWER AUTHORITY -- 3.4% 3,750 GA Municipal Electric Authority Power Revenue Refunding, Series 2002A, Insured: FSA 5.000% 01/01/18........................... 3,951 MO Environmental Improvement and Energy Resource Authority, Pollution Control Revenue Associated Electrical Cooperation Thomas Hill Project, Series 1996 3,425 5.500% 12/01/10........................... 3,600 2,000 5.500% 12/01/11........................... 2,102 5,000 SC Piedmont Municipal Power Agency, Electric Revenue Refunding, Capital Appreciation, Series 2004A, Insured: FGIC (b) 01/01/24.............................. 1,917
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 136 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- JOINT POWER AUTHORITY -- (CONTINUED) $ 3,095 SC Public Service Authority Revenue, Refunding, Series 2002D, Insured: FSA 5.000% 01/01/18........................... $ 3,261 5,000 WA Public Power Supply Systems Revenue Nuclear Project Number 2, Refunding, Series 1990A, Pre-refunded 07/01/04 Insured: MBIA 5.750% 07/01/11........................... 5,272 --------- 20,103 --------- MUNICIPAL ELECTRIC -- 3.4% 1,000 AK Anchorage, Electric Utilities Revenue Senior Lien, Refunding, Series 1993, Insured: MBIA 8.000% 12/01/09........................... 1,196 CA California, Department of Water Resources, Power Supply Revenue Series 2002A, 2,500 5.125% 05/01/18........................... 2,634 1,000 Insured: AMBAC 5.375% 05/01/18........................... 1,085 2,000 FL Reedy Creek, Improvement District Utilities Revenue, Refunding, Series 2004, Insured: MBIA 5.250% 10/01/14........................... 2,209 1,700 PR Electric Power Authority Revenue Series 2002, Insured: MBIA 5.000% 07/01/20........................... 1,860 5,000 TX Sam Rayburn Texas Municipal Power Agency Revenue Refunding, Series 2002, 6.000% 10/01/16........................... 5,446 1,000 TX San Marcos, Electric Utility System Revenue Refunding, Series 2002, Insured: FSA 5.250% 11/01/16........................... 1,073 2,310 WA Chelan County, Public Utilities District Division III Revenue Series 1997A, AMT 5.600% 07/01/32........................... 2,380 2,000 WA Tacoma Electric Systems Revenue Refunding, Series 1997, Insured: AMBAC 5.250% 01/01/15........................... 2,104 --------- 19,987 ---------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- WATER AND SEWER -- 6.0% $ 570 AL Jefferson County, Sewer Revenue, Refunding Series 1997A, Insured: FGIC 5.625% 02/01/22........................... $ 598 1,020 AL Jefferson County, Sewer Revenue Series 1997A, Insured: FGIC 5.625% 02/01/18........................... 1,074 4,800 IL Chicago Water Revenue, Senior Lien Series 2000, Insured: AMBAC 5.750% 11/01/10........................... 5,347 3,000 MA Water Resources Authority, General Revenue Series 1993C, Insured: AMBAC 5.250% 12/01/15........................... 3,293 3,520 NY New York City, Municipal Water Finance Authority, Water and Sewer Systems Revenue Refunding, Series 2001D, 5.250% 06/15/25........................... 3,694 SC Western Carolina Regional Sewer Authority, Insured: FSA 7,810 5.250% 03/01/18........................... 8,645 4,400 5.250% 03/01/21........................... 4,867 2,500 TN Metropolitan Government, Nashville and Davidson County, Water And Sewer Systems Revenue Refunding, Series 1993, Insured: FGIC 5.200% 01/01/13........................... 2,736 2,070 TX Bexar, Metropolitan Water District, Waterworks Revenue Unrefunded Balance, Series 1995, Insured: MBIA 6.000% 05/01/15........................... 2,117 2,830 VA Fairfax County Virginia Water and Sewer Authority, Water Revenue Unrefunded Balance Series 1992, 6.000% 04/01/22........................... 3,037 --------- 35,408 --------- 82,013 --------- TOTAL MUNICIPAL BONDS (Cost of $558,122)........................ 595,339 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 137 NATIONS FUNDS Nations Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------ INVESTMENT MANAGEMENT COMPANY -- 0.0% 165,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $165)..................................................... $ 165 -------- TOTAL INVESTMENTS (Cost of $558,287)(d)........................... 100.6% 595,504 -------- OTHER ASSETS AND LIABILITIES, NET................................ (0.6)% (3,734) -------- NET ASSETS........................................ 100.0% $591,770 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Zero coupon bond. (c) Money market mutual fund registered under the Investment Act of 1940, as amended, and advised by Bank of America Capital Management, LLC. (d) Cost for federal income tax purposes is $557,388.
ACRONYM NAME - ------- ---- ABAG Association of Bay Area Government AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association GO General Obligation MBIA MBIA Insurance Corp. PSFG Permanent School Fund Guaranteed RAD Radian Asset Assurance, Inc. TOB Tender Option Bond
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 34.7% Health care................................. 14.5 Other....................................... 14.1 Utilities................................... 13.9 Transportation.............................. 9.0 Industrials................................. 5.8 Education................................... 5.3 Housing..................................... 2.9 Resource recovery........................... 0.4 Investment management company............... 0.0 Other assets and liabilities, net........... (0.6) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 138 NATIONS FUND Nations California Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL BONDS -- 100.2% EDUCATION -- 2.6% $1,040 CA Infrastructure and Economic Development Bank Revenue, American Center for Wine Food Arts Project Series 1999 Insured: ACA 5.250% 12/01/08........................... $ 1,100 2,000 CA University of California Revenues, University and College Improvements Revenue Series 2003A 5.000% 05/15/10........................... 2,174 -------- 3,274 -------- HEALTH CARE -- 7.3% CONTINUING CARE RETIREMENT -- 1.3% 1,250 CA ABAG Finance Authority For Non-Profit Corps Certificates of Participation Refunding Episcopal Homes Foundation Project Series 1998, 5.000% 07/01/07........................... 1,282 300 CA ABAG Finance Authority For Nonprofit Corps. Certificates of Participation Refunding, American Baptist Homes Project, Series 1998A, 5.500% 10/01/07........................... 309 -------- 1,591 -------- HOSPITALS -- 6.0% 1,000 CA Health Facilities Finance Authority Revenue Cedars-Sinai Medical Center Project, Series 1999A 6.125% 12/01/19........................... 1,087 5,000 CA Statewide Communities Development Authority Revenue Series E Kaiser Permanente 3.875% 04/01/32........................... 5,000 1,465 CA Statewide Communities Development Authority Certificates of Participation, Catholic Healthcare West Project Series 1999, 6.000% 07/01/09........................... 1,534 -------- 7,621 -------- 9,212 -------- HOUSING -- 3.3% MULTI-FAMILY -- 3.3% 2,000 CA ABAG Finance Authority for Non-Profit Corporations, Multi-Family Revenue, Refunding, Series 2000 B, 6.250% 08/15/30........................... 2,152 2,000 CA Municipal Mortgage and Equity Tax Exempt Bond, Subsidiary LLC Perpetual Preferred, Series 2004A-2, 4.900% 06/30/49........................... 2,002 -------- 4,154 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- OTHER -- 11.1% REFUNDED/ESCROWED(a) -- 10.3% $1,000 CA Chaffey, California High School District, GO Series 2000B Insured: FGIC Pre-refunded 08/01/10 5.500% 08/01/14........................... $ 1,122 1,800 CA Florin, California Resource Conservative District Certificates of Participation Elk Grove Water Works Project Series 1999A Pre-refunded 09/01/09 6.650% 09/01/19........................... 2,099 1,750 CA Foothill/Eastern Transportation Corridor Agency California Toll Road Revenue Senior Lien Series A Pre-refunded 01/01/2010 7.150% 01/01/13........................... 2,085 2,000 CA Health Facilities Finance Authority Revenue Kaiser Permanente Project Series 1998A Insured: FSA Pre-refunded 06/01/08 5.250% 06/01/12........................... 2,162 5,000 CA Inland Empire Solid Waste Authority Revenue Landfill Improvement Financing Project, Series 1996B, AMT, Insured: FSA Pre-refunded 08/01/11 6.250% 08/01/11........................... 5,498 20 CA St Department of Water Resources Central Valley Project Revenue Water Systems Series 1998T Pre-refunded 12/01/08 5.500% 12/01/08........................... 22 -------- 12,988 -------- TOBACCO -- 0.8% 1,000 CA Golden State Tobacco Securitization Corps., Tobacco Settlement Revenue, Series 2003A-1, 3.400% 06/01/08........................... 978 -------- 13,966 -------- RESOURCE RECOVERY -- 0.9% DISPOSAL -- 0.9% 1,000 CA Orange County California Public Financing Authority Waste Management Systems Revenue Funding, Series 1997, Insured: AMBAC 5.750% 12/01/10........................... 1,102 -------- TAX-BACKED -- 54.7% LOCAL APPROPRIATED -- 12.9% 1,000 CA Alameda County, Certificates of Participation, Refunding, Series 2001A, Insured: MBIA 4.250% 12/01/11........................... 1,046 1,000 CA Alameda County Certificates of Participation, Refunding, Series 2001A, Insured: MBIA 5.375% 12/01/10........................... 1,106
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 139 NATIONS FUNDS Nations California Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- LOCAL APPROPRIATED -- (CONTINUED) $1,000 CA Anaheim California Public Financing Authority, Lease Revenue Public Improvements Project, Series 1997C, Insured: FSA 6.000% 09/01/11........................... $ 1,145 2,320 CA Desert Sands California University School District Certificates of Participation, Measure O Project, Series 2003F Insured: MBIA 4.000% 03/01/06........................... 2,352 3,135 CA Kings River Conservative District Revenue, Certificates of Participation, Peaking Project Series 2004 5.000% 05/01/14........................... 3,338 1,500 CA Los Angeles California Municipal Improvement, Corporate Lease Revenue Special Tax-Police Emergency Projects Series 2002G, Insured: FGIC 5.250% 09/01/13........................... 1,658 1,000 CA Los Angeles County California Lease Revenue, Refunding, Series 2002B Insured: AMBAC 6.000% 12/01/12........................... 1,155 3,000 CA Oakland J.T. Powers Financing Authority Lease Revenue, Refunding, Oakland Convention Centers Series 2001 Insured: AMBAC 5.500% 10/01/11........................... 3,362 1,000 CA San Jose California Financing Authority Lease Revenue, Convention Center Project Series 2001F, Insured: MBIA 5.000% 09/01/15........................... 1,062 -------- 16,224 -------- LOCAL GENERAL OBLIGATIONS -- 18.0% 1,330 CA Compton, California Community College District, GO, Series 2004A, Insured: MBIA, 5.250% 07/01/17........................... 1,447 1,000 CA East Bay Municipal Utilities District Wastewater Systems Revenue, Refunding, Series 2003F, Insured: AMBAC 5.000% 04/01/15........................... 1,068 1,290 CA Los Altos California School District, GO, Series 2001B, 5.000% 08/01/14........................... 1,375 3,500 CA Los Angeles California Unified School District, GO, Series 2000D, 5.500% 07/01/09........................... 3,845 500 CA Los Angeles County, California Community College District, Series 2003B Insured: FGIC 5.000% 08/01/12........................... 546 1,105 CA Los Gatos California JT High School District, GO, Series 2002C Insured: FSA 5.375% 06/01/13........................... 1,219
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $1,230 CA Lucia Mar Unified School District California, GO Election 2004 Insured: FGIC 5.250% 08/01/20........................... $ 1,325 3,000 CA San Bernardino Insured: FSA 5.000% 08/01/17........................... 3,225 1,000 CA San Juan California Unified School District, GO Series 2000 Insured: FGIC 5.000% 08/01/09........................... 1,081 1,800 CA San Ramon Valley California Unified School District, GO Election 2002 Series 2004 Insured: FSA 5.250% 08/01/16........................... 1,969 1,000 CA Santa Clara County California East Side Union High School District GO Refunding Series 2003B Insured: MBIA 4.200% 02/01/11........................... 1,047 3,285 CA Santa Magarita/Dana Point Authority Revenue Series 1997A Insured: AMBAC 5.500% 08/01/11........................... 3,519 965 CA State Center California Community College District, GO Election 2002 Series A Insured: MBIA 5.250% 08/01/22........................... 1,033 -------- 22,699 -------- SPECIAL NON-PROPERTY TAX -- 12.6% 2,000 CA California State University Revenue Refunding Systemwide Series 2004A Insured: FSA 5.000% 11/01/13........................... 2,185 1,325 Series 2003A Insured: FGIC 5.000% 11/01/12........................... 1,449 2,000 CA Orange County California Redevelopment Agency Tax Allocation Central District Redevelopment Series 2003 Insured: FGIC 5.000% 02/15/09........................... 2,149 1,000 CA San Diego County California Regional Transportation Sales Tax Revenue Series 1996A Insured: AMBAC 6.000% 04/01/06........................... 1,035 3,440 CA San Francisco California Bay Area Rapid Transportation District Sales Tax Revenue Series 1998 5.500% 07/01/09........................... 3,720 1,180 CA San Mateo County California Transit District Series 1997A Insured: MBIA 5.000% 06/01/13........................... 1,286 2,000 CA Santa Clara County California Financing Authority Revenue Series 2003 4.000% 08/01/05........................... 2,009 1,870 CA State Economic Recovery, GO Series 2004A, AMT Insured: FGIC 5.250% 07/01/14........................... 2,069 -------- 15,902 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 140 NATIONS FUNDS Nations California Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- SPECIAL PROPERTY TAX - 8.5% $2,025 CA Culver City California Redevelopment Finance Authority Revenue Refunding Tax Allocation Series 1993 Insured: AMBAC 5.500% 11/01/14........................... $ 2,250 1,455 CA Indian Wells California Redevelopment Agency Tax Allocation Consolidated Whitewater Project Series 2003A Insured: AMBAC 5.000% 09/01/14........................... 1,569 CA Oakland California Redevelopment Agency Tax Allocation Center District Redevelopment Project 3,700 Series 1992, Insured: AMBAC 5.500% 02/01/14........................... 4,090 1,500 Series 2003 Insured: FGIC 5.500% 09/01/12........................... 1,682 1,000 Series 2003A Insured: AMBAC 5.250% 07/15/13........................... 1,104 -------- 10,695 -------- STATE APPROPRIATED -- 1.0% 1,200 CA State Public Works 5.000% 06/01/15........................... 1,272 -------- STATE GENERAL OBLIGATIONS -- 1.7% 1,000 PR Commonwealth of Puerto Rico Public Improvements GO Refunding Series 2003C Insured: MBIA Mandatory Put 07/01/08 @ 100 5.000% 07/01/28........................... 1,058 1,000 PR Commonwealth of Puerto Rico, GO Series 2004A 5.250% 07/01/19........................... 1,066 -------- 2,124 -------- 68,916 -------- TRANSPORTATION -- 1.8% AIRPORTS -- 1.8% 2,000 CA San Francisco California City and County Airport Commission International Airport Revenue Refunding Second Series Issue 29B Insured: FGIC 5.250% 05/01/13........................... 2,206 -------- UTILITIES -- 18.5% INDEPENDENT POWER PRODUCERS -- 1.7% 2,000 CA Sacramento California Cogeneration Authority Revenue Refunding Cogeneration Project Series 1998 Insured: MBIA 5.250% 07/01/09........................... 2,137 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL ELECTRIC -- 12.0% $2,375 CA California State Department of Water Resources Power Supply Revenue Series 2002A, 6.000% 05/01/13........................... $ 2,700 1,300 CA Los Angeles California Water and Power Revenue Series 2001A Insured: MBIA 5.250% 07/01/15........................... 1,402 1,185 CA Modesto California Irrigation District Certificates of Participation Series 2001A Insured: FSA 5.250% 07/01/18........................... 1,270 1,615 CA Sacramento California Municipal Utility District Electric Revenue Series 2003R Insured: MBIA 5.000% 08/15/12........................... 1,764 3,000 CA Southern California Public Power Authority Power Project Revenue Series 1989, 6.750% 07/01/13........................... 3,538 2,055 CA Walnut California Energy Center Authority Revenue Series 2004A Insured: AMBAC 5.000% 01/01/16........................... 2,193 2,000 PR Puerto Rico Electric Power Authority Power Revenue Series 1997A Insured: MBIA 6.250% 07/01/10........................... 2,278 -------- 15,145 -------- WATER AND SEWER -- 4.8% 1,000 CA Los Angeles County California Sanitation District Financing Authority Revenue Capital Project Series 2003A Insured: FSA 5.000% 10/01/10........................... 1,091 3,000 CA Metropolitan Water District of Southern California Waterworks Revenue 5.000% 07/01/14........................... 3,256 650 CA Orange County California Water District Revenue Certificates of Participation Series 2003B Insured: MBIA 5.375% 08/15/17........................... 704 1,000 CA Sacramento County California Sanitation District Financing Authority Revenue Series 2000A 5.000% 12/01/08........................... 1,070 -------- 6,121 -------- 23,403 -------- TOTAL MUNICIPAL BONDS (Cost of $124,341)........................ 126,233 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 141 NATIONS FUNDS Nations California Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
SHARES VALUE (000) (000) - ------------------------------------------------------------------------------------ INVESTMENT MANAGEMENT COMPANY -- 4.1% 5,125 Nations Tax-Exempt Reserves, Capital Class(b) (Cost of $5,125)......................... $ 5,125 -------- TOTAL INVESTMENTS (Cost of $129,466)(c)........................... 104.3% 131,358 -------- OTHER ASSETS AND LIABILITIES, NET................. (4.3)% (5,439) -------- NET ASSETS........................................ 100.0% $125,919 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Cost for federal income tax purposes is $129,442.
ACRONYM NAME - ------- ---- ABAG Association of Bay Area Government ACA ACA Financial Guaranty Corp. AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GO General Obligation IBC Insured Bond Certificate MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 54.7% Utilities................................... 18.5 Other....................................... 11.1 Health care................................. 7.3 Housing..................................... 3.3 Education................................... 2.6 Transportation.............................. 1.8 Resource recovery........................... 0.9 Investment management company............... 4.1 Other assets and liabilities, net........... (4.3) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 142 NATIONS FUNDS Nations California Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- MUNICIPAL BONDS -- 98.2% EDUCATION -- 1.4% $ 1,000 CA Educational Facilities Authority Revenue Pooled College and University Project, Series 1999B 5.250% 04/01/24................................... $ 1,006 2,500 University Southern California Series 2003A 5.000% 10/01/33................................... 2,575 -------- 3,581 -------- HEALTH CARE -- 8.8% HOSPITALS -- 8.8% 3,500 CA Health Facilities Finance Authority Revenue Cedars-Sinai Medical Center Project, Series 1999A 6.125% 12/01/19................................... 3,804 5,000 CA Health Facilities Financing Authority, Revenue Refunding Insured Health Facilities Mark Twain Project, Series 1996 Insured: MBIA 6.000% 07/01/16................................... 5,282 2,500 CA Infrastructure And Economic Development Bank, Revenue Kaiser Hospital Assistant I-LLC Series 2001A 5.550% 08/01/31................................... 2,622 1,835 CA Statewide Communities Development Authority Certificates of Participation Insured: FSA 5.500% 08/15/19................................... 1,991 2,500 CA Statewide Communities Development Authority Revenue Certificates of Participation Series 1993, 5.400% 11/01/15................................... 2,515 3,300 CA Statewide Communities Development, Authority, Revenue, Certificates of Participation John Muir/Mount Diablo Health Systems Project, Series 1997 Insured: MBIA 5.125% 08/15/17................................... 3,491 1,000 CA Torrance California Hospital Revenue Torrance Memorial Medical Center Project, Series 2001A 5.500% 06/01/31................................... 1,043 1,000 CA Tri City California Hospital District Revenue Series 1991 Insured: MBIA 6.000% 02/01/22................................... 1,014 940 CA Turlock California Health Facilities Revenue, Certificates of Participation Emanuel Medical Center, Inc. Project, Series 2004, 5.000% 10/15/13................................... 963 -------- 22,725 --------
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- HOUSING -- 8.0% MULTI-FAMILY -- 7.7% $ 2,000 CA ABAG Finance Authority for Non-Profit Corporations, Multi-Family Revenue, Refunding, Series 2000B, 6.250% 08/15/30................................... $ 2,153 2,000 CA ABAG Finance Authority for Non-Profit Corporations, Multi-Family Revenue Refunding, Series 2000A, AMT 6.400% 08/15/30................................... 2,144 2,000 CA Daly City California Housing Development Finance Agency Mobile Home Park Revenue Franciscan Acquisition Project, Series 2002A, 5.850% 12/15/32.......................................... 2,052 1,290 CA Housing Finance Agency Multi-Unit Rental Housing Revenue Series 1992B-II, 6.700% 08/01/15................................... 1,311 2,000 CA Municipal Mortgage and Equity Tax Exempt Bond, Subsidiary LLC Perpetual Preferred, Series 2004A-2, 4.900% 06/30/49................................... 2,002 2,000 CA Statewide Communities Development Authority , Multi-Family Revenue Refunding Quail Ridge Apartments Project, Series 2002E-1, 5.375% 07/01/32................................... 2,019 6,000 CA Statewide Communities Development Authority Apartment Development Revenue Refunding, Irvine Apartment Communities Project Series 1998A-4, Mandatory Put 05/15/13, 5.250% 05/15/25................................... 6,208 2,000 CA Statewide Communities Development Authority, Multi-Family Revenue Refunding Archstone/Oakridge Housing Project, Series 1999E, Mandatory Put 06/01/08 @ 100, 5.300% 06/01/29................................... 2,100 -------- 19,989 -------- SINGLE FAMILY -- 0.3% 800 CA Housing Finance Agency Single-Family Mortgage Revenue Series 1997B-3 Class I, AMT Insured: FHA 5.400% 08/01/28................................... 812 -------- 20,801 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 143 NATIONS FUNDS Nations California Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- OTHER -- 14.8% REFUNDED/ESCROWED(a) -- 14.4% $ 2,000 CA Anaheim California Union School District GO Series 2002, Insured: FSA Pre-refunded 08/01/12 5.000% 08/01/25................................... $ 2,192 1,500 CA Capistrano California Unified School District Community Facilities District Special Tax Number 98-2-Ladera Pre-refunded 09/01/09 5.750% 09/01/29................................... 1,544 2,000 CA Foothill/Eastern Corridor Agency California Toll Road Revenue Sr. Lien Series 1995A Pre-refunded 01/01/10 6.000% 01/01/16................................... 2,251 1,000 CA Health Facilities Financing Authority Revenue Kaiser Permanente Project Series 1998B Pre-refunded 10/01/08 5.250% 10/01/13................................... 1,072 3,000 CA Health Facilities Financing Authority, Revenue Kaiser Permanente Project, Series 1998A Insured: FSA Pre-refunded 06/01/08 5.000% 06/01/24................................... 3,109 2,000 CA Inland Empire Solid Waste Authority Revenue Landfill Improvement Financing Project, Series 1996B, AMT, Insured: FSA Pre-refunded 08/01/11 6.250% 08/01/11................................... 2,199 2,500 CA Los Angeles County California Public Works Financing Authority, Lease Revenue Multiple Capital Facilities Project VI, Series 2000A Insured: AMBAC Pre-refunded 05/01/10 5.625% 05/01/26................................... 2,790 425 CA Los Angeles County California Public Works Financing Authority, Revenue Regional Park and Open Space District A, Series 1997A, Pre-refunded 10/01/07 5.500% 10/01/08................................... 457 1,115 CA Manhattan Beach California Unified School District, Certificates of Participation Series 1995A Insured: MBIA Pre-refunded 08/01/05 5.750% 08/01/20................................... 1,150 2,865 CA Metropolitan Water District of Southern California Waterworks Revenue Series 1993A Pre-refunded 07/01/21 5.750% 07/01/21................................... 3,239
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- REFUNDED/ESCROWED(a) -- (CONTINUED) Series 1997A, Pre-refunded 01/01/08 $ 815 5.000% 07/01/26................................... $ 869 490 5.000% 07/01/26................................... 522 5,270 CA Pleasanton-Suisun City California Home Financing Authority Home Mortgage Revenue, Municipal Multiplier Series 1984A Insured: MBIA Pre-refunded 10/01/16 (b) 10/01/16...................................... 3,141 2,900 CA Sacramento California Power Authority Revenue Cogeneration Project, Series 1995, Pre-refunded 07/01/06 5.875% 07/01/15................................... 3,013 2,000 CA San Diego County California Water Authority Water Revenue Certificates of Participation Series 1998A, Pre-refunded 05/01/08 5.125% 05/01/16................................... 2,151 1,455 CA San Joaquin Hills California Transportation Corridor Agency Toll Road Revenue Sr. Lien, Series 1993, Escrowed to Maturity 7.400% 01/01/07................................... 1,571 1,405 CA San Jose California Redevelopment Agency Tax Allocation Merged Area Redeveloped Escrowed to Maturity Insured: MBIA 6.000% 08/01/15................................... 1,649 1,025 CA Westwood California Unified School District GO, Series 1996, Pre-refunded 08/01/06 6.500% 08/01/21................................... 1,067 1,500 PR Commonwealth Infrastructure Financing Authority Special Obligation Series 2000A Pre-refunded 10/01/10 5.500% 10/01/32................................... 1,631 1,520 PR Public Finance Corporation -- Commonwealth Appropriation E Pre-refunded 02/01/12 5.500% 08/01/29................................... 1,684 -------- 37,301 -------- TOBACCO -- 0.4% 1,000 CA Golden State Tobacco Securitization Corporations, Tobacco Settlement Revenue Series 2003A, 6.250% 06/01/33................................... 1,023 -------- 38,324 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 144 NATIONS FUNDS Nations California Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- OTHER REVENUE -- 1.1% RECREATION -- 1.1% $ 1,400 CA Del Mar California Race Track Authority Revenue Refunding Series 1996, 6.000% 08/15/08................................... $ 1,473 CA Del Mar California Race Track Authority Revenue Refunding, Series 1996 1,000 6.200% 08/15/11................................... 1,055 300 6.000% 08/15/06................................... 304 -------- 2,832 -------- TAX-BACKED -- 30.1% LOCAL APPROPRIATED -- 6.4% 1,185 CA Bodega Bay Fire Protection District Certificates of Participation Fire Station Project, Series 1996, 6.450% 10/01/31................................... 1,247 3,000 CA Escondido JT Powers Financing Authority, Lease Revenue California Center for the Arts Project, Series 1995 Insured: AMBAC 6.000% 09/01/18................................... 3,100 1,100 CA Foothill/Deanza Community College District University Southern California, Certificates of Participation Refunding, Series 2003 Insured: MBIA 5.000% 09/01/17................................... 1,162 3,000 CA Los Angeles California Convention and Exhibition Center Authority Lease Revenue Refunding Series 1993A Insured: MBIA 6.000% 08/15/10................................... 3,404 2,000 CA Montery County California Certificates of Participation Series 2001 Insured: MBIA 5.000% 08/01/32................................... 2,036 1,500 CA Sacramento City Financing Authority City Hall and Redevelopment Projects, Series 2002A, Insured: FSA 5.000% 12/01/32................................... 1,532 1,750 CA San Joaquin County California Certificates Participation Capital Facilities Project, Series 1993 Insured: MBIA 5.500% 11/15/13................................... 1,963 2,000 CA San Mateo County California JT Powers Authority Lease Revenue Capital Project, Series 1997A Insured: FSA 5.125% 07/15/32................................... 2,058 -------- 16,502 --------
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- 9.1% $ 2,010 CA East Side Union High School District California Insured: MBIA 5.250% 08/01/26................................... $ 2,230 2,575 CA Fresno Calif Unified School District Education Center Series 2004B Insured: MBIA 5.000% 02/01/19................................... 2,781 1,995 CA Lafayette California GO, Series 2002, 5.125% 07/15/25................................... $ 2,087 3,050 CA Larkspur California School District GO, Series 2000A 5.250% 08/01/25................................... 3,223 4,065 CA Lompoc California Unified School District GO Election of 2002 Project, Series 2003A Insured: FGIC 5.000% 08/01/27................................... 4,207 2,095 CA Oak Park California Unified School District GO Series 2000 Insured: FSA (b) 05/01/14...................................... 1,414 1,000 CA San Diego California Community College District, GO Series 2003A Insured: FSA 5.000% 05/01/22................................... 1,046 2,000 CA Saratoga California GO Saratoga Community Library Project, Series 2001 Insured: MBIA 5.250% 08/01/31................................... 2,103 2,965 CA Tahoe Truckee California Unified School District Number 2 GO Series 1999A Insured: FGIC (b) 08/01/24...................................... 1,101 3,780 CA Tahoe Trukee California Unified School District GO Series 1999A Insured: FGIC (b) 08/01/23...................................... 1,491 1,610 CA West Contra Costa California Unified School District GO Refunding, Series 2001A Insured: MBIA 5.600% 02/01/20................................... 1,845 -------- 23,528 -------- SPECIAL NON-PROPERTY TAX -- 2.0% 3,000 CA Los Angeles County California Metropolitan Transportation Authority Sales Tax Revenue Series 2000A Insured: FGIC 5.250% 07/01/30................................... 3,155 2,000 CA San Francisco California Bay Area Rapid Transit District Sales Tax Revenue Series 2001 Insured: AMBAC 5.000% 07/01/26................................... 2,057 -------- 5,212 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 145 NATIONS FUNDS Nations California Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- SPECIAL PROPERTY TAX -- 5.9% $ 1,270 CA Lancaster California Financing Authority Tax Allocation Revenue Redevelopment Projects 5 and 6, Series 2003 Insured: MBIA 5.125% 02/01/17................................... $ 1,380 225 CA Los Angeles County California Public Works Financing Authority Revenue Regional Park and Open Space District A, Series 1997A, 5.500% 10/01/08................................... 240 2,000 CA Los Angeles County California Public Works Insured: FSA 5.250% 10/01/18................................... 2,223 1,000 CA Oceanside California Community Facilities District Special Tax Number 00-1-Ocean Ranch Corporation, Series 2004, 5.875% 09/01/34................................... 1,014 2,790 CA San Jose California Redevelopment Agency Tax Allocation Merged Area Redeveloped Unrefunded Balance Insured: MBIA 6.000% 08/01/15................................... 3,240 1,500 CA Sulphur Springs California Unified School District Special Tax Series 2002-1-A, 6.000% 09/01/33................................... 1,512 5,000 CA West Covina California Redevelopment Agency Community Facilities District Special Tax Refunding Fashion Plaza Project, Series 1996, 6.000% 09/01/17................................... 5,659 -------- 15,268 -------- STATE APPROPRIATED -- 0.8% 1,500 CA State Public Works Board Lease Revenue Department of Health -- Colinga, Series 2004A, 5.500% 06/01/19................................... 1,636 480 PR Public Finance Corporation Miscellaneous Revenue Commonwealth Appropriation Series 2002E, Unrefunded Balance 5.500% 08/01/29................................... 508 -------- 2,144 -------- STATE GENERAL OBLIGATIONS -- 5.9% CA California State GO Series 1991, 1,675 6.600% 02/01/10................................... 1,906 65 Series 1995, 5.750% 03/01/09................................... 66 2,600 Series 2000 Insured: FGIC 5.250% 09/01/30................................... 2,735
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- STATE GENERAL OBLIGATIONS -- (CONTINUED) $ 1,000 Series 1993, 5.500% 04/01/13................................... $ 1,108 3,000 Refunding Series 2000, 5.625% 05/01/26................................... 3,259 1,940 PR Commonwealth of Puerto Rico GO Public Improvement Series 2001A, Unrefunded Balance 5.375% 07/01/28................................... 2,045 2,000 Series 2004A, 5.250% 07/01/22................................... 2,115 2,000 5.250% 07/01/21................................... 2,122 -------- 15,356 -------- 78,010 -------- TRANSPORTATION -- 10.8% AIRPORTS -- 4.9% 2,000 CA Maritime Infrastructure Authority Airport Revenue San Diego Unified Port District Airport, Series 1995 Insured: AMBAC 5.500% 11/01/05................................... 2,034 3,000 CA Orange County California Airport Revenue Refunding Series 1997, AMT Insured: MBIA 5.500% 07/01/10................................... 3,187 2,250 CA San Francisco City and County Airport Commission International Airport Revenue Refunding Series 2001-27B Insured: FGIC 5.000% 05/01/21................................... 2,323 3,000 CA San Francisco California City and County Airports Commission International Airport Revenue Second Series Issue 10A Insured: MBIA 5.700% 05/01/26................................... 3,134 2,000 CA San Francisco California City and County Airports Commission International Airport Revenue Refunding Series Issue 30 Insured: XLCA 5.000% 05/01/17................................... 2,112 -------- 12,790 -------- PORTS -- 1.8% 3,000 CA Long Beach California Harbor Revenue Series 2000A AMT, 5.375% 05/15/24................................... 3,125 1,500 CA Port Oakland California Port Revenue Refunding Series 1997H, AMT Insured: MBIA 5.500% 11/01/15................................... 1,601 -------- 4,726 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 146 NATIONS FUNDS Nations California Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- TOLL FACILITIES -- 3.2% $ 4,000 CA Foothill/Eastern Corridor Agency California Toll Road Revenue Refunding Series 1999, 5.750% 01/15/40................................... $ 4,042 2,000 CA Foothill/Eastern Corridor Agency California Toll Road Revenue Sr Lien Series 1995, Insured: MBIA 5.000% 01/01/35................................... 2,027 2,000 CA Foothill/Eastern Corridor Agency California Toll Road Revenue Refunding Series 1999 Insured: MBIA 5.125% 01/15/15................................... 2,130 -------- 8,199 -------- TRANSPORTATION -- 0.9% 2,250 PR Commonwealth of Puerto Rico Highway And Transportation Authority Transportation Revenue Series 1998A Insured: MBIA 4.750% 07/01/38................................... 2,294 -------- 28,009 -------- UTILITIES -- 23.2% INVESTOR OWNED -- 1.2% 1,000 CA California Pollution Control Financing Authority Pollution Control Revenue Southern California Edison Co. Project Series 1992B, AMT, 6.400% 12/01/24................................... 1,020 2,000 CA Chula Vista California Industrial Development Authority San Diego Gas & Electric-B, Series 1996, AMT, 5.500% 12/01/21................................... 2,093 -------- 3,113 -------- JOINT POWER AUTHORITY -- 0.4% 1,000 CA San Juan California M-S-R Public Power Agency Revenue Refunding San Juan Project Series 2001I Insured: MBIA 5.000% 07/01/12................................... 1,077 -------- MUNICIPAL ELECTRIC -- 7.9% CA Central Valley Financing Authority Cogeneration Project Revenue Carson Ice General Project, Series 1993, 1,110 6.000% 07/01/09................................... 1,148 1,615 Series 1998 Insured: MBIA 5.250% 07/01/12................................... 1,721 CA Sacramento California Municipal Utility District Electric Revenue Refunding: Series 2001P Insured: FSA 1,000 5.250% 08/15/20................................... 1,068 2,000 Series 2001N: Insured: MBIA 5.000% 08/15/28................................... 2,055 2,220 CA Sacramento California MUD Electric Revenue Series 1997K Insured: AMBAC 5.250% 07/01/24................................... 2,448
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- MUNICIPAL ELECTRIC -- (CONTINUED) $ 4,000 CA Southern California Public Power Authority Power Project Revenue Series 1989, 6.750% 07/01/13................................... $ 4,717 1,000 CA Southern California Public Power Authority Power Revenue Project Magnolia Power Project, Series A2003-1 Insured: AMBAC 5.000% 07/01/25................................... 1,035 1,000 CA Walnut California Energy Center Authority Revenue Series 2004A Insured: AMBAC 5.000% 01/01/16................................... 1,067 5,000 PR Electric Power Authority Power Revenue Series 2000HH Insured: FSA 5.250% 07/01/29................................... 5,328 -------- 20,587 -------- WATER AND SEWER -- 13.7% 3,000 CA California State Department of Water Resources Water Systems Revenue Central Valley Project, Series 1997S, 5.000% 12/01/17................................... 3,149 1,920 CA Contra Costa California Water District Water Revenue Series 2002L Insured: FSA 5.000% 10/01/24................................... 1,985 2,750 CA East Bay California Municipal Utility District Water Systems Revenue Series 2001 Insured: MBIA 5.000% 06/01/26................................... 2,828 1,000 CA Eastern Municipal Water District California Water and Sewer Certificates of Participation Series 1991 Insured: FGIC 6.750% 07/01/12................................... 1,178 2,500 CA Elsinore Valley Municipal Water District California Certificates of Participation Refunding, Series 1992A Insured: FGIC 6.000% 07/01/12................................... 2,869 5,000 CA Fresno California Sewer Revenue Series 1993A-1 Insured: AMBAC 6.250% 09/01/14................................... 5,930 3,000 CA Los Angeles California Department of Water and Power Waterworks Revenue Series 2001A 5.125% 07/01/41................................... 3,058 3,000 Series 2001A Refunding Insured: FGIC 5.125% 07/01/41................................... 3,058 985 CA Manteca California Financing Authority Sewer Revenue Series 2003B Insured: MBIA 5.000% 12/01/33................................... 1,002 3,635 CA Metropolitan Water District of Southern California Waterworks Revenue Refunding Series 1993A 5.750% 07/01/21................................... 4,209
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 147 NATIONS FUNDS Nations California Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- WATER AND SEWER -- (CONTINUED) $ 2,500 CA Northridge Water District Revenue Certificates of Participation Series 1996 Insured: AMBAC 5.250% 02/01/18................................... $ 2,596 2,000 CA Pico Rivera California Water Authority Revenue Water System Project, Series 1999A, Insured: MBIA 5.500% 05/01/29................................... 2,245 1,400 CA San Diego California Public Facilities Financing Authority Sewer Revenue Series 1999B Insured: FGIC 5.000% 05/15/29................................... 1,433 -------- 35,540 -------- 60,317 -------- TOTAL MUNICIPAL BONDS (Cost of $239,477)................................ 254,599 --------
SHARES - --------- INVESTMENT MANAGEMENT COMPANY -- 1.1% 2,801,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $2,801)............................................ 2,801 -------- TOTAL INVESTMENTS (Cost of $242,278)(d)............................. 99.3% 257,400 -------- OTHER ASSETS AND LIABILITIES, NET................... 0.7% 1,688 -------- NET ASSETS.......................................... 100.0% $259,088 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Zero coupon bond. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $242,135.
ACRONYM NAME - ------- ---- ABAG Association of Bay Area Governments AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FSA Financial Security Assurance, Inc. GO General Obligation IBC Insured Bond Certificates MBIA MBIA Insurance Corp. XLCA XL Capital Assurance, Inc.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 30.1% Utilities................................... 23.2 Other....................................... 14.8 Transportation.............................. 10.8 Health care................................. 8.8 Housing..................................... 8.0 Education................................... 1.4 Other revenue............................... 1.1 Investment management company............... 1.1 Other assets and liabilities, net........... 0.7 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 148 NATIONS FUNDS Nations Florida Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL BONDS -- 98.4% EDUCATION -- 2.2% $ 3,000 FL University Athletic Association, Inc. Athletic Program Revenue Series 2001, 2.200% 10/01/31........................... $ 2,997 1,000 FL Volusia County Educational Facilities Authority Revenue Embry Riddle Aeronautical University Project, Series 1996A, 6.125% 10/15/26........................... 1,056 -------- 4,053 -------- HEALTH CARE -- 16.9% HOSPITALS -- 16.7% FL Bay Medical Center Hospital Revenue Bay Medical Center Project, Refunding, Series 1996, Insured: AMBAC 1,000 5.000% 10/01/05........................... 1,012 2,000 5.450% 10/01/12........................... 2,107 2,125 FL Escambia County Health Facilities Authority Revenue Ascension Health Credit Project, Series 2003A, 5.250% 11/15/11........................... 2,297 2,025 FL Marion County Hospital District Revenue Refunding, Series 1999, 5.250% 10/01/11........................... 2,153 555 FL Orange County Health Facilities Authority Revenue Unrefunded Balance, Series 1996A, Insured: MBIA 6.250% 10/01/16........................... 654 1,750 FL Sarasota County Public Hospital Board Revenue Sarasota Memorial Hospital Project, Refunding, Series 1998B Insured: MBIA 5.250% 07/01/11........................... 1,897 1,650 FL Sarasota County Public Hospital Board Revenue Sarasota Memorial Hospital Project, Refunding, Series 1997B, Insured: MBIA 5.000% 10/01/07........................... 1,727 FL South Broward Hospital District Revenue 3,000 Series 2002, 5.600% 05/01/27........................... 3,200 1,000 Series 2002, 5.500% 05/01/22........................... 1,064 3,955 Series 2003A, Insured: MBIA 5.250% 05/01/12........................... 4,302 1,980 FL St. Petersburg Health Facilities Authority Revenue All Children's Hospital Project, Series 2002, Insured: AMBAC 5.500% 11/15/16........................... 2,144 1,995 All Children's Hospital, Series 2002, Insured: AMBAC 5.500% 11/15/15........................... 2,164
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 2,000 FL Tampa Health Systems Revenue Catholic Health Project, Series 1998A-1, Insured: MBIA 4.875% 11/15/15........................... $ 2,070 4,180 VA Arlington County Industrial Development Authority Revenue Virginia Hospital Arlington Health Systems Project, Series 2001, 5.500% 07/01/14........................... 4,498 -------- 31,289 -------- INTERMEDIATE CARE FACILITIES -- 0.2% 375 FL Orange County Health Facilities Authority Revenue Lakeside Alternatives, Inc. Project, Refunding, Series 1995, 6.250% 07/01/05........................... 376 -------- 31,665 -------- HOUSING -- 5.3% MULTI-FAMILY -- 4.3% 3,300 FL Capital Trust Agency Multifamily Housing Revenue Shadow Run Project, Series A, 5.150% 11/01/30........................... 3,473 2,250 FL Collier County Housing Finance Authority Multifamily Revenue Goodlette Arms Project, Series 2002A-1, 4.900% 02/15/32........................... 2,293 1,000 FL Housing Finance Agency Multi-Family Housing Revenue United Dominion Realty Trust-Andover Project, Refunding Series 1996E, AMT 6.350% 05/01/26........................... 1,023 FL Housing Finance Agency Revenue Refunding, The Vineyards Project, Series 1995H, 195 5.875% 11/01/05........................... 196 1,000 6.400% 11/01/15........................... 1,035 -------- 8,020 -------- SINGLE FAMILY -- 1.0% 420 FL Escambia County Housing Finance Authority Single-Family Mortgage Revenue Series 2000A, AMT Insured: MBIA 6.300% 10/01/20........................... 426 1,515 FL Housing Finance Corp. Revenue Homeowner Mortgage Project Series 1998-1, Insured: MBIA 4.950% 07/01/11........................... 1,573 -------- 1,999 -------- 10,019 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 149 NATIONS FUNDS Nations Florida Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- INDUSTRIALS -- 0.6% FOREST PRODUCTS AND PAPER -- 0.6% $ 1,000 FL Bay County Pollution Control Revenue International Paper Company, Refunding, Series 1998A, 5.100% 09/01/12........................... $ 1,058 -------- OTHER -- 10.3% POOL/BOND BANK -- 0.7% 1,125 FL State Municipal Loan Council Revenue Series 2003B, Insured: MBIA 5.250% 12/01/13........................... 1,232 -------- REFUNDED/ESCROWED(a) -- 9.6% 1,470 FL Boca Raton GO, Series 2000, Pre-refunded 07/01/09 5.000% 07/01/13........................... 1,587 315 FL Gainesville Utilities System Revenue Escrowed to Maturity, Series 1996A, 5.750% 10/01/07........................... 336 1,000 FL Lakeland Electricity and Water Revenue Refunding, Series 1990, Insured: AMBAC Pre-refunded 10/01/09 (b) 10/01/09.............................. 860 4,640 FL Orange County Health Facilities Authority Revenue Orlando Regional Healthcare Project, Series 1996A, Insured: MBIA Pre-refunded 10/01/08 6.250% 10/01/08........................... 5,125 1,445 Orlando Regional Healthcare System, Series 1996A, Escrowed to Maturity, Insured: MBIA 6.250% 10/01/16........................... 1,736 2,070 FL Pembroke Pines Consolidated Utilities Systems Revenue Refunding, Series 1992, Insured: FGIC Pre-refunded 09/01/07 6.250% 09/01/07........................... 2,165 510 FL Port St. Lucie Utility Revenue Series 2003, Pre-refunded 09/01/13 5.000% 09/01/16........................... 554 3,000 FL Tampa Tax Allocation Cigarette-H. Lee Moffitt Cancer Project, Series 1999, Insured: AMBAC Pre-refunded 03/01/07 5.000% 03/01/07........................... 3,119 1,620 IL Champaign Community Unit School District Number 116 Urbana, GO, Series 1999C, Insured: FGIC Pre-refunded 01/01/09 (b) 01/01/10.............................. 1,367 1,000 SC Calhoun County Solid Waste Disposal Facility Revenue Carolina Eastman Company Project, Series 1992, AMT Pre-refunded 05/01/17 6.750% 05/01/17........................... 1,217 -------- 18,066 -------- 19,298 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- OTHER REVENUE -- 0.8% RECREATION -- 0.8% $ 1,450 FL State Board of Education Lottery Revenue Series 2002A, Insured: FGIC 5.375% 07/01/17........................... $ 1,580 -------- RESOURCE RECOVERY -- 0.9% DISPOSAL -- 0.9% 1,750 FL Okeechobee County Solid Waste Revenue Various Disposal -- Waste Management/Landfill, Series 2004A, AMT, 4.200% 07/01/39........................... 1,759 -------- TAX-BACKED -- 37.5% LOCAL APPROPRIATED -- 2.3% 1,000 FL Miami Dade County Special Obligation Bonds, Series 2002A-1, Insured: AMBAC 5.000% 04/01/11........................... 1,079 3,000 FL Palm Beach County School Board Certificates of Participation, Series 2002A, Insured: FSA 5.375% 08/01/14........................... 3,296 -------- 4,375 -------- LOCAL GENERAL OBLIGATIONS -- 1.8% 2,000 FL Palm Beach County GO, Refunding, Series 1998, 5.500% 12/01/11........................... 2,231 1,000 FL Saint Lucie County School District GO, Series 1997, Insured: FGIC 5.875% 02/01/07........................... 1,053 -------- 3,284 -------- SPECIAL NON-PROPERTY TAX -- 29.4% FL Collier County Gas Tax Revenue Series 2003, Insured: AMBAC 3,660 5.250% 06/01/13........................... 4,023 3,285 5.250% 06/01/15........................... 3,583 1,375 FL Hialeah Capital Improvement Revenue Series 1993, 5.500% 10/01/18........................... 1,381 1,000 FL Hillsborough County Capital Improvement Revenue County Center Project, Refunding, Series 1996B, Insured: MBIA 5.000% 07/01/11........................... 1,046 Criminal Justice Facilities Project, 1,000 Refunding, Series 2003, Insured: FGIC 5.000% 08/01/12........................... 1,079
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 150 NATIONS FUNDS Nations Florida Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- (CONTINUED) $ 1,000 FL Jacksonville Excise Tax Revenue Refunding, Series 1995A, Insured: FGIC 5.000% 10/01/09........................... $ 1,072 3,450 FL Jacksonville Guaranteed Entitlement Improvement Revenue Refunding, Series 2002, Insured: FGIC 5.375% 10/01/18........................... 3,750 FL Jacksonville Sales Tax Revenue Refunding, 1,000 Series 2001, Insured FGIC 5.500% 10/01/12........................... 1,117 1,000 Series 2002, Insured: FGIC 5.375% 10/01/18........................... 1,087 1,080 Series 2003, Insured: MBIA 5.250% 10/01/19........................... 1,166 4,285 FL Manatee County School District Sales Tax Revenue Series 2003, Insured: AMBAC 5.000% 10/01/12........................... 4,640 1,530 FL Ocala Cap Imports Revenue Refunding, Series 2003, Insured: AMBAC 5.375% 10/01/16........................... 1,681 4,000 FL Orange County Tourist Development Tax Authority Revenue Refunding, Series 1998A, Insured: AMBAC 5.000% 10/01/15........................... 4,221 3,500 FL Palm Beach County Criminal Justice Facilities Revenue Series 1997, Insured: FGIC 5.750% 06/01/13........................... 3,967 1,000 FL Palm Beach County Public Improvement Revenue GO, Refunding, 5.000% 08/01/17........................... 1,067 2,000 FL Palm Beach County Stadium Facilities Revenue Series 1996, Insured: MBIA 5.250% 12/01/16........................... 2,139 1,000 FL Port St. Lucie Sales Tax Revenue Series 2003, Insured: MBIA 5.000% 09/01/19........................... 1,054 5,000 FL State Department of Environmental Protection and Preservation Revenue Florida Forever Project, Refunding, Series 2001B, Insured: MBIA 5.000% 07/01/09........................... 5,346 3,000 FL State Division of Bond Finance Department of Environmental Protection and Preservation 2000, Series 1998B, Insured: FSA 5.500% 07/01/08........................... 3,227 3,775 FL Tallahassee Blue Print 2000 Intern Government Revenue Series 2003, Insured: FSA 5.000% 10/01/13........................... 4,050 3,170 FL Tampa Sports Authority and Local Optional Sales Tax Revenue Stadium Project, Series 1997, Insured: MBIA 6.000% 01/01/07........................... 3,339
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- (CONTINUED) $ 1,000 FL Tampa Sports Authority Revenue Sales Tax Tampa Bay Arena Project, Series 1995, Insured: MBIA 5.750% 10/01/20........................... $ 1,164 -------- 55,199 -------- SPECIAL PROPERTY TAX -- 1.4% 2,335 FL Hillsborough County Individual Development Authority Cigarette Tax Allocation, H. Lee Moffitt Cancer Project, Series 2002B, Insured: AMBAC 5.500% 09/01/15........................... 2,566 -------- STATE GENERAL OBLIGATIONS -- 2.6% 1,000 FL State Board of Education Public Education Capital Outlay GO, Refunding, Series 1993A, 5.000% 06/01/08........................... 1,059 Public Education Capital Outlay GO, 3,525 Series 1997A, 5.500% 01/01/08........................... 3,707 -------- 4,766 -------- 70,190 -------- TRANSPORTATION -- 2.3% AIRPORTS -- 1.1% 1,000 FL Dade County Aviation Revenue Refunding, Series 1994B, AMT Insured: AMBAC 6.300% 10/01/05........................... 1,019 1,000 FL Greater Orlando Aviation Authority Airport Facilities Revenue Refunding, Series 1997, AMT Insured: FGIC 5.125% 10/01/12........................... 1,044 -------- 2,063 -------- TOLL FACILITIES -- 1.2% 2,000 FL Orlando and Orange County Expressway Authority Revenue Junior Lien, Series 1990, Insured: FGIC 6.500% 07/01/10........................... 2,290 -------- 4,353 -------- UTILITIES -- 21.6% JOINT POWER AUTHORITY -- 3.1% 3,420 FL State Municipal Agency Revenue Refunding, Series 2003A, Insured: FSA 5.000% 10/01/13........................... 3,703 1,850 FL State Municipal Power Agency Revenue Stanton II Project, Refunding, Series 2002, Insured: AMBAC 5.500% 10/01/21........................... 2,024 -------- 5,727 -------- MUNICIPAL ELECTRIC -- 10.4% 685 FL Gainesville Utilities Systems Revenue Unrefunded Balance, Series 1996A, 5.750% 10/01/07........................... 731
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 151 NATIONS FUNDS Nations Florida Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL ELECTRIC -- (CONTINUED) $ 2,000 FL Jacksonville Electric Systems Authority Revenue Refunding, Series 1995-11, 5.375% 10/01/15........................... $ 2,014 2,500 FL Jea St. Johns River Power Parkway Systems Revenue Refunding, Series 2002, 5.250% 10/01/13.................................. 2,699 2,235 FL Kissimmee Utility Authority Electrical System Improvement Revenue Refunding, Series 2003, Insured: FSA 5.250% 10/01/15........................... 2,445 FL Orlando Utilities Commission Water and Electric Revenue Refunding, 5,000 Series C, 5.250% 10/01/18........................... 5,382 5,865 Series 2001, 5.000% 10/01/09........................... 6,284 -------- 19,555 -------- WATER AND SEWER -- 8.1% 2,000 FL Brevard County Utilities Revenue Refunding, Series 2002, Insured: FGIC 5.250% 03/01/14........................... 2,173 1,200 FL Daytona Beach Utility Systems Revenue Refunding, Series D, Insured: FSA 5.250% 11/15/16........................... 1,299 1,070 FL Hollywood Water and Sewer Improvement Revenue Refunding, Series 2003, Insured: FSA 5.000% 10/01/17........................... 1,137 2,000 FL Manatee County Public Utilities and Improvement Revenue Refunding, Series 2003A, Insured: MBIA 5.000% 10/01/12........................... 2,168 1,810 FL Miami Beach Water and Sewer Revenue Series 1995, Insured: FSA 5.375% 09/01/15........................... 1,864 3,500 FL Miami Dade County Water and Sewer Revenue Refunding, Series 2003, Insured: MBIA 5.000% 10/01/07........................... 3,675 490 FL Port St. Lucie Utility Revenue Unrefunded Balance, Series 2003, 5.000% 09/01/16........................... 523 1,000 FL Tallahassee Conservative Utilities System Revenue Refunding, Series 2001, Insured: FGIC 5.500% 10/01/18........................... 1,136 1,110 FL Tohopekaliga Water Authority Utility Revenue Series 2003B, Insured: FSA 5.250% 10/01/17........................... 1,205 -------- 15,180 -------- 40,462 -------- TOTAL MUNICIPAL BONDS (Cost of $181,264)........................ 184,437 --------
SHARES - -------- INVESTMENT MANAGEMENT COMPANY -- 0.4% $725,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $725)................................... $ 725 TOTAL INVESTMENTS (Cost of $181,989)(d)........................... 98.8% 185,162 -------- OTHER ASSETS AND LIABILITIES, NET................. 1.2% 2,295 -------- NET ASSETS........................................ 100.0% $187,457 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Zero coupon bond. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $181,910.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 37.5% Utilities................................... 21.6 Health care................................. 16.9 Other....................................... 10.3 Housing..................................... 5.3 Transportation.............................. 2.3 Education................................... 2.2 Resource recovery........................... 0.9 Other revenue............................... 0.8 Industrials................................. 0.6 Investment management company............... 0.4 Other assets and liabilities, net........... 1.2 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 152 NATIONS FUNDS Nations Florida Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------- MUNICIPAL BONDS -- 97.7% EDUCATION -- 4.5% $ 1,465 FL Miami-Dade County Educational Facilities Authority Miami University, Series 2004A, Insured: AMBAC 5.000% 04/01/14................................... $ 1,582 2,380 FL Volusia County Educational Facilities Authority Revenue Embry - Riddle Aeronautical University Project, Series 1999A, 5.750% 10/15/29................................... 2,402 ------- 3,984 ------- HEALTH CARE -- 5.3% HOSPITALS -- 5.3% 2,000 FL North Broward Hospital District Revenue Refunding, Series 1997, Insured: MBIA 5.250% 01/15/17................................... 2,083 1,260 FL Orange County Health Facilities Authority Revenue Unrefunded Balance, Series 1996A, Insured: MBIA 6.250% 10/01/16................................... 1,483 1,000 FL South Broward Hospital District Revenue Series 2002, 5.600% 05/01/27................................... 1,067 ------- 4,633 ------- HOUSING -- 6.2% MULTI-FAMILY -- 2.3% 1,000 FL Capital Trust Agency Multifamily Housing Revenue Shadow Run Project, Series A, 5.150% 11/01/30................................... 1,053 1,000 FL Collier County Housing Finance Authority Multifamily Revenue Goodlette Arms Project, Series 2002A-1, 4.900% 02/15/32................................... 1,019 ------- 2,072 ------- SINGLE FAMILY -- 3.9% 365 FL Escambia County Housing Finance Authority Single-Family Mortgage Revenue Series 2000A, AMT, Insured: MBIA 6.300% 10/01/20................................... 370 1,105 FL Housing Finance Agency Revenue Homeowner Mortgage Project, Series 1998-1, Insured: MBIA 4.950% 01/01/11................................... 1,148 1,805 Homeowner Mortgage Project, Series 1997-2, AMT, Insured: MBIA 5.750% 07/01/14................................... 1,881 ------- 3,399 ------- 5,471 -------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------- INDUSTRIALS -- 1.7% FOREST PRODUCTS AND PAPER -- 1.7% $ 1,375 FL Bay County Pollution Control Revenue International Paper Company, Refunding, Series 1998A, 5.100% 09/01/12................................... $ 1,455 ------- OTHER -- 12.6% POOL/BOND BANK -- 1.2% 1,015 FL Municipal Loan Council Revenue Series A, Insured: MBIA 5.000% 02/01/19................................... 1,071 ------- REFUNDED/ESCROWED(A) -- 11.4% 2,430 FL Leon County Capital Improvement Revenue Series 1997, Insured: AMBAC Pre-refunded 10/01/07 5.250% 10/01/17................................... 2,568 3,260 FL Orange County Health Facilities Authority Revenue Orlando Regional Healthcare System, Series 1996A, Escrowed to Maturity, Insured: MBIA 6.250% 10/01/16................................... 3,916 1,800 FL Orlando Utilities Commission Water and Electric Revenue Refunding, Series 1989D, Pre-refunded 10/01/17 6.750% 10/01/17................................... 2,192 1,250 FL State Board of Education Public Education Capital Outlay GO, Series 1996A, Pre-refunded 06/01/06 5.250% 06/01/16................................... 1,300 ------- 9,976 ------- 11,047 ------- OTHER REVENUE -- 1.2% RECREATION -- 1.2% 1,000 FL State Board of Education Lottery Revenue Series 2000C Insured: FGIC 5.250% 07/01/17................................... 1,077 ------- RESOURCE RECOVERY -- 6.4% RESOURCE RECOVERY -- 6.4% 5,000 FL Palm Beach County Solid Waste Authority Revenue Unrefunded Balance, Series 1997A Insured: AMBAC 6.000% 10/01/10................................... 5,587 -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 153 NATIONS FUNDS Nations Florida Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------- TAX-BACKED -- 26.5% LOCAL APPROPRIATED -- 4.5% $ 1,470 FL Brevard County School Board Certificates of Participation, Series 2004A, Insured: FGIC 5.000% 07/01/17................................... $ 1,564 2,240 FL Osceola County School Board Certificates of Participation, Series 2004A, Insured: FGIC 5.000% 06/01/16................................... 2,400 ------- 3,964 ------- SPECIAL NON-PROPERTY TAX -- 10.2% 3,720 FL Jacksonville Guaranteed Entitlement Improvement Revenue Refunding, Series 2002, Insured: FGIC 5.375% 10/01/19................................... 4,039 2,000 FL Tampa Sports Authority Local Optional Sales Tax Revenue Stadium Project, Series 1997, Insured: MBIA 5.250% 01/01/17................................... 2,088 2,500 FL Tampa Sports Authority Sales Tax Revenue Tampa Bay Arena Project, Series 1995, Insured: MBIA 5.750% 10/01/15................................... 2,825 ------- 8,952 ------- STATE GENERAL OBLIGATIONS -- 11.8% 3,000 FL State Board of Education Capital Outlay GO, Series 1997A, 5.000% 01/01/17................................... 3,109 1,000 FL State Department of Transportation Revenue Series 2002, Insured: MBIA 5.375% 07/01/15................................... 1,095 1,000 FL State Department of Transportation GO, Series 2004-A 5.000% 07/01/30................................... 1,036 4,190 PR Commonwealth GO, Series 1997, Insured: MBIA 6.500% 07/01/15................................... 5,103 ------- 10,343 ------- 23,259 ------- TRANSPORTATION -- 9.6% AIRPORTS -- 9.6% 2,500 FL Dade County Aviation Revenue Series 1996A, AMT Insured: MBIA 5.750% 10/01/12................................... 2,635 3,500 FL Miami-Dade County Aviation Revenue Series 1998C, AMT Insured: MBIA 5.250% 10/01/15................................... 3,677 2,000 FL Pensacola Airport Revenue Series 1997B, AMT Insured: MBIA 5.625% 10/01/14................................... 2,130 ------- 8,442 -------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------- UTILITIES -- 23.7% MUNICIPAL ELECTRIC -- 10.9% $ 2,250 FL Charlotte County Utility Revenue Refunding, Series 1996A Insured: FGIC 5.625% 10/01/16................................... $ 2,380 3,000 FL Gainesville Utility Systems Revenue Series 1992B, 6.500% 10/01/11................................... 3,492 2,000 FL Jea St. Johns River Power Parkway Systems Revenue Refunding, Series 2002, 5.250% 10/01/13................................... 2,160 1,425 FL Orlando Utilities Commission Water and Electric Revenue Refunding, Series C, 5.250% 10/01/18................................... 1,534 ------- 9,566 ------- WATER AND SEWER -- 12.8% 2,445 FL Miami-Dade County Stormwater Utility Revenue Series 2004, Insured: MBIA 5.000% 04/01/24................................... 2,557 1,485 FL Municipal Loan Council Revenue North Miami Beach Water Project, Series 2002B, Insured: MBIA 5.375% 08/01/16................................... 1,621 1,000 FL Ocala Utilities System Revenue Refunding, Series B, Insured: FGIC 5.250% 10/01/20................................... 1,085 2,115 FL Port St. Lucie Utilities Revenue Series 2003, Insured: MBIA 5.000% 09/01/19................................... 2,229 1,000 FL Sarasota County Utility Systems Revenue Refunding, Series 2002C Insured: FGIC 5.250% 10/01/16................................... 1,082 1,030 FL Sebring Water and Wastewater Revenue Refunding, Series 2002, Insured: FGIC 5.250% 01/01/14................................... 1,123 1,330 FL Tallahassee Conservative Utility System Revenue Refunding, Series 2001, Insured: FGIC 5.500% 10/01/14................................... 1,495 ------- 11,192 ------- 20,758 ------- TOTAL MUNICIPAL BONDS (Cost of $80,862)................................. 85,713 -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 154 NATIONS FUNDS Nations Florida Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 0.8% 725,000 Nations Tax-Exempt Reserves, Capital Class(b) (Cost of $725)........................... 725 -------- TOTAL INVESTMENTS (Cost of $81,587)(c)............................ 98.5% 86,438 ------- OTHER ASSETS AND LIABILITIES, NET................. 1.5% 1,314 -------- NET ASSETS........................................ 100.0% $87,752 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Cost for federal income tax purposes is $81,463.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance, Co. GO General Obligation MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 26.5% Utilities................................... 23.7 Other....................................... 12.6 Transportation.............................. 9.6 Resource recovery........................... 6.4 Housing..................................... 6.2 Health care................................. 5.3 Education................................... 4.5 Industrials................................. 1.7 Other revenue............................... 1.2 Investment management company............... 0.8 Other assets and liabilities, net........... 1.5 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 155 NATIONS FUNDS Nations Georgia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL BONDS -- 98.8% EDUCATION -- 6.2% $ 1,150 GA Athens University of Georgia Student Housing Authority Revenue Refunding, Series 2002, Insured: AMBAC 5.250% 12/01/19........................... $ 1,235 GA Bulloch County Development Authority Student Housing Lease Revenue Georgia Southern University Project, Series 2002, Insured: AMBAC 1,090 4.000% 08/01/11........................... 1,116 1,055 3.750% 08/01/10........................... 1,072 1,870 GA Cobb County Development Authority University Facilities Lease Revenue Kennesaw State University Foundation, Inc. Project, Series 2004, Insured: MBIA 5.000% 07/15/19........................... 1,980 1,300 GA Dekalb County Development Authority Revenue Emory University Project, Series 1994A, 6.000% 10/01/14........................... 1,330 GA Fulton County Development Authority Revenue 500 Clark Atlanta University Project, Series 1995, Insured: CON 5.125% 01/01/10........................... 519 1,735 Georgia Tech Foundation Facilities Project, Series 1997A, 5.000% 09/01/17........................... 1,813 --------- 9,065 --------- HEALTH CARE -- 13.9% HOSPITALS -- 13.9% 1,000 GA Chatham County Hospital Authority Revenue Memorial Health University, Series 2004A, 5.375% 01/01/26........................... 1,035 3,000 GA Chatham County Hospital Medical Authority Revenue Memorial Health Medical Center Project, Series 2001A, 6.125% 01/01/24........................... 3,240 3,190 GA Clayton County Hospital Authority Revenue Anticipation Certificates, Southern Regional Medical Center Project, Series 1998A, Insured: MBIA 5.250% 08/01/09........................... 3,427 2,000 GA Fulco Hospital Authority Revenue Anticipation Certificates, Catholic Health East Project, Series 1998A, Insured: MBIA 4.600% 11/15/09........................... 2,099 1,000 GA Gainesville & Hall County Hospital Authority Revenue Anticipation Certificates, Northeast Georgia Health System Inc. Project, Series 2001, 5.000% 05/15/15........................... 1,021
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 3,000 GA Henry County Hospital Authority Revenue Henry Medical Center Project, Series 1997, Insured: AMBAC Prerefunded 07/01/07 6.000% 07/01/29........................... $ 3,354 GA Savannah Hospital Authority Revenue St. Joseph's Candler Health Systems Project, Series 1998A, Insured: FSA 1,225 5.250% 07/01/11........................... 1,302 1,310 5.250% 07/01/12........................... 1,397 1,000 Series 1998B, Insured: FSA 5.250% 07/01/10........................... 1,069 2,225 GA Tift County Hospital Authority Revenue Series 2002, Insured: AMBAC 5.250% 12/01/18........................... 2,371 --------- 20,315 --------- HOUSING -- 6.3% MULTI-FAMILY -- 6.0% 2,000 GA Atlanta Urban Residential Finance Authority Multi-Family Revenue Housing City Plaza Project, Refunding, Series 1998, AMT, Insured: FNMA 4.550% 12/01/28........................... 2,048 3,815 GA Clayton County Georgia Housing Authority Multi-Family Housing Revenue Refunding Tara Court II Apartments Project, Series 2001 Mandatory Put 12/01/11 @ 100 4.350% 12/01/31........................... 3,919 2,000 GA Cobb County Development Authority University Facilities Revenue Kennesaw State University Housing Project, Series 2004A, Insured: MBIA 5.250% 07/15/19........................... 2,158 500 GA Lawrenceville Housing Authority Multifamily Revenue Knollwood Park Apartments Project, Series 1997, AMT Insured: FNMA 6.250% 12/01/29........................... 540 --------- 8,665 --------- SINGLE FAMILY -- 0.3% GA State Housing and Finance Authority Single-Family Mortgage Revenue 40 Series 1999B-2, AMT, 6.100% 06/01/31........................... 41 400 Series 1998B-3, Insured: FHA 4.400% 06/01/17........................... 401 --------- 442 --------- 9,107 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 156 NATIONS FUNDS Nations Georgia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- INDUSTRIALS -- 5.7% FOOD PRODUCTS -- 2.2% GA Cartersville Development Authority Sewer Facilities Revenue Anheuser-Busch Companies, Inc. Project, Refunding, Series 1997, AMT, $ 2,000 5.625% 05/01/09........................... $ 2,145 1,000 6.125% 05/01/27........................... 1,039 --------- 3,184 --------- FOREST PRODUCTS AND PAPER -- 2.1% 3,000 GA Richmond County Development Authority Environmental Improvement Revenue, International Paper Co. Project, Series 2001A, 5.150% 03/01/15........................... 3,135 --------- OIL AND GAS -- 1.4% 2,000 LA Calcasieu Parish Louisiana Industrial Development Board Pollution Control Revenue Occidental Petroleum Project, Series 2001, 4.800% 12/01/06........................... 2,049 --------- 8,368 --------- OTHER -- 17.3% POOL/BOND BANK -- 1.0% 1,315 AK Municipal Bond Bank Authority Revenue Series 2003, Insured: MBIA 5.250% 12/01/17........................... 1,411 --------- REFUNDED/ESCROWED(A) -- 15.3% 5,000 GA Atlanta Airport Facilities Revenue Refunding, Series 2000A, Insured: FGIC Pre-refunded 01/01/10 5.600% 01/01/30........................... 5,547 1,060 GA Atlanta Water and Wastewater Revenue Unrefunded Balance, Series 1999A, Insured: FGIC Prerefunded 05/01/09 5.000% 11/01/38........................... 1,141 1,000 GA Clayton County Water and Sewer Authority Revenue Series 2000, 1,000 Pre-refunded 05/01/10 5.600% 05/01/18........................... 1,113 2,000 6.250% 05/01/17........................... 2,287 2,000 GA Forsyth County School District GO, Series 1999, Pre-refunded 02/01/10 6.000% 02/01/15........................... 2,273 2,900 GA Fulton County Housing Authority Multifamily Housing Revenue Concorde Place Apartments Project, Series 1996A, AMT Pre-refunded 07/01/06 6.375% 01/01/27........................... 3,168
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 1,550 GA Henry County Hospital Authority Revenue Henry Medical Center Project, Series 1997, Insured: AMBAC Pre-refunded 07/01/07 5.250% 07/01/09........................... $ 1,656 1,000 GA Macon Bibb County Industrial Authority Revenue Weyerhaeuser Company Project, Series 1982, Pre-refunded 10/01/07 9.000% 10/01/07........................... 1,143 540 GA Metropolitan Atlanta Rapid Transit Authority Revenue Series 1983D, Pre-refunded 07/01/11 7.000% 07/01/11........................... 644 3,000 GA State GO, Series 1999D, Pre-refunded 11/01/09 5.800% 11/01/13........................... 3,375 --------- 22,347 --------- TOBACCO -- 1.0% 1,500 SC Tobacco Settlement Management Revenue Series 2001B, 6.375% 05/15/28........................... 1,529 --------- 25,287 --------- TAX-BACKED -- 28.0% LOCAL APPROPRIATED -- 6.1% 2,490 GA East Point Building Authority Revenue Series 2000, Insured: FSA (b) 02/01/18.............................. 1,284 5,000 GA Fulton County Building Authority Revenue Judicial Center Facilities Project, Series 2002B, Insured: MBIA 4.000% 01/01/08........................... 5,127 1,250 GA Municipal Association, Inc. Certificates of Participation, City Court Atlanta Project, Series 2002, Insured: AMBAC 5.250% 12/01/26........................... 1,308 1,000 GA Smyrna Downtown Development Authority Revenue Refunding, Series 2002, Insured: AMBAC 5.250% 02/01/16........................... 1,105 --------- 8,824 --------- LOCAL GENERAL OBLIGATIONS -- 16.4% 2,320 AL Birmingham GO, Refunding, Series 2003A, Insured: AMBAC 5.250% 06/01/18........................... 2,513 GA Cherokee County School Systems GO, State Aid Withholding, 1,500 5.000% 02/01/13........................... 1,622 805 Series 1993, Insured: AMBAC 5.875% 02/01/09........................... 858 Series 2001, 1,000 5.250% 08/01/17........................... 1,078 1,000 5.250% 08/01/15........................... 1,083 1,785 GA Gwinnett County School District GO Refunding, Series 2002, 5.000% 02/01/08........................... 1,883
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 157 NATIONS FUNDS Nations Georgia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 2,000 GA Gwinnett County GO, Series 2002, 4.000% 01/01/11........................... $ 2,061 1,000 GA Hall County School District GO Refunding, Series 1192B, 6.300% 12/01/05........................... 1,025 2,000 GA Houston County School District GO, Series 2002, State Aid Withholding, 4.000% 09/01/06........................... 2,035 1,000 GA Meriwether County School District GO, Series 1996, State Aid Withholding, Insured: FSA 5.500% 02/01/16........................... 1,060 500 GA Peach County School District GO, State Aid Withholding, Series 1994, Insured: MBIA 6.500% 02/01/08........................... 547 1,000 GA Richmond County Board of Education GO Refunding, Series 1993, Insured: FGIC 4.700% 11/01/06........................... 1,012 2,000 GA Rosewell GO, Series 2000, 5.500% 02/01/12........................... 2,176 1,000 GA Savannah Downtown Authority Revenue Chatham County Project, Refunding, Series 1993A, 5.000% 01/01/11........................... 1,002 3,650 MI Detroit GO Refunding, Series 2001B, Insured: MBIA 5.375% 04/01/14........................... 3,967 --------- 23,922 --------- SPECIAL NON-PROPERTY TAX -- 1.8% 2,430 GA Cobb-Marietta County Coliseum and Exhibit Hall Authority Revenue Refunding, Insured: MBIA 5.250% 10/01/19........................... 2,677 --------- STATE GENERAL OBLIGATIONS -- 3.7% GA State GO Refunding, 1,500 Series 1992A, 6.250% 03/01/06........................... 1,549 2,750 Series 1993C, 6.500% 07/01/05........................... 2,779 1,000 Series 2002B, 5.000% 05/01/20........................... 1,053 --------- 5,381 --------- 40,804 --------- TRANSPORTATION -- 6.3% TOLL FACILITIES -- 0.7% 1,000 GA State Tollway Authority Revenue Georgia 400 Project, Refunding, Series 1998, 5.000% 07/01/07........................... 1,047 ---------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- TRANSPORTATION -- 5.6% GA Metropolitan Atlanta Rapid Transit Authority Revenue Refunding, Series 1992, Insured: MBIA $ 2,000 6.250% 07/01/18........................... $ 2,351 2,500 Series 1998B, 5.100% 07/01/13........................... 2,654 3,000 5.100% 07/01/15........................... 3,172 --------- 8,177 --------- 9,224 --------- UTILITIES -- 15.1% INVESTOR OWNED -- 4.3% 1,000 GA Monroe County Development Authority Pollution Control Revenue Oglethorpe Power Corp. Project, Series 1992A, 6.800% 01/01/12........................... 1,163 5,000 GA Monroe County Georgia Development Authority Pollution Control Revenue Georgia Power Company Plant Scherer Project, Series 2001 Mandatory Put 12/01/08 @ 100 4.200% 01/01/12........................... 5,138 --------- 6,301 --------- JOINT POWER AUTHORITY -- 0.8% 1,000 GA Municipal Electric Authority Revenue Project One Subordinated Series 1998A Insured: MBIA 5.250% 01/01/13........................... 1,097 --------- MUNICIPAL ELECTRIC -- 1.5% 2,000 TX Sam Rayburn Texas Municipal Power Agency Revenue Refunding Series 2002, 6.000% 10/01/16........................... 2,179 --------- WATER AND SEWER -- 8.5% 430 GA Cherokee County Water and Sewer Authority Revenue Refunding, Series 1993, Insured: MBIA 5.300% 08/01/09........................... 452 5,195 GA Cobb and Marietta County Water Authority Revenue Series 2000, 5.125% 11/01/20........................... 5,562 2,220 GA Columbus County Water and Sewer Revenue Refunding, Series 2003, Insured: FSA 5.250% 05/01/13........................... 2,441
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 158 NATIONS FUNDS Nations Georgia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- WATER AND SEWER -- (CONTINUED) $ 2,585 GA Griffin Combined Public Utility Improvement Revenue Refunding, Series 2002, Insured: AMBAC 5.125% 01/01/19........................... $ 2,768 1,140 GA Upper Oconee Basin Water Authority Refunding, Insured: MBIA 5.000% 07/01/17........................... 1,235 --------- 12,458 --------- 22,035 --------- TOTAL MUNICIPAL BONDS (Cost of $138,658)........................ 144,205 --------
SHARES - --------- INVESTMENT MANAGEMENT COMPANY -- 0.2% 375,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $375)........................... 375 --------- TOTAL INVESTMENTS (Cost of $139,033)(d)........................... 99.0% 144,580 --------- OTHER ASSETS AND LIABILITIES, NET................. 1.0% 1,403 --------- NET ASSETS........................................ 100.0% $145,983 =========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Zero coupon bond. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $138,928.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax CON College Construction Loan Association FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FNMA Federal National Mortgage Association FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 28.0% Other....................................... 17.3 Utilities................................... 15.1 Health care................................. 13.9 Housing..................................... 6.3 Transportation.............................. 6.3 Education................................... 6.2 Industrials................................. 5.7 Investment management company............... 0.2 Other assets and liabilities, net........... 1.0 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 159 NATIONS FUNDS Nations Kansas Municipal Income Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- MUNICIPAL BONDS -- 97.4% EDUCATION -- 9.0% $ 2,000 KS Regents-Wichita University Project: Series 2000 B, Insured: AMBAC 5.900% 04/01/15........................... $ 2,209 2,000 KS State Development Finance Authority Revenue, Board of Regents Scientific Research Series 2003, Insured: AMBAC 5.000% 10/01/19........................... 2,122 1,020 KS State Development Finance Authority Revenue Kansas State Projects, Series 2001 Insured: AMBAC 5.500% 03/01/16........................... 1,112 900 KS Washburn University Topeka Living Learning, Insured: AMBAC 5.000% 07/01/18........................... 956 -------- 6,399 -------- HEALTH CARE -- 13.1% HOSPITALS -- 13.1% 605 KS Health Facilities Revenue St. Luke's/ Shawnee Mission Project, Series 1996 N, Insured: MBIA 4.700% 11/15/05........................... 613 1,005 KS Lawrence Memorial Hospital 5.250% 07/01/11........................... 1,068 1,005 KS Manhattan, Hospital Revenue, Mercy Health Care Center, Series 2001, Insured: FSA 5.250% 08/15/10........................... 1,086 955 KS State Development Finance Authority Revenue Sisters of Charity Leavenworth Project, Series 1998, Insured: MBIA 5.000% 12/01/14........................... 1,007 KS State Development Finance Authority, Health Facilities Revenue, Hays Medical Center Inc. Project, Series 1997 B, Insured: MBIA 670 4.900% 11/15/05........................... 680 510 5.000% 11/15/06........................... 528 KS Stormont-Vail Healthcare Inc. Project, Series 1996 F, Insured: MBIA 740 5.600% 11/15/07........................... 769 500 5.750% 11/15/09........................... 521 KS University Hospital Authority Revenue, Kansas University Health System Project Series 1999 A, Insured: AMBAC 1,265 5.350% 09/01/12........................... 1,351 1,525 5.400% 09/01/13........................... 1,633 -------- 9,256 -------- HOUSING -- 4.9% MULTI-FAMILY -- 2.2% 1,575 NC Medical Care Commission Revenue Health Care Housing Arc Projects, 5.500% 10/01/24........................... 1,575 --------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- SINGLE FAMILY -- 2.7% KS Sedgwick and Shawnee Counties, Single Family Revenue Mortgage Backed Securities Program Series 2003, AMT, Insured: GNMA $ 855 6.300% 06/01/27........................... $ 914 890 6.050% 06/01/27........................... 955 -------- 1,869 -------- 3,444 -------- OTHER -- 15.6% POOL/BOND BANK -- 3.1% KS State Development Finance Authority Revenue Refunding Water Pollution Revolving Fund 1,000 5.500% 11/01/13........................... 1,108 1,000 5.500% 11/01/15........................... 1,106 -------- 2,214 -------- REFUNDED/ESCROWED(A) -- 12.5% 595 KS Junction City Water and Sewer Revenue, Series 1996 A, Insured: MBIA Pre-refunded 09/01/05 4.900% 09/01/07........................... 607 500 KS Shawnee County Health Care Facilities Revenue Refunding, Menninger Foundation Project, Series 1995 Insured: FSA Pre-refunded 08/15/05 5.100% 08/15/09........................... 505 1,000 KS State Development Finance Authority Revenue Board of Regents Rehabilitation Project, Series 1997 G-2, Insured: AMBAC Pre-refunded 10/01/07 5.000% 10/01/10........................... 1,050 KS State Development Finance Authority, Health Facilities Revenue, 620 St. Luke's/Shawnee Mission Project, Series 1996 N, Insured: MBIA Pre-refunded 11/15/05 4.700% 11/15/05........................... 629 Stormont-Vail Healthcare Inc. Project, Series 1996 G, Insured: MBIA Pre-refunded 11/15/06 730 5.750% 11/15/09........................... 764 890 5.700% 11/15/08........................... 931 1,715 KS State Development Water Supply Revolving Loan Insured: AMBAC Pre-refunded 10/01/10 5.750% 04/01/15........................... 1,916 2,000 SC Calhoun County Solid Waste Disposal Facility Revenue Carolina Eastman Company Project, Series 1992, AMT, Pre-refunded 05/01/17 6.750% 05/01/17........................... 2,435 -------- 8,837 -------- 11,051 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 160 NATIONS FUNDS Nations Kansas Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- TAX-BACKED -- 43.2% LOCAL APPROPRIATED -- 3.9% $ 100 KS Johnson County Park and Recreation District, Certificates of Partnership, Series 2003 A, Insured: MBIA 4.000% 09/01/15........................... $ 99 KS Wyandotte County, Unified School District Number 500, Insured: FSA 700 5.000% 12/01/07........................... 737 1,890 Series 2002, 5.000% 09/01/20........................... 1,975 -------- 2,811 -------- LOCAL GENERAL OBLIGATIONS -- 33.3% 2,000 AK North Slope Borough Capital Appreciation, GO, Series B, Insured: MBIA (b) 06/30/09.............................. 1,722 1,380 KS Butler & Sedgwick Counties Unified School District Number 385, GO, Series 2000, Insured: FSA 6.000% 09/01/13........................... 1,592 1,600 KS Ford County Dodge Unified School District Number 443, GO, Refunding, Series 2002, Insured: FGIC 5.000% 03/01/13........................... 1,731 KS Johnson County 50 Unified School District Number 21, GO, Refunding, Series 2001 A, Insured: FSA 5.500% 10/01/15........................... 56 150 Unified School District Number 232 Insured: MBIA 5.000% 09/01/15........................... 162 500 Unified School District Number 233 Insured: FGIC 5.000% 03/01/06........................... 511 1,030 KS Leavenworth County Unified School District Number 464, Insured: MBIA 5.000% 09/01/19........................... 1,096 1,000 KS Lenexa, GO, Refunding, Series 2003 A, 5.000% 09/01/11........................... 1,083 1,000 Public Improvement, Revenue Refunding, Series 2003 A, 5.000% 09/01/12........................... 1,083 1,065 KS Montgomery County, Unified School District Number 445, Series 2002, Insured: FGIC 6.250% 04/01/12........................... 1,230 KS Reno County, Unified School District No 313, GO, Series 1996 B, Insured: FSA 860 5.900% 09/01/08........................... 938 925 5.900% 09/01/09........................... 1,023 995 5.900% 09/01/10........................... 1,115 KS Saline County, Unified School District Number 305 Salina GO, Refunding, Series 1999, Insured: FSA 1,000 5.000% 09/01/09........................... 1,070 1,010 5.250% 09/01/13........................... 1,070
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 1,000 KS Sedgwick County, Unified School District Number 259 Wichita, Insured: MBIA 5.000% 09/01/15........................... $ 1,083 500 KS Sedgwick County, Unified School District Number 262, Series 2003, GO, Insured: FSA 5.000% 11/01/09........................... 536 KS Sedgwick County, Unified School District Number 264 Clearwater, Series 2003, GO, Insured: FGIC 495 5.125% 09/01/09........................... 532 550 5.125% 09/01/10........................... 596 1,000 KS Sedgwick County, Unified School District Number 267, Series 1999, GO, Insured: AMBAC 5.250% 11/01/11........................... 1,097 KS Shawnee County, GO, Refunding and Improvement, Series 1998 A, 1,320 5.125% 09/01/10........................... 1,424 1,660 Series 2002, Insured: FSA 5.250% 09/01/17........................... 1,791 1,000 KS Shawnee County, Unified School District Number 501 Topeka, Series 2002, GO, 5.000% 02/01/14........................... 1,067 -------- 23,608 -------- SPECIAL NON-PROPERTY TAX -- 5.7% KS Douglas County Revenue Refunding, Sales Tax, 1,025 Series 1999, Insured: AMBAC 5.000% 02/01/13........................... 1,109 540 Series 2004 A, Insured: AMBAC 4.550% 08/01/05........................... 544 1,000 KS State Department of Transportation Highway Revenue Refunding, Series 1998, Insured: AMBAC 5.500% 09/01/10........................... 1,103 1,260 KS Wichita, Series 2003-772, GO, Insured: FGIC, 4.250% 09/01/16........................... 1,270 -------- 4,026 -------- STATE GENERAL OBLIGATIONS -- 0.3% 200 Virgin Islands Public Finance Authority Revenue, Senior Lien Matching Fund Loan Note A, 5.000% 10/01/10........................... 211 -------- 30,656 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 161 NATIONS FUNDS Nations Kansas Municipal Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- STATE GENERAL OBLIGATIONS -- (CONTINUED) TRANSPORTATION -- 5.6% AIR TRANSPORTATION -- 0.8% $ 500 OH Dayton, Special Facilities Revenue Air Freight Corp. Project, Series 1988 D, AMT 6.200% 10/01/09........................... $ 551 -------- TOLL FACILITIES -- 4.8% KS State Turnpike Authority Revenue, Series 2002, Insured: FSA 1,855 5.250% 09/01/15........................... 2,054 1,230 5.250% 09/01/16........................... 1,366 -------- 3,420 -------- 3,971 -------- UTILITIES -- 6.0% JOINT POWER AUTHORITY -- 1.6% 1,000 WA Northwest Washington Energy Northwest Electric Revenue Refunding Columbia Generating, Series 2002 A, Insured: MBIA 5.750% 07/01/18........................... 1,110 -------- WATER AND SEWER -- 4.4% 1,000 KS Johnson County Water District Number 001, Water Revenue, Series 2001 5.000% 12/01/12........................... 1,078 2,000 KS Wyandotte County, Kansas City Utility System Revenue Insured: FSA 5.000% 09/01/32........................... 2,070 -------- 3,148 -------- 4,258 -------- TOTAL MUNICIPAL BONDS (Cost of $67,763)......................... 69,035 --------
VALUE SHARES (000) - ------------------------------------------------------------------------------------ INVESTMENT MANAGEMENT COMPANY -- 2.0% 1,425,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $1,425).......................................... $ 1,425 -------- TOTAL INVESTMENTS (Cost of $69,188)(d)............................ 99.4% 70,460 -------- OTHER ASSETS AND LIABILITIES, NET................. 0.6% 441 -------- NET ASSETS........................................ 100.0%.. $70,901 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Zero coupon bond. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $69,178.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association GO General Obligation MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 43.2% Other....................................... 15.6 Health care................................. 13.1 Education................................... 9.0 Utilities................................... 6.0 Transportation.............................. 5.6 Housing..................................... 4.9 Investment management company............... 2.0 Other assets and liabilities, net........... 0.6 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 162 NATIONS FUNDS Nations Maryland Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL BONDS -- 98.6% EDUCATION -- 2.4% $ 510 MD State Health and Higher Education Facilities Authority Revenue College of Notre Dame Project, Series 1998, Insured: MBIA 4.600% 10/01/14........................... $ 539 1,100 MD State Industrial Development Financing Authority Revenue American Center for Physics Facilities Project, Refunding, Series 2001 3.650% 12/15/05........................... 1,109 1,000 MD Industrial Development Authority, Series 2001, 5.250% 12/15/15........................... 1,085 1,975 MD University Systems Auxiliary Facilities and Tuition Revenue, Series 2000A, 5.000% 10/01/08........................... 2,102 --------- 4,835 --------- HEALTH CARE -- 2.7% HOSPITALS -- 2.7% 1,000 MD State Health and Higher Educational Facilities Authority Revenue Johns Hopkins Medical Project, Series 1998, Insured: MBIA 5.000% 07/01/29........................... 1,018 MS State Hospital Facilities and Equipment Authority Revenue Forrest County General Hospital Project, Series 2000, Insured: FSA 1,000 5.625% 01/01/20........................... 1,088 3,100 5.500% 01/01/24........................... 3,294 --------- 5,400 --------- HOUSING -- 8.5% MULTI-FAMILY -- 3.6% 1,500 MD Montgomery County Housing Opportunities Commission Multifamily Mortgage Revenue Series 2000A, 6.100% 07/01/30........................... 1,561 MD State Economic Development Corp. Student Housing Revenue Collegiate Housing Project, Series 1999A, 495 5.300% 06/01/08........................... 516 575 5.600% 06/01/11........................... 610 Salisbury Collegiate Housing Project, Series 1999A, 1,850 6.000% 06/01/30........................... 1,918 675 5.600% 06/01/10........................... 715 815 6.000% 06/01/19........................... 860 1,000 5.700% 06/01/12........................... 1,008 --------- 7,188 ---------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- SINGLE FAMILY -- 4.9% $ 40 MD Prince Georges County Housing Authority Single Family Mortgage Revenue Collateral Series 2000A, AMT Insured: GNMA 6.150% 08/01/19........................... $ 42 MD State Community Development Administration Department Housing and Community Development Revenue Residential Project, Series 1998B, AMT 500 Insured: FHA 4.950% 09/01/11........................... 516 2,410 Series 1999D, AMT 5.375% 09/01/24........................... 2,483 1,685 Single-Family Program, Series 1998-3, AMT 4.700% 04/01/10........................... 1,742 4,000 Single-Family Program, Series 1998-3, AMT 4.500% 04/01/08........................... 4,111 915 Single-Family Program, Series 1997-1, Insured: FHA 4.950% 04/01/07........................... 948 --------- 9,842 --------- 17,030 --------- INDUSTRIALS -- 1.0% FOREST PRODUCTS & PAPER -- 0.3% 500 MS Warren County Mississippi Environmental Improvement Revenue Refunding International Paper Co. Project, Series 2000A, AMT 6.700% 08/01/18........................... 545 --------- MANUFACTURING -- 0.7% 1,355 TN Maury County Industrial Development Board Multi-Model Pollution Control Revenue Refunding, General Motors Corporation - Saturn Corporation Project, Series 1997, 6.500% 09/01/24........................... 1,381 --------- 1,926 --------- OTHER -- 20.0% OTHER -- 1.5% 3,000 MD State Transportation Authority Baltimore/Washington International Airport Project, Series 2002A, Insured: AMBAC 4.500% 03/01/15........................... 3,092 --------- POOL/BOND BANK -- 1.1% 2,000 TX Water Development Board Revenue Series 1997, 5.000% 07/15/12........................... 2,097 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 163 NATIONS FUNDS Nations Maryland Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- POOL/BOND BANK -- (CONTINUED) REFUNDED/ESCROWED(A) -- 17.4% $ 1,740 MD Baltimore Consolidated Public Improvement GO, Series 1997A, Insured: FGIC Pre-refunded 10/15/07 5.300% 10/15/16........................... $ 1,873 MD Howard County Consolidated Public Improvement GO, 20 Series 1993A, Pre-refunded 08/15/05 5.250% 08/15/06........................... 20 Series 2000A, Pre-refunded 02/15/08 1,220 5.250% 02/15/16........................... 1,306 280 5.250% 02/15/16........................... 300 1,790 5.250% 02/15/18........................... 1,917 210 5.250% 02/15/18........................... 225 1,900 5.250% 02/15/17........................... 2,034 1,800 MD Howard County Consumer Public Improvement GO, Series 2002A Pre-refunded 02/15/12 5.250% 08/15/15........................... 1,975 1,000 MD Montgomery County Consolidated Public Improvement GO, Series 1997A, Pre-refunded 05/01/07 5.375% 05/01/13........................... 1,069 1,935 MD Prince Georges County Consolidated Public Improvement GO, Series 1999, Insured: FSA Pre-refunded 10/01/09 5.000% 10/01/12........................... 2,092 1,200 MD Queen Annes County School and Public Facilities GO, Series 2000, Insured: FGIC Pre-refunded 01/15/10 5.250% 01/15/14........................... 1,301 2,000 MD State Health and Higher Educational Facilities Authority Revenue John Hopkins Hospital Redevelopment Project, Series 1979, Pre-refunded 07/01/09 5.750% 07/01/09........................... 2,200 5,000 MD State Health & Higher Education, Series 1999, Pre-refunded 07/01/09 6.000% 07/01/39........................... 5,589 710 MD State Transportation Authority Revenue Transportation Facilities Project, Series 1978, Pre-refunded 04/11/05 6.800% 07/01/16........................... 821 MD State GO, 1,000 Series 1998, Pre-refunded 07/15/08 5.000% 07/15/11........................... 1,070 1,550 Series 1996-2, Pre-refunded 06/15/06 5.250% 06/15/11........................... 1,628 MD University Systems Auxiliary Facilities and Tuition Revenue Series 1996A, Pre-refunded 04/01/06 3,520 5.600% 04/01/13........................... 3,658 3,115 5.600% 04/01/14........................... 3,237 1,000 Series 1997A, Pre-refunded 04/01/07 5.125% 04/01/13........................... 1,053
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 1,000 MD Washington Suburban Sanitation District Authority General Construction GO, Series 2000, Pre-refunded 06/01/10 5.250% 06/01/22........................... $ 1,067 165 MO St. Louis County Mortgage Revenue Series 1989A, AMT Insured: GNMA Pre-refunded 04/11/05 7.950% 08/01/09........................... 183 --------- 34,618 --------- 39,807 --------- RESOURCE RECOVERY -- 5.8% DISPOSAL -- 3.7% 2,915 FL Orange County Solid Waste Facilities Revenue Refunding, Series 2003, Insured: MBIA 5.000% 10/01/15........................... 3,079 4,135 MD Prince Georges County Solid Waste Management System Revenue Insured: MBIA 5.000% 06/15/08........................... 4,383 --------- 7,462 --------- RESOURCE RECOVERY -- 2.1% 1,500 MD Northeast Solid Waste Disposal Authority Revenue Montgomery County Resources Recreation Project, Series 1993A, AMT 6.000% 07/01/07........................... 1,570 2,500 MD Northeast Waste Disposal Authority Revenue Refunding, Series 2003, AMT Insured: AMBAC 5.500% 04/01/10........................... 2,702 --------- 4,272 --------- 11,734 --------- TAX-BACKED -- 46.2% LOCAL GENERAL OBLIGATIONS -- 27.4% MD Anne Arundel County Consolidated General Improvement, GO, Refunding, Series 1995, 500 5.300% 04/01/10........................... 506 2,855 5.200% 04/01/08........................... 2,890 4,045 Series 2003, 5.000% 03/01/13........................... 4,402 MD Baltimore Consolidated Public Improvement GO, 2,075 Series 1991 C, Insured: FGIC 6.375% 10/15/07........................... 2,250 1,000 Series 1998B, Insured: FGIC 6.500% 10/15/08........................... 1,067 1,000 MD Baltimore GO, Series 1989B, Insured: MBIA 7.050% 10/15/07........................... 1,100 250 MD Cumberland Maryland GO Refunding, Series 1994A, Insured: FGIC 5.250% 05/01/21........................... 255
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 164 NATIONS FUNDS Nations Maryland Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- TAX-BACKED -- (CONTINUED) $ 1,000 MD Harford County GO, Series 1997, 5.500% 12/01/07........................... $ 1,068 MD Howard County Consolidated Public Improvement GO, 3,900 Series 2002A, 5.000% 08/15/09........................... 4,186 795 Unrefunded Balance, Series 2002A, 5.250% 08/15/15........................... 866 1,530 MD Laurel Public Improvement GO, Refunding, Series 1996A, Insured: FGIC 5.000% 10/01/11........................... 1,591 MD Montgomery County Consolidated Public Improvement GO, 1,500 Series 1992A, 5.800% 07/01/07........................... 1,597 1,000 Series 1997A, 5.375% 05/01/08........................... 1,066 1,000 Refunding, Series 1992A, 5.750% 07/01/06........................... 1,038 MD Montgomery County GO, Refunding, Series 2001, 1,000 5.250% 10/01/14........................... 1,094 3,800 5.250% 10/01/10........................... 4,168 65 MD Prince George County Consolidated Public Improvement GO, Unrefunded Balance, Insured: FSA 5.000% 10/01/12........................... 70 MD Prince Georges County Consolidated Public Improvement GO 1,000 5.125% 10/01/10........................... 1,089 3,300 Series 1999, Insured: FSA 5.125% 10/01/16........................... 3,564 1,000 Series 2000, 5.125% 10/01/08........................... 1,070 4,825 Series 2001, Insured: FGIC 5.250% 12/01/11........................... 5,310 4,650 MD Prince Georges County Construction Public Improvements GO, Series 2001, Insured: FGIC 5.250% 12/01/12........................... 5,104 MD St. Mary's County GO, Refunding, Series 2003, 2,565 3.000% 11/01/07........................... 2,573 2,620 2.750% 11/01/06........................... 2,622 MD Wicomico County Public Improvement GO, Series 1997, Insured: MBIA 1,290 4.800% 12/01/10........................... 1,356 1,355 4.900% 12/01/11........................... 1,424 1,425 5.000% 12/01/12........................... 1,500 --------- 54,826 ---------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- 5.6% $ 1,000 MD Baltimore Convention Center Revenue GO, Series 1989B, Insured: MBIA 5.000% 09/01/06........................... $ 1,031 1,725 MD Baltimore Exchanged Revenue Series 1996A, Insured: FGIC 5.900% 07/01/10........................... 1,927 MD State Department of Transportation Revenue Series 2002, 1,265 5.500% 02/01/11........................... 1,401 6,115 5.500% 02/01/14........................... 6,882 --------- 11,241 --------- SPECIAL PROPERTY TAX -- 2.5% MD Washington Suburban Sanitation District Authority GO, Refunding, 2,700 Series 2001, 5.000% 06/01/08........................... 2,864 2,050 Water Supply GO, Series 2001, 4.125% 06/01/05........................... 2,057 --------- 4,921 --------- STATE APPROPRIATED -- 0.8% 1,125 MD State Certificates of Participation Revenue Aviation Administration Facilities Project, Series 1999, AMT, 4.750% 05/01/07........................... 1,164 500 MD State Stadium Authority Lease Revenue Ocean City Convention Project, Series 1995, 5.375% 12/15/13........................... 514 --------- 1,678 --------- STATE GENERAL OBLIGATIONS -- 9.9% 600 GU Government GO, Series 1993A, 5.200% 11/15/08........................... 597 1,375 MD Baltimore Board of School Commissioners School System Revenue Series 2003A, 5.000% 05/01/12........................... 1,492 MD State and Local Facilities Loan, GO, Series 2000, 5,500 5.500% 08/01/09........................... 6,014 2,970 5.750% 08/01/11........................... 3,311 2,245 Series 2002, 5.500% 03/01/13........................... 2,525 5,000 PR Public Buildings Authority Revenue Guaranteed Refunding, Government Facilities Series 2003H, Insured: AMBAC 5.500% 07/01/18........................... 5,732 --------- 19,671 --------- 92,337 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 165 NATIONS FUNDS Nations Maryland Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- TRANSPORTATION -- 6.5% AIR TRANSPORTATION -- 1.1% $ 2,000 TN Memphis Shelby County Airport Authority Special Facilities Revenue Federal Express Corp. Project, Refunding, Series 2001, 5.000% 09/01/09........................... $ 2,138 --------- TRANSPORTATION -- 5.4% 350 DC Washington Metropolitan Area Transportation Authority Revenue Refunding, Series 1993, Insured: FGIC 6.000% 07/01/10........................... 395 3,090 MD State Transportation Authority Facilities Projects Revenue Series 2004, Insured: FSA 5.250% 07/01/14........................... 3,429 MD State Transportation Authority Revenue Series 1992, 4,000 5.700% 07/01/05........................... 4,034 2,800 5.800% 07/01/06........................... 2,906 --------- 10,764 --------- 12,902 --------- UTILITIES -- 5.5% INVESTOR OWNED -- 1.8% 1,000 KS Burlington Kansas Environmental Improvement Revenue Refunding Power And Light Project, Series 1998K Mandatory Put 10/1/07 @ 100 4.750% 09/01/15........................... 1,029 800 MD Calvert County Pollution Control Revenue Baltimore Gas and Electric Co. Project, Refunding, Series 1993, 5.550% 07/15/14........................... 814 1,500 MD Prince Georges County Pollution Control Revenue Potomac Electric Project, Refunding, Series 1995, 5.750% 03/15/10........................... 1,657 --------- 3,500 --------- MUNICIPAL ELECTRIC -- 3.7% 3,000 TX Austin Utility System Revenue Refunding, Series 1997, Insured: FSA 5.125% 11/15/13........................... 3,136 2,000 TX Sam Rayburn Texas Municipal Power Agency Revenue Refunding Series 2002, 6.000% 10/01/16........................... 2,179 2,000 TX San Antonio Electric and Gas Systems GO, Refunding, Series 1998A, 5.250% 02/01/16........................... 2,126 --------- 7,441 --------- 10,941 --------- TOTAL MUNICIPAL BONDS (Cost of $189,893)........................ 196,912 ---------
VALUE SHARES (000) - ------------------------------------------------------------------------------------ INVESTMENT MANAGEMENT COMPANY -- 0.4% 832,000 Nations Tax-Exempt Reserves, Capital Class(b) (Cost of $832)........................... $ 832 --------- TOTAL INVESTMENTS (Cost of $190,725)(c)........................... 99.0% 197,744 --------- OTHER ASSETS AND LIABILITIES, NET................. 1.0% 2,056 --------- NET ASSETS........................................ 100.0% $199,800 =========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Cost for federal income tax purposes is $190,486.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FHA Federal Housing Administration FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association GO General Obligation MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 46.2% Other....................................... 20.0 Housing..................................... 8.5 Transportation.............................. 6.5 Resource recovery........................... 5.8 Utilities................................... 5.5 Health care................................. 2.7 Education................................... 2.4 Industrials................................. 1.0 Investment management company............... 0.4 Other assets and liabilities, net........... 1.0 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 166 NATIONS FUNDS Nations North Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- MUNICIPAL BONDS -- 98.5% EDUCATION -- 4.5% NC Appalachian State University $ 1,000 Series 1998, Insured: MBIA 5.000% 05/15/18........................... $ 1,050 1,000 Series 2003A, Insured: FGIC 5.125% 05/01/18........................... 1,066 1,000 Utility Systems Project, Series 1998, Insured: MBIA 5.000% 05/15/12........................... 1,082 1,000 NC Capital Facilities Finance Agency Educational Facilities Revenue Johnson and Wales University Project, Series 2003A, Insured: XLCA 5.250% 04/01/21........................... 1,058 NC Raleigh North Carolina State University Revenue, 3,000 Series 2002B, 5.000% 12/01/06........................... 3,111 1,000 Series 2003A, 5.000% 10/01/17........................... 1,066 --------- 8,433 --------- HEALTH CARE -- 15.6% HOSPITALS -- 15.6% 1,000 AZ University Medical Center Corporation Hospital Revenue Refunding, Series 2004, 5.250% 07/01/13........................... 1,063 NC Charlotte-Mecklenburg Hospital Authority Revenue Carolinas Healthcare Systems Project, Series 1997A, 3,000 5.125% 01/15/22........................... 3,087 2,000 5.000% 01/15/17........................... 2,067 NC Medical Care Commission Health Care Facilities Revenue Carolina Medicorp Inc. Project, Series 1996, 2,000 5.100% 05/01/07........................... 2,081 1,715 5.125% 05/01/08........................... 1,777 1,130 Gaston Memorial Hospital Project, Series 1995, Insured: AMBAC 5.250% 02/15/07........................... 1,173 3,500 Novant Health Obligation Group, Series 2003A 5.000% 11/01/17........................... 3,661 2,605 Novant Health, Inc. Project, Series 1998A, Insured: MBIA 5.000% 10/01/08........................... 2,771
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- HOSPITALS -- (CONTINUED) NC Medical Care Commission Hospital Revenue $ 2,000 Duke University Hospital Project, Series 1996C, 5.250% 06/01/17........................... $ 2,045 2,750 Gaston Memorial Hospital Project, Series 1995 5.400% 02/15/11........................... 2,857 660 Halifax Regional Medical Center, Inc. Project, Series 1998, 4.600% 08/15/06........................... 668 1,000 Northeast Medical Center Project, Series 2002A, Insured: AMBAC 5.000% 11/01/10........................... 1,076 Pitt County Memorial Hospital Project, Series 1998B, 1,000 4.750% 12/01/28........................... 990 1,000 5.000% 12/01/18........................... 1,037 1,000 Stanley Memorial Hospital Project, Series 1996, Insured: AMBAC 5.250% 10/01/06........................... 1,815 1,690 Chapel Hill Hospital Revenue Refunding, Series 1999, Insured: AMBAC 5.250% 02/15/12........................... 1,815 --------- 29,199 --------- HOUSING -- 6.2% SINGLE FAMILY -- 6.2% NC Housing Finance Agency Revenue Home Ownership Project, 2,825 Series 1998A-1, AMT 5.350% 01/01/17........................... 2,914 1,145 Series 1998A-2, AMT 5.200% 01/01/20........................... 1,171 1,350 Series 1999A-3, AMT 5.150% 01/01/19........................... 1,385 765 Series 1999A-6, AMT 6.000% 01/01/16........................... 800 Series 2000A-8, AMT 670 5.950% 07/01/10........................... 696 495 6.050% 07/01/12........................... 513 970 Series 2002A-14, AMT, Insured: AMBAC 4.400% 07/01/10........................... 994
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 167 NATIONS FUNDS Nations North Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- SINGLE FAMILY -- (CONTINUED) $ 365 NC Housing Finance Agency Single-Family Housing Revenue, Series 1994Y, 6.300% 09/01/15........................... $ 373 2,650 NC Housing Financing Agency Series 1996A-5, AMT 5.550% 01/01/19........................... 2,746 --------- 11,592 --------- INDUSTRIALS -- 4.7% FOREST PRODUCTS AND PAPER -- 3.8% 1,300 NC Martin County Industrial Facilities and Pollution Control Financing Authority, Solid Waste Disposal Revenue, Weyerhaeuser Company Project, Series 1993, AMT, 5.650% 12/01/23........................... 1,303 NC Haywood County Industrial Facilities and Pollution Control Financing Authority, Solid Waste Disposal Revenue, Champion International Corporation Project, 500 Series 1993, AMT, 5.500% 10/01/18........................... 516 4,000 Series 1999, AMT, 6.400% 11/01/24........................... 4,287 1,000 NC Robeson County Industrial Facilities PCR Refunding, Campbell Soup Company Project, Series 1991, 6.400% 12/01/06........................... 1,057 --------- 7,163 --------- OTHER INDUSTRIAL DEVELOPMENT BONDS -- 0.9% 1,665 NC Mecklenburg County Industrial Facilities and Pollution Control Financing Authority, Flour Corporation Project, Series 1993 5.250% 12/01/09........................... 1,668 --------- 8,831 --------- OTHER -- 21.0% REFUNDED/ESCROWED(A) -- 21.0% 1,000 NC Brunswick County Certificates of Participation, Series 2000, Pre-refunded 06/01/10, Insured: FSA 5.500% 06/01/20........................... 1,085 1,500 NC Cabarrus County GO, Series 1997, Pre-refunded 02/01/07, Insured: MBIA 5.300% 02/01/13........................... 1,593 1,000 NC Charlotte GO, Series 2000, Pre-refunded 06/01/10, 5.500% 06/01/12........................... 1,103 2,545 Water and Sewer Systems Revenue, Series 1999, Pre-refunded 06/01/09, 5.375% 06/01/19........................... 2,779 1,670 Water And Sewer GO, Series 1996, Escrowed to Maturity, 5.500% 05/01/06........................... 1,721
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 2,165 NC Eastern Municipal Power Authority Revenue Series 1986A, Escrowed to Maturity, 5.000% 01/01/17........................... $ 2,334 2,180 NC Iredell County Public Facilities Corporate Installment Payment Revenue, School Projects, Series 2000, Pre-refunded 06/01/10, Insured: AMBAC 5.125% 06/01/18........................... 2,378 NC Johnson County GO, Series 2000, Pre-refunded 03/01/10, Insured: FGIC 1,925 5.500% 03/01/15........................... 2,128 2,700 5.500% 03/01/16........................... 2,989 1,305 Series 2000, Pre-refunded 06/01/10, Insured: FGIC 5.500% 03/01/12........................... 1,436 1,195 NC Morganton Water & Sewer GO, Series 1995, Pre-refunded 06/01/05, Insured: FGIC 5.700% 06/01/11........................... 1,226 1,000 NC Pitt County Hospital Revenue Pitt County Memorial Hospital Project, Series 1995, Pre-refunded 12/01/05, 5.250% 12/01/21........................... 1,041 1,910 NC Raleigh GO, Series 1996, Pre-refunded 06/01/06, 5.300% 06/01/16........................... 2,005 NC Randolph County Certificates of Participation, Series 2000, Pre-refunded 06/01/09, Insured: FSA 1,000 5.200% 06/01/12........................... 1,085 1,000 5.300% 06/01/13........................... 1,089 2,115 5.500% 06/01/14........................... 2,320 1,000 5.500% 06/01/15........................... 1,097 1,350 5.750% 06/01/22........................... 1,494 3,065 NC Wake County Hospital Revenue Series 1993, Pre-refunded 10/01/05, Insured: MBIA 5.125% 10/01/26........................... 3,255 1,815 NC Wake County GO, Series 1996, Pre-refunded 03/01/06, 4.600% 03/01/11........................... 1,884 1,500 SC Calhoun County Solid Waste Disposal Facility Revenue Carolina Eastman Company Project, Series 1992, AMT Pre-refunded 05/01/17, 6.750% 05/01/17........................... 1,826 1,325 TN State GO, Series 1999 B, Pre-refunded 05/01/09, Insured: FSA 5.250% 05/01/17........................... 1,428 --------- 39,296 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 168 NATIONS FUNDS Nations North Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- TAX-BACKED -- 37.5% LOCAL APPROPRIATED -- 11.4% $ 2,000 NC Cabarrus County Certificates of Participation, Installment Financing Contract, Series 2001, 5.500% 04/01/13........................... $ 2,195 1,500 NC Catawba County Certificates of Participation, Public School and Community College Project, Series 2004, Insured: MBIA 5.250% 06/01/14........................... 1,645 1,490 NC Concord Certificates of Participation, Series 2001, Insured: MBIA 5.000% 06/01/17........................... 1,563 2,180 NC Greenville Certificates of Participation, Public Facilities and Equipment Project, Series 2004, Insured: AMBAC 5.250% 06/01/22........................... 2,320 1,955 NC Iredell County Public Facilities Corporate Installment Payment Revenue, School Projects, Series 2000, Insured: AMBAC 5.500% 06/01/09........................... 2,127 NC Pitt County Certificates of Participation, School Facilities Project, Series 2000B, Insured: FSA 1,390 5.750% 04/01/16........................... 1,531 1,000 5.500% 04/01/25........................... 1,077 NC Randolph County Certificates of Participation, 2,395 Series 2003, Insured: FSA 5.000% 06/01/14........................... 2,581 Series 2004, Insured: FSA 2,000 5.000% 06/01/15........................... 2,156 1,000 5.000% 06/01/18........................... 1,066 NC Wilmington Certificates of Participation, 1,550 Series 1999A, Insured: MBIA 5.350% 06/01/24........................... 1,654 1,240 Series 2003A, Insured: AMBAC 5.000% 06/01/14........................... 1,327 -------- 21,242 -------- LOCAL GENERAL OBLIGATIONS -- 18.8% NC Charlotte GO, Series 2002C, 1,570 5.000% 07/01/20........................... 1,658 1,265 5.000% 07/01/22........................... 1,319 1,500 Series 2003, 4.250% 07/01/11........................... 1,566 1,855 NC Charlotte Water and Sewer GO, Series, 1998 4.750% 02/01/12........................... 1,951 500 NC Concord GO, Series 1992, 6.200% 06/01/05........................... 503 1,000 NC Craven County GO, Insured: AMBAC 5.000% 05/01/19........................... 1,055 NC Cumberland County GO, Series 1998, Insured: FGIC 1,000 5.000% 03/01/17........................... 1,060 1,370 4.750% 02/01/10........................... 1,437 1,945 NC Forsyth County GO, Series 2003B, 4.750% 03/01/22........................... 1,995
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 1,500 NC Gaston County GO, Series 2002, Insured: AMBAC 5.250% 06/01/20........................... $ 1,616 1,000 NC Greensboro Public Improvement GO, Series 1998, 4.700% 04/01/10........................... 1,049 1,275 NC High Point Water and Sewer, GO, Series 2002, Insured: MBIA 4.500% 06/01/14........................... 1,337 NC Mecklenburg County GO, 1,000 Series 1993, 6.000% 04/01/11........................... 1,138 1,800 Series 2000 D, 5.000% 04/01/11........................... 1,936 Series 2001A, 1,170 5.000% 04/01/16........................... 1,250 2,000 5.000% 04/01/17........................... 2,130 NC New Hanover GO, Series 2001, 1,750 4.600% 06/01/14........................... 1,844 2,000 5.000% 06/01/17........................... 2,132 NC Orange County GO, Series 2000, 1,000 5.300% 04/01/17........................... 1,089 4,645 5.300% 04/01/18........................... 5,048 NC Wilmington Public Improvement GO, Series 1997A, Insured: FGIC 1,000 5.000% 04/01/11........................... 1,057 1,000 5.000% 04/01/13........................... 1,057 --------- 35,227 --------- SPECIAL NON-PROPERTY TAX -- 0.8% 1,315 NC Charlotte Storm Water Fee Revenue Series 2002, 5.250% 06/01/15........................... 1,429 --------- STATE APPROPRIATED -- 2.0% 1,800 NC Infrastructure Finance Corporation Lease Purchase Revenue North Carolina Facilities Project, Series 2004, 5.250% 11/01/15........................... 1,968 1,705 NC University of North Carolina Certificates of Participation, Series 2004, Insured: AMBAC 5.000% 06/01/12........................... 1,838 --------- 3,806 --------- STATE GENERAL OBLIGATIONS -- 4.5% NC State GO, 3,000 Series 1997A, 5.100% 03/01/06........................... 3,069 5,000 Series 2001A, 4.750% 03/01/14........................... 5,316 --------- 8,385 --------- 70,089 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 169 NATIONS FUNDS Nations North Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------- TRANSPORTATION -- 1.2% AIRPORTS -- 1.2% NC Charlotte Airport Revenue, AMT, Insured: MBIA $ 1,200 Series 1998B 4.750% 07/01/05........................... $ 1,207 1,000 Series 1999B 6.000% 07/01/24........................... 1,092 --------- 2,299 --------- UTILITIES -- 7.8% JOINT POWER AUTHORITY -- 1.8% 2,000 NC Municipal Power Agency No. 1 Series 1992, Insured: MBIA 7.250% 01/01/07........................... 2,145 1,150 WA State Public Power Supply Systems Revenue Series 1993A, Insured: MBIA 5.800% 07/01/07........................... 1,221 --------- 3,366 --------- MUNICIPAL ELECTRIC -- 2.3% 1,000 NC Greenville Utilities Commission Revenue, Series 2000A, Insured: MBIA 5.500% 09/01/19........................... 1,078 1,000 PR Electric Power Authority Revenue Series 1995Y, Insured: MBIA 7.000% 07/01/07........................... 1,089 2,000 TX Sam Rayburn Municipal Power Agency Series 2002, 5.000% 10/01/07........................... 2,096 --------- 4,263 --------- WATER AND SEWER -- 3.7% 1,000 NC Durham, Water & Sewer Utility System Revenue, Series 2001, 5.250% 06/01/16........................... 1,078 1,150 NC Fayetteville Public Works Commission Revenue, Series 1997, Insured: FSA 5.250% 03/01/07........................... 1,201 1,000 NC Greensboro Combined Enterprise Systems Revenue Series 1998A, 5.000% 06/01/18........................... 1,046 1,305 NC Greensboro Enterprise Systems Revenue Series 1998A, 5.500% 06/01/08........................... 1,400 1,000 NC Raleigh Combined Enterprise System Revenue Series 1996, 5.250% 03/01/07........................... 1,045 1,045 NC Union County Enterprise System Revenue, Series 2003A, Insured: FSA 5.000% 06/01/16........................... 1,107 --------- 6,877 --------- 14,506 --------- TOTAL MUNICIPAL BONDS (Cost of $175,714)........................ 184,245 ---------
VALUE SHARES (000) - ------------------------------------------------------------------------------------ INVESTMENT MANAGEMENT COMPANY -- 0.6% 1,154,000 Nations Tax-Exempt Reserves, Capital Class(b) (Cost of $1,154).......................................... 1,154 -------- TOTAL INVESTMENTS (Cost of $176,868)(c)........................... 99.1% 185,399 -------- OTHER ASSETS AND LIABILITIES, NET................. 0.9% 1,712 -------- NET ASSETS........................................ 100.0% $187,111 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Money market mutual fund registered under the Investment Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Cost for federal income tax purposes is $176,586.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp. PCR Pollution Control Revenue XLCA XL Capital Assurance, Inc.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ------------------------------------------------------------- Tax-backed..................................... 37.5% Other.......................................... 21.0 Health care.................................... 15.6 Utilities...................................... 7.8 Housing........................................ 6.2 Industrials.................................... 4.7 Education...................................... 4.5 Transportation................................. 1.2 Investment management company.................. 0.6 Other assets and liabilities, net.............. 0.9 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 170 NATIONS FUNDS Nations South Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- MUNICIPAL BONDS -- 98.8% EDUCATION -- 5.9% $ 8,650 IL Educational Facilities Revenue, Series 2003C, Insured: AMBAC 5.000% 09/01/18........................... $ 9,013 SC Florence Darlington Communication For Technical Education Special Fee Revenue, Series A, 1,725 5.000% 03/01/18........................... 1,837 1,905 5.000% 03/01/20........................... 2,013 -------- 12,863 -------- HEALTH CARE -- 13.0% HOSPITALS -- 13.0% SC Charleston County, Hospital Facilities Revenue, Care Alliance Health Services Project, Series 1999A, Insured: FSA 6,370 5.125% 08/15/15........................... 6,854 1,000 Refunding 5.000% 08/15/12........................... 1,060 SC Greenville Hospital Facilities Revenue, 1,000 Refunding, Series 1996A, 5.400% 05/01/07........................... 1,043 2,000 Series 1996B, 5.250% 05/01/17........................... 2,072 SC Horry County Hospital Facilities Revenue, Conway Hospital, Inc. Project, Series 1998, Insured: AMBAC 1,100 4.750% 07/01/10........................... 1,152 1,200 4.875% 07/01/11........................... 1,255 SC Jobs Economic Development Authority, Hospital Facilities Revenue, 1,250 Georgetown Memorial Hospital Project, Series 2001, Insured: RAD 5.250% 02/01/21........................... 1,293 1,500 Oconee Memorial Hospital, Inc. Project. Series 1995, Insured: CON 6.150% 03/01/15........................... 1,534 4,375 Series 1999, Insured: FSA 5.300% 02/01/14........................... 4,679 SC Lexington County, Health Services District Hospital Revenue, Health Services District and Lexemed, Inc. Project, Refunding, 2,000 Series 2003, 5.500% 11/01/23........................... 2,082 1,180 Series 1997, Insured: FSA 5.500% 11/01/06........................... 1,229 3,000 5.125% 11/01/21........................... 3,121 1,000 SC Spartanburg County Health Services District Hospital Revenue, Refunding, Series 1997B, Insured: MBIA 5.125% 04/15/17........................... 1,040 -------- 28,414 --------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- INDUSTRIALS -- 2.6% FOREST PRODUCTS -- 2.6% SC Georgetown County, Pollution Control Revenue, International Paper Company Project, Refunding, $ 5,000 Series 1999A, 5.125% 02/01/12........................... $ 5,263 500 Series 1997A, AMT 5.700% 10/01/21........................... 511 -------- 5,774 -------- OTHER -- 20.3% OTHER -- 0.5% 1,000 SC Columbia, Parking Facilities Revenue, Refunding, Series 1994, AMT Insured: AMBAC 5.750% 12/01/09........................... 1,023 -------- REFUNDED/ESCROWED(A) -- 18.2% SC Beaufort County, School District, GO, 1,725 Series 2000B, Pre-refunded 03/01/09, 5.500% 03/01/16........................... 1,871 1,200 Series 2000C, Pre-refunded 03/01/09, 5.125% 03/01/12........................... 1,285 1,135 Series 2001A, Pre-refunded 03/01/11, 5.000% 03/01/18........................... 1,223 2,500 SC Berkeley County, School District, GO, Series 2000, Pre-refunded 04/01/08, 5.000% 04/01/21........................... 2,687 2,000 SC Calhoun County Solid Waste Disposal Facility Revenue, Carolina Eastman Company Project, Series 1992, AMT Escrowed to Maturity, 6.750% 05/01/17........................... 2,435 1,000 SC Camden Combined Public Utilities Revenue, Refunding and Improvement, Series 1997, Pre-refunded 03/01/07, Insured: MBIA 5.500% 03/01/17........................... 1,061 SC Charleston County, Hospital Facilities Revenue Refunding and Improvement, Bon Secours Health Systems Project, 500 Series 1992, Pre-refunded 08/15/05, Insured: FSA 5.625% 08/15/25........................... 504 3,000 Series 1993, Pre-refunded 08/15/05, Insured: FSA 5.500% 08/15/10........................... 3,026 1,000 Medical Society Health Project, Series 1992, Pre-refunded 04/01/05, Insured: MBIA 6.000% 10/01/09........................... 1,002 1,000 SC Charleston County Public Improvement Authority, GO, Series 1994, Pre-refunded 06/01/06, 5.500% 06/01/14........................... 1,033 1,000 SC Georgetown County, School District, GO, Series 2000, Pre-refunded 03/01/11, 5.250% 03/01/19........................... 1,091
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 171 NATIONS FUNDS Nations South Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 1,000 SC Greenville, Water Utility Improvement, Waterworks Revenue, Series 1997, Pre-refunded 02/01/07, 6.000% 02/01/08........................... $ 1,075 1,500 Pre-refunded 02/01/12, 5.500% 02/01/22........................... 1,599 1,000 SC Hilton Head Island, GO, Series 2001, Pre-refunded 03/01/09, 5.000% 03/01/13........................... 1,066 5,500 SC Jobs Economic Development Authority, Hospital Facilities Revenue, Palmetto Health Alliance Project, Series 2000A, Pre-refunded 12/12/10, 7.125% 12/15/15........................... 6,606 2,000 SC Lexington, Water and Sewer Authority Revenue, Series 1997, Pre-refunded 10/01/14, Insured: RAD 5.450% 04/01/19........................... 2,129 1,575 SC Medical University, Hospital Facilities Revenue, Series 1999, Pre-refunded 07/01/09, 5.500% 07/01/09........................... 1,712 5,000 SC Piedmont Municipal Power Agency, Electric Revenue, Refunding, Series 2001A, Pre-refunded 01/01/07, Insured: MBIA 5.250% 01/01/09........................... 5,232 2,850 SC Spartanburg Sewer District Sewer Systems Revenue, Series 1997, AMT, Pre-refunded 06/01/07, Insured: MBIA 5.500% 06/01/27........................... 3,032 -------- 39,669 -------- TOBACCO -- 1.6% 3,500 SC Tobacco Settlement Management Revenue, Series 2001B, 6.375% 05/15/28........................... 3,569 -------- 44,261 -------- RESOURCE RECOVERY -- 2.0% RESOURCE RECOVERY -- 2.0% 4,000 SC Charleston County, Resources Recovery Revenue, Foster Wheeler Charleston, Series 1997, AMT, Insured: AMBAC 5.250% 01/01/10........................... 4,280 -------- TAX-BACKED -- 19.3% LOCAL APPROPRIATED -- 2.3% 4,625 SC Greenville County, School District, Installment Purchase Revenue, Building Equity Sooner Tomorrow Project, Refunding, Series 2003, 5.250% 12/01/16........................... 4,943 --------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- 10.9% $ 2,500 IL Chicago, GO, Refunding, Series 2001A Insured: MBIA 5.500% 01/01/14........................... $ 2,743 2,480 SC Georgetown County, School District, GO, Series 2000, 5.500% 03/01/09........................... 2,691 SC Hilton Head Island, GO, 1,825 Series 2002, 5.000% 12/01/16........................... 1,971 1,960 Series A, 5.000% 12/01/17........................... 2,104 3,570 SC Richland County, School District Number 001, GO, Refunding, Series 2001A, 5.250% 03/01/19........................... 3,825 SC Spartanburg County, School District Number 007, GO, Series 2001, 3,240 4.125% 03/01/13........................... 3,311 2,000 5.000% 03/01/18........................... 2,158 1,275 4.000% 03/01/12........................... 1,302 3,410 SC York County School District Number 003 Rock Hill, GO, Series 2001, 5.000% 03/01/12........................... 3,692 -------- 23,797 -------- SPECIAL NON-PROPERTY TAX -- 1.7% 2,000 IL Metropolitan Pier And Exposition Authority, Dedicated State Tax Revenue, McCormick Place Expansion, Refunding, Series 2002B, Insured: MBIA 5.750% 06/15/23........................... 2,232 1,440 SC Hilton Head Island, Revenue, Insured: MBIA 5.250% 12/01/16........................... 1,559 -------- 3,791 -------- STATE GENERAL OBLIGATIONS -- 4.4% 1,885 SC Highway Improvement, GO, Series 1999A, 4.600% 05/01/11........................... 2,000 6,135 SC Capital Improvement, GO, Series 1996A, 3.500% 07/01/06........................... 6,200 1,245 SC, GO, Series 2000A, 4.800% 03/01/09........................... 1,322 -------- 9,522 -------- 42,053 -------- TRANSPORTATION -- 8.5% PORTS -- 2.2% 4,565 SC Port Authority Revenue, Series 1998, AMT Insured: FSA 5.250% 07/01/13........................... 4,771 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 172 NATIONS FUNDS Nations South Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- TRANSPORTATION -- 6.3% $ 2,730 SC Transportation Infrastructure Bank Revenue, Series 2004A, Insured: AMBAC 5.250% 10/01/09........................... $ 2,950 SC Transportation Infrastructure, Book Revenue Junior Lien, Series 2001B, Insured: AMBAC 3,340 5.250% 10/01/13........................... 3,617 3,670 5.250% 10/01/17........................... 3,960 1,985 Series 2004A, Insured: AMBAC 5.000% 10/01/16........................... 2,121 1,000 SC Transportation Infrastructure Revenue, Series 1998A, Insured: MBIA 5.000% 10/01/12........................... 1,060 -------- 13,708 -------- 18,479 -------- UTILITIES -- 27.2% INVESTOR OWNED -- 1.7% 3,615 SC Jobs Economic, AMT Insured: AMBAC 4.200% 11/01/12........................... 3,655 -------- JOINT POWER AUTHORITY -- 5.0% 1,480 SC Public Service Authority Revenue, Refunding, Series 2002A, Insured: FSA 5.500% 01/01/17........................... 1,625 1,615 Refunding, Series 2001A, Insured: FSA 5.250% 01/01/18........................... 1,733 2,000 Series 1999A, Insured: MBIA 5.625% 01/01/13........................... 2,197 2,000 SC Public Service Authority Revenue, Refunding, Series 2002D, Insured: FSA 5.000% 01/01/18........................... 2,107 3,000 WA Energy Northwest, Electric Revenue, Columbia Generating Project, Refunding, Series 2002A, Insured: MBIA 5.500% 07/01/17........................... 3,279 -------- 10,941 -------- MUNICIPAL ELECTRIC -- 4.0% SC Rock Hill, Water Utility System Revenue, Series 2003A, Insured: FSA 2,350 5.250% 01/01/13........................... 2,577 1,500 5.375% 01/01/19........................... 1,629 1,020 SC Winnsboro Utility Revenue, Refunding, Series 1999, Insured: MBIA 5.250% 08/15/13........................... 1,121 3,000 TX Sam Rayburn Texas Municipal Power Agency Revenue Refunding, Series 2002, 6.000% 10/01/16........................... 3,268 -------- 8,595 --------
PRINCIPAL AMOUNT VALUE (000) (000) - ------------------------------------------------------------------- WATER AND SEWER -- 16.5% SC Berkeley County, Water and Sewer Revenue, Series 2003, Insured: MBIA $ 1,000 5.250% 06/01/19........................... $ 1,076 2,790 5.250% 06/01/17........................... 3,020 5,105 SC Charleston, Waterworks and Sewer Capital Improvement Revenue, Refunding, Series 1998, 5.250% 01/01/08........................... 5,407 7,000 SC Columbia, Waterworks and Sewer Systems Revenue, Refunding, Series 1993 5.500% 02/01/09........................... 7,575 1,250 SC Florence, Water and Sewer Revenue, Refunding, Series 1993, Insured: AMBAC 5.150% 03/01/06........................... 1,253 2,000 SC Grand Strand, Water and Sewer Systems Revenue, Series A, Insured: FSA 5.375% 06/01/14........................... 2,194 1,555 SC Greenville, Water Utility Improvement, Waterworks Revenue, Series 2002, 5.250% 02/01/14........................... 1,688 SC Mount Pleasant, Water and Sewer Revenue and Improvement, Refunding, Series 2002, Insured: FGIC 1,980 5.250% 12/01/16........................... 2,143 1,270 5.250% 12/01/18........................... 1,368 3,040 SC North Charleston, Sewer District Revenue, Refunding, Series 2002, Insured: FSA 5.500% 07/01/17........................... 3,348 6,250 SC Western Carolina, Regional Sewer Authority, 5.250% 03/01/16........................... 6,895 -------- 35,967 -------- 59,158 -------- TOTAL MUNICIPAL BONDS (Cost of $206,951)........................ 215,282 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 173 NATIONS FUNDS Nations South Carolina Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 0.4% 832,000 Nations Tax-Exempt Reserves, Capital Class(b) (Cost of $832)........................... $ 832 -------- TOTAL INVESTMENTS (Cost of $207,783)(c)........................... 99.2% 216,114 -------- OTHER ASSETS AND LIABILITIES, NET................. 0.8% 1,771 -------- NET ASSETS........................................ 100.0% $217,885 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a)The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b)Money market mutual fund registered under the Investment Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c)Cost for federal income tax purposes is $207,235.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax CON College Construction Loan Association FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp. RAD Radian Asset Assurance, Inc.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Utilities................................... 27.2% Other....................................... 20.3 Tax-backed.................................. 19.3 Health care................................. 13.0 Transportation.............................. 8.5 Education................................... 5.9 Industrials................................. 2.6 Resource recovery........................... 2.0 Investment management company............... 0.4 Other assets and liabilities, net........... 0.8 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 174 NATIONS FUNDS Nations Tennessee Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- MUNICIPAL BONDS -- 95.2% EDUCATION -- 3.2% TN Metropolitan Government, Nashville and Davidson County, Health and Educational Facilities Board Improvement Revenue Meharry Medical College Project, Refunding, Series 1996, Insured: AMBAC $ 505 6.000% 12/01/08................................... $ 555 595 6.000% 12/01/09................................... 662 500 6.000% 12/01/16................................... 577 ------- 1,794 ------- HEALTH CARE -- 11.3% HOSPITALS -- 11.3% 1,250 TN Chattanooga-Hamilton County Hospital Authority Revenue, Erlanger Medical Center Project, Refunding, Series 1993, Insured: FSA 5.500% 10/01/07................................... 1,322 TN Knox County 300 Health, Educational and Housing Facilities Board Revenue, Fort Sanders Alliance Project, Refunding, Series 1993, Insured: MBIA 7.250% 01/01/09................................... 340 2,000 Health, Educational and Housing Facilities Board Revenue, Hospital Facilities Improvement Revenue, Baptist Health System of East Tennessee, Inc. Project, Refunding, Series 1996, Insured: CON 5.500% 04/15/11................................... 2,110 1,500 Health, Educational and Housing Facilities Board Revenue, University Health Systems Inc. Project, Series 1993, 5.750% 04/01/19................................... 1,555 10 TN Shelby County, Health, Educational and Housing Facilities Board Revenue Methodist Health Systems, Series 1995, Insured: MBIA 6.250% 08/01/09................................... 11 1,000 St. Jude's Children's Research Project, Series 1999, 5.375% 07/01/24................................... 1,037 ------- 6,375 -------
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- HOUSING -- 9.8% MULTI-FAMILY -- 1.8% $ 1,000 TN Metropolitan Government, Nashville and Davidson County Multi-Family Housing Revenue, Enhancement, Inc. - Welch Bend Apartments Project, Series 1996A, Insured: FNMA 5.500% 01/01/27................................... $ 1,029 ------- SINGLE FAMILY -- 8.0% 1,085 TN Housing Development Agency Revenue Home Ownership Program, Series 1988, AMT 4.750% 07/01/08................................... 1,121 ------- 2,500 Series 1997-3A, AMT(a) 01/01/08................... 2,231 ------- 1,135 TN Housing Development Agency Revenue Home Ownership Program, Series 1998, AMT 4.850% 07/01/09................................... 1,173 ------- 4,525 ------- 5,554 ------- INDUSTRIALS -- 3.3% CHEMICALS -- 1.0% 575 TN Humphreys County, Industrial Development Board, Solid Waste Disposal Revenue E.I. Dupont Denemours and Co. Project, Series 1994, AMT 6.700% 05/01/24................................... 588 ------- FOREST PRODUCTS -- 0.9% 500 NC Haywood County Industrial Facilities and Pollution Control Financing Authority, Solid Waste Disposal Revenue, Champion International Corporation Project, Series 1993, AMT, 5.500% 10/01/18................................... 515 ------- MANUFACTURING -- 1.4% 750 TN Maury County Industrial Development Board Multi-Model Pollution Control Revenue Refunding, General Motors Corporation - Saturn Corporation Project, Series 1997, 6.500% 09/01/24................................... 764 ------- 1,867 ------- OTHER -- 12.6% REFUNDED/ESCROWED(B) -- 12.6% 500 TN Blount County Public Building Authority Public Facility Revenue, Series 1998, Pre-refunded 06/01/14, Insured: FGIC 5.000% 04/01/19................................... 532 1,250 TN Knox County Health, Educational and Housing Facilities Board Revenue, University Health Systems Inc., Project, Series 1999, Pre-refunded 04/01/06, 4.750% 04/01/19................................... 1,288
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 175 NATIONS FUNDS Nations Tennessee Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- REFUNDED/ESCROWED(B) -- (CONTINUED) $ 1,160 TN Madison County GO, Series 2002, Pre-refunded 04/01/12, 5.000% 04/01/13................................... $ 1,255 490 TN Shelby County Health, Educational and Housing Facilities Board Revenue, Methodist Health Systems, Series 1995, Escrowed to Maturity, Insured: MBIA 6.250% 08/01/09................................... 548 2,000 TN State GO, Series 1999B, Pre-refunded 05/01/09, Insured: FSA 5.250% 05/01/17................................... 2,155 1,200 TN Williamson County GO, Series 2000, Pre-refunded 03/01/10, 5.350% 03/01/17................................... 1,309 ------- 7,087 ------- RESOURCE RECOVERY -- 1.8% DISPOSAL -- 1.8% 1,000 FL Okeechobee County Solid Waste Revenue Various Disposal - Waste Management/Landfill, Series 2004A, AMT, 4.200% 07/01/39................................... 1,006 ------- TAX-BACKED -- 44.6% LOCAL GENERAL OBLIGATIONS -- 42.8% 1,000 IL Chicago Insured: FSA 5.250% 01/01/17................................... 1,080 1,535 TN Anderson County GO, Refunding, Series 2001, Insured: FSA 5.000% 04/01/13................................... 1,631 1,075 TN Blount County Public Building Authority, GO, Local Government Public Improvement, Series 2004B-5-A, Insured: FGIC 5.000% 06/01/16................................... 1,151 TN Dickson County GO, Refunding, 1,000 Series 2002, Insured: FGIC 5.000% 03/01/14................................... 1,085 1,000 Series 2003, Insured: FGIC 5.000% 06/01/14................................... 1,075 TN Franklin Special School District, GO, Refunding, 1,000 Series 2002, 5.000% 06/01/12................................... 1,080 2,000 Insured: FSA (b) 06/01/20...................................... 973 500 TN Hamilton County GO Refunding, Series 1998B, 5.100% 08/01/24................................... 544 1,000 TN Kingsport GO, Insured: AMBAC 5.000% 03/01/14................................... 1,084 1,330 TN Lawrenceburg Public Building Authority, Water and Sewer, GO, Series 2001B, Insured: FSA 5.500% 07/01/16................................... 1,456 390 TN Madison County GO, Unrefunded, Series 2002, 5.000% 04/01/13................................... 418
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 2,500 TN Memphis GO, Series 2000, 5.000% 04/01/17................................... $ 2,662 1,000 TN Metropolitan Government, Nashville and Davidson County GO, Refunding, Series 1993, 5.250% 05/15/07................................... 1,049 1,250 TN Montgomery County GO, Refunding, Series 2004, Insured: FGIC 5.000% 05/01/14................................... 1,359 1,000 TN Overton County GO, Insured: MBIA 5.000% 04/01/16................................... 1,077 TN Rutherford County 1,550 5.000% 04/01/14................................... 1,682 1,645 Public Improvement GO, Series 1996, 6.000% 04/01/06................................... 1,675 TN Shelby County GO, Refunding, Series 1996B, 1,030 5.200% 12/01/09................................... 1,078 1,000 Series 1999B, 5.250% 04/01/11................................... 1,093 400 TN Shelby County Public Improvement, GO, Refunding, Series 1999A, 4.750% 05/01/21................................... 405 500 TN Shelby County Public Improvement, GO, Series 1996A, 5.625% 06/01/06................................... 517 ------- 24,174 ------- STATE GENERAL OBLIGATIONS -- 1.8% 1,000 TX State Public Finance Authority, GO, Refunding, Series 1997, 5.000% 10/01/15................................... 1,039 ------- 25,213 ------- TRANSPORTATION -- 1.9% AIR TRANSPORTATION -- 1.9% 1,000 TN Memphis Shelby County Airport Authority Special Facilities Revenue Refunding, Federal Express Corp. Project, Series 2002, 5.050% 09/01/12................................... 1,069 ------- UTILITIES -- 6.7% MUNICIPAL ELECTRIC -- 6.7% 2,000 TN Metropolitan Government, Nashville and Davidson County Electric Revenue Series 1998B, 5.500% 05/15/13................................... 2,231 1,500 TN Tennergy Corp. Gas Revenue, Insured: MBIA 5.000% 06/01/07................................... 1,566 ------- 3,797 ------- TOTAL MUNICIPAL BONDS (Cost of $51,627)................................. 53,762 -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 176 NATIONS FUNDS Nations Tennessee Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 5.0% 2,821,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $2,821)................................................... $ 2,821 ------- TOTAL INVESTMENTS (Cost of $54,448)(d)............................ 100.2% 56,583 ------- OTHER ASSETS AND LIABILITIES, NET................. (0.2)% (97) ------- NET ASSETS........................................ 100.0% $56,486 =======
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Zero coupon bond. (b) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (c) Money market mutual fund registered under the Investment Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $54,414. ACRONYM NAME - ---------- ------------------------------------------------ AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax CON College Construction Loan Association FGIC Financial Guaranty Insurance Co. FNMA Federal National Mortgage Association FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp.
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 44.6% Other....................................... 12.6 Health care................................. 11.3 Housing..................................... 9.8 Utilities................................... 6.7 Industrials................................. 3.3 Education................................... 3.2 Transportation.............................. 1.9 Resource recovery........................... 1.8 Investment management company............... 5.0 Other assets and liabilities, net........... (0.2) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 177 NATIONS FUNDS Nations Texas Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- MUNICIPAL BONDS -- 102.0% EDUCATION -- 6.9% $ 1,000 TX Alamo Texas Community College District, Insured: FSA 5.375% 11/01/16................................... $ 1,085 400 TX Fort Worth, Higher Education Financial Corporation, Higher Education Revenue Texas Christian University Project, Series 1997, 5.000% 03/15/17................................... 415 1,000 TX Houston, Community College System Revenue Junior Lien, Student Fee Project, Refunding, Series 2001A, Insured: MBIA 5.375% 04/15/15................................... 1,079 3,500 TX Texas A&M University Revenue Series, 1999, 5.500% 05/15/20................................... 3,739 1,000 TX Texas Tech University Revenue Refunding, Series 2001, Insured: AMBAC 5.000% 02/15/11................................... 1,075 5,000 TX University of Texas, Permanent University Funds Revenue Series 2002A, 5.000% 07/01/07................................... 5,227 1,000 TX University of Texas, University Financing Systems Revenue Series 2003A, 5.375% 08/15/15................................... 1,098 1,760 TX University of Texas, University Revenue Series 2004C, 4.000% 08/15/05................................... 1,771 -------- 15,489 -------- HEALTH CARE -- 8.5% HOSPITALS -- 8.5% 1,150 KS University Hospital Authority Revenue Kansas University Health System Project, Series 1999A, Insured: AMBAC 5.250% 09/01/11................................... 1,228 3,135 TN Chattanooga-Hamilton County Hospital Authority Revenue, Erlanger Medical Center Project, Refunding, Series 1993, Insured: FSA 5.500% 10/01/07................................... 3,315 TX Harris County, Health Facilities Development Corporation Revenue Christian Health Project, 2,000 Series 1999A, Insured: MBIA 5.500% 07/01/10................................... 2,167 1,000 Refunding, Series 1999A, Insured: MBIA 5.250% 07/01/07................................... 1,048 2,780 St. Lukes Episcopal Hospital Project, Series 2001A, 5.625% 02/15/16................................... 2,967
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 3,000 TX North Central, Health Facilities Development Corporation Revenue Baylor Health Care Systems Project, Refunding, Series 1995, 5.500% 05/15/13................................... $ 3,129 3,300 TX Tarrant County, Health Facilities Development Corporation, Health Systems Revenue Texas Health Resources Systems Project, Refunding, Series 1997A Insured: MBIA 5.750% 02/15/08................................... 3,527 1,355 TX Tarrant County, Hospital District Revenue Series 2002, Insured: MBIA 5.500% 08/15/13................................... 1,482 -------- 18,863 -------- HOUSING -- 1.1% MULTI-FAMILY -- 0.5% 1,000 FL Housing Finance Agency Multi-Family Housing Revenue United Dominion Realty Trust-Andover Project, Refunding, Series 1996E, AMT 6.350% 05/01/26................................... 1,023 -------- SINGLE FAMILY -- 0.6% 1,400 OK Housing Development Authority Revenue Obligation Lease Purchase Program, Series 2000A 5.100% 11/01/05................................... 1,420 -------- 2,443 -------- INDUSTRIALS -- 1.7% FOREST PRODUCTS AND PAPER -- 1.3% 2,600 MS Warren County Mississippi Environmental Improvement Revenue Refunding International Paper Co. Project, Series 2000A, AMT 6.700% 08/01/18................................... 2,834 -------- MANUFACTURING -- 0.4% 1,000 TX Trinity River Authority Texas Instruments Project, Series 1996, AMT, 6.200% 03/01/20................................... 1,033 -------- 3,867 -------- OTHER -- 19.0% POOL/BOND BANK -- 2.1% TX Water Development Board Revenue 3,000 Series 1997, 5.000% 07/15/12................................... 3,145 1,500 Series 1999B, 5.625% 07/15/21................................... 1,616 -------- 4,761 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 178 NATIONS FUNDS Nations Texas Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- 16.9% $ 1,500 IL Kane County Forest Preservation District, GO, Series 1999, Pre-refunded 12/30/09 5.375% 12/30/14................................... $ 1,637 1,500 SC Calhoun County Solid Waste Disposal Facility Revenue Carolina Eastman Company Project, Series 1992, AMT Escrowed to Maturity, 6.750% 05/01/17................................... 1,826 500 TX Austin Public Improvement, GO, Series 1999, Pre-refunded 09/01/09, 5.375% 09/01/18................................... 542 1,290 TX Brazosport Independent School District, GO, Series 1996, Pre-refunded 02/15/06, Insured: PSFG 5.400% 02/15/13................................... 1,321 1,400 TX Harris County GO, Series 1995, Pre-refunded 10/01/05, 5.000% 10/01/17................................... 1,418 TX Houston, Water and Sewer Systems Revenue Junior Lien, Refunding, 4,000 Series 1996A, Pre-refunded 12/01/06, Insured: FGIC 5.250% 12/01/25................................... 4,202 5,000 Series 1997A, Pre-refunded 12/01/07, Insured: FGIC 5.375% 12/01/27................................... 5,357 5,000 TX North Central, Health Facilities Development Corp. Revenue Presbyterian Healthcare Residential Project, Refunding, Series 1996B, Pre-refunded 06/01/06, Insured: MBIA 5.500% 06/01/16................................... 5,665 1,500 TX Pearland Independent School District, GO, Series 2000, Insured: PSFG Pre-refunded 02/15/09, 5.500% 02/15/20................................... 1,624 TX San Antonio, GO, 120 Series 2001, Escrowed to Maturity, 5.000% 08/01/09................................... 128 30 Series 2002, Escrowed to Maturity, 5.000% 02/01/11................................... 32 20 TX San Antonio, GO, Forward-General Improvements, Series 2001, Escrowed to Maturity, 5.250% 08/01/13................................... 22 1,000 TX San Antonio Independent School District, GO, Pre-refunded 08/15/09, Insured: PSFG 5.500% 08/15/24................................... 1,090 1,000 TX Tarrant County, Health Facilities Development Corporation, Health Systems Revenue Harris Methodist Health Systems Project, Series 1994, Escrowed to Maturity, Insured: MBIA 6.000% 09/01/10................................... 1,102
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 500 TX Travis County, Health Facilities Development Corp. Revenue Ascension Health Credit Project, Series 1999A, Pre-refunded 11/15/09, Insured: AMBAC 5.875% 11/15/24................................... $ 557 3,250 TX Turnpike Authority of Dallas, North Tollway Revenue President George Bush Turnpike Project, Series 1996, Escrowed to Maturity, Insured: AMBAC (b) 01/01/09...................................... 2,866 2,500 TX University of Texas, University Financing Systems Revenue Series 2002A, Pre-refunded 08/15/11, 5.375% 08/15/15................................... 2,742 5,365 TX Waxahachie Independent School District, Capital Appreciation, GO, Series 2000, Pre-refunded 08/15/10, Insured: PSFG (b) 08/15/17...................................... 2,806 4,545 Unrefunded balance, Series 2000, Pre-refunded 08/15/10, Insured: PSFG (b) 08/15/15...................................... 2,726 -------- 37,663 -------- 42,424 -------- RESOURCE RECOVERY -- 0.9% DISPOSAL -- 0.9% 1,875 TX Gulf Coast Waste Disposal, Insured: AMBAC 5.000% 10/01/12................................... 2,004 -------- TAX-BACKED -- 44.2% LOCAL GENERAL OBLIGATIONS -- 37.2% 1,655 TX Aldine School District, Insured: PSFG 5.250% 02/15/15................................... 1,798 1,000 TX Allen Independent School District, GO, Series 2004, Insured: PSFG 5.000% 02/15/17................................... 1,058 2,025 TX Arlington Independent School District Insured: PSFG 5.000% 02/15/16................................... 2,161 4,000 TX Austin Independent School District, GO, Refunding, Series 2004, Insured: PSFG 5.000% 08/01/12................................... 4,318 1,030 TX Barbers Hill Independent School District, GO, Refunding, Series 2003, Insured: PSFG 5.000% 02/15/22................................... 1,071 2,585 TX Belton Texas Independent School District, GO, Refunding, Series 1998, Insured: PSFG 5.250% 08/15/08................................... 2,758 1,280 TX Carrollton Farmers Brh Independent School District, GO, Insured: MBIA 5.000% 02/15/14................................... 1,378
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 179 NATIONS FUNDS Nations Texas Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) TX Cedar Hill Independent School District, GO, Series 2000, Insured: PSFG $ 4,115 (b) 08/15/16...................................... $ 2,215 2,840 (b) 08/15/17...................................... 1,427 1,655 TX Corpus Christi GO, Series 2002, Insured: FSA 5.500% 09/01/15................................... 1,816 3,000 TX Cypress-Fairbanks Independent School District, Insured: PSFG 5.000% 02/15/18................................... 3,192 1,045 TX Dallas, GO, Series 2000, 5.000% 08/15/09................................... 1,118 1,000 TX Dallas, GO, Refunding, Series 2003A, 5.000% 02/15/09................................... 1,065 1,000 TX Fort Bend Independent School District, GO, Series 2000, Insured: PSFG 5.250% 08/15/19................................... 1,065 1,905 TX Garland GO, Series 1998, 5.000% 02/15/12................................... 1,992 2,665 TX Goose Creek Conservative Independent School District, GO, Refunding, Series 2003, Insured: PSFG 4.500% 02/15/14................................... 2,767 1,000 TX Grapevine GO, Series 2000, Insured: FGIC 5.800% 08/15/19................................... 1,098 4,870 TX Harlandale Independent School District, GO, Refunding, Series 2004, Insured: PSFG 5.250% 08/15/16................................... 5,282 2,000 TX Harris County, Revenue Tax and Subordinated Lien, Refunding, Series 2004B, Insured: FSA 5.000% 08/15/32................................... 2,126 1,120 TX Harris County GO, Refunded, Series 2002, 5.000% 10/01/08................................... 1,190 1,000 TX Jefferson County GO, Refunding, Series 2002, Insured: FGIC 5.750% 08/01/14................................... 1,116 50 TX Johnson City Independent School District, GO, Refunding, Series 2003, Insured: PSFG 3.000% 02/15/09................................... 50 2,000 TX Klein Independent School District, GO, Refunding, Series 1999A, Insured: PSFG 5.125% 08/01/15................................... 2,113 1,740 TX La Marque Independent School District, GO, Refunding, Series 2003, Insured: PSFG 5.000% 02/15/21................................... 1,816 TX North Harris Montgomery Community College District, Refunding, 1,000 Insured: FGIC 5.375% 02/15/16................................... 1,079
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 1,500 Insured: MBIA 5.375% 02/15/16................................... $ 1,608 3,285 TX Northside Independent School District, GO, Refunding, Series 2002A 5.250% 02/15/20................................... 3,502 3,000 TX Plano Independent School District, GO, Series 2004, Insured: PSFG 5.000% 02/15/14................................... 3,230 1,190 TX Rio Grande City Conservative Independent School District, GO, Series 2002, Insured: PSFG 5.000% 08/15/19................................... 1,244 5,600 TX Round Rock Independent School District, GO, Series 2000, Insured: PSFG 5.000% 08/01/18................................... 5,850 2,000 TX San Antonio Tax and Revenue 5.000% 02/01/09................................... 2,126 1,970 TX San Antonio GO, 5.000% 02/01/11................................... 2,115 1,480 Series 2001, 5.250% 08/01/13................................... 1,620 1,380 Series 2003, 5.000% 08/01/09................................... 1,473 2,500 TX Socorro School District, GO, Insured: PSFG 5.250% 08/15/13................................... 2,737 1,260 TX South Texas Community College District, GO, Series 2002, Insured: AMBAC 5.250% 08/15/10................................... 1,369 1,170 TX Sugar Land GO, Refunding, Series 2003, Insured: FGIC 5.000% 02/15/11................................... 1,256 3,675 TX Travis County GO, Limited Tax, Refunding, Series 2004, 5.000% 03/01/15................................... 3,941 TX Waxahachie Independent School District, Capital Appreciation, GO, Unrefunded Balance, Series 2000, Insured: PSFG 210 (b) 08/15/15...................................... 121 245 (b) 08/15/17...................................... 125 1,440 TX West University Place Permanent Improvement, GO, Refunding, Series 2002, 5.500% 02/01/15................................... 1,571 1,910 TX White Settlement Independent School District, GO, Refunding, Series 2003, Insured: PSFG 5.375% 08/15/19................................... 2,062 -------- 83,019 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 180 NATIONS FUNDS Nations Texas Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- SPECIAL NON-PROPERTY TAX -- 2.8% TX Corpus Christi Business and Job Development Corporation, Sales Tax Revenue, Arena Project, Series 2002, Insured: AMBAC $ 2,065 5.500% 09/01/14................................... $ 2,282 1,250 5.500% 09/01/18................................... 1,363 TX Houston, Hotel Occupancy Tax and Special Revenue Series 2001B, Insured: AMBAC 1,195 5.250% 09/01/19................................... 1,275 1,265 5.250% 09/01/20................................... 1,346 -------- 6,266 -------- STATE GENERAL OBLIGATIONS -- 4.2% 1,000 TX College Student Loan Authority GO, Series 1994, AMT 5.750% 08/01/11................................... 1,001 1,200 TX Public Finance Authority GO, Refunding, Series 1996C, 6.000% 10/01/06................................... 1,256 375 TX Veterans Housing Assistance, GO, Refunding, Series 1994C, 6.400% 12/01/09................................... 383 5,000 TX Water Development GO, Series 1997, 5.250% 08/01/28................................... 5,174 455 TX Water Financial Assistance Series A, 5.250% 08/01/21................................... 482 1,000 WA Motor Vehicle Fuel Tax, GO, Refunding, Series 2001R-B, 5.000% 09/01/09................................... 1,068 -------- 9,364 -------- 98,649 -------- TRANSPORTATION -- 4.4% AIRPORTS -- 0.2% 500 TX Dallas Fort Worth Regional Airport Revenue, Refunding, Series 1994A, Insured: MBIA 6.000% 11/01/09................................... 501 -------- TOLL FACILITIES -- 4.2% 2,000 TX Central Texas Regional Mobility Authority Revenue Subordinated Bond Anticipation Notes, 5.000% 01/01/08................................... 2,093 2,150 TX Harris County, Revenue Refunding, Series 2002, Insured: FSA 5.000% 08/15/06................................... 2,215 TX Harris County, Toll Road Revenue 735 Refunding, Series 2002, Insured: FSA 5.375% 08/15/11................................... 809
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- TOLL FACILITIES -- (CONTINUED) $ 1,000 Series 2002, Insured: FSA 5.375% 08/15/10................................... $ 1,094 3,000 TX North Texas, Tollway Authority, Dallas North Tollway System Revenue Refunding, Series 2003B, Insured: AMBAC 5.000% 01/01/38................................... 3,168 -------- 9,379 -------- 9,880 -------- UTILITIES -- 15.3% INVESTOR OWNED -- 2.3% 4,000 TX Redeemable River Authority Pollution Control Revenue Southwestern Public, Insured: AMBAC 5.200% 07/01/11................................... 4,089 1,000 TX Sabine River Authority Pollution Control Revenue TXU Electric Company Project, Refunding, Series 2001B, 5.750% 05/01/30................................... 1,062 -------- 5,151 -------- MUNICIPAL ELECTRIC -- 8.9% 1,000 TN Metropolitan Government, Nashville and Davidson County Electric Revenue Series 1998B, 5.500% 05/15/13................................... 1,116 3,410 TX Austin Electric Utility Systems Revenue Refunding, Series 2002, Insured: FSA 5.500% 11/15/12................................... 3,786 2,000 Insured: AMBAC 5.500% 11/15/13................................... 2,228 2,500 TX Austin Utility Systems Revenue Refunding, Series 1992, Insured: AMBAC (b) 11/15/09...................................... 2,121 3,000 TX Lower Colorado River Authority Revenue Refunding, Series B Insured: FSA 6.000% 05/15/08................................... 3,256 3,000 TX Sam Rayburn Texas Municipal Power Agency Revenue Refunding, Series 2002, 6.000% 10/01/16................................... 3,268 1,500 TX San Antonio Electric and Gas Systems GO, Refunding, Series 1998A, 5.250% 02/01/16................................... 1,595 2,250 TX San Antonio Electric and Gas Systems Refunding, 5.250% 02/01/12................................... 2,453 -------- 19,823 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 181 NATIONS FUNDS Nations Texas Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- WATER AND SEWER -- 4.1% $ 1,000 TX Corpus Christi, Utility System Revenue Refunding, Series 2002, Insured: FSA 5.000% 07/15/14................................... $ 1,063 TX Dallas Waterworks and Sewer System Revenue Refunding, 1,300 Series 2001, 5.000% 10/01/12................................... 1,383 1,000 Series 2002, 5.500% 10/01/12................................... 1,101 3,000 TX Houston, Area Water Corporation Contract Revenue Northeast Water Purification Project, Series 2002, Insured: FGIC 5.500% 03/01/18................................... 3,264 2,265 TX Houston, Utility Systems Revenue Combined First Lien, Refunding, Series 2004A, Insured: MBIA 5.250% 05/15/14................................... 2,484 -------- 9,295 -------- 34,269 -------- TOTAL MUNICIPAL BONDS (Cost of $219,854)................................ 227,888 --------
SHARES - --------- INVESTMENT MANAGEMENT COMPANY -- 0.1% 267,000 Nations Tax-Exempt Reserves, Capital Class(c) (Cost of $267)..................................................... 267 -------- TOTAL INVESTMENTS (Cost of $220,121)(d)........................... 102.1% 228,155 -------- OTHER ASSETS AND LIABILITIES, NET................. (2.1)% (4,633) -------- NET ASSETS........................................ 100.0% $223,522 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Zero coupon bond. (c) Money market mutual fund registered under the Investment Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Cost for federal income tax purposes is $219,936.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FHLMC Federal Home Loan Mortgage Corp. FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp. PSFG Permanent School Fund Guaranteed
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 44.2% Other....................................... 19.0 Utilities................................... 15.3 Health care................................. 8.5 Education................................... 6.9 Transportation.............................. 4.4 Industrials................................. 1.7 Housing..................................... 1.1 Resource recovery........................... 0.9 Investment management company............... 0.1 Other assets and liabilities, net........... (2.1) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 182 NATIONS FUNDS Nations Virginia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- MUNICIPAL BONDS -- 98.8% EDUCATION -- 2.0% $ 2,100 VA Volusia County Florida Educational Facilities Authority Revenue Series 1996 A, 6.125% 10/15/16................................... $ 2,217 1,115 VA Roanoke County Industrial Development Revenue/Hollins College Project, Series 1998, 5.200% 03/15/17................................... 1,157 3,535 VA Staunton Industrial Development Authority Educational Facilities Revenue Mary Baldwin College Project, Series 1996, 6.600% 11/01/14................................... 3,694 -------- 7,068 -------- HEALTH CARE -- 5.4% HOSPITALS -- 5.4% 1,000 AZ University Medical Center Corp. Arizona Hospital Revenue Series 2004, GO of University 5.250% 07/01/14................................... 1,059 1,195 FL Miami-Dade County Florida Health Authority Hospital Revenue Refunding Miami Children's Hospital Project, Series 2001, Insured: AMBAC 4.375% 08/15/10................................... 1,241 1,285 MS State Hospital Facilities and Equipment Authority Revenue Forrest County General Hospital Project, Series 2000, Insured: FSA 5.625% 01/01/20................................... 1,398 1,000 VA Arlington County Industrial Development Authority Hospital Facility Revenue Virginia Hospital Center Arlington Health Systems, Series 2001, 5.500% 07/01/13................................... 1,081 VA Fairfax County Industrial Development Authority Health Care Revenue Refunding, Inova Health Systems Project, Series 1993, Insured: MBIA 1,000 5.250% 08/15/19................................... 1,097 500 Series 1996, 5.500% 08/15/10................................... 527 VA Hanover County Industrial Development Authority Revenue Secours Health Systems Project, Series 1995, Insured: MBIA 500 5.500% 08/15/25................................... 514 1,000 Memorial Regional Medical Center Project, Series 1995, Insured: MBIA 5.500% 08/15/25................................... 1,028 VA Loudoun County Industrial Development Authority Hospital Revenue Loudoun Hospital Center Project, Series 1995, Insured: FSA 1,500 5.500% 06/01/08................................... 1,535 500 5.800% 06/01/20................................... 512
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- HOSPITALS -- (CONTINUED) $ 1,765 VA Loudoun County Industrial Development Authority Hospital Revenue Loudoun Hospital Center Project, Series 1995 Insured: FSA 5.600% 06/01/09................................... $ 1,806 1,000 VA Medical College of Virginia Hospital Authority General Revenue Series 1998, Insured: MBIA 4.800% 07/01/11................................... 1,050 345 VA Prince William County Industrial Development Authority Hospital Revenue Refunding Potomac Hospital Corporation Project, Series 1995, 6.550% 10/01/05................................... 351 4,000 VA Roanoke Industrial Development Authority Hospital Revenue Carilion Health System Project, Series 2002 A, Insured: MBIA 5.250% 07/01/12................................... 4,346 1,000 WI State Health and Educational Facilities Revenue Agnesian Healthcare Project, Series 2001 6.000% 07/01/21................................... 1,057 -------- 18,602 -------- HOUSING -- 3.5% MULTI-FAMILY -- 3.2% 2,000 VA Alexandria Redevelopment and Housing Authority Multi-Family Housing Mortgage Revenue Buckingham Village Apartments Project, Series 1996 A, 6.050% 07/01/16................................... 2,055 2,655 VA State Housing Development Authority Revenue Rental Housing Project, Series 2000 B, AMT, 5.875% 08/01/15................................... 2,805 5,800 VA Suffolk Redevelopment and Housing Authority Multi-Family Housing Revenue Refunding Windsor Ltd. Partnership Project, Series 2001 Mandatory Put 07/01/11 @ 100, 4.850% 07/01/31................................... 6,136 -------- 10,996 -------- SINGLE FAMILY -- 0.3% 1,035 VA State Housing Development Authority Commonwealth Mortgage Revenue Series 2001 D-D-1, 4.750% 07/01/12................................... 1,091 -------- 12,087 -------- INDUSTRIALS -- 1.9% CHEMICALS -- 0.2% 550 VA Giles County Industrial Development Authority Exempt Facility Revenue Hoechst Celanese Corporation Project, Series 1995, AMT 5.950% 12/01/25................................... 545 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 183 NATIONS FUNDS Nations Virginia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- FOREST PRODUCTS AND PAPER -- 1.7% $ 2,250 AL Mobile Alabama Industrial Development Board Pollution Control Revenue Refunding International Paper Co. Project Series 1998 B 4.750% 04/01/10................................... $ 2,338 1,450 GA Richmond County Development Authority Environmental Improvement Revenue, International Paper Co. Project, Series 2001 A, 5.150% 03/01/15................................... 1,515 500 MS Warren County Mississippi Environmental Improvement Revenue Refunding International Paper Co. Project, Series 2000 A, AMT 6.700% 08/01/18................................... 545 1,500 ME Baileyville Maine Pollution Control Revenue Georgia-Pacific Corporation Project, Series 1998, 4.750% 06/01/05................................... 1,503 -------- 5,901 -------- 6,446 -------- OTHER -- 19.1% POOL/BOND BANK -- 3.5% 1,385 AK Municipal Bond Bank Authority Revenue Series 2003, Insured: MBIA 5.250% 12/01/18................................... 1,482 VA State Resource Authority Infrastructure Revenue, Series 2000 A, Insured: MBIA 1,070 5.500% 05/01/21................................... 1,163 1,120 5.500% 05/01/22................................... 1,218 1,205 Series 2001 A, 5.250% 08/01/18................................... 1,288 VA Pooled Financing Program, Series 2003, 1,075 5.000% 11/01/18................................... 1,138 1,125 5.000% 11/01/19................................... 1,187 1,185 5.000% 11/01/21................................... 1,244 1,100 5.000% 11/01/22................................... 1,150 1,175 Infrastructure Revenue, Series 2002, 5.000% 11/01/13................................... 1,271 1,000 VA State Resources Authority Infrastructure Revenue Series 2002 B, 5.000% 11/01/09................................... 1,071 -------- 12,212 -------- REFUNDED/ESCROWED(A) -- 15.6% 2,000 MI Southfield Michigan Library Building Authority GO Series 2000, Insured: MBIA Pre-refunded 05/01/10 5.500% 05/01/24................................... 2,159 2,000 SC Calhoun County Solid Waste Disposal Facility Revenue Carolina Eastman Company Project, Series 1992, AMT Pre-refunded 05/01/17 6.750% 05/01/17................................... 2,435
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 1,000 VA Arlington County Industrial Development Authority Facilities Revenue The Nature Conservancy Project Series 1997 A, Pre-refunded 07/01/07 5.450% 07/01/27................................... $ 1,074 3,865 VA Arlington GO Series 1999 State Aid Withholding Pre-refunded 06/01/09 5.250% 06/01/16................................... 4,172 1,000 VA Biotechnology Research Park Authority Lease Revenue Biotech Two Project, Series 1996 Pre-refunded 09/01/06 5.300% 09/01/13................................... 1,043 1,000 VA Charlottesville-Albemarle Airport Authority Revenue Refunding Series 1995 AMT, Pre-refunded 06/01/05 6.125% 12/01/09................................... 1,026 1,125 VA Chesapeake Bay Bridge and Tunnel Commission Virginia District Revenue Revenue Bonds Insured: FGIC Pre-refunded 07/01/05 5.875% 07/01/10................................... 1,157 VA Chesapeake Water and Sewer GO 1,000 Series 1995 A, Pre-refunded 12/01/05 5.375% 12/01/20................................... 1,039 2,000 State Aid Withholding Pre-refunded 12/01/05 7.000% 12/01/09................................... 2,100 2,300 VA College Building Authority Educational Facilities Revenue Public Higher Education Financing Program, Series 1999 A, Pre-refunded 09/01/09 5.375% 09/01/12................................... 2,500 1,000 VA Fairfax County GO Series 1998 State Aid Withholding Pre-refunded 04/01/08 4.800% 04/01/10................................... 1,069 VA Fairfax County Public Improvement GO 3,000 Series 1997 State Aid Withholding Pre-refunded 06/01/05 5.250% 06/01/17................................... 3,075 1,000 Series 1999 B, Pre-refunded 12/01/07 5.500% 12/01/16................................... 1,084 3,000 VA Fairfax County Water and Sewer Authority Water Revenue Series 2000, Pre-refunded 04/01/10 5.625% 04/01/25................................... 3,340 1,450 VA Fairfax County Public Improvement GO Series 1997 A, Pre-refunded 06/01/05 5.125% 06/01/11................................... 1,486 500 VA Henrico County Industrial Development Authority Public Facilities Lease Revenue Series 1994, Pre-refunded 08/01/05 7.000% 08/01/13................................... 518
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 184 NATIONS FUNDS Nations Virginia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- REFUNDED/ESCROWED(A) -- (CONTINUED) $ 1,915 VA James City County GO Series 1995: State Aid Withholding Insured: FGIC Pre-refunded 12/15/05 5.000% 12/15/08................................... $ 1,987 700 5.250% 12/15/14................................... 727 2,600 VA Loudoun County GO Series 2000 B State Aid Withholding Pre-refunded 01/01/10 5.250% 01/01/17................................... 2,846 510 VA Loudoun County Public Improvement GO Series 2001 C State Aid Withholding Pre-refunded 11/01/11 5.000% 11/01/14................................... 555 1,140 VA Lynchburg Public Improvement GO Series 1997 Pre-refunded 05/01/06 5.400% 05/01/17................................... 1,196 2,000 VA Montgomery County Industrial Development Lease Authority Revenue Series 2000 B Insured: AMBAC Pre-refunded 01/15/11 5.500% 01/15/22................................... 2,182 2,680 VA Portsmouth GO Refunding Series 2001 A Insured: FGIC Pre-refunded 06/01/08 5.500% 06/01/17................................... 2,877 2,345 VA State Commonwealth Transportation Board Authority Transportation Revenue Northern Virginia Transportation District Project Series 1996 A, Pre-refunded 05/15/06 5.125% 05/15/21................................... 2,432 1,020 VA State Resource Authority Water and Sewer Systems Revenue Suffolk Project, Series 1996 A, Pre-refunded 04/01/07 5.500% 04/01/17................................... 1,083 3,805 VA Virginia Beach Public Improvement GO Series 2000, Pre-refunded 03/01/10 5.500% 03/01/18................................... 4,208 3,060 VA Virginia Beach, Public Improvement GO Series 2000, Pre-refunded 03/01/10 5.500% 03/01/17................................... 3,384 1,000 VA Washington County Industrial Development Authority Hospital Facility Revenue Refunding Johnston Memorial Hospital Project Series 1995, Pre-refunded 07/01/05 6.000% 07/01/14................................... 1,029 -------- 53,783 -------- 65,995 -------- RESOURCE RECOVERY -- 7.2% DISPOSAL -- 3.1% 3,280 VA Arlington County Industrial Development Authority Revenue Ogden Martin Systems of Union-Alexandria/ Arlington Project Series 1999B AMT Insured: FSA 5.25% 01/01/09.................................... 3,482
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- DISPOSAL -- (CONTINUED) $ 1,855 VA Arlington County Industrial Development Authority Revenue Ogden Martin Systems of Union-Alexandria/ Arlington Project Series 1998B AMT Insured: FSA 5.25% 01/01/10.................................... $ 1,960 5,000 VA Southeastern Public Service Authority Revenue Refunding Series 1993A Insured: MBIA 5.10% 07/01/08.................................... 5,310 -------- 10,752 -------- RESOURCE RECOVERY -- 4.1% 10,000 VA Fairfax County Economic Development Authority Resource Recovery Revenue Refunding Series 1998A AMT Insured: AMBAC 5.95% 02/01/07.................................... 10,504 3,385 VA Fairfax County Economic Development Authority Resource Recovery Revenue Refunding Series 1998A AMT Insured: AMBAC 6.05% 02/01/09.................................... 3,685 -------- 14,189 -------- 24,941 -------- TAX-BACKED -- 47.6% LOCAL APPROPRIATED -- 3.1% 1,205 VA Arlington County Industrial Development Authority Lease Revenue Virginia Capital Project, Series 2004, 5.000% 08/01/17................................... 1,282 1,205 Virginia Capital Project: Series 2004, 5.000% 08/01/18................................... 1,277 1,380 VA Fairfax County Economic Development Authority Facilities Revenue School Board Administration Building Project I-A 5.000% 04/01/19................................... 1,464 VA Hampton Roads Regional Jail Authority Regional Jail Facility Revenue: Series 2004, Insured: MBIA 1,750 5.000% 07/01/14................................... 1,888 1,685 5.000% 07/01/15................................... 1,805 1,930 5.000% 07/01/16................................... 2,059 1,000 VA Prince William County Industrial Development Authority Lease Revenue ATCC Project, Series 1996, 6.000% 02/01/14................................... 1,031 -------- 10,806 -------- LOCAL GENERAL OBLIGATIONS -- 19.1% VA Arlington County GO Refunding 3,285 Series 1993, 6.000% 06/01/12................................... 3,785 1,000 Series B, 5.000% 11/01/10................................... 1,086
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 185 NATIONS FUNDS Nations Virginia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) $ 6,195 VA Chesapeake GO, Refunding Series 1993, 5.125% 12/01/05................................... $ 6,304 1,000 VA Chesapeake GO, Series 1998, State Aid Withholding, 4.650% 08/01/11................................... 1,052 5,000 VA Fairfax County GO, Series 2002 A, State Aid Withholding, 5.000% 06/01/10................................... 5,403 1,300 VA Henrico County GO, Series 2002, 5.000% 04/01/15................................... 1,396 VA James City County Virginia Public Improvement, GO, Refunding, Series 2003, 2,335 5.000% 12/15/12................................... 2,541 2,175 5.000% 12/15/13................................... 2,369 VA Loudoun County GO, Refunding, 1,000 Series 1998 B State Aid Withholding 5.250% 12/01/15................................... 1,115 3,245 Series A, State Aid Withholding 5.000% 07/01/09................................... 3,479 1,000 VA Newport News GO, Series 1998, 5.000% 03/01/18................................... 1,054 VA Norfolk Capital Improvement GO Refunding 1,000 Series 1998 State Aid Withholding Insured: FGIC 5.000% 07/01/13................................... 1,062 4,960 Series 2002 B Insured: FSA 5.250% 07/01/11................................... 5,437 3,500 VA Norfolk Capital Improvement GO Refunding Series 1998 State Aid Withholding Insured: FGIC 5.000% 07/01/11................................... 3,715 3,770 VA Norfolk GO Refunding Series 2003 Insured: FSA 4.000% 12/01/08................................... 3,892 VA Portsmouth GO Refunding Series 2003 Insured: FSA 4,385 5.000% 07/01/17................................... 4,703 2,060 5.000% 07/01/19................................... 2,192 1,030 VA Portsmouth GO Unrefunded Balance Series 2001 A Insured: FGIC 5.500% 06/01/17................................... 1,095 1,000 VA Richmond Virginia GO Refunding Series 1995 B State Aid Withholding Insured: FGIC 5.000% 01/15/21................................... 1,033 2,855 VA Richmond Public Improvement GO Refunding Series 1999 A Insured: FSA 5.000% 01/15/19................................... 3,003 VA Richmond Public Improvement GO 1,430 Series 1993 B State Aid Withholding 5.500% 07/15/09................................... 1,558 2,150 Series 2002 A Insured: FSA 5.250% 07/15/11................................... 2,358
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- LOCAL GENERAL OBLIGATIONS -- (CONTINUED) VA Spotsylvania County GO Refunding Series 1998 Insured: FSA $ 1,900 4.400% 07/15/06................................... $ 1,942 2,000 4.400% 07/15/07................................... 2,068 2,300 VA Virginia Beach GO Refunding Series 1993, 5.400% 07/15/08................................... 2,468 -------- 66,110 -------- SPECIAL PROPERTY TAX -- 0.9% 2,865 VA Fairfax County Economic Development Authority Transportation Contract Revenue Route 28 Project Series 2004 Insured: MBIA 5.000%, 04/01/16.................................. 3,057 SPECIAL NON-PROPERTY TAX -- 2.2% 4,500 IL Metropolitan Pier and Exposition Authority Illinois Dedicated State Tax Revenue Refunding McCormick Plant Expansion, Series 2002 B, Insured: MBIA 5.250% 06/15/11................................... 4,900 2,540 VA State Public School Authority Revenue Refunding School Financing Project, Series 1998 A, 4.875% 08/01/14................................... 2,660 -------- 7,560 -------- STATE APPROPRIATED -- 7.5% 2,030 AZ School Facilities Board Revenue State School Improvement, Series 2002, 5.250% 07/01/14................................... 2,214 VA College Building Authority Educational Facilities Revenue 1,270 21st Century Catalogue and Equipment Program Project, Series 2002 A, 5.000% 02/01/15................................... 1,348 3,555 Public Higher Education Financing Program, Series 2003 A, 5.000% 09/01/07................................... 3,728 VA Commonwealth Transportation Board Authority Transportation Revenue 1,000 Oak Grove Connector Project, Series 1997 A, 5.250% 05/15/22................................... 1,045 U.S. Route 58 Corridor Project Series 1997 C Insured: MBIA 3,375 5.000% 05/15/13................................... 3,533 1,245 5.125% 05/15/19................................... 1,301 1,500 Series 2002 B 5.000% 05/15/08................................... 1,587 VA Port Authority Commonwealth Port Fund Revenue 2,465 Series 1996 AMT, 5.550% 07/01/12................................... 2,552 1,000 Series 1997 AMT Insured: MBIA 5.650% 07/01/17................................... 1,052
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 186 NATIONS FUNDS Nations Virginia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- STATE APPROPRIATED -- (CONTINUED) Series 2003 Insured: MBIA $ 1,430 5.125% 07/01/15................................... $ 1,525 1,585 5.250% 07/01/17................................... 1,689 1,360 5.125% 07/01/14................................... 1,460 2,790 VA State Public Building Authority Public Facilities Revenue Series 2002 A, 5.000% 08/01/14................................... 2,984 -------- 26,018 -------- STATE GENERAL OBLIGATIONS -- 14.8% 1,900 CT State GO Series 2001 G, 5.000% 12/15/11................................... 2,058 1,100 VA Biotechnology Research Park Authority Lease Revenue Consolidated Laboratories Project, Series 2001, 5.125% 09/01/16................................... 1,174 1,210 VA Biotechnology Research Park Authority Lease Revenue Biotech Two Project, Series 1996, 5.750% 09/01/05................................... 1,227 5,000 VA College Building Authority Educational Facilities Revenue University Richmond Project, Series 2002 A, Mandatory Put 03/01/09 @ 100 5.000% 03/01/32................................... 5,297 1,800 VA College Building Authority Educational Facilities Revenue Public Higher Education Financing Program, Series 2003 A, 5.000% 09/01/11................................... 1,948 VA State GO, Series 2004 B, 9,205 5.000% 06/01/16................................... 9,956 10,230 Series 2002, 4.000% 06/01/09................................... 10,576 5,000 Series 2003 A, 5.000% 06/01/08................................... 5,307 7,725 Refunding Series 2004 B, 5.000% 06/01/15................................... 8,388 5,035 WA State Motor Vehicle Fuel Tax GO Series 1997 F, 5.375% 07/01/22................................... 5,234 -------- 51,165 -------- 164,716 -------- TRANSPORTATION -- 2.0% AIR TRANSPORTATION -- 0.7% 2,000 TN Memphis Shelby County Airport Authority Special Facilities Revenue Federal Express Corp. Project, Refunding, Series 2001, 5.000% 09/01/09................................... 2,138 --------
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- AIRPORTS -- 1.0% $ 1,000 DC Metropolitan Washington District of Columbia Airport Authority Virginia General Airport Revenue Refunding Series 1998 B, AMT, Insured: MBIA 5.250% 10/01/10................................... $ 1,057 2,265 FL Hillsborough County Florida Aviation Authority Revenue Refunding Tampa International Airport, Series 2003 D, Insured: MBIA 5.500% 10/01/10................................... 2,459 -------- 3,516 -------- TOLL FACILITIES -- 0.3% 1,000 VA Richmond Virginia Metropolitan Authority Expressway Revenue Series 1998 Insured: FGIC 5.250% 07/15/17................................... 1,096 -------- 6,750 -------- UTILITIES -- 10.1% INVESTOR OWNED -- 0.6% 2,000 KS Burlington Kansas Environmental Improvement Revenue Refunding Power And Light Project, Series 1998 K Mandatory Put 10/01/07 @ 100 4.750% 09/01/15................................... 2,059 -------- JOINT POWER AUTHORITY -- 0.3% 1,000 WA Northwest Washington Energy Northwest Electric Revenue Refunding Columbia Generating, Series 2002 A, Insured: MBIA 5.750% 07/01/18................................... 1,110 -------- MUNICIPAL ELECTRIC -- 0.6% 2,000 TX Sam Rayburn Texas Municipal Power Agency Revenue Refunding, Series 2002, 6.000% 10/01/16................................... 2,179 -------- WATER AND SEWER -- 8.6% 2,795 TX Trinity River Authority Texas Water Revenue Refunding Tarrant County Water Project, Series 2003 Insured: MBIA 5.500% 02/01/14................................... 3,082 VA Beach Virginia Water and Sewer Revenue Series 2000, 1,935 5.250% 08/01/18................................... 2,071 2,035 5.250% 08/01/19................................... 2,175 265 VA Chesterfield County, Virginia Water and Sewer Authority Revenue, Refunding Series 1992, 6.200% 11/01/05................................... 266 3,000 VA Fairfax County, Virginia Water and Sewer Authority, Water Revenue, Unrefunded Balance, Series 1992, 6.000% 04/01/22................................... 3,219 1,835 VA Fairfax County Virginia Water and Sewer Authority, Water Revenue Series 2005 B, 5.250% 04/01/19................................... 2,035
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 187 NATIONS FUNDS Nations Virginia Intermediate Municipal Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------- WATER AND SEWER -- (CONTINUED) $ 2,000 VA Norfolk Virginia Water Revenue, Series 1995, Insured: MBIA 5.700% 11/01/10................................... $ 2,075 3,350 VA Prince William County Virginia Service Authority Water and Sewer System Revenue, Refunding, Series 2003, 5.000% 07/01/13................................... 3,632 1,750 VA State Resource Authority Sewer Systems Revenue Hopewell Regional Wastewater Facilities Project, Series 1995 A, AMT, 6.000% 10/01/15................................... 1,798 2,970 VA Systems Revenue Refunding Harrisonburg-Rockingham Project, Series 1998, 5.000% 05/01/18................................... 3,113 1,790 VA Virginia Beach Water and Sewer Revenue, Series 2000, 5.250% 08/01/17................................... 1,918 2,145 VA Virginia Beach, Water and Sewer Revenue Series 2000, 5.250% 08/01/20................................... 2,284 2,000 Virginia State Resource Authority Systems Revenue Refunding, Series 1998, 5.000% 05/01/22................................... 2,065 -------- 29,733 -------- 35,081 -------- TOTAL MUNICIPAL BONDS (Cost of $332,041)................................ 341,686 --------
SHARES - ------- INVESTMENT MANAGEMENT COMPANY -- 0.2% 904,000 Nations Tax-Exempt Reserves, Capital Class(b) (Cost of $904)..................................................... 904 -------- TOTAL INVESTMENTS (Cost of $332,945)(c)........................... 99.0% 342,590 -------- OTHER ASSETS AND LIABILITIES, NET................. 1.0% 3,333 -------- NET ASSETS........................................ 100.0% $345,923 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (b) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Cost for federal income tax purposes is $332,116.
ACRONYM NAME - ------- ---- AMBAC Ambac Assurance Corp. AMT Alternative Minimum Tax FGIC Financial Guaranty Insurance Co. FSA Financial Security Assurance, Inc. GO General Obligation MBIA MBIA Insurance Corp. PSFG Permanent School Fund Guaranteed VA Veterans Administration
At March 31, 2005, the Fund held investments in the following:
% OF HOLDINGS BY REVENUE SOURCE NET ASSETS - ---------------------------------------------------------- Tax-backed.................................. 47.6% Other....................................... 19.1 Utilities................................... 10.1 Resource recovery........................... 7.2 Health care................................. 5.4 Housing..................................... 3.5 Education................................... 2.0 Transportation.............................. 2.0 Industrials................................. 1.9 Investment management company............... 0.2 Other assets and liabilities, net........... 1.0 ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 188 [This page intentionally left blank] 189 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2005
INTERMEDIATE SHORT-TERM MUNICIPAL MUNICIPAL INCOME BOND --------------------------------------- (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) ASSETS: Non-affiliated investments, at cost......................... $ 955,698 $ 1,560,939 Affiliated investments, at cost............................. 1,014 102,761 ----------------- ----------------- Non-affiliated investments, at value........................ 954,030 1,607,246 Affiliated investments, at value............................ 1,014 102,761 Cash........................................................ -- 1 Receivable for investment securities sold................... 2,000 -- Receivable for Fund shares sold............................. 541 628 Dividends receivable........................................ 6 116 Interest receivable......................................... 11,985 21,771 Receivable from investment advisor.......................... 80 62 Other assets................................................ --+ 3 ----------------- ----------------- Total assets............................................ 969,656 1,732,588 ----------------- ----------------- LIABILITIES: Payable for Fund shares redeemed............................ $ (2,311) $ (660) Investment advisory fee payable............................. (240) (501) Administration fee payable.................................. (125) (215) Shareholder servicing and distribution fees payable......... (48) (14) Distributions payable....................................... (1,847) (5,372) Payable for investment securities purchased................. -- (46,183) Payable to custodian bank................................... (2,002) -- Accrued Trustees' fees and expenses......................... (66) (68) Accrued expenses and other liabilities...................... (197) (343) ----------------- ----------------- Total liabilities....................................... (6,836) (53,356) ----------------- ----------------- NET ASSETS.................................................. $ 962,820 $ 1,679,232 ================= ================= NET ASSETS CONSIST OF: Undistributed net investment income......................... $ 128 $ 2,075 Accumulated net realized gain/(loss) on investments......... (2,772) 4,544 Unrealized appreciation/(depreciation) on investments....... (1,668) 46,307 Paid-in capital............................................. 967,132 1,626,306 ----------------- ----------------- NET ASSETS.................................................. $ 962,820 $ 1,679,232 ================= ================= PRIMARY A SHARES: Net assets................................................ $ 840,910,160 $ 1,639,536,202 Number of shares outstanding.............................. 82,367,295 162,568,261 Net asset value and redemption price per share............ $ 10.21 $ 10.09 INVESTOR A SHARES: Net assets................................................ $ 88,601,121 $ 31,128,808 Number of shares outstanding.............................. 8,677,165 3,086,930 Net asset value and redemption price per share............ $ 10.21 $ 10.08 Maximum sales charge...................................... 1.00% 3.25% Maximum offering price per share.......................... $ 10.31 $ 10.42 INVESTOR B SHARES: Net assets................................................ $ 1,185,708 $ 4,436,561 Number of shares outstanding.............................. 116,130 440,035 Net asset value and offering price per share**............ $ 10.21 $ 10.08 INVESTOR C SHARES: Net assets................................................ $ 32,122,749 $ 4,130,495 Number of shares outstanding.............................. 3,146,259 409,597 Net asset value and offering price per share**............ $ 10.21 $ 10.08
- --------------- **The redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. + Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 190 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 2005
CALIFORNIA FLORIDA GEORGIA INTERMEDIATE CALIFORNIA INTERMEDIATE FLORIDA INTERMEDIATE MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME BOND BOND BOND BOND BOND - ------------------------------------------------------------------------------------------------------- $ 558,122 $ 124,341 $ 239,477 $ 181,264 $ 80,862 $ 138,658 165 5,125 2,801 725 725 375 -------------- -------------- -------------- -------------- -------------- -------------- 595,339 126,233 254,599 184,437 85,713 144,205 165 5,125 2,801 725 725 375 1 --+ 1 1 1 --+ -- 2,718 -- -- -- -- 1,066 333 10 62 1 83 1 9 5 1 1 6 8,175 1,481 3,114 3,342 1,702 1,990 8 29 35 24 26 31 1 -- --+ -- --+ 1 -------------- -------------- -------------- -------------- -------------- -------------- 604,756 135,928 260,565 188,592 88,169 146,691 -------------- -------------- -------------- -------------- -------------- -------------- $ (138) $ (27) $ (533) $ (403) $ (30) $ (49) (199) (43) (88) (65) (30) (50) (76) (16) (33) (24) (11) (19) (13) (5) (36) (16) (15) (13) (2,140) (344) (670) (503) (218) (425) (10,225) (9,493) -- -- -- -- -- -- -- -- -- -- (68) (28) (58) (66) (65) (100) (127) (53) (59) (58) (48) (52) -------------- -------------- -------------- -------------- -------------- -------------- (12,986) (10,009) (1,477) (1,135) (417) (708) -------------- -------------- -------------- -------------- -------------- -------------- $ 591,770 $ 125,919 $ 259,088 $ 187,457 $ 87,752 $ 145,983 ============== ============== ============== ============== ============== ============== $ 1,969 $ -- $ 453 $ 239 $ 403 $ 207 (5,883) 228 227 (298) 921 (2,044) 37,217 1,892 15,122 3,173 4,851 5,547 558,467 123,799 243,286 184,343 81,577 142,273 -------------- -------------- -------------- -------------- -------------- -------------- $ 591,770 $ 125,919 $ 259,088 $ 187,457 $ 87,752 $ 145,983 ============== ============== ============== ============== ============== ============== $ 555,155,221 $ 116,533,223 $ 126,548,149 $ 155,469,793 $ 44,308,795 $ 114,651,709 51,114,566 12,125,458 17,218,404 14,849,405 4,639,679 10,752,804 $ 10.86 $ 9.61 $ 7.35 $ 10.47 $ 9.55 $ 10.66 $ 29,227,563 $ 5,426,892 $ 121,086,010 $ 16,980,266 $ 35,175,106 $ 21,415,203 2,691,638 563,629 16,443,492 1,622,982 3,683,285 2,008,606 $ 10.86 $ 9.63 $ 7.36 $ 10.46 $ 9.55 $ 10.66 4.75% 3.25% 4.75% 3.25% 4.75% 3.25% $ 11.40 $ 9.95 $ 7.73 $ 10.81 $ 10.03 $ 11.02 $ 6,680,396 $ 1,162,582 $ 7,661,977 $ 6,763,651 $ 7,784,754 $ 6,662,114 615,199 120,849 1,040,032 645,942 815,437 624,608 $ 10.86 $ 9.62 $ 7.37 $ 10.47 $ 9.55 $ 10.67 $ 706,653 $ 2,796,779 $ 3,792,118 $ 8,243,245 $ 482,848 $ 3,254,050 65,060 290,398 516,576 786,301 50,633 305,146 $ 10.86 $ 9.63 $ 7.34 $ 10.48 $ 9.54 $ 10.66
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 191 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 2005
MARYLAND KANSAS INTERMEDIATE MUNICIPAL MUNICIPAL INCOME BOND --------------------------------------- (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) ASSETS: Non-affiliated investments, at cost......................... $ 67,763 $ 189,893 Affiliated investments, at cost............................. 1,425 832 ----------------- ----------------- Non-affiliated investments, at value........................ 69,035 196,912 Affiliated investments, at value............................ 1,425 832 Cash........................................................ 1 1 Receivable for investment securities sold................... -- -- Receivable for Fund shares sold............................. -- 17 Dividends receivable........................................ 2 3 Interest receivable......................................... 801 2,908 Receivable from investment advisor.......................... 34 47 Other assets................................................ -- --+ ----------------- ----------------- Total assets............................................ 71,298 200,720 ----------------- ----------------- LIABILITIES: Payable for Fund shares redeemed............................ $ (59) $ (99) Investment advisory fee payable............................. (23) (71) Administration fee payable.................................. (11) (25) Shareholder servicing and distribution fees payable......... (1) (20) Distributions payable....................................... (206) (531) Payable for investment securities purchased................. -- -- Accrued Trustees' fees and expenses......................... (44) (103) Accrued expenses and other liabilities...................... (53) (71) ----------------- ----------------- Total liabilities....................................... (397) (920) ----------------- ----------------- NET ASSETS.................................................. $ 70,901 $ 199,800 ================= ================= NET ASSETS CONSIST OF: Undistributed net investment income......................... $ 62 $ 157 Accumulated net realized gain/(loss) on investments......... 110 (2,476) Unrealized appreciation/(depreciation) on investments....... 1,272 7,019 Paid-in capital............................................. 69,457 195,100 ----------------- ----------------- NET ASSETS.................................................. $ 70,901 $ 199,800 ================= ================= PRIMARY A SHARES: Net assets................................................ $ 66,302,220 $ 153,653,081 Number of shares outstanding.............................. 6,682,570 14,251,867 Net asset value and redemption price per share............ $ 9.92 $ 10.78 INVESTOR A SHARES: Net assets................................................ $ 4,146,044 $ 30,400,271 Number of shares outstanding.............................. 417,937 2,820,094 Net asset value and redemption price per share............ $ 9.92 $ 10.78 Maximum sales charge...................................... 3.25% 3.25% Maximum offering price per share.......................... $ 10.25 $ 11.14 INVESTOR B SHARES: Net assets................................................ $ 216,049 $ 13,119,004 Number of shares outstanding.............................. 21,806 1,216,577 Net asset value and offering price per share**............ $ 9.91 $ 10.78 INVESTOR C SHARES: Net assets................................................ $ 236,713 $ 2,627,594 Number of shares outstanding.............................. 23,921 243,737 Net asset value and offering price per share**............ $ 9.90 $ 10.78
- --------------- **The redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. + Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 192 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 2005
NORTH CAROLINA SOUTH CAROLINA TENNESSEE TEXAS VIRGINIA INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL BOND BOND BOND BOND BOND - -------------------------------------------------------------------------------------- $ 175,714 $ 206,951 $ 51,627 $ 219,854 $ 332,041 1,154 832 2,821 267 904 -------------- -------------- -------------- -------------- -------------- 184,245 215,282 53,762 227,888 341,686 1,154 832 2,821 267 904 1 1 --+ --+ 1 -- -- -- -- -- 69 211 19 6 125 2 4 3 1 4 2,859 2,625 885 2,319 4,688 43 42 24 45 54 1 -- -- --+ 1 -------------- -------------- -------------- -------------- -------------- 188,374 218,997 57,514 230,526 347,463 -------------- -------------- -------------- -------------- -------------- $ (428) $ (159) $ (727) $ (56) $ (166) (64) (75) (19) (77) (119) (24) (28) (7) (29) (45) (19) (19) (7) (5) (24) (560) (660) (138) (714) (985) -- -- -- (5,951) -- (100) (100) (98) (99) (109) (68) (71) (32) (73) (92) -------------- -------------- -------------- -------------- -------------- (1,263) (1,112) (1,028) (7,004) (1,540) -------------- -------------- -------------- -------------- -------------- $ 187,111 $ 217,885 $ 56,486 $ 223,522 $ 345,923 ============== ============== ============== ============== ============== $ 802 $ 1,147 $ 40 $ 432 $ 871 (468) 378 37 943 (552) 8,531 8,331 2,135 8,034 9,645 178,246 208,029 54,274 214,113 335,959 -------------- -------------- -------------- -------------- -------------- $ 187,111 $ 217,885 $ 56,486 $ 223,522 $ 345,923 ============== ============== ============== ============== ============== $ 150,588,344 $ 178,467,778 $ 36,133,033 $ 214,002,321 $ 282,024,209 14,262,104 17,054,495 3,476,580 20,873,414 25,970,324 $ 10.56 $ 10.46 $ 10.39 $ 10.25 $ 10.86 $ 19,082,180 $ 23,302,789 $ 15,472,635 $ 5,708,253 $ 48,476,407 1,806,729 2,227,423 1,488,776 556,871 4,463,576 $ 10.56 $ 10.46 $ 10.39 $ 10.25 $ 10.86 3.25% 3.25% 3.25% 3.25% 3.25% $ 10.91 $ 10.81 $ 10.74 $ 10.59 $ 11.22 $ 13,403,286 $ 8,170,036 $ 3,344,589 $ 3,449,161 $ 13,562,524 1,269,548 780,762 321,784 336,355 1,248,629 $ 10.56 $ 10.46 $ 10.39 $ 10.25 $ 10.86 $ 4,037,010 $ 7,943,969 $ 1,535,318 $ 362,385 $ 1,860,273 382,210 758,912 148,464 35,325 171,312 $ 10.56 $ 10.47 $ 10.34 $ 10.26 $ 10.86
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 193 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
SHORT-TERM INTERMEDIATE MUNICIPAL MUNICIPAL INCOME BOND --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 29,237 $ 77,497 Dividend income from affiliated funds....................... 109 429 -------------- -------------- 29,346 77,926 -------------- -------------- EXPENSES: Investment advisory fee..................................... 3,123 6,730 Administration fee.......................................... 2,119 3,465 Transfer agent fees......................................... 320 484 Custodian fees.............................................. 67 103 Legal and audit fees........................................ 108 110 Trustees' fees and expenses................................. 27 27 Interest expense............................................ 1 2 Registration and filing fees................................ 41 62 Printing expense............................................ 40 38 Non-recurring costs (see Note 9)............................ -- 478 Other....................................................... 84 109 -------------- -------------- Subtotal................................................ 5,930 11,608 Shareholder servicing and distribution fees: Investor A Shares......................................... 309 86 Investor B Shares......................................... 13 46 Investor C Shares......................................... 424 48 -------------- -------------- Total expenses.......................................... 6,676 11,788 Fees waived and/or expenses reimbursed by investment advisor (see Note 2).............................................. (1,654) (2,346) Costs assumed by Bank of America Corporation (see Note 9)... -- (478) -------------- -------------- Net expenses............................................ 5,022 8,964 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 24,324 68,962 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments..................... (1,951) 5,912 Net change in unrealized appreciation/(depreciation) of investments............................................... (21,067) (59,923) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (23,018) (54,011) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 1,306 $ 14,951 ============== ==============
- --------------- *Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 194 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
CALIFORNIA FLORIDA GEORGIA INTERMEDIATE CALIFORNIA INTERMEDIATE FLORIDA INTERMEDIATE MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME BOND BOND BOND BOND BOND - ------------------------------------------------------------------------------------------------------- $ 32,180 $ 4,862 $ 13,483 $ 8,482 $ 4,634 $ 6,848 35 43 30 47 10 38 -------------- -------------- -------------- -------------- -------------- -------------- 32,215 4,905 13,513 8,529 4,644 6,886 -------------- -------------- -------------- -------------- -------------- -------------- 2,929 513 1,254 838 449 611 1,244 253 529 415 190 302 173 30 90 48 22 33 38 11 18 13 7 10 108 127 112 119 127 129 27 28 28 28 28 28 3 1 1 1 1 --* 51 --* 1 --* 4 --* 25 13 18 16 14 15 172 -- 73 -- -- -- 51 21 32 28 18 23 -------------- -------------- -------------- -------------- -------------- -------------- 4,821 997 2,156 1,506 860 1,151 78 16 308 41 92 54 74 11 82 75 91 69 8 33 39 90 6 42 -------------- -------------- -------------- -------------- -------------- -------------- 4,981 1,057 2,585 1,712 1,049 1,316 (865) (355) (473) (456) (283) (386) (172) -- (73) -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- 3,944 702 2,039 1,256 766 930 -------------- -------------- -------------- -------------- -------------- -------------- 28,271 4,203 11,474 7,273 3,878 5,956 -------------- -------------- -------------- -------------- -------------- -------------- 5,376 1,463 2,086 (209) 1,254 405 (23,589) (5,401) (7,964) (7,566) (4,916) (5,194) -------------- -------------- -------------- -------------- -------------- -------------- (18,213) (3,938) (5,878) (7,775) (3,662) (4,789) -------------- -------------- -------------- -------------- -------------- -------------- $ 10,058 $ 265 $ 5,596 $ (502) $ 216 $ 1,167 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 195 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED) For the year ended March 31, 2005
MARYLAND KANSAS INTERMEDIATE MUNICIPAL MUNICIPAL INCOME BOND --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 3,013 $ 9,255 Dividend income from affiliated funds....................... 37 27 -------------- -------------- 3,050 9,282 -------------- -------------- EXPENSES: Investment advisory fee..................................... 341 865 Administration fee.......................................... 144 428 Transfer agent fees......................................... 21 60 Custodian fees.............................................. 5 14 Legal and audit fees........................................ 137 130 Trustees' fees and expenses................................. 27 27 Interest expense............................................ 1 2 Registration and filing fees................................ 1 3 Printing expense............................................ 16 18 Other....................................................... 18 27 -------------- -------------- Subtotal................................................ 711 1,574 Shareholder servicing and distribution fees: Investor A Shares......................................... 10 79 Investor B Shares......................................... 3 150 Investor C Shares......................................... 2 29 -------------- -------------- Total expenses.......................................... 726 1,832 Fees waived and/or expenses reimbursed by investment advisor (see Note 2).............................................. (272) (491) -------------- -------------- Net expenses............................................ 454 1,341 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 2,596 7,941 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments..................... 481 (1,791) Net change in unrealized appreciation/(depreciation) of investments............................................... (2,947) (7,283) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (2,466) (9,074) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 130 $ (1,133) ============== ==============
- --------------- *Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 196 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
NORTH CAROLINA SOUTH CAROLINA TENNESSEE TEXAS VIRGINIA INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE INTERMEDIATE MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL BOND BOND BOND BOND BOND - -------------------------------------------------------------------------------------- $ 9,289 $ 10,346 $ 2,597 $ 10,237 $ 15,174 19 56 16 38 51 -------------- -------------- -------------- -------------- -------------- 9,308 10,402 2,613 10,275 15,225 -------------- -------------- -------------- -------------- -------------- 814 914 229 959 1,371 403 451 113 474 673 56 65 17 68 94 14 14 5 16 21 131 115 118 116 114 27 27 28 28 28 2 --* -- --* --* --* --* 2 1 --* 18 17 15 16 21 28 32 17 34 43 -------------- -------------- -------------- -------------- -------------- 1,493 1,635 544 1,712 2,365 59 61 38 17 135 147 91 37 40 145 31 83 18 5 21 -------------- -------------- -------------- -------------- -------------- 1,730 1,870 637 1,774 2,666 (473) (492) (257) (513) (651) -------------- -------------- -------------- -------------- -------------- 1,257 1,378 380 1,261 2,015 -------------- -------------- -------------- -------------- -------------- 8,051 9,024 2,233 9,014 13,210 -------------- -------------- -------------- -------------- -------------- 336 1,183 37 2,274 (325) (6,852) (7,578) (1,615) (9,356) (10,702) -------------- -------------- -------------- -------------- -------------- (6,516) (6,395) (1,578) (7,082) (11,027) -------------- -------------- -------------- -------------- -------------- $ 1,535 $ 2,629 $ 655 $ 1,932 $ 2,183 ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 197 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
SHORT-TERM INTERMEDIATE MUNICIPAL INCOME MUNICIPAL BOND --------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 ----------------------------------------------------------------------- (IN THOUSANDS) Net investment income/(loss)....................... $ 24,324 $ 23,442 $ 68,962 $ 76,864 Net realized gain/(loss) on investments............ (1,951) (125) 5,912 7,106 Net change in unrealized appreciation/(depreciation) of investments....... (21,067) 2,035 (59,923) 933 -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations.............................. 1,306 25,352 14,951 84,903 Distributions to shareholders from net investment income: Primary A Shares................................. (21,152) (18,844) (67,413) (74,963) Investor A Shares................................ (2,587) (3,780) (1,271) (1,514) Investor B Shares................................ (17) (17) (137) (175) Investor C Shares................................ (568) (801) (141) (198) Distributions to shareholders from net realized gains on investments: Primary A Shares................................. -- -- (2,676) (1,844) Investor A Shares................................ -- -- (55) (35) Investor B Shares................................ -- -- (7) (5) Investor C Shares................................ -- -- (8) (6) Net increase/(decrease) in net assets from Fund share transactions............................... (262,907) 178,797 (152,962) (142,143) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets.............. (285,925) 180,707 (209,719) (135,980) NET ASSETS: Beginning of period................................ 1,248,745 1,068,038 1,888,951 2,024,931 -------------- -------------- -------------- -------------- End of period...................................... $ 962,820 $ 1,248,745 $ 1,679,232 $ 1,888,951 ============== ============== ============== ============== Undistributed net investment income/(distributions in excess of net investment income) at end of period........................................... $ 128 $ 129 $ 2,075 $ 2,178 ============== ============== ============== ==============
- --------------- *Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 198 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
CALIFORNIA INTERMEDIATE CALIFORNIA MUNICIPAL INCOME MUNICIPAL BOND MUNICIPAL BOND ------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------- $ 28,271 $ 33,590 $ 4,203 $ 4,796 $ 11,474 $ 13,443 5,376 5,003 1,463 627 2,086 2,385 (23,589) 1,605 (5,401) 233 (7,964) (481) -------------- -------------- -------------- -------------- -------------- -------------- 10,058 40,198 265 5,656 5,596 15,347 (26,790) (31,568) (3,909) (4,293) (5,909) (7,104) (1,340) (1,597) (191) (380) (5,150) (5,823) (262) (307) (27) (30) (281) (327) (30) (54) (76) (93) (134) (181) -- -- (1,339) (759) (1,626) (1,546) -- -- (68) (73) (1,472) (1,337) -- -- (14) (7) (97) (89) -- -- (36) (23) (48) (50) (95,215) (106,047) (13,150) 8,611 (31,401) (27,584) -------------- -------------- -------------- -------------- -------------- -------------- (113,579) (99,375) (18,545) 8,609 (40,522) (28,694) 705,349 804,724 144,464 135,855 299,610 328,304 -------------- -------------- -------------- -------------- -------------- -------------- $ 591,770 $ 705,349 $ 125,919 $ 144,464 $ 259,088 $ 299,610 ============== ============== ============== ============== ============== ============== $ 1,969 $ 1,889 $ -- $ -- $ 453 $ 493 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 199 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FLORIDA INTERMEDIATE FLORIDA MUNICIPAL BOND MUNICIPAL BOND --------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 ----------------------------------------------------------------------- (IN THOUSANDS) Net investment income/(loss)....................... $ 7,273 $ 9,194 $ 3,878 $ 4,772 Net realized gain/(loss) on investments............ (209) 1,801 1,254 1,794 Net change in unrealized appreciation/(depreciation) of investments....... (7,566) (847) (4,916) (1,955) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations.................................. (502) 10,148 216 4,611 Distributions to shareholders from net investment income: Primary A Shares................................. (6,295) (8,006) (2,090) (2,625) Investor A Shares................................ (552) (639) (1,473) (1,743) Investor B Shares................................ (195) (262) (295) (378) Investor C Shares................................ (231) (287) (20) (26) Distributions to shareholders from net realized gains on investments: Primary A Shares................................. (481) -- (579) (560) Investor A Shares................................ (42) -- (420) (405) Investor B Shares................................ (21) -- (108) (106) Investor C Shares................................ (24) -- (9) (7) Net increase/(decrease) in net assets from Fund share transactions............................... (48,122) (10,874) (16,143) (15,129) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets.............. (56,465) (9,920) (20,921) (16,368) NET ASSETS: Beginning of period................................ 243,922 253,842 108,673 125,041 -------------- -------------- -------------- -------------- End of period...................................... $ 187,457 $ 243,922 $ 87,752 $ 108,673 ============== ============== ============== ============== Undistributed net investment income/(distributions in excess of net investment income) at end of period........................................... $ 239 $ 150 $ 403 $ 351 ============== ============== ============== ==============
- --------------- *Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 200 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GEORGIA INTERMEDIATE KANSAS MARYLAND INTERMEDIATE MUNICIPAL BOND MUNICIPAL INCOME MUNICIPAL BOND ------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------- $ 5,956 $ 6,952 $ 2,596 $ 3,297 $ 7,941 $ 9,255 405 137 481 1,298 (1,791) 1,056 (5,194) 697 (2,947) (1,073) (7,283) (1,148) -------------- -------------- -------------- -------------- -------------- -------------- 1,167 7,786 130 3,522 (1,133) 9,163 (4,801) (5,760) (2,463) (3,084) (6,370) (7,413) (819) (767) (139) (178) (1,127) (1,191) (208) (265) (7) (7) (424) (568) (128) (160) (4) (10) (81) (82) -- -- (990) (769) -- -- -- -- (61) (47) -- -- -- -- (4) (3) -- -- -- -- (2) (4) -- -- (16,553) (17,610) (7,135) (14,756) (34,703) (4,454) -------------- -------------- -------------- -------------- -------------- -------------- (21,342) (16,776) (10,675) (15,336) (43,838) (4,545) 167,325 184,101 81,576 96,912 243,638 248,183 -------------- -------------- -------------- -------------- -------------- -------------- $ 145,983 $ 167,325 $ 70,901 $ 81,576 $ 199,800 $ 243,638 ============== ============== ============== ============== ============== ============== $ 207 $ 222 $ 62 $ 97 $ 157 $ 217 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 201 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
NORTH CAROLINA INTERMEDIATE SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND MUNICIPAL BOND --------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 ----------------------------------------------------------------------- (IN THOUSANDS) Net investment income/(loss)....................... $ 8,051 $ 9,446 $ 9,024 $ 10,557 Net realized gain/(loss) on investments............ 336 1,083 1,183 1,513 Net change in unrealized appreciation/(depreciation) of investments....... (6,852) (842) (7,578) 1,866 -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations.................................. 1,535 9,687 2,629 13,936 Distributions to shareholders from net investment income: Primary A Shares................................. (6,598) (7,948) (7,566) (8,743) Investor A Shares................................ (904) (902) (925) (1,139) Investor B Shares................................ (455) (542) (279) (364) Investor C Shares................................ (95) (55) (254) (311) Distributions to shareholders from net realized gains on investments: Primary A Shares................................. -- -- (761) (1,621) Investor A Shares................................ -- -- (96) (217) Investor B Shares................................ -- -- (37) (90) Investor C Shares................................ -- -- (34) (72) Net increase/(decrease) in net assets from Fund share transactions............................... (42,687) (10,771) (22,624) (16,922) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets.............. (49,204) (10,531) (29,947) (15,543) NET ASSETS: Beginning of period................................ 236,315 246,846 247,832 263,375 -------------- -------------- -------------- -------------- End of period...................................... $ 187,111 $ 236,315 $ 217,885 $ 247,832 ============== ============== ============== ============== Undistributed net investment income/(distributions in excess of net investment income) at end of period........................................... $ 802 $ 877 $ 1,147 $ 1,105 ============== ============== ============== ==============
- --------------- *Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 202 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
TENNESSEE INTERMEDIATE TEXAS INTERMEDIATE VIRGINIA INTERMEDIATE MUNICIPAL BOND MUNICIPAL BOND MUNICIPAL BOND ------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------- $ 2,233 $ 2,587 $ 9,014 $ 10,579 $ 13,210 $ 14,063 37 299 2,274 2,883 (325) 1,717 (1,615) (217) (9,356) (79) (10,702) (1,072) -------------- -------------- -------------- -------------- -------------- -------------- 655 2,669 1,932 13,383 2,183 14,708 (1,477) (1,867) (8,650) (10,146) (10,764) (11,252) (586) (547) (239) (293) (2,013) (2,219) (113) (120) (111) (137) (431) (519) (57) (54) (14) (3) (63) (73) (46) -- (1,405) -- (393) (7) (20) -- (41) -- (80) (2) (5) -- (24) -- (22) --* (2) -- (3) -- (3) --* (965) (17,183) (28,365) (19,936) 1,496 (8,076) -------------- -------------- -------------- -------------- -------------- -------------- (2,616) (17,102) (36,920) (17,132) (10,090) (7,440) 59,102 76,204 260,442 277,574 356,013 363,453 -------------- -------------- -------------- -------------- -------------- -------------- $ 56,486 $ 59,102 $ 223,522 $ 260,442 $ 345,923 $ 356,013 ============== ============== ============== ============== ============== ============== $ 40 $ 42 $ 432 $ 398 $ 871 $ 917 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 203 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
SHORT-TERM MUNICIPAL INCOME ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 32,989 $ 339,821 65,687 $ 684,117 Issued as reinvestment of distributions................... 52 532 72 750 Redeemed.................................................. (47,531) (489,346) (43,266) (450,438) ------- --------- ------- --------- Net increase/(decrease)................................... (14,490) $(148,993) 22,493 $ 234,429 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 2,207 $ 22,747 9,641 $ 100,422 Issued as reinvestment of distributions................... 195 2,011 280 2,917 Redeemed.................................................. (11,174) (115,045) (12,721) (132,412) ------- --------- ------- --------- Net increase/(decrease)................................... (8,772) $ (90,287) (2,800) $ (29,073) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... --* $ 1 -- $ -- Issued as reinvestment of distributions................... 1 13 1 10 Redeemed.................................................. (15) (158) (41) (423) ------- --------- ------- --------- Net increase/(decrease)................................... (14) $ (144) (40) $ (413) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 344 $ 3,549 1,368 $ 14,254 Issued as reinvestment of distributions................... 30 306 41 427 Redeemed.................................................. (2,656) (27,338) (3,922) (40,827) ------- --------- ------- --------- Net increase/(decrease)................................... (2,282) $ (23,483) (2,513) $ (26,146) ======= ========= ======= ========= Total net increase/(decrease)............................. (25,558) $(262,907) 17,140 $ 178,797 ======= ========= ======= =========
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 204 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
INTERMEDIATE MUNICIPAL BOND ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 15,434 $ 157,551 30,097 $ 312,833 Issued as reinvestment of distributions................... 152 1,541 126 1,302 Redeemed.................................................. (29,763) (302,956) (43,220) (447,978) ------- --------- ------- --------- Net increase/(decrease)................................... (14,177) $(143,864) (12,997) $(133,843) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 859 $ 8,767 4,132 $ 43,019 Shares issued upon conversion from Investor B Shares...... 16 163 41 417 Issued as reinvestment of distributions................... 55 561 63 656 Redeemed.................................................. (1,611) (16,406) (4,775) (49,545) ------- --------- ------- --------- Net increase/(decrease)................................... (681) $ (6,915) (539) $ (5,453) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 17 $ 170 83 $ 863 Issued as reinvestment of distributions................... 8 79 10 101 Shares redeemed upon conversion into Investor A Shares.... (16) (163) (41) (417) Redeemed.................................................. (59) (591) (160) (1,656) ------- --------- ------- --------- Net increase/(decrease)................................... (50) $ (505) (108) $ (1,109) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 30 $ 306 196 $ 2,047 Issued as reinvestment of distributions................... 4 45 8 85 Redeemed.................................................. (198) (2,029) (374) (3,870) ------- --------- ------- --------- Net increase/(decrease)................................... (164) $ (1,678) (170) $ (1,738) ======= ========= ======= ========= Total net increase/(decrease)............................. (15,072) $(152,962) (13,814) $(142,143) ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 205 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MUNICIPAL INCOME ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 3,616 $ 39,777 5,841 $ 64,705 Issued as reinvestment of distributions................... 29 316 32 359 Redeemed.................................................. (11,877) (130,009) (14,215) (158,012) ------- --------- ------- --------- Net increase/(decrease)................................... (8,232) $ (89,916) (8,342) $ (92,948) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 462 $ 5,046 3,479 $ 38,488 Shares issued upon conversion from Investor B Shares...... 3 41 3 38 Shares issued upon conversion from Investor C Shares...... 31 346 13 144 Issued as reinvestment of distributions................... 55 598 77 849 Redeemed.................................................. (867) (9,473) (4,616) (51,170) ------- --------- ------- --------- Net increase/(decrease)................................... (316) $ (3,442) (1,044) $ (11,651) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 22 $ 238 43 $ 484 Issued as reinvestment of distributions................... 10 108 13 145 Shares redeemed upon conversion into Investor A Shares.... (3) (41) (3) (38) Redeemed.................................................. (141) (1,533) (163) (1,805) ------- --------- ------- --------- Net increase/(decrease)................................... (112) $ (1,228) (110) $ (1,214) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 11 $ 123 15 $ 161 Issued as reinvestment of distributions................... 2 19 3 33 Shares redeemed upon conversion into Investor A Shares.... (31) (346) (13) (144) Redeemed.................................................. (40) (425) (26) (284) ------- --------- ------- --------- Net increase/(decrease)................................... (58) $ (629) (21) $ (234) ======= ========= ======= ========= Total net increase/(decrease)............................. (8,718) $ (95,215) (9,517) $(106,047) ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 206 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
CALIFORNIA INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,972 $ 19,273 2,897 $ 28,793 Issued as reinvestment of dividends....................... 100 970 67 670 Redeemed.................................................. (2,853) (27,820) (2,457) (24,560) ------ -------- ------ -------- Net increase/(decrease)................................... (781) $ (7,577) 507 $ 4,903 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 142 $ 1,393 903 $ 9,032 Issued as reinvestment of dividends....................... 16 152 31 308 Redeemed.................................................. (608) (5,919) (707) (7,071) ------ -------- ------ -------- Net increase/(decrease)................................... (450) $ (4,374) 227 $ 2,269 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 25 $ 240 36 $ 360 Issued as reinvestment of dividends....................... 3 28 2 25 Redeemed.................................................. (35) (336) (5) (44) ------ -------- ------ -------- Net increase/(decrease)................................... (7) $ (68) 33 $ 341 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 24 $ 236 237 $ 2,392 Issued as reinvestment of dividends....................... 5 55 7 74 Redeemed.................................................. (146) (1,422) (138) (1,368) ------ -------- ------ -------- Net increase/(decrease)................................... (117) $ (1,131) 106 $ 1,098 ====== ======== ====== ======== Total net increase/(decrease)............................. (1,355) $(13,150) 873 $ 8,611 ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 207 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
CALIFORNIA MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,798 $ 13,344 2,246 $ 16,893 Issued as reinvestment of distributions................... 140 1,027 139 1,062 Redeemed.................................................. (4,885) (35,896) (4,752) (35,789) ------ -------- ------ -------- Net increase/(decrease)................................... (2,947) $(21,525) (2,367) $(17,834) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 788 $ 5,858 3,334 $ 25,430 Shares issued upon conversion from Investor C Shares...... 3 21 -- -- Issued as reinvestment of distributions................... 543 4,004 571 4,329 Redeemed.................................................. (2,417) (17,907) (5,142) (38,965) ------ -------- ------ -------- Net increase/(decrease)................................... (1,083) $ (8,024) (1,237) $ (9,206) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 29 $ 216 141 $ 1,082 Issued as reinvestment of distributions................... 34 254 37 278 Redeemed.................................................. (235) (1,748) (200) (1,506) ------ -------- ------ -------- Net increase/(decrease)................................... (172) $ (1,278) (22) $ (146) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 124 $ 914 174 $ 1,336 Issued as reinvestment of distributions................... 14 104 20 153 Shares redeemed upon conversion into Investor A Shares.... (3) (21) -- -- Redeemed.................................................. (214) (1,571) (253) (1,887) ------ -------- ------ -------- Net increase/(decrease)................................... (79) $ (574) (59) $ (398) ====== ======== ====== ======== Total net increase/(decrease)............................. (4,281) $(31,401) (3,685) $(27,584) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 208 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
FLORIDA INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,651 $ 17,518 3,779 $ 40,955 Issued as reinvestment of distributions................... 8 88 7 80 Redeemed.................................................. (5,761) (61,082) (4,880) (52,499) ------ -------- ------ -------- Net increase/(decrease)................................... (4,102) $(43,476) (1,094) $(11,464) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 578 $ 6,130 990 $ 10,710 Shares issued upon conversion from Investor B Shares...... 18 192 12 130 Issued as reinvestment of distributions................... 21 225 24 255 Redeemed.................................................. (730) (7,733) (989) (10,698) ------ -------- ------ -------- Net increase/(decrease)................................... (113) $ (1,186) 37 $ 397 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 37 $ 395 93 $ 1,010 Issued as reinvestment of distributions................... 10 103 13 140 Shares redeemed upon conversion into Investor A Shares.... (18) (192) (12) (130) Redeemed.................................................. (201) (2,123) (174) (1,874) ------ -------- ------ -------- Net increase/(decrease)................................... (172) $ (1,817) (80) $ (854) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 55 $ 585 284 $ 3,082 Issued as reinvestment of distributions................... 4 44 7 74 Redeemed.................................................. (214) (2,272) (196) (2,109) ------ -------- ------ -------- Net increase/(decrease)................................... (155) $ (1,643) 95 $ 1,047 ====== ======== ====== ======== Total net increase/(decrease)............................. (4,542) $(48,122) (1,042) $(10,874) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 209 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
FLORIDA MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 731 $ 7,111 792 $ 7,998 Issued as reinvestment of distributions................... 17 166 9 88 Redeemed.................................................. (1,758) (17,049) (1,945) (19,511) ------ -------- ------ -------- Net increase/(decrease)................................... (1,010) $ (9,772) (1,144) $(11,425) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 478 $ 4,601 600 $ 5,988 Shares issued upon conversion from Investor B Shares...... 1 9 22 216 Issued as reinvestment of distributions................... 103 998 112 1,127 Redeemed.................................................. (956) (9,278) (1,035) (10,367) ------ -------- ------ -------- Net increase/(decrease)................................... (374) $ (3,670) (301) $ (3,036) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 19 $ 178 68 $ 697 Issued as reinvestment of distributions................... 20 192 22 225 Shares redeemed upon conversion into Investor A Shares.... (1) (9) (22) (216) Redeemed.................................................. (285) (2,764) (167) (1,671) ------ -------- ------ -------- Net increase/(decrease)................................... (247) $ (2,403) (99) $ (965) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 4 $ 37 43 $ 424 Issued as reinvestment of distributions................... --* 2 --* 4 Redeemed.................................................. (35) (337) (13) (131) ------ -------- ------ -------- Net increase/(decrease)................................... (31) $ (298) 30 $ 297 ====== ======== ====== ======== Total net increase/(decrease)............................. (1,662) $(16,143) (1,514) $(15,129) ====== ======== ====== ========
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 210 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
GEORGIA INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 792 $ 8,531 1,168 $ 12,791 Issued as reinvestment of distributions................... 2 22 2 18 Redeemed.................................................. (2,171) (23,313) (2,848) (30,998) ------ -------- ------ -------- Net increase/(decrease)................................... (1,377) $(14,760) (1,678) $(18,189) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 393 $ 4,225 588 $ 6,393 Shares issued upon conversion from Investor B Shares...... 35 378 9 103 Issued as reinvestment of distributions................... 40 435 42 455 Redeemed.................................................. (453) (4,856) (383) (4,212) ------ -------- ------ -------- Net increase/(decrease)................................... 15 $ 182 256 $ 2,739 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 15 $ 155 59 $ 645 Issued as reinvestment of distributions................... 13 139 16 175 Shares redeemed upon conversion into Investor A Shares.... (35) (378) (9) (103) Redeemed.................................................. (48) (503) (223) (2,439) ------ -------- ------ -------- Net increase/(decrease)................................... (55) $ (587) (157) $ (1,722) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 46 $ 504 203 $ 2,221 Issued as reinvestment of distributions................... 8 86 9 102 Redeemed.................................................. (183) (1,978) (253) (2,761) ------ -------- ------ -------- Net increase/(decrease)................................... (129) $ (1,388) (41) $ (438) ====== ======== ====== ======== Total net increase/(decrease)............................. (1,546) $(16,553) (1,620) $(17,610) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 211 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
KANSAS MUNICIPAL INCOME ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 559 $ 5,654 357 $ 3,720 Issued as reinvestment of distributions................... 16 166 18 183 Redeemed.................................................. (1,287) (13,002) (1,560) (16,258) ------ -------- ------ -------- Net increase/(decrease)................................... (712) $ (7,182) (1,185) $(12,355) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 64 $ 645 72 $ 747 Issued as reinvestment of distributions................... 6 63 10 100 Redeemed.................................................. (73) (727) (282) (2,954) ------ -------- ------ -------- Net increase/(decrease)................................... (3) $ (19) (200) $ (2,107) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 4 $ 40 5 $ 50 Issued as reinvestment of distributions................... 1 11 1 10 Redeemed.................................................. (10) (105) (4) (39) ------ -------- ------ -------- Net increase/(decrease)................................... (5) $ (54) 2 $ 21 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 11 $ 114 1 $ 7 Issued as reinvestment of distributions................... 1 6 1 13 Redeemed.................................................. -- -- (32) (335) ------ -------- ------ -------- Net increase/(decrease)................................... 12 $ 120 (30) $ (315) ====== ======== ====== ======== Total net increase/(decrease)............................. (708) $ (7,135) (1,413) $(14,756) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 212 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MARYLAND INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,085 $ 11,893 2,447 $ 27,555 Issued as reinvestment of distributions................... 14 153 14 160 Redeemed.................................................. (3,631) (39,751) (2,848) (31,940) ------ -------- ------ -------- Net increase/(decrease)................................... (2,532) $(27,705) (387) $ (4,225) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 472 $ 5,169 749 $ 8,434 Shares issued upon conversion from Investor B Shares...... 69 762 87 982 Issued as reinvestment of distributions................... 61 668 68 763 Redeemed.................................................. (852) (9,320) (701) (7,843) ------ -------- ------ -------- Net increase/(decrease)................................... (250) $ (2,721) 203 $ 2,336 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 29 $ 319 85 $ 959 Issued as reinvestment of distributions................... 24 263 34 377 Shares redeemed upon conversion into Investor A Shares.... (69) (762) (87) (982) Redeemed.................................................. (367) (4,008) (265) (2,970) ------ -------- ------ -------- Net increase/(decrease)................................... (383) $ (4,188) (233) $ (2,616) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 30 $ 327 35 $ 399 Issued as reinvestment of distributions................... 6 63 5 60 Redeemed.................................................. (44) (479) (36) (408) ------ -------- ------ -------- Net increase/(decrease)................................... (8) $ (89) 4 $ 51 ====== ======== ====== ======== Total net increase/(decrease)............................. (3,173) $(34,703) (413) $ (4,454) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 213 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,345 $ 14,412 2,335 $ 25,368 Issued as reinvestment of distributions................... 10 102 7 78 Redeemed.................................................. (4,805) (51,185) (3,355) (36,268) ------ -------- ------ -------- Net increase/(decrease)................................... (3,450) $(36,671) (1,013) $(10,822) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 486 $ 5,232 631 $ 6,862 Shares issued upon conversion from Investor B Shares...... 26 275 123 1,339 Issued as reinvestment of distributions................... 58 614 61 666 Redeemed.................................................. (1,118) (11,934) (642) (6,969) ------ -------- ------ -------- Net increase/(decrease)................................... (548) $ (5,813) 173 $ 1,898 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 29 $ 310 103 $ 1,124 Issued as reinvestment of distributions................... 31 326 35 377 Shares redeemed upon conversion into Investor A Shares.... (26) (275) (123) (1,339) Redeemed.................................................. (257) (2,738) (219) (2,373) ------ -------- ------ -------- Net increase/(decrease)................................... (223) $ (2,377) (204) $ (2,211) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 275 $ 2,929 82 $ 891 Issued as reinvestment of distributions................... 2 22 2 22 Redeemed.................................................. (73) (777) (51) (549) ------ -------- ------ -------- Net increase/(decrease)................................... 204 $ 2,174 33 $ 364 ====== ======== ====== ======== Total net increase/(decrease)............................. (4,017) $(42,687) (1,011) $(10,771) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 214 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,336 $ 14,148 1,561 $ 16,782 Issued as reinvestment of distributions................... 18 193 23 244 Redeemed.................................................. (2,852) (30,166) (2,808) (30,272) ------ -------- ------ -------- Net increase/(decrease)................................... (1,498) $(15,825) (1,224) $(13,246) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 705 $ 7,456 675 $ 7,304 Shares issued upon conversion from Investor B Shares...... 43 451 70 755 Issued as reinvestment of distributions................... 52 550 70 758 Redeemed.................................................. (1,163) (12,317) (944) (10,171) ------ -------- ------ -------- Net increase/(decrease)................................... (363) $ (3,860) (129) $ (1,354) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 16 $ 170 95 $ 1,020 Issued as reinvestment of distributions................... 19 201 29 315 Shares redeemed upon conversion into Investor A Shares.... (43) (451) (70) (755) Redeemed.................................................. (186) (1,970) (187) (2,011) ------ -------- ------ -------- Net increase/(decrease)................................... (194) $ (2,050) (133) $ (1,431) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 100 $ 1,045 340 $ 3,683 Issued as reinvestment of distributions................... 9 99 14 148 Redeemed.................................................. (193) (2,033) (441) (4,722) ------ -------- ------ -------- Net increase/(decrease)................................... (84) $ (889) (87) $ (891) ====== ======== ====== ======== Total net increase/(decrease)............................. (2,139) $(22,624) (1,573) $(16,922) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 215 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
TENNESSEE INTERMEDIATE MUNICIPAL BOND ----------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ----------------- ------------------ SHARES DOLLARS SHARES DOLLARS ----------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 780 $ 8,160 1,248 $ 13,251 Issued as reinvestment of distributions................... 1 12 1 10 Redeemed.................................................. (815) (8,568) (2,870) (30,607) ---- ------- ------ -------- Net increase/(decrease)................................... (34) $ (396) (1,621) $(17,346) ==== ======= ====== ======== INVESTOR A SHARES: Sold...................................................... 269 $ 2,823 687 $ 7,372 Shares issued upon conversion from Investor B Shares...... 2 21 1 7 Issued as reinvestment of distributions................... 36 381 34 362 Redeemed.................................................. (267) (2,805) (731) (7,770) ---- ------- ------ -------- Net increase/(decrease)................................... 40 $ 420 (9) $ (29) ==== ======= ====== ======== INVESTOR B SHARES: Sold...................................................... 10 $ 109 12 $ 122 Issued as reinvestment of distributions................... 7 78 8 87 Shares redeemed upon conversion into Investor A Shares.... (2) (21) (1) (7) Redeemed.................................................. (59) (635) (68) (730) ---- ------- ------ -------- Net increase/(decrease)................................... (44) $ (469) (49) $ (528) ==== ======= ====== ======== INVESTOR C SHARES: Sold...................................................... 24 $ 249 112 $ 1,191 Issued as reinvestment of distributions................... 4 44 4 38 Redeemed.................................................. (78) (813) (48) (509) ---- ------- ------ -------- Net increase/(decrease)................................... (50) $ (520) 68 $ 720 ==== ======= ====== ======== Total net increase/(decrease)............................. (88) $ (965) (1,611) $(17,183) ==== ======= ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 216 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
TEXAS INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 585 $ 6,099 1,103 $ 11,604 Issued as reinvestment of distributions................... 11 115 2 20 Redeemed.................................................. (3,111) (32,347) (2,814) (29,670) ------ -------- ------ -------- Net increase/(decrease)................................... (2,515) $(26,133) (1,709) $(18,046) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 115 $ 1,209 144 $ 1,529 Shares issued upon conversion from Investor B Shares...... 1 5 1 11 Issued as reinvestment of distributions................... 9 93 10 100 Redeemed.................................................. (254) (2,653) (294) (3,094) ------ -------- ------ -------- Net increase/(decrease)................................... (129) $ (1,346) (139) $ (1,454) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 5 $ 55 14 $ 148 Issued as reinvestment of distributions................... 6 62 6 64 Shares redeemed upon conversion into Investor A Shares.... (1) (5) (1) (11) Redeemed.................................................. (87) (913) (97) (1,020) ------ -------- ------ -------- Net increase/(decrease)................................... (77) $ (801) (78) $ (819) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 20 $ 211 41 $ 439 Issued as reinvestment of distributions................... -- 4 --* 2 Redeemed.................................................. (29) (300) (6) (58) ------ -------- ------ -------- Net increase/(decrease)................................... (9) $ (85) 35 $ 383 ====== ======== ====== ======== Total net increase/(decrease)............................. (2,730) $(28,365) (1,891) $(19,936) ====== ======== ====== ========
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 217 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
VIRGINIA INTERMEDIATE MUNICIPAL BOND ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 5,480 $ 60,411 5,830 $ 65,342 Issued as reinvestment of distributions................... 7 75 5 51 Redeemed.................................................. (4,533) (49,702) (6,527) (72,670) ------ -------- ------ -------- Net increase/(decrease)................................... 954 $ 10,784 (692) $ (7,277) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 352 $ 3,875 716 $ 8,026 Shares issued upon conversion from Investor B Shares...... 29 321 31 349 Issued as reinvestment of distributions................... 121 1,330 133 1,488 Redeemed.................................................. (1,146) (12,579) (879) (9,807) ------ -------- ------ -------- Net increase/(decrease)................................... (644) $ (7,053) 1 $ 56 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 23 $ 246 79 $ 890 Issued as reinvestment of distributions................... 25 272 31 342 Shares redeemed upon conversion into Investor A Shares.... (29) (321) (31) (349) Redeemed.................................................. (188) (2,058) (212) (2,349) ------ -------- ------ -------- Net increase/(decrease)................................... (169) $ (1,861) (133) $ (1,466) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 9 $ 105 79 $ 885 Issued as reinvestment of distributions................... 4 41 5 52 Redeemed.................................................. (47) (520) (29) (326) ------ -------- ------ -------- Net increase/(decrease)................................... (34) $ (374) 55 $ 611 ====== ======== ====== ======== Total net increase/(decrease)............................. 107 $ 1,496 (769) $ (8,076) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 218 [This page intentionally left blank] 219 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- SHORT-TERM MUNICIPAL INCOME PRIMARY A SHARES Year ended 3/31/2005...................... $10.42 $0.24 $(0.21) $ 0.03 $(0.24) Year ended 3/31/2004...................... 10.40 0.22 0.02 0.24 (0.22) Year ended 3/31/2003...................... 10.13 0.26 0.27 0.53 (0.26) Year ended 3/31/2002(d)................... 10.14 0.34 0.01 0.35 (0.36) Year ended 3/31/2001...................... 9.94 0.44 0.20 0.64 (0.44) INVESTOR A SHARES Year ended 3/31/2005...................... $10.42 $0.22 $(0.21) $ 0.01 $(0.22) Year ended 3/31/2004...................... 10.40 0.20 0.02 0.22 (0.20) Year ended 3/31/2003...................... 10.13 0.23 0.27 0.50 (0.23) Year ended 3/31/2002(d)................... 10.14 0.30 0.03 0.33 (0.34) Year ended 3/31/2001...................... 9.94 0.41 0.21 0.62 (0.42) INVESTOR B SHARES Year ended 3/31/2005...................... $10.42 $0.14 $(0.21) $(0.07) $(0.14) Year ended 3/31/2004...................... 10.40 0.12 0.02 0.14 (0.12) Year ended 3/31/2003...................... 10.13 0.16 0.27 0.43 (0.16) Year ended 3/31/2002(d)................... 10.14 0.27 (0.02) 0.25 (0.26) Year ended 3/31/2001...................... 9.94 0.34 0.20 0.54 (0.34) INVESTOR C SHARES Year ended 3/31/2005...................... $10.42 $0.14 $(0.21) $(0.07) $(0.14) Year ended 3/31/2004...................... 10.40 0.12 0.02 0.14 (0.12) Year ended 3/31/2003...................... 10.13 0.15 0.28 0.43 (0.16) Year ended 3/31/2002(d)................... 10.14 0.19 0.06 0.25 (0.26) Year ended 3/31/2001...................... 9.94 0.34 0.20 0.54 (0.34)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Effective April 1, 2001, the Short-Term Municipal Income Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.33% to 3.37%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.08% to 3.12%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 2.33% to 2.37%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 2.33% to 2.37%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 220 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSETS OPERATING INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO VALUE TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE END OF PERIOD RETURN(b) (000) ASSETS(c) NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------- $10.21 0.31% $ 840,910 0.40% 2.35% 17% 0.55% 10.42 2.34 1,009,036 0.40 2.12 20 0.58 10.40 5.27 773,148 0.40 2.46 11 0.59 10.13 3.54 364,372 0.40 3.37 12 0.63 10.14 6.61 105,004 0.40 4.41 38 0.66 $10.21 0.07% $ 88,601 0.65% 2.10% 17% 0.80% 10.42 2.09 181,802 0.65 1.87 20 0.83 10.40 5.00 210,556 0.65 2.21 11 0.84 10.13 3.27 125,262 0.65 3.12 12 0.88 10.14 6.34 23,613 0.65 4.16 38 0.91 $10.21 (0.68)% $ 1,186 1.40% 1.35% 17% 1.55% 10.42 1.33 1,356 1.40 1.12 20 1.58 10.40 4.22 1,771 1.40 1.46 11 1.59 10.13 2.51 1,884 1.40 2.37 12 1.63 10.14 5.56 3,463 1.40 3.41 38 1.66 $10.21 (0.68)% $ 32,123 1.40% 1.34% 17% 1.55% 10.42 1.33 56,551 1.40 1.12 20 1.58 10.40 4.21 82,563 1.40 1.46 11 1.59 10.13 2.47 41,822 1.40 2.37 12 1.63 10.14 5.55 1,417 1.40 3.41 38 1.66
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 221 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005(a)................... $10.40 $0.40 $(0.29) $ 0.11 $(0.40) Year ended 3/31/2004(a)................... 10.36 0.41 0.05 0.46 (0.41) Year ended 3/31/2003(a)................... 10.00 0.44 0.38 0.82 (0.44) Year ended 3/31/2002(a)(g)................ 10.15 0.47 (0.15) 0.32 (0.47) Year ended 3/31/2001...................... 9.78 0.47 0.37 0.84 (0.47) INVESTOR A SHARES Year ended 3/31/2005(a)................... $10.40 $0.38 $(0.31) $ 0.07 $(0.37) Year ended 3/31/2004(a)................... 10.36 0.39 0.05 0.44 (0.39) Year ended 3/31/2003(a)................... 10.00 0.42 0.38 0.80 (0.42) Year ended 3/31/2002(a)(g)................ 10.15 0.45 (0.16) 0.29 (0.44) Year ended 3/31/2001...................... 9.78 0.46 0.36 0.82 (0.45) INVESTOR B SHARES Year ended 3/31/2005(a)................... $10.40 $0.30 $(0.30) $(0.00) $(0.30) Year ended 3/31/2004(a)................... 10.36 0.31 0.05 0.36 (0.31) Year ended 3/31/2003(a)................... 10.00 0.33 0.39 0.72 (0.34) Year ended 3/31/2002(a)(g)................ 10.15 0.36 (0.14) 0.22 (0.37) Year ended 3/31/2001...................... 9.78 0.37 0.37 0.74 (0.37) INVESTOR C SHARES Year ended 3/31/2005(a)................... $10.40 $0.30 $(0.30) $(0.00) $(0.30) Year ended 3/31/2004(a)................... 10.36 0.31 0.05 0.36 (0.31) Year ended 3/31/2003(a)................... 10.00 0.33 0.39 0.72 (0.34) Year ended 3/31/2002(a)(g)................ 10.16 0.35 (0.14) 0.21 (0.37) Year ended 3/31/2001...................... 9.78 0.37 0.38 0.75 (0.37)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)The effect of non-recurring costs assumed by Bank of America Corporation (see Note 9) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.63% for Primary A Shares, 0.88% for Investor A Shares and 1.63% each for Investor B and Investor C Shares. (e)The reimbursement from investment advisor (see Note 9) is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expenses ratio (with waivers) was less than 0.01%. (f)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without the waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.67% for Primary A Shares, 0.92% for Investor A Shares and 1.67% each for Investor B and Investor C Shares. (g)Effective April 1, 2001, the Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.53% to 4.61%. Investor A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.28% to 4.36%. Investor B Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.53% to 3.61%. Investor C Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.53% to 3.61%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 222 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------------------------------------------- $(0.02) $(0.42) $10.09 1.07% $1,639,536 0.50%(c) 3.94% 21% 0.66%(d) (0.01) (0.42) 10.40 4.58 1,838,690 0.50(c)(e) 4.00 17 0.70(f) (0.02) (0.46) 10.36 8.34 1,966,401 0.50 4.27 15 0.68 -- (0.47) 10.00 3.17 1,160,559 0.50(c) 4.61 14 0.68 -- (0.47) 10.15 8.81 1,196,121 0.50(c) 4.73 17 0.68 $(0.02) $(0.39) $10.08 0.72% $ 31,129 0.75%(c) 3.69% 21% 0.91%(d) (0.01) (0.40) 10.40 4.32 39,198 0.75(c)(e) 3.75 17 0.95(f) (0.02) (0.44) 10.36 8.07 44,628 0.75 4.02 15 0.93 -- (0.44) 10.00 2.91 28,868 0.75(c) 4.36 14 0.93 -- (0.45) 10.15 8.54 20,728 0.75(c) 4.48 17 0.93 $(0.02) $(0.32) $10.08 (0.03)% $ 4,437 1.50%(c) 2.94% 21% 1.66%(d) (0.01) (0.32) 10.40 3.54 5,092 1.50(c)(e) 3.00 17 1.70(f) (0.02) (0.36) 10.36 7.26 6,200 1.50 3.27 15 1.68 -- (0.37) 10.00 2.14 4,110 1.50(c) 3.61 14 1.68 -- (0.37) 10.15 7.74 2,563 1.50(c) 3.73 17 1.68 $(0.02) $(0.32) $10.08 (0.03)% $ 4,130 1.50%(c) 2.94% 21% 1.66%(d) (0.01) (0.32) 10.40 3.55 5,970 1.50(c)(e) 3.00 17 1.70(f) (0.02) (0.36) 10.36 7.25 7,702 1.50 3.27 15 1.68 -- (0.37) 10.00 2.03 2,006 1.50(c) 3.61 14 1.68 -- (0.37) 10.16 7.84 528 1.50(c) 3.73 17 1.68
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 223 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- MUNICIPAL INCOME PRIMARY A SHARES Year ended 3/31/2005...................... $11.16 $0.49 $(0.29) $0.20 $(0.50) Year ended 3/31/2004...................... 11.07 0.50 0.09 0.59 (0.50) Year ended 3/31/2003...................... 10.83 0.53 0.24 0.77 (0.53) Year ended 3/31/2002(g)................... 11.14 0.55 (0.31) 0.24 (0.55) Year ended 3/31/2001...................... 10.69 0.56 0.45 1.01 (0.56) INVESTOR A SHARES Year ended 3/31/2005...................... $11.16 $0.47 $(0.30) $0.17 $(0.47) Year ended 3/31/2004...................... 11.06 0.47 0.10 0.57 (0.47) Year ended 3/31/2003...................... 10.83 0.50 0.23 0.73 (0.50) Year ended 3/31/2002(g)................... 11.14 0.53 (0.31) 0.22 (0.53) Year ended 3/31/2001...................... 10.68 0.53 0.46 0.99 (0.53) INVESTOR B SHARES Year ended 3/31/2005...................... $11.16 $0.39 $(0.30) $0.09 $(0.39) Year ended 3/31/2004...................... 11.06 0.39 0.10 0.49 (0.39) Year ended 3/31/2003...................... 10.83 0.42 0.23 0.65 (0.42) Year ended 3/31/2002(g)................... 11.13 0.44 (0.30) 0.14 (0.44) Year ended 3/31/2001...................... 10.69 0.45 0.44 0.89 (0.45) INVESTOR C SHARES Year ended 3/31/2005...................... $11.16 $0.39 $(0.30) $0.09 $(0.39) Year ended 3/31/2004...................... 11.07 0.39 0.09 0.48 (0.39) Year ended 3/31/2003...................... 10.84 0.42 0.23 0.65 (0.42) Year ended 3/31/2002(g)................... 11.14 0.44 (0.30) 0.14 (0.44) Year ended 3/31/2001...................... 10.69 0.45 0.45 0.90 (0.45)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 9) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.74% for Primary A Shares, 0.99% for Investor A Shares and 1.74% each for Investor B and Investor C Shares. (e)The reimbursement from investment advisor (see Note 9) is included in the ratio of operating expenses to average net assets (with waivers). Absent this reimbursement, the ratios of operating expenses to average net assets would have been 0.60% for Primary A, 0.85% for Investor A, and 1.60% each for Investor B and Investor C Shares. (f)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.78% for Primary A Shares, 1.03% for Investor A Shares and 1.78% each for Investor B and Investor C shares. (g)Effective April 1, 2001, the Municipal Income Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.95% to 5.01%. Investor A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.70% to 4.76%. Investor B Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.95% to 4.01%. Investor C Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.95% to 4.01%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 224 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS(c) NET ASSETS RATE NET ASSETS - --------------------------------------------------------------------------------------------------------------- $(0.50) $10.86 1.82% $555,155 0.60% 4.52% 16% 0.77%(d) (0.50) 11.16 5.44 662,303 0.59(e) 4.50 8 0.81(f) (0.53) 11.07 7.19 749,047 0.60 4.77 25 0.79 (0.55) 10.83 2.21 805,149 0.60 5.01 13 0.79 (0.56) 11.14 9.80 881,611 0.60 5.13 18 0.79 $(0.47) $10.86 1.57% $ 29,228 0.85% 4.27% 16% 1.02%(d) (0.47) 11.16 5.28 33,557 0.84(e) 4.25 8 1.06(f) (0.50) 11.06 6.83 44,823 0.85 4.52 25 1.04 (0.53) 10.83 1.95 50,765 0.85 4.76 13 1.04 (0.53) 11.14 9.55 38,591 0.83 4.90 18 1.04 $(0.39) $10.86 0.81% $ 6,680 1.60% 3.52% 16% 1.77%(d) (0.39) 11.16 4.49 8,117 1.59(e) 3.50 8 1.81(f) (0.42) 11.06 6.04 9,263 1.60 3.77 25 1.79 (0.44) 10.83 1.28 9,116 1.60 4.01 13 1.79 (0.45) 11.13 8.62 8,930 1.60 4.13 18 1.79 $(0.39) $10.86 0.82% $ 707 1.60% 3.52% 16% 1.77%(d) (0.39) 11.16 4.40 1,372 1.59(e) 3.50 8 1.81(f) (0.42) 11.07 6.03 1,591 1.60 3.77 25 1.79 (0.44) 10.84 1.28 1,294 1.60 4.01 13 1.79 (0.45) 11.14 8.71 1,318 1.60 4.13 18 1.79
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 225 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- CALIFORNIA INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES(c) Year ended 3/31/2005...................... $ 9.99 $0.33 $(0.27) $ 0.06 $(0.33) Year ended 3/31/2004...................... 10.00 0.34 0.05 0.39 (0.34) Period ended 3/31/2003.................... 10.00 0.22 0.07 0.29 (0.22) INVESTOR A SHARES(c) Year ended 3/31/2005...................... $10.01 $0.30 $(0.27) $ 0.03 $(0.30) Year ended 3/31/2004...................... 10.02 0.32 0.05 0.37 (0.32) Period ended 3/31/2003.................... 10.00 0.18 0.09 0.27 (0.18) INVESTOR B SHARES(c) Year ended 3/31/2005...................... $10.00 $0.23 $(0.27) $(0.04) $(0.23) Year ended 3/31/2004...................... 10.01 0.24 0.05 0.29 (0.24) Period ended 3/31/2003.................... 10.00 0.15 0.08 0.23 (0.15) INVESTOR C SHARES(c) Year ended 3/31/2005...................... $10.01 $0.23 $(0.27) $(0.04) $(0.23) Year ended 3/31/2004...................... 10.02 0.24 0.05 0.29 (0.24) Period ended 3/31/2003.................... 10.00 0.14 0.09 0.23 (0.14)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)California Intermediate Municipal Bond Primary A, Investor A, Investor B and Investor C shares commenced operations on August 19, 2002, September 9, 2002, August 29, 2002, and September 11, 2002, respectively. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 226 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS - --------------------------------------------------------------------------------------------------------------------------------- $(0.11) $(0.44) $ 9.61 0.59% $116,533 0.50%(d) 3.32% 26% 0.78% (0.06) (0.40) 9.99 3.99 128,957 0.50(d) 3.40 12 0.74 (0.07) (0.29) 10.00 2.94 124,009 0.50(d)(e) 3.61(e) 19 0.77(e) $(0.11) $(0.41) $ 9.63 0.34% $ 5,427 0.75%(d) 3.10% 26% 1.03% (0.06) (0.38) 10.01 3.72 10,151 0.75(d) 3.15 12 0.99 (0.07) (0.25) 10.02 1.42 7,884 0.75(d)(e) 3.36(e) 19 1.02(e) $(0.11) $(0.34) $ 9.62 (0.41)% $ 1,163 1.50%(d) 2.33% 26% 1.78% (0.06) (0.30) 10.00 2.95 1,281 1.50(d) 2.40 12 1.74 (0.07) (0.22) 10.01 1.91 945 1.50(d)(e) 2.61(e) 19 1.77(e) $(0.11) $(0.34) $ 9.63 (0.40)% $ 2,797 1.50%(d) 2.33% 26% 1.78% (0.06) (0.30) 10.01 2.95 4,075 1.50(d) 2.40 12 1.74 (0.07) (0.21) 10.02 0.96 3,017 1.50(d)(e) 2.61(e) 19 1.77(e)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 227 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- CALIFORNIA MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005...................... $7.58 $0.33 $(0.14) $0.19 $(0.33) Year ended 3/31/2004(a)................... 7.60 0.34 0.05 0.39 (0.34) Year ended 3/31/2003(a)................... 7.28 0.35 0.32 0.67 (0.34) Year ended 3/31/2002(a)(g)................ 7.45 0.35 (0.14) 0.21 (0.35) Year ended 3/31/2001(a)................... 7.13 0.37 0.33 0.70 (0.36) INVESTOR A SHARES(g) Year ended 3/31/2005...................... $7.59 $0.31 $(0.14) $0.17 $(0.31) Year ended 3/31/2004(a)................... 7.61 0.32 0.05 0.37 (0.32) Year ended 3/31/2003(a)................... 7.29 0.33 0.32 0.65 (0.32) Year ended 3/31/2002(a)(g)................ 7.47 0.33 (0.15) 0.18 (0.33) Year ended 3/31/2001(a)................... 7.14 0.35 0.34 0.69 (0.34) INVESTOR B SHARES(g) Year ended 3/31/2005...................... $7.60 $0.25 $(0.14) $0.11 $(0.25) Year ended 3/31/2004(a)................... 7.61 0.26 0.06 0.32 (0.26) Year ended 3/31/2003(a)................... 7.29 0.27 0.33 0.60 (0.27) Year ended 3/31/2002(a)(g)................ 7.47 0.27 (0.14) 0.13 (0.28) Year ended 3/31/2001(a)................... 7.14 0.30 0.34 0.64 (0.29) INVESTOR C SHARES Year ended 3/31/2005...................... $7.57 $0.25 $(0.14) $0.11 $(0.25) Year ended 3/31/2004(a)................... 7.59 0.26 0.05 0.31 (0.26) Year ended 3/31/2003(a)................... 7.27 0.27 0.33 0.60 (0.27) Year ended 3/31/2002(a)(g)................ 7.44 0.27 (0.13) 0.14 (0.28) Year ended 3/31/2001(a)................... 7.12 0.30 0.33 0.63 (0.29)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 9) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.78% for Primary A Shares, 1.03% for Investor A Shares and 1.78% each for Investor B and Investor C shares. (e)The reimbursement from investment advisor (see Note 9) is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expenses ratio (with waivers) was less than 0.01%. (f)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.80% for Primary A Shares, 1.05% for Investor A Shares and 1.80% each for Investor B and Investor C shares. (g)Effective April 1, 2001, the California Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.69% to 4.71%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.44% to 4.46%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.69% to 3.71%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.69% to 3.71%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 228 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------------------------------------------- $(0.09) $(0.42) $7.35 2.59% $126,548 0.60%(c) 4.43% 7% 0.81%(d) (0.07) (0.41) 7.58 5.26 152,819 0.60(c)(e) 4.45 10 0.83(f) (0.01) (0.35) 7.60 9.37 171,155 0.60(c) 4.56 6 0.82 (0.03) (0.38) 7.28 2.85 57,803 0.60 4.71 8 0.85 (0.02) (0.38) 7.45 10.05 37,285 0.60(c) 5.04 20 0.82 $(0.09) $(0.40) $7.36 2.33% $121,086 0.85%(c) 4.18% 7% 1.06%(d) (0.07) (0.39) 7.59 4.99 133,077 0.85(c)(e) 4.20 10 1.08(f) (0.01) (0.33) 7.61 9.09 142,798 0.85(c) 4.31 6 1.07 (0.03) (0.36) 7.29 2.45 145,567 0.85 4.46 8 1.10 (0.02) (0.36) 7.47 9.93 149,282 0.83(c) 4.81 20 1.07 $(0.09) $(0.34) $7.37 1.57% $ 7,662 1.60%(c) 3.43% 7% 1.81%(d) (0.07) (0.33) 7.60 4.34 9,203 1.60(c)(e) 3.45 10 1.83(f) (0.01) (0.28) 7.61 8.27 9,390 1.60(c) 3.56 6 1.82 (0.03) (0.31) 7.29 1.68 7,458 1.60 3.71 8 1.85 (0.02) (0.31) 7.47 9.15 5,729 1.55(c) 4.09 20 1.82 $(0.09) $(0.34) $7.34 1.58% $ 3,792 1.60%(c) 3.46% 7% 1.81%(d) (0.07) (0.33) 7.57 4.22 4,510 1.60(c)(e) 3.45 10 1.83(f) (0.01) (0.28) 7.59 8.30 4,961 1.60(c) 3.56 6 1.82 (0.03) (0.31) 7.27 1.82 3,265 1.60 3.71 8 1.85 (0.02) (0.31) 7.44 8.97 1,191 1.60(c) 4.04 20 1.82
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 229 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME -------------------------------------------------------------------------- FLORIDA INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005(a)................... $10.87 $0.38 $(0.37) $ 0.01 $(0.38) Year ended 3/31/2004(a)................... 10.81 0.41 0.06 0.47 (0.41) Year ended 3/31/2003(a)................... 10.55 0.46 0.26 0.72 (0.46) Year ended 3/31/2002(a)(d)................ 10.70 0.50 (0.15) 0.35 (0.50) Year ended 3/31/2001...................... 10.34 0.50 0.37 0.87 (0.51) INVESTOR A SHARES Year ended 3/31/2005(a)................... $10.86 $0.35 $(0.37) $(0.02) $(0.35) Year ended 3/31/2004(a)................... 10.80 0.38 0.06 0.44 (0.38) Year ended 3/31/2003(a)................... 10.54 0.43 0.26 0.69 (0.43) Year ended 3/31/2002(a)(d)................ 10.69 0.47 (0.15) 0.32 (0.47) Year ended 3/31/2001...................... 10.33 0.48 0.36 0.84 (0.48) INVESTOR B SHARES Year ended 3/31/2005(a)................... $10.87 $0.27 $(0.37) $(0.10) $(0.27) Year ended 3/31/2004(a)................... 10.81 0.30 0.06 0.36 (0.30) Year ended 3/31/2003(a)................... 10.55 0.35 0.26 0.61 (0.35) Year ended 3/31/2002(a)(d)................ 10.70 0.39 (0.15) 0.24 (0.39) Year ended 3/31/2001...................... 10.34 0.40 0.36 0.76 (0.40) INVESTOR C SHARES Year ended 3/31/2005(a)................... $10.88 $0.27 $(0.37) $(0.10) $(0.27) Year ended 3/31/2004(a)................... 10.82 0.30 0.06 0.36 (0.30) Year ended 3/31/2003(a)................... 10.56 0.35 0.26 0.61 (0.35) Year ended 3/31/2002(a)(d)................ 10.72 0.31 (0.08) 0.23 (0.39) Year ended 3/31/2001...................... 10.36 0.40 0.36 0.76 (0.40)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Effective April 1, 2001, the Florida Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.61% to 4.65%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.36% to 4.40%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.61% to 3.65%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.61% to 3.65%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 230 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS(c) NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------------------------- $(0.03) $(0.41) $10.47 0.07% $155,470 0.50% 3.57% 5% 0.72% -- (0.41) 10.87 4.43 205,937 0.50 3.78 25 0.71 -- (0.46) 10.81 6.94 216,624 0.50 4.29 20 0.72 -- (0.50) 10.55 3.28 211,928 0.50 4.65 15 0.73 -- (0.51) 10.70 8.59 240,441 0.50 4.82 6 0.71 $(0.03) $(0.38) $10.46 (0.18)% $ 16,980 0.75% 3.32% 5% 0.97% -- (0.38) 10.86 4.17 18,854 0.75 3.53 25 0.96 -- (0.43) 10.80 6.68 18,358 0.75 4.04 20 0.97 -- (0.47) 10.54 3.03 8,530 0.75 4.40 15 0.98 -- (0.48) 10.69 8.33 5,319 0.75 4.57 6 0.96 $(0.03) $(0.30) $10.47 (0.92)% $ 6,764 1.50% 2.57% 5% 1.72% -- (0.30) 10.87 3.39 8,885 1.50 2.78 25 1.71 -- (0.35) 10.81 5.87 9,700 1.50 3.29 20 1.72 -- (0.39) 10.55 2.26 5,700 1.50 3.65 15 1.73 -- (0.40) 10.70 7.52 4,429 1.50 3.82 6 1.71 $(0.03) $(0.30) $10.48 (0.92)% $ 8,243 1.50% 2.57% 5% 1.72% -- (0.30) 10.88 3.38 10,246 1.50 2.78 25 1.71 -- (0.35) 10.82 5.85 9,160 1.50 3.29 20 1.72 -- (0.39) 10.56 2.12 2,116 1.50 3.65 15 1.73 -- (0.40) 10.72 7.49 172 1.50 3.82 6 1.71
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 231 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- FLORIDA MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005(a)................... $10.02 $0.41 $(0.36) $ 0.03 $(0.41) Year ended 3/31/2004(a)................... 10.11 0.43 --(d) 0.43 (0.43) Year ended 3/31/2003(a)................... 9.81 0.46 0.48 0.94 (0.46) Year ended 3/31/2002(a)(e)................ 9.98 0.47 (0.12) 0.35 (0.47) Year ended 3/31/2001...................... 9.53 0.48 0.46 0.94 (0.48) INVESTOR A SHARES Year ended 3/31/2005(a)................... $10.02 $0.39 $(0.36) $ 0.05 $(0.39) Year ended 3/31/2004(a)................... 10.11 0.41 --(d) 0.41 (0.41) Year ended 3/31/2003(a)................... 9.81 0.43 0.48 0.91 (0.43) Year ended 3/31/2002(a)(e)................ 9.98 0.45 (0.12) 0.33 (0.45) Year ended 3/31/2001...................... 9.53 0.45 0.46 0.91 (0.45) INVESTOR B SHARES Year ended 3/31/2005(a)................... $10.01 $0.32 $(0.36) $(0.04) $(0.31) Year ended 3/31/2004(a)................... 10.11 0.33 (0.01) 0.32 (0.33) Year ended 3/31/2003(a)................... 9.81 0.35 0.49 0.84 (0.36) Year ended 3/31/2002(a)(e)................ 9.98 0.37 (0.12) 0.25 (0.37) Year ended 3/31/2001...................... 9.53 0.38 0.46 0.84 (0.38) INVESTOR C SHARES Year ended 3/31/2005(a)................... $10.00 $0.32 $(0.36) $(0.04) $(0.31) Year ended 3/31/2004(a)................... 10.10 0.33 (0.01) 0.32 (0.33) Year ended 3/31/2003(a)................... 9.80 0.35 0.49 0.84 (0.36) Year ended 3/31/2002(a)(e)................ 9.97 0.36 (0.11) 0.25 (0.37) Year ended 3/31/2001...................... 9.53 0.37 0.46 0.83 (0.38)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Amount represents less than $0.01 per share. (e)Effective April 1, 2001, the Florida Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.71% to 4.76%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.46% to 4.51%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.71% to 3.76%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.71% to 3.76%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 232 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS RATIO OF ---------------- NET NET OPERATING RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL ASSET ASSETS EXPENSES INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF TO AVERAGE INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD NET TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) ASSETS(c) NET ASSETS RATE NET ASSETS - --------------------------------------------------------------------------------------------------------------------------------- $(0.11) $(0.52) $ 9.55 0.58% $44,309 0.60% 4.24% 12% 0.89% (0.09) (0.52) 10.02 4.46 56,578 0.60 4.32 8 0.86 (0.18) (0.64) 10.11 9.76 68,698 0.60 4.53 21 0.85 (0.05) (0.52) 9.81 3.55 75,300 0.60 4.76 5 0.87 (0.01) (0.49) 9.98 10.13 92,327 0.60 4.93 7 0.83 $(0.11) $(0.50) $ 9.55 0.33% $35,175 0.85% 3.99% 12% 1.14% (0.09) (0.50) 10.02 4.20 40,630 0.85 4.07 8 1.11 (0.18) (0.61) 10.11 9.49 44,073 0.85 4.28 21 1.10 (0.05) (0.50) 9.81 3.29 43,619 0.85 4.51 5 1.12 (0.01) (0.46) 9.98 9.86 45,034 0.85 4.68 7 1.08 $(0.11) $(0.42) $ 9.55 (0.32)% $ 7,785 1.60% 3.24% 12% 1.89% (0.09) (0.42) 10.01 3.33 10,648 1.60 3.32 8 1.86 (0.18) (0.54) 10.11 8.67 11,745 1.60 3.53 21 1.85 (0.05) (0.42) 9.81 2.52 10,419 1.60 3.76 5 1.87 (0.01) (0.39) 9.98 9.05 10,811 1.60 3.93 7 1.83 $(0.11) $(0.42) $ 9.54 (0.32)% $ 483 1.60% 3.24% 12% 1.89% (0.09) (0.42) 10.00 3.32 817 1.60 3.32 8 1.86 (0.18) (0.54) 10.10 8.68 525 1.60 3.53 21 1.85 (0.05) (0.42) 9.80 2.51 278 1.60 3.76 5 1.87 (0.01) (0.39) 9.97 8.92 64 1.60 3.93 7 1.83
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 233 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- GEORGIA INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005(a)................... $10.98 $0.43 $(0.32) $ 0.11 $(0.43) Year ended 3/31/2004(a)................... 10.92 0.45 0.06 0.51 (0.45) Year ended 3/31/2003(a)................... 10.69 0.49 0.23 0.72 (0.49) Year ended 3/31/2002(a)(d)................ 10.82 0.50 (0.13) 0.37 (0.50) Year ended 3/31/2001...................... 10.42 0.51 0.40 0.91 (0.51) INVESTOR A SHARES Year ended 3/31/2005(a)................... $10.98 $0.41 $(0.32) $ 0.09 $(0.41) Year ended 3/31/2004(a)................... 10.92 0.42 0.06 0.48 (0.42) Year ended 3/31/2003(a)................... 10.69 0.46 0.23 0.69 (0.46) Year ended 3/31/2002(a)(d)................ 10.82 0.48 (0.13) 0.35 (0.48) Year ended 3/31/2001...................... 10.42 0.48 0.40 0.88 (0.48) INVESTOR B SHARES Year ended 3/31/2005(a)................... $10.99 $0.32 $(0.32) $ 0.00 $(0.32) Year ended 3/31/2004(a)................... 10.92 0.34 0.07 0.41 (0.34) Year ended 3/31/2003(a)................... 10.69 0.39 0.22 0.61 (0.38) Year ended 3/31/2002(a)(d)................ 10.82 0.39 (0.12) 0.27 (0.40) Year ended 3/31/2001...................... 10.42 0.40 0.40 0.80 (0.40) INVESTOR C SHARES Year ended 3/31/2005(a)................... $10.98 $0.33 $(0.33) $ 0.00 $(0.32) Year ended 3/31/2004(a)................... 10.92 0.34 0.06 0.40 (0.34) Year ended 3/31/2003(a)................... 10.69 0.37 0.24 0.61 (0.38) Year ended 3/31/2002(a)(d)................ 10.82 0.39 (0.12) 0.27 (0.40) Year ended 3/31/2001...................... 10.42 0.40 0.40 0.80 (0.40)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Effective April 1, 2001, the Georgia Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.61% to 4.65%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.36% to 4.40%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.61% to 3.65%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.61% to 3.65%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 234 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS RATIO OF ---------------- NET OPERATING RATIO OF NET RATIO OF TOTAL ASSET NET ASSETS EXPENSES INVESTMENT OPERATING DIVIDENDS VALUE END OF TO AVERAGE INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(b) (000) ASSETS(c) NET ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------- $(0.43) $10.66 1.05% $114,652 0.50% 4.01% 8% 0.75% (0.45) 10.98 4.73 133,207 0.50 4.08 11 0.73 (0.49) 10.92 6.81 150,797 0.50 4.47 15 0.73 (0.50) 10.69 3.50 134,638 0.50 4.65 6 0.76 (0.51) 10.82 8.93 128,158 0.50 4.80 10 0.73 $(0.41) $10.66 0.80% $ 21,415 0.75% 3.76% 8% 1.00% (0.42) 10.98 4.47 21,887 0.75 3.83 11 0.98 (0.46) 10.92 6.54 18,979 0.75 4.22 15 0.98 (0.48) 10.69 3.24 12,791 0.75 4.40 6 1.01 (0.48) 10.82 8.66 11,872 0.75 4.55 10 0.98 $(0.32) $10.67 0.05% $ 6,662 1.50% 3.01% 8% 1.75% (0.34) 10.99 3.79 7,462 1.50 3.08 11 1.73 (0.38) 10.92 5.76 9,135 1.50 3.47 15 1.73 (0.40) 10.69 2.47 6,865 1.50 3.65 6 1.76 (0.40) 10.82 7.85 6,773 1.50 3.80 10 1.73 $(0.32) $10.66 0.05% $ 3,254 1.50% 3.01% 8% 1.75% (0.34) 10.98 3.69 4,769 1.50 3.08 11 1.73 (0.38) 10.92 5.74 5,190 1.50 3.47 15 1.73 (0.40) 10.69 2.46 1,400 1.50 3.65 6 1.76 (0.40) 10.82 7.96 770 1.50 3.80 10 1.73
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 235 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- KANSAS MUNICIPAL INCOME PRIMARY A SHARES Year ended 3/31/2005...................... $10.39 $0.36 $(0.32) $ 0.04 $(0.37) Year ended 3/31/2004...................... 10.46 0.38 0.02 0.40 (0.38) Year ended 3/31/2003...................... 10.16 0.42 0.32 0.74 (0.42) Year ended 3/31/2002(d)................... 10.33 0.45 (0.16) 0.29 (0.45) Period ended 3/31/2001(e)................. 10.00 0.46 0.18 0.64 (0.31) INVESTOR A SHARES Year ended 3/31/2005...................... $10.38 $0.34 $(0.32) $ 0.02 $(0.34) Year ended 3/31/2004...................... 10.45 0.36 0.02 0.38 (0.36) Year ended 3/31/2003...................... 10.15 0.40 0.32 0.72 (0.40) Year ended 3/31/2002(d)................... 10.33 0.43 (0.17) 0.26 (0.43) Period ended 3/31/2001(e)................. 10.00 0.47 0.13 0.60 (0.27) INVESTOR B SHARES Year ended 3/31/2005...................... $10.37 $0.27 $(0.32) $(0.05) $(0.27) Year ended 3/31/2004...................... 10.44 0.28 0.02 0.30 (0.28) Year ended 3/31/2003...................... 10.14 0.32 0.32 0.64 (0.32) Year ended 3/31/2002(d)................... 10.32 0.35 (0.17) 0.18 (0.35) Period ended 3/31/2001(e)................. 10.00 0.33 0.19 0.52 (0.20) INVESTOR C SHARES Year ended 3/31/2005...................... $10.36 $0.27 $(0.32) $(0.05) $(0.27) Year ended 3/31/2004...................... 10.43 0.28 0.02 0.30 (0.28) Period ended 3/31/2003(e)................. 10.00 0.22 0.45 0.67 (0.22)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Effective April 1, 2001, the Kansas Municipal Income Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.39% to 4.40.%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.14% to 4.15%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.39% to 3.40%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. (e)Kansas Municipal Income Primary A, Investor A, Investor B and Investor C Shares commenced operations on July 17, 2000, August 14, 2000, August 29, 2000 and July 9, 2002, respectively. (f)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 236 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- NET RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- $(0.14) $(0.51) $ 9.92 0.41% $ 66,302 0.60%(c) 3.57% 21% 0.97% (0.09) (0.47) 10.39 3.99 76,800 0.60(c) 3.70 12 0.88 (0.02) (0.44) 10.46 7.45 89,718 0.60(c) 4.07 42 0.90 (0.01) (0.46) 10.16 2.84 98,506 0.60(c) 4.40 13 0.91 0.00 (0.31) 10.33 6.60 111,226 0.60(c)(f) 4.44(f) 17 0.93(c)(f) $(0.14) $(0.48) $ 9.92 0.26% $ 4,146 0.85%(c) 3.32% 21% 1.22% (0.09) (0.45) 10.38 3.73 4,370 0.85(c) 3.45 12 1.13 (0.02) (0.42) 10.45 7.19 6,489 0.85(c) 3.82 42 1.15 (0.01) (0.44) 10.15 2.49 3,115 0.85(c) 4.15 13 1.16 0.00 (0.27) 10.33 5.66 646 0.85(c)(f) 4.19(f) 17 1.18(c)(f) $(0.14) $(0.41) $ 9.91 (0.49)% $ 216 1.60%(c) 2.57% 21% 1.97% (0.09) (0.37) 10.37 2.96 281 1.60(c) 2.70 12 1.88 (0.02) (0.34) 10.44 6.39 262 1.60(c) 3.07 42 1.90 (0.01) (0.36) 10.14 1.62 25 1.60(c) 3.40 13 1.91 0.00 (0.20) 10.32 4.78 262 1.60(c)(f) 3.44(f) 17 1.93(c)(f) $(0.14) $(0.41) $ 9.90 (0.50)% $ 237 1.60%(c) 2.54% 21% 1.97% (0.09) (0.37) 10.36 2.99 125 1.60(c) 2.70 12 1.88 (0.02) (0.24) 10.43 3.04 443 1.60(c)(f) 3.07(f) 42 1.90(f)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 237 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- MARYLAND INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005(a)................... $11.23 $0.41 $(0.44) $(0.03) $(0.42) Year ended 3/31/2004(a)................... 11.22 0.45 --(c) 0.45 (0.44) Year ended 3/31/2003(a)................... 10.84 0.47 0.38 0.85 (0.47) Year ended 3/31/2002(a)(e)................ 11.01 0.50 (0.17) 0.33 (0.50) Year ended 3/31/2001(a)................... 10.58 0.51 0.43 0.94 (0.51) INVESTOR A SHARES Year ended 3/31/2005(a)................... $11.22 $0.39 $(0.44) $(0.05) $(0.39) Year ended 3/31/2004(a)................... 11.22 0.41 --(c) 0.41 (0.41) Year ended 3/31/2003(a)................... 10.84 0.44 0.38 0.82 (0.44) Year ended 3/31/2002(a)(e)................ 11.01 0.47 (0.17) 0.30 (0.47) Year ended 3/31/2001(a)................... 10.58 0.48 0.43 0.91 (0.48) INVESTOR B SHARES Year ended 3/31/2005(a)................... $11.23 $0.31 $(0.45) $(0.14) $(0.31) Year ended 3/31/2004(a)................... 11.22 0.33 --(c) 0.33 (0.32) Year ended 3/31/2003(a)................... 10.84 0.37 0.37 0.74 (0.36) Year ended 3/31/2002(a)(e)................ 11.01 0.38 (0.16) 0.22 (0.39) Year ended 3/31/2001(a)................... 10.58 0.40 0.43 0.83 (0.40) INVESTOR C SHARES Year ended 3/31/2005(a)................... $11.23 $0.31 $(0.45) $(0.14) $(0.31) Year ended 3/31/2004(a)................... 11.22 0.33 --(c) 0.33 (0.32) Year ended 3/31/2003(a)................... 10.84 0.36 0.38 0.74 (0.36) Year ended 3/31/2002(a)(e)................ 11.01 0.35 (0.13) 0.22 (0.39) Year ended 3/31/2001(a)................... 10.58 0.40 0.43 0.83 (0.40)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Amount represents less than $0.01 per share. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)Effective April 1, 2001, the Maryland Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.49% to 4.54%. Investor A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.24% to 4.29%. Investor B Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.49% to 3.54%. Investor C Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.49% to 3.54%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 238 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS --------------------------------------------------------------------------------------------------------------------------- $(0.42) $10.78 (0.27)% $153,653 0.50%(d) 3.79% 2% 0.73% (0.44) 11.23 4.05 188,400 0.50(d) 3.89 19 0.72 (0.47) 11.22 7.95 192,668 0.50(d) 4.22 15 0.72 (0.50) 10.84 3.02 172,600 0.50(d) 4.54 16 0.74 (0.51) 11.01 9.08 178,304 0.50 4.72 13 0.71 $(0.39) $10.78 (0.43)% $ 30,400 0.75%(d) 3.54% 2% 0.98% (0.41) 11.22 3.70 34,458 0.75(d) 3.64 19 0.97 (0.44) 11.22 7.69 32,174 0.75(d) 3.97 15 0.97 (0.47) 10.84 2.76 20,760 0.75(d) 4.29 16 0.99 (0.48) 11.01 8.81 17,478 0.75 4.47 13 0.96 $(0.31) $10.78 (1.26)% $ 13,119 1.50%(d) 2.79% 2% 1.73% (0.32) 11.23 3.02 17,955 1.50(d) 2.89 19 1.72 (0.36) 11.22 6.89 20,565 1.50(d) 3.22 15 1.72 (0.39) 10.84 1.99 6,318 1.50(d) 3.54 16 1.74 (0.40) 11.01 8.01 5,120 1.50 3.72 13 1.71 $(0.31) $10.78 (1.26)% $ 2,628 1.50%(d) 2.79% 2% 1.73% (0.32) 11.23 3.02 2,825 1.50(d) 2.89 19 1.72 (0.36) 11.22 6.88 2,776 1.50(d) 3.22 15 1.72 (0.39) 10.84 1.98 1,454 1.50(d) 3.54 16 1.74 (0.40) 11.01 8.01 301 1.50 3.72 13 1.71
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 239 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005...................... $10.87 $0.43 $(0.30) $0.13 $(0.44) Year ended 3/31/2004...................... 10.85 0.44 0.02 0.46 (0.44) Year ended 3/31/2003...................... 10.43 0.46 0.42 0.88 (0.46) Year ended 3/31/2002(d)................... 10.58 0.49 (0.16) 0.33 (0.48) Year ended 3/31/2001...................... 10.21 0.49 0.37 0.86 (0.49) INVESTOR A SHARES Year ended 3/31/2005...................... $10.87 $0.41 $(0.31) $0.10 $(0.41) Year ended 3/31/2004...................... 10.85 0.41 0.02 0.43 (0.41) Year ended 3/31/2003...................... 10.44 0.44 0.41 0.85 (0.44) Year ended 3/31/2002(d)................... 10.58 0.46 (0.14) 0.32 (0.46) Year ended 3/31/2001...................... 10.21 0.47 0.36 0.83 (0.46) INVESTOR B SHARES Year ended 3/31/2005...................... $10.87 $0.33 $(0.31) $0.02 $(0.33) Year ended 3/31/2004...................... 10.85 0.33 0.02 0.35 (0.33) Year ended 3/31/2003...................... 10.43 0.36 0.42 0.78 (0.36) Year ended 3/31/2002(d)................... 10.58 0.38 (0.15) 0.23 (0.38) Year ended 3/31/2001...................... 10.21 0.38 0.37 0.75 (0.38) INVESTOR C SHARES Year ended 3/31/2005...................... $10.87 $0.33 $(0.31) $0.02 $(0.33) Year ended 3/31/2004...................... 10.85 0.33 0.02 0.35 (0.33) Year ended 3/31/2003...................... 10.44 0.36 0.41 0.77 (0.36) Year ended 3/31/2002(d)................... 10.58 0.34 (0.10) 0.24 (0.38) Year ended 3/31/2001...................... 10.21 0.39 0.36 0.75 (0.38)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Effective April 1, 2001, the North Carolina Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.48% to 4.58%. Investor A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.23% to 4.33%. Investor B Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.48% to 3.58%. Investor C Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.48% to 3.58%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 240 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS --------------------------------------------------------------------------------------------------------------------------- $(0.44) $10.56 1.19% $150,588 0.50%(c) 4.08% 6% 0.73% (0.44) 10.87 4.29 192,537 0.50(c) 4.02 20 0.72 (0.46) 10.85 8.59 203,170 0.50 4.30 9 0.72 (0.48) 10.43 3.20 176,671 0.50(c) 4.58 13 0.74 (0.49) 10.58 8.61 180,126 0.50(c) 4.71 19 0.71 $(0.41) $10.56 0.93% $ 19,082 0.75%(c) 3.83% 6% 0.98% (0.41) 10.87 4.03 25,608 0.75(c) 3.77 20 0.97 (0.44) 10.85 8.21 23,677 0.75 4.05 9 0.97 (0.46) 10.44 3.04 11,975 0.75(c) 4.33 13 0.99 (0.46) 10.58 8.34 10,332 0.75(c) 4.46 19 0.96 $(0.33) $10.56 0.18% $ 13,403 1.50%(c) 3.08% 6% 1.73% (0.33) 10.87 3.25 16,228 1.50(c) 3.02 20 1.72 (0.36) 10.85 7.51 18,414 1.50 3.30 9 1.72 (0.38) 10.43 2.17 5,917 1.50(c) 3.58 13 1.74 (0.38) 10.58 7.54 5,261 1.50(c) 3.71 19 1.71 $(0.33) $10.56 0.17% $ 4,037 1.50%(c) 3.08% 6% 1.73% (0.33) 10.87 3.25 1,942 1.50(c) 3.02 20 1.72 (0.36) 10.85 7.40 1,585 1.50 3.30 9 1.72 (0.38) 10.44 2.25 734 1.50(c) 3.58 13 1.74 (0.38) 10.58 7.54 79 1.50(c) 3.71 19 1.71
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 241 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005...................... $10.79 $0.43 $(0.29) $0.14 $(0.43) Year ended 3/31/2004...................... 10.74 0.45 0.13 0.58 (0.45) Year ended 3/31/2003...................... 10.50 0.50 0.24 0.74 (0.50) Year ended 3/31/2002(e)................... 10.64 0.52 (0.14) 0.38 (0.52) Year ended 3/31/2001...................... 10.27 0.52 0.37 0.89 (0.52) INVESTOR A SHARES Year ended 3/31/2005...................... $10.79 $0.41 $(0.29) $0.12 $(0.41) Year ended 3/31/2004...................... 10.73 0.42 0.14 0.56 (0.42) Year ended 3/31/2003...................... 10.50 0.46 0.24 0.70 (0.47) Year ended 3/31/2002(e)................... 10.64 0.50 (0.14) 0.36 (0.50) Year ended 3/31/2001...................... 10.27 0.49 0.37 0.86 (0.49) INVESTOR B SHARES Year ended 3/31/2005...................... $10.79 $0.33 $(0.29) $0.04 $(0.33) Year ended 3/31/2004...................... 10.73 0.34 0.14 0.48 (0.34) Year ended 3/31/2003...................... 10.50 0.40 0.22 0.62 (0.39) Year ended 3/31/2002(e)................... 10.64 0.42 (0.14) 0.28 (0.42) Year ended 3/31/2001...................... 10.27 0.41 0.37 0.78 (0.41) INVESTOR C SHARES Year ended 3/31/2005...................... $10.80 $0.33 $(0.29) $0.04 $(0.33) Year ended 3/31/2004...................... 10.74 0.34 0.14 0.48 (0.34) Year ended 3/31/2003...................... 10.51 0.38 0.24 0.62 (0.39) Year ended 3/31/2002(e)................... 10.64 0.41 (0.12) 0.29 (0.42) Year ended 3/31/2001...................... 10.27 0.41 0.37 0.78 (0.41)
- --------------- (a)Per share net investment income has been calculated using the average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Amount represents less than $0.01 per share. (e)Effective April 1, 2001, the South Carolina Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.02, decrease net realized and unrealized gains or losses per share by $0.02 and increase the ratio of net investment income to average net assets from 4.78% to 4.92%. Investor A Shares -- increase net investment income per share by $0.02, decrease net realized and unrealized gains or losses per share by $0.02 and increase the ratio of net investment income to average net assets from 4.53% to 4.67%. Investor B Shares -- increase net investment income per share by $0.02, decrease net realized and unrealized gains or losses per share by $0.02 and increase the ratio of net investment income to average net assets from 3.78% to 3.92%. Investor C Shares -- increase net investment income per share by $0.02, decrease net realized and unrealized gains or losses per share by $0.02 and increase the ratio of net investment income to average net assets from 3.78% to 3.92%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 242 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF NET DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS(C) NET ASSETS RATE - ------------------------------------------------------------------------------------------------------------------------ $(0.04) $(0.47) $10.46 1.36% $178,468 0.50% 4.05% 9% (0.08) (0.53) 10.79 5.57 200,249 0.50 4.19 15 --(d) (0.50) 10.74 7.16 212,300 0.50 4.64 24 -- (0.52) 10.50 3.65 207,645 0.50 4.92 8 -- (0.52) 10.64 8.85 217,513 0.50 4.95 9 $(0.04) $(0.45) $10.46 1.11% $ 23,303 0.75% 3.80% 9% (0.08) (0.50) 10.79 5.41 27,956 0.75 3.94 15 --(d) (0.47) 10.73 6.79 29,186 0.75 4.39 24 -- (0.50) 10.50 3.39 17,791 0.75 4.67 8 -- (0.49) 10.64 8.58 18,420 0.75 4.70 9 $(0.04) $(0.37) $10.46 0.35% $ 8,170 1.50% 3.06% 9% (0.08) (0.42) 10.79 4.62 10,524 1.50 3.19 15 --(d) (0.39) 10.73 6.00 11,892 1.50 3.64 24 -- (0.42) 10.50 2.62 7,797 1.50 3.92 8 -- (0.41) 10.64 7.78 7,083 1.50 3.95 9 $(0.04) $(0.37) $10.47 0.36% $ 7,944 1.50% 3.06% 9% (0.08) (0.42) 10.80 4.62 9,103 1.50 3.19 15 --(d) (0.39) 10.74 5.98 9,997 1.50 3.64 24 -- (0.42) 10.51 2.71 3,713 1.50 3.92 8 -- (0.41) 10.64 7.78 2,175 1.50 3.95 9 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS - ---------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS - ---------------- 0.72% 0.71 0.71 0.73 0.70 0.96% 0.96 0.96 0.98 0.95 1.72% 1.71 1.71 1.73 1.70 1.72% 1.71 1.71 1.73 1.70
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 243 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- TENNESSEE INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005...................... $10.70 $0.43 $(0.30) $0.13 $(0.43) Year ended 3/31/2004...................... 10.68 0.42 0.02 0.44 (0.42) Year ended 3/31/2003...................... 10.25 0.44 0.43 0.87 (0.44) Year ended 3/31/2002(d)................... 10.35 0.46 (0.10) 0.36 (0.46) Year ended 3/31/2001...................... 9.91 0.48 0.44 0.92 (0.48) INVESTOR A SHARES Year ended 3/31/2005...................... $10.70 $0.40 $(0.30) $0.10 $(0.40) Year ended 3/31/2004...................... 10.68 0.39 0.02 0.41 (0.39) Year ended 3/31/2003...................... 10.25 0.42 0.43 0.85 (0.42) Year ended 3/31/2002(d)................... 10.35 0.43 (0.09) 0.34 (0.44) Year ended 3/31/2001...................... 9.91 0.45 0.44 0.89 (0.45) INVESTOR B SHARES Year ended 3/31/2005...................... $10.70 $0.32 $(0.29) $0.03 $(0.33) Year ended 3/31/2004...................... 10.68 0.31 0.02 0.33 (0.31) Year ended 3/31/2003...................... 10.26 0.34 0.42 0.76 (0.34) Year ended 3/31/2002(d)................... 10.35 0.36 (0.09) 0.27 (0.36) Year ended 3/31/2001...................... 9.91 0.38 0.44 0.82 (0.38) INVESTOR C SHARES Year ended 3/31/2005...................... $10.65 $0.33 $(0.30) $0.03 $(0.33) Year ended 3/31/2004...................... 10.63 0.31 0.02 0.33 (0.31) Year ended 3/31/2003...................... 10.21 0.34 0.42 0.76 (0.34) Year ended 3/31/2002(d)................... 10.31 0.30 (0.04) 0.26 (0.36) Year ended 3/31/2001...................... 9.87 0.42 0.40 0.82 (0.38)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Effective April 1, 2001, the Tennessee Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.44% to 4.45%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.19% to 4.20%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.44% to 3.45%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.44% to 3.45%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 244 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------------------------------------- $(0.01) $(0.44) $10.39 1.26% $36,133 0.50% 4.06% 21% 0.95% -- (0.42) 10.70 4.19 37,564 0.50(c) 3.91 24 0.83 -- (0.44) 10.68 8.65 54,802 0.50(c) 4.18 16 0.84 -- (0.46) 10.25 3.54 40,807 0.50 4.45 0 0.93 -- (0.48) 10.35 9.53 38,928 0.50(c) 4.77 10 0.84 $(0.01) $(0.41) $10.39 1.01% $15,473 0.75% 3.81% 21% 1.20% -- (0.39) 10.70 3.93 15,505 0.75(c) 3.66 24 1.08 -- (0.42) 10.68 8.38 15,572 0.75(c) 3.93 16 1.09 -- (0.44) 10.25 3.28 9,955 0.75 4.20 0 1.18 -- (0.45) 10.35 9.25 7,945 0.75(c) 4.52 10 1.09 $(0.01) $(0.34) $10.39 0.25% $ 3,345 1.50%.. 3.06% 21% 1.95% -- (0.31) 10.70 3.16 3,922 1.50(c) 2.91 24 1.83 -- (0.34) 10.68 7.46 4,439 1.50(c) 3.18 16 1.84 -- (0.36) 10.26 2.61 1,351 1.50 3.45 0 1.93 -- (0.38) 10.35 8.44 1,448 1.50(c) 3.77 10 1.84 $(0.01) $(0.34) $10.34 0.26% $ 1,535 1.50% 3.06% 21% 1.95% -- (0.31) 10.65 3.17 2,111 1.50(c) 2.91 24 1.83 -- (0.34) 10.63 7.49 1,391 1.50(c) 3.18 16 1.84 -- (0.36) 10.21 2.52 322 1.50 3.45 0 1.93 -- (0.38) 10.31 8.46 3 1.50(c) 3.77 10 1.84
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 245 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- TEXAS INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005(c)................... $10.62 $0.39 $(0.30) $ 0.09 $(0.40) Year ended 3/31/2004(c)................... 10.51 0.41 0.11 0.52 (0.41) Year ended 3/31/2003(c)................... 10.19 0.47 0.32 0.79 (0.47) Year ended 3/31/2002(c)(d)................ 10.35 0.50 (0.16) 0.34 (0.50) Year ended 3/31/2001...................... 10.00 0.51 0.35 0.86 (0.51) INVESTOR A SHARES Year ended 3/31/2005(c)................... $10.61 $0.37 $(0.30) $ 0.07 $(0.37) Year ended 3/31/2004(c)................... 10.50 0.39 0.11 0.50 (0.39) Year ended 3/31/2003(c)................... 10.19 0.45 0.31 0.76 (0.45) Year ended 3/31/2002(c)(d)................ 10.35 0.48 (0.16) 0.32 (0.48) Year ended 3/31/2001...................... 10.00 0.48 0.35 0.83 (0.48) INVESTOR B SHARES Year ended 3/31/2005(c)................... $10.62 $0.29 $(0.31) $(0.02) $(0.29) Year ended 3/31/2004(c)................... 10.51 0.31 0.11 0.42 (0.31) Year ended 3/31/2003(c)................... 10.19 0.37 0.32 0.69 (0.37) Year ended 3/31/2002(c)(d)................ 10.35 0.40 (0.16) 0.24 (0.40) Year ended 3/31/2001...................... 10.00 0.40 0.35 0.75 (0.40) INVESTOR C SHARES Year ended 3/31/2005(c)................... $10.62 $0.30 $(0.31) $(0.01) $(0.29) Year ended 3/31/2004(c)................... 10.50 0.31 0.12 0.43 (0.31) Year ended 3/31/2003(c)................... 10.18 0.37 0.32 0.69 (0.37) Year ended 3/31/2002(c)(d)................ 10.35 0.24 (0.02) 0.22 (0.39) Year ended 3/31/2001...................... 10.00 0.40 0.35 0.75 (0.40)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of interest expense on the operating expense ratio was less than 0.01%. (c)Per share net investment income has been calculated using the monthly average shares method. (d)Effective April 1, 2001, the Texas Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.84% to 4.87%. Investor A Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 4.59% to 4.62%. Investor B Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.84% to 3.87%. Investor C Shares -- increase net investment income per share by $0.00, decrease net realized and unrealized gains or losses per share by $0.00 and increase the ratio of net investment income to average net assets from 3.84% to 3.87%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 246 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(a) (000) NET ASSETS(b) NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------------------------- $(0.06) $(0.46) $10.25 0.86% $214,002 0.50% 3.80% 15% 0.71% -- (0.41) 10.62 5.09 248,306 0.50 3.93 16 0.71 -- (0.47) 10.51 7.92 263,658 0.50 4.54 29 0.71 -- (0.50) 10.19 3.36 265,882 0.50 4.87 5 0.72 -- (0.51) 10.35 8.78 286,949 0.50 5.00 6 0.70 $(0.06) $(0.43) $10.25 0.70% $ 5,708 0.75% 3.55% 15% 0.96% -- (0.39) 10.61 4.83 7,277 0.75 3.68 16 0.96 -- (0.45) 10.50 7.55 8,665 0.75 4.29 29 0.96 -- (0.48) 10.19 3.10 4,813 0.75 4.62 5 0.97 -- (0.48) 10.35 8.52 4,346 0.75 4.75 6 0.95 $(0.06) $(0.35) $10.25 (0.14)% $ 3,449 1.50% 2.80% 15% 1.71% -- (0.31) 10.62 4.05 4,393 1.50 2.93 16 1.71 -- (0.37) 10.51 6.85 5,166 1.50 3.54 29 1.71 -- (0.40) 10.19 2.33 2,021 1.50 3.87 5 1.72 -- (0.40) 10.35 7.71 2,145 1.50 4.00 6 1.70 $(0.06) $(0.35) $10.26 (0.05)% $ 362 1.50% 2.80% 15% 1.71% -- (0.31) 10.62 4.17 466 1.50 2.93 16 1.71 -- (0.37) 10.50 6.84 85 1.50 3.54 29 1.71 -- (0.39) 10.18 2.16 58 1.50 3.87 5 1.72 -- (0.40) 10.35 7.69 3 1.50 4.00 6 1.70
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 247 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS FROM OPERATIONS INCOME ---------------------------------------------------------------------------- VIRGINIA INTERMEDIATE MUNICIPAL BOND PRIMARY A SHARES Year ended 3/31/2005...................... $11.21 $0.43 $(0.33) $ 0.10 $(0.43) Year ended 3/31/2004...................... 11.18 0.46 0.03 0.49 (0.46) Year ended 3/31/2003...................... 10.79 0.48 0.39 0.87 (0.48) Year ended 3/31/2002(e)................... 10.92 0.50 (0.13) 0.37 (0.50) Year ended 3/31/2001...................... 10.51 0.50 0.41 0.91 (0.50) INVESTOR A SHARES Year ended 3/31/2005...................... $11.21 $0.40 $(0.33) $ 0.07 $(0.40) Year ended 3/31/2004...................... 11.18 0.43 0.03 0.46 (0.43) Year ended 3/31/2003...................... 10.79 0.46 0.38 0.84 (0.45) Year ended 3/31/2002(e)................... 10.92 0.47 (0.13) 0.34 (0.47) Year ended 3/31/2001...................... 10.51 0.48 0.41 0.89 (0.48) INVESTOR B SHARES Year ended 3/31/2005...................... $11.22 $0.32 $(0.34) $(0.02) $(0.32) Year ended 3/31/2004...................... 11.18 0.35 0.04 0.39 (0.35) Year ended 3/31/2003...................... 10.79 0.37 0.39 0.76 (0.37) Year ended 3/31/2002(e)................... 10.92 0.39 (0.13) 0.26 (0.39) Year ended 3/31/2001...................... 10.51 0.40 0.41 0.81 (0.40) INVESTOR C SHARES Year ended 3/31/2005...................... $11.21 $0.32 $(0.33) (0.01) $(0.32) Year ended 3/31/2004...................... 11.18 0.35 0.03 0.38 (0.35) Year ended 3/31/2003...................... 10.79 0.37 0.39 0.76 (0.37) Year ended 3/31/2002(e)................... 10.92 0.39 (0.13) 0.26 (0.39) Year ended 3/31/2001...................... 10.51 0.40 0.41 0.81 (0.40)
- --------------- (a)Per share net investment income has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Amount represents less than $0.01 per share. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)Effective April 1, 2001, the Virginia Intermediate Municipal Bond Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended March 31, 2002 on each of the classes was: Primary A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.49% to 4.58%. Investor A Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 4.24% to 4.33%. Investor B Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.49% to 3.58%. Investor C Shares -- increase net investment income per share by $0.01, decrease net realized and unrealized gains or losses per share by $0.01 and increase the ratio of net investment income to average net assets from 3.49% to 3.58%. Per share amounts and ratios for the period ended March 31, 2001 have not been restated to reflect this change in presentation. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 248 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------------------------------------- $(0.02) $(0.45) $10.86 0.94% $282,024 0.50%(d) 3.94% 14% 0.69% --(c) (0.46) 11.21 4.47 280,515 0.50(d) 4.10 17 0.70 -- (0.48) 11.18 8.21 287,348 0.50(d) 4.36 7 0.70 -- (0.50) 10.79 3.44 237,459 0.50(d) 4.58 10 0.72 -- (0.50) 10.92 8.92 252,741 0.50 4.73 9 0.70 $(0.02) $(0.42) $10.86 0.69% $ 48,476 0.75%(d) 3.70% 14% 0.94% --(c) (0.43) 11.21 4.21 57,288 0.75(d) 3.85 17 0.95 -- (0.45) 11.18 7.95 57,088 0.75(d) 4.11 7 0.95 -- (0.47) 10.79 3.18 45,678 0.75(d) 4.33 10 0.97 -- (0.48) 10.92 8.65 43,655 0.75 4.48 9 0.95 $(0.02) $(0.34) $10.86 (0.15)% $ 13,563 1.50%(d) 2.95% 14% 1.69% --(c) (0.35) 11.22 3.52 15,907 1.50(d) 3.10 17 1.70 -- (0.37) 11.18 7.14 17,337 1.50(d) 3.36 7 1.70 -- (0.39) 10.79 2.40 8,987 1.50(d) 3.58 10 1.72 -- (0.40) 10.92 7.85 8,859 1.50 3.73 9 1.70 $(0.02) $(0.34) $10.86 (0.06)% $ 1,860 1.50%(d) 2.95% 14% 1.69% --(c) (0.35) 11.21 3.43 2,303 1.50(d) 3.10 17 1.70 -- (0.37) 11.18 7.14 1,680 1.50(d) 3.36 7 1.70 -- (0.39) 10.79 2.41 869 1.50(d) 3.58 10 1.72 -- (0.40) 10.92 7.84 817 1.50 3.73 9 1.70
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 249 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain only to the municipal bond portfolios of Funds Trust (each a "Fund" and collectively, the "Funds"): Short-Term Municipal Income Fund Intermediate Municipal Bond Fund Municipal Income Fund California Intermediate Municipal Bond Fund California Municipal Bond Fund Florida Intermediate Municipal Bond Fund Florida Municipal Bond Fund Georgia Intermediate Municipal Bond Fund Kansas Municipal Income Fund Maryland Intermediate Municipal Bond Fund North Carolina Intermediate Municipal Bond Fund South Carolina Intermediate Municipal Bond Fund Tennessee Intermediate Municipal Bond Fund Texas Intermediate Municipal Bond Fund Virginia Intermediate Municipal Bond Fund
Financial statements for the other portfolios of Funds Trust are presented under separate cover. The Funds currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. A Fund's municipal holdings may include obligations of issuers that rely in whole or in part for payment of interest and principal on state specific revenues, real property taxes, revenues from particular institutions, such as healthcare institutions, or obligations secured by mortgages on real property. Consequently, the impact of changes in state law or regulations or the economic conditions in a particular state should be considered. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic developments in a specific industry or region. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Securities are generally valued by an independent pricing service. These valuations may be based upon a matrix pricing system and/or appraisals which considers such factors as security prices, yields, maturities, redemption features and credit ratings on comparable securities. Certain securities may be valued based upon quotes provided by one or more principal market makers. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. When-issued/delayed-delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. 250 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Each Fund's investment income and realized and unrealized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. Dividends and distributions to shareholders: It is the policy of each Fund to declare dividends from net investment income daily and to pay such dividends monthly. Each Fund will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. Indemnifications: In the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Funds Trust's organizational documents, the Trustees and Officers of the Funds Trust are indemnified against certain liabilities that may arise out of their duties to the Funds Trust. However, based on experience, the Funds expect the risk of loss due to the warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Funds. Effective December 1, 2004, BACAP 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:
FEES ON FEES ON FEES ON FEES ON FEES ON AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS FIRST $500 MILLION $1 BILLION TO $1.5 BILLION TO $3 BILLION TO $500 MILLION TO $1 BILLION $1.5 BILLION $3 BILLION $6 BILLION ------------------------------------------------------------------------------------------ All Funds (except Short-Term Municipal Income Fund)......... 0.40% 0.35% 0.32% 0.29% 0.28% Short-Term Municipal Income Fund........................... 0.30% 0.25% 0.25% 0.25% 0.25% FEES ON AVERAGE NET ASSETS OVER $6 BILLION ---------- All Funds (except Short-Term Municipal Income Fund)......... 0.27% Short-Term Municipal Income Fund........................... 0.25%
251 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL RATE ----------- Short-Term Municipal Income................................. 0.30% Intermediate Municipal Bond and all nine single-state Intermediate Municipal Bond Funds...................................... 0.40% Municipal Income and all three single-state Municipal Bond Funds..................................................... 0.50%
For the year ended March 31, 2005, the effective investment advisory fee rates for the Funds were as follows:
ANNUAL RATE ----------- Short-Term Municipal Income................................. 0.29% Intermediate Municipal Bond................................. 0.38% All nine single-state Intermediate Municipal Bond Funds...................................... 0.40% Municipal Income Fund....................................... 0.46% All three single-state Municipal Bond Funds................. 0.47%
BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Effective December 1, 2004, BACAP Distributors is entitled to receive a fee, computed daily and paid monthly, at the annual rate of 0.15% of each Fund's average daily net assets. Prior to December 1, 2004, BACAP Distributors received a monthly administration fee at the annual rate of 0.22% of each Fund's average daily net assets. For the year ended March 31, 2005, the effective administration fee rate for each Fund was 0.20%. The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of Funds Trust's assets. PFPC Inc. serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A Shares of the Funds. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Primary A Shares of each Fund. For the year ended March 31, 2005, Bank of America earned the following sub-transfer agent fees from the Funds for providing such services and these amounts are included in "Transfer agent fees" in each Fund's Statement of operations.
SUB-TRANSFER AGENT FEE FUND (000) - --------------------------------------------------------------------------- Short-Term Municipal Income................................. $ 30 Intermediate Municipal Bond................................. 58 Municipal Income............................................ 20 California Intermediate Municipal Bond...................... 4 California Municipal Bond................................... 4 Florida Intermediate Municipal Bond......................... 6 Florida Municipal Bond...................................... 2 Georgia Intermediate Municipal Bond......................... 4 Kansas Municipal Income..................................... 2 Maryland Intermediate Municipal Bond........................ 6 North Carolina Intermediate Municipal Bond.................. 5 South Carolina Intermediate Municipal Bond.................. 6 Tennessee Intermediate Municipal Bond....................... 1 Texas Intermediate Municipal Bond........................... 8 Virginia Intermediate Municipal Bond........................ 9
252 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) BACAP Distributors serves as distributor of the Funds' shares. For the year ended March 31, 2005, the Funds were informed that the distributor received the following:
FRONT END CONTINGENT DEFERRED SALES CHARGE SALES CHARGE (000) (000) ------------- -------------------------------------- FUND INVESTOR A INVESTOR A INVESTOR B INVESTOR C - --------------------------------------------------------------------------------------------------------------------- Short-Term Municipal Income................................. $10 $55 $-- $ 3 Intermediate Municipal Bond................................. 6 1 3 --* Municipal Income............................................ 15 -- 10 --* California Intermediate Municipal Bond...................... 9 -- 5 3 California Municipal Bond................................... 24 -- 10 --* Florida Intermediate Municipal Bond......................... 7 1 11 --* Florida Municipal Bond...................................... 33 -- 22 -- Georgia Intermediate Municipal Bond......................... 6 --* 3 --* Kansas Municipal Income..................................... 11 -- 2 -- Maryland Intermediate Municipal Bond........................ 32 -- 15 --* North Carolina Intermediate Municipal Bond.................. 16 -- 6 1 South Carolina Intermediate Municipal Bond.................. 21 11 9 -- Tennessee Intermediate Municipal Bond....................... 9 -- 1 1 Texas Intermediate Municipal Bond........................... 4 -- 2 --* Virginia Intermediate Municipal Bond........................ 16 -- 5 --*
- --------------- *Amount represents less than $500. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, pays its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. Each Fund's fee will not exceed $15,000 per year. As of March 31, 2005, the fees paid for the Office of the Chief Compliance Officer were as follows:
FUND (000) - ------------------------------------------------------------------- Short-Term Municipal Income................................. $ 8 Intermediate Municipal Bond................................. 8 Municipal Income............................................ 8 California Intermediate Municipal Bond...................... 4 California Municipal Bond................................... 5 Florida Intermediate Municipal Bond......................... 4 Florida Municipal Bond...................................... 3 Georgia Intermediate Municipal Bond......................... 4 Kansas Municipal Bond....................................... 3 Maryland Intermediate Municipal Bond........................ 5 North Carolina Intermediate Municipal Bond.................. 4 South Carolina Intermediate Municipal Bond.................. 5 Tennessee Intermediate Municipal Bond....................... 3 Texas Intermediate Municipal Bond........................... 5 Virginia Intermediate Municipal Bond........................ 6
These amounts are included in "Other expenses" on the Statements of operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, another portfolio of Funds Trust. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. 253 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Certain Funds have made daily investments of cash balances in Nations Tax-Exempt Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Fund from such investments is included in its Statement of operations as "Dividend income from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Tax- Exempt Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Funds. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADMINISTRATION FEES ADVISORY FEES (EARNED BY BACAP (EARNED BY BACAP) DISTRIBUTORS) FUND (000) (000) - ------------------------------------------------------------------------------------------------------ Short-Term Municipal Income................................. $11 $ 4 Intermediate Municipal Bond................................. 34 11 Municipal Income............................................ 3 1 California Intermediate Municipal Bond...................... 3 1 California Municipal Bond................................... 3 1 Florida Intermediate Municipal Bond......................... 4 2 Florida Municipal Bond...................................... 1 --* Georgia Intermediate Municipal Bond......................... 3 1 Kansas Municipal Income..................................... 3 1 Maryland Intermediate Municipal Bond........................ 3 1 North Carolina Intermediate Municipal Bond.................. 2 1 South Carolina Intermediate Municipal Bond.................. 6 2 Tennessee Intermediate Municipal Bond....................... 2 1 Texas Intermediate Municipal Bond........................... 4 1 Virginia Intermediate Municipal Bond........................ 5 2
- --------------- *Amount represents less than $500. A significant portion of each Fund's Primary A Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. 3. TOTAL OPERATING EXPENSE LIMITATIONS BACAP and/or its affiliates may, from time to time, reduce its fee payable by each Fund. BACAP has contractually agreed to reimburse expenses and/or waive fees through July 31, 2006 to the extent that the total expenses (excluding interest expense and shareholder servicing and distribution fees), as a percentage of the respective Fund's average daily net assets, exceed the following annual rates:
ANNUAL RATE ----------- Short-Term Municipal Income................................. 0.40% Intermediate Municipal Bond and nine single-state Intermediate Municipal Bond Funds...................................... 0.50% Municipal Income and three single-state Municipal Bond Funds..................................................... 0.60%
BACAP is entitled to recover from the Funds (except Kansas Municipal Income Fund) any fees waived or expenses reimbursed by BACAP during the three year period following the date of such waiver or reimbursement, to the extent that such recovery would not cause the affected fund to exceed the expense limitations in effect at the time of recovery. There is no guarantee that these expense limitations will continue. 254 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) At March 31, 2005, the amounts potentially recoverable by BACAP pursuant to this arrangement are as follows:
AMOUNT AMOUNT OF POTENTIAL RECOVERY EXPIRING RECOVERED DURING -------------------------------------- TOTAL POTENTIAL YEAR ENDED FUND 3/31/08 3/31/07 3/31/06 RECOVERY 3/31/05 - -------------------------------------------------------------------------------------------------------------------------- Short-Term Municipal Income................ $1,654,068 $1,941,539 $1,533,069 $5,128,676 $ -- Intermediate Municipal Bond................ 2,345,645 2,952,298 2,838,755 8,136,698 -- Municipal Income........................... 864,563 1,197,407 1,468,151 3,530,121 -- California Intermediate Municipal Bond..... 355,379 324,546 221,927 901,852 -- California Municipal Bond.................. 472,718 573,485 605,058 1,651,261 -- Florida Intermediate Municipal Bond........ 456,315 486,394 494,942 1,437,651 -- Florida Municipal Bond..................... 282,448 274,866 296,315 853,629 -- Georgia Intermediate Municipal Bond........ 385,979 369,815 389,857 1,145,651 -- Maryland Intermediate Municipal Bond....... 491,226 496,036 495,122 1,482,384 -- North Carolina Intermediate Municipal Bond..................................... 473,009 481,044 481,144 1,435,197 -- South Carolina Intermediate Municipal Bond..................................... 492,127 493,535 517,196 1,502,858 -- Tennessee Intermediate Municipal Bond...... 257,244 214,986 201,545 673,775 -- Texas Intermediate Municipal Bond.......... 513,068 511,278 529,754 1,554,100 -- Virginia Intermediate Municipal Bond....... 650,981 630,499 653,332 1,934,812 --
4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Fund and a combined distribution and shareholder servicing plan for Investor A Shares of each Fund. 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 1940 Act, permit the Funds to compensate or reimburse 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 and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of each Fund directly to the applicable class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP Distributors. For the year ended March 31, 2005, the annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT PLAN RATE LIMIT --------------------- Investor A Combined Distribution and Shareholder Servicing Plan...................................................... 0.25%* 0.25% Investor B and Investor C Shareholder Servicing Plans....... 0.25% 0.25% Investor B and Investor C Distribution Plans................ 0.75% 0.75%
- --------------- *Short-Term Municipal Income pays its shareholder servicing fees, at the rates shown above, under a separate shareholder servicing plan. 5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. 255 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for discount accretion on debt securities and redemption based payments treated as dividend paid deduction were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED INCOME/(LOSS) GAIN/(LOSS) PAID-IN CAPITAL FUND (000) (000) (000) - --------------------------------------------------------------------------------------------------------------- Short-Term Municipal Income................................. $ (1) $ 1 $ -- Intermediate Municipal Bond................................. (103) (65) 168 Municipal Income............................................ 231 (231) -- California Intermediate Municipal Bond...................... -- (77) 77 California Municipal Bond................................... (40) (62) 102 Florida Intermediate Municipal Bond......................... 89 (89) -- Florida Municipal Bond...................................... 52 (116) 64 Georgia Intermediate Municipal Bond......................... (15) 15 -- Kansas Municipal Income..................................... (18) (6) 24 Maryland Intermediate Municipal Bond........................ 1 (1) -- North Carolina Intermediate Municipal Bond.................. (74) 74 -- South Carolina Intermediate Municipal Bond.................. 42 (125) 83 Tennessee Intermediate Municipal Bond....................... (2) -- 2 Texas Intermediate Municipal Bond........................... 34 (93) 59 Virginia Intermediate Municipal Bond........................ 15 (33) 18
Net investment income and net realized gains (losses), as disclosed on the Statement of operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 ------------------------------------- ------------------------------------- TAX- TAX- EXEMPT ORDINARY LONG-TERM EXEMPT ORDINARY LONG-TERM INCOME INCOME* CAPITAL GAINS INCOME INCOME* CAPITAL GAINS FUND (000) (000) (000) (000) (000) (000) - ---------------------------------------------------------------------------------------------------------------------------- Short-Term Municipal Income................. $24,193 $131 $ -- $23,248 $ 194 $ -- Intermediate Municipal Bond................. 68,384 692 2,632 75,755 1,095 1,890 Municipal Income............................ 27,934 488 -- 33,446 80 -- California Intermediate Municipal Bond...... 4,185 18 1,456 4,761 35 862 California Municipal Bond................... 11,385 89 3,243 13,356 79 3,022 Florida Intermediate Municipal Bond......... 7,273 1 568 9,116 78 -- Florida Municipal Bond...................... 3,833 45 1,116 4,667 105 1,078 Georgia Intermediate Municipal Bond......... 5,899 57 -- 6,887 65 -- Kansas Municipal Income..................... 2,613 14 1,043 3,279 --** 823 Maryland Intermediate Municipal Bond........ 7,919 83 -- 9,144 110 -- North Carolina Intermediate Municipal Bond...................................... 8,052 -- -- 9,201 246 -- South Carolina Intermediate Municipal Bond...................................... 8,879 144 928 9,896 661 2,000 Tennessee Intermediate Municipal Bond....... 2,220 13 74 2,576 12 -- Texas Intermediate Municipal Bond........... 8,895 119 1,473 10,528 51 -- Virginia Intermediate Municipal Bond........ 13,214 57 498 13,705 358 9
- --------------- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. **Amount represents less than $500. 256 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED LONG-TERM NET UNREALIZED TAX-EXEMPT ORDINARY CAPITAL APPRECIATION/ FUND INCOME INCOME* GAINS* (DEPRECIATION)** - --------------------------------------------------------------------------------------------------------------------------------- Short-Term Municipal Income................................. $ -- $-- $(2,771) $(1,504) Intermediate Municipal Bond................................. 1,254 34 4,533 47,104 Municipal Income............................................ 990 80 (5,882) 38,116 California Intermediate Municipal Bond...................... -- 1 229 1,916 California Municipal Bond................................... 286 24 227 15,265 Florida Intermediate Municipal Bond......................... 159 --*** (298) 3,252 Florida Municipal Bond...................................... 244 35 920 4,975 Georgia Intermediate Municipal Bond......................... 99 4 (2,044) 5,652 Kansas Municipal Income..................................... 50 --*** 111 1,282 Maryland Intermediate Municipal Bond........................ -- -- (2,475) 7,258 North Carolina Intermediate Municipal Bond.................. 521 --*** (469) 8,813 South Carolina Intermediate Municipal Bond.................. 593 6 378 8,879 Tennessee Intermediate Municipal Bond....................... 6 1 37 2,169 Texas Intermediate Municipal Bond........................... 248 -- 942 8,219 Virginia Intermediate Municipal Bond........................ 41 2 (552) 10,474
- --------------- * These amounts may include Post-October loss deferrals. **The differences between book-basis and tax-basis net unrealized appreciation/(depreciation) are primarily due to discount accretion on debt securities. ***Amount represents less than $500. Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION (DEPRECIATION) FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------ Short-Term Municipal Income................................. $ 4,108 $(5,612) $(1,504) Intermediate Municipal Bond................................. 52,279 (5,175) 47,104 Municipal Income............................................ 38,832 (716) 38,116 California Intermediate Municipal Bond...................... 2,682 (766) 1,916 California Municipal Bond................................... 15,677 (412) 15,265 Florida Intermediate Municipal Bond......................... 4,603 (1,351) 3,252 Florida Municipal Bond...................................... 5,324 (349) 4,975 Georgia Intermediate Municipal Bond......................... 6,057 (405) 5,652 Kansas Municipal Income..................................... 1,635 (353) 1,282 Maryland Intermediate Municipal Bond........................ 7,971 (713) 7,258 North Carolina Intermediate Municipal Bond.................. 9,303 (490) 8,813 South Carolina Intermediate Municipal Bond.................. 9,334 (455) 8,879 Tennessee Intermediate Municipal Bond....................... 2,260 (91) 2,169 Texas Intermediate Municipal Bond........................... 9,411 (1,192) 8,219 Virginia Intermediate Municipal Bond........................ 12,802 (2,328) 10,474
The following capital loss carryforwards, determined as of March 31, 2005, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
EXPIRING IN EXPIRING IN EXPIRING IN EXPIRING IN EXPIRING IN EXPIRING IN 2008 2009 2010 2011 2012 2013 FUND (000) (000) (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- Short-Term Municipal Income*............. $ -- $360 $15 $ 336 $ 110 $1,653 Municipal Income......................... -- -- -- 4,562 1,320 -- Florida Intermediate Municipal Bond...... -- -- -- -- -- 298 Georgia Intermediate Municipal Bond...... 423 608 58 956 -- -- Maryland Intermediate Municipal Bond..... -- 202 -- 480 -- 828 North Carolina Intermediate Municipal Bond................................... -- 469 -- -- -- --
257 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the year ended March 31, 2005, the following Funds utilized capital losses as follows:
CAPITAL LOSSES UTILIZED FUND (000) - ------------------------------------------------------------------------------- Municipal Income............................................ $5,146 Georgia Intermediate Municipal Bond......................... 420 North Carolina Intermediate Municipal Bond.................. 411
Under current tax rules, certain currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of March 31, 2005, the following Funds elected to defer losses occurring between November 1, 2004 and March 31, 2005 under these rules:
CAPITAL LOSSES DEFERRED FUND (000) - ------------------------------------------------------------------------------- Short-Term Municipal Income................................. $298 Maryland Intermediate Municipal Bond........................ 964 Virginia Intermediate Municipal Bond........................ 552
6. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005 were as follows:
PURCHASES SALES FUND (000) (000) - ----------------------------------------------------------------------------------- Short-Term Municipal Income................................. $545,430 $795,386 Intermediate Municipal Bond................................. 361,116 552,438 Municipal Income............................................ 96,644 181,568 California Intermediate Municipal Bond...................... 73,017 79,732 California Municipal Bond................................... 65,873 100,064 Florida Intermediate Municipal Bond......................... 10,767 47,670 Florida Municipal Bond...................................... 11,479 28,343 Georgia Intermediate Municipal Bond......................... 11,850 26,359 Kansas Municipal Income..................................... 34,065 41,785 Maryland Intermediate Municipal Bond........................ 3,546 36,890 North Carolina Intermediate Municipal Bond.................. 12,546 52,352 South Carolina Intermediate Municipal Bond.................. 20,093 41,710 Tennessee Intermediate Municipal Bond....................... 11,455 12,897 Texas Intermediate Municipal Bond........................... 35,675 56,337 Virginia Intermediate Municipal Bond........................ 127,215 124,644
7. SHARES OF BENEFICIAL INTEREST As of March 31, 2005, an unlimited number of shares of beneficial interest without par value were authorized for Funds Trust. Funds Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any authorized but unissued shares into one or more additional classes or series of shares. Investor B Shares generally convert to Investor A Shares based on the following conditions: INTERMEDIATE MUNICIPAL BOND FUNDS
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1998 and November 15, 1998 $0 - $499,999 Six years $500,000 - $999,999 Five years
258 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) MUNICIPAL INCOME FUND
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1997 and November 15, 1998 $0 - $249,999 Nine years $250,000 - $499,999 Six years $500,000 - $999,999 Five years - -- before August 1, 1997 Eight years
ALL OTHER LONG-TERM MUNICIPAL BOND FUNDS
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1997 and November 15, 1998 $0 - $249,999 Nine years $250,000 - $499,999 Six years $500,000 - $999,999 Five years - -- before August 1, 1997 Nine years
See Schedules of capital stock activity. 8. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Funds had no borrowings outstanding at March 31, 2005. During the year ended March 31, 2005, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST FUND (000) RATE - -------------------------------------------------------------------------------------- Short-Term Municipal Income................................. $ 60 2.07% Intermediate Municipal Bond................................. 278 1.75 Municipal Income............................................ 132 1.81 California Intermediate Municipal Bond...................... 57 1.58 California Municipal Bond................................... 67 1.51 Florida Intermediate Municipal Bond......................... 35 1.74 Florida Municipal Bond...................................... 35 2.03 Georgia Intermediate Municipal Bond......................... 7 1.74 Kansas Municipal Income..................................... 45 1.70 Maryland Intermediate Municipal Bond........................ 84 1.81 North Carolina Intermediate Municipal Bond.................. 108 1.74 South Carolina Intermediate Municipal Bond.................. 1 2.24 Texas Intermediate Municipal Bond........................... 21 1.72 Virginia Intermediate Municipal Bond........................ 16 2.21
- --------------- *The average amount outstanding was calculated based on daily balances in the period. 259 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders cannot currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. 260 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the fiscal year ended March 31, 2005, Bank of America Corporation has assumed $6.7 million of legal, shareholder communications, audit related, transfer agent, consulting and Trustee costs and fees incurred by the Funds impacted in connection with the regulatory and civil litigation matters discussed above. These non-recurring costs were allocated to the Funds based on their respective average nets assets for the year ended March 31, 2005. These non-recurring costs on a per Fund basis are shown in that Fund's respective Statement of operations. Because these costs were borne by Bank of America Corporation and not any Fund, an offsetting waiver of these costs is also presented in each respective Fund's Statement of operations as, "Costs assumed by Bank of America Corporation". The impact to the expense ratio of each impacted Fund is reflected in the Fund's Financial highlights. 10. PROPOSED REORGANIZATION The Board of Trustees of the Funds approved a proposal to reorganize the following funds: the Nations Intermediate Municipal Bond Fund, the Nations Kansas Municipal Income Fund and the Nations Tennessee Intermediate Municipal Bond Fund into the Columbia Intermediate Tax-Exempt Fund; the Nations California Municipal Bond Fund into the Columbia California Tax-Exempt Fund; and the Nations Florida Municipal Bond Fund into the Nations Florida Intermediate Municipal Bond Fund. The fund mergers are subject to approval by shareholders of the Funds and the satisfaction of certain other conditions. The Nations Intermediate Municipal Bond Fund, the Nations Kansas Municipal Income Fund, the Nations Tennessee Intermediate Municipal Bond Fund, the Nations California Municipal Bond Fund and the Nations Florida Municipal Bond Fund will be closed to new investments as of the close of business on April 29, 2005. The fund mergers, if approved, are expected to be completed in the third quarter of 2005. 261 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond Fund, Nations Municipal Income Fund, Nations California Intermediate Municipal Bond Fund, Nations California Municipal Bond Fund, Nations Florida Intermediate Municipal Bond Fund, Nations Florida Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations Kansas Municipal Income Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations North Carolina Intermediate Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund, Nations Tennessee Intermediate Municipal Bond Fund, Nations Texas Intermediate Municipal Bond Fund and Nations Virginia Intermediate Municipal Bond Fund (constituting part of Nations Funds Trust, hereafter referred to as the "Funds") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 262 NATIONS FUND TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2005, the following percentage of distributions made from net investment income of the Nations Municipal Bond Funds are exempt for Federal income tax purposes. A portion of the income may also be subject to Federal Alternative Minimum Tax.
FEDERAL EXEMPT FUND PERCENTAGE - ---------------------------------------------------------------------------- Short-Term Municipal Income................................. 99.46% Intermediate Municipal Bond................................. 99.00 Municipal Income............................................ 98.28 California Intermediate Municipal Bond...................... 99.57 California Municipal Bond................................... 99.23 Florida Intermediate Municipal Bond......................... 99.99 Florida Municipal Bond...................................... 98.84 Georgia Intermediate Municipal Bond......................... 99.04 Kansas Municipal Income..................................... 99.46 Maryland Intermediate Municipal Bond........................ 98.97 North Carolina Intermediate Municipal Bond.................. 95.41 South Carolina Intermediate Municipal Bond.................. 98.40 Tennessee Intermediate Municipal Bond....................... 99.41 Texas Intermediate Municipal Bond........................... 98.68 Virginia Intermediate Municipal Bond........................ 99.57
For the fiscal year ended March 31, 2005, the amount of total long-term capital gains distributed by Funds Trust were as follows:
TOTAL LONG-TERM FUND CAPITAL GAIN - -------------------------------------------------------------------------- Intermediate Municipal Bond................................. $2,799,781 California Intermediate Municipal Bond...................... 1,532,796 California Municipal Bond................................... 3,345,040 Florida Intermediate Municipal Bond......................... 567,567 Florida Municipal Bond...................................... 1,179,298 Kansas Municipal Income..................................... 1,067,149 South Carolina Intermediate Municipal Bond.................. 1,011,066 Tennessee Intermediate Municipal Bond....................... 76,062 Texas Intermediate Municipal Bond........................... 1,531,876 Virginia Intermediate Municipal Bond........................ 515,507
263 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director - Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
264 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
265 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 266 MUNICIPAL BOND FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Board of Trustees (the "Board") of Nations Funds Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not "interested persons" of the Trust, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory agreement and approve any newly proposed terms therein. In this regard, the Board reviewed and re-approved, during the most recent six months covered by this report, an investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond Fund, Nations Municipal Income Fund, Nations California Intermediate Municipal Bond Fund, Nations California Municipal Bond Fund, Nations Florida Intermediate Municipal Bond Fund, Nations Florida Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations Kansas Municipal Income Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations North Carolina Intermediate Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund, Nations Tennessee Intermediate Municipal Bond Fund, Nations Texas Intermediate Municipal Bond Fund and Nations Virginia Intermediate Municipal Bond Fund (the "Advisory Agreement"). The funds identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at a meeting held on November 17-18, 2004, the Board, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the re-approval of the Advisory Agreement. Nature, Extent and Quality of Services The Board received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP under the Advisory Agreement. The most recent investment adviser registration form ("Form ADV") for BACAP was provided to the Board, as were responses of BACAP to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Board reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by, investment personnel of BACAP. In this regard, the Board specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Board received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds and BACAP. The Board considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Board also considered the Funds' Chief Compliance Officer's report and recommendations. The Board evaluated the ability of BACAP, based on its resources, reputation and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Board considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Board considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Board concluded that it was generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP. Fund Performance and Expenses The Board considered the one-year, three-year, five-year and ten-year performance results for each of the Funds, as relevant. It also considered these results in comparison to the median performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the median performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that of expenses to provide a more 267 MUNICIPAL BOND FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) accurate basis of comparison. The Board was provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. The Board also considered information in the Lipper data that ranked each Fund based on: (i) each Fund's one-year performance compared to actual management fees; (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Board of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Board (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Board considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Board also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Board noted that the performance of the Funds, except Nations California Municipal Bond Fund, was better than, or not appreciably below, the median performance of each Fund's Universe and did not necessitate any significant additional review. The Board noted that Nations California Municipal Bond Fund required additional review as a result of its 4th quintile performance in the one-year period and 4th quintile Actual Management Fees for the same period, but noted that total expenses were in the third quintile and that the Fund underwent a portfolio management team change on July 15, 2004. The Board also noted that the new management team has since shifted the Fund's duration bias from short-term in nature to neutral relative to its peers. The Board received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. It also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. As with its review of each Fund's performance, Management highlighted Funds that performed poorly or below average with respect to their total expense ratios for further review by the Board. The Board noted that the overall expense ratios of the Funds were lower than, or not appreciably above, each Fund's Peer Group's median overall ratio and did not require significant additional consideration by the Board. Management also discussed the Lipper data and rankings, and other relevant information, for each Fund. Based on the above-referenced considerations and other factors, the Board concluded that the overall performance and expense results supported the re-approval of the Advisory Agreements for each Fund. Investment Advisory Fee Rates The Board reviewed and considered the proposed contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). In addition, the Board reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). The Board noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain of its affiliates relating to trading in mutual fund shares. At the November meetings, the Board also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Board also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. 268 MUNICIPAL BOND FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) Additionally, the Board received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Board concluded that the respective Net Advisory Rates for each of the Funds, except Nations Municipal Income Fund, was lower than, or not appreciably higher than, the median rates of each Fund's Peer Group and did not warrant significant additional consideration. The Board noted that the Advisory Agreement Rates and Net Advisory Rates for Nations Municipal Income Fund were ranked in the 4th and 5th quintiles respectively and necessitated additional review. However, the Board noted that, while the Advisory Agreement Rates and Net Advisory Rates were significantly higher than other comparable funds in its Universe, the Total Expenses of the Fund were within the median overall ratios of its Peer Group. The Board concluded that these and other factors supported the Advisory Agreement Rates and the Net Advisory Rates, and approved the Advisory Agreements for all of the Funds. Profitability The Board received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates. The Board concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. Economies of Scale The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board concluded that any actual or potential economies of scale are, or will be, shared fairly with Fund shareholders, most particularly through the newly approved Advisory Agreement Rate breakpoints effective December 1, 2004. The Board acknowledged the inherent limitations of any analysis of an investment adviser's economies of scale and of any attempt to correlate breakpoints with such economies, stemming largely from the Board's understanding that economies of scale are realized, if at all, by an investment adviser across a variety of products and services, not just with respect to a single fund. Information About Services to Other Clients The Board also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP to its other clients, including institutional investors. The Board concluded that the Advisory Agreement Rates and the Net Advisory Rates were within a reasonable range of the fee rates offered to other BACAP clients. Where rates offered to other clients were appreciably lower, the Board concluded, based on information provided by BACAP, that the costs associated with managing and operating an institutional investor account, provided a justification for the higher fee rates charged to the Funds. Other Benefits to BACAP The Board received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP as a result of its relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates). The Board also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and 269 MUNICIPAL BOND FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) the controls applicable to brokerage allocation procedures. The Board also reviewed the policy of BACAP regarding the allocation of portfolio investment opportunities among the Funds and other clients. Other Factors and Broader Review The Board also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Board noted that the Funds are utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. As discussed above, the Board reviews detailed materials received from BACAP annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Funds receive throughout the year. In this regard, the Board reviews reports of BACAP at least in each of its quarterly meetings, which include, among other things, a detailed portfolio review and detailed fund performance reports. In addition, the Board interviews the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and its evaluation of the information provided to them, the Board concluded that re-approval of the Advisory Agreements for each of the Funds was in the best interest of the Funds and its shareholders. Accordingly, the Board unanimously re-approved the Advisory Agreement. 270 SHAREHOLDER MEETING RESULTS (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - --------------------- --- -------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
271 [BACKGROUND IMAGE] THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF INTERNATIONAL/ BANC OF AMERICA CAPITAL MANAGEMENT GLOBAL FUNDS Nations Marsico Within each category, EQUITY International the funds are listed from FUNDS Opportunities aggressive to conservative. Fund Nations International Equity Fund GROWTH FUNDS Nations International Value Fund Nations Small Company Fund Nations Global Value Fund Nations Marsico 21st Century Fund FIXED INCOME Nations MidCap FUNDS Growth Fund Nations Marsico TAXABLE Focused Equities INCOME FUNDS Fund MONEY Nations High Yield Nations Marsico MARKET Bond Fund Growth Fund FUNDS Nations Strategic Income Fund BLEND FUNDS Nations Bond Fund Nations Cash Nations Asset Reserves Nations Intermediate Allocation Fund Bond Fund Nations Money Nations Strategic Market Reserves Nations Government Growth Fund Securities Fund LOWER RISK/REWARD POTENTIAL Nations Government Reserves Nations Short- Intermediate Nations Treasury Government Fund VALUE FUNDS Reserves Nations Short-Term Nations SmallCap Nations Tax-Exempt Income Fund Value Fund Reserves Nations MidCap Nations Municipal Value Fund Reserves Nations California TAX-EXEMPT Nations Value Fund Tax-Exempt Reserves INCOME FUNDS Nations NewYork Nations Municipal SPECIALTY FUNDS Tax-Exempt Reserves Income Fund INDEX FUNDS Nations State-Specific Nations SmallCap Index Fund Long-Term Municipal Bond Funds (CA, FL) Nations MidCap Index Fund Nations Intermediate Nations LargeCap Index Fund Municipal Bond Fund Nations LargeCap Enhanced Nations State-Specific Core Fund Intermediate Municipal Bond Funds (CA, FL, ASSET ALLOCATION GA, KS, MD, NC, SC, PORTFOLIOS TN, TX, VA) Nations LifeGoal Nations Short-Term Growth Portfolio Municipal Income Fund Nations LifeGoal Balanced Growth Portfolio Nations LifeGoal Income and Growth Portfolio Nations LifeGoal Income Portfolio OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/055V-0405 (05/05) 05/5726
Nations Convertible Securities Fund Nations Asset Allocation Fund Nations Value Fund Nations MidCap Value Fund Nations SmallCap Value Fund Nations Marsico Growth Fund Nations Strategic Growth Fund Nations Marsico Stock Funds Focused Equities Fund Nations Marsico MidCap Annual report for the year ended Growth Fund March 31, 2005 Nations Marsico 21st Century Fund Nations Small Company Fund [NATIONS FUNDS LOGO] A description of the policies and procedures that the funds use to determine how to vote proxies and a copy of the funds' voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment advisor to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [CHRISTOPHER WILSON PHOTO] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to help maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have also reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the better has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS PORTFOLIO COMMENTARY Nations Convertible Securities Fund 3 Nations Asset Allocation Fund 10 Nations Value Fund 17 Nations MidCap Value Fund 23 Nations SmallCap Value Fund 29 Nations Marsico Growth Fund 35 Nations Strategic Growth Fund 42 Nations Marsico Focused Equities Fund 49 Nations Marsico MidCap Growth Fund 56 Nations Marsico 21st Century Fund 63 Nations Small Company Fund 70 FINANCIAL STATEMENTS Investment portfolios 77 Statements of assets and liabilities 110 Statements of operations 112 Statements of changes in net assets 114 Schedules of capital stock activity 120 Financial highlights 132 Notes to financial statements 154 Report of independent registered public accounting firm 171 Tax information 172 Investment portfolios -- Nations Master Investment Trust 175 Nations Marsico Growth Master Portfolio 175 Nations Strategic Growth Master Portfolio 178 Nations Marsico Focused Equities Master Portfolio 182 Nations Small Company Master Portfolio 184 Statements of assets and liabilities 188 Statements of operations 189 Statements of changes in net assets 190 Financial highlights 192 Notes to financial statements 193 Report of independent registered public accounting firm 201 Fund governance 202 Board consideration and re-approval of investment advisory and sub-advisory agreements 205 Shareholder meeting results 210
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. [LIPPER FUND AWARDS USA 2005 LOGO] NATIONS FUNDS(R) EARNS 2005 LIPPER AWARD FOR "BEST EQUITY FUND GROUP" Lipper Inc., a widely respected data provider in the industry, calculates an NATIONS FUNDS WON THE "BEST EQUITY FUND GROUP" AMONG average total return for mutual funds LARGER FUND GROUPS. IN THE EQUITY ASSET CLASS, NATIONS with similar investment objectives as COMPETED WITH 61 OTHER ELIGIBLE FUND FAMILIES TO WIN THE those of the fund. AWARD. LIPPER DETERMINED THE LARGER FUND GROUP AWARDS BY AVERAGING THE DECILE RANK OF THE THREE-YEAR CONSISTENT RETURN SCORES FOR ALL OF THE FIRM'S FUNDS WITHIN THE ASSET CLASS, AND THE ELIGIBLE GROUP WITH THE LOWEST AVERAGE DECILE RANK RECEIVED THE AWARD FOR THAT ASSET CLASS. IN CASE OF A TIE, THE GROUP WITH THE LOWER AVERAGE PERCENTILE RANK RECEIVED THE AWARD. LARGER FUND GROUPS MUST HAVE AT LEAST THREE EQUITY, THREE BOND OR THREE MIXED EQUITY PORTFOLIOS THAT RECEIVED CONSISTENT RETURN SCORES AS OF DECEMBER 31, 2004 TO BE ELIGIBLE FOR A FUND GROUP AWARD IN THE RESPECTIVE ASSET CLASS. ALTHOUGH LIPPER MAKES REASONABLE EFFORTS TO ENSURE THE ACCURACY AND RELIABILITY OF THE DATA CONTAINED HEREIN, THE ACCURACY IS NOT GUARANTEED BY LIPPER. USERS ACKNOWLEDGE THAT THEY HAVE NOT RELIED UPON ANY WARRANTY, CONDITION, GUARANTEE OR REPRESENTATION MADE BY LIPPER. ANY USE OF THE DATA FOR ANALYZING, MANAGING OR TRADING FINANCIAL INSTRUMENTS IS AT THE USER'S OWN RISK. THIS IN NOT AN OFFER TO BUY OR SELL SECURITIES.
NATIONS CONVERTIBLE SECURITIES FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS CONVERTIBLE SECURITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks to provide investors with a total investment return, comprised of current income and capital appreciation, consistent with prudent investment risk. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Convertible Securities Fund Investor A Shares provided shareholders with a total return of 3.87%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Our investment style seeks to exploit to the fullest extent the unique characteristics of convertible securities, while adhering to a disciplined investment process and adapting to an ever-evolving market environment. Within the convertible securities asset class universe, we focus on securities known as balanced convertibles. Balanced convertibles exhibit both fixed income and equity features and generally produce the highest risk-adjusted returns. Over the long term, we believe that this strategy has the potential to outperform strategies that focus purely on high fixed income or equity sensitivity. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? The Nations Convertible Securities Fund (Investor A Shares) outperformed its benchmark, the Merrill Lynch All Convertibles All Qualities Index*** for each of the four quarters during the 12 months ended March 31, 2005. For the fiscal year, the fund posted a positive return of 3.87%, compared with a return of 0.24% for the Merrill Lynch All Convertibles All Qualities Index. Sector allocation and security selection accounted for the fund's outperformance relative to its benchmark, especially within the energy sector. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? With the exception of a rally late last year, most segments of the equity markets delivered weak performance for the 12-month period. Higher energy prices, an uncertain corporate profit outlook and rising short-term interest rates held the markets back. However, the fund posted positive returns for three of the four quarters while its benchmark registered losses for three quarters. Fund performance benefited from our bullish stance on energy, an emphasis on quality and a preference for companies that are growing their businesses over those that relied on cost cutting to bolster their bottom lines. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Merrill Lynch All Convertibles All Qualities Index is an unmanaged index which measures the performance of US dollar-denominated convertible securities of issuers not currently in bankruptcy with a total market value greater than $50 million at issuance. MOST CONVERTIBLE SECURITIES ARE BELOW INVESTMENT GRADE AND TEND TO BE MORE SPECULATIVE THAN HIGHER-RATED SECURITIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 NATIONS CONVERTIBLE SECURITIES FUND PORTFOLIO MANAGERS' COMMENTARY (continued) WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?+ The fund took an overweight position in the energy sector, led by the belief of a structural shift in the growth of global demand, lagging refining capacity and a higher cost structure of alternative resources. Large holdings in the sector included Amerada Hess and Chesapeake convertible preferred securities. The fund also had an underweight position in the information technology sector, due to its poor visibility, high inventory build up and a lack of pricing power. Sizeable exposure to basic materials and capital goods companies also proved beneficial, as China and other emerging nations devoured industrial materials. Among consumer discretionary sectors, our decision to underweight US automotive stocks and overweight exposure to hotel companies was rewarded. In autos, declining market share and profit margins, challenges from overseas, high inventories and onerous healthcare obligations all forced share prices lower. In the lodging industry, capacity increases fell behind robust demand; companies with high profiles in major urban and resort areas were the chief beneficiaries. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? Doral Financial, a diversified financial holding company with mortgage operations in Puerto Rico, declined on reports that management had overstated the value of certain assets. The fund's stake in Northwest Airlines also hurt returns when an anticipated rebound in business travel to Asia failed to materialize. Vishay Intertechnology, a U.S. electronic manufacturing supply company, also declined. Lackluster order flow, slack demand from customers in the auto industry, and stressful conditions in the computer and telecom markets were to blame. We have since reduced our positions in these names because the companies continue to face some challenges, with limited prospects going forward. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We think that overall economic conditions rather than technical trends in the convertible markets will drive results in upcoming months. With that outlook in mind, we have maintained a defensive positioning within the portfolio, with reduced exposure to non-convertible equities and increased overall credit quality. Although conditions remain challenging, we believe the headwinds are limited. Companies are not issuing large volumes of convertible securities; and currently attractive valuations may entice income-seeking equity investors to the convertible marketplace. With demand and supply roughly in balance, increased investor interest could easily push convertible valuations higher. History also suggests that if stock market volatility increases, investors may be drawn to convertibles because of their built-in option to convert to common shares when stock prices are favorable. Against that backdrop, we believe our "balanced convertibles" approach has the potential to do well. +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. 4 NATIONS CONVERTIBLE SECURITIES FUND PORTFOLIO MANAGERS' COMMENTARY (continued) Yanfang (Emma) Yan has co-managed the fund since 2001. She is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Richard Dahlberg has co-managed Nations Convertible Securities Fund since 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Edward Paik has co-managed the fund since 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 5 NATIONS CONVERTIBLE SECURITIES FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,038.44 1,020.59 4.42 4.38 0.87 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,036.60 1,019.35 5.69 5.64 1.12 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,033.11 1,015.61 9.48 9.40 1.87 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,033.36 1,015.61 9.48 9.40 1.87
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 6 NATIONS CONVERTIBLE SECURITIES FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 7 NATIONS CONVERTIBLE SECURITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 2.9% Consumer staples 5.0% Utilities 5.0% Telecommunications services 5.1% Materials 9.0% Energy 10.7% Financials 12.1% Industrials 13.0% Information technology 13.5% Consumer discretionary 18.7% Health care 5.0% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Tyco International, 3.13% 01/15/23 1.8% ------------------------------------------------- 2 Amazon.com, 4.75% 02/01/09 1.6% ------------------------------------------------- 3 Halliburton, 3.13% 07/15/23 1.4% ------------------------------------------------- 4 Nextel Communications, Class A, 5.25% 01/15/10 1.3% ------------------------------------------------- 5 Providian Financial, 2.75% 03/15/16 1.2% ------------------------------------------------- 6 Host Marriott, 3.25% 04/15/24 1.2% ------------------------------------------------- 7 Teva Pharmaceutical Industries, 0.50% 02/01/24 1.2% ------------------------------------------------- 8 Sealed Air, 3.00% 06/30/33 1.2% ------------------------------------------------- 9 Genzyme, 1.25% 12/01/23 1.2% ------------------------------------------------- 10 Invitrogen, 2.00% 08/01/23 1.2% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
8 NATIONS CONVERTIBLE SECURITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
MERRILL LYNCH ALL NATIONS CONVERTIBLE LIPPER CONVERTIBLE CONVERTIBLES ALL QUALITIES SECURITIES FUND SECURITIES FUNDS AVERAGE INDEX ------------------- ------------------------ -------------------------- Mar. 31 1995 9425 10000 10000 1996 11786 12163 12449 13583 13496 13594 1998 17259 17047 17594 17825 16994 18611 2000 24845 23613 26656 22887 20109 20834 2002 23683 20065 20982 21035 18728 19958 2004 27203 24147 25662 Mar. 31 2005 28264 24446 25725
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
MERRILL LYNCH ALL NATIONS CONVERTIBLE LIPPER CONVERTIBLE CONVERTIBLES ALL QUALITIES SECURITIES FUND SECURITIES FUNDS AVERAGE INDEX ------------------- ------------------------ -------------------------- Mar. 31 1995 10000 10000 10000 1996 12505 12163 12449 14412 13496 13594 1998 18312 17047 17594 18913 16994 18611 2000 26360 23613 26656 24283 20109 20834 2002 25128 20065 20982 22319 18728 19958 2004 28863 24147 25662 Mar. 31 2005 29985 24446 25725
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 11.61% 10.95%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Convertible Securities Fund over the last 10 years. The Merrill Lynch All Convertibles All Qualities Index is an unmanaged index which measures the performance of US dollar-denominated convertible securities of issuers not currently in bankruptcy with a total market value greater than $50 million at issuance. Funds in the Lipper Convertible Securities Funds Average invest their portfolios primarily in convertible bonds and convertible preferred shares. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B++ INVESTOR C PRIMARY A+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** INCEPTION DATE 5/21/99 9/25/87 7/15/98 10/21/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 4.18% 3.87% -2.12% 3.08% -1.92% 3.16% 2.16% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 6.30% 6.06% 3.98% 5.26% 4.35% 5.26% 5.26% 5 YEARS 2.86% 2.61% 1.40% 1.85% 1.55% 1.84% 1.84% 10 YEARS 11.88% 11.61% 10.95% 11.07% 11.07% -- -- SINCE INCEPTION 12.42% 12.27% 11.89% 11.96% 11.96% 9.00% 9.00%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. +Primary A Shares commenced operations on May 21, 1999 and have no performance prior to that date. Performance prior to May 21, 1999 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. These 12b-1 fees are not applicable to Primary A Shares. Inception date for Investor A Shares is September 25, 1987. ++Investor B Shares commenced operations on July 15, 1998 and have no performance prior to that date. Performance prior to July 15, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. 9 NATIONS ASSET ALLOCATION FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS ASSET ALLOCATION FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks to obtain long-term growth from capital appreciation plus dividend and interest income. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Asset Allocation Fund Investor A Shares provided shareholders with a total return of 4.80%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund invests in a mix of equity and fixed income securities that provide exposure primarily to the domestic capital markets. The fund seeks total return through a balance of long-term capital appreciation from equities and the stabilizing characteristics of fixed income investments. The equity portfolio invests in large- and mid-capitalization stocks of generally well-known companies that are recognized leaders in their industry. Combining rigorous fundamental research and quantitative analysis, the team selects securities according to their competitive advantages, solid or improving financial health and attractive valuations. Risk controls are utilized for adequate diversification across market capitalization, economic sectors and growth/value styles. The Russell 1000 Index,*** the benchmark for the equity portion of the fund, reflects the core investment style of the equity portfolio. Although the investment universe consists of both growth and value companies, the quantitative methods driving the investment process may, at times, warrant tactical tilts away from the fund's benchmark. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Asset Allocation Fund (Investor A Shares) returned 4.80% compared to a return of 4.86% for the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest US companies and represents approximately 90% of the US market. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. STOCKS OF MID-CAP COMPANIES POSE SPECIAL RISKS, INCLUDING POSSIBLE ILLIQUIDITY AND GREATER PRICE VOLATILITY THAN STOCKS OF LARGER, MORE ESTABLISHED COMPANIES. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN, BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 10 NATIONS ASSET ALLOCATION FUND PORTFOLIO MANAGERS' COMMENTARY (continued) Russell 1000 Index, its benchmark and Lehman Brothers US Aggregate Index+ in a 60/40 mix for the period. The Russell 1000 Index returned 7.24% and the Lehman Brothers US Aggregate Index returned 1.15% for the period. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? The US economy grew at a solid pace during the 12-month period. The labor market reported an increase in the number of new jobs and corporate profit growth was strong. However, inflationary concerns also increased. As a result, the Federal Reserve (The Fed) increased the federal funds rate, a key short-term interest rate, from 1.00% to 2.75% in seven one-quarter percentage steps during the period. Higher interest rates hurt bond market performance, but most of the damage was sustained by short-term bonds. As a result, bond investors turned to lower quality issues for the higher income they pay. While investment grade corporate bonds had a modest positive return, high-yield bonds were the best performing fixed income alternative during the period. By contrast, stock market investors exhibited a renewed aversion to risk and flocked to higher quality companies. Value stocks benefited from this trend, as did energy stocks and the stocks of companies paying out relatively high dividends. As investors turned more defensive, the mid-capitalization segment of the market benefited most and small-cap stocks had the weakest returns. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?++ Within the stock portfolio, the fund's holdings in the energy sector contributed significantly to performance, as high energy prices boosted stock prices. Valero Energy and Marathon Oil were two of the area's strongest contributors. Stock selection in the health care, financial and basic materials sectors also aided returns. In the health care sector, Triad Hospitals was a top performer. Strong performance from Charter One Financial and Aetna in the financial area, also helped drive the fund's results. Copper producer Phelps Dodge was another significant contributor. Within the bond portfolio, the funds' substantial holdings in corporate bonds relative to its benchmark were favorable to performance. A sizeable allocation to high-yield bonds also helped. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? Poor performance from equity holdings in the consumer cyclical, consumer staples and communications sectors of the market detracted from the fund's return. Lear, Wal-Mart Stores and Clear Channel Communications were among the stocks in these areas that hurt results. A relatively light allocation to the mortgage-backed sector of the bond market during the first half of the period also detracted, as that sector outperformed Treasuries and investment-grade corporate issues. +The Lehman Brothers US Aggregate Index is an unmanaged index of US government agency and US Treasury securities, corporate bonds, and agency- and mortgage-backed securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. 11 NATIONS ASSET ALLOCATION FUND PORTFOLIO MANAGERS' COMMENTARY (continued) HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? With the expectation that interest rates are likely to continue to move higher, we have focused on segments of the bond market that we believe have the lowest vulnerability to higher rates, including corporate bonds, mortgage- and asset-backed securities. We have also increased the fund's exposure to high-quality, dividend-paying stocks and lowered exposure to small-cap stocks because we believe that baby boomers advancing to retirement are more likely to favor the former and grow less comfortable with the latter. These sectors represent larger segments of the fund's portfolio than they do in its benchmark, which we believe positions the fund to take advantage of current trends. --------------------------------------------- Vikram Kuriyan has comanaged the equity portion of Nations Asset Allocation Fund since February 2005. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Michael Welhoelter has comanaged the equity portion of the fund since February 2005. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Leonard Aplet has comanaged the fixed-income and money market portions of the fund since February 2005. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Richard Cutts has comanaged the fixed-income and money market portions of the fund since February 2005. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Prior to February 2005, the fund was managed by the Quantitative Strategies Group and the Fixed Income Management Team. 12 NATIONS ASSET ALLOCATION FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,050.36 1,019.75 5.32 5.24 1.04 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,049.02 1,018.50 6.59 6.49 1.29 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,044.88 1,014.76 10.40 10.25 2.04 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,045.08 1,014.76 10.40 10.25 2.04
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of the expenses, total return would have been reduced. 13 NATIONS ASSET ALLOCATION FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 14 NATIONS ASSET ALLOCATION FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 67.8% Common stocks 11.7% Mortgage-backed securities 9.3% Corporate fixed-income bonds and notes 6.9% Government agencies and obligations 4.1% Asset-backed securities 0.2% Collateralized mortgage obligations
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS - ------------------------------------------------- 1 FNMA 5.00% 04/15/20 4.0% - ------------------------------------------------- 2 General Electric 2.1% - ------------------------------------------------- 3 U.S. Treasury Bonds, 6.25% 8/15/23 2.1% - ------------------------------------------------- 4 Exxon Mobil 2.0% - ------------------------------------------------- 5 FNMA 5.00% 04/15/35 1.9% - ------------------------------------------------- 6 Citigroup 1.9% - ------------------------------------------------- 7 GNMA 5.50% 03/15/35 1.8% - ------------------------------------------------- 8 Johnson & Johnson 1.7% - ------------------------------------------------- 9 Pfizer 1.5% - ------------------------------------------------- 10 Microsoft 1.3% - ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
15 NATIONS ASSET ALLOCATION FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS ASSET LIPPER BALANCED FUNDS LEHMAN BROTHERS U.S. ALLOCATION FUND AVERAGE RUSSELL 1000 INDEX AGGREGATE INDEX --------------- --------------------- ------------------ -------------------- Mar. 31 1995 9425.00 10000.00 10000.00 10000.00 11404.00 12152.00 13274.00 11079.00 1997 12979.00 13468.00 15642.00 11623.00 16942.00 17332.00 23200.00 13017.00 1999 19419.00 18620.00 27066.00 13861.00 21487.00 20752.00 32801.00 14121.00 2001 19327.00 19507.00 25339.00 15890.00 19318.00 19844.00 25559.00 16740.00 2003 16217.00 17235.00 19294.00 18697.00 20228.00 21368.00 26312.00 19707.00 Mar. 31 2005 21203.00 22288.00 28220.00 19932.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS ASSET LIPPER BALANCED FUNDS LEHMAN BROTHERS U.S. ALLOCATION FUND AVERAGE RUSSELL 1000 INDEX AGGREGATE INDEX --------------- --------------------- ------------------ -------------------- Mar. 31 1995 10000 10000 10000 10000 12100 12152 13274 11079 1997 13771 13468 15642 11623 17975 17332 23200 13017 1999 20603 18620 27066 13861 22798 20752 32801 14121 2001 20506 19507 25339 15890 20496 19844 25559 16740 2003 17207 17235 19294 18697 21462 21368 26312 19707 Mar. 31 2005 22492 22288 28220 19932
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 8.44% 7.80%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Asset Allocation Fund over the last 10 years. The Lehman Brothers US Aggregate Index is an unmanaged index of US Treasury securities, US government agency securities, corporate bonds and agency-and mortgage-backed securities. The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest US companies and represents approximately 90% of the US equity market. Funds in the Lipper Balanced Funds Average have a primary objective of conserving principal by maintaining, at all times, a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B++ INVESTOR C PRIMARY A+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 1/18/94 7/15/98 11/11/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 5.01% 4.80% -1.22% 3.97% -1.03% 4.02% 3.02% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 3.34% 3.14% 1.12% 2.31% 1.35% 2.31% 2.31% 5 YEARS -0.04% -0.27% -1.45% -1.05% -1.41% -1.05% -1.05% 10 YEARS 8.72% 8.44% 7.80% 7.89% 7.89% -- -- SINCE INCEPTION 8.32% 8.08% 7.51% 7.58% 7.58% 5.52% 5.52%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75% **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect at CDSC fees of 1.00% in the first year after purchase. +Primary A Shares commences operations on May 21, 1999 and have no performance prior to that date. Performance prior to May 21, 1999 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. These 12b-1 are not applicable to Primary A Shares. Inception date for Investor A Shares is January 18, 1994. ++Investor B Shares commenced operations on July 15, 1998 and have no performance prior to that date. Performance prior to July 15, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. Inception date for Investor A Shares is January 18, 1994. 16 NATIONS VALUE FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks growth of capital by investing in companies that are believed to be undervalued. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Value Fund Investor A Shares provided shareholders with a total return of 12.16%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. We focus on stocks that have attractive valuations based upon measures such as price-to-earnings and price-to-cash flow ratios, and seek to achieve moderately lower volatility when compared with the broad market. It is our belief that undervalued and misunderstood stocks may deliver superior risk-adjusted performance over time. Further, we believe that companies can go through periods when their business prospects temporarily deteriorate, resulting in stock prices that are below what we perceive to be their fair values. We also think that a disciplined investment process that combines a valuation screen, fundamental research and a comprehensive risk-management strategy is the best way to identify investment opportunities. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Value Fund (Investor A Shares) returned 12.16% compared with a return of 13.17% for the Russell 1000 Value Index,*** its benchmark. The Lipper Multi-Cap Value Funds Average+ returned 9.96% over that same time period. WHAT ECONOMIC AND MARKET FACTORS INFLUENCED PERFORMANCE? As interest rates rose stock prices declined relative to their earnings, but this was more than offset by an improvement in corporate profits. Despite positive returns over the period, investors became increasingly concerned about an economic slowdown driven by either higher interest rates or higher energy prices. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?++ Much of the portfolio's success was driven by sector allocation. Decisions to de-emphasize consumer stocks and to focus on basic industries and capital goods stocks, where demand was quite strong, were rewarded. Given the perceived risk of rising interest rates, the underweight in financial stocks was also beneficial. Stock *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Russell 1000 Value Index is an unmanaged index which measures the performance of those securities in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth rates. +Lipper Inc. is an independent mutual fund performance monitor. Funds in the Lipper Multi-Cap Value Funds Average invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range. ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 17 NATIONS VALUE FUND PORTFOLIO MANAGERS' COMMENTARY (continued) selection in the financial sector was very strong with names such as Wachovia and Wells Fargo posting good results. In addition, a number of our REIT (Real Estate Investment Trust) holdings were up strongly as well. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? Selected holdings in the communications sector detracted from performance, including Clear Channel Communications, the largest owner of radio stations in the United States, and Dow Jones, best known as the publisher of the Wall Street Journal. Both companies were hurt by a soft advertising environment, which was reflected in their stock prices. Within telecommunications, most of the fund's exposure was to the regional bell operating companies (RBOCs), which have had to raise spending to fend off competitive threats. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We believe that the portfolio is positioned to benefit from continued economic growth as well as moderately rising interest rates. We are focused on the most attractively valued companies within a broad range of economic sectors. We look to increase the number of positions moving forward in order to reduce stock specific risk. ---------------------------------------------- Lori Ensinger has co-managed Nations Value Fund since August 2001. Ms. Ensinger is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Diane Sobin co-managed the fund since August 2001. Ms. Sobin is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. The Board of Trustees of the Funds approved a proposal to merge the Columbia Growth & Income Fund into the Nations Value Fund, subject to approval by shareholders of the Fund and the satisfaction of certain other conditions. The merger is expected to be completed in the third quarter of 2005. 18 NATIONS VALUE FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,118.03 1,021.14 4.01 3.83 0.76 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,115.93 1,019.90 5.33 5.09 1.01 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,112.39 1,016.16 9.27 8.85 1.76 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,112.39 1,016.16 9.27 8.85 1.76
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of the expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 19 NATIONS VALUE FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 20 NATIONS VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 3.2% Telecommunication services 4.6% Information technology 4.8% Health care 6.2% Utilities 7.0% Consumer staples 7.1% Materials 10.3% Consumer discretionary 13.9% Energy 14.8% Industrials 25.4% Financials 2.7% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Exxon Mobil 4.6% ------------------------------------------------- 2 Citigroup 3.5% ------------------------------------------------- 3 Altria Group 3.3% ------------------------------------------------- 4 General Electric 2.8% ------------------------------------------------- 5 Wachovia 2.5% ------------------------------------------------- 6 Merrill Lynch 2.3% ------------------------------------------------- 7 United Technologies 1.9% ------------------------------------------------- 8 ChevronTexaco 1.9% ------------------------------------------------- 9 Genworth Financial 1.7% ------------------------------------------------- 10 US Bancorp 1.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
21 NATIONS VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
LIPPER MULTI-CAP VALUE NATIONS VALUE FUND FUNDS AVERAGE RUSSELL 1000 VALUE INDEX ------------------ ---------------------- ------------------------ Mar. 31 1995 9425 10000 10000 1996 12291 12786 13349 14479 14782 15761 1998 20013 20619 23196 20805 20370 24365 2000 20708 22144 25909 20233 23187 25979 2002 21312 24655 27117 15521 18861 20937 2004 21964 26745 29484 Mar. 31 2005 24633 29400 33367
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
LIPPER MULTI-CAP VALUE NATIONS VALUE FUND FUNDS AVERAGE RUSSELL 1000 VALUE INDEX ------------------ ---------------------- ------------------------ Mar. 31 1995 10000 10000 10000 1996 13041 12786 13349 15362 14782 15761 1998 21234 20619 23196 22075 20370 24365 2000 21971 22144 25909 21468 23187 25979 2002 22612 24655 27117 16468 18861 20937 2004 23304 26745 29484 Mar. 31 2005 26138 29400 33367
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 10.08% 9.43%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Value Fund over the last 10 years. The Russell 1000 Value Index is an unmanaged index which measures the performance of those securities in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth rates. Funds in the Lipper Multi-Cap Value Funds Average invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range. The indices are unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/19/89 12/6/89 6/7/93 6/17/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 12.51% 12.16% 5.73% 11.31% 6.31% 11.36% 10.36% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.19% 4.95% 2.89% 4.12% 3.19% 4.13% 4.13% 5 YEARS 3.81% 3.54% 2.32% 2.75% 2.46% 2.76% 2.76% 10 YEARS 10.37% 10.08% 9.43% 9.31% 9.31% 9.39% 9.39% SINCE INCEPTION 10.42% 10.32% 9.90% 9.14% 9.14% 9.54% 9.54%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CSDC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CSDC fee of 1.00% in the first year after purchase. 22 NATIONS MIDCAP VALUE FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS MIDCAP VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term growth of capital with income as a secondary consideration. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations MidCap Value Fund Investor A Shares provided shareholders with a total return of 19.90%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. We focus on mid-capitalization stocks that have attractive valuations based upon measures such as price-to-earnings and price-to-cash flow ratios, and seek to achieve moderately lower volatility when compared with the broad market. It is our belief that undervalued and misunderstood stocks can deliver superior risk-adjusted performance over time. Further, we believe companies can go through periods when their business prospects deteriorate, resulting in stock prices that are below what we perceive to be their fair values. We also think that a disciplined investment process that combines a valuation screen, fundamental research and a comprehensive risk- management strategy is the best way to identify investment opportunities. HOW DID THE FUND PERFORM OVER THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations MidCap Value Fund (Investor A Shares) returned 19.90% compared with a return of 18.34% for the Russell MidCap Value Index,*** its benchmark. WHAT ECONOMIC AND MARKET FACTORS INFLUENCED PERFORMANCE? As interest rates rose, stock valuations compressed. However, this was more than offset by an improvement in corporate profits. Returns were positive for the period but investors became increasingly concerned about an economic slowdown driven by either higher interest rates or higher energy prices. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?++ Much of the portfolio's success was driven by stock selection. Decisions to deemphasize consumer staples stocks and to focus on basic industry stocks, where demand was quite strong, were rewarded. The fund also had more exposure to energy -- the strongest sector performer for the period -- than the index, which paid off as oil prices rose. Given the perceived risk of rising interest rates, an underweight in financial stocks also worked. Yet, selected financial stocks performed well, such as Legg Mason. More important, the average return of the bank stocks we owned was more than twice the return of the bank stocks in the benchmark. Stock selection also helped results, including Aetna within health care and Martin Marietta Materials in the consumer cyclicals area. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. ***The Russell Midcap Value Index is an unmanaged index which measures the performance of those securities in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth rates. ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. 23 NATIONS MIDCAP VALUE FUND PORTFOLIO MANAGERS' COMMENTARY (continued) WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? Generally speaking, unfavorable factors were the result of disappointing performance from specific stocks. A slight overweight relative to the index in technology stocks, especially networking stocks, hurt performance. Many of these companies were hurt by lower-than-anticipated capital spending activity. In communications, a slower advertising environment hurt Dow Jones, the publisher of the Wall Street Journal. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We believe that the portfolio is positioned to benefit from continued economic growth as well as moderately rising interest rates. We are focused on finding the most attractively valued companies within a broad range of economic sectors. We look to increase the number of positions moving forward in order to reduce stock specific risk. --------------------------------------------------- Diane Sobin has co-managed Nations MidCap Value Fund since November 2001. Ms. Sobin is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. David Hoffman has co-managed the fund since April 2004. Mr. Hoffman is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. INVESTING IN MID-CAP STOCKS MAY PRESENT SPECIAL RISKS, INCLUDING POSSIBLE ILLIQUIDITY AND GREATER PRICE VOLATILITY THAN STOCKS OF LARGER, MORE ESTABLISHED COMPANIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 24 NATIONS MIDCAP VALUE FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,159.41 1,020.29 5.01 4.68 0.93 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,158.32 1,019.05 6.35 5.94 1.18 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,154.13 1,015.31 10.37 9.70 1.93 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,153.88 1,015.31 10.36 9.70 1.93
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 25 NATIONS MIDCAP VALUE FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 26 NATIONS MIDCAP VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.5% Telecommunication services 4.5% Consumer staples 5.2% Health care 5.5% Information technology 7.4% Energy 8.5% Utilities 12.1% Materials 12.5% Consumer discretionary 18.3% Industrials 23.2% Financials 2.3% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Constellation Energy Group 1.4% ------------------------------------------------- 2 Marshall and Ilsley 1.3% ------------------------------------------------- 3 Martin Marietta Materials 1.3% ------------------------------------------------- 4 UST 1.3% ------------------------------------------------- 5 Marathon Oil 1.2% ------------------------------------------------- 6 Dollar General 1.2% ------------------------------------------------- 7 Pitney Bowes 1.2% ------------------------------------------------- 8 Sempra Energy 1.2% ------------------------------------------------- 9 Burlington Northern Santa Fe 1.1% ------------------------------------------------- 10 Waste Management 1.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
27 NATIONS MIDCAP VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS MIDCAP VALUE FUND RUSSELL MIDCAP VALUE INDEX ------------------------- -------------------------- Nov. 20 2001 9425.00 10000.00 10685.00 11276.00 2002 8296.00 9060.00 12261.00 13735.00 Mar. 31 2005 14702.00 16252.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MIDCAP VALUE FUND RUSSELL MIDCAP VALUE INDEX ------------------------- -------------------------- Nov. 20 2001 10000.00 10000.00 11337.00 11276.00 2002 8802.00 9060.00 13009.00 13735.00 Mar. 31 2005 15599.00 16252.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (11/20/01 through 3/31/05) 14.15% 12.16%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations MidCap Value Fund from the inception of the share class. The Russell Midcap Value Index is an unmanaged index which measures the performance of those securities in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth rates. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 11/20/01 11/20/01 11/20/01 11/20/01 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 20.16% 19.90% 13.00% 18.91% 13.91% 18.97% 17.97% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 11.44% 11.22% 9.05% 10.36% 9.53% 10.39% 10.39% SINCE INCEPTION 14.43% 14.15% 12.16% 13.29% 12.62% 13.31% 13.31%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower, Investor A Shares are available with a reduced on waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 28 NATIONS SMALLCAP VALUE FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS SMALLCAP VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term growth of capital by investing in small capitalization companies believed to be undervalued. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations SmallCap Value Fund Investor A Shares provided shareholders with a total return of 13.42%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. We focus on stocks that have attractive valuations based upon measures such as price-to-earnings and price-to-cash flow ratios. It is our belief that undervalued and misunderstood stocks have the potential to deliver superior risk-adjusted performance over time. We also think that a disciplined investment process that combines a valuation screen, fundamental research and a comprehensive risk management strategy is the best way to identify investment opportunities. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations SmallCap Value Fund (Investor A Shares) returned 13.42%, compared with a return of 9.79% for its benchmark, the Russell 2000 Value Index.*** The Lipper Small-Cap Value Funds Average+ returned 11.42% over that same time period. The fund outperformed its benchmark mostly because of good stock selection. Seven of the fund's ten sectors outperformed the return of their respective index groups. WHAT ECONOMIC AND MARKET FACTORS INFLUENCED PERFORMANCE? Value stocks were generally strong performers during the reporting period. Increased global economic activity, a resurgence of domestic manufacturing and a weak US dollar bolstered returns on investments in energy, basic industry, capital goods and utility companies. Stronger economic growth and higher commodity prices also raised the specter of inflation and higher interest rates, which put pressure on the financial sector. In addition, corporate spending on information technology infrastructure remained below historical averages, intensifying *The outlook for the fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Russell 2000 Value Index, an unmanaged index, measures the performance of those securities in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth rates. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +Lipper Inc. is an independent mutual fund performance monitor. Funds in the Lipper Small-Cap Value Funds average typically have below-average price-to-earnings and price-to-book ratios compared to the S&P SmallCap 600 Index. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. INVESTMENTS IN SMALL-CAP STOCKS MAY BE SUBJECT TO GREATER VOLATILITY AND PRICE FLUCTUATIONS BECAUSE THEY MAY BE THINLY TRADED AND LESS LIQUID THAN INVESTMENTS IN LARGER COMPANIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 29 NATIONS SMALLCAP VALUE FUND PORTFOLIO MANAGERS' COMMENTARY (continued) challenges faced by companies in already highly competitive technology industries with few barriers to entry and low-cost foreign competition. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?**** Holdings in the basic industry, capital goods and finance sectors provided the largest contribution to performance during the reporting period. The fund's overweight in the basic industries sector amplified very strong company-specific returns from select chemical and steel investments. Millenium Chemicals, which was acquired during the period, and Crompton were top contributors. Specialty steel producer Carpenter Technology and minimill Steel Dynamics also added notably to the fund's return. We eliminated Millenium Chemicals and Steel Dynamics later in the period. These stocks were the beneficiaries of a rise in commodity prices buoyed by worldwide economic growth. Strong performance from investments in the capital goods group reflected our strategy of overweighting sectors where stocks had been trading at unusually low valuations. Good stock selection and below-index exposure to the weak financial sector also helped. In the financial sector, we underweighted stocks of regional banks and real estate investment trusts, areas that are highly vulnerable to interest rate pressures. In addition, our valuation discipline helped us avoid biotechnology stocks, while emphasizing holdings in health care services. In contrast to a negative sector return for the index, the fund's investments in health care rose more than 20%. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? The fund's underweight in the energy sector, by far the top performing group for the benchmark index, held back performance. Although the fund's energy investments generated its highest sector return, 54%, the fund had proportionately less exposure to oil and gas exploration stocks in its portfolio than the index. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We have positioned the fund for continued growth in the US economy and continued increases by the Federal Reserve Board that could put pressure on long-term interest rates and the dollar. In this environment, we are looking for attractively valued companies that have strong balance sheets as well as opportunities to improve their operating performance. At the same time, we are positioning the fund to minimize exposure to interest-rate and currency risks. Given the strong performance of value stocks during the reporting period, we are attracted to companies that are increasing their dividends or repurchasing shares. We are also seeking stocks that could benefit from increased capital spending for equipment and technology in the business sector. The strategy remains to look for companies that we believe are undervalued yet, in our opinion, have good long-term growth opportunities. --------------------------------------------------- Christian Stadlinger has co-managed the fund since May 2002. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Jarl Ginsberg has co-managed Nations Small Cap Value Fund since February 2003. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 30 NATIONS SMALLCAP VALUE FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,099.83 1,019.15 6.07 5.84 1.16 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,098.58 1,017.85 7.43 7.14 1.42 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,094.84 1,014.11 11.33 10.90 2.17 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,093.99 1,014.16 11.28 10.85 2.16
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of expenses, total return would have been reduced. 31 NATIONS SMALLCAP VALUE FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 32 NATIONS SMALLCAP VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.9% Telecommunication Services 3.9% Utilities 3.6% Consumer staples 3.7% Energy 3.8% Health care 8.5% Materials 10.4% Information technology 13.1% Consumer discretionary 23.6% Financials 24.6% Industrials 3.9% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Kennametal 1.2% ------------------------------------------------- 2 Century Aluminum 1.2% ------------------------------------------------- 3 Finish Line 1.1% ------------------------------------------------- 4 Apollo Investment 1.1% ------------------------------------------------- 5 Equity Inns 1.1% ------------------------------------------------- 6 Manitowoc 1.1% ------------------------------------------------- 7 Longs Drug Stores 1.1% ------------------------------------------------- 8 FTI Consulting 1.1% ------------------------------------------------- 9 Overnite 1.0% ------------------------------------------------- 10 Hercules 1.0% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
33 NATIONS SMALLCAP VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS SMALLCAP VALUE LIPPER SMALL-CAP VALUE FUND FUNDS AVERAGE RUSSELL 2000 VALUE INDEX ---------------------- ---------------------- ------------------------ May 1 2002 9425 10000 10000 2002 8991 9433 9455 7427 7605 7442 7772 8003 7808 7281 7544 7412 2003 8679 9163 9095 9359 9874 9798 11009 11443 11401 11696 12149 12190 2004 11971 12368 12294 12074 12265 12312 13635 13829 13938 Mar. 31 2005 13265 13537 13384
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART] Nations SmallCap Value Fund Lipper Small-Cap Value Funds Average May 1 2002 10000 10000 2002 9540 9433 7880 7605 8246 8003 7725 7544 2003 9209 9163 9930 9874 11681 11443 12410 12149 2004 12702 12368 12811 12265 14467 13829 Mar. 31 2005 14074 13537 Russell 2000 Value Index May 1 2002 10000 2002 9455 7442 7808 7412 2003 9095 9798 11401 12190 2004 12294 12312 13938 Mar. 31 2005 13384
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (5/1/02 through 3/31/05) 12.43% 10.17%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations SmallCap Value Fund from the inception of the share class. The Russell 2000 Value Index is an unmanaged index which measures the performance of those securities in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth rates. Funds in the Lipper Small-Cap Value Funds Average typically have below-average price-to-earnings and price-to-book ratios compared to the S&P SmallCap 600 Index. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/01/02 5/01/02 5/01/02 5/01/02 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 13.72% 13.42% 6.88% 12.59% 7.59% 12.51% 11.51% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURN SINCE INCEPTION 12.73% 12.43% 10.17% 11.61% 10.77% 11.59% 11.59%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 34 NATIONS MARSICO GROWTH FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MARSICO GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Marsico Growth Fund Investor A Shares provided shareholders with a total return of 7.85%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Marsico Growth Fund seeks long-term growth of capital. The fund invests primarily in large-capitalization equity securities that are selected for their long-term growth potential. Generally, the fund holds 35 to 50 securities allocated across a variety of economic sectors and industries. The investment process blends top-down macroeconomic analysis with bottom-up stock selection. Specific macroeconomic factors include interest rates, inflation, productivity data, commodity prices, the regulatory environment, fiscal policy and geopolitical issues. Characteristics sought in individual companies include strong brand franchise; improving fundamentals (e.g., gains in market share, improving profitability, strong free cash flow); strong balance sheets; excellent distribution and marketing capabilities; apparent commitment to shareholder interests; and talented, management teams with an incentive to do well. The fund will typically own three types of stocks: core growth, aggressive growth, and life-cycle change. The latter category refers to companies that are experiencing some sort of positive, fundamental transformation in their business (e.g., new product, acquisition, divestiture, new management team) that, in our view, augurs well for future earnings growth potential. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Marsico Growth Fund (Investor A Shares) returned 7.85% compared with a return of 6.69% for its benchmark, the S&P 500 Index.*** The fund's strong performance resulted primarily from good stock selection in the consumer discretionary, health care, financials and industrials sectors. The fund outperformed the index despite a lack of exposure to the top-performing energy sector, a testament to good stock selection in other areas, as well as sector- and industry-level positioning. *The outlook for the fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total sales returns would have been lower. ***The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. THE FUND MAY INVEST UP TO 25% OF ITS ASSETS IN FOREIGN SECURITIES. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 35 NATIONS MARSICO GROWTH FUND PORTFOLIO MANAGER COMMENTARY (continued) WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? At the beginning of the period, rising oil prices, inflation, rising interest rates and geopolitical risks dominated investors' concerns. Investors were also apprehensive about the US presidential election. There were fears that it would be contested or that there might be a terrorist attack in the days preceding or following the election. Then George W. Bush was definitively elected to a second term without incident. Oil prices had a modest decline. And, the war in Iraq seemed to have less of an impact on investors as these factors were favorably resolved. As a result, the fourth quarter of 2004 was a very good one for the market. Both the third and fourth quarters were good for the fund. However, the period ended on a less positive note as concerns about the continued growth of the US economy were rekindled by rising oil prices and increasing interest rates. As measured by the S&P 500 Index, the domestic equity market returned negative 2.15% for the first quarter of 2005. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?**** The fund's holdings in Wynn Resorts, Mandalay Resort Group and Four Seasons Hotels were among the largest contributors to overall performance. We sold Mandalay Resort Group by the end of the period. The performance lift from these individual stocks was amplified by the fund's heavy weight in this industry group (hotels, restaurants and leisure). Stock selection and an overweight position in the health care equipment and services industry also benefited performance. The fund's position in UnitedHealth Group emerged as the largest individual stock contributor for the reporting period. Performance was helped by holdings in the diversified financial industry and by a lack of exposure to insurance companies in the financial sector. SLM and Goldman Sachs Group, two of the fund's larger positions, performed well. In addition, a position in FedEx benefited the fund's results in the transportation industry. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? The fund missed out on gains from the energy sector, which posted the benchmark index's strongest absolute return for the reporting period. The fund had no exposure to energy companies for most of the year. Positions in Tiffany & Co. and eBay accounted for disappointing results from investments in the retailing industry. We sold Tiffany & Co. and eBay by the end of the period. Specific stock selection was also to blame in the information technology software and services industry, where the fund lost some ground with its investment in Electronic Arts. In addition, the fund's below-index exposure to utilities companies held back performance. The utilities sector generated a strong absolute return for the benchmark index during the period. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Marsico Capital Management, LLC. Marsico Capital Management, LLC (Marsico) is an SEC-registered investment advisor and wholly owned subsidiary of Bank of America, N.A. 36 NATIONS MARSICO GROWTH FUND PORTFOLIO MANAGER COMMENTARY (continued) HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? As of March 31, 2005, the fund emphasized health care, consumer discretionary and industrials investments. The fund had no exposure to the materials or telecommunications services sectors at the end of the reporting period. --------------------------------------------------- Thomas F. Marsico has managed Nations Marsico Growth Fund since December 1997 and has been with the advisor or its predecessors or affiliate organizations since October 1997. He is also Chief Executive Officer of Marsico Capital Management, LLC. 37 NATIONS MARSICO GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,070.76 1,019.90 5.21 5.09 1.01 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,069.66 1,018.60 6.55 6.39 1.27 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,065.87 1,014.86 10.40 10.15 2.02 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,065.77 1,014.86 10.40 10.15 2.02
Expenses paid during the period are equal to the annualized expense for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 38 NATIONS MARSICO GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 39 NATIONS MARSICO GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.0% Utilities 3.9% Energy 5.5% Consumer staples 8.4% Information technology 13.6% Financials 13.8% Industrials 21.2% Health care 22.6% Consumer discretionary 10.0% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 UnitedHealth Group 7.0% ------------------------------------------------- 2 General Electric 3.9% ------------------------------------------------- 3 Genentech 3.6% ------------------------------------------------- 4 Procter & Gamble 3.2% ------------------------------------------------- 5 QUALCOMM 3.2% ------------------------------------------------- 6 FedEx 3.2% ------------------------------------------------- 7 Zimmer Holdings 3.1% ------------------------------------------------- 8 Dell 2.9% ------------------------------------------------- 9 SLM 2.9% ------------------------------------------------- 10 Lowe's 2.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
40 NATIONS MARSICO GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN GRAPH]
NATIONS MARSICO GROWTH LIPPER LARGE-CAP GROWTH FUND FUNDS AVERAGE S&P 500 INDEX ---------------------- ----------------------- ------------- Dec. 31 1997 9425 10000 10000 11338 12370 11395 1998 14103 15496 13499 20450 21535 15920 2000 14186 14013 12469 14043 13278 12499 2002 11314 9782 9404 2004 15073 12697 12707 Mar. 31 2005 16256 12860 13558
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN GRAPH]
NATIONS MARSICO GROWTH LIPPER LARGE-CAP GROWTH FUND FUNDS AVERAGE S&P 500 INDEX ---------------------- ----------------------- ------------- Dec. 31 1997 10000 10000 10000 12030 12370 11395 1998 14963 15496 13499 21698 21535 15920 2000 15052 14013 12469 14900 13278 12499 2002 12005 9782 9404 2004 15993 12697 12707 Mar. 31 2005 17248 12860 13558
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/31/97 through 3/31/05) 7.81% 6.93%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico Growth Fund from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies with long-term earnings expected to grow significantly. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception Date 12/31/97 12/31/97 12/31/97 12/31/97 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 8.08% 7.85% 1.67% 7.01% 2.01% 7.00% 6.00% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.26% 5.00% 2.94% 4.23% 3.30% 4.22% 4.22% 5 YEARS -4.24% -4.49% -5.61% -5.20% -5.57% -5.19% -5.19% SINCE INCEPTION 7.99% 7.81% 6.93% 7.05% 7.05% 7.06% 7.06%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 41 NATIONS STRATEGIC GROWTH FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS STRATEGIC GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Strategic Growth Fund Investor A Shares provided shareholders with a total return of 4.71%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Strategic Growth Fund seeks long-term capital growth with an emphasis on maximizing after-tax returns. Our intent is to hold a blend of large capitalization growth and value stocks with a medium to long-term investment horizon in mind. We employ an integrated approach to portfolio construction by combining fundamental and quantitative research to select companies that we believe have long-term sustainable competitive advantages. The fund typically invests in companies that are recognized leaders in their industries, have strong track records and are in sound financial condition. Through our top-down framework and bottom-up stock selection, we create a portfolio of companies that we believe have long-term sustainable competitive advantages. We attempt to manage and monitor the portfolio's risk through diversification and quantitative techniques. In order to monitor risk, we use a tracking error method that measures the volatility of the fund's performance. We have a consistent approach to risk and seek a variation over time of no more than 5 percentage points between the fund's return and that of its benchmark, the S&P 500 Index.*** In addition, we employ customized risk-measurement tools, which help us understand the nature of risks taken in the portfolio and help ensure that we are taking risks for which we can be rewarded. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Strategic Growth Fund (Investor A Shares) returned 4.71%, compared with a return of 6.69% for its benchmark, the S&P 500 Index. A handful of disappointing earnings announcements which led to dramatic share price declines was the primary driver of underperformance during the early part of the reporting period. Sector allocation decisions also hurt performance during the remainder of the period. After we took over the fund's management in the second half of 2004, the fund's stock selection improved and changes to the fund's sector allocation process helped diminish negative results. *The outlook for the fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reject fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 42 NATIONS STRATEGIC GROWTH FUND PORTFOLIO MANAGERS' COMMENTARY (continued) WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? The market's preference for smaller-sized and lower quality companies hurt the fund's performance during the early part of the reporting period. However, as the economic expansion slowed, investors shifted their preference to larger, higher quality companies. This benefited the fund since these are the types of companies that make up the majority of the fund's portfolio. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?**** Stock selection within the consumer discretionary, materials and utilities sectors aided performance. Positions in Yum! Brands and selected department stores, in Brazilian mining company Companhia Vale do Rio Doce, and in Peabody Energy were among the fund's biggest contributors in these areas. The fund's overweight in the energy sector, which was by far the top performing group in the index, also added significantly to investment results. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? Overweights in information technology and telecommunications services hurt performance. Both sectors struggled during the year and were among the weakest areas in the index. Stock selection in the health care, consumer staples, information technology and financial sectors also detracted from return. Pfizer, whose shares fell sharply in the wake of concerns about the safety of COX-2 inhibitors, drugs used in treatment of pain, was responsible for almost one percentage point of the fund's shortfall relative to the index return. Disappointing investment results from Wal-Mart Stores, Fairchild Semiconductor and Citigroup also detracted from performance. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We believe that the fund's new management team has brought significant resources to stock selection as well as portfolio allocation tools that have the potential to enhance performance within the framework of a sector-neutral investment strategy. We will continue to seek larger capitalized companies that demonstrate high quality characteristics such as low leverage, earnings consistency and free cash flow generation. We think companies with these attributes have the potential to outperform the more cyclically vulnerable companies that have over-earned during the recent economic expansion. --------------------------------------------- Brian Condon has co-managed Nations Strategic Growth Fund since July 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Craig Leopold has co-managed the fund since July 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 43 NATIONS STRATEGIC GROWTH FUND PORTFOLIO MANAGERS' COMMENTARY (continued) George Maris has co-managed the fund since November 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Robert McConnaughey has co-managed the fund since July 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Colin Moore has co-managed the fund since July 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Peter Santoro has co-managed the fund since July 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Sean Wilson has co-managed the fund since July 2004. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 44 NATIONS STRATEGIC GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,069.16 1,020.94 4.13 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,068.41 1,019.70 5.41 5.29 1.05 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,064.97 1,015.96 9.27 9.05 1.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,063.82 1,015.96 9.26 9.05 1.80
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 45 NATIONS STRATEGIC GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 46 NATIONS STRATEGIC GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 3.0% Telecommunication services 3.0% Utilities 3.2% Materials 8.5% Energy 10.4% Consumer staples 10.6% Consumer discretionary 11.1% Industrials 13.2% Health care 15.7% Information technology 19.9% Financials 1.4% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Exxon Mobil 3.6% ------------------------------------------------- 2 Citigroup 3.4% ------------------------------------------------- 3 General Electric 2.8% ------------------------------------------------- 4 Johnson & Johnson 2.4% ------------------------------------------------- 5 PepsiCo 2.1% ------------------------------------------------- 6 ConocoPhillips 2.1% ------------------------------------------------- 7 United Technologies 1.8% ------------------------------------------------- 8 Wachovia 1.8% ------------------------------------------------- 9 Cisco Systems 1.8% ------------------------------------------------- 10 Wells Fargo 1.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
47 NATIONS STRATEGIC GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS STRATEGIC GROWTH LIPPER LARGE-CAP CORE FUND FUNDS AVERAGE S&P 500 INDEX ------------------------ --------------------- ------------- Oct. 2 1998 9425 10000 10000 12141 12450 12303 1999 13068 12946 12916 13721 13849 13826 12883 12984 12963 15520 14975 14892 2000 16237 15525 15233 15660 15121 14828 15353 15168 14684 13572 14090 13536 2001 11915 12326 11931 12596 12965 12629 10574 10957 10775 11886 12179 11927 2002 11799 12140 11959 9934 10490 10356 8361 8736 8567 8597 9359 9290 2003 8424 9044 8997 9617 10340 10382 9867 10577 10657 10946 11770 11955 2004 11139 11900 12157 11178 12011 12366 10917 11661 12135 11830 12692 13255 Mar. 31 2005 11665 12385 12973
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS STRATEGIC GROWTH LIPPER LARGE-CAP CORE FUND FUNDS AVERAGE S&P 500 INDEX ------------------------ --------------------- ------------- Oct. 2 1998 10000 10000 10000 12882 12450 12303 1999 13865 12946 12916 14558 13849 13826 13669 12984 12963 16467 14975 14892 2000 17227 15525 15233 16616 15121 14828 16290 15168 14684 14400 14090 13536 2001 12642 12326 11931 13364 12965 12629 11219 10957 10775 12611 12179 11927 2002 12519 12140 11959 10540 10490 10356 8872 8736 8567 9122 9359 9290 2003 8938 9044 8997 10204 10340 10382 10469 10577 10657 11614 11770 11955 2004 11818 11900 12157 11859 12011 12366 11583 11661 12135 12551 12692 13255 Mar. 31 2005 12377 12385 12973
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/2/98 through 3/31/05) 3.34% 2.40%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Strategic Growth Fund from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper Large-Cap Core Funds Average invest at least 75% of their equity assets in companies with market capitalizations of greater than $10 billion. The indices are unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A+ INVESTOR B+ INVESTOR C+ PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/2/98 8/2/99 8/2/99 8/2/99 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 4.98% 4.71% -1.27% 3.93% -1.07% 3.91% 2.91% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -0.19% -0.39% -2.33% -1.16% -2.16% -1.20% -1.20% 5 YEARS -6.27% -6.40% -7.51% -7.13% -7.50% -7.15% -7.15% SINCE INCEPTION 3.50% 3.34% 2.40% 2.66% 2.66% 2.65% 2.65%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75% **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00%, in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. +Investor A, Investor B and Investor C Shares commenced operations on August 2, 1999 and have no performance prior to that date. Performance prior to August 2, 1999 is that of Primary A Shares, which do not have any 12b-1 or shareholder servicing fees. If Investor A, Investor B and Investor C Shares 12b-1 or shareholder servicing fees had been reflected, total returns would have been lower. 48 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MARSICO FOCUSED EQUITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Marsico Focused Equities Fund Investor A Shares provided shareholders with a total return of 5.24%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Marsico Focused Equities Fund seeks long-term growth in capital. Typically, the fund will hold a core position of approximately 20 to 30 large- capitalization equity securities that we believe may offer attractive long-term appreciation potential. The fund may take substantial positions in individual companies, and typically will make significant allocations to a relatively limited number of major economic sectors. However, the fund's assets typically will be diversified across a variety of industries within each broad economic sector. The investment process blends top-down macroeconomic analysis with bottom-up stock selection. Specific macroeconomic factors include interest rates, inflation, productivity data, commodity prices, the regulatory environment, fiscal policy, and geopolitical issues. Characteristics sought in individual companies include strong brand franchise; improving fundamentals (e.g., gains in market share, improving profitability, strong free cash flow); strong balance sheets; excellent distribution and marketing capabilities; apparent commitment to shareholder interests; and talented, management teams with an incentive to do well. The fund will typically own three types of stocks: core growth, aggressive growth and life-cycle change. The latter category refers to companies that are experiencing some sort of positive, fundamental transformation in their business (e.g., new product, acquisition, divestiture, new management team) that, in our view, augurs well for future earnings growth potential. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations Marsico Focused Equities Fund (Investor A Shares) returned 5.24% compared with a return of 6.69% for its benchmark, the S&P 500 Index.*** *The outlook for the fund may differ from that presented for other Nations Funds mutual funds and portfolios. ** For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. *** The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. THE FUND NORMALLY INVESTS IN A CORE PORTFOLIO OF 20-30 COMMON STOCKS. BY MAINTAINING A RELATIVELY CONCENTRATED PORTFOLIO, THE FUND MAY BE SUBJECT TO A GREATER RISK THAN A FUND THAT IS MORE FULLY DIVERSIFIED. THE FUND MAY INVEST UP TO 25% OF ITS ASSETS IN FOREIGN SECURITIES. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 49 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY (continued) Holdings in health care, information technology, financials and industrials enhanced the fund's return. In contrast, the fund's investments in the consumer staples and materials sectors hurt performance during the reporting period. The fund was underweight in energy, which also hampered performance as the fund did not fully participate in this sector's solid performance during the period. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? During the period, rising oil prices, inflation, rising interest rates and geopolitical risks dominated investors' concerns. Investors were also apprehensive about the US presidential election. There were fears that it would be contested or that there might be a terrorist attack in the days preceding or following the election. Then George W. Bush was definitively elected to a second term without incident. Oil prices had a modest decline. And, the war in Iraq seemed to have less of an impact on investors. As a result, the fourth quarter of 2004 was a very good one for the market. Both the third and fourth quarters were good for the fund. However, the period ended on a less positive note as concerns about the continued growth of the US economy were rekindled by rising oil prices and increasing interest rates. As measured by the S&P 500 Index, the domestic equity market returned negative 2.15% during the first quarter of 2005. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?**** An emphasis in the health care equipment and services industry along with specific holdings made the greatest contribution to the fund's performance over the reporting period. The fund's largest individual holding, UnitedHealth Group, also emerged as the single largest contributor to fund performance. Stock selection in the information technology hardware and equipment industry was another strength. Apple Computer and QUALCOMM were among the fund's top contributors. Apple Computer was sold prior to March 31, 2005. An overweight position in the hotels, restaurants and leisure sector also contributed to the fund's relative performance. In addition, selected holdings within this sector performed well and also added to fund performance: Wynn Resorts, Four Seasons Hotels and Mandalay Resort Group. We sold Mandalay Resort Group by the end of the period. Two investment decisions benefited fund performance in the financials sector. Specific stock selection in the diversified financials industry, and our decision to avoid the weak-performing insurance industry, helped the fund. SLM and Goldman Sachs Group, two of the largest holdings, performed well. Finally, the fund had a heavier weight in FedEx than its benchmark. This transportation stock contributed positively to fund performance. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? The fund's exposure to energy was lower than the sector's weight in the benchmark, and that hurt performance. For much of the year, the fund had no **** Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Marsico Capital Management, LLC. Marsico Capital Management, LLC (Marsico) is an SEC-registered investment advisor and wholly owned subsidiary of Bank of America, N.A. 50 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY (continued) exposure to energy companies, one of the strongest performing sectors in the benchmark index. Within the consumer staples sector, the fund had positions in Wal-Mart and PepsiCo, which were among the fund's poorest performers and we sold these securities during the period. In addition, we owned no positions in food, beverage or tobacco companies and had less exposure to the materials sector than the index, which hurt performance. These market segments did well during the period. In addition, stock selection in the retailing sector detracted from fund performance. Our holdings in Tiffany & Co. and Target also had a negative impact on performance. We eliminated our positions in both companies prior to the end of this reporting period. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? As of March 31, 2005, the fund's sector allocation emphasized health care, consumer discretionary and financials investments. The fund had no exposure to the materials or telecommunications services sectors at the end of the period. --------------------------------------------- Thomas F. Marsico has managed Nations Marsico Focused Equities Fund since December 1997 and has been with the advisor or its predecessors or affiliate organizations since October 1997. He is also Chief Executive Officer of Marsico Capital Management, LLC. 51 NATIONS MARSICO FOCUSED EQUITIES FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,072.40 1,019.85 5.27 5.14 1.02 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,070.91 1,018.65 6.51 6.34 1.26 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,066.67 1,014.86 10.41 10.15 2.02 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,066.47 1,014.86 10.41 10.15 2.02
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 52 NATIONS MARSICO FOCUSED EQUITIES FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 53 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 3.0% Utilities 3.5% Energy 5.4% Consumer staples 9.8% Information technology 13.1% Industrials 17.7% Financials 20.7% Consumer discretionary 24.5% Health care 2.3% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 UnitedHealth Group 11.4% ------------------------------------------------- 2 General Electric 6.0% ------------------------------------------------- 3 Genentech 6.0% ------------------------------------------------- 4 Lowe's 5.4% ------------------------------------------------- 5 Procter & Gamble 5.4% ------------------------------------------------- 6 Zimmer Holdings 5.1% ------------------------------------------------- 7 SLM 5.0% ------------------------------------------------- 8 Goldman Sachs Group 5.0% ------------------------------------------------- 9 QUALCOMM 4.6% ------------------------------------------------- 10 FedEx 4.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
54 NATIONS MARSICO FOCUSED EQUITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS MARSICO FOCUSED LIPPER LARGE-CAP GROWTH EQUITIES FUND FUNDS AVERAGE S&P 500 INDEX ----------------------- ----------------------- ------------- Dec. 31 1997 9425 10000 10000 1998 11442 11476 11395 12697 12004 11771 11556 10634 10600 14151 13327 12858 1999 15783 14333 13498 16297 15050 14449 16250 14470 13548 21630 18324 15564 2000 21563 19760 15920 19849 18901 15497 20520 18793 15346 17883 15933 14146 2001 14696 12775 12469 15359 13500 13198 13064 10910 11260 14466 12400 12464 2002 15137 12114 12498 14629 10229 10823 12516 8632 8953 12190 9032 9709 2003 12190 8929 9403 13956 10130 10850 14542 10435 11137 16011 11466 12494 2004 16117 11590 12705 15752 11732 12924 15839 11203 12682 17721 12294 13852 Mar. 31 2005 16963 11739 13558
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MARSICO FOCUSED LIPPER LARGE-CAP GROWTH EQUITIES FUND FUNDS AVERAGE S&P 500 INDEX ----------------------- ----------------------- ------------- Dec. 31 1997 10000 10000 10000 1998 12140 11476 11395 13472 12004 11771 12261 10634 10600 15014 13327 12858 1999 16746 14333 13498 17291 15050 14449 17241 14470 13548 22950 18324 15564 2000 22879 19760 15920 21060 18901 15497 21772 18793 15346 18974 15933 14146 2001 15593 12775 12469 16296 13500 13198 13861 10910 11260 15349 12400 12464 2002 16061 12114 12498 15521 10229 10823 13280 8632 8953 12933 9032 9709 2003 12933 8929 9403 14808 10130 10850 15429 10435 11137 16988 11466 12494 2004 17100 11590 12705 16713 11732 12924 16805 11203 12682 18802 12294 13852 Mar. 31 2005 17997 11739 13558
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/31/97 through 3/31/05) 8.45% 7.56%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico Focused Equities Fund from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies with long-term earnings expected to grow significantly. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction or taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/31/97 12/31/97 12/31/97 12/31/97 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 5.54% 5.24% -0.79% 4.48% -0.52% 4.46% 3.46% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.13% 3.86% 1.84% 3.10% 2.15% 3.09% 3.09% 5 YEARS -4.44% -4.69% -5.81% -5.39% -5.77% -5.39% -5.39% SINCE INCEPTION 8.66% 8.45% 7.56% 7.70% 7.70% 7.74% 7.74%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 55 NATIONS MARSICO MIDCAP GROWTH FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MARSICO MIDCAP GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term capital growth by investing primarily in equity securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Marsico MidCap Growth Fund Investor A Shares provided shareholders with a total return of 4.80%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund seeks long-term growth of capital by investing primarily in mid-sized companies that are selected for their long-term growth potential. Generally, the fund holds 50 to 75 securities allocated across a variety of economic sectors and industries. The fund may invest up to 15% of its assets in foreign securities and up to 10% in non-equity securities. The investment process blends top-down macroeconomic analysis with bottom-up stock selection. Specific macroeconomic factors include interest rates, inflation, productivity data, commodity prices, the regulatory environment, fiscal policy and geopolitical issues. We seek companies with the following characteristics: strong brand franchise, improving business prospects, strong balance sheets, excellent distribution and marketing capabilities, and apparent commitment to shareholder interests. In addition, we look for companies that are led by strong management teams with adequate incentives to improve performance. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations Marsico MidCap Growth Fund (Investor A Shares) returned 4.80% compared with a return of 8.31% for its benchmark, the Russell Midcap Growth Index.*** *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. ***The Russell Midcap Growth Index, an unmanaged index, measures the performance of those securities in the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth rates. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Marsico Capital Management, LLC. Marsico Capital Management, LLC (Marsico) is an SEC-registered investment advisor and wholly owned subsidiary of Bank of America, N.A. INVESTING IN MID-CAP STOCKS MAY PRESENT SPECIAL RISKS, INCLUDING POSSIBLE ILLIQUIDITY AND GREATER PRICE VOLATILITY THAN STOCKS OF LARGER, MORE ESTABLISHED COMPANIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 56 NATIONS MARSICO MIDCAP GROWTH FUND PORTFOLIO MANAGER COMMENTARY (continued) WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? At the beginning of the period, rising oil prices, inflation, rising interest rates and geopolitical risks, including the war in Iraq, dominated investors' concerns. Investors were also apprehensive about the US presidential election. There were fears that it would be contested or that there might be a terrorist attack in the days preceding or following the election. However, after George W. Bush was definitively elected to a second term without incident and oil prices had a modest decline, these other factors seemed to have less of an impact on investors. As a result, the fourth quarter of 2004 was a very good one for the market. However, the period ended on a less positive note as concerns about the continued growth of the US economy were rekindled by increasing interest rates and, once again, by rising oil prices. As measured by the S&P 500 Index, the domestic equity market returned negative 2.15% during the first quarter of 2005. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?**** During the first half of the reporting period, the fund benefited from good performance in its consumer cyclical, energy and technology holdings. In technology, Symantec was a solid contributor to fund performance during this period. Symantec, which produces and markets Norton Anti-Virus, continued to solidify its position as a market leader. In the energy sector, BJ Services, an oil service company, benefited from rising oil prices. Throughout the period, the fund benefited from its investments in the hotel, restaurant and leisure group. Starwood Hotels & Resorts is a leader in the hospitality industry and its hotel brands including Westin, W and Sheraton. Starwood controlled its inventory of managed and franchised hotel rooms, while reducing the number of hotel rooms it owned directly through recent asset sales. With more than 8,000 coffee shops worldwide, Starbucks continued to maintain and expand its competitive edge. Later in the reporting period, Las Vegas Sands, Yum Brands, MGM Mirage and Shangri-La Asia were also strong contributors to relative fund performance. During the period our decision to avoid investments in the semiconductor and semiconductor equipment industry, as well as good stock selection in the software and services industry, proved effective. On a sector level, information technology was the top contributor to fund performance later in the period. In addition, the fund's positions in homebuilder Toll Brothers and Expeditors International of Washington, a company in the transportation industry, were among the largest contributors to performance on an individual stock level. Finally, a position in Monsanto provided a similar performance lift in the materials sector. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? During the first half of the reporting period, we were disappointed by our investments in the capital goods and communications industries. For example, Navistar International suffered at a time when it should have been benefiting from an upturn in the truck cycle. This leading manufacturer of tracks and buses was dealing with raw material and supply issues. The weak performance of Entercom and Univision mirrored the overall weakness of the media and communications sector. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 57 NATIONS MARSICO MIDCAP GROWTH FUND PORTFOLIO MANAGER COMMENTARY (continued) Results from financial investments were a significant factor in the fund's shortfall relative to the benchmark index. Both an overweight in bank stocks and positions in diversified financials, specifically Marketaxess Holdings and Jefferies Group, hurt results for the reporting period. Results in the industrials sector also had a negative effect on the fund's return. Within this sector, stock selection in the capital goods and communications services and supplies hurt performance. Earlier in the period, our positions in the following health care companies hurt performance: Barr Pharmaceuticals, Invitrogen, Health Net and Par Pharmaceutical. During the latter part of the period, investments in the health care equipment and services industry detracted from performance, notably from positions in Wright Medical Group and St. Jude Medical. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? As of March 31, 2005, the fund's sector allocation emphasized consumer discretionary, financials and health care investments. The fund had no exposure to materials, telecommunications services or utilities companies at the end of the reporting period. --------------------------------------------- Corydon J. Gilchrist has managed Nations Marsico MidCap Growth Fund since November 2004. He is affiliated with Marsico Capital Management, LLC, investment sub-advisor to the Fund. Prior to November 2004, the fund was co-managed by Christian Pineno, Daniel Cole and Clifford Siverd. Messrs. Pineno, Cole and Siverd are affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 58 NATIONS MARSICO MIDCAP GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,096.98 1,020.00 5.18 4.99 0.99 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,095.64 1,018.75 6.48 6.24 1.24 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,091.10 1,015.01 10.37 10.00 1.99 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,091.65 1,015.01 10.38 10.00 1.99
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 59 NATIONS MARSICO MIDCAP GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 60 NATIONS MARSICO MIDCAP GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 2.0% Energy 3.8% Consumer staples 6.0% Information technology 7.4% Industrials 10.1% Health care 26.6% Financials 38.1% Consumer discretionary 6.0% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 UCBH Holdings 4.4% ------------------------------------------------- 2 St. Joe 4.0% ------------------------------------------------- 3 Wynn Resorts 3.8% ------------------------------------------------- 4 AMERIGROUP 3.7% ------------------------------------------------- 5 Kerzner International 3.6% ------------------------------------------------- 6 Pixar 3.4% ------------------------------------------------- 7 Jefferies Group 3.2% ------------------------------------------------- 8 QUALCOMM 3.2% ------------------------------------------------- 9 Dean Foods 3.0% ------------------------------------------------- 10 Royal Caribbean Cruises 3.0% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
61 NATIONS MARSICO MIDCAP GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS MIDCAP GROWTH LIPPER MID-CAP GROWTH RUSSELL MIDCAP GROWTH FUND FUNDS AVERAGE INDEX --------------------- --------------------- --------------------- Mar. 31 1995 9425 10000 10000 12662 13294 12870 1997 12685 13743 13686 18376 19860 19483 1999 17014 20850 21215 29744 38242 37594 2001 23504 25244 20519 21161 25181 21483 2003 13847 18349 15874 18718 26320 23752 Mar. 31 2005 19607 27665 25729
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MIDCAP GROWTH LIPPER MID-CAP GROWTH RUSSELL MIDCAP GROWTH FUND FUNDS AVERAGE INDEX --------------------- --------------------- --------------------- Mar. 31 1995 10000 10000 10000 13435 13294 12870 1997 13459 13743 13686 19497 19860 19483 1999 18052 20850 21215 31559 38242 37594 2001 24938 25244 20519 22452 25181 21483 2003 14692 18349 15874 19860 26320 23752 Mar. 31 2005 20809 27665 25729
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 7.60% 6.96%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations MidCap Growth Fund over the last 10 years. The Russell Midcap Growth Index is an unmanaged index which measures the performance of those securities in the Russell MidCap Index with higher price-to-book ratios and higher forecasted growth rates. Funds in the Lipper Mid-Cap Growth Funds Average invest at least 75% of their equity assets in mid-capitalization companies that typically have above-average price-to-earnings and price-to-book ratios compared to the S&P 500 MidCap 400 Index. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/04/92 12/10/92 6/07/93 12/18/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 5.03% 4.80% -1.26% 3.99% -1.01% 3.97% 2.97% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -2.27% -2.50% -4.41% -3.26% -4.24% -3.24% -3.24% 5 YEARS -7.74% -7.99% -9.07% -8.67% -8.96% -8.66% -8.66% 10 YEARS 7.87% 7.60% 6.96% 6.79% 6.79% 6.88% 6.88% SINCE INCEPTION 8.12% 7.97% 7.45% 7.50% 7.50% 7.23% 7.23%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 62 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MARSICO 21ST CENTURY FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Marsico 21st Century Fund Investor A Shares provided shareholders with a total return of 9.38%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Marsico 21st Century Fund seeks long-term growth of capital. The fund is a diversified portfolio and invests primarily in common stocks that are selected for their long-term growth potential. The fund may invest in companies of any size across the market-capitalization spectrum and typically will own between 35 and 50 stocks. The investment process blends top-down macroeconomic analysis with bottom-up stock selection. Specific macroeconomic factors include interest rates, inflation, productivity data, commodity prices, the regulatory environment, fiscal policy and geopolitical issues. Characteristics sought in individual companies include strong brand franchise; improving fundamentals (e.g., gains in market share, improving profitability, strong free cash flow); strong balance sheets; excellent distribution and marketing capabilities; apparent commitment to shareholder interests; and talented, management teams with an incentive to do well The fund will typically own three types of stocks: core growth, aggressive growth and life-cycle change. The latter category refers to companies that are experiencing some sort of positive, fundamental transformation in their business (e.g., new product, acquisition, divestiture, new management team) that, in our view, augurs well for future earnings growth potential. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Marsico 21st Century Fund (Investor A Shares) returned 9.38% compared with a return of 7.09% for its benchmark, the Russell 3000 Index.*** Prior to August 1, 2004, fund performance was compared to the S&P 500 Index, which returned 6.69%.**** We feel that the broader Russell 3000 Index is a more appropriate benchmark because it represents *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. ***The Russell 3000 Index tracks the performance of 3000 of the largest US companies, based on market capitalization. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ****The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Marsico Capital Management, LLC. Marsico Capital Management, LLC (Marsico) is an SEC-registered investment advisor and wholly owned subsidiary of Bank of America, N.A. THE FUND MAY INVEST WITHOUT LIMIT IN FOREIGN SECURITIES. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 63 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY (continued) a broader spectrum of market capitalizations, which makes it a better match with the fund's investment universe. Stock selection and the fund's investments in the consumer discretionary and health care sectors were primary reasons that the fund outperformed its benchmark. The fund's relative lack of exposure to the energy, industrials and utilities sectors held back performance during the reporting period. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? During the period, rising oil prices, inflation, rising interest rates and geopolitical risks dominated investors' concerns. Investors were also apprehensive about the US presidential election. There were fears that it would be contested or that there might be a terrorist attack in the days preceding or following the election. Then George W. Bush was definitively elected to a second term without incident. Oil prices had a modest decline. And, the war in Iraq seemed to have less of an impact on investors. As a result, the fourth quarter of 2004 was a very good one for the market. Both the third and fourth quarters were good for the fund. However, the period ended on a less positive note as concerns about the continued growth of the US economy were rekindled by rising oil prices and increasing interest rates. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?***** The fund's holdings in Wynn Resorts, Shangri-La Asia, Las Vegas Sands, Kerzner International and Mandalay Resort Group were among the largest contributors to performance. We sold Mandalay Resort Group by the end of the period. The performance lift from the individual stocks was amplified by the fund's heavily overweighted position in this industry group (hotels, restaurants and leisure). The fund also benefited from its holding in ImClone Systems as well as its underweight position in the pharmaceuticals and biotechnology industry, an area that produced a negative absolute return for the benchmark index. We sold ImClone Systems by the end of the period. Monsanto, the fund's sole holding in the materials sector, also contributed nicely to performance. Within the financial sector, positions in Chicago Mercantile Exchange Holdings and Moody's Corporation added to fund performance, as did our decision to avoid insurance investments during the reporting period. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? On a sector level, underweights in three areas hampered performance. For most of the reporting period, the fund had no exposure to energy investments, the top performing sector in the Russell 3000 Index. An underweight position in the industrials sector detracted from fund performance, as well as disappointing results from Ceradyne. In addition, the fund's lack of exposure to utilities companies, another area of strength for the benchmark, had a negative effect on performance. *****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 64 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY (continued) HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? As of March 31, 2005, the fund's sector allocation emphasized the consumer discretionary, financials and health care sectors. The fund had no exposure to materials, utilities or telecommunications services companies. --------------------------------------------- Corydon J. Gilchrist has managed Nations Marsico 21st Century Fund since February 2003 and has been with the advisor or affiliate organizations since May 2000. 65 NATIONS MARSICO 21ST CENTURY FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,102.57 1,019.30 5.92 5.69 1.13 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,100.62 1,018.05 7.23 6.94 1.38 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,096.58 1,014.31 11.13 10.70 2.13 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,096.58 1,014.31 11.13 10.70 2.13
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 66 NATIONS MARSICO 21ST CENTURY FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 67 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.9% Energy 4.0% Consumer staples 6.7% Industrials 8.3% Information technology 10.1% Health care 28.7% Financials 32.2% Consumer discretionary 8.1% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Wynn Resorts 4.6% ------------------------------------------------- 2 UCBH Holdings 4.6% ------------------------------------------------- 3 UBS AG 4.0% ------------------------------------------------- 4 UnitedHealth Group 3.9% ------------------------------------------------- 5 St. Joe 3.9% ------------------------------------------------- 6 AMERIGROUP 3.6% ------------------------------------------------- 7 Pixar 3.5% ------------------------------------------------- 8 Kerzner International 3.5% ------------------------------------------------- 9 Dell 3.4% ------------------------------------------------- 10 QUALCOMM 3.4% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
68 NATIONS MARSICO 21ST CENTURY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS MARSICO 21ST LIPPER MULTI-CAP CENTURY FUND GROWTH FUNDS AVERAGE RUSSELL 3000 INDEX S&P 500 INDEX -------------------- -------------------- ------------------ ------------- Apr. 10 2000 9425 10000 10000 10000 8973 9863 9712 9694 9500 10079 9784 9600 8040 7992 8902 8849 2001 6569 6185 7821 7800 6909 6795 8359 8256 5598 5143 7053 7044 6541 6134 7883 7797 2002 6654 5924 7959 7818 6635 4931 6917 6770 5815 4131 5725 5601 5900 4375 6185 6073 2003 5834 4360 5997 5882 7125 5115 6970 6787 7785 5367 7209 6967 8765 5945 8106 7816 2004 9142 6114 8286 7948 9114 6175 8397 8084 9085 5883 8237 7933 10687 6589 9074 8665 Mar. 31 2005 10000 6302 8873 8480
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MARSICO 21ST LIPPER MULTI-CAP CENTURY FUND GROWTH FUNDS AVERAGE RUSSELL 3000 INDEX S&P 500 INDEX -------------------- -------------------- ------------------ ------------- Apr. 10 2000 10000 10000 10000 10000 9520 9863 9712 9694 10080 10079 9784 9600 8530 7992 8902 8849 2001 6970 6185 7821 7800 7330 6795 8359 8256 5940 5143 7053 7044 6940 6134 7883 7797 2002 7060 5924 7959 7818 7040 4931 6917 6770 6170 4131 5725 5601 6260 4375 6185 6073 2003 6190 4360 5997 5882 7560 5115 6970 6787 8260 5367 7209 6967 9300 5945 8106 7816 2004 9700 6114 8286 7948 9670 6175 8397 8084 9640 5883 8237 7933 11339 6589 9074 8665 Mar. 31 2005 10610 6302 8873 8480
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (4/10/00 through 3/31/05) 1.20% 0.00%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico 21st Century Fund from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper Multi-Cap Growth Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. The Russell 3000 Index tracks the performance of 3000 of the largest US companies, based on market capitalization. The indices are unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/10/00 4/10/00 4/10/00 4/10/00 - ------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 9.69% 9.38% 3.11% 8.49% 3.49% 8.49% 7.49% - ------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 14.83% 14.54% 12.31% 13.66% 12.88% 13.66% 13.66% SINCE INCEPTION 1.47% 1.20% 0.00% 0.44% 0.04% 0.44% 0.44%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 69 NATIONS SMALL COMPANY FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS SMALL COMPANY FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term capital growth by investing primarily in equity securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Small Company Fund Investor A Shares provided shareholders with a total return of 0.13%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. We believe the potential for above-average returns can be achieved by investing in small-cap companies with long-term growth potential using an active approach to investment management, based on fundamental research. Our goal is to structure a high-quality portfolio through a well-defined investment process that pays attention to both valuation and risk. In selecting securities for the portfolio, we focus on companies with steady growth prospects, successful business models and attractive valuations. Individual security weights are based on our level of conviction and outlook for a company's growth prospects, sustainability of growth, valuation, liquidity, as well as the overall risk management of the portfolio. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Small Company Fund (Investor A Shares) returned 0.13%, compared with a return of 0.87% for its benchmark, the Russell 2000 Growth Index.*** In an environment that was generally unfavorable for growth stocks, the fund's investments in basic materials, communications and health care accounted for its slight underperformance. Investments in consumer cyclical, energy and technology stocks produced the fund's strongest sector returns. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? The global economy moved ahead during the year with increased productivity and employment, profit growth, mergers and acquisitions and overall GDP growth. However, uncertainty about presidential elections, Iraq, commodity prices and the direction of the dollar also influenced the market during the reporting period. *The outlook for the fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other services providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Russell 2000 Growth Index, an unmanaged index, measures the performance of those securities in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth rates. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. INVESTMENTS IN SMALL-CAP STOCKS MAY BE SUBJECT TO GREATER VOLATILITY AND PRICE FLUCTUATIONS BECAUSE THEY MAY BE THINLY TRADED AND LESS LIQUID THAN INVESTMENTS IN LARGER COMPANIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 70 NATIONS SMALL COMPANY FUND PORTFOLIO MANAGERS' COMMENTARY (continued) Owing to strong profit growth and their cyclical nature, the stocks of smaller companies generally outperformed their larger counterparts. However, growth stocks did not fare as well as value stocks during the period. WHAT INVESTMENT DECISIONS PROVED FAVORABLE TO FUND PERFORMANCE?**** Within the consumer cyclicals sector, gaming stocks clearly led the portfolio this year. In particular, the fund benefited from holdings in Boyd Gaming and Shuffle Master. Exposure to a very strong energy sector also helped. One of the fund's energy holdings, Varco International, a leader in oil and gas drilling and well-servicing equipment, agreed to merge with rival National Oilwell. Stock selection in the technology sector also was good. The fund's holdings outperformed the benchmark sector. Although the technology sector confronted inventory, capacity and pricing challenges, the fund's investments in Cognizant Technology, Virage Logic, Microsemi and Hyperion performed well. In addition, the fund was rewarded by strong results from selected exposure to other industries. For example, shares of Province Healthcare, a leader in non-urban hospitals, rose substantially when it agreed to be acquired by LifePoint Hospitals. A position in Affiliated Managers, an asset management firm, gained on evidence of improving flow and fee income as investors returned to the markets. Finally, stronger-than-expected comparable store sales and operating trends at Red Robin Gourmet Burger pushed its share price up. WHAT INVESTMENT DECISIONS PROVED UNFAVORABLE TO FUND PERFORMANCE? The fund's lack of exposure to the metal and mining industry group, and disappointing results from packaging company Anchor Glass, detracted from performance in the basic materials sector. Results in the communications sector were also detrimental. Pricing pressures in advertiser Autobytel's end market and slow growth in advertising revenue for broadcaster Radio One hurt the companies' share prices. Excellent performance from the fund's service-related health care names was offset by weakness in some biotechnology and medical device holdings. Shares of Wright Medical, an orthopedic medical device company, declined on across-the-board weakness in the company's end markets and a voluntary recall affecting one of its product lines. Merrit Medical Systems pre-announced weak results, citing slower demand and increased competitive pressures. We removed both stocks from the portfolio. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We plan to continue to emphasize high quality stocks through a well-defined investment process with attention to valuation and risk management techniques with our focus on the long term. --------------------------------------------- Christian Pineno has co-managed Nations Small Company Fund since its inception in January 1997. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 71 NATIONS SMALL COMPANY FUND PORTFOLIO MANAGERS' COMMENTARY (continued) Daniel Cole has co-managed the fund since September 2001. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. 72 NATIONS SMALL COMPANY FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,067.22 1,020.00 5.10 4.99 0.99 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,066.57 1,018.80 6.34 6.19 1.23 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,061.63 1,015.06 10.18 9.95 1.98 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,062.28 1,015.06 10.18 9.95 1.98
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of the expenses, total return would have been reduced. 73 NATIONS SMALL COMPANY FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 74 NATIONS SMALL COMPANY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.4% Utilities 1.5% Consumer staples 1.7% Telecommunication services 3.7% Materials 4.8% Energy 8.2% Financials 13.6% Industrials 17.2% Consumer discretionary 17.8% Health care 27.3% Information technology 2.8% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 VCA Antech 2.1% ------------------------------------------------- 2 Affiliated Managers Group 1.9% ------------------------------------------------- 3 Province Healthcare 1.7% ------------------------------------------------- 4 Microsemi 1.6% ------------------------------------------------- 5 Respironics 1.5% ------------------------------------------------- 6 Affymetrix 1.4% ------------------------------------------------- 7 City National 1.4% ------------------------------------------------- 8 UTI Worldwide 1.4% ------------------------------------------------- 9 Energen 1.4% ------------------------------------------------- 10 Hibbet Sporting Goods 1.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
75 NATIONS SMALL COMPANY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS SMALL COMPANY LIPPER SMALL-CAP GROWTH FUND FUNDS AVERAGE RUSSELL 2000 GROWTH INDEX --------------------- ----------------------- ------------------------- Dec. 12 1995 9425 10000 10000 9313 10090 10155 1996 11167 11968 11298 13341 14224 12759 1998 13505 15266 12916 20867 24455 18482 2000 20485 23063 14337 17985 20544 13014 2002 12956 14570 9075 17766 21094 13481 19532 23397 15409 Mar. 31 2005 18475 22143 14360
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS SMALL COMPANY LIPPER SMALL-CAP GROWTH FUND FUNDS AVERAGE RUSSELL 2000 GROWTH INDEX --------------------- ----------------------- ------------------------- Dec. 12 1995 10000 10000 10000 9881 10090 10155 1996 11848 11968 11298 14155 14224 12759 1998 14329 15266 12916 22140 24455 18482 2000 21735 23063 14337 19082 20544 13014 2002 13746 14570 9075 18849 21094 13481 20723 23397 15409 Mar. 31 2005 19602 22143 14360
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/12/95 through 3/31/05) 7.50% 6.82%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Small Company Fund from the inception of the share class. The Russell 2000 Growth Index is an unmanaged index which measures the performance of those securities in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth rates. Funds in the Lipper Small-Cap Growth Funds Average invest at least 75% of their equity assets in small-capitalization companies that typically have above-average price-to-earnings and price-to-book ratios compared to the S&P Small Cap 600 Index. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/12/95 12/12/95 12/12/95 9/22/97 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.33% 0.13% -5.64% -0.63% -5.60% -0.62% -1.62% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 0.72% 0.49% -1.48% -0.28% -1.29% -0.28% -0.28% 5 YEARS -5.18% -5.39% -6.51% -6.11% -6.44% -6.10% -6.10% SINCE INCEPTION 7.80% 7.50% 6.82% 6.76% 6.76% 2.65% 2.65%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISER AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 76 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ CONVERTIBLE BONDS -- 62.9% CONSUMER DISCRETIONARY -- 9.9% ADVERTISING -- 1.0% $ 14,795 Lamar Advertising Co. 2.875% 12/31/10(a).......................................... $ 14,999 ---------- APPAREL ACCESSORIES AND LUXURY GOODS -- 0.3% 4,625 Kellwood Co. 3.500% 06/15/34(a)(b)....................................... 4,197 ---------- APPAREL RETAIL -- 0.2% 2,940 Men's Wearhouse, Inc. 3.125% 10/15/23(a).......................................... 3,388 ---------- CASINOS AND GAMING -- 0.9% 13,097 Scientific Games Corp. 0.750% 12/01/24(b).......................................... 12,704 ---------- DEPARTMENT STORES -- 0.6% 8,930 Saks, Inc. 2.000% 03/15/24(b).......................................... 9,444 ---------- FOOTWEAR -- 0.4% 5,963 Reebok International Ltd. 2.000% 05/01/24(a).......................................... 6,358 ---------- HOME BUILDERS -- 0.3% 3,945 Beazer Homes USA, Inc. 4.625% 06/15/24(b).......................................... 4,902 ---------- HOTELS, RESORTS AND CRUISE LINES -- 2.1% Fairmont Hotels and Resorts, Inc. 6,952 3.750% 12/01/23(b).......................................... 7,560 5,803 3.750% 12/01/23(a).......................................... 6,311 14,803 Hilton Hotels Corp. 3.375% 04/15/23............................................. 17,134 ---------- 31,005 ---------- INTERNET AND CATALOG RETAIL -- 1.6% 23,637 Amazon.com, Inc. 4.750% 02/01/09............................................. 23,401 ---------- MOVIES AND ENTERTAINMENT -- 2.5% 12,310 Liberty Media Corp. 3.250% 03/15/31(a).......................................... 10,510 7,480 Lions Gate Entertainment Corp. 2.938% 10/15/24(a)(b)....................................... 8,583
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ MOVIES AND ENTERTAINMENT -- (CONTINUED) $ 5,000 Playboy Enterprises, Inc. 3.000% 03/15/25(b).......................................... $ 5,000 12,835 Walt Disney Co. 2.125% 04/15/23............................................. 14,102 ---------- 38,195 ---------- 148,593 ---------- CONSUMER STAPLES -- 0.9% HOUSEHOLD PRODUCTS -- 0.4% 4,915 Church and Dwight 5.250% 08/15/33(b).......................................... 6,537 ---------- PACKAGED FOODS AND MEATS -- 0.5% 7,255 AT&T Corp. - Liberty Media Group 3.500% 01/15/31(b).......................................... 5,641 1,975 Liberty Media Corp. 3.500% 01/15/31............................................. 1,535 ---------- 7,176 ---------- 13,713 ---------- ENERGY -- 4.2% OIL AND GAS DRILLING -- 1.2% Pride International, Inc. 1,880 3.250% 05/01/33(a).......................................... 2,211 13,900 3.250% 05/01/33(b).......................................... 16,350 ---------- 18,561 ---------- OIL AND GAS EQUIPMENT AND SERVICES -- 2.3% Cooper Cameron Corp. 5,467 1.500% 05/15/24(b).......................................... 5,809 3,840 1.500% 05/15/24(a).......................................... 4,080 15,925 Halliburton Co. 3.125% 07/15/23(b).......................................... 20,543 3,451 Hanover Compress Co. 4.750% 01/15/14............................................. 3,822 ---------- 34,254 ---------- OIL AND GAS REFINING AND MARKETING AND TRANSPORTATION -- 0.7% Omi Corp. 3,350 2.875% 12/01/24(a).......................................... 3,187 6,997 2.875% 12/01/24(b).......................................... 6,656 ---------- 9,843 ---------- 62,658 ---------- FINANCIALS -- 5.4% CONSUMER FINANCE -- 2.2% 14,385 American Express Co. 1.850% 12/01/33(b).......................................... 14,709 15,780 Providian Financial Corp. 2.750% 03/15/16............................................. 18,758 ---------- 33,467 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 77 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ INVESTMENT BANKING AND BROKERAGE -- 0.3% $ 4,900 E*trade Group 6.000% 02/01/07............................................. $ 4,961 ---------- LIFE AND HEALTH INSURANCE -- 0.3% 3,488 American Equity Investment Life Insurance Co. 5.250% 12/06/24(b).......................................... 4,116 ---------- MULTI-SECTOR HOLDINGS -- 0.4% 5,770 Leucadia National Corp. 3.750% 04/15/14(b).......................................... 5,698 ---------- OTHER DIVERSIFIED FINANCIAL SERVICES -- 0.7% 10,945 CapitalSource, Inc. 3.500% 07/15/34(b).......................................... 10,753 ---------- PROPERTY AND CASUALTY INSURANCE -- 0.2% 2,645 Ohio Casualty Corp. 5.000% 03/19/22............................................. 2,698 ---------- REAL ESTATE INVESTMENT TRUST (REITS) -- 1.3% 1,494 Cray, Inc. 3.000% 12/01/24(b).......................................... 1,238 17,040 Host Marriott Corp. 3.250% 04/15/24(b).......................................... 18,574 ---------- 19,812 ---------- 81,505 ---------- HEALTH CARE -- 14.9% BIOTECHNOLOGY -- 5.4% 6,965 Amylin Pharmaceuticals 2.500% 04/15/11(b).......................................... 6,155 2,980 Cell Therapeutics, Inc. 4.000% 07/01/10(b).......................................... 2,157 3,950 Cephalon, Inc. 2.500% 12/15/06(a).......................................... 3,812 7,820 Cubist Pharmaceuticals 5.500% 11/01/08............................................. 7,272 3,870 CV Therapeutics, Inc. 2.000% 05/16/23............................................. 3,168 2,500 Dov Pharmaceutical, Inc. 2.500% 01/15/25(b).......................................... 2,112 2,365 Enzon Pharmaceuticals 4.500% 07/01/08............................................. 2,126 Genzyme Corp. 850 1.250% 12/01/23(a).......................................... 863 17,410 1.250% 12/01/23(b).......................................... 17,671 995 Human Genome Sciences, Inc. 2.250% 10/15/11(b).......................................... 845
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ BIOTECHNOLOGY -- (CONTINUED) Icos Corp. $ 2,880 2.000% 07/01/23............................................. $ 2,326 9,880 2.000% 07/01/23(b).......................................... 7,978 14,890 Invitrogen, Inc. 2.000% 08/01/23............................................. 17,589 3,346 Millennium Pharmaceuticals, Inc. 5.500% 01/15/07............................................. 3,350 4,400 Vertex Pharmaceuticals 5.000% 09/19/07............................................. 4,004 ---------- 81,428 ---------- HEALTH CARE DISTRIBUTORS -- 0.3% 3,980 Henry Schein, Inc. 3.000% 08/15/34(b).......................................... 4,139 ---------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.8% 14,832 Fisher Scientific 3.250% 03/01/24(a).......................................... 15,036 11,320 Four Seasons Hotels and Resorts 1.875% 07/30/24(a).......................................... 12,905 ---------- 27,941 ---------- HEALTH CARE FACILITIES -- 1.3% 15,880 Health Management Associates, Inc. 1.500% 08/01/23(b).......................................... 17,349 1,910 Lifepoint Hospitals, Inc. 4.500% 06/01/09............................................. 1,960 ---------- 19,309 ---------- HEALTH CARE SERVICES -- 1.0% 12,890 Lincare Holdings, Inc. 3.000% 06/15/33(b).......................................... 13,518 1,940 WebMD Corp. 1.750% 06/15/23(a).......................................... 1,664 ---------- 15,182 ---------- HEALTH CARE SUPPLIES -- 1.4% 14,920 Advanced Medical Optics, Inc. 2.500% 07/15/24(a)(b)....................................... 14,808 4,950 Bausch and Lomb, Inc. 3.460% 08/01/23(a).......................................... 7,186 ---------- 21,994 ---------- PHARMACEUTICALS -- 3.7% IVAX Corp. 9,840 4.500% 05/15/08............................................. 9,852 5,700 4.500% 05/15/08(b).......................................... 5,707 6,950 Sepracor, Inc. 5.000% 02/15/07............................................. 7,037 18,200 Teva Pharmaceutical Industries Ltd. 0.500% 02/01/24............................................. 18,109 4,660 Watson Pharmaceuticals, Inc. 1.750% 03/15/23............................................. 4,427
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 78 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ PHARMACEUTICALS -- (CONTINUED) $ 9,925 Wyeth 2.390% 01/15/24(b).......................................... $ 10,176 ---------- 55,308 ---------- 225,301 ---------- INDUSTRIALS -- 8.0% AEROSPACE/DEFENSE -- 0.1% 685 United Industrial Corp. 3.750% 09/15/24(b).......................................... 723 ---------- AIRLINES -- 0.2% 5,960 Northwest Airlines Corp. 7.625% 11/15/23(b).......................................... 3,472 ---------- BUILDING PRODUCTS -- 0.7% 7,897 Lennox International 6.250% 06/01/09(b).......................................... 10,217 ---------- CONSTRUCTION AND ENGINEERING -- 0.8% 10,395 Fluor Corp. 1.500% 02/15/24(a).......................................... 11,746 ---------- ELECTRICAL COMPONENTS AND EQUIPMENT -- 0.3% 10,860 Roper Industries, Inc. 1.481% 01/15/34(a).......................................... 5,185 ---------- ENVIRONMENTAL SERVICES -- 0.4% 7,359 Allied Waste Industries, Inc. 4.250% 04/15/34(a).......................................... 6,191 ---------- INDUSTRIAL CONGLOMERATES -- 2.2% Tyco International Ltd. 4,270 2.750% 01/15/18(b).......................................... 6,362 17,350 3.125% 01/15/23(b).......................................... 27,457 ---------- 33,819 ---------- INDUSTRIAL MACHINERY -- 1.0% 6,205 Actuant Corp. 2.000% 11/15/23............................................. 8,005 5,715 Kaydon Corp. 4.000% 05/23/23(b).......................................... 6,779 ---------- 14,784 ---------- TRADING COMPANIES AND DISTRIBUTORS -- 1.0% GATX Corp. 3,952 5.000% 08/15/23(b).......................................... 5,731 1,805 7.500% 02/01/07............................................. 2,114 5,875 7.500% 02/01/07(b).......................................... 6,881 ---------- 14,726 ----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ TRUCKING AND LEASING -- 1.3% Yellow Corp. $ 5,759 3.375% 11/25/23............................................. $ 8,761 5,935 5.000% 08/08/23............................................. 10,512 ---------- 19,273 ---------- 120,136 ---------- INFORMATION TECHNOLOGY -- 9.8% APPLICATION SOFTWARE -- 1.4% 10,232 BEA Systems, Inc. 4.000% 12/15/06............................................. 10,091 Fair Issac Corp. 4,900 1.500% 08/15/23............................................. 4,912 3,955 1.500% 08/15/23(b).......................................... 3,965 5,480 Open Solutions 1.467% 02/02/35(b).......................................... 2,788 ---------- 21,756 ---------- COMMUNICATIONS EQUIPMENT -- 1.5% 5,910 Andrew Corp. 3.250% 08/15/13(b).......................................... 6,471 1,130 Harris Corp. 3.500% 08/15/22(b).......................................... 1,704 14,800 Lucent Technologies 8.000% 08/01/31(a).......................................... 15,300 ---------- 23,475 ---------- DATA PROCESSING AND OUTSOURCED SERVICES -- 2.9% Bisys Group 3,925 4.000% 03/15/06............................................. 3,881 3,850 4.000% 03/15/06(b).......................................... 3,807 9,920 CSG Systems International, Inc. 2.500% 06/15/24............................................. 8,928 11,910 DST Systems, Inc. 4.125% 08/15/23(b).......................................... 13,949 12,940 Electronic Data Systems Corp. 3.875% 07/15/23(b).......................................... 12,778 ---------- 43,343 ---------- ELECTRONIC EQUIPMENT MANUFACTURERS -- 1.5% 13,230 Agilent Technologies, Inc. 3.000% 12/01/21............................................. 12,999 9,880 Vishay Intertechnology, Inc. 3.625% 08/01/23(a)(b)....................................... 9,633 ---------- 22,632 ---------- INTERNET SOFTWARE AND SERVICES -- 0.4% 5,975 CNET Networks, Inc. 0.750% 04/15/24(b).......................................... 5,542 ---------- IT SERVICES -- 0.5% 8,282 Ciber 2.875% 12/15/23(a)(b)....................................... 7,444 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 79 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ SEMICONDUCTORS -- 0.7% $ 2,990 ASM International NV 4.250% 12/06/11(b).......................................... $ 3,057 7,500 Fairchild Semiconductor 5.000% 11/01/08............................................. 7,575 ---------- 10,632 ---------- SOFTWARE -- 0.9% 11,420 Sybase, Inc. 1.750% 02/22/25(b).......................................... 11,063 1,980 Veritas Software Corp. 0.500% 08/01/13(b).......................................... 1,908 ---------- 12,971 ---------- 147,795 ---------- MATERIALS -- 3.2% DIVERSIFIED METALS AND MINING -- 2.0% 10,710 Freeport-McMoran Copper and Gold, Inc. 7.000% 02/11/11............................................. 15,382 Massey Energy Co. 5,415 2.250% 04/01/24(b).......................................... 7,371 3,510 4.750% 05/15/23(b).......................................... 7,779 ---------- 30,532 ---------- PAPER PACKAGING -- 1.2% 17,910 Sealed Air Corp. 3.000% 06/30/33(a)(b)....................................... 17,955 ---------- 48,487 ---------- TELECOMMUNICATION SERVICES -- 3.2% INTEGRATED TELECOMMUNICATION SERVICES -- 1.5% 5,473 Commonwealth Telephone 3.250% 07/15/23(b).......................................... 5,487 25,099 Liberty Media Corp. 4.000% 11/15/29............................................. 16,565 ---------- 22,052 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 1.7% American Tower Corp. 3,980 3.000% 08/15/12(a)(b)....................................... 4,318 1,554 3.250% 08/01/10(a)(b)....................................... 2,496 18,950 Nextel Communications 5.250% 01/15/10............................................. 19,424 ---------- 26,238 ---------- 48,290 ---------- UTILITIES -- 3.4% ELECTRIC UTILITIES -- 2.5% Centerpoint Energy, Inc. 2,979 2.875% 01/15/24(b).......................................... 3,146 5,485 3.750% 05/15/23(a)(b)....................................... 6,280 95 Centerpoint Energy, Inc. 3.750% 05/15/23............................................. 109 PPL Energy Supply, LLC 5,205 2.625% 05/15/23............................................. 5,830 12,890 2.625% 05/15/23(a)(b)....................................... 14,437
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ELECTRIC UTILITIES -- (CONTINUED) Reliant Energy, Inc. $ 1,000 5.000% 08/15/10............................................. $ 1,394 4,950 5.000% 08/15/10(a)(b)....................................... 6,899 ---------- 38,095 ---------- MULTI-UTILITIES AND UNREGULATED POWER -- 0.9% 12,832 Dominion Resources 2.125% 12/15/23............................................. 13,586 ---------- 51,681 ---------- TOTAL CONVERTIBLE BONDS (cost of $890,262).......................................... 948,159 ---------- SHARES - ----------- CONVERTIBLE PREFERRED STOCKS -- 19.2% CONSUMER DISCRETIONARY -- 2.0% ADVERTISING -- 0.9% 291,000 Interpublic Group of Companies, Inc. ......................... 13,232 ---------- AUTO MANUFACTURERS -- 1.1% 46,000 Ford Motor Co. Capital Trust II............................... 2,086 233,300 General Motors Corp., Series B................................ 4,358 512,050 General Motors Corp., Series C................................ 10,650 ---------- 17,094 ---------- 30,326 ---------- CONSUMER STAPLES -- 1.2% DISTILLERS AND VINTERS -- 0.6% 210,350 Constellation Brands, Inc. ................................... 8,500 ---------- PACKAGED FOODS AND MEATS -- 0.6% 370,500 Lehman Brothers Holdings...................................... 9,781 ---------- 18,281 ---------- ENERGY -- 3.1% INTEGRATED OIL -- 1.0% 187,120 Amerada Hess Corp. ........................................... 15,697 ---------- OIL AND GAS EXPLORATION AND PRODUCTION -- 1.0% 10,000 Chesapeake Energy(b).......................................... 14,439 ---------- OIL AND GAS REFINING AND MARKETING AND TRANSPORTATION -- 1.1% 120,300 Williams Companies, Inc. ..................................... 10,947 66,600 Williams Companies, Inc.(b)................................... 6,061 ---------- 17,008 ---------- 47,144 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 80 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ FINANCIALS -- 4.5% DIVERSIFIED FINANCIAL SERVICES -- 0.8% 294,000 Citigroup Regency Centers..................................... $ 11,976 ---------- MULTI-LINE INSURANCE -- 0.3% 47,700 Hartford Financial Services Group, Inc. ...................... 3,074 1,490 Fortis Insurance(b)........................................... 1,591 ---------- 4,665 ---------- PROPERTY AND CASUALTY INSURANCE -- 1.0% 632,950 XL Capital Ltd. .............................................. 15,159 ---------- REINSURANCE -- 0.2% 66,000 Reinsurance Group of America, Inc. ........................... 3,820 ---------- THRIFTS AND MORTGAGE FINANCE -- 2.2% 32,410 Doral Financial Corp.(b)...................................... 5,879 24 Fannie Mae.................................................... 2,249 296,650 Sovereign Capital Trust IV.................................... 14,054 76,800 Washington Mutual............................................. 4,005 121,000 Washington Mutual(b).......................................... 6,409 ---------- 32,596 ---------- 68,216 ---------- HEALTH CARE -- 2.7% HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.0% 276,060 Baxter International(a)....................................... 14,866 ---------- HEALTH CARE SERVICES -- 0.9% 255,850 Omnicare Capital Trust II..................................... 13,194 ---------- PHARMACEUTICALS -- 0.8% 248,000 Schering-Plough............................................... 12,474 ---------- 40,534 ---------- INDUSTRIALS -- 0.7% AEROSPACE/DEFENSE -- 0.3% 40,000 Northrop Grumman.............................................. 5,200 ---------- CONSTRUCTION AND FARM MACHINERY AND HEAVY TRUCKS -- 0.4% 76,000 Cummins Capital Trust I....................................... 5,843 ---------- 11,043 ---------- INFORMATION TECHNOLOGY -- 0.7% OFFICE ELECTRONICS -- 0.7% 80,090 Xerox Corp. .................................................. 10,538 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ MATERIALS -- 1.6% CHEMICALS -- 0.3% 154,350 Celanese AG................................................... $ 4,283 ---------- DIVERSIFIED CHEMICALS -- 0.3% 83,160 Huntsman Corp. ............................................... 4,241 ---------- DIVERSIFIED METALS AND MINING -- 0.4% 6,270 Freeport-McMoRan Copper and Gold, Inc.(b)..................... 6,215 ---------- PAPER PACKAGING -- 0.6% 158,620 Temple-Inland, Inc. .......................................... 9,210 ---------- 23,949 ---------- TELECOMMUNICATION SERVICES -- 1.5% INTEGRATED TELECOMMUNICATION SERVICES -- 0.4% 101,200 Alltel Corp. ................................................. 5,110 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 1.1% 336,185 Crown Castle International Corp.(d) ................................................... 17,019 ---------- 22,129 ---------- UTILITIES -- 1.2% ELECTRIC UTILITIES -- 0.7% 191,000 Ameren Corp. ................................................. 5,122 82,900 FPLGroup, Inc. ............................................... 5,141 ---------- 10,263 ---------- GAS UTILITIES -- 0.3% 92,920 Southern Union Co. ........................................... 4,809 ---------- MULTI-UTILITIES AND UNREGULATED POWER -- 0.2% 49,200 Dominion Resources, Inc.(a)................................... 2,759 ---------- 17,831 ---------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost of $263,380).......................................... 289,991 ---------- COMMON STOCKS -- 12.9% CONSUMER DISCRETIONARY -- 1.6% MOVIES AND ENTERTAINMENT -- 0.8% 394,450 Walt Disney Co. .............................................. 11,333 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 81 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ RESTAURANTS -- 0.8% 192,000 Centerplate, Inc. ............................................ $ 2,434 320,000 McDonald's Corp. ............................................. 9,965 ---------- 12,399 ---------- 23,732 ---------- CONSUMER STAPLES -- 0.8% HOUSEHOLD PRODUCTS -- 0.5% 146,000 Procter & Gamble Co. ......................................... 7,738 ---------- PACKAGED FOODS AND MEATS -- 0.3% 61,600 Wm. Wrigley Jr. Co. .......................................... 4,039 ---------- 11,777 ---------- ENERGY -- 1.7% OIL AND GAS EQUIPMENT AND SERVICES -- 0.6% 220,000 Halliburton Co. .............................................. 9,515 ---------- OIL AND GAS EXPLORATION AND PRODUCTION -- 0.7% 447,439 Chesapeake Energy Corp. ...................................... 9,817 ---------- OIL AND GAS REFINING AND MARKETING AND TRANSPORTATION -- 0.4% 321,000 Williams Companies, Inc. ..................................... 6,038 ---------- 25,370 ---------- FINANCIALS -- 0.8% LIFE AND HEALTH INSURANCE -- 0.8% 216,078 Prudential Financial, Inc. ................................... 12,403 ---------- HEALTH CARE -- 1.1% BIOTECHNOLOGY -- 0.9% 141,000 Amgen, Inc.(d)................................................ 8,208 170,600 Celgene Corp.(d).............................................. 5,809 ---------- 14,017 ---------- MANAGED HEALTH CARE -- 0.1% 12,408 WellPoint, Inc.(d)............................................ 1,555 ---------- PHARMACEUTICALS -- 0.1% 59,000 Axcan Pharma, Inc.(d)(a)...................................... 993 ---------- 16,565 ---------- INDUSTRIALS -- 3.4% AEROSPACE/DEFENSE -- 0.5% 77,677 L-3 Communications Holdings, Inc. ............................ 5,517 52,538 Northrop Grumman Corp. ....................................... 2,836 ---------- 8,353 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ CONSTRUCTION AND ENGINEERING -- 0.4% 310,000 McDermott International, Inc.(d).............................. $ 5,868 ---------- CONSTRUCTION AND FARM MACHINERY AND HEAVY TRUCKS -- 0.7% 151,000 Cummins, Inc. ................................................ 10,623 ---------- INDUSTRIAL CONGLOMERATES -- 0.9% 51,330 3M Co. ....................................................... 4,399 260,000 Tyco International Ltd. ...................................... 8,788 ---------- 13,187 ---------- INDUSTRIAL MACHINERY -- 0.9% 130,000 Actuant Corp., Class A(d)..................................... 5,840 148,000 Danaher Corp. ................................................ 7,904 ---------- 13,744 ---------- 51,775 ---------- INFORMATION TECHNOLOGY -- 2.5% COMMUNICATIONS EQUIPMENT -- 1.2% 450,000 Corning, Inc.(d).............................................. 5,009 249,684 Motorola, Inc. ............................................... 3,738 228,000 QUALCOMM, Inc. ............................................... 8,356 ---------- 17,103 ---------- DATA PROCESSING AND OUTSOURCED SERVICES -- 0.6% 176,000 Automatic Data Processing, Inc. .............................. 7,911 92,100 Startek, Inc. ................................................ 1,547 ---------- 9,458 ---------- INTERNET SOFTWARE AND SERVICES -- 0.7% 80,000 InfoSpace, Inc.(d)............................................ 3,266 205,600 Yahoo!, Inc.(d)............................................... 6,970 ---------- 10,236 ---------- SOFTWARE -- 0.0% 219 Computer Associates International, Inc. ...................... 6 ---------- 36,803 ---------- MATERIALS -- 0.3% SPECIALTY CHEMICALS -- 0.3% 269,600 RPM International, Inc. ...................................... 4,928 ---------- TELECOMMUNICATION SERVICES -- 0.3% INTEGRATED TELECOMMUNICATION SERVICES -- 0.2% 92,671 Compania Anonima Nacional Telefonos de Venezuela, ADR......... 1,753 30,000 Telefonos de Mexico SA de CV, ADR............................. 1,036 ---------- 2,789 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 82 NATIONS FUNDS Nations Convertible Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES -- 0.1% 120,925 Crown Castle International Corp.(d)........................... $ 1,942 ---------- 4,731 ---------- UTILITIES -- 0.4% ELECTRIC UTILITIES -- 0.4% 140,000 Cinergy Corp. ................................................ 5,673 ---------- TOTAL COMMON STOCKS (Cost of $149,966).......................................... 193,757 ---------- UNITS - ----------- WARRANTS -- 0.0% INFORMATION TECHNOLOGY -- 0.0% COMMUNICATIONS EQUIPMENT -- 0.0% 12,396 Lucent Technologies, Inc.(c).................................. 8 ---------- TOTAL WARRANTS (Cost of $15)............................................... 8 ---------- SHARES - ----------- INVESTMENT MANAGEMENT COMPANY -- 4.5% 69,106,000 Nations Cash Reserves, Capital Class Shares(d)..................................... 69,106 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $69,106)........................................... 69,106 ---------- PAR (000) - ----------- REPURCHASE AGREEMENTS(E) -- 9.2% $ 36,813 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $37,163 (repurchase proceeds $36,816)............................... 36,813 44,175 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $44,755 (repurchase proceeds $44,178).......... 44,175
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ REPURCHASE AGREEMENTS(E) -- (CONTINUED) $ 57,509 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $58,416 (repurchase proceeds $57,514).......... $ 57,509 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $138,497).......................................... 138,497 ---------- TOTAL INVESTMENTS 108.7% (Cost of $1,511,226)(f)........................... 1,639,518 ---------- OTHER ASSETS AND (8.7)% LIABILITIES, NET.................................. (131,197) ---------- NET ASSETS.......................................... 100.0% $1,508,321 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $128,940 and $131,197, respectively. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $540,122, which represents 35.8% of net assets. (c) Non-income producing security. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 11). (f) Cost for federal income tax purposes is $1,514,062. ABBREVIATION: ADR -- American Depositary Receipt
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Health care................................. 18.7% Consumer discretionary...................... 13.5 Information technology...................... 13.0 Industrials................................. 12.1 Financials.................................. 10.7 Energy...................................... 9.0 Materials................................... 5.1 Telecommunication services.................. 5.0 Utilities................................... 5.0 Consumer staples............................ 2.9 Investment management company............... 4.5 Repurchase agreements....................... 9.2 Other assets and liabilities, net........... (8.7) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 83 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- COMMON STOCKS -- 67.8% CONSUMER DISCRETIONARY -- 8.2% AUTO COMPONENTS -- 0.6% 21,905 Lear Corp. ................................................... $ 972 -------- AUTOMOBILES -- 0.3% 50,243 Ford Motor Co. ............................................... 569 -------- HOTELS, RESTAURANTS AND LEISURE -- 0.3% 21,444 International Game Technology, Inc. .......................... 572 -------- HOUSEHOLD DURABLES -- 0.8% 8,844 Lennar Corp., Class A......................................... 501 21,919 Stanley Works................................................. 992 -------- 1,493 -------- LEISURE EQUIPMENT AND PRODUCTS -- 0.4% 15,933 Brunswick Corp. .............................................. 746 -------- MEDIA -- 1.9% 36,445 Clear Channel Communications, Inc.(a)......................... 1,256 11,233 Dow Jones & Co., Inc. ........................................ 420 81,382 Time Warner, Inc.(b).......................................... 1,428 8,751 Viacom, Inc., Class B......................................... 305 -------- 3,409 -------- MULTILINE RETAIL -- 1.0% 19,334 J.C. Penney Co., Inc. ........................................ 1,004 17,271 Target Corp. ................................................. 864 -------- 1,868 -------- SPECIALTY RETAIL -- 2.9% 6,755 AutoZone, Inc.(b)............................................. 579 15,737 Barnes & Noble, Inc.(b)....................................... 543 22,090 Home Depot, Inc. ............................................. 845 35,353 Limited Brands................................................ 859 24,645 Sherwin-Williams Co. ......................................... 1,084 21,858 Staples, Inc. ................................................ 687 25,546 TJX Companies, Inc. .......................................... 629 -------- 5,226 -------- 14,855 -------- CONSUMER STAPLES -- 6.4% BEVERAGES -- 2.1% 11,457 Anheuser-Busch Companies, Inc. ............................... 543 17,824 Coca-Cola Co. ................................................ 743 10,900 Diageo PLC, ADR............................................... 620 41,378 Pepsi Bottling Group, Inc. ................................... 1,152 13,792 PepsiCo, Inc. ................................................ 731 -------- 3,789 -------- FOOD AND STAPLES RETAILING -- 1.3% 14,128 SUPERVALU, Inc. .............................................. 471 39,485 Wal-Mart Stores, Inc. ........................................ 1,979 -------- 2,450 --------
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- FOOD PRODUCTS -- 1.0% 12,440 Kellogg Co. .................................................. $ 538 23,718 Sara Lee Corp. ............................................... 526 40,312 Tyson Foods, Inc., Class A.................................... 672 -------- 1,736 -------- HOUSEHOLD PRODUCTS -- 0.9% 30,401 Procter & Gamble Co. ......................................... 1,611 -------- PERSONAL PRODUCTS -- 0.2% 10,020 Estee Lauder Companies, Inc., Class A......................... 451 -------- TOBACCO -- 0.9% 24,022 Altria Group, Inc. ........................................... 1,571 -------- 11,608 -------- ENERGY -- 5.0% OIL AND GAS -- 5.0% 11,857 Anadarko Petroleum Corp. ..................................... 902 8,808 Apache Corp. ................................................. 539 25,146 ChevronTexaco Corp. .......................................... 1,467 13,412 ConocoPhillips................................................ 1,446 62,389 Exxon Mobil Corp. ............................................ 3,719 6,880 Marathon Oil Corp. ........................................... 323 9,660 Newfield Exploration Co.(b)................................... 717 -------- 9,113 -------- FINANCIALS -- 14.4% CAPITAL MARKETS -- 2.5% 10,964 Goldman Sachs Group, Inc. .................................... 1,206 9,253 Lehman Brothers Holdings, Inc. ............................... 871 18,502 Mellon Financial Corp. ....................................... 528 22,933 Merrill Lynch & Co., Inc. .................................... 1,298 13,192 State Street Corp. ........................................... 577 -------- 4,480 -------- COMMERCIAL BANKS -- 3.6% 13,593 City National Corp. .......................................... 949 18,250 Comerica, Inc. ............................................... 1,005 15,356 Marshall & Ilsley Corp. ...................................... 641 45,816 U.S. Bancorp.................................................. 1,321 34,270 Wachovia Corp. ............................................... 1,745 13,973 Zions Bancorporation.......................................... 964 -------- 6,625 -------- CONSUMER FINANCE -- 0.9% 10,383 Capital One Financial Corp. .................................. 776 36,320 MBNA Corp. ................................................... 892 -------- 1,668 -------- DIVERSIFIED FINANCIAL SERVICES -- 2.6% 76,519 Citigroup, Inc. .............................................. 3,439 36,720 JPMorgan Chase & Co. ......................................... 1,271 -------- 4,710 -------- INSURANCE -- 3.4% 15,596 Allstate Corp. ............................................... 843 6,831 Ambac Financial Group, Inc. .................................. 511 30,044 American International Group, Inc. ........................... 1,665 11,191 Endurance Specialty Holdings Ltd. ............................ 423
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 84 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- INSURANCE -- (CONTINUED) 10,140 Hartford Financial Services Group, Inc. ...................... $ 695 12,874 Lincoln National Corp. ....................................... 581 13,965 MBIA, Inc. ................................................... 730 13,064 Prudential Financial, Inc. ................................... 750 -------- 6,198 -------- THRIFTS AND MORTGAGE FINANCE -- 1.4% 11,294 Fannie Mae.................................................... 615 12,187 Freddie Mac................................................... 770 15,887 PMI Group, Inc. .............................................. 604 15,547 Washington Mutual, Inc. ...................................... 614 -------- 2,603 -------- 26,284 -------- HEALTH CARE -- 9.8% BIOTECHNOLOGY -- 1.0% 30,066 Amgen, Inc.(b)................................................ 1,750 -------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.9% 18,099 Medtronic, Inc. .............................................. 922 37,197 PerkinElmer, Inc. ............................................ 767 -------- 1,689 -------- HEALTH CARE PROVIDERS AND SERVICES -- 3.2% 11,384 Aetna, Inc. .................................................. 853 10,890 Cardinal Health, Inc. ........................................ 608 13,962 Express Scripts, Inc.(b)...................................... 1,217 22,257 Health Net, Inc.(b)........................................... 728 6,343 Quest Diagnostics, Inc. ...................................... 667 9,255 Triad Hospitals, Inc.(b)...................................... 464 14,080 UnitedHealth Group, Inc. ..................................... 1,343 -------- 5,880 -------- PHARMACEUTICALS -- 4.7% 14,556 Abbott Laboratories........................................... 679 7,274 Allergan, Inc. ............................................... 505 9,985 Eli Lilly & Co. .............................................. 520 45,461 Johnson & Johnson............................................. 3,053 15,781 Merck & Co., Inc. ............................................ 511 106,192 Pfizer, Inc. ................................................. 2,790 30,539 Schering-Plough Corp. ........................................ 554 -------- 8,612 -------- 17,931 -------- INDUSTRIALS -- 7.3% AEROSPACE AND DEFENSE -- 1.5% 19,277 Boeing Co. ................................................... 1,127 7,305 Lockheed Martin Corp. ........................................ 446 11,046 Northrop Grumman Corp. ....................................... 596 6,350 United Technologies Corp. .................................... 646 -------- 2,815 -------- AIR FREIGHT AND LOGISTICS -- 0.7% 7,882 FedEx Corp. .................................................. 740 7,178 United Parcel Service, Inc., Class B.......................... 522 -------- 1,262 --------
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- COMMERCIAL SERVICES AND SUPPLIES -- 1.5% 28,290 Allied Waste Industries, Inc.(a)(b)........................... $ 207 31,333 Cendant Corp. ................................................ 643 17,307 H&R Block, Inc. .............................................. 875 38,118 ServiceMaster Co. ............................................ 515 13,828 Waste Management, Inc. ....................................... 399 -------- 2,639 -------- ELECTRICAL EQUIPMENT -- 0.6% 14,253 Cooper Industries Ltd., Class A............................... 1,019 -------- INDUSTRIAL CONGLOMERATES -- 2.1% 107,449 General Electric Co. ......................................... 3,875 -------- MACHINERY -- 0.9% 7,394 Cummins, Inc. ................................................ 520 10,047 Harsco Corp. ................................................. 599 5,849 Illinois Tool Works, Inc. .................................... 524 -------- 1,643 -------- 13,253 -------- INFORMATION TECHNOLOGY -- 10.7% COMMUNICATIONS EQUIPMENT -- 1.7% 77,982 Cisco Systems, Inc.(b)........................................ 1,395 16,296 Harris Corp. ................................................. 532 23,717 Motorola, Inc. ............................................... 355 11,786 QUALCOMM, Inc. ............................................... 432 65,886 Tellabs, Inc.(b).............................................. 481 -------- 3,195 -------- COMPUTERS AND PERIPHERALS -- 1.9% 20,001 Dell, Inc.(b)................................................. 769 30,291 EMC Corp.(b).................................................. 373 27,586 Hewlett-Packard Co. .......................................... 605 19,144 International Business Machines Corp. ........................ 1,749 -------- 3,496 -------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.6% 18,442 Amphenol Corp., Class A....................................... 683 21,448 Ingram Micro, Inc., Class A(b)................................ 358 -------- 1,041 -------- IT SERVICES -- 1.3% 22,561 Accenture Ltd., Class A(b).................................... 545 13,157 Affiliated Computer Services, Inc., Class A(b)................ 700 14,231 Computer Sciences Corp.(b).................................... 653 11,331 First Data Corp. ............................................. 445 -------- 2,343 -------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.6% 83,700 Agere Systems Inc.(b)......................................... 120 38,759 Applied Materials, Inc. ...................................... 630 21,993 Broadcom Corp., Class A(b).................................... 658 26,056 Fairchild Semiconductor Corp., Class A(b)..................... 399 92,165 Intel Corp. .................................................. 2,141
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 85 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- (CONTINUED) 38,867 National Semiconductor Corp. ................................. $ 801 -------- 4,749 -------- SOFTWARE -- 2.6% 18,624 Citrix Systems, Inc.(b)....................................... 444 118 Computer Associates International, Inc. ...................... 3 9,720 Intuit, Inc.(b)............................................... 425 97,481 Microsoft Corp. .............................................. 2,356 24,023 Quest Software, Inc.(b)....................................... 333 33,476 Symantec Corp.(b)............................................. 714 27,239 Synopsys, Inc.(b)............................................. 493 -------- 4,768 -------- 19,592 -------- MATERIALS -- 2.0% CHEMICALS -- 0.6% 8,831 PPG Industries, Inc. ......................................... 632 5,796 Scotts Co., Class A(b)........................................ 407 -------- 1,039 -------- CONSTRUCTION MATERIALS -- 0.1% 5,513 Martin Marietta Materials, Inc. .............................. 308 -------- CONTAINERS AND PACKAGING -- 0.7% 23,067 Ball Corp. ................................................... 957 14,836 Pactiv Corp.(b)............................................... 347 -------- 1,304 -------- METALS AND MINING -- 0.3% 17,287 Alcoa, Inc. .................................................. 525 -------- PAPER AND FOREST PRODUCTS -- 0.3% 16,720 MeadWestvaco Corp. ........................................... 532 -------- 3,708 -------- TELECOMMUNICATION SERVICES -- 2.1% DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.7% 47,174 SBC Communications, Inc. ..................................... 1,117 19,943 Sprint Corp. ................................................. 454 44,920 Verizon Communications, Inc. ................................. 1,595 -------- 3,166 -------- WIRELESS TELECOMMUNICATION SERVICES -- 0.4% 23,831 Nextel Communications, Inc., Class A(b)....................... 677 -------- 3,843 -------- UTILITIES -- 1.9% ELECTRIC UTILITIES -- 1.4% 23,453 American Electric Power Co., Inc. ............................ 799 15,068 DTE Energy Co. ............................................... 685 16,215 Entergy Corp. ................................................ 1,146 -------- 2,630 --------
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- MULTI-UTILITIES AND UNREGULATED POWER -- 0.5% 21,099 Sempra Energy................................................. $ 841 -------- 3,471 -------- TOTAL COMMON STOCKS (Cost of $97,163)........................................... 123,658 -------- PAR (000) - ----------- MORTGAGE-BACKED SECURITIES -- 11.7% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.9% $ 1,300 Federal Home Loan Mortgage Corp., Interest Only 4.000% 09/15/15............................................. 1,271 305 5.500% 05/15/27............................................. 30 Federal National Mortgage Association 260 6.000% 04/25/17............................................. 271 35 7.000% 01/25/21............................................. 36 -------- 1,608 -------- MORTGAGE-BACKED SECURITIES -- 10.8% Federal Home Loan Mortgage Corp. 801 6.500% 07/01/29--11/01/32................................... 833 100 6.750% 03/15/31............................................. 122 103 8.000% 07/01/10--09/01/25................................... 110 Federal National Mortgage Association 51 4.185% 08/01/36............................................. 52 1,256 5.500% 08/25/17--07/01/33................................... 985 946 6.500% 10/01/24--05/01/33................................... 988 55 7.500% 10/01/11............................................. 58 115 8.500% 08/01/11............................................. 122 87 10.000% 09/01/18............................................ 97 TBA 10,758 5.000% 04/15/20--04/15/35(c)................................ 10,672 750 5.500% 03/15/35(c).......................................... 751 1,710 6.500% 04/15/35(c).......................................... 1,774 Government National Mortgage Association 3,177 5.500% 03/15/35............................................. 3,205 48 7.500% 12/15/23............................................. 52 4 10.000% 02/15/16............................................ 4 -------- 19,825 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost of $21,486)........................................... 21,433 -------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 9.3% BASIC MATERIALS -- 0.3% CHEMICALS -- 0.1% 38 Eastman Chemical Co. 3.250% 06/15/08............................................. 36 63 E.I. Dupont De Nemours & Co. 3.375% 11/15/07............................................. 62 -------- 98 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 86 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- FOREST PRODUCTS AND PAPER -- 0.1% $ 70 Champion International Corp. 7.350% 11/01/25............................................. $ 81 International Paper Co. 62 5.850% 10/30/12............................................. 65 61 4.250% 01/15/09............................................. 60 81 Westvaco Corp. 8.200% 01/15/30............................................. 102 -------- 308 -------- METALS AND MINING -- 0.1% Alcan, Inc. 44 7.250% 03/15/31............................................. 53 47 6.450% 03/15/11............................................. 51 48 BHP Billiton Finance USA 4.800% 04/15/13............................................. 48 -------- 152 -------- 558 -------- COMMUNICATIONS -- 1.2% MEDIA -- 0.5% 78 Comcast Cable Communications, Inc. 7.125% 06/15/13............................................. 87 58 Knight-Ridder, Inc. 7.125% 06/01/11............................................. 65 17 Rogers Cable, Inc. 6.250% 06/15/13............................................. 17 51 TCI Communications, Inc., 9.875% 06/15/22............................................. 72 105 Thomson Corp. 5.250% 08/15/13............................................. 106 Time Warner, Inc. 54 7.250% 09/01/08............................................. 58 142 7.625% 04/15/31............................................. 167 88 9.125% 01/15/13............................................. 109 61 Viacom, Inc. 5.625% 05/01/07............................................. 62 72 Walt Disney Co. 5.500% 12/29/06............................................. 73 -------- 816 -------- TELECOMMUNICATIONS -- 0.7% 125 BellSouth Corp. 5.000% 10/15/06............................................. 127 36 BellSouth Telecommunications, Inc. 6.375% 06/01/28............................................. 38 53 British Telecommunications PLC 8.375% 12/15/10............................................. 62 Cingular Wireless SV 41 8.125% 05/01/12............................................. 48 37 8.750% 03/01/31............................................. 49 183 Deutsche Telekom International Finance BV 5.250% 07/22/13............................................. 182 255 SBC Communications, Inc. 5.750% 05/02/06............................................. 260 Sprint Capital Corp. 24 6.125% 11/15/08............................................. 25 116 8.750% 03/15/32............................................. 150 28 Verizon Global Funding Corp. 7.750% 12/01/30............................................. 34
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- (CONTINUED) $ 224 Verizon New England, Inc. 6.500% 09/15/11............................................. $ 240 140 Verizon Pennsylvania, Inc. 5.650% 11/15/11............................................. 144 -------- 1,359 -------- 2,175 -------- CONSUMER CYCLICAL -- 0.6% AUTO MANUFACTURERS -- 0.2% 199 DaimlerChrysler N.A. Holding Corp. 4.050% 06/04/08............................................. 193 252 Ford Motor Co. 7.450% 07/16/31(a).......................................... 228 -------- 421 -------- HOME BUILDERS -- 0.3% 156 Dr. Horton, Inc. 7.875% 08/15/11............................................. 170 183 KB Home 5.750% 02/01/14............................................. 175 97 Toll Brothers, Inc. 4.950% 03/15/14............................................. 92 -------- 437 -------- RETAIL -- 0.1% Target Corp. 22 5.375% 06/15/09............................................. 23 100 5.400% 10/01/08............................................. 103 66 5.875% 03/01/12............................................. 70 -------- 196 -------- 1,054 -------- CONSUMER NON-CYCLICAL -- 0.4% BEVERAGES -- 0.1% 91 Anheuser-Busch Companies, Inc. 5.950% 01/15/33............................................. 97 -------- COMMERCIAL SERVICES -- 0.0% 14 Donnelley & Sons 4.950% 04/01/14............................................. 14 -------- COSMETICS/PERSONAL CARE -- 0.0% 51 Procter & Gamble Co. 4.750% 06/15/07............................................. 52 -------- FOOD -- 0.2% Kroger Co. 19 6.800% 04/01/11............................................. 21 23 6.750% 04/15/12............................................. 25 202 Fred Myer, Inc. 7.450% 03/01/08............................................. 216 50 Unilever Capital Corp. 6.875% 11/01/05............................................. 51 -------- 313 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 87 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- HEALTHCARE SERVICES -- 0.1% WellPoint Health Networks, Inc. $ 193 6.375% 06/15/06............................................. $ 198 45 6.375% 01/15/12............................................. 48 -------- 246 -------- HOUSEHOLD PRODUCTS/WARES -- 0.0% 65 Fortune Brands, Inc. 2.875% 12/01/06............................................. 64 -------- 786 -------- ENERGY -- 0.9% OIL AND GAS -- 0.6% 137 BP Capital Markets PLC 2.750% 12/29/06............................................. 134 Conoco Funding Co. 117 5.450% 10/15/06............................................. 120 142 6.350% 10/15/11............................................. 155 31 Devon Energy Corp. 7.950% 04/15/32............................................. 39 206 Pioneer Natural Resources Co. 6.500% 01/15/08............................................. 216 37 Suncor Energy 5.950% 12/01/34............................................. 39 194 USX Corp. 6.650% 02/01/06............................................. 198 175 XTO Energy, Inc. 7.500% 04/15/12............................................. 200 -------- 1,101 -------- PIPELINES -- 0.3% 111 Consolidated Natural Gas Co. 5.375% 11/01/06............................................. 113 270 Kinder Morgan Energy Partners 7.300% 08/15/33............................................. 310 125 Teppco Partners LP 7.625% 02/15/12............................................. 141 -------- 564 -------- 1,665 -------- FINANCIALS -- 4.6% BANKS -- 1.0% 69 Bank of New York Co., Inc. 3.900% 09/01/07............................................. 68 42 HSBC Holdings PLC 7.350% 11/27/32(d).......................................... 51 67 Key Bank National Association 7.000% 02/01/11............................................. 74 300 Marshall & lsley Corp. 4.375% 08/01/09............................................. 297 101 Mellon Funding Corp. 6.700% 03/01/08............................................. 108 186 National City Bank 4.625% 05/01/13............................................. 181 153 PNC Funding Corp. 5.750% 08/01/06............................................. 156 114 Scotland International Finance 4.250% 05/23/13(d).......................................... 109
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- BANKS -- (CONTINUED) $ 53 SouthTrust Bank, Inc. 4.750% 03/01/13(a)(d)....................................... $ 52 203 Union Planters Corp. 4.375% 12/01/10............................................. 197 189 US Bank NA 6.375% 08/01/11............................................. 205 325 Wachovia Corp. 4.875% 02/15/14............................................. 317 -------- 1,815 -------- DIVERSIFIED FINANCIAL SERVICES -- 3.2% American Express Co. 56 3.750% 11/20/07............................................. 55 153 4.750% 06/17/09............................................. 154 48 5.500% 09/12/06............................................. 49 65 American General Finance Corp. 2.750% 06/15/08............................................. 62 120 Associates Corp. 6.950% 11/01/18............................................. 137 Bear Stearns Companies, Inc. 185 4.500% 10/28/10............................................. 182 64 5.700% 01/15/07............................................. 66 79 Capital One Bank 5.000% 06/15/09............................................. 79 Caterpillar Financial Services Corp. 103 2.350% 09/15/06............................................. 101 135 4.500% 06/15/09............................................. 134 154 5.950% 05/01/06............................................. 157 87 CIT Group, Inc. 7.375% 04/02/07............................................. 92 70 Citigroup Global Markets Holdings, Inc. 6.500% 02/15/08............................................. 74 Citigroup, Inc. 337 5.000% 09/15/14............................................. 331 78 6.000% 02/21/12............................................. 83 302 Countrywide Home Loans, Inc. 5.500% 08/01/06............................................. 307 100 Credit Suisse First Boston USA, Inc. 4.625% 01/15/08............................................. 100 General Electric Capital Corp. 25 5.875% 02/15/12............................................. 26 307 6.750% 03/15/32............................................. 354 General Motors Acceptance Corp. 115 6.150% 04/05/07............................................. 113 50 6.875% 09/15/11............................................. 45 143 8.000% 11/01/31............................................. 125 Goldman Sachs Group, Inc. 40 4.125% 01/15/08............................................. 40 112 4.750% 07/15/13............................................. 108 169 6.600% 01/15/12............................................. 183 HSBC Finance Corp. 106 5.875% 02/01/09............................................. 110 53 6.375% 11/27/12............................................. 57 117 7.200% 07/15/06............................................. 122
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 88 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) International Lease Finance Corp. $ 213 3.500% 04/01/09............................................. $ 204 52 4.500% 05/01/08............................................. 52 138 John Deere Capital Corp. 3.125% 12/15/05............................................. 137 475 JPMorgan Chase Capital XV 5.875% 03/15/35............................................. 459 Lehman Brothers Holdings, Inc. 129 4.000% 01/22/08............................................. 127 152 7.000% 02/01/08............................................. 162 38 7.875% 08/15/10............................................. 43 70 MassMutual Global Funding II 2.550% 07/15/08(d).......................................... 66 Merrill Lynch & Co., Inc. 63 3.700% 04/21/08............................................. 62 149 6.000% 02/17/09(d).......................................... 156 300 Morgan Stanley 4.750% 04/01/14(d).......................................... 285 National Rural Utilities Cooperative Finance Corp. 70 3.250% 10/01/07............................................. 68 80 5.750% 08/28/09............................................. 83 60 8.000% 03/01/32............................................. 78 144 Principal Life Global 6.250% 02/15/12(d).......................................... 155 212 Prudential Funding LLC 6.600% 05/15/08(d).......................................... 225 -------- 5,808 -------- INSURANCE -- 0.1% Hartford Financial Services Group, Inc. 46 2.375% 06/01/06............................................. 45 35 4.625% 07/15/13............................................. 34 30 Metlife, Inc. 5.375% 12/15/12............................................. 31 30 Nationwide Financial Services 5.900% 07/01/12............................................. 31 -------- 141 -------- REAL ESTATE -- 0.0% 16 ERP Operating LP 5.200% 04/01/13............................................. 16 -------- REAL ESTATE INVESTMENT TRUST (REITS) -- 0.1% 58 Health Care Property Investors, Inc. 6.450% 06/25/12............................................. 62 161 Simon Property Group LP 3.750% 01/30/09............................................. 155 -------- 217 --------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- SAVINGS AND LOANS -- 0.2% Washington Mutual, Inc. $ 180 5.625% 01/15/07............................................. $ 184 195 4.625% 04/01/14............................................. 184 64 2.400% 11/03/05............................................. 64 -------- 432 -------- 8,429 -------- INDUSTRIALS -- 0.5% AEROSPACE AND DEFENSE -- 0.2% 79 Boeing Co. 5.125% 02/15/13............................................. 79 101 Northrop Grumman Corp. 7.125% 02/15/11............................................. 113 73 Raytheon Co. 5.375% 04/01/13............................................. 74 -------- 266 -------- BUILDING MATERIALS -- 0.0% 68 Hanson Overseas BV 6.750% 09/15/05............................................. 69 -------- ENVIRONMENTAL CONTROL -- 0.1% 118 Waste Management, Inc. 7.375% 08/01/10............................................. 132 -------- MISCELLANEOUS MANUFACTURING -- 0.1% 66 General Electric Co. 5.000% 02/01/13............................................. 66 113 Tyco International Group SA 6.375% 10/15/11............................................. 120 -------- 186 -------- TRANSPORTATION -- 0.1% 107 Burlington Northern Santa Fe Corp. 6.750% 07/15/11............................................. 117 95 Canadian National Railway Co. 6.900% 07/15/28............................................. 111 -------- 228 -------- 881 -------- TECHNOLOGY -- 0.3% COMPUTERS -- 0.3% 212 Hewlett-Packard Co. 5.750% 12/15/06............................................. 217 International Business Machines Corp. 104 4.875% 10/01/06............................................. 105 33 5.875% 11/29/32............................................. 35 59 6.500% 01/15/28............................................. 66 -------- 423 -------- UTILITIES -- 0.5% ELECTRIC -- 0.4% Con Edison Co. 108 4.700% 06/15/09............................................. 109 108 6.625% 12/15/05............................................. 110 35 Dominion Resources, Inc. 5.000% 03/15/13............................................. 35
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 89 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ELECTRIC -- (CONTINUED) $ 113 NiSource Finance Corp. 5.400% 07/15/14............................................. $ 114 18 NY State Electric & Gas 5.750% 05/01/23............................................. 18 57 Public Service Electric & Gas Co. 4.000% 11/01/08............................................. 56 275 Scottish Power PLC 4.910% 03/15/10............................................. 275 93 Virginia Electric & Power Co. 5.375% 02/01/07............................................. 95 -------- 812 -------- GAS -- 0.1% 150 Sempra Energy 4.750% 05/15/09............................................. 149 -------- 961 -------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost of $16,756)........................................... 16,932 -------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 6.9% FOREIGN GOVERNMENT BONDS -- 0.7% 162 Hellenic Republic of Greece 6.950% 03/04/08............................................. 174 169 Province of Quebec 7.500% 09/15/29............................................. 218 106 Region of Lombardy 5.804% 10/25/32............................................. 112 Republic of Italy 123 2.750% 12/15/06............................................. 121 302 3.750% 12/14/07............................................. 298 United Mexican States 191 7.500% 04/08/33............................................. 202 196 8.375% 01/14/11............................................. 223 -------- 1,348 -------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 6.2% Federal Home Loan Bank 300 3.625% 11/14/08............................................. 293 100 3.875% 06/14/13............................................. 95 Federal Home Loan Mortgage Corp. 172 4.500% 01/15/13............................................. 169 98 4.875% 11/15/13............................................. 98 180 5.125% 10/15/08............................................. 185 Federal National Mortgage Association 1,592 4.375% 03/15/13--07/17/13................................... 1,529 221 5.250% 01/15/09............................................. 228 3,220 U.S. Treasury Bonds 6.250% 08/15/23............................................. 3,749 1,711 U.S. Treasury Inflation Index Note 3.625% 01/15/08............................................. 1,841
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- (CONTINUED) U.S. Treasury Notes $ 100 1.250% 05/31/05............................................. $ 100 1,000 2.000% 05/15/06............................................. 983 150 3.000% 02/15/09............................................. 144 600 3.125% 05/15/07............................................. 592 495 3.250% 01/15/09............................................. 481 850 4.250% 11/15/13............................................. 837 -------- 11,324 -------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost of $12,673)........................................... 12,672 -------- ASSET-BACKED SECURITIES -- 4.1% 125 American Express Credit Account Master Trust 1.690% 01/15/09............................................. 122 AmeriCredit Automobile Receivables Trust 460 2.070% 08/06/08............................................. 451 351 5.370% 06/12/08............................................. 354 337 Bank One Auto Securitization Trust 1.820% 09/20/07............................................. 333 880 CIT Equipment Collateral 4.670% 12/21/09............................................. 882 621 Citibank Credit Card Issuance Trust 2.500% 04/07/08............................................. 613 500 Citibank Credit Card Master Trust I 6.100% 05/15/08............................................. 512 32 First Plus Home Loan Trust 7.720% 05/10/24............................................. 32 Ford Credit Auto Owner Trust 267 2.700% 06/15/07............................................. 265 450 5.180% 10/16/06............................................. 453 676 Honda Auto Receivables Owner Trust 3.060% 10/21/09............................................. 660 1,400 Long Beach Mortgage Loan Trust 2.930% 03/25/35............................................. 1,400 318 Nissan Auto Receivables Owner Trust 2.700% 12/17/07............................................. 314 1,048 Volkswagen Auto Loan Enhanced Trust 2.270% 10/22/07............................................. 1,038 -------- TOTAL ASSET-BACKED SECURITIES (Cost of $7,471)............................................ 7,429 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 90 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.2% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% Vendee Mortgage Trust, Interest Only $ 14,111 0.295% 03/15/29(e)(f)....................................... $ 110 10,564 0.433% 09/15/27(e)(f)....................................... 115 -------- 225 -------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 0.1% 5,577 Merrill Lynch Mortgage Investors, Inc., Interest Only 1.017% 12/15/30(e).......................................... 169 -------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost of $642).............................................. 394 -------- UNITS - ----------- WARRANTS -- 0.0% CHEMICALS -- 0.0% 195 Solutia, Inc.(b)(d)........................................... --(g) -------- TOTAL WARRANTS (Cost of $--)............................................... --(g) -------- SHARES - ----------- INVESTMENT MANAGEMENT COMPANY -- 9.9% 18,028,000 Nations Cash Reserves, Capital Class Shares(h)..................................... 18,028 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $18,028)........................................... 18,028 -------- PAR (000) - ----------- REPURCHASE AGREEMENTS(I) -- 1.0% $ 476 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $481 (repurchase proceeds $476).................................. 476 571 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $579 (repurchase proceeds $571)................ 571
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(I) -- (CONTINUED) $ 745 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $757 (repurchase proceeds $745)................ $ 745 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $1,792)............................................ 1,792 -------- TOTAL INVESTMENTS (Cost of $176,011)(j)............................. 110.9% 202,338 -------- OTHER ASSETS AND LIABILITIES, NET................... (10.9)% (19,913) -------- NET ASSETS.......................................... 100.0% $182,425 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $1,836 and $1,743, respectively. (b) Non-income producing security. (c) Security purchased on a delayed delivery basis. (d) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $1,099, which represents 0.6% of net assets. (e) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (f) Restricted and illiquid security. (g) Amount represents less than $500. (h) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (i) This amount represents cash collateral received from securities lending activity (see Note 11). (j) Cost for federal income tax purposes is $176,267.
ABBREVIATIONS: ADR -- American Depositary Receipt TBA -- To Be Announced
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 91 NATIONS FUNDS Nations Asset Allocation Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Common stocks............................... 67.8% Mortgage-backed securities.................. 11.7 Corporate fixed-income bonds and notes...... 9.3 Government agencies and obligations......... 6.9 Asset-backed securities..................... 4.1 Collateralized mortgage obligations......... 0.2 Warrants.................................... 0.0 Investment management company............... 9.9 Repurchase agreements....................... 1.0 Other assets and liabilities, net........... (10.9) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 92 NATIONS FUNDS Nations Value Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- COMMON STOCKS -- 97.0% CONSUMER DISCRETIONARY -- 10.3% HOTELS, RESTAURANTS AND LEISURE -- 3.3% 180,349 Carnival Corp. ............................................... $ 9,344 253,500 Harrah's Entertainment, Inc. ................................. 16,371 520,700 McDonald's Corp. ............................................. 16,215 273,700 Starwood Hotels and Resorts Worldwide, Inc. .................. 16,430 ---------- 58,360 ---------- MEDIA -- 2.5% 496,200 Comcast Corp., Class A(a)..................................... 16,762 1,033,400 News Corp., Class A........................................... 17,485 278,200 Viacom, Inc., Class B......................................... 9,689 ---------- 43,936 ---------- MULTILINE RETAIL -- 3.0% 295,100 Federated Department Stores, Inc. ....................................................... 18,780 422,700 J.C. Penney Co., Inc. ........................................ 21,947 330,600 May Department Stores Co. .................................... 12,239 ---------- 52,966 ---------- SPECIALTY RETAIL -- 1.5% 575,300 Limited Brands................................................ 13,980 434,000 Staples, Inc. ................................................ 13,640 ---------- 27,620 ---------- 182,882 ---------- CONSUMER STAPLES -- 7.0% BEVERAGES -- 2.5% 440,651 Diageo PLC, ADR............................................... 25,073 377,589 PepsiCo, Inc. ................................................ 20,024 ---------- 45,097 ---------- HOUSEHOLD PRODUCTS -- 1.2% 312,420 Kimberly-Clark Corp. ......................................... 20,535 ---------- TOBACCO -- 3.3% 888,048 Altria Group, Inc. ........................................... 58,069 ---------- 123,701 ---------- ENERGY -- 13.9% ENERGY EQUIPMENT AND SERVICES -- 2.2% 177,509 ENSCO International, Inc. .................................... 6,685 410,100 Halliburton Co. .............................................. 17,737 161,019 Nabors Industries Ltd.(a)..................................... 9,523 61,800 Schlumberger Ltd. ............................................ 4,355 ---------- 38,300 ---------- OIL AND GAS -- 11.7% 203,401 BP PLC, ADR................................................... 12,692 574,676 ChevronTexaco Corp. .......................................... 33,509 184,694 ConocoPhillips................................................ 19,917 193,100 EOG Resources, Inc.(b)........................................ 9,412 1,374,900 Exxon Mobil Corp. ............................................ 81,944 79,600 Murphy Oil Corp. ............................................. 7,859 110,100 Occidental Petroleum Corp. ................................... 7,836
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- OIL AND GAS -- (CONTINUED) 289,200 Royal Dutch Petroleum Co., N.Y. Registered Shares............. $ 17,364 942,000 Williams Companies, Inc. ..................................... 17,719 ---------- 208,252 ---------- 246,552 ---------- FINANCIALS -- 25.1% CAPITAL MARKETS -- 4.7% 682,000 Bank of New York Co., Inc. ................................... 19,812 203,900 Goldman Sachs Group, Inc. .................................... 22,427 713,543 Merrill Lynch and Co., Inc. .................................. 40,387 ---------- 82,626 ---------- COMMERCIAL BANKS -- 7.3% 322,700 Marshall and Ilsley Corp. .................................... 13,473 1,025,093 U.S. Bancorp(b)............................................... 29,543 211,800 UnionBanCal Corp. ............................................ 12,973 866,622 Wachovia Corp. ............................................... 44,120 486,600 Wells Fargo and Co. .......................................... 29,098 ---------- 129,207 ---------- DIVERSIFIED FINANCIAL SERVICES -- 5.3% 403,000 CIT Group, Inc. .............................................. 15,314 1,385,124 Citigroup, Inc. .............................................. 62,247 491,700 JPMorgan Chase and Co. ....................................... 17,013 ---------- 94,574 ---------- INSURANCE -- 4.7% 291,100 Ace Ltd.(b)................................................... 12,014 172,600 Ambac Financial Group, Inc. .................................. 12,902 1,097,200 Genworth Financial, Inc., Class A............................. 30,195 292,200 Hartford Financial Services Group, Inc. ...................... 20,033 214,571 St. Paul Travelers Companies, Inc. ........................... 7,881 ---------- 83,025 ---------- REAL ESTATE -- 3.1% 470,200 Archstone-Smith Trust, REIT................................... 16,038 854,895 Equity Office Properties Trust, REIT.......................... 25,758 781,100 Host Marriott Corp., REIT(b).................................. 12,935 ---------- 54,731 ---------- 444,163 ---------- HEALTH CARE -- 4.8% HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.1% 280,000 Baxter International, Inc. ................................... 9,514 310,470 Hospira, Inc.(a).............................................. 10,019 ---------- 19,533 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 1.7% 202,800 Aetna, Inc. .................................................. 15,200 298,500 Medco Health Solutions, Inc.(a)............................... 14,797 ---------- 29,997 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 93 NATIONS FUNDS Nations Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- Pharmaceuticals -- 2.0% 374,200 Abbott Laboratories........................................... $ 17,445 702,740 Pfizer, Inc. ................................................. 18,461 ---------- 35,906 ---------- 85,436 ---------- INDUSTRIALS -- 14.8% AEROSPACE AND DEFENSE -- 4.8% 473,400 Goodrich Corp. ............................................... 18,126 466,059 Honeywell International, Inc. ................................ 17,342 285,900 Northrop Grumman Corp. ....................................... 15,433 332,191 United Technologies Corp. .................................... 33,771 ---------- 84,672 ---------- BUILDING PRODUCTS -- 0.5% 208,800 American Standard Companies, Inc. ............................ 9,705 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 2.1% 604,300 Cendant Corp. ................................................ 12,412 30,215 PHH Corp.(a).................................................. 661 839,500 Waste Management, Inc. ....................................... 24,220 ---------- 37,293 ---------- INDUSTRIAL CONGLOMERATES -- 2.8% 1,371,300 General Electric Co. ......................................... 49,449 ---------- MACHINERY -- 3.0% 152,200 Caterpillar, Inc. ............................................ 13,917 199,400 Deere and Co.(b).............................................. 13,385 124,400 Eaton Corp. .................................................. 8,136 212,100 Ingersoll-Rand Co., Ltd., Class A............................. 16,894 ---------- 52,332 ---------- ROAD AND RAIL -- 1.6% 251,000 Burlington Northern Santa Fe Corp. ........................... 13,537 202,300 Union Pacific Corp. .......................................... 14,100 ---------- 27,637 ---------- 261,088 ---------- INFORMATION TECHNOLOGY -- 4.6% COMPUTERS AND PERIPHERALS -- 2.4% 609,480 Hewlett-Packard Co. .......................................... 13,372 314,385 International Business Machines Corp. ........................ 28,728 ---------- 42,100 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.8% 768,000 Agilent Technologies, Inc.(a)................................. 17,050 1,253,575 Flextronics International Ltd.(a)(b).................................................. 15,093 ---------- 32,143 ----------
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.4% 448,500 Fairchild Semiconductor Corp., Class A(a)..................... 6,876 ---------- 81,119 ---------- MATERIALS -- 7.1% CHEMICALS -- 3.2% 252,200 Dow Chemical Co. ............................................. $ 12,572 305,400 Eastman Chemical Co. ......................................... 18,019 124,000 PPG Industries, Inc. ......................................... 8,868 348,200 Rohm and Haas Co. ............................................ 16,714 ---------- 56,173 ---------- CONTAINERS AND PACKAGING -- 1.0% 560,600 Bemis Co., Inc. .............................................. 17,446 ---------- METALS AND MINING -- 1.6% 425,000 Alcoa, Inc. .................................................. 12,915 390,100 Freeport-McMoRan Copper and Gold, Inc., Class B............... 15,452 ---------- 28,367 ---------- PAPER AND FOREST PRODUCTS -- 1.3% 253,923 International Paper Co. ...................................... 9,342 208,700 Weyerhaeuser Co. ............................................. 14,296 ---------- 23,638 ---------- 125,624 ---------- TELECOMMUNICATION SERVICES -- 3.2% DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.2% 516,660 BellSouth Corp. .............................................. 13,584 789,715 SBC Communications, Inc. ..................................... 18,708 707,348 Verizon Communications, Inc. ................................. 25,110 ---------- 57,402 ---------- UTILITIES -- 6.2% ELECTRIC UTILITIES -- 3.8% 185,200 Entergy Corp. ................................................ 13,086 560,700 Exelon Corp. ................................................. 25,731 512,150 PG&E Corp.(b)................................................. 17,464 147,000 TXU Corp. .................................................... 11,706 ---------- 67,987 ---------- MULTI-UTILITIES AND UNREGULATED POWER -- 2.4% 244,100 Dominion Resources, Inc. ..................................... 18,168 849,210 Duke Energy Corp. ............................................ 23,787 ---------- 41,955 ---------- 109,942 ---------- TOTAL COMMON STOCKS (Cost of $1,422,095)........................................ 1,717,909 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 94 NATIONS FUNDS Nations Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 0.3% FINANCIALS -- 0.3% INSURANCE -- 0.3% 136,100 Genworth Financial, Inc....................................... $ 4,369 ---------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost of $3,554)............................................ 4,369 ---------- INVESTMENT MANAGEMENT COMPANY -- 2.3% 41,510,000 Nations Cash Reserves, Capital Class Shares(c)..................................... 41,510 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $41,510)........................................... 41,510 ---------- PAR (000) - ---------- REPURCHASE AGREEMENTS(D) -- 2.9% $ 13,563 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $13,692 (repurchase proceeds $13,564)............................... 13,563 16,275 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $16,489 (repurchase proceeds $16,276).......... 16,275 21,189 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $21,523 (repurchase proceeds $21,191).......... 21,189 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $51,027)........................................... 51,027 ----------
VALUE (000) - ----------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost of $1,518,186)(e)........................... 102.5% $1,814,815 ---------- OTHER ASSETS AND LIABILITIES, NET................... (2.5)% (44,122) ---------- NET ASSETS.......................................... 100.0% $1,770,693 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $40,172 and $49,965, respectively. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) This amount represents cash collateral received from securities lending activity (see Note 11). (e) Cost for federal income tax purposes is $1,520,176. ABBREVIATIONS: ADR -- American Depositary Receipt REIT -- Real Estate Investment Trust
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Financials.................................. 25.4% Industrials................................. 14.8 Energy...................................... 13.9 Consumer discretionary...................... 10.3 Materials................................... 7.1 Consumer staples............................ 7.0 Utilities................................... 6.2 Health care................................. 4.8 Information technology...................... 4.6 Telecommunication services.................. 3.2 Investment management company............... 2.3 Repurchase agreements....................... 2.9 Other assets and liabilities, net........... (2.5) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 95 NATIONS FUNDS Nations MidCap Value Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMON STOCKS -- 97.1% CONSUMER DISCRETIONARY -- 12.5% HOTELS, RESTAURANTS AND LEISURE -- 2.8% 150,600 Brinker International, Inc.(a)................................ $ 5,455 76,900 Harrah's Entertainment, Inc. ................................. 4,966 105,200 Starwood Hotels and Resorts Worldwide, Inc. .................. 6,315 -------- 16,736 -------- LEISURE EQUIPMENT AND PRODUCTS -- 0.5% 142,750 Mattel, Inc. ................................................. 3,048 -------- MEDIA -- 0.8% 135,000 Dow Jones and Co., Inc. ...................................... 5,045 -------- MULTILINE RETAIL -- 3.8% 322,800 Dollar General Corp. ......................................... 7,073 101,300 Federated Department Stores, Inc. ............................ 6,447 86,700 J.C. Penney Co., Inc. ........................................ 4,501 139,600 May Department Stores Co. .................................... 5,168 -------- 23,189 -------- SPECIALTY RETAIL -- 4.1% 206,200 Limited Brands................................................ 5,011 193,500 Linens 'N Things, Inc.(a)..................................... 4,804 89,400 OfficeMax, Inc. .............................................. 2,995 126,100 Sherwin-Williams Co. ......................................... 5,547 251,600 TJX Companies, Inc. .......................................... 6,197 -------- 24,554 -------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.5% 69,100 Reebok International Ltd. .................................... 3,061 -------- 75,633 -------- CONSUMER STAPLES -- 4.5% BEVERAGES -- 0.8% 170,600 Pepsi Bottling Group, Inc. ................................... 4,751 -------- FOOD AND STAPLES RETAILING -- 1.4% 241,800 Kroger Co.(a)................................................. 3,876 135,300 SUPERVALU, Inc. .............................................. 4,512 -------- 8,388 -------- FOOD PRODUCTS -- 1.1% 628,900 Del Monte Foods Co.(a)........................................ 6,824 -------- TOBACCO -- 1.2% 148,800 UST, Inc. .................................................... 7,693 -------- 27,656 -------- ENERGY -- 7.4% ENERGY EQUIPMENT AND SERVICES -- 3.0% 126,900 Baker Hughes, Inc. ........................................... 5,646 179,100 ENSCO International, Inc. .................................... 6,745
VALUE SHARES (000) - --------------------------------------------------------------------------------------- ENERGY EQUIPMENT AND SERVICES -- (CONTINUED) 62,908 National-Oilwell Varco, Inc.(a)............................... $ 2,938 72,900 Technip SA, ADR............................................... 3,039 -------- 18,368 -------- OIL AND GAS -- 4.4% 71,100 Ashland, Inc. ................................................ 4,797 50,000 EOG Resources, Inc. .......................................... 2,437 152,600 Marathon Oil Corp. ........................................... 7,160 22,400 Murphy Oil Corp. ............................................. 2,212 75,500 Occidental Petroleum Corp. ................................... 5,373 241,100 Williams Companies, Inc. ..................................... 4,535 -------- 26,514 -------- 44,882 -------- FINANCIALS -- 22.7% CAPITAL MARKETS -- 0.8% 58,000 Legg Mason, Inc. ............................................. 4,532 -------- COMMERCIAL BANKS -- 7.0% 60,300 City National Corp. .......................................... 4,210 93,100 Compass Bancshares, Inc. ..................................... 4,227 59,650 Cullen Frost Bankers, Inc. ................................... 2,693 155,200 Hibernia Corp., Class A....................................... 4,968 192,400 Marshall and Ilsley Corp. .................................... 8,033 55,400 Mercantile Bankshares Corp. .................................. 2,817 67,100 UnionBanCal Corp. ............................................ 4,110 105,910 Wachovia Corp. ............................................... 5,392 87,950 Zions Bancorporation.......................................... 6,070 -------- 42,520 -------- DIVERSIFIED FINANCIAL SERVICES -- 0.7% 115,200 CIT Group, Inc. .............................................. 4,378 -------- INSURANCE -- 6.7% 95,500 Ace Ltd. ..................................................... 3,941 59,800 Ambac Financial Group, Inc. .................................. 4,470 181,300 Endurance Specialty Holdings Ltd. ............................ 6,860 226,200 Genworth Financial, Inc., Class A............................. 6,225 64,600 Hartford Financial Services Group, Inc. ...................... 4,429 142,900 Lincoln National Corp. ....................................... 6,450 62,600 Loews Corp. .................................................. 4,604 168,300 Old Republic International Corp. ............................. 3,920 -------- 40,899 -------- REAL ESTATE -- 5.2% 164,100 Archstone-Smith Trust, REIT................................... 5,597 64,175 AvalonBay Communities, Inc., REIT.................................................. 4,293 100,000 Boston Properties, Inc., REIT................................. 6,023 80,800 Camden Property Trust, REIT................................... 3,800 184,400 Equity Office Properties Trust, REIT.......................... 5,556 373,000 Host Marriott Corp., REIT..................................... 6,177 -------- 31,446 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 96 NATIONS FUNDS Nations MidCap Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 2.3% 50,700 Golden West Financial Corp. .................................. $ 3,067 157,000 PMI Group, Inc. .............................................. 5,968 232,800 Sovereign Bancorp, Inc. ...................................... 5,159 -------- 14,194 -------- 137,969 -------- HEALTH CARE -- 5.2% HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.5% 68,700 Millipore Corp.(a)............................................ 2,982 -------- HEALTH CARE PROVIDERS AND SERVICES -- 3.1% 44,400 Aetna, Inc. .................................................. 3,328 119,800 Community Health Systems, Inc.(a)............................. 4,182 101,800 Medco Health Solutions, Inc.(a)............................... 5,046 129,600 Triad Hospitals, Inc.(a)...................................... 6,493 -------- 19,049 -------- PHARMACEUTICALS -- 1.6% 154,500 IVAX Corp.(a)................................................. 3,054 189,600 Shire Pharmaceuticals Group PLC, ADR.......................... 6,500 -------- 9,554 -------- 31,585 -------- INDUSTRIALS -- 18.3% AEROSPACE AND DEFENSE -- 2.2% 160,900 Goodrich Corp. ............................................... 6,161 71,925 Northrop Grumman Corp. ....................................... 3,882 64,300 Rockwell Collins, Inc. ....................................... 3,060 -------- 13,103 -------- BUILDING PRODUCTS -- 0.8% 101,700 American Standard Companies, Inc. ............................................ 4,727 -------- COMMERCIAL SERVICES AND SUPPLIES -- 3.8% 74,300 Avery Dennison Corp. ......................................... 4,601 105,200 Manpower, Inc. ............................................... 4,578 156,600 Pitney Bowes, Inc. ........................................... 7,066 237,900 Waste Management, Inc. ....................................... 6,864 -------- 23,109 -------- CONSTRUCTION AND ENGINEERING -- 0.7% 71,900 Fluor Corp. .................................................. 3,985 -------- ELECTRICAL EQUIPMENT -- 1.0% 83,300 Cooper Industries Ltd., Class A............................... 5,958 -------- MACHINERY -- 5.7% 160,700 Agco Corp.(a)................................................. 2,933 77,500 Dover Corp. .................................................. 2,929 83,000 Harsco Corp. ................................................. 4,948 72,700 Ingersoll-Rand Co., Ltd., Class A............................. 5,790
VALUE SHARES (000) - --------------------------------------------------------------------------------------- MACHINERY -- (CONTINUED) 115,300 Kennametal, Inc. ............................................. $ 5,476 140,400 Navistar International Corp.(a)............................... 5,110 153,300 Pall Corp. ................................................... 4,157 57,600 Parker Hannifin Corp. ........................................ 3,509 -------- 34,852 -------- ROAD AND RAIL -- 2.1% 127,800 Burlington Northern Santa Fe Corp. ............................................. 6,892 156,800 Norfolk Southern Corp. ....................................... 5,810 -------- 12,702 -------- TRADING COMPANIES AND DISTRIBUTORS -- 2.0% 187,000 GATX Corp. ................................................... 6,206 307,900 United Rentals, Inc.(a)....................................... 6,223 -------- 12,429 -------- 110,865 -------- INFORMATION TECHNOLOGY -- 5.5% COMMUNICATIONS EQUIPMENT -- 1.1% 224,600 Andrew Corp.(a)............................................... 2,630 125,250 Harris Corp. ................................................. 4,089 -------- 6,719 -------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 3.2% 125,000 Agilent Technologies, Inc.(a)................................. 2,775 178,000 Arrow Electronics, Inc.(a).................................... 4,512 383,200 Flextronics International Ltd.(a)............................. 4,614 88,400 Ingram Micro, Inc., Class A(a)................................ 1,474 60,300 Mettler-Toledo International, Inc.(a)......................... 2,864 121,650 Tektronix, Inc. .............................................. 2,984 -------- 19,223 -------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 1.2% 292,300 Fairchild Semiconductor Corp., Class A(a)..................... 4,481 253,500 Integrated Device Technology, Inc.(a)......................... 3,050 -------- 7,531 -------- 33,473 -------- MATERIALS -- 12.0% CHEMICALS -- 6.0% 247,500 Agrium, Inc. ................................................. 4,517 175,000 Celanese Corp., Series A(a)................................... 3,148 89,900 Eastman Chemical Co. ......................................... 5,304 129,100 International Flavors and Fragrances, Inc. ................... 5,099 144,600 Lubrizol Corp. ............................................... 5,877 99,600 Lyondell Chemical Co. ........................................ 2,781 200,000 Nalco Holding Co.(a).......................................... 3,766 124,900 Rohm and Haas Co. ............................................ 5,995 -------- 36,487 -------- CONSTRUCTION MATERIALS -- 1.2% 137,600 Martin Marietta Materials, Inc. .............................. 7,695 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 97 NATIONS FUNDS Nations MidCap Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- CONTAINERS AND PACKAGING -- 2.8% 154,600 Bemis Co., Inc. .............................................. $ 4,811 273,000 Crown Holdings, Inc.(a)....................................... 4,248 346,300 Smurfit-Stone Container Corp.(a).............................. 5,357 33,075 Temple-Inland, Inc. .......................................... 2,400 -------- 16,816 -------- METALS AND MINING -- 1.5% 104,125 Arch Coal, Inc. .............................................. 4,478 107,475 Newmont Mining Corp. ......................................... 4,541 -------- 9,019 -------- PAPER AND FOREST PRODUCTS -- 0.5% 84,100 Georgia-Pacific Corp. ........................................ 2,985 -------- 73,002 -------- TELECOMMUNICATION SERVICES -- 0.5% WIRELESS TELECOMMUNICATION SERVICES -- 0.5% 36,100 Telephone and Data Systems, Inc. ............................. 2,946 -------- UTILITIES -- 8.5% ELECTRIC UTILITIES -- 5.4% 85,300 Consolidated Edison, Inc. .................................... 3,598 99,100 DTE Energy Co. ............................................... 4,507 139,600 Edison International.......................................... 4,847 86,600 Entergy Corp. ................................................ 6,119 63,900 NSTAR......................................................... 3,470 176,000 PG&E Corp. ................................................... 6,002 83,000 PPL Corp. .................................................... 4,481 -------- 33,024 -------- MULTI-UTILITIES AND UNREGULATED POWER -- 3.1% 162,500 Constellation Energy Group.................................... 8,401 56,800 Public Service Enterprise Group, Inc. ........................ 3,089 176,200 Sempra Energy................................................. 7,020 -------- 18,510 -------- 51,534 -------- TOTAL COMMON STOCKS (Cost of $468,312).......................................... 589,545 -------- CONVERTIBLE PREFERRED STOCKS -- 0.6% MATERIALS -- 0.1% CHEMICALS -- 0.1% 25,000 Celanese AG................................................... 694 -------- FINANCIALS -- 0.5% INSURANCE -- 0.5% 41,600 Hartford Financial Services Group, Inc. ...................... 2,681 -------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost of $2,763)............................................ 3,375 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 2.7% 16,619,000 Nations Cash Reserves, Capital Class Shares(b)..................................... $ 16,619 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $16,619)........................................... 16,619 -------- TOTAL INVESTMENTS (Cost of $487,694)(c)............................. 100.4% 609,539 -------- OTHER ASSETS AND LIABILITIES, NET.................................. (0.4)% (2,571) -------- NET ASSETS.......................................... 100.0% $606,968 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Cost for federal income tax purposes is $488,823. ABBREVIATIONS: ADR -- American Depositary Receipt REIT -- Real Estate Investment Trust
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Financials.................................. 23.2% Industrials................................. 18.3 Consumer discretionary...................... 12.5 Materials................................... 12.1 Utilities................................... 8.5 Energy...................................... 7.4 Information technology...................... 5.5 Health care................................. 5.2 Consumer staples............................ 4.5 Telecommunication services.................. 0.5 Investment management company............... 2.7 Other assets and liabilities, net........... (0.4) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 98 NATIONS FUNDS Nations SmallCap Value Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMON STOCKS -- 96.1% CONSUMER DISCRETIONARY -- 13.1% AUTO COMPONENTS -- 1.2% 19,000 BorgWarner, Inc. ............................................. $ 925 78,700 Cooper Tire & Rubber Co. ..................................... 1,445 -------- 2,370 -------- HOTELS, RESTAURANTS AND LEISURE -- 1.6% 218,000 La Quinta Corp.(a)............................................ 1,853 67,300 Marcus Corp. ................................................. 1,380 -------- 3,233 -------- MEDIA -- 3.3% 48,175 Carmike Cinemas, Inc. ........................................ 1,796 105,400 Cumulus Media, Inc., Class A(a)............................... 1,502 86,600 Emmis Communications Corp.(a)................................. 1,665 49,100 Scholastic Corp.(a)........................................... 1,811 -------- 6,774 -------- SPECIALTY RETAIL -- 4.4% 80,600 AnnTaylor Stores Corp.(a)..................................... 2,063 98,000 Finish Line, Inc., Class A.................................... 2,269 56,600 GameStop Corp., Class A(a).................................... 1,254 113,200 Inter Parfums, Inc. .......................................... 1,630 21,400 Regis Corp. .................................................. 876 26,400 Stage Stores, Inc.(a)......................................... 1,013 -------- 9,105 -------- TEXTILES, APPAREL AND LUXURY GOODS -- 2.6% 49,400 Carter's, Inc.(a)............................................. 1,964 53,200 K-Swiss, Inc. ................................................ 1,757 59,400 Phillips-Van Heusen Corp. .................................... 1,582 -------- 5,303 -------- 26,785 -------- CONSUMER STAPLES -- 3.6% FOOD AND STAPLES RETAILING -- 1.0% 63,700 Longs Drug Stores Corp. ...................................... 2,180 -------- FOOD PRODUCTS -- 1.7% 64,400 American Italian Pasta Co., Inc.(b)........................... 1,765 153,100 Del Monte Foods Co.(a)........................................ 1,661 -------- 3,426 -------- HOUSEHOLD PRODUCTS -- 0.9% 44,200 Rayovac Corp.(a).............................................. 1,839 -------- 7,445 -------- ENERGY -- 3.7% ENERGY EQUIPMENT AND SERVICES -- 1.9% 304,400 Grey Wolf, Inc.(a)(b)......................................... 2,003 49,400 Universal Compression Holdings, Inc.(a)....................... 1,871 -------- 3,874 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- OIL AND GAS -- 1.8% 50,800 Encore Acquisition Co.(a)(b).................................. $ 2,098 75,300 W&T Offshore, Inc.(a)(b)...................................... 1,563 -------- 3,661 -------- 7,535 -------- FINANCIALS -- 23.6% CAPITAL MARKETS -- 2.0% 31,000 Affiliated Managers Group, Inc.(a)(b)......................... 1,923 65,300 American Capital Strategies(b)................................ 2,051 -------- 3,974 -------- COMMERCIAL BANKS -- 9.0% 142,000 Cardinal Financial Corp.(a)................................... 1,306 80,400 Colonial BancGroup, Inc. ..................................... 1,650 56,300 Community Bank System, Inc. .................................. 1,290 134,636 First Niagara Financial Group, Inc. .......................... 1,779 37,500 First Republic Bank........................................... 1,214 100,200 First State Bancorporation.................................... 1,701 55,090 Fulton Financial Corp.(b)..................................... 1,200 48,300 Independent Bank Corp......................................... 1,401 69,300 Oriental Financial Group(b)................................... 1,623 59,400 Prosperity Bancshares, Inc. .................................. 1,573 73,100 Sterling Bancorp-N.Y. ........................................ 1,774 114,320 Summit Bancshares, Inc. ...................................... 1,949 -------- 18,460 -------- INSURANCE -- 4.0% 33,400 Delphi Financial Group, Inc., Class A......................... 1,436 58,400 NYMAGIC, Inc. ................................................ 1,384 69,010 Platinum Underwriters Holdings Ltd. .......................... 2,050 28,400 Triad Guaranty, Inc.(a)....................................... 1,494 36,000 Zenith National Insurance Corp. .............................. 1,867 -------- 8,231 -------- REAL ESTATE -- 7.1% 95,300 BioMed Realty Trust, Inc., REIT............................... 1,963 105,600 Education Realty Trust, Inc. ................................. 1,756 204,300 Equity Inns, Inc.(b).......................................... 2,253 88,700 LTC Properties, Inc. ......................................... 1,539 135,500 OMEGA Healthcare Investors, Inc. ............................. 1,488 31,300 Prentiss Properties Trust, REIT(b)............................ 1,069 27,300 SL Green Realty Corp., REIT(b)................................ 1,535 60,200 Tanger Factory Outlet Centers, Inc., REIT..................... 1,324 92,100 U-Store-It Trust, REIT........................................ 1,603 -------- 14,530 -------- THRIFTS AND MORTGAGE FINANCE -- 1.5% 100,100 BankAtlantic Bancorp, Inc., Class A........................... 1,742 85,900 Brookline Bancorp, Inc. ...................................... 1,280 -------- 3,022 -------- 48,217 -------- HEALTH CARE -- 3.8% HEALTH CARE PROVIDERS AND SERVICES -- 3.8% 58,300 Apria Healthcare Group, Inc.(a)............................... 1,871 45,775 Province Healthcare Co.(a).................................... 1,103 257,014 Stewart Enterprises, Inc., Class A............................ 1,580
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 99 NATIONS FUNDS Nations SmallCap Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- (CONTINUED) 86,900 Symbion, Inc.(a).............................................. $ 1,857 27,000 Triad Hospitals, Inc.(a)...................................... 1,353 -------- 7,764 -------- INDUSTRIALS -- 24.6% AEROSPACE AND DEFENSE -- 0.8% 127,000 AAR Corp.(a).................................................. 1,727 -------- AIRLINES -- 1.5% 66,300 Alaska Air Group, Inc.(a)..................................... 1,952 92,000 Continental Airlines, Inc., Class B(a)........................ 1,108 -------- 3,060 -------- BUILDING PRODUCTS -- 0.9% 48,200 York International Corp. ..................................... 1,888 -------- COMMERCIAL SERVICES AND SUPPLIES -- 4.7% 134,243 Apollo Investment Corp. ...................................... 2,253 105,500 FTI Consulting, Inc.(a)(b).................................... 2,177 48,500 School Specialty, Inc.(a)..................................... 1,899 116,200 Steelcase, Inc., Class A...................................... 1,604 63,900 Watson Wyatt & Co. Holdings................................... 1,738 -------- 9,671 -------- CONSTRUCTION AND ENGINEERING -- 3.4% 56,500 Dycom Industries, Inc.(a)..................................... 1,299 151,800 Infrasource Services, Inc.(a)................................. 1,822 72,300 Levitt Corp., Class A......................................... 1,854 72,000 URS Corp.(a).................................................. 2,070 -------- 7,045 -------- MACHINERY -- 7.6% 82,000 Agco Corp.(a)................................................. 1,496 36,100 Bucyrus International, Inc., Class A.......................... 1,410 46,200 Flowserve Corp.(a)............................................ 1,195 49,600 Gardner Denver, Inc.(a)....................................... 1,960 82,500 JLG Industries, Inc. ......................................... 1,778 29,100 Joy Global, Inc. ............................................. 1,020 52,500 Kennametal, Inc. ............................................. 2,493 54,000 Manitowoc, Inc. .............................................. 2,181 62,241 Watts Water Technologies, Inc. ............................... 2,030 -------- 15,563 -------- MARINE -- 1.5% 81,200 Arlington Tankers............................................. 1,908 67,800 Diana Shipping, Inc.(a)(b).................................... 1,122 -------- 3,030 -------- TRADING COMPANIES AND DISTRIBUTORS -- 2.1% 63,300 GATX Corp. ................................................... 2,101 105,800 United Rentals, Inc.(a)....................................... 2,138 -------- 4,239 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- TRANSPORTATION -- 2.1% 98,200 Laidlaw International, Inc.(a)................................ $ 2,043 67,000 Overnite Corp. ............................................... 2,143 -------- 4,186 -------- 50,409 -------- INFORMATION TECHNOLOGY -- 10.4% COMMUNICATIONS EQUIPMENT -- 1.3% 75,900 EMS Technologies, Inc.(a)..................................... 1,032 198,525 Powerwave Technologies, Inc.(a)............................... 1,537 -------- 2,569 -------- COMPUTERS AND PERIPHERALS -- 1.2% 192,800 ActivCard Corp.(a)............................................ 1,224 50,600 PalmOne, Inc.(a)(b)........................................... 1,284 -------- 2,508 -------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.3% 138,000 Aeroflex, Inc.(a)............................................. 1,288 56,600 Coherent, Inc.(a)............................................. 1,911 74,200 Paxar Corp.(a)................................................ 1,583 -------- 4,782 -------- IT SERVICES -- 2.4% 55,100 MAXIMUS, Inc. ................................................ 1,845 175,500 MPS Group, Inc.(a)............................................ 1,845 251,300 SonicWall, Inc.(a)............................................ 1,279 -------- 4,969 -------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.4% 144,900 Cypress Semiconductor Corp.(a)................................ 1,826 111,100 Fairchild Semiconductor Corp., Class A(a)..................... 1,703 89,600 OmniVision Technologies, Inc.(a)(b)........................... 1,357 -------- 4,886 -------- SOFTWARE -- 0.8% 149,100 Aspect Communications Corp.(a)................................ 1,552 -------- 21,266 -------- MATERIALS -- 8.5% CHEMICALS -- 3.7% 137,100 Crompton Corp. ............................................... 2,002 147,700 Hercules, Inc.(a)............................................. 2,140 77,400 Olin Corp. ................................................... 1,726 99,100 RPM International, Inc. ...................................... 1,811 -------- 7,679 -------- CONTAINERS AND PACKAGING -- 0.9% 114,700 Crown Holdings, Inc.(a)....................................... 1,785 -------- METALS AND MINING -- 3.9% 39,800 Arch Coal, Inc. .............................................. 1,712 32,341 Carpenter Technology Corp. ................................... 1,921 78,900 Century Aluminum Co.(a)....................................... 2,388 28,800 Foundation Coal Holdings, Inc. ............................... 677 29,900 Massey Energy Co. ............................................ 1,197 -------- 7,895 -------- 17,359 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 100 NATIONS FUNDS Nations SmallCap Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 0.9% WIRELESS TELECOMMUNICATION SERVICES -- 0.9% 107,500 Alamosa Holdings, Inc.(a)(b).................................. $ 1,255 106,000 Wireless Facilities, Inc.(a).................................. 662 -------- 1,917 -------- UTILITIES -- 3.9% GAS UTILITIES -- 2.0% 78,600 Atmos Energy Corp. ........................................... 2,122 45,100 New Jersey Resources Corp. ................................... 1,963 -------- 4,085 -------- MULTI-UTILITIES AND UNREGULATED POWER -- 1.9% 162,900 CMS Energy Corp.(a)........................................... 2,058 36,200 WPS Resources Corp. .......................................... 1,916 -------- 3,974 -------- 8,059 -------- TOTAL COMMON STOCKS (Cost of $157,761).......................................... 196,756 -------- INVESTMENT MANAGEMENT COMPANIES -- 4.6% 12,750 Biotech HOLDRS Trust(b)....................................... 1,795 7,532,000 Nations Cash Reserves, Capital Class Shares(c)................ 7,532 -------- TOTAL INVESTMENT MANAGEMENT COMPANIES (Cost of $8,924).................................. 9,327 -------- PAR (000) - ---------- REPURCHASE AGREEMENTS(D) -- 7.7% $ 4,188 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $4,228 (repurchase proceeds $4,188)................................ 4,188 5,026 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $5,092 (repurchase proceeds $5,026)............ 5,026 6,544 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $6,647 (repurchase proceeds $6,545)............ 6,544 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $15,758)........................................... 15,758 --------
VALUE (000) - --------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost of $182,443)(e)............................. 108.4% $221,841 -------- OTHER ASSETS AND LIABILITIES, NET................... (8.4)% (17,205) -------- NET ASSETS.......................................... 100.0% $204,636 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $11,895 and $15,255, respectively. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) This amount represents cash collateral received from securities lending activity (see Note 11). (e) Cost for federal income tax purposes is $182,733. ABBREVIATION: REIT -- Real Estate Investment Trust
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Industrials................................. 24.6% Financials.................................. 23.6 Consumer discretionary...................... 13.1 Information technology...................... 10.4 Materials................................... 8.5 Utilities................................... 3.9 Health care................................. 3.8 Energy...................................... 3.7 Consumer staples............................ 3.6 Telecommunication services.................. 0.9 Investment management companies............. 4.6 Repurchase agreements....................... 7.7 Other assets and liabilities, net........... (8.4) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 101 NATIONS FUNDS Nations Marsico Growth Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE (000) - -------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 98.4% Investment in Nations Master Investment Trust, Nations Marsico Growth Master Portfolio(a)........................ $2,273,098 ---------- TOTAL INVESTMENTS................................. 98.4% 2,273,098 ---------- OTHER ASSETS AND LIABILITIES, NET................. 1.6% 37,529 ---------- NET ASSETS........................................ 100.0% $2,310,627 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The financial statements of the Marsico Growth Master Portfolio, including its investment portfolio, are included elsewhere within this report and should be read in conjunction with the Marsico Growth Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 102 NATIONS FUNDS Nations Strategic Growth Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE (000) - -------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 100.1% Investment in Nations Master Investment Trust, Nations Strategic Growth Master Portfolio(a)...................... $1,455,251 ---------- TOTAL INVESTMENTS................................. 100.1% 1,455,251 ---------- OTHER ASSETS AND LIABILITIES, NET................. (0.1)% (2,077) ---------- NET ASSETS........................................ 100.0% $1,453,174 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The financial statements of the Strategic Growth Master Portfolio, including its investment portfolio, are included elsewhere within this report and should be read in conjunction with the Strategic Growth Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 103 NATIONS FUNDS Nations Marsico Focused Equities Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE (000) - -------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 99.9% Investment in Nations Master Investment Trust, Nations Marsico Focused Equities Master Portfolio(a).............. $2,904,391 ---------- TOTAL INVESTMENTS................................. 99.9% 2,904,391 ---------- OTHER ASSETS AND LIABILITIES, NET................. 0.1% 4,159 ---------- NET ASSETS........................................ 100.0% $2,908,550 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The financial statements of the Marsico Focused Equities Master Portfolio, including its investment portfolio, are included elsewhere within this report and should be read in conjunction with the Marsico Focused Equities Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 104 NATIONS FUNDS Nations Marsico MidCap Growth Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMON STOCKS -- 94.0% CONSUMER DISCRETIONARY -- 38.1% HOTELS, RESTAURANTS AND LEISURE -- 21.8% 277,008 Kerzner International Ltd.(a)................................. $ 16,961 298,743 Las Vegas Sands Corp.(a)(b)................................... 13,444 136,949 MGM Mirage(a)................................................. 9,699 318,311 Royal Caribbean Cruises Ltd. ................................. 14,225 7,608,000 Shangri-La Asia Ltd. ......................................... 11,120 85,116 Station Casinos, Inc. ........................................ 5,750 260,928 Wynn Resorts Ltd.(a).......................................... 17,675 261,747 Yum! Brands, Inc. ............................................ 13,561 -------- 102,435 -------- HOUSEHOLD DURABLES -- 3.6% 91,797 Harman International Industries, Inc. ........................................... 8,120 114,985 Toll Brothers, Inc.(a)........................................ 9,067 -------- 17,187 -------- LEISURE EQUIPMENT AND PRODUCTS -- 2.5% 249,618 Brunswick Corp.(b)............................................ 11,695 -------- MEDIA -- 5.5% 35,856 Getty Images, Inc.(a)......................................... 2,550 672,962 Lions Gate Entertainment Corp.(a)............................. 7,436 161,832 Pixar, Inc.(a)................................................ 15,787 -------- 25,773 -------- MULTILINE RETAIL -- 2.0% 170,805 Nordstrom, Inc. .............................................. 9,459 -------- SPECIALTY RETAIL -- 1.6% 261,390 PETsMART, Inc. ............................................... 7,515 -------- TEXTILES, APPAREL AND LUXURY GOODS -- 1.1% 91,567 Coach, Inc.(a)................................................ 5,185 -------- 179,249 -------- CONSUMER STAPLES -- 3.8% FOOD AND STAPLES RETAILING -- 0.8% 35,833 Whole Foods Market, Inc. ..................................... 3,660 -------- FOOD PRODUCTS -- 3.0% 416,866 Dean Foods Co.(a)............................................. 14,298 -------- 17,958 -------- ENERGY -- 2.0% OIL AND GAS -- 2.0% 389,882 Sasol Ltd., ADR(b)............................................ 9,299 -------- FINANCIALS -- 26.6% CAPITAL MARKETS -- 4.8% 300,129 Crystal River Capital(a)(c)................................... 7,503 399,342 Jefferies Group, Inc. ........................................ 15,047 -------- 22,550 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMERCIAL BANKS -- 8.2% 183,614 Bank of Hawaii Corp. ......................................... $ 8,310 295,659 South Financial Group, Inc. .................................. 9,030 523,040 UCBH Holdings, Inc. .......................................... 20,869 -------- 38,209 -------- CONSUMER FINANCE -- 1.0% 81,763 First Marblehead Corp.(a)..................................... 4,704 -------- DIVERSIFIED FINANCIAL SERVICES -- 3.7% 72,484 Chicago Mercantile Exchange................................... 14,064 301,618 Marketaxess Holdings, Inc.(a)................................. 3,369 -------- 17,433 -------- REAL ESTATE -- 6.1% 62,785 Brascan Corp., Class A........................................ 2,372 495,706 Government Properties Trust, Inc.(b).............................................. 4,937 45,823 Redwood Trust, Inc. .......................................... 2,345 280,318 St. Joe Co. .................................................. 18,865 -------- 28,519 -------- THRIFTS AND MORTGAGE FINANCE -- 2.8% 411,818 Countrywide Financial Corp. .................................. 13,368 -------- 124,783 -------- HEALTH CARE -- 10.1% BIOTECHNOLOGY -- 0.9% 75,726 Genzyme Corp.(a).............................................. 4,334 -------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.8% 235,228 St. Jude Medical, Inc.(a)..................................... 8,468 -------- HEALTH CARE PROVIDERS AND SERVICES -- 7.4% 474,894 AMERIGROUP Corp.(a)........................................... 17,362 155,675 Centene Corp.(a).............................................. 4,669 80,440 Pacificare Health Systems, Inc.(a)............................ 4,579 75,583 Quest Diagnostics, Inc. ...................................... 7,946 -------- 34,556 -------- 47,358 -------- INDUSTRIALS -- 7.4% AEROSPACE AND DEFENSE -- 0.5% 34,447 Alliant Techsystems, Inc.(a).................................. 2,461 -------- AIR FREIGHT AND LOGISTICS -- 3.1% 184,106 Expeditors International of Washington, Inc. ................. 9,859 68,235 UTI Worldwide, Inc. .......................................... 4,739 -------- 14,598 -------- BUILDING MATERIALS -- 2.3% 360,137 WCI Communities, Inc.(a)(b)................................... 10,833 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 105 NATIONS FUNDS Nations Marsico MidCap Growth Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.0% 80,684 Rockwell Automation, Inc. .................................... $ 4,570 -------- MACHINERY -- 0.5% 33,375 Paccar, Inc. ................................................. 2,416 -------- 34,878 -------- INFORMATION TECHNOLOGY -- 6.0% COMMUNICATIONS EQUIPMENT -- 3.2% 408,679 QUALCOMM, Inc. ............................................... 14,978 -------- SOFTWARE -- 2.8% 40,512 Adobe Systems, Inc. .......................................... 2,721 205,505 Electronic Arts, Inc.(a)...................................... 10,642 -------- 13,363 -------- 28,341 -------- TOTAL COMMON STOCKS (Cost of $416,851).......................................... 441,866 -------- INVESTMENT MANAGEMENT COMPANY -- 6.3% 29,515,000 Nations Cash Reserves, Capital Class Shares(d)..................................... 29,515 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $29,515)........................................... 29,515 -------- PAR (000) - ---------- REPURCHASE AGREEMENTS(E) -- 3.7% $ 4,651 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $4,695 (repurchase proceeds $4,651)................................ 4,651 5,581 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $5,654 (repurchase proceeds $5,581)............ 5,581 7,268 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $7,383 (repurchase proceeds $7,269)............ 7,268 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $17,500)........................................... 17,500 --------
VALUE (000) - --------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost of $463,866)(f)............................. 104.0% $488,881 -------- OTHER ASSETS AND LIABILITIES, NET.................................. (4.0)% (18,648) -------- NET ASSETS.......................................... 100.0% $470,233 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005, is $14,884 and $16,939, respectively. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, the value of this security represents 1.6% of net assets. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 11). (f) Cost for federal income tax purposes is $464,732. ABBREVIATION: ADR -- American Depositary Receipt
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Consumer discretionary...................... 38.1% Financials.................................. 26.6 Health care................................. 10.1 Industrials................................. 7.4 Information technology...................... 6.0 Consumer staples............................ 3.8 Energy...................................... 2.0 Investment management company............... 6.3 Repurchase agreements....................... 3.7 Other assets and liabilities, net........... (4.0) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 106 NATIONS FUNDS Nations Marsico 21st Century Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMON STOCKS -- 91.5% CONSUMER DISCRETIONARY -- 31.8% HOTELS, RESTAURANTS AND LEISURE -- 19.5% 44,412 Four Seasons Hotels, Inc.(a).................................. $ 3,140 226,315 Kerzner International Ltd.(b)................................. 13,857 240,653 Las Vegas Sands Corp.(a)(b)................................... 10,829 269,646 Royal Caribbean Cruises Ltd................................... 12,051 6,242,512 Shangri-La Asia Ltd.(a)....................................... 9,124 274,395 Wynn Resorts Ltd.(b).......................................... 18,588 204,669 Yum! Brands, Inc.............................................. 10,604 -------- 78,193 -------- HOUSEHOLD DURABLES -- 3.5% 76,921 Harman International Industries, Inc.......................... 6,805 30,819 Sony Corp., ADR............................................... 1,233 75,411 Toll Brothers, Inc.(b)........................................ 5,946 -------- 13,984 -------- LEISURE EQUIPMENT AND PRODUCTS -- 2.4% 207,549 Brunswick Corp................................................ 9,724 -------- MEDIA -- 4.9% 490,386 Lions Gate Entertainment Corp.(b)............................. 5,419 144,428 Pixar, Inc.(b)................................................ 14,089 -------- 19,508 -------- SPECIALTY RETAIL -- 1.5% 215,833 PETsMART, Inc................................................. 6,205 -------- 127,614 -------- CONSUMER STAPLES -- 4.0% FOOD AND STAPLES RETAILING -- 1.0% 38,901 Whole Foods Market, Inc....................................... 3,973 -------- FOOD PRODUCTS -- 3.0% 353,808 Dean Foods Co.(b)............................................. 12,136 -------- 16,109 -------- ENERGY -- 1.9% OIL AND GAS -- 1.9% 324,228 Sasol Ltd, ADR................................................ 7,733 -------- FINANCIALS -- 28.7% CAPITAL MARKETS -- 8.5% 233,425 Crystal River Capital(b)(c)................................... 5,836 324,422 Jefferies Group, Inc.......................................... 12,224 187,719 UBS AG........................................................ 15,907 -------- 33,967 -------- COMMERCIAL BANKS -- 6.4% 236,491 South Financial Group, Inc.................................... 7,222 462,847 UCBH Holdings, Inc............................................ 18,468 -------- 25,690 -------- CONSUMER FINANCE -- 1.0% 68,505 First Marblehead Corp.(b)..................................... 3,941 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 3.3% 53,088 Chicago Mercantile Exchange................................... $ 10,301 256,555 Marketaxess Holdings, Inc.(b)................................. 2,866 -------- 13,167 -------- REAL ESTATE -- 6.7% 750,830 Government Properties Trust, Inc.............................. 7,478 76,458 Redwood Trust, Inc.(a)........................................ 3,913 230,108 St. Joe Co.................................................... 15,486 -------- 26,877 -------- THRIFTS AND MORTGAGE FINANCE -- 2.8% 348,261 Countrywide Financial Corp.................................... 11,305 -------- 114,947 -------- HEALTH CARE -- 10.1% BIOTECHNOLOGY -- 2.5% 179,622 Genentech, Inc.(b)............................................ 10,168 -------- HEALTH CARE PROVIDERS AND SERVICES -- 7.6% 394,859 AMERIGROUP Corp............................................... 14,436 166,045 UnitedHealth Group, Inc....................................... 15,837 -------- 30,273 -------- 40,441 -------- INDUSTRIALS -- 6.7% AEROSPACE AND DEFENSE -- 2.4% 95,387 United Technologies Corp...................................... 9,697 -------- AIR FREIGHT AND LOGISTICS -- 2.9% 124,726 FedEx Corp.................................................... 11,718 -------- BUILDING MATERIALS -- 1.4% 188,600 WCI Communities, Inc.(b)...................................... 5,673 -------- 27,088 -------- INFORMATION TECHNOLOGY -- 8.3% COMMUNICATIONS EQUIPMENT -- 3.4% 366,908 QUALCOMM, Inc................................................. 13,447 -------- COMPUTERS AND PERIPHERALS -- 3.4% 356,689 Dell, Inc.(b)................................................. 13,704 -------- SOFTWARE -- 1.5% 115,513 Electronic Arts, Inc.(b)...................................... 5,981 -------- 33,132 -------- TOTAL COMMON STOCKS (Cost of $331,863).......................................... 367,064 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 107 NATIONS FUNDS Nations Marsico 21st Century Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- CONVERTIBLE BOND -- 0.4% CONSUMER DISCRETIONARY -- 0.4% HOTELS, RESTAURANTS AND LEISURE -- 0.4% $ 1,363 Kerzner International Ltd. 2.375% 04/15/24............................................. $ 1,651 -------- TOTAL CONVERTIBLE BOND (Cost of $1,401)............................................ 1,651 -------- SHARES - ---------- INVESTMENT MANAGEMENT COMPANY -- 8.7% 34,730,000 Nations Cash Reserves, Capital Class Shares(d)..................................... 34,730 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $34,730)........................................... 34,730 -------- PAR (000) - ---------- REPURCHASE AGREEMENTS(E) -- 6.1% $ 6,513 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $6,575 (repurchase proceeds $6,514)................................ 6,513 7,815 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $7,918 (repurchase proceeds $7,816)............ 7,815 10,175 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $10,335 (repurchase proceeds $10,176).......... 10,175 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $24,503)........................................... 24,503 -------- VALUE (000) - --------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost of $392,497)(f)............................. 106.7% $427,948 -------- OTHER ASSETS AND LIABILITIES, NET.................................. (6.7)% (27,002) -------- NET ASSETS.......................................... 100.0% $400,946 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005, is $19,551 and $23,744, respectively. (b) Non-income producing security. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, the value of this security represents 1.5% of net assets. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 11). (f) Cost for federal income tax purposes is $393,615. ABBREVIATION: ADR -- American Depositary Receipt
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Consumer discretionary...................... 32.2% Financials.................................. 28.7 Health care................................. 10.1 Information technology...................... 8.3 Industrials................................. 6.7 Consumer staples............................ 4.0 Energy...................................... 1.9 Investment management company............... 8.7 Repurchase agreements....................... 6.1 Other assets and liabilities, net........... (6.7) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 108 NATIONS FUNDS Nations Small Company Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE (000) - ----------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 100.3% Investment in Nations Master Investment Trust, Nations Small Company Master Portfolio(a)........................................... $514,434 -------- TOTAL INVESTMENTS................................. 100.3% 514,434 -------- OTHER ASSETS AND LIABILITIES, NET................. (0.3)% (1,278) -------- NET ASSETS........................................ 100.0% $513,156 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) The financial statements of the Small Company Master Portfolio, including its investment portfolio, are included elsewhere within this report and should be read in conjunction with the Small Company Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 109 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
CONVERTIBLE ASSET SECURITIES ALLOCATION VALUE ----------------------------------------------------- (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost......................... $ 1,442,120 $ 157,983 $ 1,476,676 Affiliated investments, at cost............................. 69,106 18,028 41,510 -------------- -------------- -------------- Non-affiliated investments, at value........................ 1,570,412 184,310 1,773,305 Affiliated investments, at value............................ 69,106 18,028 41,510 Cash........................................................ -- -- -- Foreign currency (cost of $--, $--, $--, $--, $--, $--, $--, $--, $--, $1,477 and $--, respectively)................... -- -- -- Receivable for investment securities sold................... 15,397 10 3,594 Receivable for Fund shares sold............................. 1,436 36 6,450 Dividends receivable........................................ 857 190 3,605 Interest receivable......................................... 7,342 409 -- Receivable from investment advisor.......................... -- -- -- Other assets................................................ 3 1 -- -------------- -------------- -------------- Total assets............................................ 1,664,553 202,984 1,828,464 -------------- -------------- -------------- LIABILITIES: Collateral on securities loaned............................. (138,497) (1,792) (51,027) Due to custodian bank....................................... (4,833) -- -- Investment advisory fee payable............................. (782) (94) (801) Administration fee payable.................................. (223) (19) (238) Shareholder servicing and distribution fees payable......... (265) (65) (149) Custody fee payable......................................... (17) (3) (13) Payable for investment securities purchased................. -- (17,843) (3,401) Payable for Fund shares redeemed............................ (11,289) (517) (1,804) Accrued Trustees' fees and expenses......................... (90) (88) (148) Accrued expenses and other liabilities...................... (236) (138) (190) -------------- -------------- -------------- Total liabilities....................................... (156,232) (20,559) (57,771) -------------- -------------- -------------- NET ASSETS.................................................. $ 1,508,321 $ 182,425 $ 1,770,693 ============== ============== ============== NET ASSETS CONSIST OF: Undistributed net investment income/(loss).................. $ (516) $ 7 $ 1,296 Accumulated net realized gain/(loss) on investments......... 41,105 (33,410) 9,326 Unrealized appreciation/(depreciation) on: Investments............................................... 128,292 26,327 296,629 Foreign currency translations............................. -- -- -- Paid-in capital............................................. 1,339,440 189,501 1,463,442 -------------- -------------- -------------- NET ASSETS.................................................. $ 1,508,321 $ 182,425 $ 1,770,693 ============== ============== ============== PRIMARY A SHARES: Net assets.................................................. $ 924,893,445 $ 26,425,056 $1,376,690,685 Number of shares outstanding................................ 53,310,746 1,270,050 104,933,527 Net asset value and redemption price per share.............. $ 17.35 $ 20.81 $ 13.12 INVESTOR A SHARES: Net assets.................................................. $ 373,389,608 $ 109,409,318 $ 292,037,133 Number of shares outstanding................................ 21,519,936 5,251,049 22,289,494 Net asset value and redemption price per share.............. $ 17.35 $ 20.84 $ 13.10 Maximum sales charge........................................ 5.75% 5.75% 5.75% Maximum offering price per share............................ $ 18.41 $ 22.11 $ 13.90 INVESTOR B SHARES: Net assets.................................................. $ 143,194,226 $ 43,962,185 $ 84,755,505 Number of shares outstanding................................ 8,343,305 2,126,507 6,645,743 Net asset value and redemption price per share(a)........... $ 17.16 $ 20.67 $ 12.75 INVESTOR C SHARES: Net assets.................................................. $ 66,844,060 $ 2,628,268 $ 17,209,756 Number of shares outstanding................................ 3,855,356 127,253 1,350,085 Net asset value and redemption price per share(a)........... $ 17.34 $ 20.65 $ 12.75
- --------------- (a)The redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 110 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
MIDCAP SMALLCAP STRATEGIC FOCUSED MIDCAP 21ST SMALL VALUE VALUE GROWTH GROWTH EQUITIES GROWTH CENTURY COMPANY - ----------------------------------------------------------------------------------------------------------------------------- $ 471,075 $ 174,911 $ -- $ -- $ -- $ 434,351 $ 357,767 $ -- 16,619 7,532 1,881,836 1,373,234 2,276,740 29,515 34,730 403,923 ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ 592,920 214,309 -- -- -- 459,366 393,218 -- 16,619 7,532 2,273,098 1,455,251 2,904,391 29,515 34,730 514,434 474 1 -- -- -- -- 7 -- -- -- -- -- -- -- 1,477 -- 3,881 2,551 -- -- -- 7,696 2,623 -- 715 212 43,486 1,387 11,430 562 4,801 377 934 226 -- -- -- 195 312 -- -- 5 -- -- -- 7 29 -- -- 18 -- -- -- -- -- -- 1 -- -- -- -- 1 1 -- ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ 615,544 224,854 2,316,584 1,456,638 2,915,821 497,342 437,198 514,811 ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ -- (15,758) -- -- -- (17,500) (24,503) -- -- -- -- -- -- -- -- -- (331) (123) -- -- -- (265) (246) -- (88) (30) (227) (151) (295) (94) (72) (9) (7) (3) (665) (101) (1,043) (26) (120) (46) (5) (2) -- -- -- (6) (5) -- (7,614) (4,114) -- -- -- (8,496) (10,225) -- (384) (84) (4,615) (3,053) (5,532) (521) (975) (1,490) (29) (31) (161) (73) (45) (78) (46) (45) (118) (73) (289) (86) (356) (123) (60) (65) ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ (8,576) (20,218) (5,957) (3,464) (7,271) (27,109) (36,252) (1,655) ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ $ 606,968 $ 204,636 $ 2,310,627 $ 1,453,174 $ 2,908,550 $ 470,233 $ 400,946 $ 513,156 ============ ============ ============ ============== ============== ============ ============ ============ $ 349 $ -- $ (13) $ 4,293 $ (8) $ -- $ (6) $ -- 41,522 9,595 (238,200) (166,326) (540,499) (114,911) (18,498) (6,629) 121,845 39,398 391,262 82,017 627,651 25,015 35,451 110,511 -- -- -- -- -- -- (11) -- 443,252 155,643 2,157,578 1,533,190 2,821,406 560,129 384,010 409,274 ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ $ 606,968 $ 204,636 $ 2,310,627 $ 1,453,174 $ 2,908,550 $ 470,233 $ 400,946 $ 513,156 ============ ============ ============ ============== ============== ============ ============ ============ $591,318,214 $197,829,164 $774,995,666 $1,187,622,491 $ 751,124,355 $424,464,630 $114,896,361 $360,974,960 42,121,576 15,696,541 44,915,549 98,705,242 41,915,093 34,427,980 10,688,396 23,434,149 $ 14.04 $ 12.60 $ 17.25 $ 12.03 $ 17.92 $ 12.33 $ 10.75 $ 15.40 $ 10,257,670 $ 4,867,578 $988,947,954 $ 213,512,735 $1,256,947,890 $ 21,287,277 $187,093,598 $132,399,775 731,725 388,650 58,041,743 17,791,691 71,114,607 1,803,715 17,630,767 8,794,397 $ 14.02 $ 12.52 $ 17.04 $ 12.00 $ 17.67 $ 11.80 $ 10.61 $ 15.06 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% $ 14.88 $ 13.28 $ 18.08 $ 12.73 $ 18.75 $ 12.52 $ 11.26 $ 15.98 $ 4,447,435 $ 1,569,323 $194,667,705 $ 37,140,246 $ 517,488,848 $ 22,986,363 $ 60,495,341 $ 16,130,647 320,173 127,770 12,034,032 3,189,197 30,798,233 2,205,956 5,918,460 1,141,467 $ 13.89 $ 12.28 $ 16.18 $ 11.65 $ 16.80 $ 10.42 $ 10.22 $ 14.13 $ 944,369 $ 370,376 $352,015,576 $ 14,898,514 $ 382,988,821 $ 1,494,718 $ 38,460,382 $ 3,650,707 67,794 30,179 21,731,315 1,279,584 22,725,840 142,606 3,763,514 254,786 $ 13.93 $ 12.27 $ 16.20 $ 11.64 $ 16.85 $ 10.48 $ 10.22 $ 14.33
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 111 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
CONVERTIBLE ASSET SECURITIES ALLOCATION VALUE ------------------------------------------------------ (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 32,257 $ 2,258 $ -- Dividends (Net of foreign withholding taxes of $13, $--, $95, $5, $1, $--, $--, $--, $1, $14 and $--, respectively)............................................. 23,527 2,642 37,052 Dividend income from affiliated funds....................... 373 277 513 Securities lending.......................................... 464 1 17 Allocated from Portfolio: Interest(a)................................................. -- -- -- Dividends (Net of foreign withholding taxes of $--, $--, $--, $--, $--, $71, $68, $179, $--, $0 and $6, respectively)(a).......................................... -- -- -- Dividend income from affiliated funds(a).................... -- -- -- Securities lending(a)....................................... -- -- -- Expenses(a)................................................. -- -- -- -------------- -------------- -------------- Total investment income/(loss).......................... 56,621 5,178 37,582 -------------- -------------- -------------- EXPENSES: Investment advisory fee..................................... 9,737 1,129 9,382 Administration fee.......................................... 3,233 352 3,205 Transfer agent fees......................................... 481 51 411 Custodian fees.............................................. 101 17 89 Legal and audit fees........................................ 125 151 126 Registration and filing fees................................ 56 48 54 Trustees' fees and expenses................................. 28 28 27 Interest expense............................................ 2 --(b) -- Printing expense............................................ 185 210 121 Non-recurring costs (see Note 12)........................... 420 -- 420 Other expenses.............................................. 67 18 57 -------------- -------------- -------------- Subtotal................................................ 14,435 2,004 13,892 Shareholder servicing and distribution fees: Investor A Shares......................................... 956 270 596 Investor B Shares......................................... 1,488 526 838 Investor C Shares......................................... 690 25 209 -------------- -------------- -------------- Total expenses.......................................... 17,569 2,825 15,535 Fees waived or reimbursed by investment advisor and/or administrator (see Note 3)................................ -- (127) (1,532) Fees reduced by credits allowed by the custodian (see Note 3)........................................................ (3) --(b) --(b) Cost assumed by Bank of America Corporation (see Note 12)... (420) -- (420) -------------- -------------- -------------- Net expenses............................................ 17,146 2,698 13,583 -------------- -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 39,475 2,480 23,999 -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... 71,680 13,378 70,719 Written options........................................... -- (8) -- Futures contracts......................................... -- 114 -- Swap contracts............................................ -- 8 -- Foreign currency and other net assets..................... -- -- -- Net increase from payments by affiliates and net realized gains/(losses) on the disposal of investments in violation of restrictions (see Note 3).................. -- 118 -- Allocated from Portfolio: Security transactions(a).................................. -- -- -- Foreign currency and other net assets(a).................. -- -- -- Net increase from payments by affiliates and net realized gains/(losses) on the disposal of investments in violation of restrictions (see Note 3).................. -- -- -- -------------- -------------- -------------- Net realized gain/(loss) on investments..................... 71,680 13,610 70,719 -------------- -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities................................................ (51,319) (7,974) 90,473 Foreign currency and other net assets..................... -- -- -- Securities allocated from Portfolio(a).................... -- -- -- -------------- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... (51,319) (7,974) 90,473 -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments...... 20,361 5,636 161,192 -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 59,836 $ 8,116 $ 185,191 ============== ============== ==============
- --------------- (a)Allocated from Growth Master Portfolio, Strategic Growth Master Portfolio, Focused Equities Master Portfolio and Small Company Master Portfolio, respectively. (b)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 112 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
MIDCAP SMALLCAP STRATEGIC FOCUSED MIDCAP 21ST SMALL VALUE VALUE GROWTH GROWTH EQUITIES GROWTH CENTURY COMPANY - ---------------------------------------------------------------------------------------------------- $ 415 $ -- $ -- $ -- $ -- $ 1 $ 14 $ -- 11,340 1,920 -- -- -- 2,446 1,735 -- -- 90 -- -- -- 180 268 -- -- 36 -- -- -- 55 74 -- -- -- 1,173 -- -- -- -- -- -- -- 14,045 33,222 1,043 -- -- 1,740 -- -- 1,894 166 23,815 -- -- 176 -- -- 42 74 44 -- -- 214 -- -- (13,160) (11,269) (22,073) -- -- (5,533) -------------- -------- -------- -------- --------- -------- -------- ----------- 11,755 2,046 3,994 22,193 2,829 2,682 2,091 (3,403) -------------- -------- -------- -------- --------- -------- -------- ----------- 3,472 1,436 -- -- -- 3,082 1,729 -- 1,116 361 1,991 2,671 3,368 1,091 519 989 137 53 1,037 398 1,884 133 86 176 40 14 -- -- -- 36 29 -- 130 137 78 70 65 140 138 66 45 44 60 47 118 49 56 55 27 27 6 6 6 27 27 6 1 --(b) -- 23 -- -- -- 6 88 69 227 54 501 80 50 48 -- -- 431 452 725 -- -- 167 25 12 17 25 12 29 25 17 -------------- -------- -------- -------- --------- -------- -------- ----------- 5,081 2,153 3,847 3,746 6,679 4,667 2,659 1,530 22 11 1,701 565 2,698 54 223 380 38 15 1,926 406 5,348 245 510 174 8 3 2,380 160 3,577 17 217 42 -------------- -------- -------- -------- --------- -------- -------- ----------- 5,149 2,182 9,854 4,877 18,302 4,983 3,609 2,126 (2) (22) -- (93) -- (61) -- (335) (1) --(b) -- -- -- (1) (1) -- -- -- (431) (452) (725) -- -- (167) -------------- -------- -------- -------- --------- -------- -------- ----------- 5,146 2,160 9,423 4,332 17,577 4,921 3,608 1,624 -------------- -------- -------- -------- --------- -------- -------- ----------- 6,609 (114) (5,429) 17,861 (14,748) (2,239) (1,517) (5,027) -------------- -------- -------- -------- --------- -------- -------- ----------- 65,242 15,337 -- -- -- 117,617 5,480 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 1 (228) -- 898 -- -- -- -- -- -- -- -- -- (31,303) 394,307 (660) -- -- 84,648 -- -- (348) -- (616) -- -- -- -- -- -- 181 -- -- -- -- -------------- -------- -------- -------- --------- -------- -------- ----------- 66,140 15,337 (31,651) 394,488 (1,276) 117,618 5,252 84,648 -------------- -------- -------- -------- --------- -------- -------- ----------- 27,259 7,285 -- -- -- (95,278) 12,965 -- -- -- -- -- -- -- (12) -- -- -- 146,210 (137,623) 146,168 -- -- (83,967) -------------- -------- -------- -------- --------- -------- -------- ----------- 27,259 7,285 146,210 (137,623) 146,168 (95,278) 12,953 (83,967) -------------- -------- -------- -------- --------- -------- -------- ----------- 93,399 22,622 114,559 256,865 144,892 22,340 18,205 681 -------------- -------- -------- -------- --------- -------- -------- ----------- $ 100,008 $ 22,508 $109,130 $274,726 $ 130,144 $ 20,101 $ 16,688 $ (4,346) ============== ======== ======== ======== ========= ======== ======== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 113 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
CONVERTIBLE SECURITIES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, 2005 2004 -------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 39,475 $ 40,534 Net realized gain/(loss) on investments..................... 71,680 93,895 Net realized gain/(loss) on investments allocated from Portfolio................................................. -- -- Net change in unrealized appreciation/(depreciation) of investments............................................... (51,319) 200,762 Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio...................... -- -- -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 59,836 335,191 Distributions to shareholders from net investment income: Primary A Shares.......................................... (28,975) (24,825) Investor A Shares......................................... (10,858) (10,005) Investor B Shares......................................... (3,142) (2,894) Investor C Shares......................................... (1,427) (1,173) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... (8,273) -- Investor A Shares......................................... (3,297) -- Investor B Shares......................................... (1,293) -- Investor C Shares......................................... (581) -- Net increase/(decrease) in net assets from Fund share transactions.............................................. (79,965) 332,348 -------------- -------------- Net increase/(decrease) in net assets....................... (77,975) 628,642 NET ASSETS: Beginning of period......................................... 1,586,296 957,654 -------------- -------------- End of period............................................... $ 1,508,321 $ 1,586,296 ============== ============== Undistributed net investment income/(loss) at end of period.................................................... $ (516) $ 1,602 ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 114 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
ASSET ALLOCATION VALUE MIDCAP VALUE - ----------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------- $ 2,480 $ 2,320 $ 23,999 $ 14,740 $ 6,609 $ 4,320 13,610 9,959 70,719 7,823 66,140 37,814 -- -- -- -- -- -- (7,974) 33,520 90,473 302,733 27,259 113,620 -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- 8,116 45,799 185,191 325,296 100,008 155,754 (461) (555) (19,810) (11,573) (6,155) (4,378) (1,701) (1,503) (3,389) (1,558) (85) (48) (405) (549) (550) (265) (16) (3) (21) (19) (120) (67) (5) (1) -- -- -- -- (39,758) -- -- -- -- -- (666) -- -- -- -- -- (289) -- -- -- -- -- (65) -- (21,989) (42,148) 180,126 580,140 49,217 53,778 -------------- -------------- -------------- -------------- -------------- -------------- (16,461) 1,025 341,448 891,973 102,186 205,102 198,886 197,861 1,429,245 537,272 504,782 299,680 -------------- -------------- -------------- -------------- -------------- -------------- $ 182,425 $ 198,886 $ 1,770,693 $ 1,429,245 $ 606,968 $ 504,782 ============== ============== ============== ============== ============== ============== $ 7 $ 104 $ 1,296 $ 1,166 $ 349 $ 1 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 115 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SMALLCAP VALUE --------------------------------- YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, 2005 2004 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ (114) $ 162 Net realized gain/(loss) on investments..................... 15,337 18,236 Net realized gain/(loss) on investments allocated from Portfolio(a).............................................. -- -- Net change in unrealized appreciation/(depreciation) of investments............................................... 7,285 35,360 Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio(a)................... -- -- -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 22,508 53,758 Distributions to shareholders from net investment income: Primary A Shares.......................................... -- (401) Investor A Shares......................................... -- (5) Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... (15,476) (1,115) Investor A Shares......................................... (398) (21) Investor B Shares......................................... (137) (9) Investor C Shares......................................... (29) (2) Net increase/(decrease) in net assets from Fund share transactions.............................................. 41,099 33,177 -------------- -------------- Net increase/(decrease) in net assets....................... 47,567 85,382 NET ASSETS: Beginning of period......................................... 157,069 71,687 -------------- -------------- End of period............................................... $ 204,636 $ 157,069 ============== ============== Undistributed net investment income/(loss) at end of period.................................................... $ -- $ -- ============== ==============
- --------------- (a)Allocated from Growth Master Portfolio, Strategic Growth Master Portfolio and Focused Equities Master Portfolio, respectively. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 116 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GROWTH STRATEGIC GROWTH FOCUSED EQUITIES - ----------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004 2005 2004 - ------------------------------------------------------------------------------------------------------- $ (5,429) $ (5,599) $ 17,861 $ 8,296 $ (14,748) $ (15,498) -- -- -- -- -- -- (31,651) 50,430 394,488 38,296 (1,276) 123,090 -- -- -- -- -- -- 146,210 185,287 (137,623) 462,907 146,168 432,350 -------------- -------------- -------------- -------------- -------------- -------------- 109,130 230,118 274,726 509,499 130,144 539,942 -- -- (14,473) (8,243) -- -- -- -- (1,796) (685) -- -- -- -- (3) -- -- -- -- -- (13) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 905,149 486,609 (629,800) (334,818) 126,346 552,340 -------------- -------------- -------------- -------------- -------------- -------------- 1,014,279 716,727 (371,359) 165,753 256,490 1,092,282 1,296,348 579,621 1,824,533 1,658,780 2,652,060 1,559,778 -------------- -------------- -------------- -------------- -------------- -------------- $ 2,310,627 $ 1,296,348 $ 1,453,174 $ 1,824,533 $ 2,908,550 $ 2,652,060 ============== ============== ============== ============== ============== ============== $ (13) $ (213) $ 4,293 $ 2,717 $ (8) $ (1,217) ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 117 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MIDCAP GROWTH --------------------------------- YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, 2005 2004 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ (2,239) $ (2,692) Net realized gain/(loss) on investments..................... 117,618 (252) Net realized gain/(loss) on investments allocated from Portfolio(b).............................................. -- -- Net change in unrealized appreciation/(depreciation) of investments............................................... (95,278) 153,370 Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio(b)................... -- -- -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 20,101 150,426 Distributions to shareholders from net investment income: Primary A Shares.......................................... -- -- Investor A Shares......................................... -- -- Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... -- -- Investor A Shares......................................... -- -- Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Net increase/(decrease) in net assets from Fund share transactions.............................................. (62,323) (82,777) -------------- -------------- Net increase/(decrease) in net assets....................... (42,222) 67,649 NET ASSETS: Beginning of period......................................... 512,455 444,806 -------------- -------------- End of period............................................... $ 470,233 $ 512,455 ============== ============== Undistributed net investment income/(loss) at end of period.................................................... $ -- $ -- ============== ==============
- --------------- (a)As of November 1, 2003, Small Company Fund converted to a master-feeder structure. (b)Allocated from Small Company Master Portfolio. (c)Amount represents results from operations prior to conversion to master-feeder structure. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 118 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
21ST CENTURY SMALL COMPANY --------------------------------- -------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, MARCH 31, MARCH 31, MARCH 31, 2005 2004 2005 2004(A) - -------------------------------------------------------------------------- $ (1,517) $ (985) $ (5,027) $ (5,942) 5,252 15,408 -- 13,611(c) -- -- 84,648 32,447 12,953 20,525 -- 208,510(c) -- -- (83,967) 29,382 -------------- -------------- -------------- -------------- 16,688 34,948 (4,346) 278,008 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 235,624 66,211 (229,592) (85,943) -------------- -------------- -------------- -------------- 252,312 101,159 (233,938) 192,065 148,634 47,475 747,094 555,029 -------------- -------------- -------------- -------------- $ 400,946 $ 148,634 $ 513,156 $ 747,094 ============== ============== ============== ============== $ (6) $ (25) $ -- $ -- ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 119 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
CONVERTIBLE SECURITIES ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 12,476 $ 216,869 33,051 $ 507,755 Issued as reinvestment of distributions................... 169 2,725 124 2,001 Redeemed.................................................. (14,886) (258,628) (15,632) (244,442) ------- --------- ------- --------- Net increase/(decrease)................................... (2,241) $ (39,034) 17,543 $ 265,314 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 3,671 $ 65,929 8,805 $ 136,443 Shares issued upon conversion from Investor B Shares...... 11 185 2 28 Shares issued upon conversion from Investor C Shares...... 19 335 20 317 Issued as reinvestment of distributions................... 817 12,100 536 8,590 Redeemed.................................................. (5,998) (103,894) (7,611) (119,750) ------- --------- ------- --------- Net increase/(decrease)................................... (1,480) $ (25,345) 1,752 $ 25,628 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 639 $ 11,495 2,101 $ 31,998 Issued as reinvestment of distributions................... 247 3,684 150 2,385 Shares redeemed upon conversion to Investor A Shares...... (11) (185) (2) (28) Redeemed.................................................. (1,532) (26,202) (1,422) (22,493) ------- --------- ------- --------- Net increase/(decrease)................................... (657) $ (11,208) 827 $ 11,862 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 866 $ 15,151 2,622 $ 40,889 Issued as reinvestment of distributions................... 66 1,001 39 631 Shares redeemed upon conversion to Investor A Shares...... (20) (335) (20) (317) Redeemed.................................................. (1,169) (20,195) (728) (11,659) ------- --------- ------- --------- Net increase/(decrease)................................... (257) $ (4,378) 1,913 $ 29,544 ======= ========= ======= ========= Total net increase/(decrease)............................. (4,635) $ (79,965) 22,035 $ 332,348 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 120 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
ASSET ALLOCATION ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 124 $ 2,579 127 $ 2,523 Issued as reinvestment of distributions................... 11 229 18 330 Redeemed.................................................. (141) (2,864) (1,031) (20,314) ------ -------- ------ -------- Net increase/(decrease)................................... (6) $ (56) (886) $(17,461) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 137 $ 2,876 1,204 $ 22,795 Shares issued upon conversion from Investor B Shares...... 662 13,397 --(a) 5 Issued as reinvestment of distributions................... 78 1,588 75 1,429 Redeemed.................................................. (903) (18,452) (1,353) (25,228) ------ -------- ------ -------- Net increase/(decrease)................................... (26) $ (591) (74) $ (999) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 56 $ 1,170 99 $ 1,840 Issued as reinvestment of distributions................... 18 366 26 491 Shares redeemed upon conversion to Investor A Shares...... (668) (13,397) --(a) (5) Redeemed.................................................. (479) (9,662) (1,361) (25,934) ------ -------- ------ -------- Net increase/(decrease)................................... (1,073) $(21,523) (1,236) $(23,608) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 28 $ 576 47 $ 875 Issued as reinvestment of distributions................... 1 20 1 16 Redeemed.................................................. (20) (415) (52) (971) ------ -------- ------ -------- Net increase/(decrease)................................... 9 $ 181 (4) $ (80) ====== ======== ====== ======== Total net increase/(decrease)............................. (1,096) $(21,989) (2,200) $(42,148) ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 121 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
VALUE ----------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- ------------------- SHARES DOLLARS SHARES DOLLARS ----------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 27,907 $ 348,660 30,844 $ 329,688 Issued in exchange for Primary A Shares of Nations Classic Value Fund.............................................. -- -- 26,676 265,429 Issued in exchange for Primary A Shares of Nations LargeCap Value Fund..................................... -- -- 3,974 39,538 Issued as reinvestment of distributions................... 899 7,524 416 4,531 Redeemed.................................................. (16,833) (207,421) (22,243) (235,036) ------- --------- ------- --------- Net increase/(decrease)................................... 11,973 $ 148,763 39,667 $ 404,150 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 8,432 $ 105,037 7,157 $ 77,892 Issued in exchange for Investor A Shares of Nations Classic Value Fund...................................... -- -- 1,872 18,605 Issued in exchange for Investor A Shares of Nations LargeCap Value Fund..................................... -- -- 6,832 67,909 Shares issued upon conversion from Investor B Shares...... 14 171 21 233 Shares issued upon conversion from Investor C Shares...... 27 318 28 305 Issued as reinvestment of distributions................... 326 3,200 129 1,442 Redeemed.................................................. (4,352) (53,135) (3,320) (35,761) ------- --------- ------- --------- Net increase/(decrease)................................... 4,447 $ 55,591 12,719 $ 130,625 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 376 $ 4,724 568 $ 5,919 Issued in exchange for Investor B Shares of Nations Classic Value Fund...................................... -- -- 3,553 34,388 Issued in exchange for Investor B Shares of Nations LargeCap Value Fund..................................... -- -- 202 1,956 Issued as reinvestment of distributions................... 62 487 22 237 Shares redeemed upon conversion to Investor A Shares...... (14) (171) (22) (233) Redeemed.................................................. (1,352) (15,908) (1,282) (13,404) ------- --------- ------- --------- Net increase/(decrease)................................... (928) $ (10,868) 3,041 $ 28,863 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 121 $ 1,464 352 $ 3,553 Issued in exchange for Investor C Shares of Nations Classic Value Fund...................................... -- -- 5,093 49,253 Issued in exchange for Investor C Shares of Nations LargeCap Value Fund..................................... -- -- 17 167 Issued as reinvestment of distributions................... 8 61 3 30 Shares redeemed upon conversion to Investor A Shares...... (27) (318) (29) (305) Redeemed.................................................. (1,255) (14,567) (3,502) (36,196) ------- --------- ------- --------- Net increase/(decrease)................................... (1,153) $ (13,360) 1,934 $ 16,502 ======= ========= ======= ========= Total net increase/(decrease)............................. 14,339 $ 180,126 57,361 $ 580,140 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 122 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MIDCAP VALUE ------------------------------------------ YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 9,886 $133,740 12,446 $136,835 Capital contribution from investment advisor (see Note 3)...................................................... -- 392 -- -- Issued as reinvestment of distributions................... 935 8,478 45 518 Redeemed.................................................. (7,198) (95,265) (7,713) (87,326) ------ -------- ------ -------- Net increase/(decrease)................................... 3,623 $ 47,345 4,778 $ 50,027 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 282 $ 3,892 442 $ 5,002 Capital contribution from investment advisor (see Note 3)...................................................... -- 7 -- -- Shares issued upon conversion from Investor B Shares...... 7 90 1 8 Issued as reinvestment of distributions................... 71 644 4 42 Redeemed.................................................. (264) (3,370) (186) (2,093) ------ -------- ------ -------- Net increase/(decrease)................................... 96 $ 1,263 261 $ 2,959 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 55 $ 844 101 $ 1,109 Capital contribution from investment advisor (see Note 3)...................................................... -- 3 -- -- Issued as reinvestment of distributions................... 32 281 --(a) 4 Shares redeemed upon conversion to Investor A Shares...... (7) (90) (1) (8) Redeemed.................................................. (47) (599) (39) (455) ------ -------- ------ -------- Net increase/(decrease)................................... 33 $ 439 61 $ 650 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 34 $ 437 23 $ 265 Capital contribution from investment advisor (see Note 3)...................................................... -- 1 -- -- Issued as reinvestment of distributions................... 4 42 --(a) --(a) Redeemed.................................................. (24) (310) (11) (123) ------ -------- ------ -------- Net increase/(decrease)................................... 14 $ 170 12 $ 142 ====== ======== ====== ======== Total net increase/(decrease)............................. 3,766 $ 49,217 5,112 $ 53,778 ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 123 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SMALLCAP VALUE -------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- ------------------- SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 4,809 $ 61,751 5,994 $ 60,657 Issued as reinvestment of distributions................... 768 4,833 43 468 Redeemed.................................................. (2,198) (26,575) (2,799) (30,561) ------ -------- ------ -------- Net increase/(decrease)................................... 3,379 $ 40,009 3,238 $ 30,564 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 116 $ 1,700 230 $ 2,459 Shares issued upon conversion from Investor B Shares...... 3 32 --(a) --(a) Issued as reinvestment of distributions................... 60 371 2 24 Redeemed.................................................. (103) (1,236) (64) (719) ------ -------- ------ -------- Net increase/(decrease)................................... 76 $ 867 168 $ 1,764 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 28 $ 440 85 $ 862 Issued as reinvestment of distributions................... 21 131 1 9 Shares redeemed upon conversion to Investor A Shares...... (3) (32) --(a) --(a) Redeemed.................................................. (33) (399) (16) (181) ------ -------- ------ -------- Net increase/(decrease)................................... 13 $ 140 70 $ 690 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 15 $ 197 24 $ 240 Issued as reinvestment of distributions................... 3 22 --(a) 2 Redeemed.................................................. (11) (136) (8) (83) ------ -------- ------ -------- Net increase/(decrease)................................... 7 $ 83 16 $ 159 ====== ======== ====== ======== Total net increase/(decrease)............................. 3,475 $ 41,099 3,492 $ 33,177 ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 124 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
GROWTH --------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- -------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 26,853 $ 458,226 12,491 $ 178,639 Issued in exchange for Primary A Shares of Nations Capital Growth Fund............................................. -- -- 6,378 101,343 Redeemed.................................................. (5,237) (86,063) (4,478) (65,705) ------ --------- ------- --------- Net increase/(decrease)................................... 21,616 $ 372,163 14,391 $ 214,277 ====== ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 31,670 $ 526,570 19,553 $ 281,705 Issued in exchange for Investor A Shares of Nations Capital Growth Fund..................................... -- -- 2,087 32,847 Shares issued upon conversion from Investor B Shares...... 115 1,766 6 84 Shares issued upon conversion from Investor C Shares...... 4 59 -- -- Redeemed.................................................. (8,331) (135,356) (10,657) (155,779) ------ --------- ------- --------- Net increase/(decrease)................................... 23,458 $ 393,039 10,989 $ 158,857 ====== ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 1,128 $ 17,821 1,580 $ 21,455 Issued in exchange for Investor B Shares of Nations Capital Growth Fund..................................... -- -- 1,570 23,676 Shares redeemed upon conversion to Investor A Shares...... (121) (1,766) (6) (84) Redeemed.................................................. (2,220) (34,220) (1,919) (26,674) ------ --------- ------- --------- Net increase/(decrease)................................... (1,213) $ (18,165) 1,225 $ 18,373 ====== ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 11,709 $ 184,667 7,528 $ 104,466 Issued in exchange for Investor C Shares of Nations Capital Growth Fund..................................... -- -- 194 2,924 Shares redeemed upon conversion to Investor A Shares...... (4) (59) -- -- Redeemed.................................................. (1,707) (26,496) (874) (12,288) ------ --------- ------- --------- Net increase/(decrease)................................... 9,998 $ 158,112 6,848 $ 95,102 ====== ========= ======= ========= Total net increase/(decrease)............................. 53,859 $ 905,149 33,453 $ 486,609 ====== ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 125 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
STRATEGIC GROWTH ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 8,182 $ 96,077 26,117 $ 268,207 Issued as reinvestment of distributions................... 103 1,262 43 486 Redeemed.................................................. (40,584) (675,716) (53,868) (563,726) ------- --------- ------- --------- Net increase/(decrease)................................... (32,299) $(578,377) (27,708) $(295,033) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 1,299 $ 15,105 4,359 $ 44,244 Shares issued upon conversion from Investor B Shares...... 9 98 8 97 Shares issued upon conversion from Investor C Shares...... --(a) 2 -- -- Issued as reinvestment of distributions................... 138 1,676 57 646 Redeemed.................................................. (4,912) (57,027) (7,572) (78,387) ------- --------- ------- --------- Net increase/(decrease)................................... (3,466) $ (40,146) (3,148) $ (33,400) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 23 $ 257 158 $ 1,607 Issued as reinvestment of distributions................... --(a) 3 -- -- Shares redeemed upon conversion to Investor A Shares...... (9) (98) (9) (97) Redeemed.................................................. (801) (9,039) (739) (7,656) ------- --------- ------- --------- Net increase/(decrease)................................... (787) $ (8,877) (590) $ (6,146) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 252 $ 2,853 426 $ 4,382 Issued as reinvestment of distributions................... 1 13 -- -- Shares redeemed upon conversion to Investor A Shares...... --(a) (2) -- -- Redeemed.................................................. (463) (5,264) (442) (4,621) ------- --------- ------- --------- Net increase/(decrease)................................... (210) $ (2,400) (16) $ (239) ======= ========= ======= ========= Total net increase/(decrease)............................. (36,762) $(629,800) (31,462) $(334,818) ======= ========= ======= =========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 126 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
FOCUSED EQUITIES ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 8,009 $ 139,608 17,863 $ 276,214 Redeemed.................................................. (7,403) (125,018) (6,589) (103,473) ------- --------- ------- --------- Net increase/(decrease)................................... 606 $ 14,590 11,274 $ 172,741 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 27,615 $ 468,988 40,446 $ 634,367 Shares issued upon conversion from Investor B Shares...... 75 1,211 169 2,721 Shares issued upon conversion from Investor C Shares...... 2 34 4 69 Redeemed.................................................. (17,995) (300,515) (21,574) (334,541) ------- --------- ------- --------- Net increase/(decrease)................................... 9,697 $ 169,718 19,045 $ 302,616 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 1,089 $ 17,602 3,662 $ 53,854 Shares redeemed upon conversion to Investor A Shares...... (78) (1,211) (176) (2,721) Redeemed.................................................. (6,094) (97,811) (5,322) (79,664) ------- --------- ------- --------- Net increase/(decrease)................................... (5,083) $ (81,420) (1,836) $ (28,531) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 5,812 $ 93,826 9,433 $ 142,065 Shares redeemed upon conversion to Investor A Shares...... (2) (34) (4) (69) Redeemed.................................................. (4,348) (70,334) (2,409) (36,482) ------- --------- ------- --------- Net increase/(decrease)................................... 1,462 $ 23,458 7,020 $ 105,514 ======= ========= ======= ========= Total net increase/(decrease)............................. 6,682 $ 126,346 35,503 $ 552,340 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 127 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MIDCAP GROWTH ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 6,301 $ 77,732 7,761 $ 82,443 Redeemed.................................................. (11,172) (132,693) (15,009) (160,517) ------- --------- ------- --------- Net increase/(decrease)................................... (4,871) $ (54,961) (7,248) $ (78,074) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 401 $ 4,589 1,094 $ 11,057 Shares issued upon conversion from Investor B Shares...... 3 31 3 35 Shares issued upon conversion from Investor C Shares...... 1 6 --(a) 5 Redeemed.................................................. (614) (7,018) (1,260) (12,709) ------- --------- ------- --------- Net increase/(decrease)................................... (209) $ (2,392) (163) $ (1,612) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 82 $ 837 255 $ 2,330 Shares redeemed upon conversion to Investor A Shares...... (3) (31) (4) (35) Redeemed.................................................. (534) (5,391) (536) (4,970) ------- --------- ------- --------- Net increase/(decrease)................................... (455) $ (4,585) (285) $ (2,675) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 28 $ 290 38 $ 359 Shares redeemed upon conversion to Investor A Shares...... (1) (6) (1) (5) Redeemed.................................................. (65) (669) (84) (770) ------- --------- ------- --------- Net increase/(decrease)................................... (38) $ (385) (47) $ (416) ======= ========= ======= ========= Total net increase/(decrease)............................. (5,573) $ (62,323) (7,743) $ (82,777) ======= ========= ======= =========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 128 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
21ST CENTURY -------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- ------------------- SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 7,493 $ 78,013 3,470 $ 30,659 Redeemed.................................................. (581) (5,874) (261) (2,362) ------ -------- ------ -------- Net increase/(decrease)................................... 6,912 $ 72,139 3,209 $ 28,297 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 14,416 $150,795 5,343 $ 46,037 Shares issued upon conversion from Investor B Shares...... 4 38 --(a) 4 Shares issued upon conversion from Investor C Shares...... --(a) 4 1 7 Redeemed.................................................. (1,801) (18,145) (2,085) (18,747) ------ -------- ------ -------- Net increase/(decrease)................................... 12,619 $132,692 3,259 $ 27,301 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 1,622 $ 16,268 975 $ 8,226 Shares redeemed upon conversion to Investor A Shares...... (4) (38) --(a) (4) Redeemed.................................................. (827) (7,941) (732) (6,065) ------ -------- ------ -------- Net increase/(decrease)................................... 791 $ 8,289 243 $ 2,157 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 2,539 $ 25,801 1,111 $ 9,589 Shares redeemed upon conversion to Investor A Shares...... --(a) (4) (1) (7) Redeemed.................................................. (337) (3,293) (130) (1,126) ------ -------- ------ -------- Net increase/(decrease)................................... 2,202 $ 22,504 980 $ 8,456 ====== ======== ====== ======== Total net increase/(decrease)............................. 22,524 $235,624 7,691 $ 66,211 ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 129 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SMALL COMPANY ---------------------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 2,619 $ 39,404 11,003 $ 134,903 Redeemed.................................................. (12,380) (187,202) (18,256) (237,496) ------- --------- ------- --------- Net increase/(decrease)................................... (9,761) $(147,798) (7,253) $(102,593) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 1,351 $ 19,846 5,040 $ 65,622 Shares issued upon conversion from Investor B Shares...... 4 55 5 79 Shares issued upon conversion from Investor C Shares...... 64 916 14 214 Redeemed.................................................. (6,782) (97,837) (3,814) (49,521) ------- --------- ------- --------- Net increase/(decrease)................................... (5,363) $ (77,020) 1,245 $ 16,394 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 79 $ 1,094 302 $ 3,693 Shares redeemed upon conversion to Investor A Shares...... (4) (55) (6) (79) Redeemed.................................................. (295) (4,077) (258) (3,325) ------- --------- ------- --------- Net increase/(decrease)................................... (220) $ (3,038) 38 $ 289 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 49 $ 688 132 $ 1,681 Shares redeemed upon conversion to Investor A Shares...... (67) (916) (15) (214) Redeemed.................................................. (105) (1,508) (117) (1,500) ------- --------- ------- --------- Net increase/(decrease)................................... (123) $ (1,736) --(a) $ (33) ======= ========= ======= ========= Total net increase/(decrease)............................. (15,467) $(229,592) (5,970) $ (85,943) ======= ========= ======= =========
- --------------- (a)Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 130 [This page intentionally left blank] 131 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
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 GAINS ----------------------------------------------------------------------------------------- CONVERTIBLE SECURITIES PRIMARY A SHARES Year ended 3/31/2005(d)........ $17.32 $0.48 $ 0.24 $ 0.72 $(0.54) $(0.15) Year ended 3/31/2004(d)........ 13.77 0.51 3.52 4.03 (0.48) -- Year ended 3/31/2003(d)........ 16.03 0.51 (2.27) (1.76) (0.50) -- Year ended 3/31/2002(d)........ 16.05 0.59 -- 0.59 (0.56) (0.05) Year ended 3/31/2001........... 22.18 0.51 (2.00) (1.49) (0.60) (4.04) INVESTOR A SHARES Year ended 3/31/2005(d)........ $17.33 $0.43 $ 0.24 $ 0.67 $(0.50) $(0.15) Year ended 3/31/2004(d)........ 13.77 0.47 3.53 4.00 (0.44) -- Year ended 3/31/2003(d)........ 16.02 0.47 (2.25) (1.78) (0.47) -- Year ended 3/31/2002(d)........ 16.04 0.59 (0.04) 0.55 (0.52) (0.05) Year ended 3/31/2001........... 22.17 0.51 (2.05) (1.54) (0.55) (4.04) INVESTOR B SHARES Year ended 3/31/2005(d)........ $17.15 $0.30 $ 0.23 $ 0.53 $(0.37) $(0.15) Year ended 3/31/2004(d)........ 13.64 0.35 3.48 3.83 (0.32) -- Year ended 3/31/2003(d)........ 15.88 0.36 (2.24) (1.88) (0.36) -- Year ended 3/31/2002(d)........ 15.92 0.45 (0.03) 0.42 (0.41) (0.05) Year ended 3/31/2001........... 22.06 0.35 (2.00) (1.65) (0.45) (4.04) INVESTOR C SHARES Year ended 3/31/2005(d)........ $17.31 $0.30 $ 0.25 $ 0.55 $(0.37) $(0.15) Year ended 3/31/2004(d)........ 13.77 0.35 3.52 3.87 (0.33) -- Year ended 3/31/2003(d)........ 16.04 0.36 (2.26) (1.90) (0.37) -- Year ended 3/31/2002(d)........ 16.08 0.45 (0.03) 0.42 (0.41) (0.05) Year ended 3/31/2001........... 22.23 0.35 (2.02) (1.67) (0.44) (4.04)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Per share net investment income/(loss) has been calculated using the monthly average shares method. (e)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.91% for Primary A Shares, 1.16% for Investor A Shares and 1.91% each for Investor B and Investor C Shares. (f) The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (g)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.95% for Primary A Shares, 1.20% for Investor A Shares and 1.95% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 132 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE NET DISTRIBUTIONS PERIOD RETURN(A) (000) ASSETS(B)(C) ASSETS RATE ASSETS(B) - ------------------------------------------------------------------------------------------------------------------ $(0.69) $17.35 4.18% $924,893 0.91% 2.75% 37% 0.94%(e) (0.48) 17.32 29.54 962,284 0.94(f) 3.19 91 0.97(g) (0.50) 13.77 (11.01) 523,271 0.97 3.59 57 0.97 (0.61) 16.03 3.74 236,202 1.00 3.78 50 1.00 (4.64) 16.05 (7.59) 75,627 0.99 3.08 73 1.00 $(0.65) $17.35 3.87% $373,390 1.16% 2.50% 37% 1.19%(e) (0.44) 17.33 29.32 398,485 1.19(f) 2.94 91 1.22(g) (0.47) 13.77 (11.18) 292,622 1.22 3.34 57 1.22 (0.57) 16.02 3.48 321,858 1.25 3.53 50 1.25 (4.59) 16.04 (7.88) 315,857 1.24 2.86 73 1.25 $(0.52) $17.16 3.08% $143,194 1.91% 1.75% 37% 1.94%(e) (0.32) 17.15 28.30 154,322 1.94(f) 2.19 91 1.97(g) (0.36) 13.64 (11.83) 111,468 1.97 2.59 57 1.97 (0.46) 15.88 2.68 90,408 2.00 2.78 50 2.00 (4.49) 15.92 (8.49) 49,763 1.99 2.08 73 2.00 $(0.52) $17.34 3.16% $ 66,844 1.91% 1.75% 37% 1.94%(e) (0.33) 17.31 28.31 71,205 1.94(f) 2.19 91 1.97(g) (0.37) 13.77 (11.89) 30,293 1.97 2.59 57 1.97 (0.46) 16.04 2.66 20,370 2.00 2.78 50 2.00 (4.48) 16.08 (8.50) 9,827 1.99 2.08 73 2.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 133 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS ------------------------------------------------------------------------------------------------- ASSET ALLOCATION PRIMARY A SHARES Year ended 3/31/2005........ $20.18 $0.36(d) $ 0.64(e) $ 1.00 $(0.37) $ -- Year ended 3/31/2004........ 16.42 0.29 3.81 4.10 (0.34) -- Year ended 3/31/2003........ 19.93 0.32 (3.49) (3.17) (0.34) -- Year ended 3/31/2002........ 20.32 0.44 (0.39) 0.05 (0.41) (0.03) Year ended 3/31/2001........ 24.35 0.57 (2.84) (2.27) (0.55) (1.21) INVESTOR A SHARES Year ended 3/31/2005........ $20.20 $0.31(d) $ 0.65(e) $ 0.96 $(0.32) $ -- Year ended 3/31/2004........ 16.44 0.25 3.80 4.05 (0.29) -- Year ended 3/31/2003........ 19.92 0.29 (3.48) (3.19) (0.29) -- Year ended 3/31/2002........ 20.32 0.39 (0.40) (0.01) (0.36) (0.03) Year ended 3/31/2001........ 24.35 0.50 (2.82) (2.32) (0.50) (1.21) INVESTOR B SHARES Year ended 3/31/2005........ $20.04 $0.15(d) $ 0.64(e) $ 0.79 $(0.16) $ -- Year ended 3/31/2004........ 16.31 0.11 3.76 3.87 (0.14) -- Year ended 3/31/2003........ 19.81 0.15 (3.47) (3.32) (0.18) -- Year ended 3/31/2002........ 20.22 0.23 (0.39) (0.16) (0.22) (0.03) Year ended 3/31/2001........ 24.24 0.33 (2.81) (2.48) (0.33) (1.21) INVESTOR C SHARES Year ended 3/31/2005........ $20.02 $0.15(d) $ 0.65(e) $ 0.80 $(0.17) $ -- Year ended 3/31/2004........ 16.31 0.11 3.75 3.86 (0.15) -- Year ended 3/31/2003........ 19.84 0.15 (3.48) (3.33) (0.20) -- Year ended 3/31/2002........ 20.24 0.24 (0.40) (0.16) (0.21) (0.03) Year ended 3/31/2001........ 24.27 0.33 (2.82) (2.49) (0.33) (1.21)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)Net investment income per share reflects a special dividend. The effect of this dividend amounted to $0.03 per share. (e)The effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions is included in the net realized and unrealized gain/(loss) on investments (per share). The effect of this reimbursement for the year ended March 31, 2005 was to increase net realized and unrealized gain/(loss) on investments by $0.01 for Primary A, Investor A, Investor B and Investor C Shares. (f) Without the effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions total return would have been 4.94%, 4.73%, 3.92% and 3.95% for Primary A, Investor A, Investor B and Investor C Shares. (g)The effect of interest expense on the operating expense ratio was less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 134 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(B) (000) ASSETS(C) ASSETS RATE NET ASSETS(C) - ------------------------------------------------------------------------------------------------------------------- $(0.37) $20.81 5.01%(f) $ 26,425 1.00%(g) 1.75% 136% 1.07% (0.34) 20.18 25.07 25,750 1.04(g) 1.58 189 1.07 (0.34) 16.42 (15.96) 35,514 1.04(g) 1.83 315 1.04 (0.44) 19.93 0.26 40,287 1.03 2.10 226 1.03 (1.76) 20.32 (9.83) 12,847 0.98(g) 2.45 88 1.00 $(0.32) $20.84 4.80%(f) $109,409 1.25%(g) 1.50% 136% 1.32% (0.29) 20.20 24.73 106,642 1.29(g) 1.33 189 1.32 (0.29) 16.44 (16.05) 88,011 1.29(g) 1.58 315 1.29 (0.39) 19.92 (0.05) 223,579 1.28 1.85 226 1.28 (1.71) 20.32 (10.05) 231,520 1.23(g) 2.20 88 1.25 $(0.16) $20.67 3.97%(f) $ 43,962 2.00%(g) 0.75% 136% 2.07% (0.14) 20.04 23.79 64,122 2.04(g) 0.58 189 2.07 (0.18) 16.31 (16.80) 72,344 2.04(g) 0.83 315 2.04 (0.25) 19.81 (0.77) 124,983 2.03 1.10 226 2.03 (1.54) 20.22 (10.73) 104,745 1.98(g) 1.45 88 2.00 $(0.17) $20.65 4.02%(f) $ 2,628 2.00%(g) 0.75% 136% 2.07% (0.15) 20.02 23.73 2,372 2.04(g) 0.58 189 2.07 (0.20) 16.31 (16.80) 1,992 2.04(g) 0.83 315 2.04 (0.24) 19.84 (0.78) 3,220 2.03 1.10 226 2.03 (1.54) 20.24 (10.74) 2,532 1.98(g) 1.45 88 2.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 135 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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 GAINS ----------------------------------------------------------------------------------------- VALUE PRIMARY A SHARES Year ended 3/31/2005(c)........ $11.85 $ 0.20 $ 1.27 $ 1.47 $(0.20) $ -- Year ended 3/31/2004(c)........ 8.48 0.16 3.36 3.52 (0.15) -- Year ended 3/31/2003(c)........ 11.96 0.14 (3.31) (3.17) (0.13) (0.18) Year ended 3/31/2002(c)........ 12.39 0.12 0.58 0.70 (0.10) (1.03) Year ended 3/31/2001........... 16.24 0.17 (0.42) (0.25) (0.18) (3.42) INVESTOR A SHARES Year ended 3/31/2005(c)........ $11.84 $ 0.17 $ 1.26 $ 1.43 $(0.17) $ -- Year ended 3/31/2004(c)........ 8.46 0.14 3.36 3.50 (0.12) -- Year ended 3/31/2003(c)........ 11.94 0.11 (3.31) (3.20) (0.10) (0.18) Year ended 3/31/2002(c)........ 12.38 0.09 0.58 0.67 (0.08) (1.03) Year ended 3/31/2001........... 16.24 0.14 (0.43) (0.29) (0.15) (3.42) INVESTOR B SHARES Year ended 3/31/2005(c)........ $11.53 $ 0.08 $ 1.22 $ 1.30 $(0.08) $ -- Year ended 3/31/2004(c)........ 8.25 0.05 3.27 3.32 (0.04) -- Year ended 3/31/2003(c)........ 11.66 0.03 (3.22) (3.19) (0.04) (0.18) Year ended 3/31/2002(c)........ 12.13 0.00(g) 0.59 0.59 (0.03) (1.03) Year ended 3/31/2001........... 16.00 0.04 (0.43) (0.39) (0.06) (3.42) INVESTOR C SHARES Year ended 3/31/2005(c)........ $11.52 $ 0.08 $ 1.22 $ 1.30 $(0.07) $ -- Year ended 3/31/2004(c)........ 8.24 0.05 3.27 3.32 (0.04) -- Year ended 3/31/2003(c)........ 11.65 0.04 (3.22) (3.18) (0.05) (0.18) Year ended 3/31/2002(c)........ 12.13 0.00(g) 0.58 0.58 (0.03) (1.03) Year ended 3/31/2001........... 15.99 0.04 (0.42) (0.38) (0.06) (3.42)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.87% for Primary A Shares, 1.12% for Investor A Shares and 1.87% each for Investor B and Investor C Shares. (e)The effect of interest expense on the operating expense ratio was less than 0.01%. (f) The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (g)Amount represents less than $0.01 per share. (h)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.93% for Primary A Shares, 1.18% for Investor A Shares and 1.93% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 136 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(A) (000) NET ASSETS(B) NET ASSETS RATE NET ASSETS(B) - ------------------------------------------------------------------------------------------------------------------ $(0.20) $13.12 12.51% $1,376,691 0.77% 1.66% 52% 0.90%(d) (0.15) 11.85 41.63 1,101,872 0.89(e)(f) 1.49 69 0.96(h) (0.31) 8.48 (26.95) 451,815 0.97 1.43 75 0.97 (1.13) 11.96 5.64 513,206 0.95(e) 1.02 135 0.95 (3.60) 12.39 (1.97) 844,432 0.94(e) 1.28 181 0.94 $(0.17) $13.10 12.16% $ 292,037 1.02% 1.41% 52% 1.15%(d) (0.12) 11.84 41.51 211,227 1.14(e)(f) 1.24 69 1.21(h) (0.28) 8.46 (27.17) 43,364 1.22 1.18 75 1.22 (1.11) 11.94 5.33 58,144 1.20(e) 0.77 135 1.20 (3.57) 12.38 (2.29) 65,975 1.19(e) 1.03 181 1.19 $(0.08) $12.75 11.31% $ 84,756 1.77% 0.66% 52% 1.90%(d) (0.04) 11.53 40.30 87,314 1.89(e)(f) 0.49 69 1.96(h) (0.22) 8.25 (27.72) 37,399 1.97 0.43 75 1.97 (1.06) 11.66 4.66 80,162 1.95(e) 0.02 135 1.95 (3.48) 12.13 (3.05) 93,064 1.94(e) 0.28 181 1.94 $(0.07) $12.75 11.36% $ 17,210 1.77% 0.66% 52% 1.90%(d) (0.04) 11.52 40.29 28,832 1.89(e)(f) 0.49 69 1.96(h) (0.23) 8.24 (27.72) 4,694 1.97 0.43 75 1.97 (1.06) 11.65 4.58 7,496 1.95(e) 0.02 135 1.95 (3.48) 12.13 (2.98) 8,479 1.94(e) 0.28 181 1.94
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 137 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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)(G) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------------- MIDCAP VALUE PRIMARY A SHARES Year ended 3/31/2005........... $12.79 $0.16 $ 2.23(d) $ 2.39 $(0.15) $(1.00) Year ended 3/31/2004........... 8.72 0.12 4.07 4.19 (0.12) -- Year ended 3/31/2003........... 11.32 0.10 (2.61) (2.51) (0.07) (0.02) Period ended 3/31/2002(g)...... 10.00 0.06 1.30 1.36 (0.04) -- INVESTOR A SHARES Year ended 3/31/2005........... $12.77 $0.13 $ 2.23(d) $ 2.36 $(0.12) $(1.00) Year ended 3/31/2004........... 8.71 0.09 4.06 4.15 (0.09) -- Year ended 3/31/2003........... 11.30 0.08 (2.60) (2.52) (0.05) (0.02) Period ended 3/31/2002(g)...... 10.00 0.04 1.30 1.34 (0.04) -- INVESTOR B SHARES Year ended 3/31/2005........... $12.70 $0.03 $ 2.20(d) $ 2.23 $(0.05) $(1.00) Year ended 3/31/2004........... 8.67 0.00(j) 4.05 4.05 (0.02) -- Year ended 3/31/2003........... 11.29 0.01 (2.59) (2.58) (0.02) (0.02) Period ended 3/31/2002(g)...... 10.00 (0.04) 1.35 1.31 (0.02) -- INVESTOR C SHARES Year ended 3/31/2005........... $12.73 $0.05 $ 2.19(d) $ 2.24 $(0.05) $(1.00) Year ended 3/31/2004........... 8.69 0.00(j) 4.05 4.05 (0.01) -- Year ended 3/31/2003........... 11.31 0.01 (2.59) (2.58) (0.02) (0.02) Period ended 3/31/2002(g)...... 10.00 (0.05) 1.36 1.31 (0.00)(i) --
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)The effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions is included in the net realized and unrealized gain/(loss) on investments (per share). The effect of this reimbursement for the year ended March 31, 2005 was to increase net realized and unrealized gain/(loss) on investments by $0.01 for Primary A, Investor A, Investor B and Investor C Shares. (e)Without the effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions total return would have been 20.07%, 19.81%, 18.82% and 18.88% for Primary A, Investor A, Investor B and Investor C Shares. (f) The effect of interest expense on the operating expense ratio was less than 0.01%. (g)MidCap Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on November 20, 2001. (h)Annualized. (i) Amount represents less than $0.01 per share. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 138 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL INCREASE DUE NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS TO CAPITAL VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND CONTRIBUTIONS END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE NET DISTRIBUTIONS (SEE NOTE 3) PERIOD RETURN(B) (000) ASSETS(C) ASSETS RATE ASSETS(C) - ---------------------------------------------------------------------------------------------------------------------------------- $(1.15) $0.01 $14.04 20.16%(e) $591,318 0.95%(f) 1.24% 61% 0.95% (0.12) -- 12.79 48.18 492,327 1.03 1.04 79 1.03 (0.09) -- 8.72 (22.27) 294,087 1.16 1.11 98 1.16 (0.04) -- 11.32 13.63 98,888 1.25(h) 0.64(h) 19 2.03(h) $(1.12) $0.01 $14.02 19.90%(e) $ 10,258 1.20%(f) 0.99% 61% 1.20% (0.09) -- 12.77 47.80 8,121 1.28 0.79 79 1.28 (0.07) -- 8.71 (22.36) 3,270 1.41 0.86 98 1.41 (0.04) -- 11.30 13.37 573 1.50(h) 0.39(h) 19 2.28(h) $(1.05) $0.01 $13.89 18.91%(e) $ 4,447 1.95%(f) 0.24% 61% 1.95% (0.02) -- 12.70 46.56 3,650 2.03 0.04 79 2.03 (0.04) -- 8.67 (22.93) 1,961 2.16 0.11 98 2.16 (0.02) -- 11.29 13.14 524 2.25(h) (0.36)(h) 19 3.03(h) $(1.05) $0.01 $13.93 18.97%(e) $ 944 1.95%(f) 0.36% 61% 1.95% (0.01) -- 12.73 46.66 684 2.03 0.04 79 2.03 (0.04) -- 8.69 (22.89) 362 2.16 0.11 98 2.16 (0.00)(i) -- 11.31 13.10 93 2.25(h) (0.36)(h) 19 3.03(h)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 139 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------------- SMALLCAP VALUE PRIMARY A SHARES Year ended 3/31/2005........... $12.30 $(0.01) $ 1.48 $ 1.47 $ -- $(1.17) Year ended 3/31/2004........... 7.73 0.02 4.67 4.69 (0.03) (0.09) Period ended 3/31/2003(e)...... 10.00 0.03 (2.28) (2.25) (0.02) -- INVESTOR A SHARES Year ended 3/31/2005........... $12.26 $(0.04) $ 1.47 $ 1.43 $ -- $(1.17) Year ended 3/31/2004........... 7.71 (0.01) 4.67 4.66 (0.02) (0.09) Period ended 3/31/2003(e)...... 10.00 0.01 (2.28) (2.27) (0.02) -- INVESTOR B SHARES Year ended 3/31/2005........... $12.13 $(0.12) $ 1.44 $ 1.32 $ -- $(1.17) Year ended 3/31/2004........... 7.68 (0.09) 4.63 4.54 -- (0.09) Period ended 3/31/2003(e)...... 10.00 (0.04) (2.28) (2.32) (0.00)(g) -- INVESTOR C SHARES Year ended 3/31/2005........... $12.13 $(0.12) $ 1.43 $ 1.31 $ -- $(1.17) Year ended 3/31/2004........... 7.67 (0.09) 4.64 4.55 -- (0.09) Period ended 3/31/2003(e)...... 10.00 (0.04) (2.29) (2.33) (0.00)(g) --
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)SmallCap Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on May 1, 2002. (f) Annualized. (g)Amount represents less than $0.01 per share. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 140 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(B) (000) ASSETS(C) NET ASSETS RATE NET ASSETS(C) - ------------------------------------------------------------------------------------------------------------- $(1.17) $12.60 13.72% $197,829 1.22%(d) (0.05)% 61% 1.24% (0.12) 12.30 60.96 151,556 1.30 0.15 111 1.35 (0.02) 7.73 (22.50) 70,168 1.30(f) 0.45(f) 89 1.57(f) $(1.17) $12.52 13.42% $ 4,868 1.47%(d) (0.30)% 61% 1.49% (0.11) 12.26 60.64 3,840 1.55 (0.10) 111 1.60 (0.02) 7.71 (22.75) 1,122 1.55(f) 0.20(f) 89 1.82(f) $(1.17) $12.28 12.59% $ 1,569 2.22%(d) (1.05)% 61% 2.24% (0.09) 12.13 59.34 1,395 2.30 (0.85) 111 2.35 (0.00)(h) 7.68 (23.20) 341 2.30(f) (0.55)(f) 89 2.57(f) $(1.17) $12.27 12.51% $ 370 2.22%(d) (1.05)% 61% 2.24% (0.09) 12.13 59.54 278 2.30 (0.85) 111 2.35 (0.00)(h) 7.67 (23.29) 56 2.30(f) (0.55)(f) 89 2.57(f)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 141 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS ---------------------------------------------------------------------------- GROWTH(A) PRIMARY A SHARES Year ended 3/31/2005(c)................... $15.96 $ 0.01 $ 1.28 $ 1.29 $ -- Year ended 3/31/2004(c)................... 11.95 (0.02) 4.03 4.01 -- Year ended 3/31/2003(c)................... 14.79 (0.05) (2.79) (2.84) -- Year ended 3/31/2002(c)................... 14.91 (0.06) (0.06) (0.12) -- Year ended 3/31/2001...................... 21.61 (0.01) (6.53) (6.54) (0.16) INVESTOR A SHARES Year ended 3/31/2005(c)................... $15.80 $(0.03) $ 1.27 $ 1.24 $ -- Year ended 3/31/2004(c)................... 11.86 (0.06) 4.00 3.94 -- Year ended 3/31/2003(c)................... 14.72 (0.08) (2.78) (2.86) -- Year ended 3/31/2002(c)................... 14.87 (0.09) (0.06) (0.15) -- Year ended 3/31/2001...................... 21.62 (0.05) (6.54) (6.59) (0.16) INVESTOR B SHARES Year ended 3/31/2005(c)................... $15.12 $(0.15) $ 1.21 $ 1.06 $ -- Year ended 3/31/2004(c)................... 11.43 (0.16) 3.85 3.69 -- Year ended 3/31/2003(c)................... 14.29 (0.17) (2.69) (2.86) -- Year ended 3/31/2002(c)................... 14.55 (0.20) (0.06) (0.26) -- Year ended 3/31/2001...................... 21.31 (0.18) (6.42) (6.60) (0.16) INVESTOR C SHARES Year ended 3/31/2005(c)................... $15.14 $(0.15) $ 1.21 $ 1.06 $ -- Year ended 3/31/2004(c)................... 11.44 (0.17) 3.87 3.70 -- Year ended 3/31/2003(c)................... 14.31 (0.17) (2.70) (2.87) -- Year ended 3/31/2002(c)................... 14.57 (0.20) (0.06) (0.26) -- Year ended 3/31/2001...................... 21.34 (0.17) (6.44) (6.61) (0.16)
- --------------- (a)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of Growth Master Portfolio. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.05% for Primary A Shares, 1.30% for Investor A Shares and 2.05% each for Investor B and Investor C Shares. (e)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.12% for Primary A Shares, 1.37% for Investor A Shares and 2.12% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 142 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO EXPENSES TO VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET AVERAGE END OF PERIOD RETURN(B) (000) ASSETS ASSETS NET ASSETS - ------------------------------------------------------------------------------------------ $17.25 8.08% $774,996 1.05% 0.04% 1.08%(d) 15.96 33.56 371,942 1.12 (0.17) 1.14(e) 11.95 (19.20) 106,436 1.17 (0.37) 1.17 14.79 (0.80) 58,752 1.14 (0.39) 1.14 14.91 (30.42) 80,526 1.10 (0.03) 1.10 $17.04 7.85% $988,948 1.30% (0.21)% 1.33%(d) 15.80 33.22 546,537 1.37 (0.42) 1.39(e) 11.86 (19.43) 279,840 1.42 (0.62) 1.42 14.72 (1.01) 217,963 1.39 (0.64) 1.39 14.87 (30.63) 164,031 1.35 (0.28) 1.35 $16.18 7.01% $194,668 2.05% (0.96)% 2.08%(d) 15.12 32.28 200,270 2.12 (1.17) 2.14(e) 11.43 (20.01) 137,432 2.17 (1.37) 2.17 14.29 (1.79) 209,503 2.14 (1.39) 2.14 14.55 (31.13) 239,621 2.10 (1.03) 2.10 $16.20 7.00% $352,016 2.05% (0.96)% 2.08%(d) 15.14 32.34 177,599 2.12 (1.17) 2.14(e) 11.44 (20.06) 55,913 2.17 (1.37) 2.17 14.31 (1.78) 31,886 2.14 (1.39) 2.14 14.57 (31.10) 32,365 2.10 (1.03) 2.10
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 143 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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 GAINS ----------------------------------------------------------------------------------------- STRATEGIC GROWTH(A) PRIMARY A SHARES Year ended 3/31/2005(c)........ $11.58 $ 0.13 $ 0.45(d) $ 0.58 $(0.13) $ -- Year ended 3/31/2004(c)........ 8.78 0.05 2.81 2.86 (0.06) -- Year ended 3/31/2003(c)........ 12.35 0.07 (3.59) (3.52) (0.05) -- Year ended 3/31/2002(c)........ 12.47 0.02 (0.12) (0.10) (0.02) -- Year ended 3/31/2001........... 17.03 (0.01) (4.51) (4.52) (0.01) (0.03) INVESTOR A SHARES Year ended 3/31/2005(c)........ $11.55 $ 0.10 $ 0.45(d) $ 0.55 $(0.10) $ -- Year ended 3/31/2004(c)........ 8.76 0.03 2.79 2.82 (0.03) -- Year ended 3/31/2003(c)........ 12.31 0.04 (3.56) (3.52) (0.03) -- Year ended 3/31/2002(c)........ 12.44 (0.01) (0.11) (0.12) (0.01) -- Year ended 3/31/2001........... 16.98 (0.04) (4.47) (4.51) -- (0.03) INVESTOR B SHARES Year ended 3/31/2005(c)........ $11.21 $ 0.02 $ 0.42(d) $ 0.44 $(0.00)(l) $ -- Year ended 3/31/2004(c)........ 8.54 (0.05) 2.72 2.67 -- -- Year ended 3/31/2003(c)........ 12.07 (0.03) (3.50) (3.53) (0.00)(l) -- Year ended 3/31/2002(c)........ 12.29 (0.10) (0.12) (0.22) (0.00)(l) -- Year ended 3/31/2001........... 16.90 (0.14) (4.44) (4.58) -- (0.03) INVESTOR C SHARES Year ended 3/31/2005(c)........ $11.21 $ 0.02 $ 0.42(d) $ 0.44 $(0.01) $ -- Year ended 3/31/2004(c)........ 8.54 (0.05) 2.72 2.67 -- -- Year ended 3/31/2003(c)........ 12.08 (0.03) (3.51) (3.54) -- -- Year ended 3/31/2002(c)........ 12.30 (0.10) (0.12) (0.22) (0.00)(l) -- Year ended 3/31/2001........... 16.92 (0.14) (4.45) (4.59) -- (0.03)
- --------------- (a)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of Strategic Growth Master Portfolio. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions is included in the net realized and unrealized gain/(loss) on investments (per share). The effect of this reimbursement for the year ended March 31, 2005 was less than $0.01 for Primary A, Investor A, Investor B, and Investor C Shares. (e)Without the effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions total return would have been 4.97%, 4.70%, 3.92% and 3.90% for Primary A, Investor A, Investor B and Investor C Shares. (f) The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.88% for Primary A Shares, 1.13% for Investor A Shares and 1.88% each for Investor B and Investor C Shares. (g)The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01% for the year ended March 31, 2004. (h)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursement would have been 0.93% for Primary A Shares, 1.18% for Investor A Shares and 1.93% each for Investor B and Investor C Shares. (i) Amount represents results prior to conversion to a master-feeder structure on May 13, 2002. (j) The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (k)The effect of interest expense on the operating expense ratio was less than 0.01% (l) Amount represents less than $0.01 per share. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 144 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(B) (000) ASSETS ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------------------------------- $(0.13) $12.03 4.98%(e) $1,187,622 0.87%(g)(k) 1.14% -- 0.90%(f) (0.06) 11.58 32.58 1,517,644 0.93(g) 0.52 -- 0.96(h) (0.05) 8.78 (28.55) 1,393,260 0.94 0.69 15%(i) 0.94 (0.02) 12.35 (0.83) 1,230,030 0.94(j) 0.20 71 0.94(j) (0.04) 12.47 (26.62) 1,182,028 0.94(j)(k) (0.09) 56 0.94(j) $(0.10) $12.00 4.71%(e) $ 213,513 1.12%(g)(k) 0.89% -- 1.15%(f) (0.03) 11.55 32.21 245,616 1.18(g) 0.27 -- 1.21(h) (0.03) 8.76 (28.61) 213,691 1.19 0.44 15%(i) 1.19 (0.01) 12.31 (0.97) 26,742 1.19(j) (0.05) 71 1.19(j) (0.03) 12.44 (26.62) 11,895 1.19(j)(k) (0.34) 56 1.19(j) $(0.00)(l) $11.65 3.93%(e) $ 37,140 1.87%(g)(k) 0.14% -- 1.90%(f) -- 11.21 31.26 44,571 1.93(g) (0.48) -- 1.96(h) (0.00)(l) 8.54 (29.23) 38,972 1.94 (0.31) 15%(i) 1.94 (0.00)(l) 12.07 (1.78) 8,358 1.94(j) (0.80) 71 1.94(j) (0.03) 12.29 (27.16) 6,758 1.94(j)(k) (1.09) 56 1.94(j) $(0.01) $11.64 3.91%(e) $ 14,899 1.87%(g)(k) 0.14% -- 1.90%(f) -- 11.21 31.26 16,702 1.93(g) (0.48) -- 1.96(h) -- 8.54 (29.30) 12,857 1.94 (0.31) 15%(i) 1.94 (0.00)(l) 12.08 (1.78) 2,645 1.94(j) (0.80) 71 1.94(j) (0.03) 12.30 (27.14) 2,137 1.94(j)(k) (1.09) 56 1.94(j)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 145 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS ---------------------------------------------------------------------------- FOCUSED EQUITIES(A) PRIMARY A SHARES Year ended 3/31/2005(c)................... $16.98 $(0.02) $ 0.96 $ 0.94 $ -- Year ended 3/31/2004(c)................... 12.81 (0.04) 4.21 4.17 -- Year ended 3/31/2003(c)................... 15.87 (0.05) (3.01) (3.06) -- Year ended 3/31/2002(c)................... 15.37 (0.05) 0.55 0.50 -- Year ended 3/31/2001...................... 22.59 (0.01) (7.13) (7.14) (0.08) INVESTOR A SHARES Year ended 3/31/2005(c)................... $16.79 $(0.06) $ 0.94 $ 0.88 $ -- Year ended 3/31/2004(c)................... 12.70 (0.08) 4.17 4.09 -- Year ended 3/31/2003(c)................... 15.77 (0.08) (2.99) (3.07) -- Year ended 3/31/2002(c)................... 15.31 (0.09) 0.55 0.46 -- Year ended 3/31/2001...................... 22.56 (0.06) (7.11) (7.17) (0.08) INVESTOR B SHARES Year ended 3/31/2005(c)................... $16.08 $(0.18) $ 0.90 $ 0.72 $ -- Year ended 3/31/2004(c)................... 12.25 (0.19) 4.02 3.83 -- Year ended 3/31/2003(c)................... 15.33 (0.18) (2.90) (3.08) -- Year ended 3/31/2002(c)................... 15.00 (0.20) 0.53 0.33 -- Year ended 3/31/2001...................... 22.26 (0.20) (6.98) (7.18) (0.08) INVESTOR C SHARES Year ended 3/31/2005(c)................... $16.13 $(0.18) $ 0.90 $ 0.72 $ -- Year ended 3/31/2004(c)................... 12.29 (0.19) 4.03 3.84 -- Year ended 3/31/2003(c)................... 15.38 (0.18) (2.91) (3.09) -- Year ended 3/31/2002(c)................... 15.05 (0.20) 0.53 0.33 -- Year ended 3/31/2001...................... 22.33 (0.20) (7.00) (7.20) (0.08)
- --------------- (a)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of Focused Equities Master Portfolio. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.05% for Primary A Shares, 1.30% for Investor A Shares and 2.05% each for Investor B and Investor C Shares. (e)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.09% for Primary A Shares, 1.34% for Investor A Shares and 2.09% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 146 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO EXPENSES TO VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET AVERAGE END OF PERIOD RETURN(B) (000) ASSETS ASSETS NET ASSETS - ---------------------------------------------------------------------------------------- $17.92 5.54% $ 751,124 1.05% (0.12)% 1.08%(d) 16.98 32.55 701,306 1.09 (0.24) 1.12(e) 12.81 (19.28) 384,706 1.12 (0.35) 1.12 15.87 3.25 346,435 1.11 (0.33) 1.11 15.37 (31.67) 354,798 1.09 (0.05) 1.09 $17.67 5.24% $1,256,948 1.30% (0.37)% 1.33%(d) 16.79 32.20 1,030,985 1.34 (0.49) 1.37(e) 12.70 (19.47) 537,958 1.37 (0.60) 1.37 15.77 3.00 507,590 1.36 (0.58) 1.36 15.31 (31.80) 491,437 1.34 (0.30) 1.34 $16.80 4.48% $ 517,489 2.05% (1.12)% 2.08%(d) 16.08 31.27 576,884 2.09 (1.24) 2.12(e) 12.25 (20.09) 462,082 2.12 (1.35) 2.12 15.33 2.20 679,688 2.11 (1.33) 2.11 15.00 (32.32) 741,285 2.09 (1.05) 2.09 $16.85 4.46% $ 382,989 2.05% (1.12)% 2.08%(d) 16.13 31.24 342,885 2.09 (1.24) 2.12(e) 12.29 (20.09) 175,032 2.12 (1.35) 2.12 15.38 2.19 188,842 2.11 (1.33) 2.11 15.05 (32.31) 203,642 2.09 (1.05) 2.09
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 147 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS ---------------------------------------------------------------------------- MIDCAP GROWTH PRIMARY A SHARES Year ended 3/31/2005(c)................... $11.74 $(0.05) $ 0.64(d) $ 0.59 $ -- Year ended 3/31/2004(c)................... 8.66 (0.05) 3.13 3.08 -- Year ended 3/31/2003(c)................... 13.21 (0.04) (4.51) (4.55) -- Year ended 3/31/2002(c)................... 14.63 (0.05) (1.37) (1.42) -- Year ended 3/31/2001...................... 22.41 (0.03) (4.02) (4.05) (3.73) INVESTOR A SHARES Year ended 3/31/2005(c)................... $11.26 $(0.08) $ 0.62(d) $ 0.54 $ -- Year ended 3/31/2004(c)................... 8.33 (0.07) 3.00 2.93 -- Year ended 3/31/2003(c)................... 12.73 (0.07) (4.33) (4.40) -- Year ended 3/31/2002(c)................... 14.14 (0.09) (1.32) (1.41) -- Year ended 3/31/2001...................... 21.87 (0.09) (3.91) (4.00) (3.73) INVESTOR B SHARES Year ended 3/31/2005(c)................... $10.02 $(0.14) $ 0.54(d) $ 0.40 $ -- Year ended 3/31/2004(c)................... 7.46 (0.13) 2.69 2.56 -- Year ended 3/31/2003(c)................... 11.51 (0.12) (3.93) (4.05) -- Year ended 3/31/2002(c)................... 12.87 (0.17) (1.19) (1.36) -- Year ended 3/31/2001...................... 20.38 (0.19) (3.59) (3.78) (3.73) INVESTOR C SHARES Year ended 3/31/2005(c)................... $10.08 $(0.14) $ 0.54(d) $ 0.40 $ -- Year ended 3/31/2004(c)................... 7.51 (0.13) 2.70 2.57 -- Year ended 3/31/2003(c)................... 11.57 (0.12) (3.94) (4.06) -- Year ended 3/31/2002(c)................... 12.95 (0.17) (1.21) (1.38) -- Year ended 3/31/2001...................... 20.47 (0.17) (3.62) (3.79) (3.73)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions is included in the net realized and unrealized gain/(loss) on investments (per share). The effect of this reimbursement for the year ended March 31, 2005 was to increase net realized and unrealized gain/(loss) on investments by $0.02 for Primary A, Investor A, Investor B, and Investor C Shares. (e)Without the effect of the Investment Advisor's reimbursement for the Fund exceeding certain investment restrictions total return would have been 4.81%, 4.58%, 3.78% and 3.77% for Primary A, Investor A, Investor B and Investor C Shares. (f) The effect of interest expense on the operating expense ratio was less than 0.01%. (g)The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 148 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE PERIOD RETURN(A) (000) ASSETS(B) NET ASSETS RATE NET ASSETS(B) - ---------------------------------------------------------------------------------------------- $12.33 5.03%(e) $424,465 0.97%(f)(g) (0.42)% 148% 0.98% 11.74 35.57 461,304 0.96(f) (0.46) 65 0.96 8.66 (34.44) 402,987 0.97(f) (0.45) 58 0.97 13.21 (9.71) 547,514 0.97(f) (0.39) 39 0.97 14.63 (20.67) 388,152 0.98 (0.27) 39 0.98 $11.80 4.80%(e) $ 21,287 1.22%(f)(g) (0.67)% 148% 1.23% 11.26 35.17 22,673 1.21(f) (0.71) 65 1.21 8.33 (34.56) 18,120 1.22(f) (0.70) 58 1.22 12.73 (9.97) 32,138 1.22(f) (0.64) 39 1.22 14.14 (20.98) 16,536 1.23 (0.52) 39 1.23 $10.42 3.99%(e) $ 22,986 1.97%(f)(g) (1.42)% 148% 1.98% 10.02 34.32 26,662 1.96(f) (1.46) 65 1.96 7.46 (35.19) 21,990 1.97(f) (1.45) 58 1.97 11.51 (10.57) 45,368 1.97(f) (1.39) 39 1.97 12.87 (21.51) 44,261 1.98 (1.27) 39 1.98 $10.48 3.97%(e) $ 1,495 1.97%(f)(g) (1.42)% 148% 1.98% 10.08 34.22 1,816 1.96(f) (1.46) 65 1.96 7.51 (35.09) 1,709 1.97(f) (1.45) 58 1.97 11.57 (10.66) 3,024 1.97(f) (1.39) 39 1.97 12.95 (21.46) 3,248 1.98 (1.27) 39 1.98
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 149 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ NET ASSET VALUE NET AND UNREALIZED (DECREASE) IN VALUE BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE END OF OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS PERIOD ------------------------------------------------------------------------ 21ST CENTURY PRIMARY A SHARES Year ended 3/31/2005(b)................... $ 9.80 $(0.03) $ 0.98 $ 0.95 $10.75 Year ended 3/31/2004(b)................... 6.24 (0.03) 3.59 3.56 9.80 Year ended 3/31/2003(b)................... 7.10 (0.05) (0.81) (0.86) 6.24 Year ended 3/31/2002(b)................... 6.99 (0.05) 0.16 0.11 7.10 Period ended 3/31/2001(f)................. 10.00 (0.03) (2.98) (3.01) 6.99 INVESTOR A SHARES Year ended 3/31/2005(b)................... $ 9.70 $(0.05) $ 0.96 $ 0.91 $10.61 Year ended 3/31/2004(b)................... 6.19 (0.05) 3.56 3.51 9.70 Year ended 3/31/2003(b)................... 7.06 (0.07) (0.80) (0.87) 6.19 Year ended 3/31/2002(b)................... 6.97 (0.07) 0.16 0.09 7.06 Period ended 3/31/2001(f)................. 10.00 (0.06) (2.97) (3.03) 6.97 INVESTOR B SHARES Year ended 3/31/2005(b)................... $ 9.42 $(0.12) $ 0.92 $ 0.80 $10.22 Year ended 3/31/2004(b)................... 6.05 (0.13) 3.50 3.37 9.42 Year ended 3/31/2003(b)................... 6.96 (0.12) (0.79) (0.91) 6.05 Year ended 3/31/2002(b)................... 6.92 (0.12) 0.16 0.04 6.96 Period ended 3/31/2001(f)................. 10.00 (0.11) (2.97) (3.08) 6.92 INVESTOR C SHARES Year ended 3/31/2005(b)................... $ 9.42 $(0.12) $ 0.92 $ 0.80 $10.22 Year ended 3/31/2004(b)................... 6.05 (0.13) 3.50 3.37 9.42 Year ended 3/31/2003(b)................... 6.96 (0.12) (0.79) (0.91) 6.05 Year ended 3/31/2002(b)................... 6.92 (0.12) 0.16 0.04 6.96 Period ended 3/31/2001(f)................. 10.00 (0.11) (2.97) (3.08) 6.92
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)Per share net investment income/(loss) has been calculated using the monthly average shares method. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)Reflects overall Fund ratios for investment income. (f) 21st Century Primary A, Investor A, Investor B and Investor C Shares commenced operations on April 10, 2000. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 150 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSETS OPERATING INVESTMENT OPERATING END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE RETURN(A) (000) ASSETS NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------- 9.69% $114,896 1.15%(c)(d) (0.25)% 130% 1.15%(c) 57.05 37,027 1.24(c)(d) (0.34)(e) 204 1.24(c) (12.11) 3,543 1.45(c)(d) (0.81) 308 1.46(c) 1.57 3,356 1.37(c) (0.72) 419 1.37(c) (30.10) 5,686 1.35(a) (0.41)(a) 426 1.35(a) 9.38% $187,094 1.40%(c)(d) (0.50)% 130% 1.40%(c) 56.70 48,630 1.49(c)(d) (0.59)(e) 204 1.49(c) (12.32) 10,853 1.70(c)(d) (1.06) 308 1.71(c) 1.29 14,741 1.62(c) (0.97) 419 1.62(c) (30.30) 19,644 1.60(a) (0.66)(a) 426 1.60(a) 8.49% $ 60,495 2.15%(c)(d) (1.25)% 130% 2.15%(c) 55.70 48,277 2.24(c)(d) (1.34)(e) 204 2.24(c) (13.07) 29,562 2.45(c)(d) (1.81) 308 2.46(c) 0.58 43,187 2.37(c) (1.72) 419 2.37(c) (30.80) 50,404 2.35(a) (1.41)(a) 426 2.35(a) 8.49% $ 38,460 2.15%(c)(d) (1.25)% 130% 2.15%(c) 55.70 14,700 2.24(c)(d) (1.34)(e) 204 2.24(c) (13.07) 3,517 2.45(c)(d) (1.81) 308 2.46(c) 0.58 4,660 2.37(c) (1.72) 419 2.37(c) (30.80) 6,557 2.35(a) (1.41)(a) 426 2.35(a)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 151 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS ---------------------------------------------------------------------------- SMALL COMPANY(A) PRIMARY A SHARES Year ended 3/31/2005(e)................... $15.35 $(0.11) $ 0.16 $ 0.05 $ -- Year ended 3/31/2004(e)................... 10.14 (0.10) 5.31 5.21 -- Year ended 3/31/2003(e)................... 15.07 (0.07) (4.86) (4.93) -- Year ended 3/31/2002(e)................... 13.69 (0.07) 1.45 1.38 -- Year ended 3/31/2001...................... 22.66 (0.10) (6.67) (6.77) (2.20) INVESTOR A SHARES Year ended 3/31/2005(e)................... $15.04 $(0.14) $ 0.16 $ 0.02 $ -- Year ended 3/31/2004(e)................... 9.96 (0.13) 5.21 5.08 -- Year ended 3/31/2003(e)................... 14.84 (0.10) (4.78) (4.88) -- Year ended 3/31/2002(e)................... 13.52 (0.10) 1.42 1.32 -- Year ended 3/31/2001...................... 22.44 (0.14) (6.58) (6.72) (2.20) INVESTOR B SHARES Year ended 3/31/2005(e)................... $14.22 $(0.24) $ 0.15 $(0.09) $ -- Year ended 3/31/2004(e)................... 9.49 (0.22) 4.95 4.73 -- Year ended 3/31/2003(e)................... 14.25 (0.18) (4.58) (4.76) -- Year ended 3/31/2002(e)................... 13.08 (0.20) 1.37 1.17 -- Year ended 3/31/2001...................... 21.94 (0.23) (6.43) (6.66) (2.20) INVESTOR C SHARES Year ended 3/31/2005(e)................... $14.42 $(0.24) $ 0.15 $(0.09) $ -- Year ended 3/31/2004(e)................... 9.62 (0.22) 5.02 4.80 -- Year ended 3/31/2003(e)................... 14.45 (0.18) (4.65) (4.83) -- Year ended 3/31/2002(e)................... 13.26 (0.20) 1.39 1.19 -- Year ended 3/31/2001...................... 22.21 (0.25) (6.50) (6.75) (2.20)
- --------------- (a)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of Small Company Master Portfolio. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.12% for Primary A Shares, 1.37% for Investor A Shares and 2.12% each for Investor B and Investor C Shares. (e)Per share net investment income/(loss) has been calculated using the monthly average shares method. (f) The effect of interest expense on the operating expense ratio was less than 0.01%. (g)The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). Absent this reimbursement, the ratios of operating expenses to average net assets would have been 1.15% for Primary A Shares, 1.40% for Investor A Shares and 2.15% each for Investor B and C Shares. (h)Amount represents results prior to conversion to a master-feeder structure on November 1, 2003. (i) The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.22% for Primary A Shares, 1.47% for Investor A Shares and 2.22% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 152 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE PERIOD RETURN(B) (000) ASSETS(C) NET ASSETS RATE NET ASSETS(C) - ---------------------------------------------------------------------------------------------------- $15.40 0.33% $360,975 1.07% (0.73)% 59% 1.15%(d) 15.35 51.38 509,419 1.13(f)(g) (0.75) 40(h) 1.25(i) 10.14 (32.71) 410,198 1.15(f) (0.61) 44 1.23 15.07 10.08 572,820 1.15(f) (0.48) 35 1.21 13.69 (31.86) 477,246 1.15(f) (0.52) 48 1.20 $15.06 0.13% $132,400 1.32% (0.96)% 59% 1.40%(d) 15.04 51.00 212,854 1.38(f)(g) (1.00) 40(h) 1.50(i) 9.96 (32.88) 128,620 1.40(f) (0.86) 44 1.48 14.84 9.76 157,759 1.40(f) (0.73) 35 1.46 13.52 (31.96) 146,457 1.40(f) (0.77) 48 1.45 $14.13 (0.63)% $ 16,131 2.07% (1.73)% 59% 2.15%(d) 14.22 49.84 19,367 2.13(f)(g) (1.75) 40(h) 2.25(i) 9.49 (33.40) 12,567 2.15(f) (1.61) 44 2.23 14.25 8.94 17,484 2.15(f) (1.48) 35 2.21 13.08 (32.45) 11,744 2.15(f) (1.52) 48 2.20 $14.33 (0.62)% $ 3,651 2.07% (1.73)% 59% 2.15%(d) 14.42 49.90 5,454 2.13(f)(g) (1.75) 40(h) 2.25(i) 9.62 (33.43) 3,644 2.15(f) (1.61) 44 2.23 14.45 8.97 3,871 2.15(f) (1.48) 35 2.21 13.26 (32.46) 2,813 2.15(f) (1.52) 48 2.20
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 153 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain only to certain domestic stock portfolios of Funds Trust (each a "Fund" and collectively, the "Funds"): Convertible Securities Fund Asset Allocation Fund Value Fund MidCap Value Fund SmallCap Value Fund Growth Fund Strategic Growth Fund Focused Equities Fund MidCap Growth Fund 21st Century Fund Small Company Fund Financial statements for the other portfolios of Funds Trust are presented under separate cover. The Funds currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. Growth Fund, Strategic Growth Fund, Focused Equities Fund and Small Company Fund (the "Feeder Funds") seek to achieve their investment objectives by investing substantially all of their assets in Growth Master Portfolio, Strategic Growth Master Portfolio, Focused Equities Master Portfolio and Small Company Master Portfolio, respectively (the "Master Portfolios"), each a series of Nations Master Investment Trust (the "Master Trust"), another open-end management investment company in the Nations Funds family. The Master Portfolios each have the same investment objective as that of its corresponding Feeder Fund. The values of the Feeder Funds' investments in the respective Master Portfolios included in the Statements of assets and liabilities reflect the Feeder Funds' proportionate beneficial interests in the net assets of the respective Master Portfolios (97.0% for Growth Master Portfolio, 98.7% for Strategic Growth Master Portfolio, 99.1% for Focused Equities Master Portfolio and 97.2% for Small Company Master Portfolio at March 31, 2005). The financial statements of the Master Portfolios, including their investment portfolios, are included elsewhere within this report and should be read in conjunction with the Feeder Funds' financial statements. Other funds not registered under the 1940 Act and managed by Banc of America Capital Management, LLC ("BACAP"), whose financial statements are not presented here, also invest in the Master Portfolios. SmallCap Value Fund and 21st Century Fund also operate in a master-feeder structure. The Funds seek to achieve their investment objectives by investing substantially all of their assets in SmallCap Value Master Portfolio and 21st Century Master Portfolio, respectively, of the Master Trust, which have the same investment objective as their corresponding Feeder Fund. Because the value of each Funds' investment in the SmallCap Value Master Portfolio and 21st Century Master Portfolio as of and for the year ended March 31, 2005 represented substantially all of the beneficial interests in the SmallCap Value Master Portfolio and 21st Century Master Portfolio, the financial statements for the SmallCap Value Fund and 21st Century Fund reflect the consolidation of the SmallCap Value Master Portfolio and 21st Century Master Portfolio. Separate financial statements for the SmallCap Value Master Portfolio and 21st Century Master Portfolio have not been prepared and references in this report to SmallCap Value Fund and 21st Century Fund should be read to include references to the corresponding Master Portfolios. Certain Funds invest in securities of foreign issuers. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in 154 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) developed markets. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments in a specific country, industry or region. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Securities, including options and futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on NASDAQ are generally valued at the NASDAQ official closing price. Securities traded only over-the-counter are generally valued at the mean of the latest bid and asked prices. Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. The valuation of each Feeder Funds' investment in its corresponding Master Portfolio is based on the reported net asset value of that Master Portfolio. The Master Portfolios use valuation policies consistent with those described above. Futures contracts: All Funds may invest in futures contracts for the purposes of hedging against changes in values of the Fund's securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity market. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Funds may purchase and write call and put options on securities, futures and swap contracts ("swaptions"). A Fund may use such options on futures contracts in connection with its hedging strategies in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures, and to seek to enhance return. The Funds may write covered call options and put options on securities in which they are permitted to invest from time to time in seeking to attain each Fund's objective. Call options written by a Fund give the holder the right to buy the underlying securities from the Fund at a stated exercise price; put options give the holder the right to sell the underlying security to the Fund at a stated price. In the case of put options, a Fund is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Funds may also write combinations of covered puts and calls on the same underlying security. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. 155 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Funds typically receive a premium from writing a put or call option, which would increase the Funds' return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received. A Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Fund. Foreign currency transactions: 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 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 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 securities are not separately identified 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 securities. Forward foreign currency transactions: Generally, each Fund may enter into forward foreign currency contracts only under two circumstances: (i) when a 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; or (ii) when the investment advisor or sub-advisor believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by a Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a 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. 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 a Fund's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency 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. Swaps: The Funds may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with their investment objective and policies to obtain a desired return at a lower cost than if the Funds had invested directly in the asset that yielded the desired return. Swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest or total return throughout the lives of the agreements. The interest to be paid or received on interest rate swaps is included in net realized gains/(loss) on investments. Unrealized gains are 156 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) reported as an asset and unrealized losses are reported as a liability on the Statement of assets and liabilities. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Fund's basis in the swap and the proceeds from (or cost of) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. At March 31, 2005, none of the Funds had swap contracts outstanding. If there is a default by the counterparty to a swap contract, a Fund will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Fund will succeed in pursuing contractual remedies. A Fund thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The creditworthiness of the swap contract counterparties is closely monitored in order to minimize this risk. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. Stripped securities: Stripped mortgage-backed securities are derivative multi-class mortgage securities structured so that one class receives most, if not all, of the principal from the underlying mortgage assets, while the other class receives most, if not all, of the interest and the remainder of the principal. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recoup its initial investment in an interest-only security. The market value of these securities consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligation. Dollar Rolls: The Funds may enter into dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon, and maturity) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund's policy is to record the component of dollar rolls using "to be announced" mortgage-backed securities ("TBA Dollar Rolls") as purchase and sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the trade date of the sale transaction. Dollar rolls outstanding are included in Payable for investment securities purchased on its Statements of assets and liabilities. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its dollar roll purchase commitments. Repurchase agreements: Each Fund may engage in repurchase agreement transactions with institutions that the Funds' investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Each Fund's investment 157 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) income and realized and unrealized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. The Funds estimate components of distributions from real estate investment trusts (REITs). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. If the Funds no longer own the applicable securities, any distributions received in excess of income are recorded as realized gains. The Feeder Funds record their share of the investment income and realized and unrealized gains and losses reported by the Master Portfolios on a daily basis. The investment income and realized and unrealized gains and losses are allocated daily to investors in the Master Portfolios based upon the relative value of their investments in the Master Portfolios. Dividends and distributions to shareholders: Distributions from net investment income are declared and paid each calendar quarter by the Convertible Securities, Asset Allocation, Value and MidCap Value Funds. SmallCap Value, Growth, Strategic Growth, Focused Equities, MidCap Growth, 21st Century and Small Company Funds declare and pay distributions annually. The Funds may, however, declare and pay distributions from net investment income more frequently. Each Fund will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from GAAP. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. The Feeder Funds record their share of the expenses reported by the Master Portfolios on a daily basis. The expenses are allocated daily to investors in the Master Portfolios based upon the relative value of the Feeder Funds' investments in the Master Portfolios. Indemnification: In the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Trust's organizational documents, the Trustees and Officers of the Trust are indemnified against certain liabilities that may arise out of their duties to the Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust and Master Trust have entered into an investment advisory agreement (the "Investment Advisory Agreement") with BACAP, a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Funds. Effective 158 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 1, 2004, BACAP 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 and Master Portfolio:
FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS $500 MILLION TO $1 BILLION TO $1.5 BILLION TO $3 BILLION TO FIRST $500 MILLION $1 BILLION $1.5 BILLION $3 BILLION $6 BILLION -------------------------------------------------------------------------------------- Convertible Securities............ 0.65% 0.60% 0.55% 0.50% 0.50% Asset Allocation.................. 0.60% 0.60% 0.60% 0.60% 0.60% Value............................. 0.60% 0.55% 0.50% 0.45% 0.43% MidCap Value...................... 0.65% 0.60% 0.55% 0.50% 0.50% SmallCap Value.................... 0.70% 0.65% 0.60% 0.60% 0.60% MidCap Growth..................... 0.65% 0.65% 0.65% 0.65% 0.65% 21st Century...................... 0.75% 0.70% 0.65% 0.60% 0.58% FEES ON AVERAGE NET ASSETS OVER $6 BILLION --------------- Convertible Securities............ 0.50% Asset Allocation.................. 0.60% Value............................. 0.41% MidCap Value...................... 0.50% SmallCap Value.................... 0.60% MidCap Growth..................... 0.65% 21st Century...................... 0.56%
The Growth, Strategic Growth, Focused Equities and Small Company Feeder Funds indirectly pay for investment advisory and sub-advisory services through their investments in their corresponding Master Portfolios (See Note 2 of Notes to financial statements of the Master Portfolios). Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL FEE RATE ------ Convertible Securities...................................... 0.65% Asset Allocation............................................ 0.60% Value....................................................... 0.65% MidCap Value................................................ 0.65% SmallCap Value.............................................. 0.90% MidCap Growth............................................... 0.65% 21st Century................................................ 0.75%
In addition, prior to December 1, 2004, BACAP voluntarily waived a portion of its investment advisory fee for the Asset Allocation Fund and the Value Fund at the annual rates of 0.10% and 0.05%, respectively, based on each Fund's average daily net assets. For the year ended March 31, 2005, the effective investment advisory fee rates for the Funds were as follows:
EFFECTIVE FEE RATE ------ Convertible Securities...................................... 0.63% Asset Allocation............................................ 0.53% Value....................................................... 0.61% MidCap Value................................................ 0.65% SmallCap Value.............................................. 0.83% MidCap Growth............................................... 0.65% 21st Century................................................ 0.75%
Master Trust has, on behalf of the 21st Century Fund, entered into a sub-advisory agreement with BACAP and Marsico Capital Management, LLC ("Marsico"), a wholly-owned subsidiary of Bank of America, pursuant to which Marsico is entitled to receive a sub-advisory fee from BACAP at the annual rate of 0.45% of the Fund's average daily net assets. 159 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Effective December 1, 2004, BACAP Distributors is entitled to receive a fee, computed daily and paid monthly, at the following annual rates:
ANNUAL FEE RATE ------ Convertible Securities...................................... 0.17% Asset Allocation............................................ 0.12% Value....................................................... 0.17% MidCap Value................................................ 0.17% SmallCap Value.............................................. 0.17% Growth...................................................... 0.12% Strategic Growth............................................ 0.12% Focused Equities............................................ 0.12% MidCap Growth............................................... 0.23% 21st Century................................................ 0.22% Small Company............................................... 0.12%
BACAP Distributors has voluntarily agreed to waive a portion of its administration fee for the Value Fund at an annual rate of 0.04% of the Value Fund's average daily net assets. BACAP Distributors, at its discretion, may revise or discontinue this arrangement any time. Prior to December 1, 2004, BACAP received a monthly administration fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL FEE RATE ------ Convertible Securities...................................... 0.23% Asset Allocation............................................ 0.22% Value....................................................... 0.23% MidCap Value................................................ 0.23% SmallCap Value.............................................. 0.23% Growth...................................................... 0.13% Strategic Growth............................................ 0.18% Focused Equities............................................ 0.13% MidCap Growth............................................... 0.23% 21st Century................................................ 0.23% Small Company............................................... 0.18%
In addition, prior to December 1, 2004, BACAP Distributors voluntarily waived a portion of its administration fee for the Value Fund at the annual rate of 0.10% of the Value Fund's average daily net assets. For the year ended March 31, 2005, the effective administration fee rates for the Funds were as follows:
EFFECTIVE FEE RATE ------ Convertible Securities...................................... 0.21% Asset Allocation............................................ 0.19% Value....................................................... 0.21% MidCap Value................................................ 0.21% SmallCap Value.............................................. 0.21% Growth...................................................... 0.13% Strategic Growth............................................ 0.16% Focused Equities............................................ 0.13% MidCap Growth............................................... 0.23% 21st Century................................................ 0.23% Small Company............................................... 0.16%
160 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of Funds Trust's assets. PFPC Inc. serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A Shares of the Funds. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Primary A shares of each Fund. For the year ended March 31, 2005, Bank of America earned the following sub-transfer agent fees from the Funds for providing such services and these amounts are included in "Transfer agent fees" in each Fund's Statements of operations.
SUB-TRANSFER AGENT FEE FUND (000) - ------------------------------------------------------------------------------------ Convertible Securities...................................... $30 Asset Allocation............................................ --* Value....................................................... 26 MidCap Value................................................ 15 SmallCap Value.............................................. 4 Growth...................................................... 14 Strategic Growth............................................ 43 Focused Equities............................................ 12 MidCap Growth............................................... 12 21st Century................................................ 2 Small Company............................................... 13
- --------------- *Amount represents less than $500. BACAP Distributors serves as distributor of the Funds' shares. For the year ended March 31, 2005, the Funds were informed that the distributor received the following:
FRONT END CONTINGENT DEFERRED SALES CHARGE SALES CHARGE (000) (000) ------------ -------------------------------------- FUND INVESTOR A INVESTOR A INVESTOR B INVESTOR C - -------------------------------------------------------------------------------------------------------------------- Convertible Securities...................................... $ 383 $13 $267 $ 8 Asset Allocation............................................ 33 -- 40 --* Value....................................................... 107 1 103 5 MidCap Value................................................ 20 -- 8 --* SmallCap Value.............................................. 10 -- 3 --* Growth...................................................... 1,061 2 249 12 Strategic Growth............................................ 70 -- 72 --* Focused Equities............................................ 706 3 842 41 MidCap Growth............................................... 25 -- 38 --* 21st Century................................................ 849 10 90 5 Small Company............................................... 34 -- 32 1
- --------------- *Amount represents less than $500. For the year ended March 31, 2005, the following Funds paid brokerage commissions to certain affiliates of BACAP in connection with the execution of various portfolio transactions:
FUND COMMISSIONS - ------------------------------------------------------------------------- Value....................................................... $7,915 MidCap Value................................................ 4,670
161 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, pays its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. Each Fund's fee will not exceed $15,000 per year. As of March 31, 2005, the fees paid for the Office of the Chief Compliance Officer were as follows:
FUND (000) - ------------------------------------------------------------------- Convertible Securities...................................... $8 Asset Allocation............................................ 4 Value....................................................... 8 MidCap Value................................................ 7 SmallCap Value.............................................. 4 Growth...................................................... 8 Strategic Growth............................................ 8 Focused Equities............................................ 8 MidCap Growth............................................... 6 21st Century................................................ 4 Small Company............................................... 8
These amounts are included in "Other expenses" on the Statements of operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, another portfolio of Funds Trust. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. Certain Funds have made daily investments of cash balances in Nations Cash Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Fund from such investments is included in its Statement of operations as "Dividend income from affiliated funds." BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Funds. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADVISORY FEES ADMINISTRATION FEES (EARNED BY BACAP) (EARNED BY BACAP DISTRIBUTORS) FUND (000) (000) - ----------------------------------------------------------------------------------------------------------------- Convertible Securities...................................... $24 $12 Asset Allocation............................................ 21 11 Value....................................................... 37 19 MidCap Value................................................ 13 6 SmallCap Value.............................................. 6 3 MidCap Growth............................................... 12 6 21st Century................................................ 18 9
A significant portion of each Fund's Primary A Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. 162 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. TOTAL OPERATING EXPENSE LIMITATIONS During the year ended March 31, 2005 and until July 31, 2005, BACAP and/or BACAP Distributors has agreed to reimburse expenses and/or waive fees to the extent that total expenses (excluding interest expense and shareholder servicing and distribution fees), as a percentage of the respective Fund's average daily net assets, exceed the following annual rates:
FUND ANNUAL RATE - ------------------------------------------------------------------------- MidCap Value................................................ 1.25% SmallCap Value.............................................. 1.30% Small Company............................................... 1.15%
BACAP and/or BACAP Distributors is entitled to recover from MidCap Value Fund, SmallCap Value Fund and Small Company Fund any fees waived or expenses reimbursed by BACAP and/or BACAP Distributors during the three year period following the date of such waiver or reimbursement, to the extent that such recovery would not cause the affected fund to exceed the expense limitations in effect at the time of recovery. There is no guarantee that these expense limitations will continue. At March 31, 2005, the amounts potentially recoverable by BACAP and/or BACAP Distributors pursuant to this arrangement are as follows:
AMOUNT RECOVERED AMOUNT OF POTENTIAL RECOVERY EXPIRING: TOTAL POTENTIAL DURING YEAR ENDED FUND 3/31/08 3/31/07 3/31/06 RECOVERY 3/31/05 - ------------------------------------------------------------------------------------------------------------------------------- SmallCap Value................................. $ 21,754 $ 60,262 $117,740 $ 199,756 $-- Small Company.................................. 335,159 531,292 405,127 1,271,578 --
Each Fund has an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statements of operations. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. During the year ended March 31, 2005, BACAP ascertained that it had caused several Funds to exceed certain investment restrictions imposed by the 1940 Act and conditions in exemptive orders granted to the Funds. During the year ended March 31, 2005, BACAP reimbursed each Fund for all losses incurred resulting from the sale of securities required to bring the Funds within their investment limits, including reimbursed advisory fees on assets invested in securities in excess of their investment limitations. The total amounts of the reimbursements are as follows: Asset Allocation............................................ $118,420 MidCap Value................................................ 897,931* Strategic Growth............................................ 181,227
- --------------- *Includes capital contribution from investment advisor of $402,826. See schedule of capital stock activity. In addition to these reimbursements, BACAP reimbursed advisory fees paid on the value of assets held in excess of the value allowed by the exemptive orders. The amounts of the reimbursements are included in the Statements of operations in "Fees waived by investment advisor and/or administrator". The amounts of the reimbursements are as follows: Asset Allocation............................................ $ 1,335 MidCap Value................................................ 1,511 Strategic Growth............................................ 92,939 MidCap Growth............................................... 60,671
4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Fund and a combined distribution and shareholder servicing plan for Investor A Shares of each Fund. The 163 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 1940 Act, permit the Funds to compensate or reimburse 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 and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of each Fund directly to the applicable share class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP Distributors. For the year ended March 31, 2005, the annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT PLAN RATE LIMIT ---------------- Investor A Combined Distribution and Shareholder Servicing Plan...................................................... 0.25% 0.25% Investor B and Investor C Shareholder Servicing Plans....... 0.25% 0.25% Investor B and Investor C Distribution Plans................ 0.75% 0.75%
5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for net operating losses, foreign currency transactions, allocations of realized gains due to tax rules, reclass for differences between book and tax treatment of trust preferred securities and redemptions used as distributions were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT INCOME/(LOSS) NET REALIZED GAIN/(LOSS) PAID-IN CAPITAL FUND (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- Convertible Securities.............................. $ 2,809 $(6,038) $ 3,229 Asset Allocation.................................... 11 (98) 87 Value............................................... -- (420) 420 MidCap Value........................................ -- (944) 944 SmallCap Value...................................... 114 (700) 586 Growth.............................................. 5,629 393 (6,022) Strategic Growth.................................... -- 864 (864) Focused Equities.................................... 15,957 856 (16,813) MidCap Growth....................................... 2,239 (1) (2,238) 21st Century........................................ 1,536 228 (1,764) Small Company....................................... 5,027 2,776 (7,803)
Net investment income and net realized gains (losses), as disclosed on the Statement of operations, and net assets were not affected by these reclassifications. 164 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 ------------------------- ------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME* CAPITAL GAINS INCOME* CAPITAL GAINS FUND (000) (000) (000) (000) - -------------------------------------------------------------------------------------------------------------------- Convertible Securities...................................... $44,402 $13,444 $38,897 $ -- Asset Allocation............................................ 2,588 -- 2,626 -- Value....................................................... 23,869 -- 13,463 -- MidCap Value................................................ 22,970 24,069 4,430 -- SmallCap Value.............................................. 8,687 7,353 1,008 544 Strategic Growth............................................ 16,285 -- 8,928 --
- --------------- *For tax purposes, short-term capital gains distributions, if any, are considered ordinary income distributions. As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED/ UNDISTRIBUTED (ACCUMULATED) NET UNREALIZED ORDINARY LONG-TERM APPRECIATION/ INCOME* CAPITAL GAINS/(LOSSES)* (DEPRECIATION)** FUND (000) (000) (000) - -------------------------------------------------------------------------------------------------------------------------- Convertible Securities...................................... $ 2,816 $ 40,609 $125,456 Asset Allocation............................................ 8 (33,155) 26,071 Value....................................................... 1,295 11,315 294,639 MidCap Value................................................ 15,369 27,630 120,716 SmallCap Value.............................................. 4,855 5,030 39,108 Growth...................................................... -- (234,561) 387,622 Strategic Growth............................................ 4,293 (164,532) 80,224 Focused Equities............................................ -- (533,455) 620,606 MidCap Growth............................................... -- (114,045) 24,149 21st Century................................................ -- (17,379) 34,315 Small Company............................................... -- (4,471) 108,352
- --------------- *May include Post-October loss deferral. **The differences between book-basis and tax-basis net unrealized appreciation/(depreciation) are primarily due to the deferral of losses from wash sales. Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION (DEPRECIATION)** FUND (000) (000) (000) - -------------------------------------------------------------------------------------------------------------- Convertible Securities...................................... $163,491 $(38,035) $125,456 Asset Allocation............................................ 28,980 (2,909) 26,071 Value....................................................... 314,104 (19,465) 294,639 MidCap Value................................................ 127,123 (6,407) 120,716 SmallCap Value.............................................. 42,013 (2,905) 39,108 Growth...................................................... N/A* N/A* N/A* Strategic Growth............................................ N/A* N/A* N/A* Focused Equities............................................ N/A* N/A* N/A* MidCap Growth............................................... 39,056 (14,907) 24,149 21st Century................................................ 38,090 (3,757) 34,333 Small Company............................................... N/A* N/A* N/A*
- --------------- *See corresponding Master Trust notes to financial statements for tax basis information. **The differences between book-basis and tax-basis net unrealized appreciation/(depreciation) are primarily due to deferral of losses from wash sales. 165 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The following capital loss carryforwards, determined as of March 31, 2005, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
EXPIRING IN EXPIRING IN EXPIRING IN EXPIRING IN EXPIRING IN EXPIRING IN 2008 2009 2010 2011 2012 2013 FUND (000) (000) (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- Asset Allocation......................... $ -- $ -- $ 3,283 $ 18,585 $11,287 $ -- Growth................................... 5,919* 13,630* 122,629* 61,904 -- 30,480 Strategic Growth......................... -- -- -- 72,852 91,680 -- Focused Equities......................... -- 11,303 375,725 145,695 -- 732 MidCap Growth............................ -- -- -- 49,030 65,015 -- 21st Century............................. -- -- 15,335 1,800 -- -- Small Company............................ -- -- -- -- 4,471 --
- --------------- *Utilization of these losses in future years may be limited under Federal tax laws. During the year ended March 31, 2005, the following Funds utilized capital losses as follows:
CAPITAL LOSSES UTILIZED FUND (000) - ---------------------------------------------------------------------------- Convertible Securities...................................... $ 9,963 Asset Allocation............................................ 12,821 Value....................................................... 58,782 Strategic Growth............................................ 382,787 MidCap Growth............................................... 118,037 21st Century................................................ 6,748 Small Company............................................... 87,981
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, 2005, the following Funds elected to defer losses occurring between November 1, 2004 and March 31, 2005 under these rules, as follows:
CAPITAL LOSSES CURRENCY LOSSES DEFERRED DEFERRED FUND (000) (000) - ----------------------------------------------------------------------------------------------- Growth...................................................... $ -- $12 Focused Equities............................................ -- 9 21st Century................................................ 244 --
Such deferred losses will be treated as arising on the first day of the fiscal year ending March 31, 2006. 6. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005, were as follows:
PURCHASES SALES FUND (000) (000) - ----------------------------------------------------------------------------------- Convertible Securities...................................... $563,612 $706,137 Asset Allocation............................................ 61,200 78,025 Value....................................................... 943,154 797,071 MidCap Value................................................ 323,751 323,628 SmallCap Value.............................................. 124,062 103,459 MidCap Growth............................................... 689,796 776,569 21st Century................................................ 490,585 286,260
166 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2005 were as follows:
PURCHASES SALES (000) (000) --------------------- Asset Allocation............................................ $195,487 $198,089
7. WRITTEN OPTIONS Written options for the Asset Allocation Fund for the year ended March 31, 2005 aggregated the following:
PREMIUM NUMBER OF RECEIVED SUMMARY OF WRITTEN OPTIONS CONTRACTS* (000) - ------------------------------------------------------------------------------------ Outstanding at March 31, 2004............................... -- $-- Contracts opened............................................ 0.10 1 Options expired............................................. (0.10) (1) ----- --- Outstanding at March 31, 2005............................... -- $-- ===== ===
- --------------- *1 contract = $1,000,000 notional amount. 8. RESTRICTED SECURITIES A restricted security is a security which has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933. The Funds do not have the right to demand that such securities be registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. The following securities are considered restricted as to resale at March 31, 2005 for the Asset Allocation Fund:
MARKET ACQUISITION VALUE PERCENTAGE ACQUISITION COST 03/31/05 OF NET SECURITY DATE (000) (000) ASSETS - ----------------------------------------------------------------------------------------------------------- Vendee Mortgage Trust, Interest Only 0.295% 03/15/29.................................... 09/24/98 $167 $110 0.06% Vendee Mortgage Trust, Interest Only 0.433% 09/15/27.................................... 02/26/98 230 115 0.06
9. SHARES OF BENEFICIAL INTEREST As of March 31, 2005, an unlimited number of shares of beneficial interest without par value were authorized for Funds Trust. Funds Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any authorized but unissued shares into one or more additional classes or series of shares. Investor B Shares generally convert to Investor A Shares based on the following conditions:
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ------------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1997 and November 15, 1998 $0 -- $249,999 Nine years $250,000 -- $499,999 Six years $500,000 -- $999,999 Five years - -- before August 1, 1997 Nine years
See Schedules of capital stock activity. 167 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Funds had no borrowings outstanding at March 31, 2005. During the year ended March 31, 2005, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST FUND (000) RATE - -------------------------------------------------------------------------------------- Convertible Securities...................................... $ 99 1.52% Asset Allocation............................................ --** 1.50 MidCap Value................................................ 24 1.50 SmallCap Value.............................................. 32 1.49 MidCap Growth............................................... 15 2.00
- --------------- * The average amount outstanding was calculated based on daily balances in the period. **Amount represents less than $500. 11. SECURITIES LENDING Under an agreement with BNY, the Funds may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of borrower default, the Fund has the right to use the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. The Fund bears the risk of loss with respect to the investment of collateral. The income earned by each Fund from securities lending is included in its Statement of operations. At March 31, 2005, the following Funds had securities on loan:
MARKET MARKET VALUE OF VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) - ------------------------------------------------------------------------------------------------ Convertible Securities...................................... $131,197 $138,497 Asset Allocation............................................ 1,743 1,792 Value....................................................... 49,965 51,027 SmallCap Value.............................................. 15,255 15,758 MidCap Growth............................................... 16,939 17,500 21st Century................................................ 23,744 24,503
12. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the 168 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. For the fiscal year ended March 31, 2005, Bank of America Corporation has assumed $6.7 million of legal, shareholder communications, audit related, transfer agent, consulting and Trustee costs and fees incurred by the Funds impacted in connection with the regulatory and civil litigation matters discussed above. These non-recurring costs were allocated to 169 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) the Funds based on their respective average net assets for the year ended March 31, 2005. These non-recurring costs on a per Fund basis are shown in that Fund's respective Statement of operations. Because these costs were borne by Bank of America Corporation and not any Fund, an offsetting waiver of these costs is also presented in each respective Fund's Statement of operations as, "Costs assumed by Bank of America Corporation". The impact to the expense ratio of each impacted Fund is reflected in the Fund's Financial highlights. 13. PROPOSED REORGANIZATION The Board of Trustees of the Funds approved a proposal to merge the Columbia Growth & Income Fund, managed by Columbia Management Advisors, Inc. an affiliate of BACAP, into the Nations Value Fund, subject to approval by shareholders of the Fund and the satisfaction of certain other conditions. The merger is expected to be completed in the third quarter of 2005. 170 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Convertible Securities Fund, Nations Asset Allocation Fund, Nations Value Fund, Nations MidCap Value Fund, Nations SmallCap Value Fund, Nations Marsico Growth Fund, Nations Strategic Growth Fund, Nations Marsico Focused Equities Fund, Nations MidCap Growth Fund, Nations Marsico 21st Century Fund and Nations Small Company Fund (constituting part of Nations Funds Trust, hereafter referred to as the "Funds") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 171 NATIONS FUNDS TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2005, the amount of long-term capital gains designated by Funds Trust were as follows:
TOTAL LONG-TERM CAPITAL GAINS - --------------------------------------------------------------------------- Convertible Securities...................................... $16,564,475 MidCap Value................................................ 24,899,341 SmallCap Value.............................................. 7,724,575
Of the ordinary income (including short-term capital gain) distributions made by Funds Trust during the fiscal year ended March 31, 2005, the following percentages qualify for the dividend received deduction available to corporate shareholders: Convertible Securities...................................... 12.58% Asset Allocation............................................ 95.39 Value....................................................... 100.00 MidCap Value................................................ 37.74 SmallCap Value.............................................. 14.43 Strategic Growth............................................ 100.00
The Jobs and Growth Tax Relief Reconciliation Act of 2003 allows a fund to distribute certain dividends paid to its eligible shareholders as qualified dividend income. Of the ordinary income (including short-term capital gain) distributions made by the Funds during the fiscal year ended March 31, 2005, the following percentages represent the amount of qualified dividend income within each Fund: Convertible Securities...................................... 12.70% Asset Allocation............................................ 100.00 Value....................................................... 100.00 MidCap Value................................................ 37.98 SmallCap Value.............................................. 14.13 Strategic Growth............................................ 100.00
172 [This page intentionally left blank] 173 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth Master Portfolio, Nations Strategic Growth Master Portfolio, Nations Marsico Focused Equities Master Portfolio and Nations Small Company Master Portfolio Annual Report MARCH 31, 2005 The following pages should be read in conjunction with Nations Marsico Growth, Nations Strategic Growth, Nations Marsico Focused Equities and Nations Small Company Funds' Annual Report. 174 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ COMMON STOCKS -- 87.4% CONSUMER DISCRETIONARY -- 20.0% AUTOMOBILES -- 0.3% 121,338 Harley-Davidson, Inc.(a)...................................... $ 7,009 ---------- HOTELS, RESTAURANTS AND LEISURE -- 8.2% 208,909 Four Seasons Hotels, Inc. .................................... 14,770 369,340 MGM Mirage(b)................................................. 26,157 536,954 Royal Caribbean Cruises Ltd. ................................. 23,996 581,194 Starbucks Corp.(b)............................................ 30,024 763,505 Wynn Resorts Ltd.(b).......................................... 51,720 887,429 Yum! Brands, Inc. ............................................ 45,978 ---------- 192,645 ---------- HOUSEHOLD DURABLES -- 4.7% 102,957 Harman International Industries, Inc. ........................ 9,108 232,810 KB Home....................................................... 27,346 500,940 Lennar Corp., Class A......................................... 28,393 269,197 M.D.C. Holdings, Inc. ........................................ 18,749 184,086 Sony Corp., ADR............................................... 7,367 224,852 Toll Brothers, Inc.(b)........................................ 17,730 ---------- 108,693 ---------- MEDIA -- 0.5% 111,605 Pixar, Inc.(a)(b)............................................. 10,887 ---------- MULTILINE RETAIL -- 1.0% 479,669 Target Corp. ................................................. 23,993 ---------- SPECIALTY RETAIL -- 2.8% 1,164,064 Lowe's Companies, Inc. ....................................... 66,456 ---------- TEXTILES, APPAREL AND LUXURY GOODS -- 2.5% 702,532 NIKE, Inc., Class B........................................... 58,528 ---------- 468,211 ---------- CONSUMER STAPLES -- 5.5% BEVERAGES -- 0.5% 229,658 PepsiCo, Inc. ................................................ 12,179 ---------- FOOD AND STAPLES RETAILING -- 1.8% 327,391 CVS Corp. .................................................... 17,227 527,149 Walgreen Co. ................................................. 23,416 ---------- 40,643 ---------- HOUSEHOLD PRODUCTS -- 3.2% 1,429,780 Procter & Gamble Co. ......................................... 75,778 ---------- 128,600 ---------- ENERGY -- 3.9% ENERGY EQUIPMENT AND SERVICES -- 1.1% 368,876 Schlumberger Ltd. ............................................ 25,998 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ OIL AND GAS -- 2.8% 1,096,526 Exxon Mobil Corp. ............................................ $ 65,353 ---------- 91,351 ---------- FINANCIALS -- 13.6% CAPITAL MARKETS -- 4.6% 444,642 Goldman Sachs Group, Inc. .................................... 48,906 686,688 UBS AG, Registered Shares(a).................................. 57,957 ---------- 106,863 ---------- COMMERCIAL BANKS -- 0.6% 376,452 UCBH Holdings, Inc.(a)........................................ 15,020 ---------- CONSUMER FINANCE -- 2.9% 1,346,121 SLM Corp. .................................................... 67,091 ---------- DIVERSIFIED FINANCIAL SERVICES -- 2.4% 105,944 Chicago Mercantile Exchange................................... 20,556 815,250 Citigroup, Inc. .............................................. 36,638 ---------- 57,194 ---------- REAL ESTATE -- 0.9% 323,385 St. Joe Co. .................................................. 21,764 ---------- THRIFTS AND MORTGAGE FINANCE -- 2.2% 1,570,165 Countrywide Financial Corp. .................................. 50,967 ---------- 318,899 ---------- HEALTH CARE -- 21.2% BIOTECHNOLOGY -- 3.6% 1,482,060 Genentech, Inc.(b)............................................ 83,899 ---------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 5.4% 515,546 Medtronic, Inc. .............................................. 26,267 816,436 St. Jude Medical, Inc.(b)..................................... 29,392 923,123 Zimmer Holdings, Inc.(b)...................................... 71,828 ---------- 127,487 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 9.1% 92,228 Aetna, Inc. .................................................. 6,913 135,964 Pacificare Health Systems, Inc.(b)............................ 7,739 221,172 Quest Diagnostics, Inc. ...................................... 23,252 1,731,969 UnitedHealth Group, Inc. ..................................... 165,195 80,856 WellPoint, Inc.(b)............................................ 10,135 ---------- 213,234 ---------- PHARMACEUTICALS -- 3.1% 697,111 Johnson & Johnson............................................. 46,818 941,751 Pfizer, Inc. ................................................. 24,740 ---------- 71,558 ---------- 496,178 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 175 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ INDUSTRIALS -- 13.8% AEROSPACE AND DEFENSE -- 4.8% 314,134 General Dynamics Corp. ....................................... $ 33,628 578,489 Lockheed Martin Corp. ........................................ 35,322 419,622 United Technologies Corp. .................................... 42,659 ---------- 111,609 ---------- AIR FREIGHT AND LOGISTICS -- 3.1% 788,962 FedEx Corp. .................................................. 74,123 ---------- INDUSTRIAL CONGLOMERATES -- 3.9% 2,534,998 General Electric Co. ......................................... 91,412 ---------- MACHINERY -- 2.0% 521,685 Caterpillar, Inc. ............................................ 47,703 ---------- 324,847 ---------- INFORMATION TECHNOLOGY -- 8.4% COMMUNICATIONS EQUIPMENT -- 3.2% 2,039,750 QUALCOMM, Inc. ............................................... 74,757 ---------- COMPUTERS AND PERIPHERALS -- 2.9% 1,784,966 Dell, Inc.(b)................................................. 68,579 ---------- SOFTWARE -- 2.3% 1,031,833 Electronic Arts, Inc.(b)...................................... 53,428 ---------- 196,764 ---------- UTILITIES -- 1.0% ELECTRIC UTILITIES -- 1.0% 293,622 TXU Corp. .................................................... 23,382 ---------- TOTAL COMMON STOCKS (Cost of $1,683,738)........................................ 2,048,232 ---------- PAR (000) - ----------- CONVERTIBLE BOND -- 2.6% CONSUMER DISCRETIONARY -- 2.6% HOTELS, RESTAURANTS AND LEISURE -- 2.6% $ 20,000 Wynn Resorts, Inc. 6.000% 07/15/15............................................. 61,325 ---------- TOTAL CONVERTIBLE BOND (Cost of $19,641)........................................... 61,325 ---------- SHARES - ----------- INVESTMENT MANAGEMENT COMPANY -- 11.0% 258,753,000 Nations Cash Reserves, Capital Class Shares(c)................ 258,753 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $258,753).......................................... 258,753 ---------- PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ REPURCHASE AGREEMENTS(D) -- 2.9% $ 17,878 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $18,048 (repurchase proceeds $17,879)............................... $ 17,878 21,453 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $21,735 (repurchase proceeds $21,455).......... 21,453 27,929 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $28,370 (repurchase proceeds $27,931).......... 27,929 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $67,260)........................................... 67,260 TOTAL INVESTMENTS (Cost of $2,029,392)(e)........................... 103.9% 2,435,570 OTHER ASSETS AND LIABILITIES, NET................... (3.9)% (91,779) ---------- NET ASSETS.......................................... $2,343,791 100.0% ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005, is $65,590 and $65,736, respectively. (b) Non-income producing security. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) This amount represents cash collateral received from securities lending activity (see Note 7). (e) Cost for federal income tax purposes is $2,033,153. ABBREVIATION: ADR -- American Depositary Receipt
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 176 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Consumer discretionary...................... 22.6% Health care................................. 21.2 Industrials................................. 13.8 Financials.................................. 13.6 Information technology...................... 8.4 Consumer staples............................ 5.5 Energy...................................... 3.9 Utilities................................... 1.0 Investment management company............... 11.0 Repurchase agreements....................... 2.9 Other assets and liabilities, net........... (3.9) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 177 NATIONS MASTER INVESTMENT TRUST Nations Strategic Growth Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- COMMON STOCKS -- 98.6% CONSUMER DISCRETIONARY -- 10.6% AUTO COMPONENTS -- 0.5% 105,000 Magna International, Inc., Class A............................ $ 7,024 ---------- HOTELS, RESTAURANTS AND LEISURE -- 2.3% 204,650 Carnival Corp. ............................................... 10,603 439,925 McDonald's Corp. ............................................. 13,699 182,650 Yum! Brands, Inc. ............................................ 9,463 ---------- 33,765 ---------- HOUSEHOLD DURABLES -- 0.5% 113,825 Ryland Group, Inc. ........................................... 7,060 ---------- MEDIA -- 3.6% 871,200 Liberty Media Corp., Class A(a)............................... 9,034 118,575 McGraw-Hill Companies, Inc. .................................. 10,346 998,950 News Corp., Class A........................................... 16,902 489,625 Viacom, Inc., Class B......................................... 17,054 ---------- 53,336 ---------- MULTILINE RETAIL -- 1.1% 121,000 Federated Department Stores, Inc. ............................ 7,701 140,400 Nordstrom, Inc. .............................................. 7,775 ---------- 15,476 ---------- SPECIALTY RETAIL -- 2.5% 473,654 Home Depot, Inc. ............................................. 18,113 229,825 OfficeMax, Inc.(b)............................................ 7,699 369,600 Staples, Inc. ................................................ 11,616 ---------- 37,428 ---------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.1% 42,600 Reebok International Ltd. .................................... 1,887 ---------- 155,976 ---------- CONSUMER STAPLES -- 10.4% BEVERAGES -- 4.5% 567,952 Coca-Cola Co. ................................................ 23,666 199,600 Diageo PLC, ADR............................................... 11,357 591,545 PepsiCo, Inc. ................................................ 31,370 ---------- 66,393 ---------- FOOD AND STAPLES RETAILING -- 1.0% 287,000 Wal-Mart Stores, Inc. ........................................ 14,382 ---------- HOUSEHOLD PRODUCTS -- 1.9% 383,250 Colgate-Palmolive Co. ........................................ 19,994 114,475 Kimberly-Clark Corp. ......................................... 7,525 ---------- 27,519 ---------- PERSONAL PRODUCTS -- 2.0% 169,450 Avon Products, Inc. .......................................... 7,276 455,250 Gillette Co. ................................................. 22,981 ---------- 30,257 ----------
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- TOBACCO -- 1.0% 230,450 Altria Group, Inc. ........................................... $ 15,069 ---------- 153,620 ---------- ENERGY -- 8.5% ENERGY EQUIPMENT AND SERVICES -- 2.4% 167,150 BJ Services Co. .............................................. 8,672 129,850 Cooper Cameron Corp.(a)....................................... 7,429 258,475 Halliburton Co. .............................................. 11,179 135,800 Nabors Industries Ltd.(a)..................................... 8,031 ---------- 35,311 ---------- OIL AND GAS -- 6.1% 125,000 ChevronTexaco Corp. .......................................... 7,289 286,875 ConocoPhillips................................................ 30,936 880,440 Exxon Mobil Corp. ............................................ 52,474 ---------- 90,699 ---------- 126,010 ---------- FINANCIALS -- 19.9% CAPITAL MARKETS -- 2.3% 173,300 A.G. Edwards, Inc. ........................................... 7,764 248,275 Bank of New York Co., Inc. ................................... 7,212 328,486 Merrill Lynch & Co., Inc. .................................... 18,592 ---------- 33,568 ---------- COMMERCIAL BANKS -- 6.4% 164,350 Cullen Frost Bankers, Inc. ................................... 7,420 336,350 KeyCorp....................................................... 10,915 655,253 U.S. Bancorp.................................................. 18,884 512,575 Wachovia Corp. ............................................... 26,095 409,925 Wells Fargo & Co. ............................................ 24,514 107,175 Zions Bancorporation.......................................... 7,397 ---------- 95,225 ---------- CONSUMER FINANCE -- 0.7% 450,999 MBNA Corp. ................................................... 11,072 ---------- DIVERSIFIED FINANCIAL SERVICES -- 4.5% 231,925 CIT Group, Inc. .............................................. 8,813 1,123,750 Citigroup, Inc. .............................................. 50,501 202,213 JPMorgan Chase & Co. ......................................... 6,997 ---------- 66,311 ---------- INSURANCE -- 5.2% 331,675 AFLAC, Inc. .................................................. 12,358 256,900 American International Group, Inc. ........................... 14,235 100,525 Chubb Corp. .................................................. 7,969 398,925 Genworth Financial, Inc., Class A............................. 10,978 109,750 Hartford Financial Services Group, Inc. ...................... 7,524 154,250 SAFECO Corp. ................................................. 7,514 522,375 UnumProvident Corp.(b)........................................ 8,891 102,375 XL Capital Ltd., Class A...................................... 7,409 ---------- 76,878 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 178 NATIONS MASTER INVESTMENT TRUST Nations Strategic Growth Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 0.8% 203,500 Fannie Mae.................................................... $ 11,081 ---------- 294,135 ---------- HEALTH CARE -- 13.2% BIOTECHNOLOGY -- 1.2% 108,300 Amgen, Inc.(a)................................................ 6,304 78,400 Biogen Idec, Inc.(a).......................................... 2,706 153,900 Genentech, Inc.(a)............................................ 8,712 ---------- 17,722 ---------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.3% 146,800 Bausch & Lomb, Inc. .......................................... 10,761 104,500 C.R. Bard, Inc. .............................................. 7,114 166,110 Medtronic, Inc. .............................................. 8,463 221,925 Varian Medical Systems, Inc.(a)............................... 7,608 ---------- 33,946 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 1.9% 164,600 HCA, Inc. .................................................... 8,818 193,175 UnitedHealth Group, Inc. ..................................... 18,425 ---------- 27,243 ---------- PHARMACEUTICALS -- 7.8% 403,950 Abbott Laboratories........................................... 18,832 101,950 Allergan, Inc. ............................................... 7,082 114,700 Eli Lilly & Co. .............................................. 5,976 260,100 GlaxoSmithKline PLC, ADR...................................... 11,944 516,675 Johnson & Johnson............................................. 34,700 390,525 Merck & Co., Inc. ............................................ 12,641 665,570 Pfizer, Inc. ................................................. 17,484 215,726 Teva Pharmaceutical Industries Ltd., ADR...................... 6,688 ---------- 115,347 ---------- 194,258 ---------- INDUSTRIALS -- 11.1% AEROSPACE AND DEFENSE -- 1.8% 256,850 United Technologies Corp. .................................... 26,111 ---------- AIR FREIGHT AND LOGISTICS -- 1.3% 253,925 United Parcel Service, Inc., Class B.......................... 18,471 ---------- BUILDING PRODUCTS -- 0.5% 210,775 Masco Corp. .................................................. 7,308 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 0.5% 185,000 ChoicePoint, Inc.(a).......................................... 7,420 ---------- ELECTRICAL EQUIPMENT -- 0.5% 109,150 Cooper Industries Ltd., Class A............................... 7,806 ----------
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 3.8% 172,450 3M Co. ....................................................... $ 14,777 1,146,173 General Electric Co. ......................................... 41,331 ---------- 56,108 ---------- MACHINERY -- 2.7% 142,425 Eaton Corp. .................................................. 9,315 118,300 Illinois Tool Works, Inc.(b).................................. 10,592 161,925 Ingersoll-Rand Co., Ltd., Class A............................. 12,897 113,150 Parker Hannifin Corp. ........................................ 6,893 ---------- 39,697 ---------- 162,921 ---------- INFORMATION TECHNOLOGY -- 15.7% COMMUNICATIONS EQUIPMENT -- 2.3% 689,300 Avaya, Inc.(a)................................................ 8,051 1,442,625 Cisco Systems, Inc.(a)........................................ 25,809 ---------- 33,860 ---------- COMPUTERS AND PERIPHERALS -- 2.8% 464,200 Dell, Inc.(a)................................................. 17,835 259,250 International Business Machines Corp. ........................ 23,690 ---------- 41,525 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.5% 332,200 Agilent Technologies, Inc.(a)................................. 7,375 ---------- IT SERVICES -- 1.9% 342,575 Accenture Ltd., Class A(a).................................... 8,273 244,900 Automatic Data Processing, Inc. .............................. 11,008 178,950 Cognizant Technology Solutions Corp., Class A(a).............. 8,268 ---------- 27,549 ---------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.2% 370,050 Intel Corp. .................................................. 8,596 154,675 KLA-Tencor Corp. ............................................. 7,116 209,800 Marvell Technology Group Ltd.(a).............................. 8,044 271,975 Maxim Integrated Products, Inc. .............................. 11,116 1,542,075 Taiwan Semiconductor Manufacturing Co., Ltd., ADR............. 13,077 ---------- 47,949 ---------- SOFTWARE -- 5.0% 116,850 Adobe Systems, Inc. .......................................... 7,849 381,600 Amdocs Ltd.(a)................................................ 10,837 258,400 Autodesk, Inc.(a)............................................. 7,690 585,580 Microsoft Corp. .............................................. 14,153 1,134,175 Oracle Corp.(a)............................................... 14,155 868,275 Symantec Corp.(a)............................................. 18,520 ---------- 73,204 ---------- 231,462 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 179 NATIONS MASTER INVESTMENT TRUST Nations Strategic Growth Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- MATERIALS -- 3.2% CHEMICALS -- 0.8% 161,100 BASF AG, ADR(b)............................................... $ 11,366 ---------- CONSTRUCTION MATERIALS -- 0.8% 218,696 Vulcan Materials Co. ......................................... 12,428 ---------- METALS AND MINING -- 1.6% 189,650 Arch Coal, Inc. .............................................. 8,157 223,172 Companhia Vale do Rio Doce, ADR............................... 7,054 164,100 Peabody Energy Corp. ......................................... 7,608 ---------- 22,819 ---------- 46,613 ---------- TELECOMMUNICATION SERVICES -- 3.0% DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.0% 241,225 ALLTEL Corp. ................................................. 13,231 419,525 BellSouth Corp. .............................................. 11,029 542,100 Citizens Communications Co. .................................. 7,015 571,650 SBC Communications, Inc. ..................................... 13,543 ---------- 44,818 ---------- UTILITIES -- 3.0% ELECTRIC UTILITIES -- 2.0% 328,600 Exelon Corp. ................................................. 15,079 419,575 PG&E Corp.(b)................................................. 14,308 ---------- 29,387 ---------- MULTI-UTILITIES AND UNREGULATED POWER -- 1.0% 374,300 Sempra Energy................................................. 14,912 ---------- 44,299 ---------- TOTAL COMMON STOCKS (Cost of $1,370,888)........................................ 1,454,112 ---------- INVESTMENT MANAGEMENT COMPANIES -- 0.8% 5,415,000 Nations Cash Reserves, Capital Class Shares(c)..................................... 5,415 62,800 SPDR Trust Series 1(b)........................................ 7,407 ---------- TOTAL INVESTMENT MANAGEMENT COMPANIES (Cost of $12,914)........................................... 12,822 ---------- REPURCHASE AGREEMENTS(D) -- 2.8% $ 10,844 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $10,947 (repurchase proceeds $10,845)............................... 10,844
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(C) -- (CONTINUED) 13,012 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $13,183 (repurchase proceeds $13,013).......... $ 13,012 16,940 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $17,207 (repurchase proceeds $16,942).......... 16,940 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $40,796)........................................... 40,796 ---------- TOTAL INVESTMENTS (Cost of $1,424,598)(e)........................... 102.2% 1,507,730 ---------- OTHER ASSETS AND LIABILITIES, NET................... (2.2)% (32,970) ---------- NET ASSETS.......................................... 100.0% $1,474,760 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a)Non-income producing security. (b)All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $37,686 and $39,813, respectively. (c)Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d)This amount represents cash collateral received from securities lending activity (see Note 7). (e)Cost for federal income tax purposes is $1,427,811.
ABBREVIATIONS: ADR -- American Depositary Receipt SPDR -- Standard & Poor's Depositary Receipts
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 180 NATIONS MASTER INVESTMENT TRUST Nations Strategic Growth Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Financials.................................. 19.9% Information technology...................... 15.7 Health care................................. 13.2 Industrials................................. 11.1 Consumer discretionary...................... 10.6 Consumer staples............................ 10.4 Energy...................................... 8.5 Materials................................... 3.2 Telecommunication services.................. 3.0 Utilities................................... 3.0 Investment management companies............. 0.8 Repurchase agreements....................... 2.8 Other assets and liabilities, net........... (2.2) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 181 NATIONS MASTER INVESTMENT TRUST Nations Marsico Focused Equities Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ COMMON STOCKS -- 97.7% CONSUMER DISCRETIONARY -- 20.7% HOTELS, RESTAURANTS AND LEISURE -- 11.4% 1,319,046 Carnival Corp. ............................................... $ 68,340 740,564 Four Seasons Hotels, Inc. .................................... 52,358 738,367 MGM Mirage(a)................................................. 52,291 1,308,529 Starbucks Corp.(a)............................................ 67,599 1,384,339 Wynn Resorts Ltd.(a).......................................... 93,775 ---------- 334,363 ---------- HOUSEHOLD DURABLES -- 1.9% 953,996 Lennar Corp., Class A......................................... 54,073 ---------- SPECIALTY RETAIL -- 5.4% 2,793,106 Lowe's Companies, Inc. ....................................... 159,458 ---------- TEXTILES, APPAREL AND LUXURY GOODS -- 2.0% 695,552 NIKE, Inc., Class B........................................... 57,946 ---------- 605,840 ---------- CONSUMER STAPLES -- 5.4% HOUSEHOLD PRODUCTS -- 5.4% 2,976,864 Procter & Gamble Co. ......................................... 157,774 ---------- 157,774 ---------- ENERGY -- 3.5% ENERGY EQUIPMENT AND SERVICES -- 0.8% 331,461 Schlumberger Ltd. ............................................ 23,361 ---------- OIL AND GAS -- 2.7% 1,353,198 Exxon Mobil Corp. ............................................ 80,651 ---------- 104,012 ---------- FINANCIALS -- 17.7% CAPITAL MARKETS -- 7.6% 1,319,211 Goldman Sachs Group, Inc. .................................... 145,100 908,874 UBS AG, Registered Shares(b).................................. 76,709 ---------- 221,809 ---------- CONSUMER FINANCE -- 5.0% 2,938,485 SLM Corp. .................................................... 146,454 ---------- DIVERSIFIED FINANCIAL SERVICES -- 1.9% 285,708 Chicago Mercantile Exchange................................... 55,436 ---------- THRIFTS AND MORTGAGE FINANCE -- 3.2% 2,916,917 Countrywide Financial Corp. .................................. 94,683 ---------- 518,382 ---------- HEALTH CARE -- 24.5% BIOTECHNOLOGY -- 6.0% 3,121,308 Genentech, Inc.(a)............................................ 176,697 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT AND SUPPLIES -- 5.1% 1,915,930 Zimmer Holdings, Inc.(a)...................................... $ 149,079 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 11.4% 3,494,279 UnitedHealth Group, Inc. ..................................... 333,284 ---------- PHARMACEUTICALS -- 2.0% 860,288 Johnson & Johnson............................................. 57,777 ---------- 716,837 ---------- INDUSTRIALS -- 13.1% AIR FREIGHT AND LOGISTICS -- 4.5% 1,409,441 FedEx Corp. .................................................. 132,417 ---------- INDUSTRIAL CONGLOMERATES -- 6.0% 4,903,565 General Electric Co. ......................................... 176,822 ---------- MACHINERY -- 2.6% 831,448 Caterpillar, Inc. ............................................ 76,028 ---------- 385,267 ---------- INFORMATION TECHNOLOGY -- 9.8% COMMUNICATIONS EQUIPMENT -- 4.6% 3,650,422 QUALCOMM, Inc. ............................................... 133,788 ---------- COMPUTERS AND PERIPHERALS -- 3.5% 2,666,333 Dell, Inc.(a)................................................. 102,441 ---------- SOFTWARE -- 1.7% 957,302 Electronic Arts, Inc.(a)...................................... 49,569 ---------- 285,798 ---------- UTILITIES -- 3.0% ELECTRIC UTILITIES -- 3.0% 1,113,287 TXU Corp. .................................................... 88,651 ---------- 88,651 ---------- TOTAL COMMON STOCKS (Cost of $2,225,604)........................................ 2,862,561 ---------- INVESTMENT MANAGEMENT COMPANY -- 4.3% 127,891,000 Nations Cash Reserves, Capital Class Shares(c)..................................... 127,891 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $127,891).......................................... 127,891 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 182 NATIONS MASTER INVESTMENT TRUST Nations Marsico Focused Equities Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ REPURCHASE AGREEMENTS(D) -- 2.7% Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due $ 20,836 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $21,034 (repurchase proceeds $20,838)............................... $ 20,836 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. 25,003 Agency securities with various maturities to 09/15/09, market value $25,332 (repurchase proceeds $25,005).......... 25,003 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. 32,551 Agency securities with various maturities to 03/31/35, market value $33,064 (repurchase proceeds $32,554).......... 32,551 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $78,390)................................. 78,390 ---------- TOTAL INVESTMENTS (Cost of $2,431,885)(e)........................... 104.7% 3,068,842 ---------- OTHER ASSETS AND LIABILITIES, NET................... (4.7)% (138,800) ---------- NET ASSETS.......................................... 100.0% $2,930,042 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005, is $76,643 and $76,709, respectively. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) This amount represents cash collateral received from securities lending activity (see Note 7). (e) Cost for federal income tax purposes is $2,438,951. At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Health care................................. 24.5% Consumer discretionary...................... 20.7 Financials.................................. 17.7 Industrials................................. 13.1 Information technology...................... 9.8 Consumer staples............................ 5.4 Energy...................................... 3.5 Utilities................................... 3.0 Investment management company............... 4.3 Repurchase agreements....................... 2.7 Other assets and liabilities, net........... (4.7) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 183 NATIONS MASTER INVESTMENT TRUST Nations Small Company Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMON STOCKS -- 97.2% CONSUMER DISCRETIONARY -- 17.2% AUTOMOBILES -- 0.7% 110,800 Winnebago Industries, Inc..................................... $ 3,501 -------- HOTELS, RESTAURANTS AND LEISURE -- 5.8% 163,975 Gaylord Entertainment Co.(a).................................. 6,624 89,015 Isle of Capris Casinos, Inc.(a)............................... 2,363 57,900 Kerzner International Ltd.(a)................................. 3,545 47,430 Panera Bread Co., Class A(a).................................. 2,681 56,700 Penn National Gaming, Inc.(a)................................. 1,666 171,590 RARE Hospitality International, Inc.(a)....................... 5,299 77,575 Scientific Games Corp., Class A(a)............................ 1,773 228,138 Shuffle Master, Inc.(a)....................................... 6,607 -------- 30,558 -------- HOUSEHOLD DURABLES -- 0.8% 50,250 Beazer Homes USA, Inc.(b)..................................... 2,506 61,075 Yankee Candle Co., Inc.(b).................................... 1,936 -------- 4,442 -------- INTERNET AND CATALOG RETAIL -- 1.6% 115,805 Blue Nile, Inc.(a)(b)......................................... 3,202 156,292 Coldwater Creek, Inc.(a)...................................... 2,888 51,700 Overstock.com, Inc.(a)(b)..................................... 2,223 -------- 8,313 -------- MEDIA -- 2.1% 330,425 Lions Gate Entertainment Corp.(a)............................. 3,651 44,725 R.H. Donnelley Corp.(a)....................................... 2,598 345,100 Radio One, Inc., Class D(a)................................... 5,090 -------- 11,339 -------- SPECIALTY RETAIL -- 3.6% 98,850 Aeropostale, Inc.(a).......................................... 3,237 227,707 Hibbett Sporting Goods, Inc.(a)............................... 6,840 67,625 MarineMax, Inc.(a)............................................ 2,109 115,380 Pacific Sunwear of California, Inc.(a)........................ 3,228 125,880 Tuesday Morning Corp.(a)...................................... 3,634 -------- 19,048 -------- TEXTILES, APPAREL AND LUXURY GOODS -- 2.6% 69,020 Deckers Outdoor Co.(a)(b)..................................... 2,467 157,225 Jos. A. Bank Clothiers, Inc.(a)(b)............................ 4,607 312,837 Wolverine World Wide, Inc.(a)................................. 6,704 -------- 13,778 -------- 90,979 -------- CONSUMER STAPLES -- 1.5% FOOD PRODUCTS -- 1.2% 159,848 Corn Products International, Inc.............................. 4,154 92,875 Delta and Pine Land Co........................................ 2,508 -------- 6,662 -------- HOUSEHOLD PRODUCTS -- 0.3% 35,920 Rayovac Corp.(a).............................................. 1,494 -------- 8,156 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- ENERGY -- 4.8% ENERGY EQUIPMENT AND SERVICES -- 1.9% 56,875 Atwood Oceanics, Inc.(a)...................................... $ 3,784 34,525 CAL Dive International, Inc.(a)............................... 1,564 129,275 Oceaneering International, Inc.(a)............................ 4,848 -------- 10,196 -------- OIL AND GAS -- 2.9% 73,465 Brigham Exploration Co.(a).................................... 678 19,055 Cheniere Energy, Inc.(a)...................................... 1,229 59,715 Denbury Resources, Inc.(a)(b)................................. 2,104 29,055 Quicksilver Resources, Inc.(a)(b)............................. 1,416 148,659 Remington Oil and Gas Corp.(a)................................ 4,686 296,045 Superior Energy Services, Inc.(a)............................. 5,092 -------- 15,205 -------- 25,401 -------- FINANCIALS -- 8.2% CAPITAL MARKETS -- 1.9% 159,524 Affiliated Managers Group, Inc.(a)(b)......................... 9,895 -------- COMMERCIAL BANKS -- 4.2% 266,238 Boston Private Financial Holdings, Inc........................ 6,323 107,367 City National Corp............................................ 7,496 132,112 Fidelity Bankshares, Inc...................................... 3,036 45,300 Main Street Banks, Inc........................................ 1,200 120,529 South Financial Group, Inc.................................... 3,681 20,875 Texas Capital Bancshares, Inc.(a)............................. 438 -------- 22,174 -------- CONSUMER FINANCE -- 0.7% 50,020 Nelnet, Inc.(a)............................................... 1,592 88,450 World Acceptance Corp.(a)..................................... 2,257 -------- 3,849 -------- INSURANCE -- 1.4% 48,875 Selective Insurance Group, Inc................................ 2,260 97,535 Triad Guaranty, Inc.(a)....................................... 5,131 -------- 7,391 -------- 43,309 -------- HEALTH CARE -- 17.8% BIOTECHNOLOGY -- 3.5% 178,366 Affymetrix, Inc.(a)(b)........................................ 7,641 159,025 AtheroGenics, Inc.(a)(b)...................................... 2,082 41,462 Illumina, Inc.(a)............................................. 332 42,215 Martek Biosciences Corp.(a)................................... 2,456 155,760 Protein Design Labs, Inc.(a).................................. 2,491 142,920 Serologicals Corp.(a)(b)...................................... 3,493 -------- 18,495 -------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 5.3% 243,190 American Medical Systems Holdings, Inc.(a).................... 4,178 160,325 Immucor, Inc.(a).............................................. 4,840 40,545 INAMED Corp.(a)............................................... 2,834 29,620 Intuitive Surgical, Inc.(a)................................... 1,346 107,905 Kyphon, Inc.(a)............................................... 2,716
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 184 NATIONS MASTER INVESTMENT TRUST Nations Small Company Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- (CONTINUED) 144,539 Palomar Medical Technologies, Inc.(a)(b)...................... $ 3,898 139,301 Respironics, Inc.(a).......................................... 8,117 -------- 27,929 -------- HEALTH CARE PROVIDERS AND SERVICES -- 6.1% 14,000 Apria Healthcare Group, Inc.(a)............................... 449 211,079 Centene Corp.(a).............................................. 6,330 82,200 HealthExtras, Inc.(a)......................................... 1,369 373,288 Province Healthcare Co.(a).................................... 8,993 80,958 Triad Hospitals, Inc.(a)...................................... 4,056 559,746 VCA Antech, Inc.(a)........................................... 11,324 -------- 32,521 -------- PHARMACEUTICALS -- 2.9% 42,831 Axcan Pharma, Inc.(a)(b)...................................... 721 136,575 Connetics Corp.(a)............................................ 3,454 61,500 OSI Pharmaceuticals, Inc.(a).................................. 2,542 40,575 Par Pharmaceutical Companies, Inc.(a)......................... 1,357 225,980 Penwest Pharmaceuticals Co.(a)(b)............................. 2,793 70,600 Pharmion Corp.(a)............................................. 2,047 137,100 Salix Pharmaceuticals Ltd.(a)................................. 2,261 -------- 15,175 -------- 94,120 -------- INDUSTRIALS -- 13.6% AEROSPACE AND DEFENSE -- 0.9% 27,275 Armor Holdings, Inc.(a)....................................... 1,011 18,630 Engineered Support Systems, Inc............................... 997 90,370 Teledyne Technologies, Inc.(a)................................ 2,829 -------- 4,837 -------- AIR FREIGHT AND LOGISTICS -- 1.4% 107,716 UTI Worldwide, Inc............................................ 7,481 -------- AIRLINES -- 0.5% 238,030 Frontier Airlines, Inc.(a).................................... 2,495 -------- BUILDING PRODUCTS -- 0.6% 150,542 Griffon Corp.(a).............................................. 3,223 -------- COMMERCIAL SERVICES AND SUPPLIES -- 4.2% 178,706 Education Management Corp.(a)................................. 4,995 111,075 Heidrick & Struggles International, Inc.(a)................... 4,084 58,775 Mine Safety Appliances Co..................................... 2,277 94,900 Navigant Consulting, Inc.(a).................................. 2,584 180,600 Resources Connection, Inc.(a)(b).............................. 3,780 117,050 Senomyx, Inc.(a)(b)........................................... 1,394 81,365 Waste Connections, Inc.(a).................................... 2,827 -------- 21,941 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- CONSTRUCTION AND ENGINEERING -- 1.2% 146,003 Chicago Bridge & Iron Co., NV, N.Y. Registered Shares......... $ 6,429 -------- MACHINERY -- 3.5% 131,942 Actuant Corp., Class A(a)..................................... 5,927 90,695 Bucyrus International, Inc., Class A.......................... 3,543 73,911 Cuno, Inc.(a)................................................. 3,798 21,400 IDEX Corp..................................................... 863 26,770 Joy Global, Inc............................................... 939 14,900 Middleby Corp.(a)(b).......................................... 736 24,500 Toro Co....................................................... 2,168 37,800 Wabtec Corp................................................... 775 -------- 18,749 -------- MARINE -- 0.3% 41,000 Kirby Corp.(a)................................................ 1,723 -------- ROAD AND RAIL -- 0.9% 82,840 Landstar System, Inc.(a)...................................... 2,713 120,500 U.S. Xpress Enterprises, Inc., Class A(a)..................... 1,970 -------- 4,683 -------- TRADING COMPANIES AND DISTRIBUTORS -- 0.1% 63,518 Aceto Corp.................................................... 471 -------- 72,032 -------- INFORMATION TECHNOLOGY -- 27.3% COMMUNICATIONS EQUIPMENT -- 3.2% 207,940 Anaren, Inc.(a)............................................... 2,522 282,565 AudioCodes Ltd.(a)(b)......................................... 3,182 119,916 Avocent Corp.(a).............................................. 3,077 253,981 C-COR.net Corp.(a)............................................ 1,544 40,340 F5 Networks, Inc.(a).......................................... 2,037 52,715 NICE Systems Ltd., ADR(a)..................................... 1,698 180,112 Packeteer, Inc.(a)............................................ 2,772 -------- 16,832 -------- COMPUTERS AND PERIPHERALS -- 1.5% 65,826 Applied Films Corp.(a)........................................ 1,522 156,300 M-Systems Flash Disk Pioneers Ltd.(a)(b)...................... 3,445 297,500 Neoware Systems, Inc.(a)(b)................................... 3,103 -------- 8,070 -------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 4.5% 272,227 Aeroflex, Inc.(a)............................................. 2,540 173,947 Daktronics, Inc.(a)........................................... 3,766 81,325 Dionex Corp.(a)............................................... 4,432 149,256 FLIR Systems, Inc.(a)......................................... 4,522 119,225 Global Imaging Systems, Inc.(a)............................... 4,228 304,764 Plexus Corp.(a)(b)............................................ 3,508 28,525 Trimble Navigation Ltd.(a).................................... 964 -------- 23,960 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 185 NATIONS MASTER INVESTMENT TRUST Nations Small Company Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- INTERNET SOFTWARE AND SERVICES -- 2.9% 42,550 Digital River, Inc.(a)........................................ $ 1,326 450,650 Digitas, Inc.(a).............................................. 4,552 112,500 EarthLink, Inc.(a)(b)......................................... 1,012 89,720 InfoSpace, Inc.(a)............................................ 3,663 310,498 Secure Computing Corp.(a)..................................... 2,661 207,330 ValueClick, Inc.(a)(b)........................................ 2,200 -------- 15,414 -------- IT SERVICES -- 2.6% 127,183 Anteon International Corp.(a)................................. 4,951 24,918 Cognizant Technology Solutions Corp., Class A(a).............. 1,151 130,215 Euronet Worldwide, Inc.(a).................................... 3,718 65,642 MTC Technologies, Inc.(a)..................................... 2,134 234,950 Sykes Enterprises, Inc.(a).................................... 1,614 -------- 13,568 -------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 6.2% 167,005 Cymer, Inc.(a)................................................ 4,471 526,333 Microsemi Corp.(a)............................................ 8,574 274,175 Semtech Corp.(a).............................................. 4,899 115,100 Silicon Laboratories, Inc.(a)................................. 3,420 106,540 Tessera Technologies, Inc.(a)................................. 4,606 86,330 Varian Semiconductor Equipment Associates, Inc.(a)............ 3,281 342,944 Virage Logic Corp.(a)......................................... 3,759 -------- 33,010 -------- SOFTWARE -- 6.4% 117,800 American Reprographics Co.(a)................................. 1,691 117,917 ANSYS, Inc.(a)................................................ 4,034 311,825 Aspect Communications Corp.(a)................................ 3,246 340,800 Borland Software Corp.(a)..................................... 2,767 184,650 Epicor Software Corp.(a)...................................... 2,419 148,046 Hyperion Solutions Corp.(a)................................... 6,530 126,745 Open Solutions, Inc.(a)....................................... 2,513 23,215 OPNET Technologies, Inc.(a)................................... 194 256,310 Progress Software Corp.(a).................................... 6,721 227,751 RSA Security, Inc.(a)......................................... 3,610 -------- 33,725 -------- 144,579 -------- MATERIALS -- 3.7% CHEMICALS -- 1.5% 74,475 Airgas, Inc................................................... 1,779 132,350 Mosaic Co.(a)................................................. 2,258 176,394 Symyx Technologies, Inc.(a)................................... 3,890 -------- 7,927 -------- CONTAINERS AND PACKAGING -- 0.3% 90,200 Crown Holdings, Inc.(a)....................................... 1,404 -------- METALS AND MINING -- 1.9% 133,900 Allegheny Technologies, Inc................................... 3,228 196,293 AMCOL International Corp...................................... 3,682 91,775 Steel Dynamics, Inc.(b)....................................... 3,162 -------- 10,072 -------- 19,403 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 1.7% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.0% 10,680 Tekelec(a)(b)................................................. $ 170 -------- WIRELESS TELECOMMUNICATION SERVICES -- 1.7% 306,800 SBA Communications Corp., Class A(a).......................... 2,810 166,011 SpectraLink Corp.............................................. 2,344 99,550 Western Wireless Corp., Class A(a)............................ 3,779 -------- 8,933 -------- 9,103 -------- UTILITIES -- 1.4% GAS UTILITIES -- 1.4% 108,810 Energen Corp.................................................. 7,247 -------- 7,247 -------- TOTAL COMMON STOCKS (Cost of $398,976).......................................... 514,329 -------- INVESTMENT MANAGEMENT COMPANIES -- 2.7% 22,150 iShares Dow Jones U.S. Real Estate Index Fund(b).............. 2,487 73,695 iShares Nasdaq Biotechnology Index Fund(b).................... 4,684 22,450 iShares Russell 2000 Index Fund(b)............................ 2,742 4,481,000 Nations Cash Reserves, Capital Class Shares(c)................ 4,481 -------- TOTAL INVESTMENT MANAGEMENT COMPANIES (Cost of $15,359)........................................... 14,394 -------- PAR (000) - ---------- REPURCHASE AGREEMENTS(d) -- 8.9% $ 12,527 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Agency securities with various maturities to 05/15/29, market value $12,646 (repurchase proceeds $12,528)............................... 12,527 15,032 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Agency securities with various maturities to 09/15/09, market value $15,230 (repurchase proceeds $15,033).......... 15,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 186 NATIONS MASTER INVESTMENT TRUST Nations Small Company Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(d) -- (CONTINUED) $ 19,571 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Agency securities with various maturities to 03/31/35, market value $19,880 (repurchase proceeds $19,573).......... 19,571 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $47,130)........................................... 47,130 -------- TOTAL INVESTMENTS (Cost of $461,465)(e)............................. 108.8% 575,853 -------- OTHER ASSETS AND LIABILITIES, NET.................................. (8.8)% (46,503) -------- NET ASSETS.......................................... 100.0% $529,350 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $48,099 and $45,943, respectively. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) This amount represents cash collateral received from securities lending activity (see Note 7). (e) Cost for federal income tax purposes is $463,659. ABBREVIATION: ADR -- American Depositary Receipt
At March 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS - ---------------------------------------------------------- Information technology...................... 27.3% Health care................................. 17.8 Consumer discretionary...................... 17.2 Industrials................................. 13.6 Financials.................................. 8.2 Energy...................................... 4.8 Materials................................... 3.7 Telecommunication services.................. 1.7 Consumer staples............................ 1.5 Utilities................................... 1.4 Investment management companies............. 2.7 Repurchase agreements....................... 8.9 Other assets and liabilities, net........... (8.8) ----------- 100.0% ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 187 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
STRATEGIC FOCUSED SMALL COMPANY GROWTH MASTER GROWTH MASTER EQUITIES MASTER MASTER PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------ (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost................. $ 1,770,639 $ 1,419,183 $ 2,303,994 $ 456,984 Affiliated investments, at cost..................... 258,753 5,415 127,891 4,481 -------------- -------------- -------------- -------------- Non-affiliated investments, at value................ 2,176,817 1,502,315 2,940,951 571,372 Affiliated investments, at value.................... 258,753 5,415 127,891 4,481 Cash................................................ 104 -- 139 -- Receivable for investment securities sold........... 6,506 8,256 8,152 6,839 Dividends receivable................................ 1,471 2,327 2,238 91 Interest receivable................................. 279 11 32 15 Other assets........................................ -- -- -- 1 -------------- -------------- -------------- -------------- Total assets.................................... 2,443,930 1,518,324 3,079,403 582,799 -------------- -------------- -------------- -------------- LIABILITIES: Collateral on securities loaned..................... (67,260) (40,796) (78,390) (47,130) Due to custodian bank............................... -- (21) -- (52) Investment advisory fee payable..................... (1,297) (702) (1,616) (324) Administration fee payable.......................... (195) (60) (248) (23) Custody fee payable................................. (18) (16) (28) (8) Payable for investment securities purchased......... (31,302) (1,882) (69,011) (5,864) Accrued Trustees' fees and expenses................. (44) (45) (44) (24) Accrued expenses and other liabilities.............. (23) (42) (24) (24) -------------- -------------- -------------- -------------- Total liabilities............................... (100,139) (43,564) (149,361) (53,449) -------------- -------------- -------------- -------------- NET ASSETS.......................................... $ 2,343,791 $ 1,474,760 $ 2,930,042 $ 529,350 ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 188 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF OPERATIONS For the year ended March 31, 2005
STRATEGIC FOCUSED SMALL COMPANY GROWTH MASTER GROWTH MASTER EQUITIES MASTER MASTER PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------ (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $74, $69, $179 and $6, respectively)................... $ 14,636 $ 33,673 $ 24,137 $ 1,793 Dividend income from affiliated funds............... 1,965 168 1,056 181 Interest............................................ 1,223 5 -- -- Securities lending.................................. 44 75 45 221 -------------- -------------- -------------- -------------- Total investment income......................... 17,868 33,921 25,238 2,195 -------------- -------------- -------------- -------------- EXPENSES: Investment advisory fee............................. 11,839 10,365 19,323 5,277 Administration fee.................................. 1,649 841 2,701 316 Custodian fees...................................... 130 106 218 43 Legal and audit fees................................ 41 42 42 23 Trustees' fees and expenses......................... 21 22 22 22 Interest expense.................................... -- 23 --* 6 Other............................................... 35 53 72 25 -------------- -------------- -------------- -------------- Total expenses.................................. 13,715 11,452 22,378 5,712 Fees waived or reimbursed by investment advisor and/or administrator (see Note 3)................. -- (93) -- -- Fees reduced by credits allowed by the custodian (see Note 3)...................................... (4) (5) (2) (3) -------------- -------------- -------------- -------------- Net expenses.................................... 13,711 11,354 22,376 5,709 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS)........................ 4,157 22,567 2,862 (3,514) -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions............................. (32,908) 399,572 (667) 88,054 Foreign currency and other net assets............. (377) -- (629) -- Net increase from payments by affiliates and net realized gain/(loss) on the disposal of investments in violation of restrictions (see Note 3)......................................... -- 181 -- -- -------------- -------------- -------------- -------------- Net realized gain/(loss) on investments............. (33,285) 399,753 (1,296) 88,054 Change in unrealized appreciation/(depreciation) of securities........................................ 153,557 (339,265) 147,000 (87,351) -------------- -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments....................................... 120,272 60,488 145,704 703 -------------- -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ $ 124,429 $ 83,055 $ 148,566 $ (2,811) ============== ============== ============== ==============
- --------------- * Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 189 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS
GROWTH MASTER PORTFOLIO --------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 --------------------------------- (IN THOUSANDS) Net investment income (loss)................................ $ 4,157 $ 641 Net realized gain/(loss) on investments..................... (33,285) 51,459 Net change in unrealized appreciation/(depreciation) of investments............................................... 153,557 192,452 -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 124,429 244,552 Contributions............................................... 1,172,736 797,051 Withdrawals................................................. (305,651) (279,054) -------------- -------------- Net increase/(decrease) in net assets....................... 991,514 762,549 NET ASSETS: Beginning of period......................................... 1,352,277 589,728 -------------- -------------- End of period............................................... $ 2,343,791 $ 1,352,277 ============== ==============
- --------------- (a)Small Company Master Portfolio commenced operations on November 1, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 190 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
STRATEGIC GROWTH FOCUSED EQUITIES SMALL COMPANY MASTER PORTFOLIO MASTER PORTFOLIO MASTER PORTFOLIO - ----------------------------------- ------------------------------- ----------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED MARCH 31, 2005 MARCH 31, 2004 MARCH 31, 2005 MARCH 31, 2004 MARCH 31, 2005 MARCH 31, 2004 (a) - ----------------------------------------------------------------------------------------------------------- $ 22,567 $ 13,753 $ 2,862 $ (295) $ (3,514) $ (2,084) 399,753 38,802 (1,296) 125,132 88,054 33,844 (339,265) 469,018 147,000 440,064 (87,351) 30,069 -------------- -------------- -------------- -------------- -------------- ----------------- 83,055 521,573 148,566 564,901 (2,811) 61,829 312,192 325,674 719,801 1,146,568 62,652 1,016,295 (779,853) (692,882) (640,299) (593,210) (300,890) (307,725) -------------- -------------- -------------- -------------- -------------- ----------------- (384,606) 154,365 228,068 1,118,259 (241,049) 770,399 1,859,366 1,705,001 2,701,974 1,583,715 770,399 -- -------------- -------------- -------------- -------------- -------------- ----------------- $ 1,474,760 $ 1,859,366 $ 2,930,042 $ 2,701,974 $ 529,350 $ 770,399 ============== ============== ============== ============== ============== =================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 191 NATIONS MASTER INVESTMENT TRUST FINANCIAL HIGHLIGHTS
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF OPERATING NET INVESTMENT OPERATING EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO TOTAL AVERAGE AVERAGE NET TURNOVER AVERAGE RETURN NET ASSETS ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------------------- GROWTH MASTER PORTFOLIO: Year ended 3/31/2005...................... 8.30% 0.83%(a)(b) 0.25% 62% 0.83%(a)(b) Year ended 3/31/2004...................... 33.81 0.87(a)(b) 0.07 94 0.87(a)(b) Year ended 3/31/2003...................... (18.90) 0.87(a)(b) (0.05) 107 0.87(a)(b) Year ended 3/31/2002...................... (0.53) 0.87(a)(b) (0.13) 114 0.87(a)(b) Year ended 3/31/2001...................... --(c) 0.86(a) 0.20 113 0.86(a) STRATEGIC GROWTH MASTER PORTFOLIO: Year ended 3/31/2005...................... 5.18% 0.67%(d) 1.34% 122% 0.68%(a)(b) Year ended 3/31/2004...................... 32.80 0.71(a)(b)(d) 0.74 47 0.71(a)(b) Period ended 3/31/2003(e)................. (22.08) 0.71(a)(b)(f)(g) 0.96(f)(g) 77 0.71(a)(b)(f)(g) FOCUSED EQUITIES MASTER PORTFOLIO: Year ended 3/31/2005...................... 5.76% 0.83%(a)(b) 0.11% 89% 0.83%(a)(b) Year ended 3/31/2004...................... 32.78 0.86(a)(b) (0.01) 96 0.86(a)(b) Year ended 3/31/2003...................... (19.02) 0.86(a)(b) (0.08) 115 0.86(a)(b) Year ended 3/31/2002...................... 3.50 0.86(a)(b) (0.08) 129 0.86(a)(b) Year ended 3/31/2001...................... --(c) 0.86(a)(b) 0.17 134 0.86(a) SMALL COMPANY MASTER PORTFOLIO: Year ended 3/31/2005...................... 0.50% 0.90%(a)(b) 0.56% 59% 0.90%(a)(b) Period ended 3/31/2004(h)................. 51.50 0.98(a)(e) (0.66)(f) 26 0.98(a)(f)
- --------------- (a)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expenses, was less than 0.01%. (b)The effect of interest expense on the operating expense ratio was less than 0.01%. (c)Total return not required for periods indicated. (d)The reimbursement from Investment Advisor (see Note 8) is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement to the operating expense ratio (with waivers) was less than 0.01% for the year ended March 31, 2004. (e)Strategic Growth Master Portfolio commenced operations on May 13, 2002. (f) Annualized. (g)Allocated from Blue Chip Master Portfolio and Focused Equities Master Portfolio, respectively. (h)Small Company Master Portfolio commenced operations on November 1, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 192 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS Nations Master Investment Trust (the "Master Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. At March 31, 2005, the Master Trust offered twelve separate portfolios. These financial statements pertain only to the following portfolios (each a "Master Portfolio" and collectively, the "Master Portfolios"): Nations Marsico Growth Master Portfolio Nations Strategic Growth Master Portfolio Nations Marsico Focused Equities Master Portfolio Nations Small Company Master Portfolio Financial statements for the other portfolios of the Master Trust are presented under separate cover. The following investors were invested in the Master Portfolios at March 31, 2005: GROWTH MASTER PORTFOLIO: Nations Marsico Growth Fund................................. 97.0% Nations Marsico Growth Fund (Offshore)...................... 1.7% Banc of America Capital Management Funds I -- Growth Fund... 1.3% STRATEGIC GROWTH MASTER PORTFOLIO: Nations Strategic Growth Fund............................... 98.7% Nations Strategic Growth Fund (Offshore).................... 1.3% FOCUSED EQUITIES MASTER PORTFOLIO: Nations Marsico Focused Equities Fund....................... 99.1% Nations Marsico Focused Equities Fund (Offshore)............ 0.8% Banc of America Capital Management Funds I -- Focused Equities Fund............................................. 0.1% SMALL COMPANY MASTER PORTFOLIO: Nations Small Company Fund.................................. 97.2% Nations Small Company Fund (Offshore)....................... 2.8%
Certain Master Portfolios invest in securities of foreign issuers. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Master Portfolios to meet their obligations may be affected by economic and political developments in a specific country, industry or region. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolios in the preparation of their financial statements. Securities valuation: Securities, including options and futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on NASDAQ are generally valued at the NASDAQ official closing price. Securities traded only over-the-counter are generally valued at the mean of the latest bid and asked prices. Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. Futures contracts: All Master Portfolios may invest in futures contracts for the purposes of hedging against changes in values of the Portfolios' securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity market. Upon entering into a futures contract, a Master Portfolio is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known 193 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) as the "initial margin." Subsequent payments ("variation margin") are made or received by a Master Portfolio each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Master Portfolios may purchase and write call and put options on securities, futures and swap contracts ("swaptions"). A Master Portfolio may use such options on futures contracts in connection with its hedging strategies in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures, and to seek to enhance return. The Master Portfolios may write covered call options and put options on securities in which they are permitted to invest from time to time in seeking to attain each Master Portfolio's objective. Call options written by a Master Portfolio give the holder the right to buy the underlying securities from the Master Portfolio at a stated exercise price; put options give the holder the right to sell the underlying security to the Master Portfolio at a stated price. In the case of put options, a Master Portfolio is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Master Portfolios may also write combinations of covered puts and calls on the same underlying security. When the Master Portfolio purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Master Portfolio writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Master Portfolios typically receive a premium from writing a put or call option, which would increase the Master Portfolios' return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Master Portfolio limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Master Portfolio assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received. A Master Portfolio may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Master Portfolio will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Master Portfolio. Foreign currency transactions: The books and records of the Master Portfolios are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of a Master Portfolio and the amounts actually received. The effects of changes in foreign currency exchange rates on 194 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) securities are not separately identified 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 securities. Forward foreign currency transactions: Generally, each Master Portfolio may enter into forward foreign currency contracts only under two circumstances: (i) when a Master Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency to "lock in" the U.S. exchange rate of the transaction, with such period being a short-dated contract covering the period between transaction date and settlement date; or (ii) when the investment advisor or sub-advisor believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by a Master Portfolio as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or offset. At March 31, 2005, the Master Portfolios had no open forward foreign currency contracts. Forward foreign currency contracts will be used primarily to protect the Master Portfolio 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 a Master Portfolio's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency contract would limit the risk of loss due to 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 Master Portfolios could be exposed to risks if counterparties to the contracts are unable to meet the terms of their contracts. The counterparty risk exposure is, therefore, closely monitored and contracts are only executed with high credit quality financial institutions. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. Repurchase agreements: Each Master Portfolio may engage in repurchase agreement transactions with institutions that the Master Portfolios' investment advisor has determined are creditworthy. Each Master Portfolio, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon each Master Portfolio's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Each investor in the Portfolio is treated as an owner of its proportionate share of the net assets, income, expenses, realized and unrealized gains and losses of the Portfolio. Federal income taxes: The Master Portfolios are treated as partnerships for federal income tax purposes and therefore are not subject to federal income tax. Each investor in the Master Portfolios will be subject to taxation on its allocated share of the Master Portfolio's ordinary income and capital gains. Expenses: General expenses of the Master Trust are allocated to the Master Portfolios based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Master Portfolio are charged to such Portfolio. Indemnification: In the normal course of business, each Master Portfolio enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Master Portfolio's maximum exposure under these arrangements is unknown, as this would involve future claims against the Master Portfolio that have not yet 195 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) occurred. Also, under the Master Trust's organizational documents, the Trustees and Officers of the Master Trust are indemnified against certain liabilities that may arise out of their duties to the Master Trust. However, based on experience, the Master Portfolios expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS The Master Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Master Portfolios. Effective December 1, 2004, BACAP 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 Master Portfolio:
FEES ON FEES ON FEES ON FEES ON FEES ON FEES ON AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS FIRST $500 MILLION TO $1 BILLION TO $1.5 BILLION TO $3 BILLION TO OVER $500 MILLION $1 BILLION $1.5 BILLION $3 BILLION $6 BILLION $6 BILLION ----------------------------------------------------------------------------------------------------- Growth Master Portfolio... 0.75% 0.70% 0.65% 0.60% 0.58% 0.56% Strategic Growth Master Portfolio............... 0.60% 0.55% 0.50% 0.45% 0.43% 0.41% Focused Equities Master Portfolio............... 0.75% 0.70% 0.65% 0.60% 0.58% 0.56% Small Company Master Portfolio............... 0.70% 0.65% 0.60% 0.60% 0.60% 0.60%
Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Portfolios at the following annual rates:
ANNUAL RATE ------ Growth Master Portfolio..................................... 0.75% Strategic Growth Master Portfolio........................... 0.65% Focused Equities Master Portfolio........................... 0.75% Small Company Master Portfolio.............................. 0.90%
For the year ended March 31, 2005, the effective investment advisory fee rates for the Portfolios were as follows:
EFFECTIVE RATE --------- Growth Master Portfolio..................................... 0.72% Strategic Growth Master Portfolio........................... 0.62% Focused Equities Master Portfolio........................... 0.72% Small Company Master Portfolio.............................. 0.84%
The Master Trust has, on behalf of the Growth and Focused Equities Master Portfolios, entered into a sub-advisory agreement with BACAP and Marsico Capital Management, LLC ("Marsico"), a wholly-owned subsidiary of Bank of America, pursuant to which Marsico is entitled to receive a sub-advisory fee from BACAP at the annual rate of 0.45% of each Master Portfolio's average daily net assets. BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of the Master Trust. Under the administration agreement, BACAP Distributors is entitled to receive a fee, computed daily and paid monthly, at the following annual rates:
ANNUAL RATE ------ Growth Master Portfolio..................................... 0.10% Strategic Growth Master Portfolio........................... 0.05% Focused Equities Master Portfolio........................... 0.10% Small Company Master Portfolio.............................. 0.05%
The Bank of New York ("BNY") serves as sub-administrator of the Master Trust pursuant to an agreement with BACAP Distributors. 196 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) BNY serves as the custodian of the Master Trust's assets. For the year ended March 31, 2005, Small Company Master Portfolio paid brokerage commissions of $11,325 to certain affiliates of BACAP in connection with the execution of various portfolio transactions. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from the Master Trust for serving as a Trustee or Officer of the Master Trust. The Master Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Master Portfolios' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, a portfolio of Nations Funds Trust, another registered investment company advised by BACAP. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. The Master Portfolios have made daily investments of cash balances in Nations Cash Reserves, a portfolio of Nations Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Master Portfolio from such investments is included in its Statement of operations as "Dividend income from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Master Portfolios. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADVISORY FEES ADMINISTRATION FEES (EARNED BY BACAP) (EARNED BY BACAP DISTRIBUTORS) FUND (000) (000) - -------------------------------------------------------------------------------------------------------------- Growth Master Portfolio.................................. $120 $63 Strategic Growth Master Portfolio........................ 15 8 Focused Equities Master Portfolio........................ 88 45 Small Company Master Portfolio........................... 15 8
3. TOTAL OPERATING EXPENSE LIMITATIONS The Master Portfolios have an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Master Portfolios could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. During the year ended March 31, 2005, BACAP ascertained that it caused the Strategic Growth Master Portfolio to exceed certain investment restrictions imposed by the 1940 Act and conditions in exemptive orders granted to the Strategic Growth Master Portfolio. BACAP reimbursed the Strategic Growth Master Portfolio for all losses incurred resulting from the sale of securities required to bring the Strategic Growth Master Portfolio within its investment limits. The amount of the reimbursement, during the year ended March 31, 2005, is as follows: Strategic Growth............................................ $181,227
In addition to this reimbursement BACAP reimbursed advisory fees paid on the value of assets held in excess of the value allowed by the exemptive order. The amount of the reimbursement is included in the Statements of operations in "Fees waived by investment advisor and/or administrator". The amount of the reimbursement is as follows: Strategic Growth............................................ $92,939
197 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. FEDERAL TAX INFORMATION Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION (DEPRECIATION) (000) (000) (000) ---------------------------------------------- Growth Master Portfolio..................................... $411,351 $ (8,934) $402,417 Strategic Growth Master Portfolio........................... 124,506 (44,587) 79,919 Focused Equities Master Portfolio........................... 659,523 (29,632) 629,891 Small Company Master Portfolio.............................. 133,833 (21,639) 112,194
5. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005, were as follows:
PURCHASES SALES (000) (000) ------------------------ Growth Master Portfolio..................................... $1,711,524 $ 973,768 Strategic Growth Master Portfolio........................... 2,026,035 2,457,411 Focused Equities Master Portfolio........................... 2,628,591 2,348,150 Small Company Master Portfolio.............................. 367,481 594,620
6. LINE OF CREDIT The Master Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Master Portfolio maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Master Portfolios had no borrowings outstanding at March 31, 2005. During the year ended March 31, 2005, borrowings by the Master Portfolios under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST PORTFOLIO (000) RATE - -------------------------------------------------------------------------------------- Strategic Growth Master Portfolio........................... $542 2.66% Focused Equities Master Portfolio........................... 23 1.93 Small Company Master Portfolio.............................. 232 2.23
- --------------- *The average amount outstanding was calculated based on daily balances in the period. 7. SECURITIES LENDING Under an agreement with BNY, the Master Portfolios may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Master Portfolio. Generally, in the event of borrower default, the Master Portfolio has the right to use the collateral to offset any losses incurred. In the event the Master Portfolio is delayed or prevented from exercising its right to dispose of the collateral, there may be a 198 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) potential loss to the Master Portfolio. The Master Portfolio bears the risk of loss with respect to the investment of collateral. The income earned by each Master Portfolio from securities lending is included in its Statement of operations. At March 31, 2005, the following Master Portfolios had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL (000) (000) ---------------------------------- Growth Master Portfolio..................................... $65,736 $67,260 Strategic Growth Master Portfolio........................... 39,813 40,796 Focused Equities Master Portfolio........................... 76,709 78,390 Small Company Master Portfolio.............................. 45,943 47,130
8. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL 199 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. The Master Portfolios are not currently named as defendants in the MDL. The Master Portfolios can not predict if they will be added as parties to the MDL, and if they are added, whether the litigation will have any impact on them. 200 NATIONS MASTER INVESTMENT TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS MASTER INVESTMENT TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Marsico Growth Master Portfolio, Nations Strategic Growth Master Portfolio, Nations Marsico Focused Equities Master Portfolio and Nations Small Company Master Portfolio (constituting part of Nations Master Investment Trust, hereafter referred to as the "Portfolios") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 201 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director -- Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
202 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
203 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 204 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS: Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Boards of Trustees (the "Boards") of Nations Funds Trust and Nations Master Investment Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory and sub-advisory agreements and are not "interested persons" of the Trusts, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory and sub-advisory agreements and approve any newly proposed terms therein. In this regard, the Boards reviewed and re-approved, during the most recent six months covered by this report: (i) an investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for Nations Convertible Securities Fund, Nations Asset Allocation Fund, Nations Value Fund, Nations MidCap Value Fund, Nations SmallCap Value Master Portfolio, Nations Marsico Growth Master Portfolio, Nations Strategic Growth Master Portfolio, Nations Marsico Focused Equities Master Portfolio, Nations Marsico MidCap Growth Fund (formerly named Nations MidCap Growth Fund), Nations Marsico 21st Century Master Portfolio and Nations Small Company Master Portfolio; and (ii) an investment sub-advisory agreement with Marsico Capital Management, LLC ("Marsico Capital" or the "Sub-Adviser") for Nations Marsico Growth Master Portfolio, Nations Marsico Focused Equities Master Portfolio and Nations Marsico 21st Century Master Portfolio. The investment advisory agreement with BACAP and the investment sub-advisory agreement with Marsico Capital are each referred to as an "Advisory Agreement" and collectively referred to as the "Advisory Agreements." The funds and master portfolios identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at meetings held on November 17-18, 2004, the Boards, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the Sub-Adviser and the re-approval of the Advisory Agreements. NATURE, EXTENT AND QUALITY OF SERVICES The Boards received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP and the Sub-Adviser under the Advisory Agreements. The most recent investment adviser registration forms ("Forms ADV") for BACAP and the Sub-Adviser were provided to the Boards, as were responses of BACAP and the Sub-Adviser to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Boards reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by, investment personnel of BACAP and the Sub-Adviser. In this regard, the Boards specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Boards received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds, BACAP and the Sub-Adviser. The Boards considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Boards also considered the Funds' Chief Compliance Officer's report and recommendations. The Boards evaluated the ability of BACAP and the Sub-Adviser, including their respective resources, reputations and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Boards considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Boards considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Boards concluded that they were generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP and the Sub-Adviser. 205 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS: (CONTINUED) FUND PERFORMANCE AND EXPENSES The Boards considered the one-year, three-year, five-year and ten-year performance results for each of the Funds, as relevant. They also considered these results in comparison to the performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain Funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that of expenses to provide a more accurate basis of comparison. The Boards were provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. The Boards also considered information in the Lipper data that ranked each Fund based on: (i) each Fund's one-year performance compared to actual management fees; (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Boards of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Boards (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Boards considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Boards also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Boards noted that the performance results for each Fund, except Nations Asset Allocation Fund and Nations Marsico MidCap Growth Fund was better than, or not substantially below each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Nations Funds Trust Board noted that Nations Asset Allocation Fund required additional review as a result of its negative performance in the ranking of three-year performance compared to actual management fees. Upon further review of the Fund, however, the Boards noted that the Fund had improved its performance and achieved a 2nd quintile ranking against its Universe in the one-year period and that total expenses of the Fund were lower than the median total expense ratio of its Peer Group. The Nations Funds Trust Board also noted that Nations Marsico MidCap Growth Fund had been brought to their attention by Management in part based on its 5th quintile performance rankings for its three-year period and 4th quintile ranking in Actual Management Fees. After additional research into the data and information provided by Management, the Board noted that the Fund's total expense ratio was the second lowest in its Peer Group and that, effective November 2, 2004, Marsico Capital would provide portfolio management services as the new sub-adviser to the Fund to address performance issues. The Boards received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. They also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. The Boards noted that the total expense ratios of Nations Asset Allocation Fund, Nations Value Fund, Nations MidCap Value Fund, Nations SmallCap Value Master Portfolio, Nations Strategic Growth Master Portfolio, Nations Marsico MidCap Growth Fund, Nations Marsico 21st Century Master Portfolio and Nations Small Company Master Portfolio were lower than, or not appreciably above, each Fund's Peer Group's median overall ratio and did not require significant additional consideration by the Boards. As with their review of each Fund's performance, Funds that performed poorly or below average with respect to their total expense ratios were highlighted by Management for further review by the Boards. The Nations Funds Trust Board 206 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS: (CONTINUED) noted that the overall expense ratio of Nations Convertible Securities Fund was appreciably higher than its Peer Group's median overall ratio as a result of the Fund's 5th quintile rating against its Peer Group in contractual and actual management fees and total expenses. However, the Board observed that management has proposed to lower the overall expense ratio for the Fund and that the Fund outperformed, or did not perform appreciably below, its Peer Group for the one- and three-year periods, respectively. The Nations Master Investment Trust Board also noted that the overall expense ratio of Nations Marsico Growth Master Portfolio was appreciably higher than its Peer Group's median overall ratio as a result of the Fund's 4th quintile rating against its Peer Group in total expenses and 5th quintile rating in contractual and actual management fees. However, the Board observed that management has proposed to lower the total expenses of the Fund and that the Fund ranked at the top of its Peer Group in performance for its one- and three-year periods. The Nations Master Investment Trust Board noted that the overall expense ratio of Nations Marsico Focused Equities Master Portfolio was appreciably higher than its Peer Group's median overall expense ratio as a result of its 4th quintile rating in total expenses and 5th quintile rating in contractual management fees and actual management fees. However, the Board also observed that the Fund ranked in the 1st quintile for performance against its Peer Group for the life of the Fund, excluding the most recent one-year period, and that Management has proposed to lower the total expense ratio of the Fund. Management also discussed the Lipper data and rankings, and other relevant information, for each Fund. Based on the above-referenced considerations and other factors, the Boards concluded that the overall performance and expense results supported the re-approval of the Advisory Agreements for each Fund. INVESTMENT ADVISORY AND SUB-ADVISORY FEE RATES The Boards reviewed and considered the proposed contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). The Boards also reviewed and considered the proposed contractual investment sub-advisory fee rates (the "Sub-Advisory Agreement Rates") payable by BACAP to the Sub-Adviser for investment sub-advisory services. In addition, the Boards reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). The Boards noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain affiliates relating to trading in mutual fund shares. At the November meetings, the Boards also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Boards also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. Additionally, the Boards received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Boards concluded that the respective Net Advisory Rates for the Funds, except Nations Convertible Securities Fund, Nations Marsico Growth Master Portfolio, Nations Marsico Focused Equities Master Portfolio and Nations Strategic Growth Master Portfolio, were lower than, or not appreciably higher than, the median rates of each Fund's Peer Group and did not warrant significant additional consideration. The Boards noted that the Advisory Agreement Rates and Net Advisory Rates for Nations Convertible Securities Fund, Nations Marsico Growth Master Portfolio and Nations Marsico Focused Equities Master Portfolio necessitated additional review. The Boards noted that the while the Advisory Agreement Rates and Net Advisory rates for Nations Convertible Securities Fund were in the 5th quintile, the Fund ranks in the 1st and 3rd quintiles for its one- and three-year performance periods, respectively. The Boards also noted that while the Advisory Agreement Rates and Net Advisory rates for Nations Marsico Growth Master Portfolio were in the 5th quintile, the Fund ranked in the 1st quintile for the one- and three-year performance periods. Similarly, while the Advisory Agreement Rates and Net Advisory Rates for Nations Marsico Focused Equities Master Portfolio were in the 5th quintile, the Fund ranked in the 1st quintile for its 207 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS: (CONTINUED) three-year period. The Boards also noted that while the ranking of Nations Strategic Growth Master Portfolio compared to three-year performance was negative, the Fund ranks in the 2nd quintile in total expense ratios. With regard to the Funds sub-advised by Marisco Capital, the Nations Master Investment Trust Board also reviewed the Sub-Advisory Agreement Rates charged by Marisco Capital, which serves as Sub-Adviser to certain of the Funds. The Board concluded that the Sub-Advisory Agreement Rates were fair and equitable, based on its consideration of the factors described above. PROFITABILITY The Boards received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates, including Marsico Capital. The Boards concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates, including Marsico Capital, received with regard to providing these services to the Funds were not unreasonable. ECONOMIES OF SCALE The Boards received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Boards concluded that any actual or potential economies of scale are, or will be, shared fairly with Fund shareholders, most particularly through the newly-approved Advisory Agreement Rate breakpoints effective December 1, 2004. The Nations Funds Trust Board did not approve such breakpoints for Nations Asset Allocation Fund. However, the Board considered the Advisory Agreement Rate of the Fund and concluded that the fees were fair and equitable based on relevant factors, including the Fund's performance results. The Boards acknowledged the inherent limitations of any analysis of an investment adviser's economies of scale and of any attempt to correlate breakpoints with such economies, stemming largely from the Boards' understanding that economies of scale are realized, if at all, by an investment adviser across a variety of products and services, not just with respect to a single fund. INFORMATION ABOUT SERVICES TO OTHER CLIENTS The Boards also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP to its other clients, including institutional investors. The Boards considered that Marsico Capital did not provide such information because it treats such information as confidential. The Boards concluded that the Advisory Agreement Rates and the Net Advisory Rates were within a reasonable range of the fee rates offered to other BACAP clients. Where rates offered to other clients of BACAP were appreciably lower, the Boards concluded, based on information provided by BACAP, that the costs associated with managing and operating a registered open-end fund, compared with an institutional investor account, provided a justification for the higher fee rates charged to the Funds. The Nations Master Investment Trust Board did not receive comparative fee rate materials for the Sub-Adviser, but concluded that the Sub-Advisory Agreement Rates were fair and equitable based on other considerations, including the performance of Funds as sub-advised by the Sub-Adviser. The Board also noted that the sub-advisory fees are paid to the Sub-Adviser by BACAP and not directly by the Funds, and that the Board separately determined that the Advisory Agreement Rates for the sub-advised Funds were fair and equitable. OTHER BENEFITS TO BACAP AND THE SUB-ADVISERS The Boards received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates, including the Sub-Adviser, as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP and the Sub-Adviser with the Funds (such as 208 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS: (CONTINUED) soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP and the Sub-Adviser as a result of their relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates or the Sub-Adviser and its affiliates). The Boards also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, including whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Boards also reviewed the respective policies of BACAP and the Sub-Adviser regarding the allocation of portfolio investment opportunities among the Funds and other clients. OTHER FACTORS AND BROADER REVIEW The Boards also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Boards noted that the Funds in the Nations Funds complex are generally utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. The Nations Funds Trust Board noted that Marsico Capital became the sub-adviser to Nations Marsico MidCap Growth Fund in August 2004, and therefore is not yet subject to an annual re-approval requirement. Nonetheless, the Board reviewed certain information related to Marsico Capital as a part of its overall review of the Advisory Agreements of the Funds. As discussed above, the Boards review detailed materials received from BACAP and the Sub-Adviser annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Boards also regularly review and assess the quality of the services that the Funds receive throughout the year. In this regard, the Boards review reports of BACAP and the Sub-Adviser at least in each of their quarterly meetings, which include, among other things, a detailed portfolio review, and detailed fund performance reports. In addition, the Boards interview the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and their evaluation of the information provided to them, the Boards concluded that re-approval of the Advisory Agreements for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Boards unanimously re-approved the Advisory Agreements. 209 NATIONS FUNDS SHAREHOLDER MEETING RESULTS UNAUDITED RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - ------------------------------------------------------------------------------------------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
SHAREHOLDER MEETING RESULTS RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Master Investment Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 996,970,350 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - ------------------------------------------------------------------------------------------- Edward J. Boudreau, Jr. .................................... 911,066,248 4,746,035 William P. Carmichael....................................... 911,023,809 4,788,474 William A. Hawkins.......................................... 911,084,335 4,727,928 R. Glenn Hilliard........................................... 911,060,388 4,751,895 Minor M. Shaw............................................... 911,038,474 4,773,809
210 THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF BANC OF AMERICA CAPITAL MANAGEMENT INTERNATIONAL/ GLOBAL Within each category, FUNDS the funds are listed from aggressive to conservative. EQUITY Nations Marsico FUNDS International FIXED Opportunities Fund INCOME FUNDS GROWTH FUNDS Nations International MONEY Equity Fund MARKET Nations Small FUNDS TAXABLE Company Fund Nations International INCOME FUNDS Value Fund Nations Marsico Nations Cash Nations High Yield 21st Century Fund Nations Global Reserves Bond Fund Value Fund Nations MidCap Nations Money Nations Strategic Growth Fund Market Reserves Income Fund Nations Marsico LOWER RISK/REWARD POTENTIAL Nations Government Nations Bond Fund Focused Equities Reserves Fund Nations Intermediate Nations Treasury Bond Fund Nations Marsico Reserves Growth Fund Nations Government Nations Tax-Exempt Securities Fund Reserves BLEND FUNDS SPECIALTY FUNDS Nations Short- Nations Municipal Intermediate Nations Asset Reserves Government Fund Allocation Fund INDEX FUNDS Nations California Nations Short-Term Nations Strategic Nations SmallCap Index Fund Tax-Exempt Reserves Income Fund Growth Fund Nations MidCap Index Fund Nations New York Tax-Exempt Reserves TAX-EXEMPT VALUE FUNDS Nations LargeCap Index Fund INCOME FUNDS Nations SmallCap Nations LargeCap Enhanced Nations Municipal Value Fund Core Fund Income Fund Nations MidCap Nations State-Specific Value Fund ASSET ALLOCATION Long-Term Municipal PORTFOLIOS Bond Funds (CA, FL) Nations Value Fund Nations LifeGoal Nations Intermediate Growth Portfolio Municipal Bond Fund Nations LifeGoal Balanced Nations State-Specific Growth Portfolio Intermediate Municipal Bond Funds (CA, FL, Nations LifeGoal Income and GA, KS, MD, NC, SC, Growth Portfolio TN, TX, VA) Nations LifeGoal Nations Short-Term Income Portfolio Municipal Income Fund OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/056V-0405 (05/05) 05/5843
Nations Cash Reserves Nations Money Market Reserves Nations Treasury Reserves Nations Government Reserves Nations Municipal Reserves Nations Money Market Funds Nations Tax-Exempt Annual report for the year ended Reserves March 31, 2005 Nations California Tax-Exempt Reserves Nations New York Tax-Exempt Reserves [NATIONS FUNDS LOGO] A description of the policies and procedures that the funds use to determine how to vote proxies and a copy of the funds' voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment advisor to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [PHOTO WILSON] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, - -s- CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS DISCLOSURE OF FUND EXPENSES AND PORTFOLIO HOLDINGS Nations Cash Reserves 3 Nations Money Market Reserves 6 Nations Treasury Reserves 9 Nations Government Reserves 12 Nations Municipal Reserves 15 Nations Tax-Exempt Reserves 18 Nations California Tax-Exempt Reserves 21 Nations New York Tax-Exempt Reserves 24 FINANCIAL STATEMENTS Investment Portfolios 27 Statements of assets and liabilities 92 Statements of operations 98 Statements of changes in net assets 100 Schedules of capital stock activity 104 Financial highlights 112 Notes to financial statements 144 Report of independent registered public accounting firm 157 Tax information 158 Fund governance 159 Board consideration and re-approval of investment advisory agreement 162 Shareholder meeting results 166
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. NATIONS CASH RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. 3 NATIONS CASH RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED)
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,010.22 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,010.02 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,009.72 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,009.47 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,008.98 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,008.48 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Market Class 1,000.00 1,000.00 1,007.88 1,021.69 3.25 3.28 0.65 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,007.18 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,007.93 1,021.69 3.25 3.28 0.65 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,004.69 1,018.45 6.50 6.54 1.30 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,004.69 1,018.45 6.50 6.54 1.30 - ----------------------------------------------------------------------------------------------------------------------------------- Marsico 1,000.00 1,000.00 1,008.48 1,022.19 2.75 2.77 0.55
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 4 NATIONS CASH RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.9% Funding agreements* 2.4% Municipal bonds and notes 2.6% Asset-backed securities 3.2% Mortgage-backed securities 3.9% Extendable commercial notes 4.3% Repurchase agreements 16.4% Government agencies and obligations 17.6% Commercial paper 21.6% Certificates of deposit 26.1% Corporate bonds and notes
* NET OF OTHER ASSETS AND LIABILITIES PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 5 NATIONS MONEY MARKET RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. 6 NATIONS MONEY MARKET RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED)
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE END EXPENSES PAID DURING FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) OF THE PERIOD ($) THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,010.17 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,009.97 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,009.67 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,009.42 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,008.88 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,008.38 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,007.13 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Service Class 1,000.00 1,000.00 1,006.13 1,019.95 5.00 5.04 1.00 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,004.64 1,018.45 6.50 6.54 1.30 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,004.64 1,018.45 6.50 6.54 1.30
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 7 NATIONS MONEY MARKET RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.8% Asset-backed securities 2.6% Mortgage-backed securities 3.2% Municipal bonds and notes 11.8% Repurchase agreements 15.5% Commercial paper 16.9% Government agencies and obligations 17.3% Certificates of deposit 30.8% Corporate bonds and notes 0.1% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 8 NATIONS TREASURY RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,009.32 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,009.12 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,008.83 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,008.58 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,008.08 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,007.58 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,006.33 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,007.08 1,021.69 3.25 3.28 0.65 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,003.79 1,018.45 6.49 6.54 1.30
9 NATIONS TREASURY RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 10 NATIONS TREASURY RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 35.4% U.S. Treasury obligations 64.5% Repurchase agreements 0.1% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 11 NATIONS GOVERNMENT RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,009.87 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,009.67 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,009.37 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,009.12 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,008.63 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,008.13 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,006.88 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,007.63 1,021.69 3.25 3.28 0.65 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,004.39 1,018.45 6.50 6.54 1.30
12 NATIONS GOVERNMENT RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 13 NATIONS GOVERNMENT RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 99.8% U.S. Government agencies and obligations 0.2% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 14 NATIONS MUNICIPAL RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,007.93 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,007.73 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,007.43 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,007.18 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,006.68 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,006.18 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,004.94 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,002.44 1,018.45 6.49 6.54 1.30
15 NATIONS MUNICIPAL RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 16 NATIONS MUNICIPAL RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 100.0% Municipal bonds and notes*
* NET OF OTHER ASSETS AND LIABILITIES PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 17 NATIONS TAX-EXEMPT RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,007.83 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,007.63 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,007.33 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,007.08 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,006.58 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,006.08 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,004.79 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,005.58 1,021.69 3.25 3.28 0.65
18 NATIONS TAX-EXEMPT RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 19 NATIONS TAX-EXEMPT RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.2% Variable rate demand notes 97.9% Municipal bonds and notes 1.9% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 20 NATIONS CALIFORNIA TAX-EXEMPT RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,007.68 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,007.48 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,007.18 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Liquidity Class 1,000.00 1,000.00 1,006.93 1,023.19 1.75 1.77 0.35 - ----------------------------------------------------------------------------------------------------------------------------------- Adviser Class 1,000.00 1,000.00 1,006.43 1,022.69 2.25 2.27 0.45 - ----------------------------------------------------------------------------------------------------------------------------------- Investor Class 1,000.00 1,000.00 1,005.93 1,022.19 2.75 2.77 0.55 - ----------------------------------------------------------------------------------------------------------------------------------- Daily Class 1,000.00 1,000.00 1,004.69 1,020.94 4.00 4.03 0.80 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,002.19 1,018.45 6.49 6.54 1.30
21 NATIONS CALIFORNIA TAX-EXEMPT RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor, Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 22 NATIONS CALIFORNIA TAX-EXEMPT RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 100.0% Municipal bonds and notes*
* NET OF OTHER ASSETS AND LIABILITIES PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 23 NATIONS NEW YORK TAX-EXEMPT RESERVES SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Capital Class 1,000.00 1,000.00 1,007.68 1,023.93 1.00 1.01 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,000.00 1,000.00 1,007.48 1,023.73 1.20 1.21 0.24 - ----------------------------------------------------------------------------------------------------------------------------------- Trust Class 1,000.00 1,000.00 1,007.18 1,023.44 1.50 1.51 0.30 - ----------------------------------------------------------------------------------------------------------------------------------- Market Class 1,000.00 1,000.00 1,005.44 1,021.69 3.25 3.28 0.65
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor and/or Administrator not reimbursed a portion of expenses, total return would have been reduced. 24 NATIONS NEW YORK TAX-EXEMPT RESERVES SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 25 NATIONS NEW YORK TAX-EXEMPT RESERVES PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 99.4% Municipal bonds and notes 0.6% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 26 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ CORPORATE BONDS AND NOTES -- 26.1% CONSUMER CYCLICAL -- 0.1% AUTO MANUFACTURERS -- 0.1% $ 36,000 Toyota Motor Credit Corp. 2.820% 09/09/05(a).......................................... $ 36,019 ----------- CONSUMER NON-CYCLICAL -- 0.0% COMMERCIAL SERVICES -- 0.0% 8,500 Kinder Care Learning Centers 3.250% 05/01/09(a)(c)....................................... 8,500 ----------- FOOD -- 0.0% 4,150 Mark-Lynn Foods, Inc. 2.920% 06/01/11(b).......................................... 4,150 ----------- HEALTHCARE SERVICES -- 0.0% 1,480 Massachusetts Nursing 2.870% 11/15/13(b).......................................... 1,480 ----------- 14,130 ----------- FINANCIALS -- 26.0% BANKS -- 6.4% 250,000 American Express Bank 2.780% 05/13/05(a).......................................... 249,994 100,000 American Express Bank 2.810% 05/27/05............................................. 99,997 100,000 Amsouth Bank N.A. 2.795% 04/28/05............................................. 99,998 125,000 Bank of New York Co. 2.870% 06/27/05(a)(c)....................................... 125,000 80,000 Barclays Bank PLC 2.990% 09/29/05............................................. 79,977 415,000 Canadian Imperial Bank of Commerce 2.955% 12/30/05............................................. 415,000 50,000 Columbus Bank & Trust 2.900% 12/23/05(a).......................................... 50,000 200,000 Fifth Third Bank 2.800% 04/28/05(a).......................................... 199,999 Key Bank N.A. 1,000,000 2.813% 04/01/05(a).......................................... 1,000,000 250,000 2.844% 04/01/05(a).......................................... 250,000 75,000 National City Bank 2.825% 10/31/05(a).......................................... 74,998 20,000 Southtrust Bank N.A. 2.810% 05/02/05(a).......................................... 20,002 299,250 Toronto Dominion Bank 2.660% 11/09/05............................................. 299,213 283,000 Wells Fargo Bank N.A. 2.790% 04/29/05(a).......................................... 282,999 ----------- 3,247,177 -----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- 19.7% $ 1,515 2320 Properties LLC 2.860% 11/01/22(b)(c)....................................... $ 1,515 2,670 2440 LLC 2.860% 05/01/24(b)(c)....................................... 2,670 330 4-L Co of Carmel 2.900% 11/01/13(b).......................................... 330 9,200 A & M Hospital Convention Center 2.640% 01/01/25(b).......................................... 9,200 3,325 Acme Paper & Supply Co. 2.980% 09/15/20(c).......................................... 3,325 American Express Credit Corp. 300,000 2.826% 04/05/05(b).......................................... 300,000 82,000 2.880% 04/20/06(b)(c)....................................... 82,043 8,655 Arogas, Inc. 2.960% 12/01/10(b)(c)....................................... 8,655 3,930 Atlanta Bread Company 2.920% 09/01/23(b).......................................... 3,930 1,750 Avatar Corp. 2.860% 05/01/39(c).......................................... 1,750 80,000 Bear Stearns Companies, Inc. 3.125% 05/23/05(b).......................................... 80,019 4,605 Berkeley Realty Co. LLC 2.960% 03/01/22............................................. 4,605 4,380 Berks Medical Realty LP 2.910% 03/01/26(c).......................................... 4,380 Beta Finance, Inc. 207,000 2.485% 11/07/05(c).......................................... 206,969 195,000 2.800% 01/24/06(b)(c)....................................... 194,968 300,000 BNP Paribas 2.793% 04/15/05............................................. 299,997 1,060 Bracalente Manufacturing Co. 3.010% 06/01/08(b).......................................... 1,060 5,550 Brewster Dairy, Inc. 2.920% 04/03/23(b).......................................... 5,550 1,450 Brookville Enterprise, Inc. 2.860% 10/01/25(b).......................................... 1,450 4,650 Brookwood Baptist Church 2.970% 12/01/23(b).......................................... 4,650 10,000 Brosis Finance LLC 2.850% 09/01/19(b).......................................... 10,000 90,000 Caterpillar Financial Service Corp. 3.060% 06/01/05(b).......................................... 90,000 CC USA, Inc. 204,000 2.485% 11/04/05(c).......................................... 203,970 65,000 2.780% 01/17/06(b)(c)....................................... 64,990 261,000 2.800% 01/25/06(b)(c)....................................... 260,957 160,000 Chase Manhattan Bank 2.721% 05/11/05............................................. 160,000 6,800 Chatham Capital Corp. 2.810% 11/01/28(b).......................................... 6,800 7,296 Clinic Building LLC 2.920% 02/01/23(b).......................................... 7,296 1,515 Cole Investments LLC 2.860% 07/01/19(b).......................................... 1,515 2,210 Colortech, Inc. 2.900% 07/01/22............................................. 2,210
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 27 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 100,000 Columbus Bank & Trust 2.800% 03/09/06............................................. $ 100,000 1,475 Commodore Medical Services LP 2.860% 08/01/23(b).......................................... 1,475 12,450 Conestoga Wood Specialities Corp. 2.890% 03/01/14(b)(c)....................................... 12,450 5,895 Cornell Iron Works, Inc. 2.910% 04/01/19(b).......................................... 5,895 Credit Suisse First Boston 50,000 2.760% 11/04/05(a).......................................... 50,012 75,000 3.110% 12/29/05(a).......................................... 75,006 5,000 Crosspoint Community Church 2.970% 09/01/23(b).......................................... 5,000 2,700 Cumberland College 2.860% 10/01/23(b).......................................... 2,700 1,695 DAPSCO, Inc. 2.860% 02/01/15(b)(c)....................................... 1,695 4,600 Dauphine Orleans Hotel Corp. 2.970% 12/01/20(b).......................................... 4,600 3,240 Defiance Metal Co. 2.970% 09/09/09(b).......................................... 3,240 800 Derby Fabricating LLC 2.860% 06/01/24(b).......................................... 800 8,155 DJD Investments LLC 2.970% 04/01/24(b).......................................... 8,155 170,000 Dorada Finance, Inc. 2.800% 01/25/06(b)(c)....................................... 169,972 18,055 Driftwood Landing Corp. 2.920% 01/15/22(b).......................................... 18,055 7,800 Eastridge Christian Assessment 2.880% 08/01/29(b).......................................... 7,800 3,000 Eau Claire Cooperative Health 2.970% 12/01/19(b).......................................... 3,000 4,315 EB & B Properties LLC 3.020% 06/01/22(b).......................................... 4,315 5,798 Edgewater Partner LP 2.950% 05/01/29(b).......................................... 5,798 1,000 Executive Management 2.860% 10/01/44(b).......................................... 1,000 2,980 FE LLC 2.810% 04/01/28(b).......................................... 2,980 3,000 First United Pentecostal 2.970% 03/01/23(b).......................................... 3,000 3,345 Florida Orthopedic Institute Surgery Center LLC 2.960% 01/01/26(b)(c)....................................... 3,345 4,775 Galday Inn, Inc. 2.960% 12/01/20(b)(c)....................................... 4,775 13,750 Garlands of Barrington Lenders, Inc. 2.850% 04/01/32(b).......................................... 13,750 3,965 Greenbrier Partners LLC 2.920% 08/01/19(b)(c)....................................... 3,965 3,130 Han Sung Industries LLC 2.960% 06/01/21(b)(c)....................................... 3,130
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) Harrier Finance Funding LLC $ 100,000 2.790% 09/15/05(b)(c)....................................... $ 99,996 115,000 2.780% 01/17/06(b)(c)....................................... 114,995 7,395 Hospital Laundry Services, Inc. 2.930% 08/01/23(b)(c)....................................... 7,395 Jackson Tube Service, Inc. 3,300 2.960% 12/01/15(b)(c)....................................... 3,300 7,160 James A Marin & Donna F. Martin 2.910% 07/01/20(b).......................................... 7,160 2,000 Johnson Bible College 2.970% 09/01/18(b).......................................... 2,000 5,160 Johnson Research & Development Co. 2.910% 09/01/16(b)(c)....................................... 5,160 145 JX Enterprises Group 2.900% 07/01/14(b)(c)....................................... 145 K2 (USA) LLC 80,000 2.385% 09/13/05(c).......................................... 79,998 100,000 2.666% 02/01/06(b)(c)....................................... 99,983 125,000 2.696% 02/07/06(b)(c)....................................... 124,979 118,000 2.700% 02/08/06(b)(c)....................................... 117,980 100,000 2.800% 09/30/05(b)(c)....................................... 99,995 200,000 2.805% 10/25/05(b)(c)....................................... 199,972 130,000 2.800% 01/24/06(b)(c)....................................... 129,979 100,000 2.800% 02/15/06(b)(c)....................................... 100,015 11,925 King & Prince Seafood Corp. 2.900% 11/01/13(b).......................................... 11,925 2,770 L & H Holdings LLC 3.070% 12/01/24(b).......................................... 2,770 12,885 L.E. Pope Building Co. 2.910% 11/01/13(b)(c)....................................... 12,885 Liberty Lighthouse Co. LLC 100,000 Discount Note 04/05/06(b)(c)................................ 99,990 50,000 2.509% 01/27/06(b)(c)....................................... 49,980 50,000 2.655% 02/01/06(b)(c)....................................... 49,998 100,000 2.681% 02/02/06(b)(c)....................................... 99,992 100,000 2.735% 03/15/06(b)(c)....................................... 99,995 25,000 2.765% 02/14/06(b)(c)....................................... 24,999 100,000 2.815% 03/22/06(b)(c)....................................... 99,995 99,000 3.440% 03/01/06(b)(c)....................................... 99,000 12,240 Lincoln Park Associates LP 2.990% 11/01/22(b).......................................... 12,240 Links Finance LLC 275,000 2.180% 07/15/05(c).......................................... 274,992 75,000 2.853% 05/25/05(c).......................................... 75,002 200,000 2.666% 02/01/06(b)(c)....................................... 199,966 110,000 2.800% 09/29/05(b)(c)....................................... 109,984 7,940 Loft Quest LLC 2.930% 06/01/27(b)(c)....................................... 7,940 3,185 Long Term Capital LLC 2.970% 05/01/18(b).......................................... 3,185 50,700 LP Pinewood SPV LLC 2.860% 02/01/18(b).......................................... 50,700 2,150 M & P Richfield LLC 2.920% 10/01/28(b).......................................... 2,150
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 28 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 185 Macatawa Capital Partners LLC 3.030% 04/01/29(b).......................................... $ 185 3,000 Marital Trust 2.970% 12/01/09............................................. 3,000 7,740 Marsh Enterprise LLC 2.810% 01/01/28(b).......................................... 7,740 2,865 Maryland Industrial 2.930% 08/01/18(b)(c)....................................... 2,865 1,560 Max Daetwyler Corp. 3.030% 07/01/13(b)(c)....................................... 1,560 5,856 Michael J Barry 2.970% 11/01/24(b).......................................... 5,856 2,250 Midtown Church of Christ 3.050% 11/01/22............................................. 2,250 Morgan Stanley 487,200 2.710% 04/03/06(b).......................................... 487,188 150,000 2.830% 09/09/05............................................. 150,000 400,000 2.930% 08/15/05(b).......................................... 400,000 2,860 Multimetco, Inc. 2.970% 09/01/18(b).......................................... 2,860 5,545 Ness Family Partners LP 2.940% 09/01/34(b).......................................... 5,545 7,435 Okolona Christ Church 2.920% 11/01/22(b).......................................... 7,435 13,500 Park State Properties I LLC 2.810% 11/01/34(b).......................................... 13,500 4,440 Pearlstine Distributors, Inc. 2.900% 03/01/23(b).......................................... 4,440 4,000 Pilot Drive Properties LLC 2.900% 02/01/35(b).......................................... 4,000 3,000 Pineview Estates LC 2.810% 01/01/23(b)(c)....................................... 3,000 Premier Asset Collateralized Entity LLC 75,000 2.813% 05/17/05(b)(c)....................................... 74,998 60,000 2.770% 01/17/06(b)(c)....................................... 60,000 4,000 Prevea Clinic, Inc. 2.810% 12/01/34(b).......................................... 4,000 5,048 PRL Corp. 2.920% 07/01/21(b).......................................... 5,048 Rathgar Capital US Corp. 40,000 2.590% 04/14/05(b)(c)....................................... 40,000 50,000 2.780% 04/15/05(b)(c)....................................... 50,000 1,555 RDR Investment Co. LLC 3.030% 11/01/19(b).......................................... 1,555 1,085 Red Lion Evangelical Association, Inc. 3.030% 01/01/25(b).......................................... 1,085 1,750 Rehab of El Paso 2.760% 06/01/15(b).......................................... 1,750 32,460 RH Sheppard Co., Inc. 2.860% 06/01/11(b)(c)....................................... 32,460 9,395 Robb & Stucky Ltd. 2.910% 09/04/18(b)(c)....................................... 9,395 3,000 Rogers, Inc. 2.860% 10/01/39(b).......................................... 3,000
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 5,880 RT Anderson LLC 2.910% 01/01/29(b).......................................... $ 5,880 4,400 Sahtooma LLC 2.930% 04/01/15(b)(c)....................................... 4,400 6,800 Schlitz Park Associates II LP 2.900% 12/01/21(b).......................................... 6,800 9,500 Shephard Family Trust 2.920% 05/01/24(b).......................................... 9,500 Sigma Finance, Inc. 250,000 2.550% 10/11/05(b)(c)....................................... 249,961 450,000 2.730% 11/14/05(b)(c)....................................... 449,916 250,000 2.760% 07/18/05(b)(c)....................................... 249,978 237,000 2.795% 09/12/05(b)(c)....................................... 237,001 50,000 2.820% 05/03/05(b)(c)....................................... 50,000 200,000 2.840% 09/26/05(b)(c)....................................... 200,000 200,000 2.795% 01/27/06(b)(c)....................................... 199,951 SLM Corp. 188,000 2.496% 07/01/05............................................. 188,131 100,000 2.720% 06/02/05(b)(c)....................................... 99,996 48,045 3.190% 09/15/05(b).......................................... 48,096 SMM Trust 66,736 2.553% 01/10/06(b)(c)....................................... 66,736 67,230 3.053% 09/23/05(b)(c)....................................... 67,231 5,990 3.055% 06/03/05(b)(c)....................................... 5,990 9,990 3.178% 09/23/05(b)(c)....................................... 9,990 4,665 South Georgia Motor Sports Park LLC 2.920% 06/01/24............................................. 4,665 20,000 St. George Wellness Center 2.820% 09/01/40(b).......................................... 20,000 Stanfield Victoria Funding LLC 100,000 2.730% 03/10/06(b)(c)....................................... 99,991 100,000 2.813% 03/27/06(b)(c)....................................... 99,981 100,000 2.800% 04/21/06(b)(c)....................................... 99,978 2,700 Stephens & Stephens XII LLC 2.430% 01/01/35............................................. 2,700 17,575 Suncoast Beverage Sales LP 2.890% 06/01/16(b)(c)....................................... 17,575 5,700 Supreme Beverage Co. 2.970% 04/01/19(b).......................................... 5,700 9,735 Tack Capital Co. 2.860% 06/01/31(b).......................................... 9,735 1,730 Talons Lake LLC 2.920% 06/01/29............................................. 1,730 Tango Finance Corp. 75,000 2.770% 01/17/06(b)(c)....................................... 74,994 50,000 2.810% 01/20/06(b)(c)....................................... 49,996 66,000 2.815% 03/22/06(b)(c)....................................... 65,997 60,000 2.815% 09/27/05(b)(c)....................................... 59,997 2,095 Temple Beth AHM 3.010% 12/01/21(b).......................................... 2,095 5,825 TIM-BAR Corp. 2.930% 08/01/07(b).......................................... 5,825 7,972 Turf Valley, Inc. 2.910% 08/01/14(b)(c)....................................... 7,972 7,595 United Steel Deck, Inc. 2.880% 10/01/14(b)(c)....................................... 7,595
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 29 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 16,110 Valleydale Baptist Church 2.970% 12/01/23(b).......................................... $ 16,110 Venezia Enterprises LP 1,130 2.900% 02/01/22............................................. 1,130 5,540 2.910% 06/01/21(c).......................................... 5,540 10,000 Wellstone Mills LLC 2.860% 12/15/24(b)(c)....................................... 10,000 6,930 West Ridge Enterprises 2.930% 12/01/13(b)(c)....................................... 6,930 30,000 WhistleJacket Capital LLC 2.810% 09/30/05(b)(c)....................................... 29,997 White Pine Finance LLC 50,000 Discount Note 04/20/06(b)(c)................................ 49,995 34,000 2.700% 08/09/05(b)(c)....................................... 33,996 46,000 2.696% 11/09/05(b).......................................... 45,991 50,000 2.706% 02/06/06(b)(c)....................................... 49,996 50,000 2.770% 12/15/05(b)(c)....................................... 49,996 28,000 2.790% 02/15/06(b)(c)....................................... 27,995 45,000 2.810% 02/27/06(b)(c)....................................... 44,991 50,000 2.810% 03/13/06(b)(c)....................................... 49,990 107,000 2.810% 09/28/05(b)(c)....................................... 106,989 85,000 2.840% 04/25/06(b)(c)....................................... 84,993 2,925 Wilson Real Estate II 2.920% 10/01/30(b).......................................... 2,925 ----------- 9,909,819 ----------- 13,156,996 ----------- TOTAL CORPORATE BONDS AND NOTES (Cost $13,207,145).......................................... 13,207,145 ----------- CERTIFICATES OF DEPOSIT -- 21.6% 700,000 Banque National De Paris 3.250% 11/25/05............................................. 700,000 500,000 Barclays Bank PLC 3.210% 09/16/05............................................. 500,000 Calyon 145,000 3.010% 09/20/05............................................. 144,852 165,000 3.105% 11/14/05............................................. 165,005 500,000 3.270% 11/30/05............................................. 500,000 395,000 Canadian Imperial Commercial Bank 2.800% 12/16/05............................................. 395,000 Credit Agricole Indosuez 250,000 2.795% 04/19/05(a).......................................... 249,997 40,000 2.795% 04/21/05(a).......................................... 40,000 Credit Suisse First Boston 250,000 2.445% 10/07/05............................................. 250,000 385,000 2.520% 04/05/05(a).......................................... 384,999 420,000 2.750% 11/14/05............................................. 420,000 268,000 2.830% 09/20/05(a).......................................... 267,996 650,000 2.875% 04/01/05(a).......................................... 650,000 700,000 Deutsche Bank AG 2.770% 04/20/05(a)(d)....................................... 700,000
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ CERTIFICATES OF DEPOSIT -- (CONTINUED) HOBS Treasury Services $ 500,000 2.900% 12/23/05............................................. $ 500,000 200,000 2.950% 12/30/05............................................. 200,000 211,000 3.130% 09/09/05............................................. 211,000 420,000 3.290% 03/15/06............................................. 420,000 175,000 3.370% 03/20/06............................................. 175,000 Landesbank Hessen 885,000 3.250% 02/17/06............................................. 885,000 450,000 3.300% 03/10/06............................................. 450,000 250,000 3.373% 03/20/06............................................. 250,006 190,500 MBNA Credit Card Master Trust Discount Note 04/28/05(c)................................... 190,107 50,000 National Bank of Commerce 2.810% 05/17/05(a).......................................... 49,997 48,120 Newcastle Building Society Discount Note 06/21/05(a)................................... 47,795 100,000 Saturn Ventures 2.816% 05/07/05(d).......................................... 100,000 Societe Generale 115,000 3.055% 09/20/05............................................. 114,907 250,000 3.100% 11/14/05............................................. 250,000 Societe Generale Cayman 360,037 2.813% 04/01/05............................................. 360,037 800,000 2.875% 04/01/05............................................. 800,000 340,000 Toronto Dominion Bank 2.350% 09/08/05............................................. 339,963 200,000 Unicredito Italiano 2.365% 09/12/05............................................. 199,978 ----------- TOTAL CERTIFICATES OF DEPOSIT (Cost $10,911,639).......................................... 10,911,639 ----------- COMMERCIAL PAPER -- 17.6% 95,000 Alliance & Leicester PLC Discount Note 09/16/05(c)................................... 93,601 Amstel Funding Corp. 78,634 Discount Note 05/24/05(c)................................... 78,342 127,190 Discount Note 06/02/05(c)................................... 126,629 375,000 Discount Note 06/15/05(c)................................... 372,953 300,379 Atlantis One Funding Discount Note 09/16/05(c)................................... 295,956 Bavaria TRR Corp. 208,444 Discount Note 04/20/05(c)................................... 208,135 115,275 Discount Note 04/21/05(c)................................... 115,095 185,000 Discount Note 04/22/05(c)................................... 184,696 Bavaria Universal Funding 1,365 Discount Note 04/27/05(c)................................... 1,362 2,605 Discount Note 05/10/05(c)................................... 2,597 50,000 Blue Bell Funding Corp. Discount Note 04/18/05(c)................................... 49,934 Citibank 400,000 Discount Note 06/22/05(c)................................... 397,249 200,000 Discount Note 06/28/05(c)................................... 198,533
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 30 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ COMMERCIAL PAPER -- (CONTINUED) Concord Minutemen Capital Corp. $ 122,573 Discount Note 04/13/05...................................... $ 122,458 178,395 Discount Note 04/14/05...................................... 178,213 75,192 Discount Note 04/18/05...................................... 75,092 47,500 Discount Note 04/12/06...................................... 47,500 Crown Point Capital Co. 76,364 Discount Note 06/13/05...................................... 75,958 61,589 Discount Note 09/12/05...................................... 60,705 250,000 DEPFA Bank PLC Discount Note 08/26/05(c)................................... 247,249 280,000 Descartes Funding Discount Note 11/15/05...................................... 280,000 775,000 Deutsche Bank Financial LLC Discount Note 05/02/05...................................... 773,131 100,000 FCAR Owner Trust I Discount Note 11/08/05...................................... 98,115 50,000 General Electric Capital Corp. Discount Note 11/08/05...................................... 49,070 Georgetown Funding Co. 302,828 Discount Note 04/21/05(c)................................... 302,355 50,000 Discount Note 04/28/05(c)................................... 49,894 GIRO Balanced Funding Corp. 133,929 Discount Note 06/09/05(c)................................... 133,269 50,395 Discount Note 06/24/05(c)................................... 50,041 Goldman Sachs Group, Inc. 385,000 Discount Note 08/10/05...................................... 381,699 151,000 Discount Note 10/31/05...................................... 148,557 510,000 Discount Note 09/13/07(d)................................... 510,000 125,000 Grampian Funding LLC Discount Note 06/29/05(c)................................... 124,073 Harrier Finance Funding US LLC 1,500 Discount Note 05/02/05...................................... 1,497 61,500 Discount Note 08/25/05...................................... 60,744 3,900 K2 (USA) LLC Discount Note 05/17/05...................................... 3,886 102,451 Millstone Funding Corp. Discount Note 04/27/05(c)................................... 102,243 Morgan Stanley 230,000 Discount Note 08/19/05(a)................................... 230,000 150,000 Discount Note 08/19/05...................................... 150,000 Natexis Banq US Financial Co. 325,000 Discount Note 06/27/05...................................... 322,648 300,000 Discount Note 06/30/05...................................... 297,754 Northern Rock PLC 70,000 Discount Note 05/24/05(c)................................... 69,740 100,000 Discount Note 05/25/05(c)................................... 99,622 150,000 Discount Note 08/19/05(c)................................... 148,431 181,120 Picaros Funding LLC Discount Note 11/22/05(c)................................... 177,289 4,000 Premier Asset LLC Discount Note 05/18/05...................................... 3,986 200,000 Santander Cent Hisp Fin Discount Note 09/15/05...................................... 197,068 25,042 Scaldis Capital LLC Discount Note 09/12/05(c)................................... 24,682
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ COMMERCIAL PAPER -- (CONTINUED) $ 4,000 Sedna Financing, Inc. Discount Note 05/18/05...................................... $ 3,986 Sigma Finance, Inc. 4,000 Discount Note 05/19/05...................................... 3,985 100,000 Discount Note 07/15/05(a)(c)................................ 99,991 Silver Tower US Funding 100,000 Discount Note 06/20/05(c)................................... 99,333 180,000 Discount Note 06/28/05(c)................................... 178,680 45,000 Discount Note 08/18/05(c)................................... 44,531 176,366 Solitaire Funding LLC Discount Note 06/24/05(c)................................... 175,132 STRIPS III LLC 36,524 Discount Note 07/25/05(c)................................... 36,524 48,108 Discount Note 02/24/06(c)................................... 48,108 Sunbelt Funding Corp. 150,391 Discount Note 04/18/05(c)................................... 150,194 172,582 Discount Note 05/03/05(c)................................... 172,156 4,000 Surrey Funding Corp. Discount Note 05/17/05(c)................................... 3,986 122,910 Thames Asset Global Securitization Discount Note 04/07/05(c)................................... 122,859 16,000 Windmill Funding Corp. Discount Note 05/16/05(c)................................... 15,946 ----------- TOTAL COMMERCIAL PAPER (Cost $8,877,462)........................................... 8,877,462 ----------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 16.4% FEDERAL HOME LOAN BANK 125,000 2.800% 04/07/05............................................. 125,000 100,000 2.770% 08/12/05(a).......................................... 99,995 125,000 2.631% 08/02/05(a).......................................... 125,002 100,000 2.626% 08/02/05(a).......................................... 99,996 350,000 1.350% 04/15/05............................................. 350,000 670,000 1.300% 04/25/05............................................. 670,000 525,000 2.755% 10/03/05(a).......................................... 524,907 100,000 2.619% 10/03/05(a).......................................... 99,976 70,000 1.400% 04/15/05............................................. 69,999 175,000 2.800% 06/01/05(a).......................................... 175,000 600,000 2.834% 09/08/05(a).......................................... 599,855 675,000 1.550% 05/04/05............................................. 675,000 595,350 1.380% 04/15/05............................................. 595,348 1,045,000 Discount Note 05/05/05...................................... 1,042,848 275,000 2.447% 10/05/05(a).......................................... 274,926 FEDERAL HOME LOAN MORTGAGE CORP. 320,000 2.925% 09/09/05(a).......................................... 320,000 -----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 31 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION $ 500,445 Discount Note 04/01/05...................................... $ 500,445 150,000 2.545% 10/21/05(a).......................................... 149,931 92,895 Discount Note 04/29/05...................................... 92,765 550,000 2.308% 09/06/05(a).......................................... 549,857 300,000 2.430% 10/03/05(a).......................................... 299,901 567,400 2.455% 07/06/05(a).......................................... 567,300 200,000 2.630% 09/08/05(a).......................................... 199,947 116,000 2.840% 12/09/05(a).......................................... 115,953 ----------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $8,323,951)........................................... 8,323,951 ----------- EXTENDABLE COMMERCIAL NOTES -- 3.9% Ajax Bambino Funding, Inc. 35,000 Discount Note 04/18/05(c)................................... 34,954 55,000 Discount Note 04/18/05(c)................................... 54,913 200,000 Citibank Credit Card Master Trust Discount Note 06/20/05(c)................................... 198,533 Concord Minutemen Capital Corp. 439,057 Discount Note 04/18/05...................................... 438,453 140,528 Discount Note 04/19/05...................................... 140,330 MBNA Credit Card Master Trust 213,998 Discount Note 04/27/05(c)................................... 213,564 141,837 Discount Note 06/21/05(c)................................... 140,876 156,800 Discount Note 06/23/05(c)................................... 155,708 Monument Gardens Funding LLC 49,500 Discount Note 04/21/05...................................... 49,423 105,106 Discount Note 06/30/05...................................... 104,310 Thornburg Mortgage Capital Resources 37,500 Discount Note 04/11/05(c)................................... 37,471 320,000 Discount Note 04/14/05(c)................................... 319,677 100,000 Discount Note 04/21/05(c)................................... 99,842 ----------- TOTAL EXTENDABLE COMMERCIAL NOTES (Cost $1,988,054)........................................... 1,988,054 ----------- MORTGAGE-BACKED SECURITIES -- 3.2% 195,000 Aire Valley Mortgages PLC 2.850% 09/20/05(a)(c)....................................... 195,000 650,000 Holmes Financing PLC 2.760% 04/15/05(a).......................................... 650,000 4,270 Imaging Business Machines PLC 2.950% 07/01/24(a).......................................... 4,270 Permanent Financing PLC 248,000 2.750% 06/10/05(a).......................................... 248,000 160,000 2.803% 03/10/06(a).......................................... 160,000 185,000 2.740% 09/10/05(a).......................................... 185,000 189,194 Residential Mortgage Securities 2.820% 05/13/27(a)(c)....................................... 189,194 ----------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $1,631,464)........................................... 1,631,464 -----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES -- 2.6% $ 300,000 Capital One Prime Auto Receivables Trust 2.791% 11/10/05(c).......................................... $ 300,000 34,143 CIT Equipment Collateral 2.095% 10/20/05(c).......................................... 34,143 150,000 Davis Square Funding, Ltd. 2.900% 10/16/38(a)(d)....................................... 150,000 9,401 Great America Leasing Receivables 2.130% 07/20/05(c).......................................... 9,400 175,000 Newcastle CDO, Ltd. 2.880% 09/24/38(d).......................................... 175,000 17,654 Nissan Auto Lease Trust 2.106% 10/17/05............................................. 17,654 45,087 Nissan Auto Receivables Owner 1.930% 09/15/05............................................. 45,087 Phoenix-Mistic CBO, Ltd. 40,000 3.329% 09/15/14(a)(d)....................................... 40,000 245,000 3.489% 03/15/06(a)(d)....................................... 245,061 50,000 Putnam Structured Product CDO 2.481% 11/25/05(a)(d)....................................... 50,000 --(f) TIAA Retail Commercial Trust 2.880% 12/28/18(a)(d)....................................... --(f) 33,567 Volkswagen Auto Lease Trust 1.999% 09/20/05............................................. 33,567 16,134 Wachovia Auto Owner Trust 1.813% 09/20/05............................................. 16,134 90,000 Whitehawk CDO Funding, Ltd. 3.040% 06/15/05(a)(c)....................................... 90,000 121,400 Winston Funding Ltd. 2.560% 04/23/09(a)(d)....................................... 121,400 ----------- TOTAL ASSET-BACKED SECURITIES (Cost $1,327,446)........................................... 1,327,446 ----------- MUNICIPAL BONDS AND NOTES -- 2.4% ALABAMA -- 0.0% 8,300 AL Albertville Industrial Development Board Revenue, Series 2004, LOC: Regions Bank 2.890% 05/01/24(b).......................................... 8,300 8,000 AL Montgomery State Revenue, Series 2003, LOC: Southtrust Bank N.A. 2.860% 11/01/23(b).......................................... 8,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 32 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ALABAMA -- (CONTINUED) $ 6,985 AL University of Alabama, Series 2004B, Insured: MBIA, SPA: Southtrust Bank N.A. 2.860% 07/01/09(b).......................................... $ 6,985 ----------- 23,285 ----------- ARKANSAS -- 0.0% 16,000 AK Northwest Regional Airport Authority, Series 2004C, LOC: Regions Bank, 2.860% 02/01/21(b).......................................... 16,000 ----------- CALIFORNIA -- 0.2% 36,490 CA Housing Finance Agency Revenue, Series 2000R, Insured: AMBAC, LOC: Westdeutsche Landesbank 2.850% 02/01/32(b).......................................... 36,490 19,240 CA Statewide Communities Development Authority, Series 2004C-1, Insured: FSA 3.000% 06/30/05(b).......................................... 19,261 5,960 CA San Diego Housing Authority Multi-Family Housing Revenue, Series 2004, LOC: FNMA 2.910% 01/15/35(b).......................................... 5,960 1,000 CA San Jose Redevelopment Agency Revenue, Series 2002H, LOC: Bank of New York 2.860% 08/01/29(b).......................................... 1,000 11,250 Series 2003A, LOC: JPMorgan Chase Bank 2.850% 08/01/28(b).......................................... 11,250 22,000 CA Santa Rosa Rancheria Tachi Yokut Tribe Revenue, Series 2004, LOC: Bank One N.A. 2.840% 09/01/19(b).......................................... 22,000 ----------- 95,961 ----------- COLORADO -- 0.2% 54,160 CO Housing & Finance Authority, Series 2003, SPA: JPMorgan Chase Bank 2.850% 11/01/33(b).......................................... 54,160 34,295 Single Family Mortgage Revenue, Series 2003B-2, SPA: JPMorgan Chase Bank 2.850% 11/01/32(b).......................................... 34,295 1,000 CO Denver City & County Certificates of Participation, Series 2002B, Insured: MBIA, LOC: Bank One Colorado, N.A. 2.830% 12/01/21............................................. 1,000 6,900 Series 2002C, LOC: JPMorgan Chase Bank 2.850% 12/01/22............................................. 6,900 ----------- 96,355 -----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ CONNECTICUT -- 0.0% $ 8,160 CT State Industrial Development Authority Revenue, Series 2002, LOC: Wachovia Bank N.A. 2.910% 01/01/10............................................. $ 8,160 ----------- DISTRICT OF COLUMBIA -- 0.0% 7,500 DC State Revenue, Series 2003B, LOC: Suntrust Bank 2.820% 12/01/23............................................. 7,500 ----------- FLORIDA -- 0.3% 15,000 FL State Housing Finance Agency Revenue, Series 1993, Insured: MBIA, SBPA: Westdeutsche Landesbank 2.850% 01/01/34(b).......................................... 15,000 34,000 FL Housing Finance Corp. Revenue, Series 1999A, Insured: MBIA, SPA: Westdeutsche Landesbank 2.850% 01/01/44(b).......................................... 34,000 67,300 Series 2000A, Insured: AMBAC, SPA: Westdeutsche Landesbank 2.850% 01/01/45(b).......................................... 67,300 34,200 Series 2002A, Insured: AMBAC SPA: Dexia Credit Local 2.850% 01/01/47(b).......................................... 34,200 ----------- 150,500 ----------- GEORGIA -- 0.3% 500 GA Burke County Industrial Development Authority, Series 2003, LOC: Fifth Third Bank 2.860% 08/01/18(b).......................................... 500 3,500 GA Columbus Development Authority Revenue Fairfield Inn Project, Series 2003, LOC: Regions Bank 2.910% 08/01/23(b).......................................... 3,500 4,900 Series 2003, LOC: Regions Bank 2.910% 08/01/23(b).......................................... 4,900 6,375 Series 2004, LOC: Columbus Bank & Trust 2.920% 12/01/24(b).......................................... 6,375 108,931 GA Municipal Electric Authority, LOC: Westdeutsche Landesbank, Bayerische Landesbank, Wachovia Bank 2.700% 04/04/05(b).......................................... 108,931
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 33 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ GEORGIA -- (CONTINUED) $ 12,645 GA Talbot County Development Authority Industrial Development Revenue, Series 2000, LOC: First Union National Bank 2.910% 03/01/13(b).......................................... $ 12,645 ----------- 136,851 ----------- ILLINOIS -- 0.0% 4,250 IL Winnebago County State Industrial Revenue, Series 2001, AMT, LOC: Federal Home Loan Bank, Alpine Bank of Illinois 5.000% 04/01/26............................................. 4,250 ----------- KANSAS -- 0.0% 7,600 KS Manhattan Industrial Development Revenue, Series 2003, LOC: Harris Trust Company of California 2.900% 04/01/28............................................. 7,600 ----------- KENTUCKY -- 0.0% 8,000 KY Webster County Industrial Revenue Green River Collieries Project, Series 2004, LOC: Regions Bank 2.860% 11/01/24............................................. 8,000 ----------- MASSACHUSETTS -- 0.1% 1,750 MA State Development Finance Agency Assisted Living Facilities Revenue, Series 2001B, LOC: First Union National Bank 3.030% 09/01/34(b).......................................... 1,750 5,000 MA State Housing Finance Agency Upper Falls LLC, LOC: JPMorgan Chase Bank, 2.840% 12/01/34(b).......................................... 5,000 19,725 Housing Revenue, Series 2004, LOC: JPMorgan Chase Bank, 2.840% 06/01/34(b).......................................... 19,725 ----------- 26,475 ----------- MICHIGAN -- 0.0% 950 MI State Housing Development Authority Multi-Family Revenue, Series 2003, LOC: FHLB 2.980% 06/01/38(b).......................................... 950 -----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ MINNESOTA -- 0.0% $ 6,700 MN State Higher Education Facilities Authority Concordia University Project, Series 2003, LOC: U.S. Bank N.A. 2.920% 04/01/27(b).......................................... $ 6,700 ----------- MISSISSIPPI -- 0.4% 9,305 MS Business Finance Corp. Revenue, Series 1997B, 2.930% 04/01/22(b).......................................... 9,305 5,000 Conair Corp Project, Series 2005, LOC: Wachovia Bank N.A 2.920% 01/14/15(b).......................................... 5,000 15,000 Industrial Development Revenue, Series 2000, LOC: First Union National Bank 2.860% 09/01/15(b).......................................... 15,000 136,725 MS State GO, Series 2003B, SPA: Dexia Credit Local 2.830% 11/01/28(b).......................................... 136,725 43,000 MS Pearl Urban Renewal Revenue, Series 2004A, LOC: First Tennessee Bank 2.860% 11/01/19(b).......................................... 43,000 ----------- 209,030 ----------- NEW JERSEY -- 0.1% 6,150 NJ Economic Development Authority Revenue, Series 1997, LOC: First Union National Bank 2.910% 10/01/15............................................. 6,150 720 Series 2002B, LOC:Wachovia Bank N.A 3.010% 11/01/09............................................. 720 800 Series 2002B, LOC: Wachovia Bank N.A 3.060% 05/01/09............................................. 800 50,000 NJ Economic Development Authority Lease Revenue, Insured: FSA, SPA: Dexia Credit Local 2.850% 02/15/29............................................. 50,000 ----------- 57,670 ----------- NEW YORK -- 0.2% 2,770 NY Clinton County Industrial Development Agency Industrial Development Revenue, Series 1997A, LOC: Marine Midland Bank 3.250% 12/01/10(b).......................................... 2,770 20,665 NY State Housing Finance Agency Revenue, Series 2002B, LOC: Key Bank, N.A. 2.850% 06/01/33(b).......................................... 20,665
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 34 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ NEW YORK -- (CONTINUED) $ 6,200 NY City Housing Development Corp. Multi-Family Housing Revenue, Series 2003, LOC: HSBC Bank USA 2.800% 12/01/36(b).......................................... $ 6,200 22,700 NY State Dormitory Authority Revenue, Series 2000, LOC: FNMA 2.860% 05/15/33(b).......................................... 22,700 8,000 Series 2001, LOC: FNMA 2.860% 05/15/33(b).......................................... 8,000 7,500 Series 2004B, LOC: JPMorgan Chase Bank 2.850% 11/01/36(b).......................................... 7,500 13,530 State Personal Income Tax, Series 2005A, Insured: MBIA, LOC: Dexia Credit Local 2.850% 12/15/14(b).......................................... 13,530 ----------- 81,365 ----------- NORTH CAROLINA -- 0.0% 10,200 Downtown Renaissance, Inc. Imperial Center Project, LOC: RBC Centura Bank 2.890% 02/01/25(b).......................................... 10,200 ----------- OHIO -- 0.0% 1,300 OH Canal Pointe LLC, Series 2003, 2.860% 12/01/13(b)(c)....................................... 1,300 ----------- SOUTH CAROLINA -- 0.0% 1,000 SC State Jobs Economic Development Authority Hospital Facility Revenue, Series 2004, LOC: National Bank of South Carolina 2.940% 06/01/09(b).......................................... 1,000 ----------- TENNESSEE -- 0.0% 3,875 TN Hamilton County Industrial Development Board, Series 1999, LOC: First Union National Bank 2.980% 02/01/14(b).......................................... 3,875 450 TN Memphis Health Educational & Housing Facilities Board Revenue, Series 2003B, LOC: First Tennessee Bank 3.000% 06/01/33(b).......................................... 450 ----------- 4,325 -----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ TEXAS -- 0.2% $ 43,790 TX Harris County Sports Authority Special Revenue, Series 2001D, Insured: MBIA SPA: Morgan Guaranty Trust 2.880% 11/15/30(b).......................................... $ 43,790 9,385 TX State, GO, Taxable Veterans Land, Series 2003, LOC: State Street Bank & Trust Co. 2.800% 12/01/23(b).......................................... 9,385 23,935 GO, Taxable Veteran Housing, Series 2003, LOC: Dexia Credit Local 2.800% 06/01/21(b).......................................... 23,935 ----------- 77,110 ----------- VIRGINIA -- 0.3% 140,000 VA State Housing Development Authority Commonwealth Revenue, Series 1996E, 2.850% 01/01/46(b).......................................... 140,000 ----------- WISCONSIN -- 0.1% 9,000 WI Heart Hospital LLC Revenue, Series 2003, LOC: Bank One N.A. 2.860% 11/01/23(b).......................................... 9,000 19,385 WI Housing & Economic Development Authority Home Ownership Revenue, Series 2003, SPA: Westdeutsche Landsbank 2.880% 03/01/28(b).......................................... 19,385 ----------- 28,385 ----------- TOTAL MUNICIPAL BONDS AND NOTES (Cost $1,198,972)........................................... 1,198,972 ----------- FUNDING AGREEMENTS -- 2.0% 100,000 GE Life Annuity 2.960% 05/16/05(d)(e)....................................... 100,000 50,000 Jackson Tube Service, Inc. 3.090% 01/01/50(d)(e)....................................... 50,000 300,000 Monumental Life 2.840% 05/31/05(a)(d)(e).................................... 300,000 Transamerica Occidental Life Insurance Co. 100,000 2.720% 08/30/05(d)(e)....................................... 100,000 20,000 2.870% 08/30/05(d)(e)....................................... 20,000 117,000 2.930% 08/30/05(d)(e)....................................... 117,000 125,000 3.030% 08/30/05(d)(e)....................................... 125,000 182,000 Travelers Insurance 2.8230% 07/29/05(d)(e)...................................... 182,000 ----------- TOTAL FUNDING AGREEMENTS (Cost $994,000)............................................. 994,000 -----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 35 NATIONS MONEY MARKET FUNDS Nations Cash Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ REPURCHASE AGREEMENTS -- 4.3% $ 700,000 Repurchase agreement with Countrywide Home Loans Inc. dated 03/31/05, due 04/01/05 at 2.880%, collateralized by various commercial paper with various maturities, market value $714,000 (repurchase proceeds $700,056)..................... $ 700,000 100,000 Repurchase agreement with Credit Suisse First Boston dated 03/31/05, due 04/01/05 at 2.950%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $102,005 (repurchase proceeds $100,008)............... 100,000 700,000 Repurchase agreement with Goldman Sachs & Co. dated 03/31/05, due 04/01/05 at 2.910%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $714,000 (repurchase proceeds $700,057)..................... 700,000 250,000 Repurchase agreement with Goldman Sachs & Co. dated 03/31/05, due 04/01/05 at 2.890%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $255,000 (repurchase proceeds $250,020)..................... 250,000 300,000 Repurchase agreement with UBS Warburg dated 03/31/05, due 04/01/05 at 2.880%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $306,000 (repurchase proceeds $300,024).............................. 300,000 131,302 Repurchase agreement with UBS Warburg dated 03/31/05, due 04/01/05 at 2.660%, collateralized by FNMA notes with various maturities, market value $133,931 (repurchase proceeds $131,312).......................................... 131,302 ----------- TOTAL REPURCHASE AGREEMENTS (Cost $2,181,302)........................................... 2,181,302 ----------- TOTAL INVESTMENTS (Cost $50,641,435)(g)............................. 100.1% 50,641,435 OTHER ASSETS AND LIABILITIES (NET)................................. (0.1)% (71,523) ----------- NET ASSETS.......................................... 100.0% $50,569,912 ===========
- --------------- Notes to Investment Portfolio: (a) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (b) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (c) Security exempt from registration under Section 4(2) of the Securities Act of 1933. These securities may only be resold in exempt transactions to qualified buyers. Private resales of these securities to qualified institutional buyers are also exempt from registration pursuant to Rule 144A under the Securities Act of 1933. At March 31, 2005, these securities amounted to $14,224,639, which represents 28.1% of net assets. (d) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized cost, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $3,085,461, which represents 6.1% of net assets. (See Note 6) (e) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (f) Represents less than $500. (g) Cost for federal income tax purposes is $50,641,435. See Note 5 for additional information. ABBREVIATIONS: AMBAC -- Ambac Assurance Corp. AMT -- Alternative Minimum Tax FHLB -- Federal Home Loan Bank FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance, Inc. GO -- General Obligation LOC -- Letter of Credit MBIA -- MBIA Insurance Corp. SBPA -- Standby Bond Purchase Agreement SPA -- Standby Purchase Agreement STRIPS -- Separate Trading of Registered Interest and Principal of Securities
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 36 NATIONS MONEY MARKET FUNDS Nations Money Market Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 30.8% $ 6,265 Acton Assisted Living 2.950% 06/01/10(a).......................................... $ 6,265 31,000 Beta Finance, Inc. MTN 2.808% 04/26/05(b)(c)....................................... 31,000 91,500 BNP Paribas 2.793% 04/15/05(a).......................................... 91,499 75,000 Canadian Imperial Bank of Commerce 2.955% 12/30/05............................................. 75,000 207,000 CC USA, Inc. 2.800% 01/24/06(b).......................................... 206,966 50,000 Chase Manhattan Bank 2.721% 05/11/05(a).......................................... 50,000 20,000 Citigroup, Inc. 2.900% 05/19/05(a).......................................... 20,003 Concord Minutemen 200,462 (d) 04/19/05................................................ 200,180 62,000 2.810% 04/13/06(a).......................................... 62,000 Credit Agricole 50,000 2.795% 04/19/05(a).......................................... 49,999 150,000 2.795% 04/21/05(a).......................................... 149,999 Credit Suisse First Boston 50,000 2.445% 10/07/05............................................. 50,000 75,000 2.750% 11/14/05............................................. 75,000 102,000 2.830% 09/20/05(a).......................................... 101,997 69,500 3.110% 12/29/05(a).......................................... 69,505 120,000 Dorada Finance, Inc. 2.800% 01/25/06(b).......................................... 119,980 115,000 Fifth Third Bank 2.800% 04/28/05(a).......................................... 114,999 140,000 Goldman Sachs 2.860% 09/13/07(a)(e)....................................... 140,000 Links Finance LLC 250,505 (d) 04/05/05................................................ 250,428 60,000 2.180% 07/15/05(a)(b)....................................... 59,998 50,000 2.853% 05/25/05(a)(b)....................................... 50,002 Morgan Stanley 100,000 2.830% 08/19/05............................................. 100,000 100,000 2.930% 08/15/05(a).......................................... 100,000 Premier Asset Collateralized Entity LLC 50,000 2.770% 01/17/06(a)(b)....................................... 50,000 25,000 2.813% 05/17/05(a)(b)....................................... 24,999 6,750 Schlitz Park Associates II LP 2.900% 12/01/21(a).......................................... 6,750 Sigma Finance, Inc. 100,000 2.630% 01/17/06(a)(b)....................................... 99,974 30,000 2.730% 11/14/05(a)(b)....................................... 29,994 43,500 2.758% 02/15/06(a)(b)....................................... 43,490 50,000 2.760% 07/18/05(a)(b)....................................... 49,996 25,000 2.795% 09/12/05(a)(b)....................................... 25,000 50,000 2.820% 05/03/05(a)(b)....................................... 50,000 11,990 SMM Trust 2.593% 01/10/06(a)(b)....................................... 11,990 50,000 Stanfield Victoria Funding LLC 2.760% 03/15/06(a)(b)....................................... 49,990
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES -- (CONTINUED) Tango Finance Corp. $ 50,000 2.765% 01/10/06(a)(b)....................................... $ 49,996 62,000 2.840% 02/27/06(a)(b)....................................... 62,009 Toyota Motor Credit Corp. 52,000 2.615% 07/21/05(a).......................................... 51,997 30,000 2.820% 09/09/05(a).......................................... 30,016 12,295 Wachovia 6.800% 06/01/05............................................. 12,380 50,000 Wells Fargo Bank 2.790% 04/29/05(a).......................................... 50,000 190,000 Wells Fargo & Co. 3.020% 06/17/05(a).......................................... 190,010 White Pine Finance LLC 38,000 2.540% 10/17/05(a).......................................... 37,994 50,000 2.620% 10/17/05(a)(b)....................................... 49,982 16,000 2.620% 10/25/05(a)(b)....................................... 15,998 47,000 2.710% 02/15/06(a)(b)....................................... 46,996 50,000 2.730% 03/10/06(a)(b)....................................... 49,991 40,000 2.730% 12/12/05(a)(b)....................................... 39,994 32,000 2.784% 08/18/05(a).......................................... 31,996 24,000 2.800% 04/25/05(a)(b)....................................... 24,000 50,000 2.800% 09/20/05(a).......................................... 49,993 20,000 2.810% 12/20/05(a)(b)....................................... 19,996 48,500 2.810% 03/20/06(a)(b)....................................... 48,491 38,000 2.810% 08/22/05(a).......................................... 37,998 ----------- TOTAL CORPORATE BONDS AND NOTES (Cost $3,516,840)........................................... 3,516,840 ----------- CERTIFICATES OF DEPOSIT -- 17.3% 200,000 Banque National De Paris 3.250% 11/25/05............................................. 200,000 Calyon 75,000 3.105% 11/14/05............................................. 75,003 150,000 3.270% 11/30/05............................................. 150,000 100,000 Canadian Imperial Bank of Commerce 2.800% 12/16/05(c).......................................... 100,000 100,000 Credit Suisse First Boston 2.875% 04/01/05(c).......................................... 100,000 HOBS Treasury Services PLC 75,000 3.130% 09/09/05(c).......................................... 75,000 75,000 3.290% 03/15/06(c).......................................... 75,000 75,000 3.370% 03/20/06(c).......................................... 75,000 Landesbank Hessen 105,000 3.250% 02/17/06(c).......................................... 105,000 50,000 3.300% 03/10/06(c).......................................... 50,000 45,000 Newcastle Building Society Discount Note 04/18/05(b)(c)................................ 44,940 44,397 Saturn Ventures 2.816% 05/07/05(c)(e)....................................... 44,397 300,000 Societe Generale Cayman 2.875% 04/01/05(c).......................................... 300,000 338,745 Suntrust Bank 2.813% 04/01/05(c).......................................... 338,745 100,000 Toronto Dominion NY 2.350% 09/08/05(c).......................................... 99,989
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 37 NATIONS MONEY MARKET FUNDS Nations Money Market Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT -- (CONTINUED) $ 100,000 Unicredito Italiano 2.365% 09/12/05(c).......................................... $ 99,989 37,000 White Pine Financial 2.720% 10/07/05(a).......................................... 36,994 ----------- TOTAL CERTIFICATES OF DEPOSIT (Cost $1,970,057)........................................... 1,970,057 ----------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 16.9% 50,000 Federal Farm Credit Bank 2.800% 06/15/05(a).......................................... 50,000 Federal Home Loan Bank 90,000 (d) 05/05/05................................................ 89,815 100,000 1.350% 04/15/05............................................. 100,000 175,000 1.300% 04/25/05............................................. 175,000 25,000 1.380% 04/15/05............................................. 25,000 50,000 1.400% 04/15/05............................................. 49,999 75,000 1.550% 05/04/05............................................. 75,000 40,325 1.625% 04/15/05............................................. 40,329 50,000 2.626% 08/02/05(a).......................................... 49,998 75,000 2.631% 08/02/05(a).......................................... 75,001 50,000 2.755% 10/03/05(a).......................................... 49,991 65,000 2.760% 07/26/05(a).......................................... 64,995 75,000 2.800% 06/01/05(a).......................................... 75,000 275,000 2.834% 09/08/05(a).......................................... 274,933 150,000 Federal Home Loan Mortgage Corp. 2.925% 09/09/05(a).......................................... 150,000 Federal National Mortgage Association 350,000 2.308% 09/06/05............................................. 349,909 100,000 2.430% 10/03/05(a).......................................... 99,967 100,000 2.455% 07/06/05(a).......................................... 99,982 30,000 2.758% 05/03/05(a).......................................... 29,999 ----------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $1,924,918)........................................... 1,924,918 ----------- COMMERCIAL PAPER -- 15.5% Amstel Funding Corp. 75,000 Discount Note 06/02/05(b)................................... 74,669 100,000 Discount Note 06/15/05(b)................................... 99,454 Atlantis One Funding 147,179 Discount Note 04/18/05(b)................................... 147,029 5,000 Discount Note 07/18/05(b)................................... 4,958 Bavaria TRR Corp. 100,000 Discount Note 04/01/05(b)................................... 100,000 65,210 Discount Note 04/18/05(b)................................... 65,124 Citibank Credit Card Master Trust 100,000 Discount Note 04/18/05(b)................................... 99,868 225,000 Discount Note 04/21/05(b)................................... 224,649 400,000 Deutsche Bank Financial LLC Discount Note 05/02/05...................................... 399,036
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- (CONTINUED) FCAR Owner Trust I $ 32,500 Discount Note 09/15/05...................................... $ 32,021 50,000 Discount Note 11/08/05...................................... 49,058 79,943 GIRO Balanced Fund Discount Note 04/18/05(b)................................... 79,837 65,000 Goldman Sachs Group, Inc. Discount Note 08/10/05...................................... 64,443 55,000 Grampian Funding LLC Discount Note 04/19/05(b)................................... 54,940 75,000 MBNA Credit Card Master Trust Discount Note 04/28/05(b)................................... 74,845 Natexis Banq US Financial Co. 75,000 Discount Note 06/27/05...................................... 74,457 75,000 Discount Note 06/30/05...................................... 74,438 50,000 Silver Tower US Funding Discount Note 06/20/05(b)................................... 49,667 ----------- TOTAL COMMERCIAL PAPER (Cost $1,768,493)........................................... 1,768,493 ----------- MUNICIPAL BONDS AND NOTES -- 3.2% CALIFORNIA -- 1.1% 18,100 CA Housing Finance Agency Revenue, Series 2000R, Insured: AMBAC, LOC: Westdeutsche Landesbank, 2.850% 02/01/32(c).......................................... 18,100 25,000 CA Statewide Communities Development Authority, Series 2004C-1, Insured: FSA, 3.000% 06/30/05............................................. 25,027 57,210 CA Los Angeles Department of Water & Power, Waterworks Revenue, Series 2004B-1, SPA: Dexia Credit Local, 2.840% 07/01/25(c).......................................... 57,210 25,000 Los Angeles Department of Water & Power, Waterworks Revenue, Series 2004B-2, SPA: Dexia Credit Local, 2.850% 07/01/25(c).......................................... 25,000 5,400 CA San Jose Financing Authority Lease Revenue Series 2000C, Insured: MBIA, SPA: Morgan Guaranty Trust, 2.850% 12/01/24(c).......................................... 5,400 ----------- 130,737 ----------- COLORADO -- 0.4% 28,800 CO Housing & Finance Authority, Single Family Class Revenue, Series 2004 A-1, SPA: Dexia Credit Local, 2.850% 11/01/34(c).......................................... 28,800 10,000 Single Family Class Revenue, Series 2004B-2, SPA: Dexia Credit Local, 2.850% 11/01/34(c).......................................... 10,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 38 NATIONS MONEY MARKET FUNDS Nations Money Market Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- COLORADO -- (CONTINUED) $ 1,300 CO Denver City & County Airport Revenue, Series 2002D, LOC: Societe Generale, 2.850% 11/15/05(c).......................................... $ 1,300 ----------- 40,100 ----------- CONNECTICUT -- 0.1% 14,000 CT State Housing Finance Authority, Series 2001A-4, Insured: AMBAC, LOC: FHLB SBPA, 2.800% 05/15/32(c).......................................... 14,000 ----------- FLORIDA -- 0.2% 10,800 FL State Housing Finance Agency, Series 1993, Insured: MBIA SPA: Westdeutsche Landesbank 2.850% 01/01/34(c).......................................... 10,800 8,350 FL Housing Finance Corporation, Series 2002A, Insured: AMBAC, SPA: Dexia Credit Local, 2.850% 01/01/47(c).......................................... 8,350 ----------- 19,150 ----------- MASSACHUSETTS -- 0.1% 8,608 MA State Housing Finance Agency, Series 2004A, Insured: FSA SPA: Dexia Credit Local, 2.850% 01/01/44(c).......................................... 8,608 ----------- OHIO -- 0.1% 13,000 OH State Air Quality Development Authority, Series 2004B, LOC: ABN AMRO Bank N.V., 2.840% 06/01/24(c).......................................... 13,000 ----------- TEXAS -- 1.2% 30,000 TX Higher Education Authority, Student Loan Revenue, Series B, Insured: AMBAC, LOC: DEPFA Bank PLC, 2.850% 12/01/44(c).......................................... 30,000 TX State, GO, Series 1994A-2, SPA: DEPFA Bank PLC, 46,200 2.850% 12/01/33(c).......................................... 46,200 26,075 2.800% 12/01/09(c).......................................... 26,075 15,000 GO, Series 1997B-2, SPA: DEPFA Bank PLC, 2.850% 12/01/29(c).......................................... 15,000 18,605 GO, Veteran Housing Assistance, Series 2004, SPA: Dexia Credit Local, 2.850% 12/01/24(c).......................................... 18,605 ----------- 135,880 -----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- WISCONSIN -- 0.0% $ 5,000 WI Housing & Economic Development Authority, Home Ownership Revenue, Series 2004, SPA: Dexia Credit Local, 2.850% 09/01/35(c).......................................... $ 5,000 ----------- TOTAL MUNICIPAL BONDS AND NOTES (Cost $366,475)............................................. 366,475 ----------- MORTGAGE-BACKED SECURITIES -- 2.6% 33,000 Aire Valley Mortgages 2.850% 09/20/05(a)(b)....................................... 33,000 180,000 Holmes Financing PLC 2.760% 04/15/05(a).......................................... 180,000 45,000 Permanent Financing PLC 2.740% 09/10/05(a).......................................... 45,000 34,421 Residential Mortgage Securities 2.820% 15/13/27(a)(b)....................................... 34,421 ----------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $292,421)............................................. 292,421 ----------- ASSET-BACKED SECURITIES -- 1.8% 42,500 Davis Square Funding, Ltd. 2.900% 10/16/38(c)(e)....................................... 42,500 61,000 G-Star Ltd. 2.900% 06/25/22(c)(e)....................................... 61,000 50,000 Phoenix-Mistic CBO, Ltd. 3.489% 09/15/14(c)(e)....................................... 50,012 50,000 Winston Funding Ltd. 2.560% 04/23/09(c)(e)....................................... 50,000 ----------- TOTAL ASSET-BACKED SECURITIES (Cost $203,512)............................................. 203,512 ----------- REPURCHASE AGREEMENTS -- 11.8% 51,940 Repurchase agreement with Barclays Bank PLC, dated 03/31/05, due 04/01/05 at 2.650%, collateralized by FNMA Notes with various maturities, market value $52,979 (repurchase proceeds $51,944)........................................... 51,940 300,000 Repurchase agreement with Goldman Sachs, dated 03/31/05, due 04/01/05 at 2.910%, collateralized by various commercial paper, market value $306,000 (repurchase proceeds $300,024)................................................... 300,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 39 NATIONS MONEY MARKET FUNDS Nations Money Market Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- (CONTINUED) $ 400,000 Repurchase agreement with Goldman Sachs, dated 03/31/05, due 04/01/05 at 2.890%, collateralized by FNMA Notes with various maturities, market value $408,000 (repurchase proceeds $400,032).......................................... $ 400,000 300,000 Repurchase agreement with Countrywide Home Loans, Inc. dated 03/31/05, due 04/01/05 at 2.880%, collateralized by FNMA Notes with various maturities, market value $306,000 (repurchase proceeds $300,024).............................. 300,000 100,000 Repurchase agreement with CS First Boston, dated 03/31/05, due 04/01/05 at 2.950%, collateralized by various commercial paper with various maturities, market value $102,004 (repurchase proceeds $100,008).............................. 100,000 200,000 Repurchase agreement with UBS Warburg, dated 03/31/05, due 04/01/05 at 2.880%, collateralized by FNMA notes with various maturities, market value $204,003 (repurchase proceeds $200,016).......................................... 200,000 ----------- TOTAL REPURCHASE AGREEMENTS (Cost $1,351,940)........................................... 1,351,940 ----------- TOTAL INVESTMENTS (Cost $11,394,656)(f)............................. 99.9% 11,394,656 ----------- OTHER ASSETS AND LIABILITIES (NET).................. 0.1% 11,911 ----------- NET ASSETS.......................................... 100.0% $11,406,567 ===========
- --------------- Notes to Investment Portfolio: (a) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (b) Security exempt from registration under Section 4(2) of the Securities Act of 1933. These securities may only be resold in exempt transactions to qualified buyers. Private resales of these securities to qualified institutional buyers are also exempt from registration pursuant to Rule 144A under the Securities Act of 1933. At March 31, 2005, these securities amounted to $2,498,233, which represents 21.9% of net assets. (c) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (d) Zero coupon bond. (e) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized cost, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $387,909, which represents 3.4% of net assets. (see Note 6). (f) Cost for federal income tax purposes is $11,394,656. See Note 5 for additional information. ABBREVIATIONS: AMBAC -- Ambac Assurance Corp. FHLB -- Federal Home Loan Bank FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance, Inc. GO -- General Obligation LOC -- Letter of Credit MBIA -- MBIA Insurance Corp. MTN -- Medium-Term Note SBPA -- Standby Bond Purchase Agreement SPA -- Standby Purchase Agreement
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 40 NATIONS MONEY MARKET FUNDS Nations Treasury Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 35.4% U.S. TREASURY BILLS $ 400,000 Discount note 04/14/05...................................... $ 399,619 123,979 Discount note 04/21/05...................................... 123,794 5,602 Discount note 05/19/05...................................... 5,583 470,000 Discount note 05/26/05...................................... 468,148 200,000 Discount note 06/16/05...................................... 198,841 U.S. TREASURY NOTES 100,000 1.500% 03/31/06............................................. 98,221 1,202,000 1.625% 04/30/05............................................. 1,201,479 205,000 1.875% 11/30/05............................................. 203,989 264,000 5.750% 11/15/05............................................. 268,610 200,000 6.750% 05/15/05............................................. 201,067 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $3,169,351)........................................... 3,169,351 ---------- REPURCHASE AGREEMENTS -- 64.5% 250,000 Repurchase agreement with Bear Stearns, dated 03/31/05, due 04/01/05 at 2.660%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $255,002 (repurchase proceeds $250,018).............................. 250,000 750,000 Repurchase agreement with Bear Stearns, dated 03/31/05, due 04/01/05 at 2.670%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $768,423 (repurchase proceeds $750,056).............................. 750,000 145,000 Repurchase agreement with BNP Paribas, dated 03/31/05, due 04/01/05 at 2.630%, collateralized by a U.S. Treasury Bill maturing on 09/29/05, market value $147,900 (repurchase proceeds $145,011).......................................... 145,000 550,000 Repurchase agreement with Countrywide Home Loans, dated 03/31/05, due 04/01/05 at 2.600% 04/01/05, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $561,000 (repurchase proceeds $550,040)........ 550,000 200,000 Repurchase agreement with Deutsche Bank Securities, dated 03/26/04, due 04/26/05 1.200%, collateralized by GNMA Bonds with various maturities, market value $204,000 (repurchase proceeds $202,640)(a)....................................... 200,000 700,000 Repurchase agreement with First Union National Bank, dated 03/31/05, due 04/01/05 at 2.830%, collateralized by GNMA Bonds and U.S. Treasury Notes with various maturities, market value $714,000 (repurchase proceeds $700,055)........ 700,000
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS -- (CONTINUED) $ 500,000 Repurchase agreement with Greenwich Capital, dated 03/31/05, due 04/01/05 at 2.650%, collateralized by a U.S. Treasury Note maturing on 05/15/09, market value $510,004 (repurchase proceeds $500,037).......................................... $ 500,000 300,000 Repurchase agreement with J.P. Morgan Chase Securities, dated 03/31/05, due 04/01/05 at 2.830%, collateralized by GNMA Bonds with various maturities, market value $306,004 (repurchase proceeds $300,024).............................. 300,000 1,368,698 Repurchase agreement with UBS Warburg, dated 03/31/05, due 04/01/05 at 2.660%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $1,396,077,457 (repurchase proceeds $1,368,799)............. 1,368,698 500,000 Repurchase agreement with Westdeutsche Landesbank Girozentrale, dated 03/31/05, due 04/01/05 at 2.625%, collateralized by U.S. Treasury Bonds and Notes with various maturities, market value $510,000 (repurchase proceeds $500,036)................................................... 500,000 500,000 Repurchase agreement with Westdeutsche Landesbank Girozentrale, dated 03/31/05, due 04/01/05 at 2.850%, collateralized by GNMA Bonds with various maturities, market value $510,000 (repurchase proceeds $500,040)............... 500,000 ---------- TOTAL REPURCHASE AGREEMENTS (Cost $5,763,698)........................................... 5,763,698 ---------- TOTAL INVESTMENTS (Cost $8,933,049)(b).............................. 99.9% 8,933,049 ---------- OTHER ASSETS AND LIABILITIES (NET)................................. 0.1% 11,719 ---------- NET ASSETS.......................................... 100.0% $8,944,768 ==========
- --------------- Notes to Investment Portfolio: (a) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized cost, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $200,000, which represents 2.2% of net assets (See Note 6). (b) Cost for federal income tax purposes is $8,933,049. See Note 5 for additional information. ABBREVIATIONS: GNMA -- Government National Mortgage Association
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 41 NATIONS MONEY MARKET FUNDS Nations Government Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 99.8% U.S. GOVERNMENT AGENCIES -- 99.2% FEDERAL FARM CREDIT BANK $ 40,090 2.134% 04/14/05(a).......................................... $ 40,090 38,298 2.500% 11/15/05............................................. 38,225 350,000 2.750% 06/29/05(a).......................................... 350,000 50,000 2.770% 09/02/05(a).......................................... 49,998 275,000 2.780% 07/21/05(a).......................................... 274,992 275,000 2.790% 05/06/05-06/28/06(a)................................. 274,993 150,000 2.800% 06/15/05............................................. 150,000 ---------- 1,178,298 ---------- FEDERAL HOME LOAN BANK 872,428 Discount notes 04/01/05-06/08/05............................ 870,654 57,000 1.300% 04/11/05-04/25/05.................................... 56,999 32,000 1.350% 04/15/05............................................. 32,000 10,000 1.400% 04/15/05............................................. 10,000 3,890 1.500% 08/26/05............................................. 3,871 50,000 1.560% 05/20/05............................................. 50,000 20,000 1.625% 04/15/05............................................. 20,003 7,800 2.050% 02/10/06............................................. 7,726 29,330 2.080% 04/15/05............................................. 29,325 39,000 2.125% 09/20/05............................................. 38,922 62,365 2.250% 10/21/05-10/27/05.................................... 62,268 82,000 2.300% 08/12/05............................................. 81,856 148,000 2.340% 06/13/06(a).......................................... 147,859 50,000 2.345% 09/12/05(a).......................................... 49,989 80,000 2.500% 04/11/06............................................. 79,087 100,000 2.580% 06/02/06(a).......................................... 99,924 50,000 2.619% 10/03/05(a).......................................... 49,988 50,000 2.626% 08/02/05(a).......................................... 49,998 300,000 2.631% 08/02/05(a).......................................... 300,005 80,000 2.656% 05/10/06(a).......................................... 79,951 80,000 2.755% 10/03/05(a).......................................... 79,986 30,000 2.760% 07/26/05(a).......................................... 29,998 100,000 2.975% 03/28/06(a).......................................... 99,946 10,000 3.625% 11/15/05............................................. 10,048 35,000 6.500% 11/15/05............................................. 35,785 ---------- 2,376,188 ---------- TOTAL U.S. GOVERNMENT AGENCIES (Cost $3,554,486)........................................... 3,554,486 ----------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 0.6% U.S. TREASURY BILL $ 20,384 Discount note 04/21/05...................................... $ 20,357 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $20,357).............................................. 20,357 ---------- TOTAL INVESTMENTS (Cost $3,574,843)(b).............................. 99.8% 3,574,843 ---------- OTHER ASSETS AND LIABILITIES (NET).................. 0.2% 6,388 ---------- NET ASSETS.......................................... 100.0% $3,581,231 ==========
- --------------- Notes to Investment Portfolio: (a) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (b) Cost for federal income tax purposes is $3,574,843. See Note 5 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 42 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- MUNICIPAL BONDS AND NOTES -- 100.0% ALABAMA -- 0.9% $ 21,510 AL Birmingham Medical Clinic Board Revenue, Medical Advancement Foundation Project, Series 2000A, LOC: Columbus Bank & Trust 2.480% 09/01/30(a).......................................... $ 21,510 3,215 AL Birmingham Private Educational Building Authority Revenue, The Altamont School Project, Series 1998, LOC: AmSouth Bank of Alabama 2.330% 04/01/13(a).......................................... 3,215 6,000 AL Birmingham Public Educational Building, Authority Student Housing Revenue, CHF-UAB II, Series 2005A, 2.300% 07/01/37(a).......................................... 6,000 3,005 AL Daphne YMCA Public Park & Recreation Board Revenue, YMCA Project, Series 2002, LOC: Legions Bank 2.330% 10/01/22(a).......................................... 3,005 1,160 AL Dothan Houston County Airport Authority Revenue, PEMCO Aviation Group Project, Series 2002, AMT LOC: SouthTrust Bank N.A. 2.270% 10/01/17(a)(b)....................................... 1,160 2,995 AL Geneva County Industrial Development Board Revenue, Brooks AG Company, Inc., Project, Series 2002, AMT, LOC: Region Bank 2.400% 03/01/14(a).......................................... 2,995 3,500 AL Huntsville Industrial Development Board Revenue, Brown Precision Inc. Project, Series 2001, AMT, LOC: First Commercial Bank 2.380% 12/01/19(a).......................................... 3,500 3,450 AL Huntsville Solid Waste Disposal Authority & Resources Revenue, Series 2003, AMT, Insured: MBIA 1.700% 10/01/12(a)(c)....................................... 3,450 2,000 AL State Board of Education Revenue, Series 2005, Insured: AMBAC 2.320% 11/01/12(a)(b)....................................... 2,000 6,910 AL University Alabama General Revenue, Series 2004, Insured: MBIA 2.320% 07/01/34(a)(b)....................................... 6,910 ---------- 53,745 ---------- ALASKA -- 1.3% 5,790 AK Municipal Board Bank Authority, Series 2004, Insured: MBIA 2.320% 01/01/24(a)(b)....................................... 5,790
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ALASKA -- (CONTINUED) $ 2,655 AK Municipal Board Bank Authority, GO, Series 2004, Insured: MBIA 2.320% 02/15/12(a)(b).................................. $ 2,655 13,900 AK North Slope Borough Alaska Exempt Facility Revenue, BP Exploration Alaska Project, Series 2001, AMT, 2.350% 07/01/25(a).......................................... 13,900 43,800 AK North Slope Borough, Series 1994, Insured: FSA (d) 06/30/05................................................ 43,602 4,980 AK State Housing Finance Corporation, Series 2005, Insured: FGIC 2.320% 12/01/34(a)(b)....................................... 4,980 7,000 AK State Housing Finance Corporation Revenue, Series 2002A, AMT, 2.320% 12/01/36(a).......................................... 7,000 ---------- 77,927 ---------- ARIZONA -- 1.3% 5,200 AZ Apache County Industrial Development Revenue, Tucson Electric Power Project, Series 1983C, LOC: Societe Generale 2.350% 12/15/18(a).......................................... 5,200 1,300 AZ Goodyear Industrial Development Revenue, Walle Corporation Project, Series 1995, AMT, LOC: Bank One Kentucky N.A. 2.380% 05/01/15(a)(b)....................................... 1,300 1,770 AZ Maricopa County Industrial Development Authority Solid Waste Disposal Revenue, Series 2004, 2.390% 12/01/31(a)(b)....................................... 1,770 12,000 AZ Phoenix Civic Improvement Corporation, Series 2004, LOC: Dexia Public Finance 1.470% 05/05/05(a).......................................... 12,000 16,671 AZ Phoenix Industrial Development Authority, Single Family Mortgage Revenue, Series 2002A, AMT, 2.824% 11/25/05(a).......................................... 16,671 6,000 AZ Pima County Industrial Development Authority, Series 2004, LOC: Branch Banking & Trust 2.270% 04/01/38(a).......................................... 6,000 35,000 AZ School District Financing Program, Certificates of Participation, Series 2004, 3.000% 07/30/05............................................. 35,177 ---------- 78,118 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 43 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ARKANSAS -- 0.2% $ 6,500 AR Lowell IDR, Little Rock Newspapers, Inc. Project, Series 1996, AMT, LOC: Bank of New York 2.420% 06/01/31(a)(b)....................................... $ 6,500 1,000 AR Sheridan IDR, H Robertson Company Project, Series 1998B, AMT, LOC: Sheridan Bank 2.380% 08/01/16(a)(b)....................................... 1,000 2,600 AR Sheridan Industrial Development Revenue, Centria Project, Series 2000A, AMT, LOC: PNC Bank 2.430% 08/01/20(a)(b)....................................... 2,600 ---------- 10,100 ---------- CALIFORNIA -- 5.7% 8,960 CA ABN AMRO Munitops Certificates Trust, Multi-State Non-AMT Certificates, Series 2004, 2.330% 02/01/11(a)(b)....................................... 8,960 65,000 CA Housing Finance Agency Multi-Family Housing Revenue, Series 2005B, AMT, 2.375% 02/01/35(a).......................................... 65,000 29,655 Series J, Insured: MBIA LOC: Lloyds Bank PLC 2.350% 02/01/33(a).......................................... 29,655 11,600 Series 2000C, AMT, 2.350% 02/01/33(a).......................................... 11,600 13,000 Series 2002E, AMT, 7.290% 08/01/37(a).......................................... 13,000 34,500 Series 2004E-2, AMT, 1.650% 02/01/35(a).......................................... 34,500 15,995 Series 2004, 2.360% 11/01/07(a)(b)....................................... 15,995 39,565 Series 2005, AMT, 2.360% 11/01/07(a)(b)....................................... 39,565 25,000 CA Los Angeles County Tax & Revenue, Series 2004A, 3.000% 06/30/05............................................. 25,078 Series 2004, 43,000 3.000% 06/30/05............................................. 43,135 10,000 3.500% 06/30/05............................................. 10,048 30,000 6.000% 06/30/05............................................. 30,294 14,000 CA Southern California Home Financing Authority Single Family Revenue, Series 2004B, AMT, 1.450% 02/01/34(a).......................................... 14,000 7,500 CA Statewide Communities Development Authority Multi-Family Revenue Housing, Bay Vista Meadow Park Project, Series 2003, AMT, LOC: Wells Fargo Bank N.A. 2.370% 12/15/37(a).......................................... 7,500 ---------- 348,330 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- COLORADO -- 3.3% $ 6,650 CO Arapahoe County Capital Improvement Trust Fund Highway Revenue, Series 1986E - 470, (d) 08/31/08................................................ $ 5,468 26,300 (d) 08/31/26................................................ 5,439 15,000 CO Denver City & County Airport Revenue, Series 2004B, AMT, Insured: AMBAC 2.320% 11/15/24(a).......................................... 15,000 4,160 Series 2005, AMT, Insured: MBIA 2.370% 11/15/09(a)(b)....................................... 4,160 1,545 CO Denver City & County Special Facility Apartment Revenue, Series 1999A, AMT, 5.250% 01/01/06............................................. 1,578 9,585 CO Douglas County Multi-Family Revenue Housing, Lincoln Pointe Loft Project, Series 2003, AMT LOC: U.S. Bank N.A. 2.350% 02/01/37(a).......................................... 9,585 2,800 CO Health Facilities Authority Revenue, Crossroads Projects, Series 2004A, LOC: U.S. Bank N.A. 2.350% 11/01/28............................................. 2,800 9,100 CO Housing & Finance Authority Multi-Family Project, Series 2002A-1, AMT, 2.320% 10/01/22(a).......................................... 9,100 10,785 Series 2004I-A, AMT, 2.320% 04/01/45(a).......................................... 10,785 9,000 Series 2002I-C2, AMT, 2.320% 10/01/32(a).......................................... 9,000 10,000 Series 2004, 2.320% 11/01/26(a).......................................... 10,000 15,685 CO Housing & Finance Authority Multi-Family Project Single Family Clinic Project, Series 2002C, AMT, 2.320% 05/01/22(a).......................................... 15,685 17,000 2.320% 11/01/26(a).......................................... 17,000 25,000 Series 2004, AMT, 2.320% 11/01/26(a).......................................... 25,000 4,000 Series 2002, AMT, 2.320% 11/01/21(a).......................................... 4,000 11,300 Series 2005I-A-4, AMT, 2.550% 03/29/06(a).......................................... 11,300 16,100 CO State Education Loan Program, Series 2004D, 2.310% 08/09/05(a)(b)....................................... 16,100 12,000 CO State General Fund Revenue, Tax and Revenue Anticipation Notes, Series 2004, 3.000% 06/27/05............................................. 12,023
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 44 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- COLORADO -- (CONTINUED) $ 17,200 CO Student Obligation Board Authority, Series 1990A, AMT, Insured: AMBAC 2.350% 09/01/24(a).......................................... $ 17,200 ---------- 201,223 ---------- CONNECTICUT -- 0.3% 7,200 CT State Development Authority, Sewage Sludge Disposal Facility Revenue, Netco Waterbury Limited, Series 1995, AMT, 9.375% 06/01/16............................................. 7,486 8,410 CT State Housing Finance Authority, Series 2005, AMT, 2.330% 11/15/09(a)(b)....................................... 8,410 ---------- 15,896 ---------- DELAWARE -- 0.2% 5,185 DE New Castle County Airport Facility Revenue, Flight Safety International Inc. Project, Series 2002, AMT, 2.320% 12/01/32(a).......................................... 5,185 8,500 DE New Castle County Multi-Family Housing Revenue, Flight Safety International Inc. Project, Series 2002, AMT, 2.350% 09/15/38(a).......................................... 8,500 1,600 DE State Economic Development Authority Revenue, Series 1998, AMT, LOC: PNC Bank Delaware 2.430% 09/01/18(a)(b)....................................... 1,600 ---------- 15,285 ---------- DISTRICT OF COLUMBIA -- 3.1% 7,500 DC Columbia Enterprise Zone Revenue, House on F Street Project, Series 2001, AMT, LOC: Bank of New York 2.420% 05/01/15(a).......................................... 7,500 5,000 Series 2004, AMT, LOC: Bank of Scotland 2.380% 12/01/29(a).......................................... 5,000 5,000 DC Housing Finance Agency, Multi-Family Housing Revenue, Series 1995A, AMT, 2.430% 08/01/25(a).......................................... 5,000 16,000 DC Metropolitan Airport Authority System, 1.950% 04/07/05............................................. 16,000 2,750 Series 2004, AMT, Insured: MBIA 2.370% 10/01/12(a)(b)....................................... 2,750 8,360 DC Metropolitan Area Transportation Authority, Series 2003, Insured: MBIA 1.950% 01/01/10(a)(c)....................................... 8,314
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- DISTRICT OF COLUMBIA -- (CONTINUED) $100,100 DC Metropolitan Columbia Airport Authority System, Series 2004, AMT, Insured: MBIA 2.300% 10/01/21(a).......................................... $ 100,100 40,000 1.950% 04/07/05(a).......................................... 40,000 7,500 DC Revenue, National Association of Realtors Project, Series 2003, AMT, LOC: SunTrust 2.340% 12/01/23(a).......................................... 7,500 ---------- 192,164 ---------- FLORIDA -- 4.3% 29,300 FL Broward County Port Facilities Revenue Refunding, Port Everglades Project, Series 1998, AMT, Insured: AMBAC 2.330% 09/01/27(a).......................................... 29,300 4,635 FL Collier Health Facilities Authority Hospital Revenue, Cleveland Clinic Health, Series 2003C-1, LOC: JPMorgan Chase 2.340% 09/01/29(a).......................................... 4,635 6,550 FL Crossings at Fleming Island Community Development District Special Assessment, Series 1995, 8.250% 05/01/16............................................. 6,709 3,885 FL Escambia Housing Finance Authority Single Family Mortgage Revenue, Series 2001, 2.360% 10/01/31(a).......................................... 3,885 1,215 FL Fort Walton Beach Industrial Development Authority, Burton Golf Inc. Project, Series 1996, AMT, LOC: Columbus Bank & Trust 2.570% 10/01/11(a)(b)....................................... 1,215 2,760 FL Hollywood Water & Sewer Revenue, Series 2003, Insured: FSA 2.310% 10/01/18(a)(b)....................................... 2,760 7,545 FL Housing Finance Agency Multi-Family Revenue, Lakes of Northdale Project, Series 1984D, LOC: SouthTrust Bank of Alabama 2.310% 05/15/12(a).......................................... 7,545 4,200 FL Housing Finance Corporation Multi-Family Revenue, Clarcona Groves Apartments, Series 2005A, AMT, 2.330% 09/15/37(a).......................................... 4,200 5,500 FL Lake County Industrial Development Authority, Senniger Irrigation Project, Series 2003, AMT, LOC: SunTrust Bank 2.340% 11/01/24(a).......................................... 5,500
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 45 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- FLORIDA -- (CONTINUED) $ 5,000 FL Lee County Industrial Development Authority Utilities Revenue, North Fort Myers Utilities Project, Series 2003A, AMT, LOC: SunTrust Bank 2.340% 06/01/22(a).......................................... $ 5,000 4,595 FL Miami Dade County School Board, Certificates of Participation, Series 2004, Insured: FGIC 2.310% 10/01/20(a)(b)....................................... 4,595 13,000 FL Miami-Dade County School District, Tax Anticipation Notes, Series 2004, 2.750% 06/28/05............................................. 13,020 9,900 FL Orange County Housing Finance Authority Multi-Family Revenue, Series 2003, AMT, LOC: South Trust Bank, N.A. 9.160% 08/15/36(a).......................................... 9,900 12,300 FL Palm Beach County Health Facilities Authority Revenue, Bethesda Healthcare Systems Project, Series 2001, LOC: Suntrust Bank 2.290% 12/01/31(a).......................................... 12,300 5,500 FL Pinellas County Housing Finance Authority Multi-Family Revenue, Alta Largo Apartments Project, Series 2004, AMT, LOC: AmSouth Bank 2.340% 03/01/26(a).......................................... 5,500 8,400 Series 2004, LOC: AmSouth 2.360% 06/01/42(a).......................................... 8,400 28,585 FL Pinellas County Housing Finance Authority Single Family Revenue, Series 2005, AMT, Insured: FGIC 2.380% 05/01/14(a)(b)....................................... 28,585 35,500 FL Pinellas County School District, Series 2004, 3.000% 06/30/05............................................. 35,618 7,000 FL St. Johns County Industrial Development Authority Revenue, Series 2004, AMT, LOC: Coastal Bank of Georgia 2.430% 11/01/34(a).......................................... 7,000 125 FL State Board of Education, Series 2003, 2.310% 07/01/11(a)(b)....................................... 125 7,645 Insured: MBIA 2.310% 01/01/12(a)(b)....................................... 7,645 55,000 FL Sunshine State Governmental Financing Commission, 2.130% 07/13/05(a).......................................... 55,000 3,500 FL Tuscany Lakes Housing Project, Series 2002, AMT, Insured: FNMA 2.360% 11/15/35(a).......................................... 3,500 ---------- 261,937 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- GEORGIA -- 4.7% $ 12,960 GA Atlanta Airport Revenue, Series 2001, AMT, Insured: FGIC 1.260% 01/01/25(a)(c)....................................... $ 12,960 5,390 Series 2003, AMT, Insured: FGIC 2.370% 01/01/14(a)(b)....................................... 5,390 10,000 Series 2003, AMT, Insured: FGIC 2.370% 12/30/11(a)(b)....................................... 10,000 4,470 Series 2004, AMT, Insured: FGIC 2.370% 01/01/14(a)(b)....................................... 4,470 12,155 Series 2005, AMT, Insured: FGIC 2.370% 01/01/17(a)(b)....................................... 12,155 5,650 GA Atlanta Urban Residential Financing Authority Multi-Family Housing Revenue, Collegetown Harris Project, Series 2003I, AMT, 2.350% 10/15/36(a).......................................... 5,650 25,100 Park District Atlantic Project, Series 2002A, AMT, LOC: SouthTrust Bank 2.380% 12/01/37(a).......................................... 25,100 9,600 Housing Market District Project, Series 2004A, AMT, LOC: Wachovia Bank N.A. 2.340% 11/01/34(a).......................................... 9,600 7,000 M Street Apartments Project, Series 2003, AMT, LOC: Regions Bank 2.360% 03/01/43(a).......................................... 7,000 5,000 GA Bartow County Development Authority Multi-Family Housing Revenue, Series 2002, AMT, LOC: PNC Bank N.A. 2.380% 02/01/35(a).......................................... 5,000 6,750 GA Carroll County Development Authority Industrial Revenue, Royal Metal Products Project, Series 2004, AMT, LOC: SunTrust Bank 2.340% 06/01/24(a).......................................... 6,750 5,725 GA Clayton County Housing Authority Multi-Family Housing Revenue, Chateau Forest Apartments Project, Series 1990E, Insured: FSA 2.030% 01/01/21(a).......................................... 5,725 3,900 GA Cobb County Housing Authority Multi-Family Housing Revenue, Woodchase Village Apartments Project, Series 2003, AMT, LOC: Regions Bank 2.380% 03/15/36(a).......................................... 3,900 390 GA Cobb County Industrial Development Revenue, Datagraphic Inc. Project, Series 1990, AMT, LOC: SouthTrust Bank of Alabama 2.390% 05/01/05(a).......................................... 390
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 46 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- GEORGIA -- (CONTINUED) $ 9,215 GA Columbia County Development Authority Multi-Family Housing Revenue, Westwood Club Apartment Project, Series 2002, AMT, LOC: Keybank N.A. 2.350% 11/15/35(a).......................................... $ 9,215 15,300 GA Columbus Hospital Authority Multi-Family Housing Revenue, St. Francis Hospital Inc., Project, Series 2000A, LOC: Columbus Bank & Trust 2.320% 01/01/31(a)(b)....................................... 15,300 7,475 GA DeKalb County Housing Authority Multi-Family Housing Revenue, Stone Mill Run Apartments Project, Series 1995A, AMT, LOC: First Tennessee Bank N.A. 2.370% 08/01/27(a)(b)....................................... 7,475 3,240 GA Dooly County Industrial Development Authority Revenue, Hambug Enterprises Project, Series 2003, AMT, LOC: Fifth Third Bank 2.260% 12/01/17(a)(b)....................................... 3,240 3,000 GA Douglas County Development Authority, Colonial Hills School Property Project, Series 2004, LOC: Branch Banking & Trust, 2.270% 06/01/24(a)(b)....................................... 3,000 8,000 GA East Point Housing Authority Multi-Family Housing Revenue, Village Highlands Apartments Project, Series 2004, AMT, LOC: SunTrust Bank 2.340% 07/01/37(a).......................................... 8,000 4,620 GA Franklin County Industrial Building Authority Industrial Development Authority, Bosal Industries Georgia, Inc. Project, Series 1995, LOC: Standard Federal Bank 2.360% 08/01/10(a).......................................... 4,620 9,350 GA Fulton County Development Authority Airport Facilities Revenue, Flight Safety International Inc. Project, Series 1999B, AMT, 2.320% 12/01/28(a).......................................... 9,350 34,770 Series 1999B, AMT, 2.320% 12/01/18(a).......................................... 34,770 3,900 GA Fulton County Development Authority Revenue, Leggett & Platt Inc. Project, Series 1992A, AMT, LOC: Wachovia Bank of Georgia 2.490% 06/01/27(a)(b)....................................... 3,900
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- GEORGIA -- (CONTINUED) $ 6,675 GA Gwinnett County Development Authority, Certificates of Participation, Series 2004, Insured: MBIA 2.320% 01/01/21(a)(b)....................................... $ 6,675 5,000 GA Kennesaw Development Authority Housing, Walton Ridenour Apartments Project, Series 2004, AMT, LOC: SunTrust Bank 2.340% 04/01/37(a).......................................... 5,000 9,601 GA Municipal Electric Power Authority Revenue, Series 2003, 1.940% 04/18/05............................................. 9,601 4,035 Series 2003, Insured: MBIA 2.320% 01/01/13(a)(b)....................................... 4,035 5,495 Series 2004, Insured: AMBAC 2.320% 01/01/26(a)(b)....................................... 5,495 7,260 GA Private Colleges & Universities Authority Revenue, Mercer University Project, Series 2003, LOC: Branch Banking & Trust 2.380% 10/01/32(a).......................................... 7,260 9,215 GA Richmond County Development Authority, Stonegate Club Apartments Project, Series 2002, AMT, LOC: JPMorgan Chase Bank 2.350% 11/15/35(a).......................................... 9,215 875 GA Thomasville Payroll Development Authority, Scruggs Company Project, Series 2000, LOC: First Union National Bank 2.440% 08/01/10(a)(b)....................................... 875 7,500 GA Urban Residential Finance Authority Multi-Family Revenue Housing, Lindbergh City Center Apartment Project, Series 2004, LOC: Regions Bank 2.350% 11/01/44(a).......................................... 7,500 15,800 GA Winder Barrow County Joint Development Authority Solid Waste Disposal Revenue, Republic Services Inc. Project, Series 2004, AMT, LOC: SunTrust Bank, 2.320% 11/01/34(a).......................................... 15,800 ---------- 284,416 ---------- HAWAII -- 0.7% 16,700 HI Honolulu City & County, Series 2004C, AMT, Insured: FGIC 2.280% 12/01/10(a).......................................... 16,700 16,700 HI Honolulu City & County, GO, Series 2001C, Insured: FGIC 2.280% 12/01/08(a).......................................... 16,700 1,350 HI State Airports System Revenue, Series 2004, AMT, 2.370% 01/01/10(a)(b)....................................... 1,350
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 47 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- HAWAII -- (CONTINUED) $ 1,690 HI State Apartments System Revenue, Series 2004, AMT, Insured: FGIC 2.370% 01/01/10(a)(b)....................................... $ 1,690 4,000 HI State, Series 2004, Insured: MBIA 2.320% 10/01/24(a).......................................... 4,000 ---------- 40,440 ---------- IDAHO -- 0.9% 4,100 ID Housing & Finance Association Single Family Mortgage Revenue, Series 2002A-38, AMT, LOC: Wachovia Bank N.A. 2.400% 07/01/32(a)(b)....................................... 4,100 13,485 Series 2002D, AMT, 2.320% 07/01/33(a).......................................... 13,485 10,910 Series 2003C, AMT, 2.320% 07/01/34(a).......................................... 10,910 18,900 Series 2004D, 2.000% 01/01/36(a).......................................... 18,900 6,000 ID Idaho Falls, GO, Series 1991, Insured: FGIC (d) 04/01/05................................................ 6,000 2,000 ID Power County Industrial Development Revenue, FMC Corp. Project, Series 2001, AMT, LOC: Wachovia Bank N.A. 2.340% 04/01/14(a).......................................... 2,000 ---------- 55,395 ---------- ILLINOIS -- 8.6% 1,795 IL Addison Industrial Development Revenue, Stand Fast Packaging Products, Series 1996, AMT, LOC: LaSalle 2.470% 07/01/21(a)(b)....................................... 1,795 15,530 IL Chicago Board of Education, Series 2004E, Insured: FSA 2.300% 03/01/15(a).......................................... 15,530 1,185 IL Chicago Industrial Development Revenue, Bullen Midwest Inc. Project, Series 1997, AMT, 2.450% 11/01/17(a).......................................... 1,185 1,500 Eli's Chicago's Finest Inc., Series 1996, AMT, LOC: LaSalle Bank 2.370% 11/01/26(a).......................................... 1,500 8,000 IL Chicago Midway Airport Revenue, Second Lien, Series 1998B, AMT, Insured: MBIA 2.330% 01/01/29(a).......................................... 8,000 13,895 IL Chicago Multi-Family Housing Revenue, Concordia Place Apartments Project, Series 2003, AMT, LOC: Harris Trust & Services 2.330% 07/01/34(a).......................................... 13,895
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 1,470 North Larrabee Project, Series 2001A, AMT, LOC: Harris Trust & Savings Bank 2.360% 04/01/36(a).......................................... $ 1,470 3,800 Renaissance Saint Luke Project, Series 2004A, AMT, LOC: Harris Trust & Savings Bank 2.360% 01/01/39(a).......................................... 3,800 5,500 IL Chicago O'Hare International Airport Revenue, Series 2003, AMT, Insured: FSA 2.370% 07/01/11(a)(b)....................................... 5,500 2,095 Series 2003, AMT, Insured: MBIA 2.370% 07/01/08(a)(b)....................................... 2,095 5,200 Series 2003, AMT, Insured: FSA 2.360% 01/01/22(a)(b)....................................... 5,200 3,025 Series 2004, AMT, Insured: AMBAC 1.250% 11/08/08(a)(b)....................................... 3,025 2,000 Insured: MBIA 2.370% 01/01/17(a)(b)....................................... 2,000 2,345 IL Chicago Wastewater Transmission Revenue, Series 2004, Insured: MBIA 2.400% 01/01/22(a)(b)....................................... 2,345 3,000 IL Chicago, Equipment Notes, Series 1997, LOC: Harris Trust & Savings Bank 2.350% 01/01/06(a).......................................... 3,000 2,820 IL Cook County Illinois, GO, Series 2003, Insured: MBIA 2.320% 11/15/21(a)(b)....................................... 2,820 710 IL Development Finance Authority Industrial Development Revenue, West Hubbard Street Project, Series 1996, AMT, LOC: American National Bank 2.050% 12/01/16(a).......................................... 710 2,515 Affordable Housing Revenue, Cinnamon Lake Towers Project, Series 1997, AMT, LOC: Bank One N.A. 2.350% 04/15/37(a).......................................... 2,515 1,500 Campagna-Turano Bakery Project, Series 2000, AMT, LOC: American National Bank & Trust 2.450% 08/01/25(a)(b)....................................... 1,500 3,950 Clingan Steel Inc. Project, Series 2003, LOC: LaSalle National Bank 2.530% 12/01/23(a)(b)....................................... 3,950 3,900 Feltes Sand & Grave Company Project, Series 2003, AMT, LOC: LaSalle Bank N.A. 2.370% 12/01/18(a).......................................... 3,900
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 48 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 1,840 Flinn Scientific Inc. Project, Series 1995, LOC: Harris Trust & Savings Bank 2.360% 10/01/15(a).......................................... $ 1,840 5,415 Groot Industries Inc. Project, Series 2003, LOC: Bank One N.A. 2.450% 12/01/23(a)(b)....................................... 5,415 1,100 Jewish Council Youth Service Project, Series 2003, LOC: Harris Trust Bank 2.330% 09/01/28(a).......................................... 1,100 6,100 Lifesource Project, Series 2000, LOC: PNC Bank N.A. 2.310% 06/01/20(a).......................................... 6,100 1,500 Park Ridge Youth Campus Project, Series 1998, LOC: Northern Trust 2.350% 09/01/18(a)(b)....................................... 1,500 2,470 Rainbow Graphics Inc. Project, Series 2003, AMT, Bank One N.A. 2.620% 08/01/23(a)(b)....................................... 2,470 8,710 Residential Rental Project, Series 1994, AMT, 2.280% 04/01/24(a)(b)....................................... 8,710 1,850 Royal Continental Box Project, Series 1995B, AMT, LOC: LaSalle National Bank 2.370% 04/01/10(a).......................................... 1,850 7,500 Sexton Energy Project, Series 2003, AMT, LOC: Fifth Third Bank 2.350% 10/01/23(a).......................................... 7,500 2,800 Unique Building Corporation Project, Series 1989, AMT LOC: American National Bank & Trust Company 2.500% 05/01/19(a).......................................... 2,800 4,500 WM Plastics Project, Series 2001, AMT, LOC: LaSalle Bank N.A. 2.370% 08/01/26(a).......................................... 4,500 2,550 IL Development Finance Authority Multi-Family Revenue, Economic Development Revenue, Addison 450 L P Project, Series 1989, AMT, LOC: National Bank & Trust Company 2.350%(a)................................................... 2,550 5,405 West Chicago Senior Apartment Project, Series 2003, AMT, LOC: Citibank N.A. 2.370% 12/01/13(a)(b)....................................... 5,405 3,145 IL Educational Facilities Authority Revenue, Chaplin Hall Center Children Project, Series 2003, 2.190% 07/01/24(a)(b)....................................... 3,145 7,100 Series 1991, Insured: MBIA (d) 07/01/05................................................ 7,064
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 2,495 IL Elgin Industrial Development Revenue, Nelson Graphic Inc. Project, Series 2000, AMT, 2.370% 05/01/20(a).......................................... $ 2,495 2,000 IL Elmhurst Industrial Development Revenue, John Sakash Company Project, Series 2000, AMT, LOC: Citibank N.A. 2.370% 02/01/25(a).......................................... 2,000 3,000 IL State, GO, Series 2002, Insured: FSA 5.000% 04/01/05............................................. 3,000 1,210 IL Gurnee Industrial Development Authority, Kenall Manufacturing Company Project, Series 1998, 2.360% 03/01/18(a).......................................... 1,210 5,630 Little Lady Foods Inc. Project, Series 2002, AMT, 2.370% 12/01/22(a).......................................... 5,630 25,840 IL Health Facilities Authority Revenue, Series 2004, Insured: MBIA 2.150% 12/23/05(a)(c)....................................... 25,840 3,400 IL Housing Development Authority Multi-Family Revenue, Mattoon Towers Project, Series 2004, AMT, LOC: First National Bank 2.320% 01/01/34(a).......................................... 3,400 6,300 Spring Creek Project, Series 2004, LOC: LaSalle Bank N.A. 2.330% 04/01/34(a).......................................... 6,300 4,300 IL Industrial Development Revenue, Enterprise Center X Project, Series 1992, AMT, Insured: LaSalle National Bank 2.370% 06/01/22(a).......................................... 4,300 1,500 IL Lombard Village Industrial Projects, Revenue Refunding, B&H Partnership Project, Series 1995, LOC: LaSalle Bank N.A. 2.680% 10/01/13(a).......................................... 1,500 9,880 IL McLean & Woodford School District No. 5, GO, Series 2003, Insured: FSA 2.320% 12/01/09(a)(b)....................................... 9,880 7,695 IL Metropolitan Pier & Exposition Authority Dedicated State Tax, Series 2004, Insured: FGIC 2.400% 05/22/24(a)(b)....................................... 7,695 Series 2004, Insured: MBIA 7,035 2.400% 12/15/25(a)(b)....................................... 7,035 4,025 2.410% 12/15/33(a)(b)....................................... 4,025 9,175 Series 2005Z-1, Insured: MBIA 2.400% 12/15/26(a)(b)....................................... 9,175 2,200 IL Multi-Family Housing Revenue, Series 2001B, LOC: Harris Trust & Savings 2.360% 04/01/09(a).......................................... 2,200
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 49 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 2,980 IL New Lenox Industrial Development Revenue, Panduit Corporation Project, Series 1990, AMT, LOC: Fifth Third Bank 2.380% 07/01/15(a).......................................... $ 2,980 7,160 IL Northern Illinois University Revenue, Series 2004, Insured: FGIC 2.320% 10/01/09(a)(b)....................................... 7,160 9,995 IL O'Hare International Airport Revenue, Series 2003, Insured: FS 2.370% 07/01/11(a)(b)....................................... 9,995 3,670 IL Palos Hills Multi-Family Housing Revenue, Green Oaks Project, Series 1998, AMT, 2.370% 08/01/29(a)(b)....................................... 3,670 1,700 IL Savanna Industrial Development, Metform Corporation Project, Series 1994B, AMT, LOC: Bank One N.A. 2.350% 06/01/09(a).......................................... 1,700 6,700 West Chicago Senior Apartment Project, Series 2003, AMT, LOC: Citibank N.A. 2.380% 02/01/38(a).......................................... 6,700 8,500 IL State Finance Authority Economic Development Revenue, Addison 450 LP Project, Series 1989, AMT, LOC: American National Bank & Trust Company 2.360% 10/15/34(a).......................................... 8,500 208,200 IL State, GO, Series 2005, 3.000% 06/03/05............................................. 208,539 2,065 IL Tinley Park Industrial Development Revenue, Beverly Manufacturing Company Project, Series 1997A, AMT, LOC: American National Bank & Trust, 2.540% 09/01/17(a).......................................... 2,065 5,280 IL University Certificate of Participation, Series 2004, Insured: FGIC 2.320% 03/01/11(a)(b)....................................... 5,280 2,375 IL Upper River Valley Development Authority, Industrial Development Revenue, Clover Properties LLC Project, Series 2000, AMT, LOC: LaSalle Bank N.A. 2.370% 07/01/20(a)(b)....................................... 2,375 1,375 IL Urbana Multi-Family Housing Revenue, Prairie Green II Apartment Project, Series 2000, AMT, LOC: LaSalle Bank N.A. 2.370% 06/01/29(a).......................................... 1,375
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 22,905 IL Will County Multi-Family Housing Redevelopment Revenue, Woodlands Crest Hill Project, Series 1999, AMT, 2.360% 02/15/31(a).......................................... $ 22,905 ---------- 526,613 ---------- INDIANA -- 1.9% 2,900 IN Allen County Multi-Family Housing Redevelopment, Woodland Crest Hill Project, Series 1999, AMT, 2.570% 08/01/17(a)(b)....................................... 2,900 2,885 IN Bloomington Multi-Family Revenue, Willow Manor Apartments Project, Series 2002, AMT, LOC: Fifth Third Bank 2.260% 11/01/32(a).......................................... 2,885 1,765 IN Burns Harbor Industrial Economic Development Revenue, Dennen Steel Corporation Project, Series 2003, AMT, LOC: Standard Federal Bank, 2.370% 12/01/23(a).......................................... 1,765 500 IN Crawfordsville Economic Development Revenue, Precision Plastics of Indiana, Series 1992, AMT, LOC: Northern Trust Company 2.350% 06/01/07(a).......................................... 500 1,600 IN Elkhart Economic Development Revenue, Vahala Foam Enterprises Project, Series 2002, AMT, LOC: Bank One N.A. 2.580% 09/01/17(a)(b)....................................... 1,600 1,780 IN Evansville Economic Development Revenue, B & M Plastics, Inc. Project, Series 2002, AMT, LOC: Fifth Third Bank N.A. 2.260% 12/01/17(a).......................................... 1,780 7,000 IN Gibson County Pollution Control Revenue, Toyota Motor Manufacturing Project, Series 1999, AMT, 2.310% 01/01/29(a).......................................... 7,000 5,000 Series 1997, AMT, 2.310% 10/01/27(a).......................................... 5,000 Series 2000A, AMT, 10,000 2.310% 01/01/28(a).......................................... 10,000 6,000 2.310% 01/01/30(a).......................................... 6,000 5,000 Series 2001B, AMT, 2.310% 09/01/31(a).......................................... 5,000 3,182 IN Greencastle Economic Development Revenue, Round Barn Manor Project, Series 2003A, AMT 2.370% 01/01/28(a).......................................... 3,182
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 50 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- INDIANA -- (CONTINUED) $ 2,000 IN Greencastle Industrial Development Revenue, Crown Equipment Corporation Project, Series 1996, AMT, LOC: Key Bank N.A. 2.380% 02/01/11(a)(b)....................................... $ 2,000 685 IN Health Facilities Financing Authority Revenue, Cardinal Center Inc. Project, Series 1996A, LOC: Key Bank N.A. 2.350% 12/01/16(a)(b)....................................... 685 4,585 IN Indianapolis Local Public Improvement Bond Bank, Series 2004, AMT, Insured: MBIA 2.370% 01/01/17(a)(b)....................................... 4,585 5,350 IN Jeffersonville Economic Development Revenue, Amatrol Project, Series 2003, AMT, LOC: National City Bank of Kentucky 2.390% 04/01/23(a)(b)....................................... 5,350 2,850 IN Jeffersonville Industrial Economic Development Revenue, Eagle Steel Products Inc. Project, Series 2001, AMT, LOC: Fifth Third Bank 1.890% 08/01/21(a)(b)....................................... 2,850 700 IN State Development Finance Authority Economic Development Revenue Patriot Homes Inc. Project, Series 1995, AMT, LOC: Bank One Indiana N.A. 2.450% 01/01/10(a)(b)....................................... 700 11,000 PSI Energy Inc. Projects, Series 2004A, AMT, LOC: Barclays Bank PLC 2.300% 08/01/39(a).......................................... 11,000 8,310 IN State Housing Finance Authority Multi-Family Revenue, Series 1997M-A, AMT, LOC: FHLB 2.360% 01/01/29(a).......................................... 8,310 IN Transportation Finance Authority Highway Revenue, Series 2004, Insured: FGIC 6,155 2.320% 12/01/14(a)(b)....................................... 6,155 6,000 2.320% 06/01/21(a)(b)....................................... 6,000 9,045 IN Vincennes University Revenue, Student Fee Project, Series 2002F, Bank One Indiana N.A. 2.300% 10/01/22(a).......................................... 9,045 4,990 IN Washington County Industrial Economic Development Revenue, Frank Miller Lumber Company Project, Series 2001, AMT, LOC: National City Bank of Indiana 2.390% 08/01/16(a)(b)....................................... 4,990
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- INDIANA -- (CONTINUED) $ 8,185 Indianapolis Industrial Resource Recovery Revenue, Ogden Martin Systems Inc. Project, Series 1996, Insured: AMBAC 6.750% 12/01/05............................................. $ 8,420 ---------- 117,702 ---------- IOWA -- 0.4% 3,000 IA Cedar Rapids Revenue, First Mortgage Cottage Grove Place Project, Series 1995, 9.000% 07/01/25............................................. 3,113 4,500 IA Clinton Industrial Development Revenue, Sethness Products Company Project, Series 2004, LOC: Northern Trust 2.350% 12/01/22(a).......................................... 4,500 4,500 IA Finance Authority Family Revenue, Mortgage Backed Securities Program, Series 2004, AMT, Insured: GNMA/FNMA 2.060% 07/01/34(a).......................................... 4,500 8,000 IA Finance Authority Multi-Family Revenue, The Gables at Johnston Project, Series 2002, AMT, LOC: Wachovia Bank N.A. 2.340% 12/01/37(a).......................................... 8,000 4,155 IA Finance Authority Single Family Revenue, Series 2002A-46, AMT, 2.400% 07/01/24(a).......................................... 4,155 1,000 IA West Burlington Industrial Development Revenue, Borhi Oil Hydraulic Project, Series 2001B, AMT, LOC: American National Bank & Trust 2.450% 01/01/11(a)(b)....................................... 1,000 ---------- 25,268 ---------- KANSAS -- 0.4% 2,200 KS Development Finance Authority Multi-Family Revenue, Delaware Highlands, Series 2005C, AMT LOC: Arvest Bank 2.380% 12/01/36(a).......................................... 2,200 5,400 KS Fredonia Revenue, Systech Environmental Corporation Project, Series 1989, AMT, LOC: Banque National de Paris 2.340% 02/01/07(a).......................................... 5,400 4,000 KS Junction City Industrial Development, Genmar Manufacturing Project, Series 1999, AMT, LOC: Bank of New York 2.420% 04/01/19(a)(b)....................................... 4,000 2,595 KS Sedgwick & Shawnee County, Series 2002, 2.370% 12/01/27(a)(c)....................................... 2,595
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 51 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- KANSAS -- (CONTINUED) $ 9,200 KS State Development Finance Authority Exempt Facilities Revenue Single Family Revenue, Seaboard Project, Series 1995A, AMT, LOC: Bank of New York 2.420% 12/01/25(a)(b)....................................... $ 9,200 ---------- 23,395 ---------- KENTUCKY -- 2.2% 31,000 KY Asset/Liability Commission General Fund Revenue, Series 2004A, 3.000% 06/29/05............................................. 31,080 7,410 KY Campbellsville-Taylor County Industrial Development Revenue, Airguard Industrial, Inc., Project, Series 2001, AMT, LOC: Northern Trust Company 2.350% 05/01/31(a).......................................... 7,410 5,000 KY Carroll County Industrial Development Revenue, Kentucky Ladder Company Project, Series 1990, AMT, LOC: Bankers Trust Company 2.550% 09/01/10(a).......................................... 5,000 17,000 KY Danville, 2.250% 08/05/05(a).......................................... 17,000 4,250 KY Daviess County Health Care Revenue, Wendell Fosters Campus for Development Project, Series 2001, AMT, LOC: National City Bank 2.340% 05/01/21(a)(b)....................................... 4,250 4,380 KY Daviess County Industrial Building Revenue, Packaging Project, Series 2003, AMT, LOC: National Bank Kentucky 2.390% 05/01/18(a)(b)....................................... 4,380 9,820 KY Economic Development Finance Authority Industrial Building Revenue, Goodwill Industries Project, Series 2003, 2.270% 08/01/23(a)(b)....................................... 9,820 2,450 KY Glasgow Industrial Building Revenue, Poly-Tech Corporation Project, Series 1994, LOC: Fifth Third Bank 2.370% 05/01/14(a).......................................... 2,450 1,965 KY Greenup County Revenue, Pathways Project, Series 2004, LOC: Fifth Third Bank 2.190% 12/01/18(a)(b)....................................... 1,965 10,000 KY Henderson County Hospital Facilities Revenue, Series 2003B, LOC: Fifth Third Bank 2.170% 12/01/25(a).......................................... 10,000
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- KENTUCKY -- (CONTINUED) $ 17,200 KY Higher Education Student Loan Corporation, Insured Student Loan Revenue, Series 1991E, AMT, Insured: AMBAC 2.280% 12/01/11(a).......................................... $ 17,200 3,720 KY Jefferson County Industrial Building Revenue Dant Growth LLC Project, Series 2002, AMT, LOC: Bank One Kentucky 2.640% 09/01/22(a)(b)....................................... 3,720 875 Seven Counties Services Inc. Project, Series 1996, Bank One of Kentucky N.A. 2.300% 06/01/11(a)(b)....................................... 875 1,000 KY Jefferson County Retirement Home Revenue, Nazareth Library Project, Series 1999, LOC: Fifth Third Bank 2.190% 10/01/19(a)(b)....................................... 1,000 300 KY Jeffersontown Industrial Building Revenue, Rague Food Systems Inc. Project, Series 1995, AMT, LOC: PNC Bank N.A. 2.430% 04/01/20(a)(b)....................................... 300 2,475 KY Lexington-Fayette Urban County Educational Facilities Revenue, Lexington School Project, Series 2003, 2.190% 05/01/25(a)(b)....................................... 2,475 3,040 KY Louisville & Jefferson County Convention Commission, Series 1996, Insured: FSA 2.320% 07/01/24(a)(b)....................................... 3,040 6,000 KY Minor Lane Heights Solid Waste Disposal Revenue, Waste Management Kentucky LLC Project, Series 2003, AMT, LOC: Wachovia Bank N.A. 2.380% 03/01/21(a).......................................... 6,000 1,000 KY Rural Economic Development Authority Revenue, Heaven Hill Project, Series 1991, AMT, LOC: PNC Bank N.A. 2.380% 10/01/16(a).......................................... 1,000 2,230 KY Shelby Industrial Building Revenue, Truss Company Inc. Kingbook Project, Series 1998, AMT, LOC: Fifth Third Bank 2.370% 06/01/18(a)(b)....................................... 2,230 3,000 KY State Property & Buildings Community Revenue, Series 2004, Insured: FSA 2.320% 10/01/18(a).......................................... 3,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 52 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- KENTUCKY -- (CONTINUED) $ 2,100 KY West Buechel Industrial Building Revenue, Berby Fabricating LLC Project, Series 2004, AMT, LOC: Fifth Third Bank 2.260% 06/01/24(a).......................................... $ 2,100 ---------- 136,295 ---------- LOUISIANA -- 1.5% 5,100 LA Calcasieu Parish Inc. Industrial Development Board Revenue, Hydroserve Westlake Project, Series 1999, AMT, 2.38% 12/01/24(a)........................................... 5,100 4,000 LA Denham Springs-Livingston Housing & Mortgage Finance Authority, Series 2004A, 2.590% 12/01/07(a).......................................... 4,000 8,015 LA East Baton Rouge Parish Sales & Used Tax, Series 2003, Insured: MBIA 2.320% 02/01/11(a)(b)....................................... 8,015 8,130 LA Ernest N Morial New Orleans Exhibition Hall Authority, Series 2003, Insured: AMBAC 2.320% 07/15/23(a)(b)....................................... 8,130 2,050 LA Housing Finance Agency Multi-Family Revenue, Restoration Project, Series 2002A, AMT, LOC: Regions Bank 2.380% 12/01/32(a).......................................... 2,050 4,000 LA Local Government Environmental Facilities, Community Development Authority Revenue, Sacred Heart -- New Orleans Project, Series 2004, LOC: Whitney National Bank, LOC: SunTrust Bank 2.340% 01/01/24(a).......................................... 4,000 6,000 LA Plaquemines Port Harbor & Terminal, District Port Facilities Revenue Chevron Pipe Line Company Project, Series 1984, 1.750% 09/01/08(a).......................................... 6,005 20,000 International Marine Terminal Project, Series B, 2.600% 03/15/06(a).......................................... 20,000 7,500 LA Port New Orleans Revenue, New Orleans Cold Storage Project, Series 2002, AMT, LOC: Whitney National Bank LOC: SunTrust Bank 2.390% 11/01/22(a).......................................... 7,500 13,255 LA St. Tammany Public Transportation Financing Authority, Chris T. Wood Project, Series 1995A, LOC: LaSalle Bank 9.000% 11/15/25............................................. 14,207
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- LOUISIANA -- (CONTINUED) $ 4,460 LA Stadium & Exposition District Hotel Occupancy Tax and Stadium Revenue, Series 1995B, Insured: FGIC 6.375% 07/01/25............................................. $ 4,597 6,650 LA State, GO, Series 1998A, Insured: AMBAC 5.500% 04/15/05............................................. 6,660 4,210 LA State, Series 2005, Insured: MBIA 2.320% 08/01/17(a)(b)....................................... 4,210 ---------- 94,474 ---------- MAINE -- 0.3% 11,600 ME Public Utility Financing Bank Public Utility Revenue, Maine Public Service Company Project, Series 1996, AMT, LOC: Bank of New York 2.420% 04/01/21(a).......................................... 11,600 5,000 ME State Housing Authority, Mortgage Purchase Series 2004B-3, AMT, 2.300% 11/15/38(a).......................................... 5,000 5,000 Series 2004B-3, AMT, 2.300% 11/15/35(a).......................................... 5,000 ---------- 21,600 ---------- MARYLAND -- 1.2% 11,200 MD Baltimore, 2.100% 06/06/05(a).......................................... 11,200 5,350 MD Carroll County Commissioners Economic Development Revenue, Shelter System Limited Facility, Series 2004, AMT, LOC: Branch & Banking Trust 2.370% 07/01/24(a)(b)....................................... 5,350 49,300 MD State Community Development Administration Department, Housing & Community Development, Series 2004K, AMT, 2.100% 03/01/32(a)................................................. 49,300 6,840 MD State Industrial Development Finance Authority, Economic Development Revenue, General Binding Corporation Project, Series 1996, AMT, LOC: Harris Trust & Savings Bank 2.330% 03/01/26(a).......................................... 6,840 ---------- 72,690 ---------- MASSACHUSETTS -- 1.1% MA Boston Industrial Development Financing, Authority Industrial Revenue, First Mortgage Springhouse Project, Series 1995 4,940 9.250% 07/01/15............................................. 5,121 3,350 9.250% 07/01/25............................................. 3,477
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 53 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- MASSACHUSETTS -- (CONTINUED) MA Commission $ 24,000 2.300% 04/12/05(a).......................................... $ 24,000 25,700 2.300% 04/12/05(a).......................................... 25,700 8,000 MA State Development Finance Agency Multi-Family Revenue, Series 2004A, LOC: PNC Bank N.A. 2.330% 12/01/37(a).......................................... 8,000 ---------- 66,298 ---------- MICHIGAN -- 4.6% 22,005 MI State, 1.900% 10/05/05(a).......................................... 22,005 4,475 MI GO, City School District, Series 2004, Insured: FGIC 2.310% 11/01/20(a)(b)....................................... 4,475 2,150 MI Livonia Economic Development Corporation, Foodland Distributions Project, Series 1986A LOC: Comerica Bank 2.150% 12/01/11(a).......................................... 2,150 20,000 MI Municipal Bond Authority Revenue, Series 2004B-1, 3.000% 08/19/05............................................. 20,109 50,000 MI State Building Authority, Series 2004, LOC: The Bank of New York 1.950% 04/27/05(a).......................................... 50,000 3,000 MI State Hospital Finance Authority Revenue, Genesys Health Systems, Series 1995A, 8.125% 10/01/21............................................. 3,149 9,500 MI State Housing Development Authority Multi-Family Revenue, Canterbury Project, Series 2003A, AMT, LOC: LaSalle Bank 2.360% 06/01/38(a).......................................... 9,500 4,670 MI State Housing Development Authority Rental Housing Revenue, Series 2001PA 849, Insured: MBIA 2.310% 12/01/05(a)(b)....................................... 4,670 2,210 MI State Strategic Fund Limited Obligation Revenue Home Inc. Project, Series 2002, AMT, LOC: Fifth Third Bank 2.260% 11/01/22(a).......................................... 2,210 6,765 American Autocoat Inc. Project, Series 2002, AMT, LOC: Fifth Third Bank 2.260% 10/01/22(a).......................................... 6,765 3,150 B&C Leasing LLC Project, Series 1999, AMT, LOC: La Salle Bank 2.400% 07/01/24(a).......................................... 3,150 16,126 Grayling Generating Project, Series 1990, AMT, LOC: Barclays Bank of New York 2.300% 01/01/14(a).......................................... 16,126
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- MICHIGAN -- (CONTINUED) $ 42,150 MI State, Series 2004, 2.200% 10/05/05(a).......................................... $ 42,150 97,000 MI Wayne Charter County Michigan Airport Revenue, Series 2002, Insured: FGIC 2.330% 12/01/32(a).......................................... 97,000 ---------- 283,459 ---------- MINNESOTA -- 1.6% 2,000 MN Minneapolis Multi-Family Housing Revenue, Driftwood Apartments Project, Series 2002, AMT, LOC: U.S. Bank 2.350% 10/01/24(a).......................................... 2,000 3,000 Gateway Real Estate Project, Series 2002, AMT, LOC: La Salle Bank 2.350% 10/01/32(a).......................................... 3,000 10,000 MN Minnesota State Higher Education Facilities Authority Revenue, University St. Thomas Project, Series 2004, LOC: LaSalle Bank 2.310% 10/01/29(a).......................................... 10,000 9,735 MN Minnesota State Housing Finance Agency, Residential Housing Finance Project, Series 2002, 1.200% 07/01/21(a)............ 9,727 50,000 MN School Districts Tax & Aid Anticipation Borrowing Program, GO, Series 2004A, 3.000% 09/02/05(a).......................................... 50,304 10,500 MN St. Paul, 1.990% 04/01/05(a).......................................... 10,500 11,670 MN St. Paul Metropolitan Airports Commission Revenue, Series 2004, AMT, Insured: FGIC 1.650% 09/03/09(a)(b)....................................... 11,670 ---------- 97,201 ---------- MISSISSIPPI -- 0.3% 300 MS Business Finance Corporation, Trilogy Communications Project, Series 1995, AMT, LOC: First Union National Bank 2.350% 06/01/05(a)(b)....................................... 300 17,325 MS Development Bank Special Obligation, Series 2004, Insured: AMBAC 1.650% 01/01/26(a)(c)....................................... 17,325 ---------- 17,625 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 54 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- MISSOURI -- 1.6% $ 6,090 MO Clay County Public School District No. 3, Series 2004, Insured: FSA 2.320% 03/01/12(a)(b)....................................... $ 6,090 17,000 MO Higher Education Loan Authority Student Loan Reserve, Series 1991B, AMT, Insured: MBIA 2.350% 03/01/20(a).......................................... 17,000 5,600 MO Industrial Development Authority Multi-Family Housing Revenue Crook Creek Apartments II Series 2004A, AMT, LOC: LaSalle National Bank 2.360% 09/01/39(a)(b)....................................... 5,600 750 Series 2004B, AMT, LOC: FHLB 2.380% 09/01/39(a)(b)....................................... 750 2,000 MO Jefferson County Industrial Development Authority Multi- Family Housing Revenue, Sunset Pointe Project, Series 2000, AMT, LaSalle Bank 2.360% 10/01/30(a).......................................... 2,000 14,000 MO Kansas City Industrial Development Multi-Family Housing Revenue Authority, Ethans Apartment Project, Series 2004, LOC: Citibank N.A. 2.310% 02/01/39(a).......................................... 14,000 1,965 MO Mountain Grove Industrial Development Authority Health Care Facility Revenue, Mountain Grove Project, Series 1997, AMT, LOC: Wachovia Bank 2.350% 11/01/13(a).......................................... 1,965 4,105 MO Nodaway Industrial Development Authority Educational Facilities Revenue, Northwest Foundation Inc. Project, Series 2002, LOC: U.S. Bank N.A. 2.350% 11/01/32(a).......................................... 4,105 4,150 MO St. Charles County Industrial Development Authority Multi- Family Housing Revenue, Peine Lakes Apartments Project, Series 2004, AMT, LOC: Wachovia Bank N.A. 2.340% 02/01/39(a).......................................... 4,150 20,000 MO St. Louis County Industrial Development Authority Multi- Family Housing Revenue, General Grant Apartments, Series 2003, AMT, LOC: U.S. Bank 2.400% 03/01/38(a).......................................... 20,000
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- MISSOURI -- (CONTINUED) $ 1,500 MO State Development Finance Board Facilities Revenue, St. Louis Air Project, Series 2000, LOC: National Bank & Trust 2.350% 03/01/30(a).......................................... $ 1,500 20,425 Southeast Missouri State University, Series 2003B, LOC: U.S. Bank 2.270% 10/01/23(a).......................................... 20,425 ---------- 97,585 ---------- MONTANA -- 0.7% 43,100 MT State Board Investment Resource Recovery Revenue, Colstrip Project, Series 1989, AMT, LOC: Dexia Credit Local De France 2.450% 12/30/15(a).......................................... 43,100 ---------- NEBRASKA -- 0.5% 6,275 NE Help Incorporated Student Loan Reserve Series 1986A, AMT, Insured: MBIA 2.350% 12/01/16(a)(b)....................................... 6,275 9,695 Series 1986B, AMT, Insured: MBIA 2.350% 12/01/16(a)(b)....................................... 9,695 8,100 Series 1986C, AMT, Insured: MBIA 2.350% 12/01/16(a)(b)....................................... 8,100 5,055 NE Lancaster County Industrial Development Revenue, Garner Industries, Inc. Project, Series 2000A, AMT, LOC: Wells Fargo 2.430% 11/01/20(a).......................................... 5,055 ---------- 29,125 ---------- NEVADA -- 1.0% 5,020 NV Clark County Airport Revenue, Series 2004, AMT, Insured: FGIC 2.360% 07/01/22(a)(b)....................................... 5,020 13,900 Subordinated Lien, Series 2001A, AMT, Insured: FGIC 2.280% 07/01/36(a).......................................... 13,900 8,000 NV Clark County Industrial Development Revenue, Cogeneration Association I Project, Series 1991, AMT, LOC: Canadian Imperial Bank of Commerce 2.400% 11/01/21(a).......................................... 8,000 2,495 NV Clark County Industrial Development Revenue, Series 2005, Insured: FGIC 2.350% 12/01/12(a)(b)....................................... 2,495 13,425 NV Clark County School District, GO, Series 2003, Insured: MBIA 1.670% 06/15/10(a)(c)....................................... 13,425
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 55 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- NEVADA -- (CONTINUED) $ 11,500 NV Director State Department of Business & Industry Pollution Control & Revenue, Barrick Goldstrike Mines Project, Series 1999, AMT, LOC: Royal Bank of Canada 2.320% 06/01/29(a).......................................... $ 11,500 4,430 NV Housing Division Multi-Unit Housing Revenue, Studio 3 LP Project, Series 1999A, AMT, LOC: U.S. Bank N.A. 2.300% 10/01/30(a).......................................... 4,430 3,450 NV Las Vegas, GO, Sewer & Flood Control, Series 2001, Insured: FGIC 5.000% 04/01/05............................................. 3,450 ---------- 62,220 ---------- NEW HAMPSHIRE -- 0.1% 3,500 NH State Business Finance Authority Exempt Facilities Revenue, Waste Management of New Hampshire, Inc. Project, Series 2000, AMT, LOC: Wachovia Bank N.A. 2.340% 09/01/12(a).......................................... 3,500 ---------- NEW JERSEY -- 0.8% 18,545 NJ Camden County Municipal Utilities Authority Sewer Revenue, Insured: FGIC (d) 09/01/05................................................ 18,376 30,500 NJ Economic Development Authority Revenue, Encap Golf Holdings LLC Project, Series 2004, AMT, LOC: Wachovia Bank, N.A. 2.300% 02/01/16(a).......................................... 30,500 ---------- 48,876 ---------- NEW MEXICO -- 1.2% 5,220 NM Finance Authority State Transition Revenue, Series 2004, 2.320% 06/15/23(a)(b)....................................... 5,220 5,200 NM Finance Authority, Series 2004, AMT, Insured: GNMA FNMA/FHLMC 2.370% 07/01/08(a)(b)....................................... 5,200 65,000 NM State, Series 2004, 2.332% 06/30/05(a)(b)....................................... 65,000 ---------- 75,420 ---------- NEW YORK -- 3.5% 27,700 NY Erie County, Series 2004, LOC: Citigroup Global Markets 3.000% 07/13/05............................................. 27,778
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 8,260 NY Forest City New Rochelle Revenue Certificate, Series 2003, LOC: JPMorgan Chase Bank 2.330% 06/01/11(a)(b)....................................... $ 8,260 3,645 NY Metropolitan Transitional Authority Revenue, Series 1992, Insured: AMBAC 9.10% 7/01/05............................................... 3,710 5,995 Series 2002, Insured: AMBAC 2.310% 05/15/10(a)(c)....................................... 5,995 5,275 Series 2003, Insured: AMBAC 2.310% 11/15/10(a)(b)....................................... 5,275 12,495 Series 2003, 5.280% 07/01/11(a)(b)....................................... 12,495 11,300 NY Nassau County Interim Financial Authority, Series 2001, Insured: AMBAC 9.323% 05/15/06(a).......................................... 11,300 4,340 NY New York City, GO, Series 2004, Insured: CIFG 2.280% 08/15/29(a).......................................... 4,340 4,400 NY New York City Housing Development Corporation Multi-Family Revenue, Mortgage First Avenue Development, Series 2002, 2.270% 10/15/35(a).......................................... 4,400 3,200 Series 2004, LOC: Citibank N.A. 2.280% 06/01/36(a).......................................... 3,200 9,525 NY New York City Industrial Development Agency Civic Facility Revenue, Jamaica First Parking LLC Project, Series 2004, LOC: JPMorgan Chase Bank 2.300% 03/01/34(a).......................................... 9,525 10,000 NY New York City Municipal Water, 2.130% 07/14/05(a).......................................... 10,000 1,600 NY New York City Transitional Finance Authority Revenue, Series 1998A-2, 2.230% 11/15/27(a).......................................... 1,600 8,095 Series 2003, Insured: MBIA 1.670% 11/01/08(a)(c)....................................... 8,095 40,000 NY New York City, 2.150% 07/14/05(a).......................................... 40,000 3,000 NY New York State Housing Finance Agency Revenue, 101 West End, Series 1999, AMT, Insured: FNMA 2.310% 05/15/31(a).......................................... 3,000 2,265 NY Port Authority, New York & New Jersey, Series 2003, AMT, 2.360% 12/15/32(a)(b)....................................... 2,265 14,655 Series 2004, Insured: MBIA 2.300% 05/15/10(a)(b)....................................... 14,655 1,430 Series 2004, Insured: MBIA 2.330% 11/01/16(a)(b)....................................... 1,430
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 56 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 175 NY Sales Tax Asset Receivable Corporation, Series 2004, Insured: MBIA 2.300% 10/15/29(a).......................................... $ 175 1,000 NY State Dormitory Authority Revenue, New York University, Series 2001, Insured: AMBAC 5.250% 07/01/05............................................. 1,008 3,055 School Districts Financing Program, Series 2002E, Insured MBIA 9.000% 10/01/05............................................. 3,159 15,000 Series 2004, Insured: MBIA 5.540% 02/01/12(b).......................................... 14,999 2,000 NY State, GO, Series 2000B, LOC: Dexia Credit Local De France 1.580% 03/15/30(a).......................................... 2,000 800 NY State Local Government Assistance Corporation, Series 1995E, LOC: Landesbank Hessen-Thuringen 2.180% 04/01/25(a).......................................... 800 12,130 Series 1995, 6.000% 04/01/24(a).......................................... 12,372 2,200 NY State Thruway Authority General Highway & Bridge Trust Fund, Series 2004, Insured: MBIA 2.300% 04/01/12(a)(b)....................................... 2,200 600 NY Westchester County Industrial Development Agency Civil Facility Revenue, Westchester Jewish Project, Series 1998, LOC: Chase Manhattan Bank 2.350% 10/01/28(a)(b)....................................... 600 ---------- 214,636 ---------- NORTH CAROLINA -- 0.8% 1,900 NC Agriculture Finance Authority Development Revenue, McGill Environment System Project, Series 2003, AMT, LOC: Branch Bank & Trust 2.370% 12/01/15(a)(b)....................................... 1,900 1,800 NC Burke Industrial Facility Pollution Control Revenue, Cox Manufacturing Company Project, Series 2003, AMT, LOC: Branch Banking & Trust 2.370% 06/01/24(a).......................................... 1,800 10,000 NC Capital Facility Finance Agency Revenue, Republic Services, Inc. Project, Series 2004, AMT, LOC: SunTrust Bank 2.320% 07/01/34(a).......................................... 10,000
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- NORTH CAROLINA -- (CONTINUED) $ 2,915 NC Catawba County Industrial Facilities & Pollution Control Revenue, Von Drehle Properties, Series 2001, AMT, LOC: Branch Banking & Trust 2.370% 12/01/21(a)(b)................ $ 2,915 4,625 NC Davidson County Industrial Pollution Control Revenue, Childress Winery Project, Series 2004, AMT, 2.370% 04/01/26(a)(b)....................................... 4,625 5,190 NC Guilford County Multi-Family Housing Revenue, Brentwood Crossings Apartments, Series 2003, AMT LOC: SunTrust 2.340% 12/01/35(a).......................................... 5,190 1,495 NC Iredell County Industrial Facilities & Pollution Control Financing Authority Revenue, Sullivan Corporation Project, Series 1996, AMT, LOC: Bank One Milwaukee N.A. 2.450% 01/01/11(a)(b)....................................... 1,495 2,000 NC Johnston County Industrial Facilities & Pollution Control Finance Authority Revenue, Hamlin Sheet Metal Company, Series 1997, AMT, LOC: Branch Banking & Trust 2.370% 11/01/17(a).......................................... 2,000 1,785 Autry Mills, Series 1999, AMT, LOC: Branch & Banking Trust 2.370% 02/01/13(a).......................................... 1,785 4,640 NC Mecklenburg County Multi-Family Housing Revenue, Barrington Oaks Apartments Project, Series 2003, AMT, LOC: SunTrust Bank 2.390% 09/01/35(a).......................................... 4,640 3,960 NC Rowan County Industrial Facilities Pollution Control Financing Authority, Fixed Industrial Development PHC LLC Project, Series 1999, AMT, LOC: Branch Banking & Trust 2.370% 03/01/14(a)(b)....................................... 3,960 4,590 NC State Port Authority Exempt Facilities Revenue, Wilmington Bulk LLC Project, Series 2001B, AMT, LOC: Branch Bank & Trust 2.370% 09/01/22(a)(b)....................................... 4,590 2,600 NC State Port Authority Exempt Facilities Revenue, Wilmington Bulk LLC Project, Series 2001A, AMT, Branch Bank & Trust 2.370% 09/01/22(a)(b)....................................... 2,600 ---------- 47,500 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 57 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- OHIO -- 1.2% $ 4,850 OH Akron Metropolitan Housing Authority, Administration Building Project, Series 1998, LOC: Fifth Third Bank 2.300% 04/01/18(a)(b)....................................... $ 4,850 5,000 OH Bellevue Hospital Facilities Revenue, Bellevue Hospital Project, Series 2003, LOC: Fifth Third Bank 2.190% 08/01/33(a)(b)....................................... 5,000 850 OH Centerville Care Revenue, Behany Lutheran Village Hospital Project, Series 1994, LOC: PNC Bank 2.310% 11/01/13(a)(b)....................................... 850 14,725 OH Columbus Regional Airport Authority Revenue, Series 2004, LOC: U.S. Bank N.A. 2.300% 03/01/34(a).......................................... 14,725 320 OH Greene County Industrial Development Revenue, FC Ltd. - AFC Stamping Project, Series 1995, AMT, LOC: Key Bank N.A. 2.420% 09/01/16(a)(b)....................................... 320 4,870 OH Hamilton County Health Care Facilities Revenue, Talbert Services Income Project, Series 2002, LOC: Fifth Third Bank 1.820% 07/01/27(a)(b)....................................... 4,870 6,225 OH Kettering Industrial Development Revenue, Series 2002, AMT, 2.410% 11/01/34(a)(b)....................................... 6,225 995 OH Lucas County Industrial Development Revenue, Dynamic Dies Income Project, Series 1997, 2.440% 07/01/09(a)(b)....................................... 995 1,450 OH Medina Industrial Development Revenue, Destiny Partners Project, Series A, AMT, LOC: Fifth Third Bank 2.260% 09/01/23(a).......................................... 1,450 2,000 OH Muskingham Watershed Conservancy District, Series 2003, LOC: Fifth Third Bank 2.190% 05/01/23(a)(b)....................................... 2,000 4,700 OH State Air Quality Development Authority Revenue, Series 2000, Insured: AMBAC 2.310% 11/01/20(a)(b)....................................... 4,700 9,000 Series 2004A, AMT, LOC: ABN AMRO BANK N.V. 2.320% 06/01/24(a).......................................... 9,000 15,800 OH Toledo Lucas County Port Authority Airport Development Revenue, Flight Safety International Inc. Project, Series 1998-1, AMT, 2.320% 01/01/18(a)(b)....................................... 15,800 ---------- 70,785 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- OKLAHOMA -- 0.5% $ 1,795 OK Claremore Industrial & Redevelopment Authority Revenue, Whirlwind Steel Buildings Project, Series 2001, AMT, LOC: Chase Manhattan Bank 2.380% 09/01/16(a).......................................... $ 1,795 17,000 OK Development Finance Authority Revenue, Conoco Project, Series 2002, AMT, LOC: JPMorgan Chase Bank 2.300% 06/01/37(a).......................................... 17,000 8,800 Seabrook Farms Inc. Project, Series 1997, AMT, LOC: Bank of New York 2.420% 03/01/27(a)(b)....................................... 8,800 2,385 OK Housing Finance Agency Single Family Revenue, Homeownership Loan Program, Series 2001PT-1288, AMT, 2.370% 09/01/29(a)(c)....................................... 2,385 1,995 OK Industrial Authority Economic Development Revenue, Scott Oklahoma Plant LLC Project, Series 2003, AMT, LOC: Fifth Third Bank 2.260% 10/01/23(a).......................................... 1,995 ---------- 31,975 ---------- OREGON -- 1.4% 4,500 OR Port Portland Special Obligation Revenue, Portland Bulk Terminals Project, Series 1999, AMT, LOC: Canadian Imperial Bank 2.350% 10/01/25(a).......................................... 4,500 20,000 Portland Bulk Terminals LLC Project, Series 1996, AMT, LOC: Canadian Imperial Bank 2.350% 10/01/25(a).......................................... 20,000 2,000 OR State Economic Development Revenue, KRC Western, Inc. Project, Series 1997-178, AMT, LOC: Wachovia Bank 2.340% 01/01/17(a)(b)....................................... 2,000 1,000 McFarland Cascade Project, Series 1996, AMT, LOC: U.S. Bank Of Washington 2.350% 11/01/16(a).......................................... 1,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 58 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- OREGON -- (CONTINUED) $ 15,000 OR State Housing & Community Services Department Mortgage Revenue, Series 2004I, AMT, 2.280% 07/01/34(a).......................................... $ 15,000 5,000 Series 2004L, 2.350% 07/01/35(a).......................................... 5,000 40,000 OR State, Tax Anticipation Notes, Series 2004, 3.000% 06/30/05(a).......................................... 40,120 ---------- 87,620 ---------- PENNSYLVANIA -- 2.4% 10,130 PA ABN AMRO Munitops Certificate Trust, Series 2005, Insured: FGIC 2.320% 11/15/12(a)(b)....................................... 10,130 17,000 PA Allegheny County Hospital Development Authority Revenue, Series 2003, Insured: MBIA 1.609% 11/01/23(a)(b)....................................... 16,999 7,800 South Hills Health Care Project, Series 2000A, LOC: PNC Bank, N.A. 1.710% 06/01/30(a).......................................... 7,800 2,270 PA Authority for Industrial Development Revenue, Goldenberg Candy Project, Series 1997, AMT, LOC: Wachovia Bank 2.380% 01/01/13(a)(b)....................................... 2,270 4,040 PA Dauphin County General Authority Hospital Revenue, Northwest Medical Center Project, Series 1995, 8.625% 10/15/13............................................. 4,255 26,995 PA Delaware Valley Regional Financial Authority Local Government Series 2002, 2.380% 01/01/26(a)(b)....................................... 26,995 12,495 Series 2002, 2.380% 01/01/14(a)(b)....................................... 12,495 Series 2004, Insured: AMBAC 4,995 2.380% 07/01/27(a)(b)....................................... 4,995 29,995 2.380% 08/01/28(a)(b)....................................... 29,995 700 PA Economic Development Financing Authority Revenue, Pennsylvania Bar Institute Project, Series 1996B, AMT, LOC: PNC Bank 2.310% 04/01/15(a)(b)....................................... 700 3,000 Series 2004, 2.350% 11/01/21(a)(b)....................................... 3,000 1,240 PA Elk County Industrial Development Authority Revenue, Clarion Sintered Metals Project, Series 1998, AMT, PNC Bank N.A. 2.430% 03/01/09(a)(b)....................................... 1,240
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- PENNSYLVANIA -- (CONTINUED) $ 10,320 PA Philadelphia Redevelopment Authority Revenue, Series 2005, AMT, Insured: FGIC 2.330% 04/15/24(a)(b)....................................... $ 10,320 8,200 PA Philadelphia Water & Wastewater Revenue, Series 1993, Insured: FGIC (d) 06/15/05................................................ 8,334 3,005 PA Westmoreland County Industrial Development Authority Revenue, Elizabeth Carbide Die Project, Series 1998A, AMT, LOC: National City 2.390% 10/01/13(a)(b)....................................... 3,005 3,290 Rhodin Enterprises Project, Series 1997, LOC: National City Bank N.A. 2.380% 04/01/17(a)(b)....................................... 3,290 ---------- 145,823 ---------- RHODE ISLAND -- 0.0% 2,180 RI State Industrial Facilities Corporation Industrial Development Revenue, Precision Turned Components Project, Series 2000, AMT, LOC: Bank of New York 2.500% 05/01/11(a).......................................... 2,180 ---------- SOUTH CAROLINA -- 2.0% 19,500 SC Berkeley County Exempt Facility Industrial Revenue, Amoco Chemical Company Project, Series 1998, 2.350% 04/01/28(a).......................................... 19,500 3,240 SC Charleston County Residential Recovery, Foster Wheeler, Series 1997, Insured: AMBAC 4.950% 01/01/06............................................. 3,301 5,700 SC Jobs Economic Development Authority, Abraham Industries LLC Project, Series 1999, AMT, LOC: PNC Bank N.A. 2.430% 05/01/14(a)(b)....................................... 5,700 1,800 Banks Construction Company, Series 1999, AMT, LOC: Wachovia Bank N.A. 2.390% 05/01/09(a).......................................... 1,800 11,250 Giant Cement Holding Inc. Project, Series 2002, AMT, LOC: Citibank N.A. 2.310% 12/01/22(a).......................................... 11,250 2,390 Kravet Fabrics Inc. Project, Series 1997, AMT, LOC: Bank of New York 2.420% 03/01/12(a)(b)....................................... 2,390
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 59 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- SOUTH CAROLINA -- (CONTINUED) $ 1,300 Mancor Industries Inc. Project, Series 1999, AMT, LOC: PNC Bank N.A. 2.430% 05/01/14(a)(b)....................................... $ 1,300 1,770 Personal Inc. Project, Series 1998, AMT, LOC: La Salle Bank 2.370% 04/01/18(a)(b)....................................... 1,770 3,500 Pine River Plastics Inc. Project, Series 2000, AMT, LOC: Comerica 2.390% 3/01/11(a)........................................... 3,500 5,125 Quoize Inc. Project, Series 1996, AMT, LOC: Bank of New York 2.370% 05/01/16(a)(b)....................................... 5,125 5,355 Raynor USA Southeast Project, Series 2000, AMT, LOC: La Salle Bank 2.370% 05/01/20(a).......................................... 5,355 1,080 Sargent Metal Fabricators Project, Series 2002, AMT, LOC: Branch Banking & Trust 2.370% 01/01/22(a)(b)....................................... 1,080 2,760 Spartanburg YMCA Project, Series 1996, AMT, LOC: First Union National Bank 2.390% 06/01/18(a)(b)....................................... 2,760 1,500 Titan Wheel International Inc. Project, Series 1995, AMT, LOC: LaSalle Bank 2.370% 02/01/10(a).......................................... 1,500 5,000 Waste Management South Carolina Project, Series 2003, AMT, LOC: Wachovia Bank 2.340% 07/01/24(a).......................................... 5,000 3,000 SC Kershaw County Industrial Development Revenue, DeRoyal Textiles Inc. Project, Series 1994, AMT, LOC: SunTrust Bank of Nashville 2.340% 12/01/07(a)(b)....................................... 3,000 22,850 SC Piedmont Municipal Power Agency, Series 2004, Insured: MBIA 2.300% 01/01/34(a).......................................... 22,850 2,844 SC State Housing Finance & Development Authority Multi-Family Revenue, Oakfield Housing Project, Series 2004, AMT, LOC: National Bank of South Carolina 2.430% 10/01/25(a).......................................... 2,844 7,410 Rental Housing Spring Grove Project, Series 2000, LOC: SunTrust Bank 2.340% 12/01/34(a).......................................... 7,410
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- SOUTH CAROLINA -- (CONTINUED) $ 12,845 SC Transportation Infrastructure Bank Revenue, Series 2004, AMT, Insured: AMBAC 2.320% 04/01/12(a)(b)....................................... $ 12,845 ---------- 120,280 ---------- SOUTH DAKOTA -- 0.1% 300 SD Economic Development Financing Authority Industrial Development Revenue, Lomar Development Company Project, Series 1996B, AMT, LOC: U.S. Bank N.A. 2.500% 08/01/08(a)(b)....................................... 300 8,030 SD State Housing Development Financing Authority Industrial Development Revenue, Series 1998PT-168 AMT, 2.370% 05/01/27(a)(b)....................................... 8,030 ---------- 8,330 ---------- TENNESSEE -- 3.8% 4,100 TN Blount County Industrial Development Board Industrial Development Revenue, Arrowhead Partners LP Project, Series 2003, AMT, LOC: SunTrust Bank 2.390% 12/01/13(a).......................................... 4,100 900 TN Cumberland County Industrial Development Board Industrial Development Revenue, Dalbar Products Inc. Project, Series 1997, AMT, LOC: PNC Bank 2.430% 07/01/12(a)(b)....................................... 900 6,005 TN Franklin County Health & Educational Facilities, University of the South Project, Series 1998B, LOC: AmSouth Bank of Alabama 2.320% 09/01/18(a).......................................... 6,005 124,875 TN Housing Development Agency, Various Single Family Mortgage, Series 2004, AMT, 2.525% 12/08/05(a).......................................... 124,875 7,030 TN Knox County First Utility District Water & Sewer Revenue, Series 2003, LOC: AmSouth Bank 2.400% 12/01/10(a).......................................... 7,030 2,090 TN Knox County Health Educational & Housing Facilities Board, Series 2002C, Insured: MBIA 5.000% 01/01/06............................................. 2,129 5,350 TN Memphis Health Educational & Housing Facilities Board Revenue, Springdale Creek Apartments Project, Series 2003A, AMT, LOC: First Tennessee 2.550% 01/01/35(a)(b)....................................... 5,350
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 60 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- TENNESSEE -- (CONTINUED) TN Memphis, $ 25,000 2.070% 07/13/05(a).......................................... $ 25,000 4,000 2.200% 07/13/05(a).......................................... 4,000 9,400 TN Metropolitan Government Nashville & Davidson County Health & Facilities Board Revenue, Multi-Family Housing Alta Lake, Series 2003, LOC: Wachovia Bank 2.340% 12/01/43(a).......................................... 9,400 1,000 TN Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue, Multi-Family Housing Wedgewood, Series 2004A, 2.310% 06/01/34(a).......................................... 1,000 4,300 Vanderbilt University, Series 2002B, 2.320% 10/01/32(a).......................................... 4,300 5,095 Rodgers/Welch Venture Project, Series 1989, 2.300% 12/01/14(a)(b)....................................... 5,095 3,010 TN Shelby County Health Educational & Housing Facilities Board Multi-Family Housing Revenue, Flag Manor Project, Series 1995, AMT, 2.330% 01/01/23(a)(b)....................................... 3,010 2,700 Multi-Family Housing Revenue, Spring Creek Apartments, Series 2003A, AMT, 2.550% 12/01/20(a)(b)....................................... 2,700 1,000 TN Springfield Industrial Development Board Revenue, All American Homes of Tennessee Project, Series 1994, AMT, LOC: Bank One of Michigan N.A. 2.450% 11/01/09(a)(b)....................................... 1,000 5,000 TN Sullivan County Industrial Development Board Revenue, Modern Forge Company Project, Series 1990, AMT, LOC: Northern Trust 2.380% 07/01/10(a)(b)....................................... 5,000 3,000 TN Union County Industrial Development Board, Cooper Container Corporation Project, Series 2004, LOC: SunTrust 2.340% 12/01/14(a).......................................... 3,000 19,500 Vanderbilt University 1.900% 04/14/05(a).......................................... 19,500 ---------- 233,394 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- TEXAS -- 17.2% $ 17,500 TX (North) Higher Education Authority Inc. Student Loan Revenue, Series 1996A, AMT, Insured: AMBAC 2.280% 04/01/36(a).......................................... $ 17,500 70,000 Series 2005A, AMT, Insured: AMBAC 2.280% 12/01/39(a).......................................... 70,000 4,300 TX Allen Independent School District, Series 2005, Insured: MBIA 2.320% 02/15/13(a)(b)....................................... 4,300 3,300 TX Bell County Health Facilities Development Corporation Revenue, Hospital Scott & White, Series 2001-1, Insured: MBIA 2.300% 08/15/31(a).......................................... 3,300 900 TX Bell County Industrial Development Corporation Industrial Development Revenue, Metal Sales Manufacturing Corporation Project, Series 1998, AMT, LOC: Firstar Bank N.A. 2.430% 08/01/08(a)(b)....................................... 900 10,375 TX Bexar Housing Finance Corporation Multi-Family Housing Revenue, Perrin Park Apartment Project, Series 1996, LOC: Northern Trust Company 2.430% 06/01/28(a).......................................... 10,375 2,630 TX Boerne Independent School District, Series 2005, 2.320% 02/01/11(a)(b)....................................... 2,630 10,245 TX Brazos County Housing Finance Corporation Single Family Mortgage Revenue, Series 2005, AMT, Insured: FGIC 2.370% 03/01/11(a)(b)....................................... 10,245 17,000 TX Brazos River Authority Pollution Control Revenue, Series 2001, LOC: Wachovia Bank N.A. 2.350% 10/01/30(a).......................................... 17,000 23,730 Txu Energy Company Project, Series 2002A, AMT 2.350% 05/01/37(a).......................................... 23,730 6,500 TX Bridgeport Independent School District, Series 2004, 2.320% 08/15/08(a)(b)....................................... 6,500 26,500 TX Calhoun County Navigation Industrial Development Authority, GO, Port Revenue British Petroleum Company Series 1998, AMT 2.350% 01/01/24(a).......................................... 26,500
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 61 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- TEXAS -- (CONTINUED) $ 11,860 TX Capital Industrial Development Corporation Solid Waste Disposal Revenue, Texas Disposal Systems Inc. Project, Series 2001, AMT, LOC: JPMorgan Chase Bank 2.350% 05/01/16(a).......................................... $ 11,860 5,220 TX Corsicana Independent School District, Series 2004, 2.320% 02/15/24(a)(b)....................................... 5,220 15,000 TX Dallas Area Rapid Transit, 1.950% 04/04/05(a).......................................... 15,000 16,180 TX Dallas Fort Worth International Airport Facility Revenue, Flight Safety Inc. Project, Series 1999, AMT, 2.320% 07/01/32(a).......................................... 16,180 9,840 Series 2003, AMT, 2.370% 05/01/11(a)(c)....................................... 9,840 3,000 Series 2004, AMT, 2.360% 11/01/33(a)(b)....................................... 3,000 4,800 TX Dallas Housing Finance Corporation Multi-Family Housing Revenue, Cherry Crest Villas Apartments, Series 2005, AMT, LOC: Wachovia Bank 2.390% 03/01/38(a).......................................... 4,800 8,000 The Masters Apartments Project, Series 2004, AMT, Insured: FNMA 2.350% 07/15/37(a).......................................... 8,000 58,552 TX Department of Housing 1.950% 04/07/05(a).......................................... 58,552 8,185 TX El Paso Housing Finance Corporation Multi-Family Housing Revenue, VIVA Apartments Project, Series 1993, AMT, 2.450% 09/01/23(a)(b)....................................... 8,185 3,682 TX Galveston County Housing Finance Corporation Single Family Mortgage Revenue, Series 2004A, AMT, 2.680% 12/01/37(a).......................................... 3,682 6,900 TX Garland Housing Finance Corporation Multi-Family Housing Revenue, Primrose At Crist Apartments, Series 2005, LOC: Wachovia Bank 2.390% 03/01/38(a).......................................... 6,900 22,700 TX Gulf Coast Waste Disposal Authority Environmental Facilities Revenue, Amoco Oil Company Project, Series 1997, AMT, 2.350% 01/01/26(a).......................................... 22,700 11,400 Pollution Control Revenue, Amoco Oil Company Project, Series 1994, AMT, 2.350% 06/01/24(a).......................................... 11,400
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- TEXAS -- (CONTINUED) $ 34,700 Solid Waste Disposal Revenue, Amoco Oil Company Project, Series 1995, AMT, 2.350% 07/01/27(a)........................ $ 34,700 27,200 TX Gulf Coast Waste Disposal, Environmental Facilities Authority Revenue, Exxon Mobile Project, Series 2002, AMT, 2.350% 05/01/23(a).......................................... 27,200 2,550 TX Harris County Health Facility Development Corporation Revenue, Blood Center Gulf Coast Regional, Series 1992, LOC: JP Morgan Chase & Company, 2.350% 04/01/17(a).......................................... 2,550 4,035 TX Hays Conservancy, Independent School District, Series 2005, 2.320% 08/15/26(a)(b)....................................... 4,035 8,767 TX Heart Of Texas Housing Finance Corporation, Series 2002A AMT, 2.530% 06/01/05(a).......................................... 8,767 1,270 TX Hillsboro Industrial Development Corporation Revenue, Lamcraft LP Project, Series 1997, AMT, LOC: First Commercial Bank 2.570% 07/01/13(a)(b)....................................... 1,270 9,900 TX Houston, 1.940% 04/01/05(a).......................................... 9,900 7,900 TX Houston Airport Systems Revenue, Series 1998B, AMT, Insured: FGIC 5.000% 07/01/05............................................. 7,964 2,930 Sub-Lien: 1998A, Insured: FGIC 6.000% 07/01/05............................................. 2,957 4,850 TX Houston Eagle, Series 2004A, Insured: MBIA 2.320% 03/01/08(a)(b)........... 4,850 15,085 TX Houston, GO, Series 2004, Insured: FSA 2.320% 09/01/09(a)(b)....................................... 15,085 3,500 TX Houston Housing Financial Corporation, Series 2004, AMT, Insured: FNMA 2.350% 04/15/37(a).......................................... 3,500 15,000 TX Houston, 2.040% 06/01/05(a).......................................... 15,000 5,215 TX Houston Utility Systems Revenue, Series 2004, Insured: FGIC 2.320% 05/15/12(a)(b)....................................... 5,215 5,705 Insured: MBIA 2.320% 05/15/14(a)(b)....................................... 5,705 7,315 Series 2004, Insured: MBIA 2.320% 05/15/28(a)(b)....................................... 7,315 5,600 TX Klein Independent School District, GO, Series 2004, 2.320% 08/15/23(a)(b)....................................... 5,600
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 62 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- TEXAS -- (CONTINUED) $ 3,970 TX Lewisville Independent School District, GO, Series 2004, 2.320% 08/15/08(a)(b)....................................... $ 3,970 1,895 TX Lower Colorado River Authority Transmission Contract Revenue, Series 2003, Insured: AMBAC 2.320% 05/15/22(a)(b)....................................... 1,895 2,900 TX Mansfield Industrial Development Corporation Revenue, Texas, Inc. Project, Series 1986, AMT, LOC: Bank One Texas N.A. 2.350% 11/01/26(a).......................................... 2,900 7,500 TX Montgomery Housing Finance Corporation Multi-Family Housing Revenue, Park at Woodline Town Homes, Series 2005, AMT, LOC: Citibank N.A. 2.390% 02/01/38(a).......................................... 7,500 4,620 TX Northside Independent School District, GO, Series 2004, 2.320% 02/15/22(a)(b)....................................... 4,620 1,200 TX Nueces County Health Facilities Development Corporation Revenue, Driscoll Foundation Children's Hospital Project, Series 1985, LOC: Bank of Texas N.A. 2.300% 07/01/15(a).......................................... 1,200 6,060 TX Panhandle Regional Housing Financing, Series 2002, AMT, 2.410% 09/01/14(a)(b)....................................... 6,060 20,000 TX Panhandler Plain Higher Education Authority, Series 1992A, Insured: MBIA 2.330% 06/01/21(a).......................................... 20,000 3,975 TX Plano Independent School District, GO, Series 2004, 2.320% 02/15/18(a)(b)....................................... 3,975 19,500 TX Public Finance Authority, 1.980% 05/06/05(a).......................................... 19,500 10,000 TX Public Finance, 1.950% 04/06/05(a).......................................... 10,000 15,000 1.990% 05/10/05(a).......................................... 15,000 5,550 2.130% 07/13/05(a).......................................... 5,550 4,080 TX San Antonio Airport System Revenue, Series 2001, AMT, Insured: FSA 5.500% 07/01/05(a).......................................... 4,118 8,010 TX San Antonio Educational Facilities Corporation Revenue, University Incarnate Word Project, Series 2001, LOC: Bank One N.A. 2.380% 12/01/21(a).......................................... 8,010 9,775 TX San Antonio Water Revenue, Series 2003A, Insured: MBIA 2.270% 05/15/33(a).......................................... 9,775
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- TEXAS -- (CONTINUED) $ 7,140 TX Southeast Housing Finance Corporation, Multi-Family Housing Revenue, Rosemont at Garth Apartments, Series 2005, AMT, LOC: Wachovia Bank N.A. 2.390% 03/01/38(a).......................................... $ 7,140 8,500 TX Spring Independent School District, Series 2005, Insured: FGIC 2.320% 08/15/12(a)(b)....................................... 8,500 4,400 TX State Department Housing & Community Affairs, Multi-Family Revenue, Series 2002, AMT, 2.410% 12/01/40(a)(b)....................................... 4,400 18,000 Single Family Revenue, Series 2004, AMT, 1.950% 09/01/37(a).......................................... 18,000 9,520 TX State, GO, College Student Loan, Series 2004, AMT, 1.970% 02/01/11(a).......................................... 9,520 49,265 Veterans Housing Assist Project, Series 2003, AMT, 2.320% 06/01/34(a).......................................... 49,265 8,300 TX State Housing & Community Affairs Single Family Revenue, Series 2004, AMT, Insured: FSA 2.350% 03/01/35(a).......................................... 8,300 33,725 TX State Tax Revenue Anticipation Notes, Series 2004D, 2.270% 08/31/05(a)(b)....................................... 33,725 140,000 Series 2004, 3.000% 08/31/05............................................. 140,790 6,700 TX Travis County Housing Finance Corporation Multi-Family Housing Revenue, Rosemont at Old Manor Apartments, Series 2004, AMT, Insured: FNMA 2.350% 08/15/37(a).......................................... 6,700 4,605 TX Travis County Housing Finance Corporation Single Family Mortgage Revenue, Series 2001, Insured: GNMA, 2.370% 09/01/18(a).......................................... 4,605 7,500 TX Turnpike Authority, Central Texas Turnpike System Revenue, Series 2004, Insured: AMBAC 2.400% 08/15/23(a)(b)....................................... 7,500 80,000 TX University of Texas, Permanent University Fund, Series 2005A, 3.500% 10/05/05............................................. 80,574 6,510 TX Wylie Independent School District, Series 2004, 2.320% 08/15/08(a)(b)....................................... 6,510 ---------- 1,049,514 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 63 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- UTAH -- 4.6% $ 5,900 UT Associated Municipal Power Systems Revenue, Capital Apprec- Ref Hunter Project, Series 1992, Insured: AMBAC (d) 07/01/05.................................................... $ 5,873 5,325 UT Central Water Conservancy District, Series 2004, Insured: AMBAC 2.320% 04/01/22(a)(b)....................................... 5,325 16,175 UT Housing Corporation Single Family Mortgage Revenue, Series 2001B, AMT, 2.320% 07/01/32(a).......................................... 16,175 8,595 Series 2002A-1, AMT, LOC: Westdeutsche Landesbank Girozentrale 2.320% 07/01/33(a).......................................... 8,595 9,095 Series 2002C-2, AMT, 2.320% 07/01/33(a).......................................... 9,095 8,950 Series 2004C-I, AMT, 2.320% 07/01/35(a).......................................... 8,950 14,060 Series 2004F, AMT, 1.500% 01/01/36(a).......................................... 14,060 4,300 Series 2004H-1, AMT, 2.320% 01/01/36(a).......................................... 4,300 7,200 Series 2005B, AMT, (d) 07/01/36................................................ 7,200 10,200 Series 2005I, 2.350% 07/01/36(a).......................................... 10,200 25,320 Series 2005, 2.320% 07/01/35(a).......................................... 25,320 9,720 Series 204A-I, AMT, 2.320% 07/01/35(a).......................................... 9,720 16,560 Series 2004G-I, AMT, 2.320% 01/01/36(a).......................................... 16,560 13,800 Series 2004D-I, AMT, 2.320% 07/01/35(a).......................................... 13,800 3,200 UT Murray City Industrial Development Revenue, Hunter Douglas Real Property Project, Series 1994, AMT, LOC: ABN-AMBRO Bank N.V. 2.340% 09/01/14(a)(b)....................................... 3,200 1,300 Zvex Project, Series 1996, AM, LOC: Bank One Arizona 2.450% 10/01/16(a)(b)....................................... 1,300 3,730 UT Salt Lake City Industrial Development Revenue, Spring Air Project, Series 2003, AMT, 2.350% 07/01/23(a).......................................... 3,730 20,000 UT State Board Regents Student Loan Revenue, Series 1993A, AMT, LOC: DEPFA Bank 2.280% 11/01/23(a).......................................... 20,000 35,000 Series 1995, AMT, Insured: AMBAC 2.280% 11/01/25(a).......................................... 35,000 38,500 Series 1996Q, AMT, Insured: AMBAC 2.280% 11/01/31(a).......................................... 38,500
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- UTAH -- (CONTINUED) $ 12,400 UT State Building Ownership Authority Lease Revenue Series 1998B, Insured: FSA (d) 05/15/05................................................ $ 12,369 9,995 UT State Housing Corporation Single Family Mortgage Revenue Series 2002C-2, AMT, 2.320% 07/01/31(a).......................................... 9,995 3,100 UT Tooele City Industrial Development Revenue Encon Utah Project, Series 2002A AMT, LOC: U.S. Bank N.A. 2.350% 10/01/22(a).......................................... 3,100 1,000 UT West Jordan Industrial Development Revenue Vesper Corporation Project, Series 1994A, AMT, LOC: PNC Bank 2.430% 04/01/14(a).......................................... 1,000 ---------- 283,367 ---------- VERMONT -- 0.2% 13,000 VT Industrial Development Authority Revenue, Ryegate Wood Energy Company Project, Series 1990, AMT, LOC: ABN AMRO Bank N.V. 2.360% 12/01/15(a).......................................... 13,000 ---------- VIRGINIA -- 0.6% 11,730 VA Fairfax County Series 2004A, Insured: State Aid Withholding 2.000% 04/01/05(a).......................................... 11,730 4,500 VA Fredericksburg Industrial Development Authority Multi- Family Housing Revenue Forest Village Apartments Project, Series 2001A-1, AMT, LOC: SunTrust 2.340% 01/01/33(a).......................................... 4,500 4,325 VA Madison County Industrial Development Revenue, Madison Wood Preservers Project, Series 1998, AMT LOC: Wachovia Bank of North Carolina 2.340% 06/01/13(a)(b)....................................... 4,325 9,250 VA Prince William County Industrial Development Revenue Economic Revenue, Dale Scott Corporation Project, Series 2001, AMT, LOC: First Union National Bank 2.340% 12/01/21(a).......................................... 9,250
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 64 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- VIRGINIA -- (CONTINUED) $ 4,000 Second Development LLC Project, LOC: Wells Fargo Bank N.A. 2.390% 08/01/19(a).......................................... $ 4,000 ---------- 33,805 ---------- WASHINGTON -- 1.9% 1,345 WA Goat Hill Properties, Washington Lease Revenue, ROCS Railroad II R 2173, Series 2005, Insured: MBIA 2.320% 12/01/23(a)(b)....................................... 1,345 4,190 WA Central, Washington University, Series 2004, Insured: FGIC 2.320% 05/01/21(a)(b)....................................... 4,190 6,260 WA King County Director Association, Series 2004-5, (d) 04/22/05.................................................... 6,252 3,370 WA King County Housing Authority Revenue, Auburn Court Apartments Project, Series 1997, AMT, LOC: U.S. Bank N.A. 2.350% 12/01/27(a).......................................... 3,370 5,595 WA King County Sewer Revenue, Series 2003, Insured: FGIC 2.320% 01/01/20(a)(b)....................................... 5,595 10,000 WA Metropolitan 2.050% 04/11/05(a).......................................... 10,000 3,120 WA Motor Vehicle Fuel Tax, Series 1995D, 7.000% 09/01/05............................................. 3,181 2,000 WA Pierce County Economic Development, McFarland Cascade Project, Series 1996, AMT, LOC: U.S. Bank N.A. 2.350% 12/01/17(a).......................................... 2,000 1,000 WA Port of Seattle Revenue, Series 2005, AMT, Insured: FGIC 2.360% 04/01/16(a)(b)....................................... 1,000 4,320 Series 2003, AMT, Insured: MBIA 1.660% 07/01/11(a)(c)....................................... 4,320 2,490 WA Seattle Housing Authority Revenue Lower Income Housing Assistance Revenue, Bayview Manor Project, Series 1994B, LOC: U.S. Bank Of Washington 2.350% 05/01/19(a).......................................... 2,490 11,250 Rainier Vista Project, Phase I, Series 2003, LOC: Key Bank N.A. 2.350% 12/01/36(a).......................................... 11,250 5,135 WA State, GO, Series 2003, Insured: FSA 2.320% 07/01/19(a)(b)....................................... 5,135
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- WASHINGTON -- (CONTINUED) $ 13,600 WA State Housing Finance Commission Multi-Family Housing Revenue, Mallard Lakes Apartment Projects, Series 2002A, AMT, 2.350% 05/15/35(a).......................................... $ 13,600 5,240 Pacific Crest Apartments Project, Series 1995, AMT, LOC: Bank of America 2.410% 04/01/34(a)(b)....................................... 5,240 1,950 Sisters of Providence Project, Series 1995, AMT, 2.350% 12/01/15(a).......................................... 1,950 8,300 Multi-Family Mortgage Revenue, Inglebrook Court Project, Series 1995, AMT, 2.350% 07/01/25(a).......................................... 8,300 4,525 Columbia Heights Project, Series 2004A, LOC: Wells Fargo Bank N.A. 2.360% 10/01/39(a).......................................... 4,525 1,350 Pacific Inn Apartments Project, Series 1996A, AMT, LOC: U.S. Bank N.A. 2.350% 05/01/28(a).......................................... 1,350 2,885 Rosemont Apartments Projects, Series 2003A, AMT, LOC: Umpua Bank, LOC: Bank of the West 2.370% 10/01/36(a).......................................... 2,885 2,000 Sherwood Springs Apartments Project, Series 1997A, AMT, LOC: U.S. Bank N.A. 2.350% 09/01/27(a).......................................... 2,000 6,000 WA State Public Power Supply System, Nuclear Project No. 3 Revenue, Series 1990, Insured: MBIA (d) 07/01/05................................................ 5,976 2,935 WA State, Series 2005D, Insured: FSA 3.000% 01/01/06............................................. 2,949 6,085 WA Tacoma Convention Center & Parking Revenue, Series 2004, Insured: MBIA 2.320% 12/01/24(a)(b)....................................... 6,085 ---------- 114,988 ---------- WEST VIRGINIA -- 0.6% 7,435 WV Beckley Revenue Refunding, Beckley Water Company Project, Series 2003, AMT, LOC: Bank One West Virginia 2.450% 10/01/16(a)(b)....................................... 7,435 11,175 WV Harrison County Board of Education, Series 2001-05, 2.530% 05/01/07(a)(b)....................................... 11,175
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 65 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- WEST VIRGINIA -- (CONTINUED) $ 1,300 WV Marion County Commission Solid Waste Disposal Facility Revenue, Grantown Project, Series 1990C, AMT, LOC: National Westminster 2.300% 10/01/17(a).......................................... $ 1,300 1,000 WV Mercer County Industrial Development Revenue, Noland Company Project, Series 2006, LOC: First National Bank 2.530% 05/01/06(a)(b)....................................... 1,000 7,055 WV Pleasants County Commission Industrial Development Revenue, Simex Inc. Building Project, Series 1999, LOC: PNC Bank N.A. 2.430% 12/01/19(a)(b)....................................... 7,055 2,555 WV Public Energy Authority Revenue, Morgantown Energy Project, Series 1998, AMT, Insured: FSA 2.380% 07/01/08(a)(b)....................................... 2,555 5,000 WV Putnam County Solid Waste Disposal Revenue, Toyota Motor Manufacturing Project, Series 2000A AMT, 2.310% 04/01/30(a).......................................... 5,000 2,350 WV State University Revenue, Series 2004, Insured: FGIC 2.320% 10/01/24(a)(b)....................................... 2,350 ---------- 37,870 ---------- WISCONSIN -- 2.1% 10,000 WI Housing & Economic Development Authority, Home Ownership Revenue, Series 2004A AMT, 2.280% 09/01/22(a).......................................... 10,000 10,000 2.280% 09/01/28(a).......................................... 10,000 18,000 2.280% 03/01/35............................................. 18,000 Series 2004E AMT, 18,000 2.280% 09/01/35(a).......................................... 18,000 3,790 Housing Revenue, Series 2004A, AMT Insured MBIA 2.280% 05/01/32(a).......................................... 3,790 3,135 WI Marathon City Redevelopment Authority Industrial Development Revenue, Maratech Calvin Frost Project, Series 2003, AMT, LOC: Fifth Third Bank 2.260% 10/01/35(a).......................................... 3,135 2,940 WI Menomonee Falls Industrial Development Revenue, Series 1994, LOC: Bank One Milwaukee N.A. 2.450% 09/01/14(a)(b)....................................... 2,940
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- WISCONSIN -- (CONTINUED) $ 1,500 WI Oconomowoc Community Development Authority Multi-Family Revenue, Series 2004, LOC: LaSalle Bank N.A. 2.390% 12/01/44(a).......................................... $ 1,500 1,300 WI Oconto Industrial Development Revenue, Unlimited Services of Wisconsin Project, Series 2000, AMT, LOC: Bank One Wisconsin 2.500% 11/01/12(a)(b)....................................... 1,300 800 WI Park Falls Industrial Development Revenue, Weather Shield Project, Series 2000, AMT, LOC: Bank One Wisconsin 2.450% 08/01/20(a)(b)....................................... 800 800 WI Pewaukee Industrial Development Revenue, Gunner Press & Finishing Project, Series 2000, AMT, LOC: Bank One Wisconsin 2.450% 09/01/20(a)(b)....................................... 800 2,800 WI Pleasant Prairie Industrial Development Revenue, Series 1995, AMT, LOC: American National Bank & Trust 2.350% 02/01/22(a).......................................... 2,800 2,000 WI Saukville Village Community Development Authority Industrial Development Revenue, Calibre Inc. Project, Series 2004, AMT, LOC: U.S. Bank N.A. 2.440% 09/01/29(a).......................................... 2,000 12,000 WI School Districts Cash Flow Management Program, Certificates of Participation, Series 2004A-1, LOC: U.S. Bank 3.000% 09/20/05(a).......................................... 12,073 3,400 WI Sheboygan Industrial Development Revenue, Subco Foods of Wisconsin, Series 2002, AMT, LOC: National Bank & Trust 2.580% 08/01/12(a)(b)....................................... 3,400 3,475 WI State, GO, Series 2004, Insured: FSA 2.320% 05/01/10(a)(b)....................................... 3,475 17,160 WI State Health & Educational Facilities Authority Revenue, Series 2003, Insured: MBIA 2.150% 08/15/19(a)(c)....................................... 17,160 5,000 2.320% 08/15/23(a)(b)....................................... 5,000 9,700 WI West Allis Revenue, State Fair Park Exposition Center Project, Series 2001, LOC: First Star N.A. 2.350% 08/01/28(a).......................................... 9,700
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 66 NATIONS MONEY MARKET FUNDS Nations Municipal Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- WISCONSIN -- (CONTINUED) $ 3,500 WI Whitewater Industrial Development Revenue, Husco International Incorporate Project, Series 1997, AMT, LOC: LaSalle Bank 2.370% 12/01/12(a).......................................... $ 3,500 ---------- 129,373 ---------- WYOMING -- 0.2% 10,000 WY State Education Fund Tax & Revenue Anticipation Notes, Series 2004, 3.000% 06/24/05(a).......................................... 10,021 ---------- TOTAL MUNICIPAL BONDS AND NOTES (Cost $6,111,883)........................................... 6,111,883 ---------- VARIABLE RATE DEMAND NOTES(E) -- 0.2% 2,660 Puttable Floating Option Tax-Exempt Receipts 2.430% 08/01/28(b).......................................... 2,660 13,390 Puttable Floating Option Tax-Exempt Receipts 2.430% 09/01/26(b).......................................... 13,390 ---------- TOTAL VARIABLE RATE DEMAND NOTES (Cost $16,050).............................................. 16,050 ---------- TOTAL INVESTMENTS (Cost $6,127,933)(f).............................. 100.2% 6,127,933 ---------- OTHER ASSETS AND LIABILITIES (NET).................. (0.2)% (14,562) ---------- NET ASSETS.......................................... 100.0% $6,113,371 ==========
- --------------- Notes to Investment Portfolio: (a) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $1,256,529, which represents 20.6% of net assets. (c) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized cost, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $131,704, which represents 2.2% of net assets. (See Note 6) (d) Zero coupon bond. (e) Variable rate demand note. These securities are payable upon demand and are secured by letters of credit or other credit support agreements from banks. The interest rate changes periodically and the interest rate shown reflects the rate as of March 31, 2005. (f) Cost for federal income tax purposes is $6,127,933. See Note 5 for additional information. ABBREVIATIONS: AMBAC -- Ambac Assurance Corp. AMT -- Alternative Minimum Tax FGIC -- Financial Guaranty Insurance Co. FHLB -- Federal Home Loan Bank FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance, Inc. GNMA -- Government National Mortgage Co. GO -- General Obligation IDR -- Industrial Development Revenue MBIA -- MBIA Insurance Corp. LOC -- Letter of Credit ROCS -- Reset Option Certificates
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 67 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- MUNICIPAL BONDS AND NOTES -- 97.9% ALABAMA -- 1.9% $ 8,345 AL ASMS Mobile Public Educational Building Authority Revenue, Alabama High School Math & Science Foundation Project, Series 1997, LOC: AmSouth Bank of Alabama 2.350% 07/01/22(a).......................................... $ 8,345 7,295 AL Birmingham Medical Clinic Board Revenue, University of Alabama Health Services Foundation Project, Series 2001A, LOC: Columbus Bank & Trust 2.430% 03/01/31(a)(b)....................................... 7,295 2,065 AL Foley Public Park & Recreation Board Revenue, YMCA Project, Series 2002, 2.330% 10/01/22(a).......................................... 2,065 31,800 AL Montgomery Industrial Development Board Pollution Control Revenue, GO, Unlimited Warrants Refunding, Series 2003, Insured: AMBAC 2.240% 09/15/06(a).......................................... 31,799 5,600 AL Tuscaloosa County Education Board, Special Tax Anticipation Warrants, Series 2003, LOC: Regions Bank 2.300% 02/01/16(a).......................................... 5,600 4,890 AL University of Southern Alabama Revenue, PUTTERS, Series 640, 2.320% 03/15/12(a)(b)....................................... 4,890 1,800 AL Vestavia Hills, Series 2004B, 2.380% 02/01/24(a).......................................... 1,800 ---------- 61,794 ---------- ALASKA -- 0.7% 5,880 AK Scottsboro Solid Waste Disposal Authority Revenue, Series 2003, LOC: Regions Bank 2.310% 11/01/18(a).......................................... 5,880 9,995 AK State Housing Finance Corp. Series 1998, Insured: MBIA 2.320% 12/01/19(a)(b)....................................... 9,995 6,295 Series 2005-703, Insured: FGIC 2.320% 12/01/12(a)(b)....................................... 6,295 ---------- 22,170 ---------- ARIZONA -- 1.0% 8,000 AZ Phoenix Civic Improvement Corporation, Series 2004, 1.470% 05/05/05............................................. 8,000 20,000 AZ School District Financing Program, Certificates of Participation, Series 2004, 3.000% 07/30/05............................................. 20,101
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ARIZONA -- (CONTINUED) $ 3,220 AZ Tourism & Sports Authority Tax Revenue, Series 2004, Insured: MBIA, LOC: Citigroup Global Markets 2.320% 07/01/21(a)(b)....................................... $ 3,220 ---------- 31,321 ---------- CALIFORNIA -- 5.2% 11,190 CA ABN AMRO Munitops Certificates Trust, Series 2004, Insured: FSA 2.330% 01/15/12(a)(b)....................................... 11,190 4,020 CA Alvord Unified School District, Series 2004, Insured: MBIA 2.300% 02/01/24(a)(b)....................................... 4,020 25,000 CA Los Angeles County Tax & Revenue, Series 2004A, 3.000% 06/30/05............................................. 25,077 Series 2004, 25,000 3.000% 06/30/05............................................. 25,079 10,000 3.500% 06/30/05............................................. 10,048 30,000 6.000% 06/30/05............................................. 30,294 31,900 CA Metropolitan Water District Southern California Waterworks Revenue, Series 2000B-1, LOC: Westdeutsche Landesbank 2.300% 07/01/35(a).......................................... 31,899 11,120 CA Public Works Board Lease Revenue, Series 2001, Insured: MBIA 0.100% 09/01/21(a)(b)....................................... 11,120 12,335 CA State Economic Recovery, Series 2004C-1, LOC: Landesbank Baden-Wurttemberg 2.300% 07/01/23(a).......................................... 12,335 10,000 CA State, GO, Series 2003, 6.770% 02/01/23(a)(b)....................................... 10,000 ---------- 171,062 ---------- COLORADO -- 7.1% CO Arapahoe County Capital Improvement Trust Federal Highway Revenue, Series 1986, 2,000 (c) 08/31/07................................................ 1,773 1,900 (c) 08/31/11................................................ 1,250 CO Arapahoe County Capital Improvement Trust Fund Highway Revenue, Series 1986E-470, 2,900 (c) 08/31/10................................................ 2,056 11,725 (c) 08/31/15................................................ 5,665 40,000 7.000% 08/31/26............................................. 42,013 5,795 CO Arapahoe County School District No. 6, GO, Series 2003, Insured: FGIC 2.320% 12/01/10(a)(b)....................................... 5,795 14,585 CO Denver City & County Excise Tax Revenue, Colorado Convention Center Project, Series 2001, Insured: FSA 2.300% 09/01/25(a).......................................... 14,585
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 68 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- COLORADO -- (CONTINUED) $ 44,875 CO Denver City & County, Certificates of Participation, Series 2003, Insured: AMBAC 2.300% 12/01/29(a).......................................... $ 44,875 3,230 CO Department of Transportation Revenue, Series 2003, Insured: AMBAC 2.320% 12/15/16(a)(b)....................................... 3,230 5,655 CO Douglas County Colorado School District No. 1, Series 2001, Insured: MBIA 2.320% 06/15/09(a)(b)....................................... 5,655 8,500 CO Housing and Finance Authority Revenue, Series 2005, 2.500% 03/29/06(a).......................................... 8,500 22,600 CO Jefferson County School District No. R-001, Series 2004A, 3.000% 06/30/05............................................. 22,679 3,715 CO Kippling Ridge Metropolitan District, Series 2005, LOC: U.S. Bank N.A. 2.110% 12/01/23(a).......................................... 3,715 18,700 CO Lower Colorado River Authority Tax Revenue, Series 2001, 2.320% 05/15/26(a)(b)....................................... 18,700 36,410 CO Moffat County Pollution Control Revenue, Tri State Colorado-Utah Electric Cooperative Project, Series 1984, Insured: AMBAC 2.320% 07/01/10(a).......................................... 36,410 8,400 CO Pitkin County Industrial Development Revenue, Refunding, Aspen Skiing Co. Project, Series 1994A, LOC: JPMorgan Chase Bank 2.300% 04/01/16(a).......................................... 8,400 8,000 CO State General Fund Revenue, Tax and Revenue Anticipation Notes, Series 2004, 3.000% 06/27/05............................................. 8,015 ---------- 233,316 ---------- DELAWARE -- 0.1% 4,385 DE Kent County Revenue, Charter Schools Incorporated Project, Series 2002, LOC: Wachovia Bank 2.340% 11/01/22(a).......................................... 4,385 ---------- DISTRICT OF COLUMBIA -- 0.3% 8,495 DC Revenue Refunding, Series 2003, LOC: Suntrust 2.290% 10/01/30(a).......................................... 8,495 2,000 DC District of Columbia, GO, Series 1993, Insured: FSA 5.875% 06/01/05............................................. 2,014 ---------- 10,509 ----------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- FLORIDA -- 7.4% $ 3,900 FL Alachua County Health Facilities Authority Revenue, Meridian Behavioral Income Project, Series 2003, LOC: Wachovia Bank 2.340% 07/01/18(a).......................................... $ 3,900 23,500 FL Collier County Health Facilities Authority Hospital Revenue, Cleveland Clinic Health, Series 2003C-1, LOC: JPMorgan Chase Bank 2.300% 01/01/35(a).......................................... 23,500 8,500 FL Dade County Special Revenue, Youth Fair & Exposition Project, Series 1995, LOC: Suntrust Bank of Central Florida 2.290% 08/01/15(a).......................................... 8,500 23,940 FL Housing Finance Agency, Series 1988, 2.350% 08/01/06(a).......................................... 23,940 14,475 FL Housing Finance Corp. Revenue, Series 2000, 2.310% 10/01/32(a)(b)....................................... 14,475 8,400 FL Miami Health Facilities Authority Facilities Revenues, Miami Jewish Home & Hospital, Series 1996, LOC: SunTrust Bank 2.290% 12/01/16(a)(b)....................................... 8,400 2,160 FL Miami-Dade County Educational Facilities Authority Revenue, Series 2004, Insured: AMBAC 2.310% 10/01/11(a)(b)....................................... 2,160 7,600 FL Miami-Dade County Industrial Development Authority Revenue, Dave & Mary Alper Community Project, Series 2002, LOC: Northern Trust 2.250% 04/01/32(a).......................................... 7,600 7,900 FL Miami-Dade County School District, Tax Anticipation Notes, Series 2004, 2.750% 06/28/05............................................. 7,912 10,000 FL Orange County Industrial Development Authority, Bishop Moore High School Project, Series 2000, LOC: SunTrust Bank 2.290% 10/01/25(a).......................................... 10,000 10,000 FL Pinellas County Health Facilities Authority Revenue, Refunding, Hospital Facilities Bayfront, Series 2004, LOC: Suntrust Bank 2.290% 07/01/34(a).......................................... 10,000 5,500 FL Pinellas County School District, Series 2004, 3.000% 06/30/05(a).......................................... 5,518
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 69 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- FLORIDA -- (CONTINUED) $ 14,080 FL State Board of Education Lottery Revenue, Series 2003, 2.310% 07/01/11(a)(b)....................................... $ 14,080 FL Sunshine State Governmental Financing Commission, 25,580 1.960% 04/04/05............................................. 25,580 14,930 2.130% 07/13/05............................................. 14,930 23,357 2.130% 07/13/05............................................. 23,357 7,250 2.150% 07/21/05............................................. 7,250 500 FL Titusville Multi-Purpose Revenue, Series 1998, LOC: SunTrust Bank 2.350% 01/01/25(a).......................................... 500 400 Series 1999, LOC: SunTrust Bank 2.350% 01/01/25(a).......................................... 400 4,100 FL Titusville Revenue, Series 1999A, LOC: SunTrust Bank 2.350% 01/01/25(a).......................................... 4,100 5,600 FL University of North Florida Foundation Income Revenue, Series 1997: LOC: First Union National Bank 2.300% 11/01/27(a).......................................... 5,600 12,000 LOC: First Union National Bank 2.300% 11/01/30(a).......................................... 12,000 9,600 Series 2003, LOC: First Union National Bank 2.300% 11/01/24(a).......................................... 9,600 ---------- 243,302 ---------- GEORGIA -- 5.2% 18,000 GA Albany Dougherty County Hospital Authority Revenue, Phoebe Hospital, Series 2002, Insured: AMBAC LOC: Regions Bank 2.300% 09/01/32(a).......................................... 18,000 2,215 GA Clayton County Authority Multi-Family Housing Revenue, Refunding, Kings Arms Apartments Project, Series 1990D, Insured: FSA 2.170% 01/01/21(a).......................................... 2,215 12,800 GA Clayton County Hospital Authority, Southern Regional Medical Center Project, Series 1998B, LOC: SunTrust Bank 2.290% 08/01/19(a).......................................... 12,800 3,935 GA Clayton County Housing Authority Multi-Family Housing Revenue, Huntington Woods Apartment Project, Series 1990A, Insured: FSA 2.170% 01/01/21(a).......................................... 3,935 3,690 Kimberly Forest Projects, Series 1990B, Insured: FSA 2.170% 01/01/21(a).......................................... 3,690 3,945 Ten Oaks Apartment Project, Series 1990F, Insured: FSA 2.170% 01/01/21(a).......................................... 3,945
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- GEORGIA -- (CONTINUED) $ 6,955 Village Rouge Apartments Project, Series 1990C, Insured: FSA 2.170% 01/01/21(a).......................................... $ 6,955 6,875 GA Cobb County Development Authority, North Cobb Christian School Project, Series 1998A, LOC: Branch Banking & Trust 2.270% 03/01/22(a).......................................... 6,875 2,740 YMCA,: Series 2003, LOC: Branch Banking & Trust Co. 2.270% 12/01/25(a).......................................... 2,740 25,000 GA Cobb County Hospital Authority Revenue, Equipment Pool Project, Series 2004, LOC: Suntrust Bank 2.300% 04/01/34(a).......................................... 25,000 13,300 GA Cobb Marietta Coliseum & Exhibit Hall Authority, Jr. Lien, Series 1996A, Insured: MBIA 2.320% 10/01/26(a)(b)....................................... 13,300 7,500 GA Columbus Development Authority, Foundation Properties, Inc., Project, Series 2004, LOC: Columbus Bank & Trust 2.350% 12/01/33(a).......................................... 7,500 8,000 GA Columbus Hospital Authority, St. Francis Hospital, Inc., Project, Series 2000A, LOC: Columbus Bank & Trust 2.320% 01/01/31(a)(b)....................................... 8,000 5,240 GA DeKalb County Development Authority, American Cancer Society, Inc., Project, Series 1988, LOC: SunTrust Bank 2.290% 05/01/13(a)(b)....................................... 5,240 3,000 Marist School, Inc., Project, Series 1999, LOC: Sun Trust 2.290% 03/01/24(a).......................................... 3,000 7,500 The Paideia School, Inc., Project, Series 2000, LOC: SunTrust 2.290% 02/01/20(a).......................................... 7,500 1,860 GA DeKalb County Hospital Authority, DeKalb Medical Center, Inc., Project, Series 1994, LOC: SunTrust 2.290% 09/01/09(a)(b)....................................... 1,860 4,500 GA DeKalb County Industrial Development Authority, A.G. Rhodes Home, Inc., Project, Series 1996, LOC: SunTrust Bank 2.290% 03/01/21(a)(b)....................................... 4,500 4,900 GA Floyd County Development Authority, Berry College, Inc., Project, Series 1999, LOC: SunTrust Bank 2.290% 03/01/24(a)(b)....................................... 4,900
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 70 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- GEORGIA -- (CONTINUED) $ 2,500 GA Fulton County Development Authority, Revenue Spelman College Project, Series 1996, LOC: SunTrust Bank 2.290% 06/01/16(a).......................................... $ 2,500 2,800 GA Fulton County Development Authority, Lovett School Project, Series 1997, LOC: SunTrust Bank 2.290% 04/01/17(a)(b)....................................... 2,800 1,650 GA Fulton County Water & Sewage Revenue, Eagle, Class A, Series 2005, Insured: FGIC 2.320% 01/01/35(a)(b)....................................... 1,650 16,700 GA Richmond County Hospital Authority, University Health Services, Inc., Project, Series 1999, LOC: SunTrust 2.290% 01/01/19(a).......................................... 16,700 4,850 GA Worth County Industrial Development Authority, Seabrook Enterprises, Inc., Project, Series 1996A, LOC: Harris Trust & Savings Bank 2.290% 08/01/23(a)(b)....................................... 4,850 ---------- 170,455 ---------- HAWAII -- 0.8% 11,100 HI Honolulu City & County GO: Series 2001, Insured: FGIC 2.280% 12/01/17............................................. 11,100 4,970 Series 2003, Insured: MBIA 2.320% 03/01/22(a)(b)............ 4,970 5,000 Series 2004A, Insured: MBIA 2.320% 10/01/10(a)(b)....................................... 5,000 4,120 Series 2005, Insured: MBIA 2.320% 03/01/28(a)(b)....................................... 4,120 ---------- 25,190 ---------- ILLINOIS -- 8.1% 22,345 IL ABN AMRO Munitops Certificate Trust, GO, Series 2002, Insured: MBIA 2.330% 12/01/10(a)(b)....................................... 22,345 2,400 IL Aurora City Economic Development Revenue, Series 2004, LOC: Harris Trust & Savings Bank 2.300% 03/01/35(a).......................................... 2,400 22,575 IL Bolingbrook, GO, Series 2004, LOC: Harris Trust & Savings Bank 2.170% 12/01/29(a).......................................... 22,575 7,200 IL Chicago Board of Education, Series 2004E, Insured: FSA 2.300% 03/01/15(a).......................................... 7,200 10,575 IL Chicago, GO, Series 2004, Insured: FSA 2.320% 01/01/29(a)(b)....................................... 10,575 4,240 IL DeKalb Tax Increment Revenue, Series 2003, LOC: Northern Trust Company 2.300% 01/01/13(a).......................................... 4,240
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 10,900 IL Development Finance Authority Pollution Control Revenue, Daimond Star Motors Project, Series 1985, 2.310% 12/01/08(a).......................................... $ 10,900 2,860 IL Development Finance Authority Revenue, Adventist Health, Series 1997, Insured: MBIA 5.500% 11/15/05............................................. 2,915 2,420 Chicago Academy of Science, Series 1997, LOC: JPMorgan Chase Bank 2.300% 01/01/31(a).......................................... 2,420 1,900 Jewish Federal Metropolitan Chicago Project, Series 2002, LOC: JPMorgan Chase Bank 2.300% 09/01/32(a).......................................... 1,900 5,900 IL Development Finance Authority, American Academy of Dermatology Project, Series 2001, LOC: American National Bank & Trust 2.400% 04/01/21(a)(b)....................................... 5,900 5,300 YMCA Metropolitan Chicago Project, Series 2001, LOC: Harris Trust & Savings Bank 2.300% 06/01/29(a).......................................... 5,300 2,285 IL Health Facilities Authority, Glenkirk Project, Series 1997, LOC: Harris Trust & Savings Bank 2.300% 02/15/21(a)(b)....................................... 2,285 16,500 IL Development Finance Authority, Roosevelt University Project, Series 1995, LOC: American National Bank & Trust 2.300% 04/01/25(a).......................................... 16,500 13,640 IL Educational Facilities Authority, Benedictine University Project, Series 2000, LOC: La Salle Bank 2.300% 08/01/25(a).......................................... 13,640 4,080 IL Development Finance Authority, Little City Foundation Project, Series 1994, LOC: La Salle National Bank 2.300% 02/01/19(a).......................................... 4,080 11,500 IL Oak Forest, Homewood Pool, South Suburban Mayors Project, Series 1989, LOC: Bank One, N.A 2.170% 07/01/24(a).......................................... 11,500 5,000 IL Schaumburg, City GO, Series 2004, Insured: FGIC 2.320% 12/01/41(a)(b)....................................... 5,000 2,360 IL State, GO, Series 2003, Insured: FSA 2.320% 12/01/20(a)(b)....................................... 2,360 5,995 Series 2004, Insured FGIC 2.320% 11/01/26(a)(b)....................................... 5,995 101,800 Series 2005, 3.000% 06/03/05............................................. 101,965
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 71 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ILLINOIS -- (CONTINUED) $ 5,470 IL Will & Kendall Counties Community Construction School District No. 202, GO, Series 2003, Insured: FGIC 2.320% 01/01/23(a)(b)....................................... $ 5,470 ---------- 267,465 ---------- INDIANA -- 1.4% 1,000 IN Angola Educational Facilities Revenue, Tri-State University Inc. Project Series 2004, LOC: Fifth Third Bank 2.190% 09/01/15(a)(b)....................................... 1,000 5,465 IN Board Book Revenue, Series 2004, Insured: AMBAC 2.320% 02/01/12(a)(b)....................................... 5,465 2,425 IN Bond Bank 2.320% 09/01/21(a)(b)....................................... 2,425 2,500 IN Health Facilities Financing Authority Revenue, Southern Indiana Rehab Hospital Project, Series 2001, LOC: Bank One Kentucky 2.400% 04/01/20(a)(b)....................................... 2,500 17,000 IN Indiana State Development Finance Authority Revenue, Educational Facilities Children's Museum, Series 2003, 2.350% 07/01/33(a).......................................... 17,000 4,390 IN St. Joseph County Indiana Economic Development Revenue, Brothers of the Holy Cross Project Series 1997, LOC: Key Bank 2.350% 09/01/17(a)(b)....................................... 4,390 7,950 IN State Development Finance Authority Industrial Development Revenue, Indiana University Foundation Project, Series 1998, LOC: National City Bank 2.400% 08/01/18(a)(b)....................................... 7,950 3,885 IN Transition Finance Authority Highway Revenue, Series 2004, Insured: MBIA 2.320% 06/01/09(a)(b)....................................... 3,885 ---------- 44,615 ---------- KANSAS -- 1.1% 29,080 KS State Department of Transportation Highway Revenue, Series 2002, LOC: Dexia Credit 2.230% 03/01/12(a).......................................... 29,080 8,430 KS Wichita City Hospital Revenue, Series 2005, Insured: MBIA, 2.320% 10/01/10(a)(b)....................................... 8,430 ---------- 37,510 ----------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- KENTUCKY -- 2.9% $ 19,000 KY Asset/Liability Commission General Fund Revenue, Series 2004A, 3.000% 06/29/05............................................. $ 19,049 15,800 KY Breckinridge County Lease Program Revenue, Series 2002, 2.300% 02/01/32(a).......................................... 15,800 1,900 KY Christian County Industrial Building Revenue, Audubon Area Community Services Project, Series 2004, LOC: Branch Banking & Trust 2.270% 01/01/29(a)(b)....................................... 1,900 10,785 KY Danville 2.250% 08/05/05(a).......................................... 10,785 9,100 KY Jefferson County Multi-Family Housing Revenue, Canter Chase Apartments Project, Series 2002, 2.330% 06/01/32(a).......................................... 9,100 2,760 KY Mayfield Multi-City Lease Revenue, League of Cities Funding Trust, Series 1996, LOC: PNC Bank 2.330% 07/01/26(a).......................................... 2,760 25,010 KY Shelby County Lease Revenue, Series 2004, LOC: U.S. Bank N.A. 2.300% 09/01/34(a).......................................... 25,010 5,345 KY State Property & Buildings Common Revenue, Series 2004, Insured: FSA 2.320% 04/01/13(a)(b)....................................... 5,345 4,250 KY Wickliffe Pollution Control & Solid Waste Disposal Revenue, Westvaco Corporation Project, Series 2001, LOC: SunTrust Bank 2.290% 01/01/09(a).......................................... 4,250 ---------- 93,999 ---------- LOUISIANA -- 0.8% 10,000 LA Public Facility Authority Lease Revenue, Series 2003, 2.330% 06/01/08(a).......................................... 10,000 4,310 LA Shreveport Home Mortgage Authority Multi-Family Housing Revenue Refunding, Summer Pointe Project, Series 2004, 2.310% 02/15/23(a).......................................... 4,310 6,500 LA State Offshore Term Authority Deepwater Port Revenue, Loop LLC Project, Series 2003, LOC: SunTrust Bank 2.290% 09/01/14(a).......................................... 6,500 4,100 LA Upper Pontalba Building Restoration Corporation Revenue, Refunding, Upper Pontalba Building Project, Series 1996, LOC: Bank One Louisiana N.A. 2.400% 12/01/16(a)(b)....................................... 4,100 ---------- 24,910 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 72 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- MAINE -- 0.1% $ 2,710 ME Health & Higher Educational Facilities Authority Revenue, Series 2003, Insured: FSA 2.320% 07/01/21(a)(b)....................................... $ 2,710 1,945 Series 2004A, Insured: MBIA 2.500% 07/01/05(a).......................................... 1,950 ---------- 4,660 ---------- MARYLAND -- 1.6% 9,100 MD Baltimore County Economic Development Revenue, Blue Circle Inc. Project, Series 1992, LOC: Den Danske Bank 2.400% 12/01/17(a).......................................... 9,100 4,000 Torah Institution Baltimore Project, Series 2004, LOC: Branch Banking & Trust 2.270% 05/01/24(a)(b)....................................... 4,000 40,000 MD State Community Development Administration Department of Housing and Community Development, Series 2004J, 2.050% 03/01/20............................................. 40,000 ---------- 53,100 ---------- MASSACHUSETTS -- 0.6% 20,720 MA Health & Educational Facilities Authority Revenue, Capital Assets Program, Series 1985D, Insured: MBIA, LOC: State Street Bank & Trust Co. 2.240% 01/01/35(a).......................................... 20,719 ---------- MICHIGAN -- 6.0% 4,000 MI Ann Arbor Economic Development, YMCA Project, Series 2004, LOC: Fifth Third Bank 2.170% 04/01/34(a).......................................... 4,000 1,000 MI Grand Rapids Public Schools, GO, Series 2004, LOC: Fifth Third Bank 2.190% 05/01/23(a).......................................... 1,000 7,155 MI Grand Valley State University Revenue, Series 2001B, Insured: FGIC 2.270% 06/01/27(a).......................................... 7,155 4,500 MI Higher Education Facilities Authority Revenue, Hope College Project, Series 2002B, LOC: Fifth Third Bank 2.310% 04/01/32(a).......................................... 4,500 5,000 Refunding, Limited Obligation Hope College, Series 2004, LOC: Bank One N.A. 2.310% 04/01/34(a).......................................... 5,000 10,500 MI Municipal Bond Authority Revenue, Series 2004B-1, 3.000% 08/19/05............................................. 10,557
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- MICHIGAN -- (CONTINUED) $ 2,395 MI Public Educational Facility Authority Revenue, West Michigan Academy Project, Series 2003, LOC: Fifth Third Bank 2.190% 12/01/18(a)(b)....................................... $ 2,395 5,000 MI South Central Power Agency Supply Systems Revenue, Refunding, Series 2004, 2.290% 11/01/11(a).......................................... 5,000 4,185 MI State Building Authority Revenue, Series 2003, Insured: MBIA 2.320% 10/15/18(a)(b)....................................... 4,185 29,025 MI State Building Authority, Series 2004, LOC: The Bank of New York 1.950% 04/27/05(a).......................................... 29,025 8,100 MI State Hospital Financial Authority Revenue, Series 2003, LOC: Fifth Third 2.150% 12/01/32(a).......................................... 8,100 3,500 MI State Underground Storage Tank Financial Assurance Authority, Refunding, Series 1996I, Insured: AMBAC 6.000% 05/01/05............................................. 3,512 75,000 MI State, GO: Series 2004A, 3.500% 09/30/05(a).......................................... 75,552 30,000 Series 2004, 2.200% 10/05/05(a).......................................... 30,000 4,370 MI Strategic Fund Ltd., Environmental Research Institute: Series 2000A, 2.330% 10/01/15(a).......................................... 4,370 4,260 Series 2000B, 2.330% 10/01/25(a).......................................... 4,260 ---------- 198,611 ---------- MINNESOTA -- 0.8% 4,990 MN Community Development Agency Revenue, Arena Acquisition Project, Series 1995A, LOC: U.S. Bank N.A. 2.330% 10/01/24(a).......................................... 4,990 20,000 MN School Districts Tax & Aid Anticipation Borrowing Program, GO, Series 2004A, 3.000% 09/02/05............................................. 20,122 ---------- 25,112 ---------- MISSISSIPPI -- 0.7% 5,000 MS Business Finance Corporation Revenue, Belhaven College Project, Series 2004, LOC: First Tennessee Bank 2.400% 07/01/24(a)(b)....................................... 5,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 73 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- MISSISSIPPI -- (CONTINUED) $ 10,000 MS Development Bank Special Obligation, Series 2004: Insured: AMBAC 1.650% 01/01/26(a)(d)....................................... $ 10,000 4,995 Insured: FSA 2.320% 09/01/25(a)(b)....................................... 4,995 2,400 Series 2005, Insured: FGIC 2.320% 01/01/13(a)(b)....................................... 2,400 ---------- 22,395 ---------- MISSOURI -- 1.5% 1,570 MO Desloge Industrial Development Revenue Authority, Refunding, National Healthcorp Project, Series 1989, LOC: Regions Bank 2.000% 12/01/10(a).......................................... 1,570 1,555 MO Dunklin County Industrial Development Authority, National Healthcorp Project, Series 1989, LOC: Regions Bank 2.050% 12/01/10(a).......................................... 1,555 18,400 MO Kansas City Industrial Development Authority Multi-Family Housing Revenue, Timberlane Village Associates Project, Series 1986, LOC: UBS AG 2.360% 06/01/27(a).......................................... 18,400 8,000 MO Kansas City Industrial Development Authority Multi-Family Housing Revenue, Ethans Apartment Project, Series 2004, LOC: Citibank N.A. 2.310% 02/01/39(a).......................................... 8,000 8,390 MO Platte County Industrial Development Authority Multi- Family Revenue, Wexford Place Project, Series 1999, 2.310% 04/01/28(a)(b)....................................... 8,390 5,000 MO St. Louis Industrial Development Authority Revenue, Wetterau Inc. Project, Series 1989, LOC: PNC Bank 2.310% 05/01/09(a)(b)....................................... 5,000 7,400 MO State Health & Educational Facilities Authority Revenue, Washington University, Series 2000B, LOC: JPMorgan Chase Bank 2.300% 03/01/40(a).......................................... 7,400 ---------- 50,315 ----------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- NEBRASKA -- 0.1% $ 4,060 NE Elementary & Secondary School Finance Authority Educational Facilities Revenue, Lutheran School Project Fund, Series 2004B, LOC: PNC Bank N.A. 2.310% 09/01/29(a).......................................... $ 4,060 ---------- NEVADA -- 0.6% 5,915 NV Clark County School District, Series 2004, Insured: MBIA 2.320% 06/15/23(a)(b)....................................... 5,915 8,635 NV Henderson, GO, Series 2004, Insured: FGIC 2.320% 06/01/24(a)(b)....................................... 8,635 3,980 NV Washoe County School District, GO, Series 2003, Insured FGIC 2.320% 06/01/20(a)(b)....................................... 3,980 ---------- 18,530 ---------- NEW JERSEY -- 0.4% 12,500 NJ State, GO, Series 2005, Insured: AMBAC 1.420% 07/15/19(a)(b)....................................... 12,500 ---------- NEW MEXICO -- 2.1% 5,000 NM Farmington Hospital Revenue, San Juan Regional Medical Center Project, Series 2004-B, LOC: Bank Of Nova Scotia 2.310% 06/01/28(a).......................................... 5,000 7,100 NM Farmington Pollution Control, Arizona Public Service Co., Series 1994B, 2.280% 09/01/24(a).......................................... 7,100 7,735 NM San Juan City Gross Receipts Tax Revenue, Series 2004, Insured: MBIA 2.320% 01/01/08(a)(b)....................................... 7,735 12,775 NM State, Series 2004A, 3.000% 06/30/05............................................. 12,806 35,000 Series 2004, 2.332% 06/30/05(a)(b)....................................... 35,000 ---------- 67,641 ---------- NEW YORK -- 4.3% 7,025 NY Albany Industrial Development Agency Civic Facility Revenue, Daughters of Sarah Housing Project, Series 2001A, LOC: Troy Savings Bank, LOC: Keybank N.A. 2.330% 03/01/31(a).......................................... 7,025 27,700 NY Erie County, Series 2004, LOC: Citigroup Global Markets 3.000% 07/13/05............................................. 27,778
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 74 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 14,590 NY Jay Street Development Corp. Facility Lease Revenue, New York City Jay Street Project, Series A, LOC: DEPFA Bank 2.280% 05/01/22(a).......................................... $ 14,590 7,485 NY Metropolitan Transitional Authority Revenue, Series 2003: Insured: AMBAC 1.630% 11/15/10(a)(d)....................................... 7,485 7,235 Insured: MBIA 2.300% 11/15/28(a)(b)....................................... 7,235 3,565 NY Monroe County Industrial Development Agency, Hillside Childrens Center Project, Series 1998, LOC: Key Bank N.A. 2.350% 08/01/18(a)(b)....................................... 3,565 11,410 NY New York City GO, Series 2004, Insured: CIFG 2.280% 08/15/29(a).......................................... 11,410 9,000 NY New York City Municipal Water, 2.130% 07/14/05(a).......................................... 9,000 12,600 NY New York City, 2.150% 07/14/05(a).......................................... 12,600 5,000 NY Sales Tax Asset Receivable Corporation, Series 2004, Insured: MBIA 2.300% 10/15/29(a).......................................... 5,000 1,400 NY State Housing Finance Agency Revenue, North End Avenue Housing, Series 2004A, LOC: Landesbank Hessen-Thuringen 2.280% 11/01/37(a).......................................... 1,400 NY State Power Authority Revenue, 12,400 1.920% 04/01/05(a).......................................... 12,400 9,000 1.980% 05/06/05(a).......................................... 9,000 135 NY State Thruway Authority, General Highway & Bridge Trust Fund, Series 2004, Insured: MBIA 2.300% 04/01/12(a)(b)....................................... 135 2,150 NY State, Series 2003, LOC: Bank of Nova Scotia 2.230% 08/01/31(a).......................................... 2,150 3,500 NY Syracuse Revenue Anticipation Notes, Series 2004, LOC: Bank of New York 2.750% 06/30/05(a).......................................... 3,509 2,280 NY Triborough Bridge & Tunnel Authority Revenue, Series 2002, Insured: MBIA 2.300% 05/15/10(a)(b)....................................... 2,280 3,500 Series 2003, Insured: MBIA 2.300% 05/15/17(a)(b)....................................... 3,500
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 500 NY Westchester County Industrial Development Agency Civic Facility Revenue, Westchester Jewish Project, Series 1998, LOC: Chase Manhattan Bank 2.350% 10/01/28(a)(b)....................................... $ 500 ---------- 140,562 ---------- NORTH CAROLINA -- 2.3% 5,800 NC Capital Facilities Finance Agency Educational Facilities Revenue, Campbell University, Series 2004, LOC: Branch Banking & Trust Co. 2.270% 10/01/24(a).......................................... 5,800 5,500 NC Capital Facility Finance Agency Educational Facility Revenue, Barton College Project, Series 2001, LOC: Branch Banking & Trust Co. 2.270% 07/01/19(a).......................................... 5,500 2,365 NC Guilford County Carolina Industrial Facilities & Pollution Control Financing Authority Revenue, YMCA Project, Series 2002, LOC: Branch Banking & Trust Company 2.270% 02/01/23(a).......................................... 2,365 13,575 NC Henderson County Hospital Revenue, Margaret R. Paradee Memorial Hospital Project, Series 2001, LOC: Branch Banking & Trust Co. 2.270% 10/01/21(a).......................................... 13,575 9,600 NC Medical Care Commission Hospital Revenue, Westcare Health Systems Project, Series 2002A, LOC: Branch Banking & Trust Co. 2.270% 09/01/22(a).......................................... 9,600 5,000 NC Medical Care Commission Retirement Facilities Revenue, 1st Mortgage United Methodist, Series 2005, LOC: Branch Banking & Trust Co. 2.270% 10/01/35(a).......................................... 5,000 10,310 Aldersgate Project, Series 2001, LOC: Branch Banking & Trust 2.350% 01/01/31(a).......................................... 10,310 3,980 NC Medical Care Community Health Care Facilities Revenue, Rutherford Hospital, Inc., Project, Series 2001, LOC: Branch Banking & Trust Co. 2.270% 09/01/21(a).......................................... 3,980 NC Medical Care Community Retirement Facilities Revenue, Series 2003, LOC: Bank of Scotland 10,000 2.270% 07/01/07(a).......................................... 10,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 75 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- NORTH CAROLINA -- (CONTINUED) NC State, GO, Series 2003, $ 5,460 2.320% 02/01/11(a)(b)....................................... $ 5,460 5,000 3.000% 05/01/05............................................. 5,006 ---------- 76,596 ---------- NORTH DAKOTA -- 0.3% 8,635 ND Grand Forks Health Care Facilities Revenue, Series 2004, Insured: MBIA 2.320% 07/21/09(a)(b)....................................... 8,635 ---------- OHIO -- 3.8% 28,495 OH Cleveland Waterworks Revenue, Series 2002L, Insured: FGIC 2.300% 01/01/33(a).......................................... 28,495 10,000 OH Columbus Regional Airport Authority Revenue, Series 2004A, LOC: U.S. Bank Trust, N.A. 2.300% 01/01/30(a).......................................... 10,000 41,000 Series 2004, LOC: U.S. Bank N.A. 2.300% 03/01/34(a).......................................... 41,000 2,620 OH Hamilton County Economic Development Revenue, CAA Complex at Jordan, Series 2003, LOC: Fifth Third Bank 2.190% 12/01/24(a)(b)....................................... 2,620 4,350 Xavier H.S. Project, Series 2003, LOC: Fifth Third Bank 2.170% 04/01/28(a).......................................... 4,350 1,805 OH Highland County Hospital Joint Township Hospital District Facilities Revenue, Series 2004, LOC: Fifth Third Bank 2.190% 08/01/24(a)(b)....................................... 1,805 3,990 OH Local School District, GO, Stark & Summit Counties Series 2004, Insured: FGIC 2.310% 12/01/24(a)(b)....................................... 3,990 2,700 OH Lucas County Facilities Improvement Revenue, Toledo Zoological Society Project, Series 1997, LOC: Key Bank N.A. 2.300% 10/01/05(a).......................................... 2,700 8,000 OH Montgomery County Economic Development Revenue, The Dayton Art Institute Project, Series 1996, LOC: National City Bank 2.350% 05/01/26(a).......................................... 8,000 14,340 OH Muskingum County Hospital Facilities Revenue, Genesis Healthcare System Project, Series 2000, LOC: National City Bank 2.310% 12/01/20(a).......................................... 14,340 1,535 OH State Higher Educational Facility, Higher Educational Pooled Financing, Series 2003A, LOC: Fifth Third Bank 2.300% 09/01/24(a).......................................... 1,535
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- OHIO -- (CONTINUED) $ 5,000 OH Summit County Port Authority Industrial Development Revenue, Jewish Community Board Project, Series 2005, (c) 10/01/23................................................ $ 5,000 1,000 OH Warren County Economic Development Revenue, Ralph J. Stolle Countryside Project, Series 2000, LOC: Fifth Third Bank 2.000% 08/01/20(a)(b)....................................... 1,000 ---------- 124,835 ---------- OKLAHOMA -- 0.0% 1,375 OK State Industrial Authority Revenue, Amateur Softball Association Project, Series 2002, LOC: Bank One Oklahoma N.A. 2.450% 06/01/14(a)(b)....................................... 1,375 ---------- OREGON -- 1.4% OR State, TAN Series 2004, 25,000 2.310% 06/30/05(a)(b)....................................... 25,000 20,000 3.000% 06/30/05............................................. 20,060 ---------- 45,060 ---------- PENNSYLVANIA -- 1.2% 6,505 PA Allegheny County Industrial Development Revenue, United Jewish Federation Project, Series 1995B, LOC: PNC Bank N.A. 2.310% 10/01/25(a).......................................... 6,505 11,340 PA Harrisburg Authority Revenue Cumberland Valley School Project, Series 2002B, Insured: FSA 2.330% 03/01/34(a).......................................... 11,340 2,025 West Brandywine Project, Series 2002D, Insured: FSA 2.330% 03/01/34(a).......................................... 2,025 8,000 PA Higher Educational Facilities Authority Revenue, Series 2005, LOC: Sovereign Bank 2.250% 11/01/36(a).......................................... 8,000 5,000 PA Montgomery County Industrial Development Authority Revenue, Plymouth Woods Project, Series 1987, LOC: PNC Bank, N.A. 2.310% 09/01/06(a)(b)....................................... 5,000 5,450 PA Philadelphia Redevelopment Authority The Presbyterian Home Project, Series 1998, LOC: PNC Bank, N.A. 2.310% 07/01/28(a)(b)....................................... 5,450 ---------- 38,320 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 76 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- PUERTO RICO -- 0.3% $ 11,440 PR Commonwealth of Puerto Rico, GO, Series 2003, Insured: MBIA 3.640% 01/01/13(a)(b)....................................... $ 11,440 ---------- SOUTH CAROLINA -- 2.0% 6,400 SC Jobs Economic Development Authority Health Care Facilities Revenue Baptist Ministries Incorporated, Series 2000, LOC: Nationsbank N.A. 2.350% 07/01/20(a).......................................... 6,400 13,145 SC Jobs Economic Development Authority Health Facilities Revenue, Carolina Village Project, Series 2000, LOC: Branch Banking & Trust 2.270% 02/01/22(a).......................................... 13,145 6,250 SC Jobs Economic Development Authority Hospital Facility Revenue, Canon Memorial Hospital Project, Series 2004A, LOC: National Bank of South Carolina 2.380% 06/01/24(a).......................................... 6,250 4,175 SC Piedmont Municipal Power Agency, Series 2004: Insured: AMBAC LOC: JPMorgan Chase Bank 2.300% 01/01/34(a).......................................... 4,175 13,300 Insured: MBIA 2.300% 01/01/34(a).......................................... 13,300 3,025 LOC: Dexia 2.300% 01/01/31(a).......................................... 3,025 5,490 SC State Public Service Authority Revenue, Series 2002, Insured: FSA 2.320% 07/01/10(a)(b)....................................... 5,490 4,575 Series 2004, Insured: AMBAC 2.320% 01/01/22(a)(b)....................................... 4,575 10,345 SC Transportation Infrastructure Book Revenue, Series 2004, Insured: AMBAC 2.320% 10/01/08(a)(b)....................................... 10,345 ---------- 66,705 ---------- TENNESSEE -- 3.6% 3,900 TN Blount County Public Building Authority, Local Government Public Improvement, Series 2002, Insured: AMBAC 2.310% 06/01/17(a).......................................... 3,900 6,855 TN Clarksville Public Building Authority Revenue, Series 1996, LOC: SunTrust Bank 2.290% 07/01/11(a).......................................... 6,855 3,150 TN Cleveland Health & Educational Facilities Board Revenue, Lee University Project, Series 2002, LOC: First Tennessee 2.550% 12/01/19(a)(b)....................................... 3,150
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- TENNESSEE -- (CONTINUED) $ 20,600 TN Collierville Industrial Development Board, St. Georges High School Project, Series 2001, LOC: Amsouth 2.320% 08/01/31(a).......................................... $ 20,600 7,700 TN Dickson County Industrial Development Board Revenue, The Jackson Foundation-Renaissance Learning Center Project, Series 1997, LOC: SunTrust Bank of Nashville 2.290% 11/01/12(a)(b)....................................... 7,700 6,000 TN Franklin Health & Educational Facilities Board Revenue, Battle Ground Academy Project, Series 2002, LOC: SunTrust Bank 2.290% 01/01/22(a).......................................... 6,000 18,240 TN Housing Development Agency, Single Family Mortgage, Series 2004, 2.526% 12/08/05(a).......................................... 18,240 14,200 TN Knox County Health & Educational Facilities Board, Webb School -- Knoxville Project, Series 1999, LOC: SunTrust Bank of Nashville 2.290% 03/01/19(a).......................................... 14,200 675 TN Loudon Water & Sewer Revenue, Series 1996, LOC: Wachovia Bank 2.340% 09/01/06(a)(b)....................................... 675 5,360 TN Metropolitan Government Nashville & Davidson County District Energy, Series 2002, Insured: AMBAC 2.320% 04/01/10(a)(b)....................................... 5,360 7,515 TN Metropolitan Government Nashville & Davidson County Housing & Facilities Board Revenue, Mary Queen of Angels Project, Series 2000, LOC: SunTrust Bank 2.290% 07/01/32(a).......................................... 7,515 3,555 TN Metropolitan Government Nashville & Davidson County Industrial Development Board Revenue Nashville Apartment Properties Project, Series 1995-2, LOC: AmSouth Bank, N.A. 2.390% 09/01/15(a)(b)....................................... 3,555 2,200 TN Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue, Vanderbilt University, Series 2002B, 2.320% 10/01/32(a).......................................... 2,200
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 77 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- TENNESSEE -- (CONTINUED) $ 4,520 TN Shelby County Health Educational & Housing Facilities Board Revenue, Memphis University School Project, Series 2002, LOC: SunTrust Bank 2.310% 10/01/22(a).......................................... $ 4,520 5,170 St. Benedict Auburndale School, Series 2003, LOC: AM South 2.320% 05/01/33(a).......................................... 5,170 3,500 St. Mary's Episcopal School Project, Series 2004, LOC: First Tennessee Bank 2.580% 12/01/34(a).......................................... 3,500 4,150 TN Williamson County Industrial Development Board Revenue Educational Facility St. Matthew School Project, Series 2004, LOC: SunTrust Bank 2.340% 07/01/24(a).......................................... 4,150 ---------- 117,290 ---------- TEXAS -- 15.7% 21,930 TX Water Development Board Revenue, Refunding, State Revolving Fund, Series 2003, LOC: JPMorgan Chase Bank 2.300% 07/15/22(a).......................................... 21,930 32,198 TX Austin City 2.300% 04/12/05(a).......................................... 32,198 4,982 TX Brazosport Independent School District, Series 2003, 2.320% 08/15/10(a)(b)....................................... 4,982 5,190 TX Bridgeport, GO, Independent School District, Series 2004, 2.320% 02/15/09(a)(b)....................................... 5,190 4,815 TX Canutillo Independent School District, GO, Series 2003, 2.320% 08/15/22(a)(b)....................................... 4,815 6,800 TX Cypress Fairbanks Independent School District, Series 2005, Insured: PSFG 2.320% 02/15/20(a)(b)....................................... 6,800 4,490 TX Dallas Independent School District, GO, Series 2004, Insured: PSFG 2.320% 08/15/24(a).......................................... 4,490 4,600 TX Denton County, GO, Series 2005, Insured: MBIA 2.320% 07/15/10(a)(b)....................................... 4,600 5,340 TX Denton Utilities System, Series 2004, Insured: MBIA 2.320% 12/01/24(b).......................................... 5,340 9,600 TX Grand Prairie Housing Finance Corporation Multi-Family Housing Revenue, Lincoln Property Project, Series 1993, 2.300% 06/01/10(a).......................................... 9,600
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- TEXAS -- (CONTINUED) $ 9,000 Windbridge Grand Prairie Project, Series 1993, 2.300% 06/01/10(a)(b)....................................... $ 9,000 TX Gregg County Housing Finance Corporation Multi-Family Housing Revenue Refunding, Summer Green Project, Series 2004A: 2,660 2.310% 02/15/23(a).......................................... 2,660 5,155 2.310% 02/15/23(a).......................................... 5,155 3,800 TX Harris County Health Facilities Development Corp. Special Facilities Revenue, Texas Medical Center Project, Series 1999B, Insured: FSA LOC: JPMorgan Chase Bank 2.300% 05/15/29(a).......................................... 3,800 3,690 TX Hays County Independent School District, GO, Series 2005, Insured: PSFG 2.320% 08/15/25(a)(b)....................................... 3,690 9,995 TX Houston Independent School District, GO, Series 2004, Insured: FSA 1.800% 06/14/05(d).......................................... 9,995 5,185 TX Houston Utility System Revenue Series 2004, Insured: FSA 2.320% 05/15/20(a)(b)....................................... 5,185 12,495 TX Houston Water & Sewer Systems Revenue, Series 2002, Insured: MBIA 2.300% 12/01/23(a)(d)....................................... 12,495 11,490 TX Hunt Memorial Hospital District Revenue, Series 1998, Insured: FSA 2.330% 08/15/17(a).......................................... 11,490 2,000 TX Lower Colorado River Authority Transmission Contract Revenue, Series 2004-623, Insured: FGIC 2.320% 11/15/09(a)(b)....................................... 2,000 64,570 TX Municipal Power Agency Revenue, Floating Rate Trust Receipts, Series 2004, Insured: FGIC 2.310% 09/01/11(a)(b)....................................... 64,570 9,990 TX North Central Health Facility Development Corporation Revenue, Series 2004, Insured: MBIA 2.320% 07/11/12(a)(b)....................................... 9,990 18,340 TX North East Independent School District GO, Series 2000PT-1249, 2.320% 02/01/21(a)(b)....................................... 18,340 10,580 TX Nueces County, GO, Series 2004, Insured: AMBAC 2.320% 02/15/12(a)(b)....................................... 10,580 TX Public Finance 5,000 1.950% 04/06/05............................................. 5,000 10,000 1.990% 05/10/05............................................. 10,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 78 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- TEXAS -- (CONTINUED) $ 4,900 TX San Antonio Health Facilities Development Corp. Revenue, Ctrc Clinical Foundation Project, LOC: Wells Fargo Bank N.A. 2.280% 06/01/20(a).......................................... $ 4,900 23,000 TX San Antonio Water Revenue Series 2003A, Insured: MBIA 2.270% 05/15/33(a).......................................... 23,000 42,170 TX Small Business Industrial Development Corporation IDR Texas Public Facilities Capital Access, Series 1986, LOC: KBC Bank N.V. 2.300% 07/01/26(a).......................................... 42,170 5,945 TX Spring Independent School District, GO, Series 2005, Insured: FGIC 2.320% 08/15/26(a)(b)....................................... 5,945 3,250 TX State TRAN, Series 2004D, 2.270% 08/31/05(a)(b)....................................... 3,250 100,000 Series 2004, 3.000% 08/31/05............................................. 100,569 32,000 TX University of Texas Permanent University Fund, Series 2005A, 3.500% 10/05/05(a).......................................... 32,229 9,700 TX West Side Calhoun County Development Corporation PCR, Sohio Chemical Corporation Project Series 1985, 2.300% 12/01/15(a).......................................... 9,700 8,135 TX Williamson County Putable Receipts Series 1998, Insured: FSA 2.320% 02/15/21(a)(b)....................................... 8,135 ---------- 513,793 ---------- UTAH -- 0.1% 3,500 UT Salt Lake County Pollution Control Revenue Refunding, Service Station Holdings Project B, Series 1994, LOC: British Pete PLC 2.300% 08/01/07(a).......................................... 3,500 ---------- VIRGINIA -- 0.7% 2,705 VA Alexandria Industrial Development Authority Revenue, American Red Cross Project, Series 1989, LOC: First Union National Bank 2.340% 01/01/09(a)(b)....................................... 2,705 3,900 VA Front Royal & Warren County IDR, Hospital Facility Warren Memorial Hospital Project, Series 2003, LOC: Branch Banking & Trust 2.270% 05/01/23(a)(b)....................................... 3,900
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- VIRGINIA -- (CONTINUED) $ 1,700 VA Hanover County Virginia Industrial Development Authority, Residential Care Facility Revenue, Series 1999, LOC: Branch Banking & Trust Co. 2.270% 07/01/29(a)(b)....................................... $ 1,700 12,050 VA Rockingham County Industrial Development Authority, Residential Care Facility Revenue, Sunnyside Presbyterian Project, Series 2003, LOC: Branch Banking & Trust 2.270% 12/01/33(a).......................................... 12,050 2,000 VA Spotsylvania County Industrial Development Authority IDR, Carlisle Corporation Project, Series 1993, LOC: SunTrust Bank 2.290% 06/01/08(a)(b)....................................... 2,000 ---------- 22,355 ---------- WASHINGTON -- 0.7% 8,960 WA Broadway Office Properties Revenue, Series 2002, Insured: MBIA 2.320% 06/01/10(a)(b)....................................... 8,960 7,340 WA State, GO, Series 2004, Insured: AMBAC 2.320% 01/01/12(a)(b)....................................... 7,340 3,600 WA State Housing Finance Commission Nonprofit Housing Revenue Rockwood Retirement Program A, Series 1999, LOC: Wells Fargo Bank N.A. 2.310% 01/01/30(a).......................................... 3,600 4,000 WA State Public Power Supply System, Nuclear Project No. 3 Revenue, Series 1990 Insured: MBIA (c) 07/01/05................................................ 3,984 ---------- 23,884 ---------- WEST VIRGINIA -- 0.4% 7,700 WV Marshall County Pollution Control Revenue, Mountaineer Carbon Company Project, Series 1985, LOC: Standard Oil Co. 2.300% 12/01/20(a).......................................... 7,700 5,000 WV University of West Virginia Series 2005, Insured: FGIC 2.320% 10/01/12(a)(b)....................................... 5,000 ---------- 12,700 ---------- WISCONSIN -- 2.3% 5,210 WI Allouez, GO, Series 2004, Insured: AMBAC 2.320% 04/01/24(a)(b)....................................... 5,210 3,600 WI Appleton IDR, Series 1994, U.S. Bank N.A. 2.350% 12/15/09(a).......................................... 3,600
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 79 NATIONS MONEY MARKET FUNDS Nations Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- WISCONSIN -- (CONTINUED) $ 6,635 WI Center District Tax Revenue, Series 2004, Insured: MBIA 2.320% 12/15/21(a)(b)....................................... $ 6,635 8,580 WI State Health & Educational Facilities Authority Revenue Series 2003, Insured: MBIA 2.150% 08/15/19(a)(d)....................................... 8,580 15,900 Wheaton Franciscan Services, Series 2003, Insured: MBIA LOC: U.S. Bank Trust, N.A. 2.300% 08/15/16(a)(b)....................................... 15,900 3,500 WI State Health & Educational Facility Authority Revenue, Mequon Jewish Project, Series 2003, LOC: Bank One N.A. 2.320% 07/01/28(a).......................................... 3,500 10,030 WI State, GO, Series 2004, Insured: FSA 2.320% 05/01/08(a)(b)....................................... 10,030 3,700 WI Wind Point Revenue, The Johnson Foundation Project, Series 2000, LOC: Harris Trust & Savings Bank 2.330% 09/01/35(a).......................................... 3,700 18,850 WY Uinta County Pollution Control, Chevron U.S.A., Inc., Project, Series 1993, 2.280% 08/15/20(a).......................................... 18,850 ---------- 76,005 ---------- WYOMING -- 0.3% 10,000 WY State Education Fund, Tax & Revenue Anticipation Notes Series 2004, 3.000% 06/24/05(a).......................................... 10,021 ---------- TOTAL MUNICIPAL BONDS AND NOTES (Cost $3,212,722)........................................... 3,212,722 ---------- VARIABLE RATE DEMAND NOTES(E) -- 0.2% 7,937 Municipal Electric Authority, Georgia Revenue 1.940% 04/18/05............................................. 7,937 ---------- TOTAL VARIABLE RATE DEMAND NOTES (Cost $7,937)............................................... 7,937 ----------
VALUE (000) - ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $3,220,659)(f).............................. 98.1% $3,220,659 ---------- OTHER ASSETS AND LIABILITIES (NET)................................. 1.9% 62,457 ---------- NET ASSETS.......................................... 100.0% $3,283,116 ==========
- --------------- Notes to Investment Portfolio: (a) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $793,502 which represents 24.2% of net assets. (c) Zero coupon bond. (d) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized costs, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $48,555, which represents 1.5% of net assets. (See Note 6) (e) Variable rate demand note. These securities are payable upon demand and are secured by letters of credit or other credit support agreements from banks. The interest rate changes periodically and the interest rate shown reflects the rate as of March 31, 2005. (f) Cost for federal income tax purposes is $3,220,659. See Note 5 for additional information. ABBREVIATIONS: AMBAC -- Ambac Assurance Corp. FGIC -- Financial Guaranty Insurance Co. FSA -- Financial Security Assurance Inc. GO -- General Obligation LOC -- Letter of Credit MBIA -- MBIA Insurance Corp. PCR -- Pollution Control Revenue PUTTERS -- Puttable Tax Exempt Receipts TAN -- Tax Anticipation Note
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 80 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- MUNICIPAL BONDS AND NOTES -- 100.8% CALIFORNIA -- 96.9% $14,200 CA ABAG Finance Authority for Non-Profit Corporations, California Multi-Family Revenue, Fine Arts Building Project, Series 2002A, AMT, FNMA Liquidity Facility 2.320% 07/15/35(a).......................................... $ 14,200 12,000 Lease Pass Through Obligations, Series 2003A, LOC: Societe Generale 2.340% 07/01/08(a).......................................... 12,000 7,825 CA ABN AMRO Munitops Certificates Trust, Series 2004, Insured: FSA 2.310% 06/01/12(a)(b)....................................... 7,825 8,895 Series 2003, Insured: FGIC 2.310% 08/01/11(a)(b)....................................... 8,895 7,590 Series 2004, Insured: FGIC 2.310% 07/01/11(a)(b)....................................... 7,590 8,575 Insured: MBIA 2.310% 08/01/12(a)(b)....................................... 8,575 2,400 CA Alameda Contra Costa County Schools Financing Authority, Certificates of Participation, Capital Improvements Financing Project, Series 1997E, LOC: Bank of Nova Scotia 2.300% 06/01/22(a).......................................... 2,400 3,025 Series 1997, LOC: Scotiabank 2.300% 07/01/23(a).......................................... 3,025 1,290 Series 2000F, LOC: KBC Bank N.V. 2.350% 08/01/23(a).......................................... 1,290 620 Series 2000I, Insured: AMBAC 2.300% 08/01/29(a).......................................... 620 8,100 Series 1999G, Insured: AMBAC 2.370% 08/01/24(a).......................................... 8,100 800 Certificates of Participation, Capital Improvements Financing Project, Series 1997D, LOC: Bank of Nova Scotia 2.300% 07/01/18(a).......................................... 800 6,480 CA Alameda County Corridor Transportation Authority Revenue, Series 1999C-1, Insured: MBIA 2.310% 10/01/13(a)(b)....................................... 6,480 5,400 CA Alameda County Industrial Development Authority Revenue, Edward L Shimmon Inc Project, Series 1996A, AMT, LOC: Bank of the West, BNP Paribas 2.320% 11/01/26(a).......................................... 5,400 2,860 CA Alameda County, IDR, Segale Brothers Wood Production Project, Series 2002, AMT, LOC: Bank of the West 2.380% 10/01/32(a).......................................... 2,860 35,000 CA Bay Area Toll Authority Toll Bridge Revenue, Series 2004B, Insured: AMBAC 2.260% 04/01/39(a).......................................... 35,000
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $ 1,700 CA Carlsbad, California Unified School District Certificates of Participation, School Facilities Bridge Funding Program, Series 2001, 2.230% 09/01/24(a).......................................... $ 1,700 3,185 CA Carson Redevelopment Agency, Series 2003, Insured: MBIA 2.310% 10/01/19(a)(b)....................................... 3,185 13,000 CA City Of Long Beach, 2.350% 05/15/15(a)(b)....................................... 13,000 1,350 CA Clovis Unified School District, 2.400% 08/01/28(a)(b)....................................... 1,350 5,440 CA Colton Joint Unified School District, GO, Series 2004, Insured: FGIC 1.600% 02/01/12(a)(c)....................................... 5,440 35,390 CA Community College Financing Authority Revenue, Series 2004D, Lehman Liquidity Company, 2.310% 07/29/05(a)(c)....................................... 35,390 5,000 CA Duarte Redevelopment Agency Revenue, Certificates of Participation, Johnson Duarte Partners Project, Series 1984B, LOC: General Electric Capital Corporation 2.260% 12/01/14(a).......................................... 5,000 7,000 CA Duarte Redevelopment Agency, Certificates of Participation, Piken Duarte Partners Project, Series 1984A, LOC: General Electric Capital Corporation 2.260% 12/01/14(a)(b)....................................... 7,000 4,080 CA East Bay Municipal Utility District, Water System Revenue, Series 2003, Insured: MBIA 2.310% 06/01/19(a)(b)....................................... 4,080 35,710 CA Eastern Municipal Water District, Water & Sewer Revenue, Certificates Participation, Series 2003B, Insured: MBIA 2.230% 07/01/33(a).......................................... 35,710 14,275 CA Educational Facilities Authority Revenue, Series 2000A, LOC: Societe Generale 2.310% 10/01/27(a)(b)....................................... 14,275 6,300 Series 1999, LOC: Bank of the West 2.310% 01/01/25(a).......................................... 6,300 14,000 CA Fontana Unified School District, TRAN, Series 2004, 2.500% 07/06/05............................................. 14,033 31,695 CA Fremont, Certificates of Participation, Capital Improvement Funding Project, Series 2001, LOC: ScotiaBank 2.270% 08/01/30(a).......................................... 31,695 3,535 Union High School District, Santa Clara County, 2.300% 09/01/23(a)(b)....................................... 3,535
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 81 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $ 335 CA Fresno Airport Revenue, Series 2000B, AMT, Insured: FSA 5.000% 07/01/05............................................. $ 338 50,000 CA Fresno County, TRAN, Series 2004-5, AMT, Insured: FSA 3.000% 06/30/05............................................. 50,172 5,500 CA Fullerton School District, GO, Series 2002, Insured: FGIC 2.300% 08/01/21(a)(b)....................................... 5,500 1,745 CA Goleta Water District Revenue, Certificates of Partnership, Series 2003, Insured: MBIA 2.310% 12/01/22(a)(b)....................................... 1,745 26,100 CA Health Facilities Financing Authority Revenue, Catholic Healthcare Facility, Series 2004K, LOC: Bank One N.A. 2.280% 07/01/33(a).......................................... 26,100 11,745 Catholic Healthcare Project, Series 1988B, Insured: MBIA 2.140% 07/01/16(a).......................................... 11,745 6,920 Hospital Adventist, Series A, 2.280% 09/01/28(a).......................................... 6,920 10,995 Series 1999C-6, Insured: FSA 2.310% 06/01/12(a)(b)....................................... 10,995 10,465 CA Housing Finance Agency Revenue, Home Mortgage, Series J, Insured: MBIA, LOC: Lloyds Bank PLC 2.350% 02/01/33(a).......................................... 10,465 1,500 Multi-Family Housing, Series 2002III-A, 2.320% 02/01/37(a).......................................... 1,500 6,715 Multi-Family Housing, Series A, 2.370% 02/01/35(a).......................................... 6,715 7,535 Series 2000, AMT, LOC: State Street Bank & Trust Company 2.400% 08/01/29(a).......................................... 7,535 4,800 Series 2001E, AMT, Insured: GO of Agency 2.320% 02/01/36(a).......................................... 4,800 24,285 Series 2002Q, AMT, Bank of Nova Scotia Liquidity Facility 2.320% 08/01/33(a).......................................... 24,285 8,040 Series 2004E-2, AMT, 1.650% 02/01/35(a).......................................... 8,040 22,000 Series A, Insured: GO of Agency 2.330% 08/01/36(a).......................................... 22,000 4,000 CA Housing Finance Agency, Series 2004, 2.360% 11/01/07(a)(b)....................................... 4,000 10,000 Series B, 2.375% 08/01/35(a).......................................... 10,000 5,650 CA Indio Multi-Family Housing Revenue, Series 1996A, 2.260% 08/01/26(a).......................................... 5,650 3,560 Western Federal Savings Project, Series 1985, LOC: Wells Fargo & Company 2.380% 06/01/05(a).......................................... 3,560
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $14,000 CA Infrastructure & Economic Development Bank Revenue, J Paul Getty Trust, Series D, 2.250% 04/01/33(a).......................................... $ 14,000 29,450 Series 2001, LOC: Bank of New York LOC: Bank of California State Teacher 2.240% 11/15/37(a).......................................... 29,450 22,070 Series 2003A, Insured: AMBAC 2.310% 07/01/37(a)(b)....................................... 22,070 7,000 Insured: FGIC 2.310% 07/01/29(a)(b)....................................... 7,000 4,000 LOC: Wells Fargo Bank N.A. 2.280% 09/01/28(a).......................................... 4,000 15,000 Series 2003B, AMT, 2.250% 04/01/33(a).......................................... 15,000 5,100 CA Infrastructure & Economic Development Bank, IDR, Kruger & Sons Inc. Project, Series 2002, AMT LOC: Bank of the West 2.400% 11/01/28(a).......................................... 5,100 2,380 Series 2003, AMT, LOC: Mellon Bank 2.450% 08/01/28(a).......................................... 2,380 10,974 CA Irvine Improvement Bond Act 1915, Assessment District 03-19 Series 2004, LOC: Bank Of New York 2.280% 09/02/29(a).......................................... 10,974 4,900 CA Lassen Municipal Utility District Revenue, Series 1996A, 2.360% 05/01/08(a).......................................... 4,900 4,000 CA Long Beach, Aquarium of The Pacific 6.125% 07/01/15............................................. 4,120 3,515 Harbor Revenue, Series 2002B, AMT, Insured: MBIA 3.000% 05/15/05............................................. 3,520 4,997 Municipal Securities Trust Receipts Revenue, Series 1998C-1, AMT, Insured: FGIC 2.330% 05/15/07(a)(b)....................................... 4,997 11,800 CA Los Angeles Community Redevelopment Agency, Multi-Family Housing Revenue Refunding, Grand Promenade Project, Series 2002, 2.260% 04/01/32(a).......................................... 11,800 17,965 Multi-Family Housing Revenue, Second & Central Apartment Project, Series 2003A, AMT, 2.260% 12/01/38(a).......................................... 17,965 63,785 CA Los Angeles County Housing Authority, Multi Family Housing Revenue, 2.360% 10/01/31(a)(b)....................................... 63,785
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 82 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $11,645 CA Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue, Series 2002, Insured: MBIA 2.300% 01/01/07(a)(b)....................................... $ 11,645 9,700 Series 2004A, Insured: MBIA 2.310% 07/01/34(a)(b)....................................... 9,700 64,905 CA Los Angeles County Tax & Revenue, Series 2004A, 3.000% 06/30/05............................................. 65,062 Series 2004, 37,000 3.000% 06/30/05............................................. 37,134 30,000 3.500% 06/30/05............................................. 30,145 20,000 6.000% 06/30/05............................................. 20,196 CA Los Angeles Department of Airports, 8,700 1.990% 04/05/05(a).......................................... 8,700 6,800 1.990% 04/05/05(a).......................................... 6,800 18,700 Sub Los Angeles International Airport, Series 2002C-1, LOC: Bayerische Landesbank LOC: JPMorgan Chase Bank 2.230% 05/15/20(a).......................................... 18,700 CA Los Angeles Metropolitan Transportation, 43,000 1.900% 04/06/05(a).......................................... 43,000 10,000 2.090% 07/21/05(a).......................................... 10,000 14,705 CA Los Angeles Unified School District, TRAN, Series 2004A, 3.000% 09/01/05............................................. 14,796 9,800 CA Los Angeles Water & Power Revenue, Power Systems, Series 2002A-4, 2.280% 07/01/35(a).......................................... 9,800 12,995 Series 2001, Insured: MBIA 2.310% 01/01/09(a)(b)....................................... 12,995 5,100 CA M S R Public Power Agency, San Juan Project Revenue, Refunding Subordinated Lien, Series E, Insured: MBIA 2.230% 07/01/22(a).......................................... 5,100 17,000 CA Metropolitan Water District of Southern California, 2.260% 07/01/35(a).......................................... 17,000 8,450 Waterworks Revenue Series 2004A-1, 2.230% 07/01/23(a).......................................... 8,450 8,600 Series 2000B-1, VRDB, SPA: Westdeutsche Landesbank GZ 2.280% 07/01/35(a).......................................... 8,600 20,430 CA Modesto, District Certification of Partnership, Series 2003, Insured: MBIA 2.300% 07/01/25(a)(b)....................................... 20,430 4,290 CA Morgan Hill United School District, GO, Series 2000S, Insured: FGIC 2.300% 08/01/25(a).......................................... 4,290
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $15,290 CA Multi-Family Housing Revenue, Turnleaf Apartments Project, Series 2003A, 2.290% 06/01/36(a).......................................... $ 15,290 5,915 CA Newport Mesa Unified School District, GO, Series 2003, Insured: FGIC 2.310% 08/01/20(a)(b)....................................... 5,915 7,000 CA North California Transportation Agency, 1.950% 04/07/05(a).......................................... 7,000 11,800 CA Oakland Redevelopment Agency Revenue, Series 2003, Insured: FGIC 2.300% 03/01/11(a)(b)....................................... 11,800 12,700 CA Orange County Housing Authority, Apartment Development Revenue Refunding, Oasis Martinique Project, Series 1998I, 2.270% 06/15/28(a).......................................... 12,700 8,425 CA Orange County Special Financing Authority Revenue, Series 1995B, Insured: AMBAC 2.290% 11/01/14(a)(b)....................................... 8,425 23,775 Series 1995C, Insured: AMBAC 2.290% 11/01/14(a).......................................... 23,775 11,085 Series 1995D, Insured: AMBAC 2.290% 11/01/14(a).......................................... 11,085 10,625 CA Orange County Special Financing Housing Authority, Teeter Plan Revenue, Series 1995E, Insured: AMBAC 2.290% 11/01/14(a).......................................... 10,625 4,575 CA Orange County Water District Revenue, Certificates of Participation, Series 2003, Insured: MBIA 2.300% 02/15/11(a)(b)....................................... 4,575 1,900 CA Oxnard Financing Authority, Series B, Insured: AMBAC 2.280% 06/01/34(a).......................................... 1,900 115 CA Pajaro Valley Unified School District, Certificates of Participation, School Facilities Bridge Funding Project, Series 2000, Insured: FSA 2.230% 09/01/23(a).......................................... 115 5,285 CA Pasadena Water Revenue, Series 2003, Insured: SBPA 2.300% 06/01/27(a)(b)....................................... 5,285 7,500 CA Pasadena, Certificates of Participation, City Hall & Park Improvement Projects, Insured: AMBAC LOC: State Street Bank & Trust Company 2.290% 02/01/33(a).......................................... 7,500 5,885 CA Peralta Community College District, GO, Series 2004, Insured: MBIA 2.300% 08/01/08(a)(b)....................................... 5,885
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 83 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $ 2,900 CA Pleasanton, Multi-Family Housing Revenue, Bernal Apartment Project, Series 2001A, 2.340% 09/15/34(a).......................................... $ 2,900 32,300 CA Pollution Control Financing Authority, Pollution Control Revenue, Refunding Pacific E, LOC: JPMorgan Chase Bank 2.290% 11/01/26(a).......................................... 32,300 13,400 Sierra Pacific Industries Project, Series 1993, LOC: Wells Fargo Bank N.A. 2.300% 02/01/13(a).......................................... 13,400 2,500 Solid Waste Disposal, Blue Line Transfer Project, Series 2002A, AMT LOC: Wells Fargo 2.360% 08/01/14(a).......................................... 2,500 1,100 Santa Clara Valley Industries Project, Series 1998A, AMT LOC: Comerica Bank 2.410% 03/01/18(a)(b)....................................... 1,100 25,045 CA Pomona, Certificates of Participation, LOC: HSH Nordbank Agency 2.280% 01/01/34(a).......................................... 25,045 4,290 CA Poway Redevelopment Agency, Tax Allocation, Series 2003R, Insured: MBIA 2.310% 06/15/20(a)(b)....................................... 4,290 7,490 CA Poway Unified School District, GO, Series 2004 Insured: MBIA 2.300% 08/01/08(a)(b)....................................... 7,490 12,600 CA Riverside County Housing Authority, Multi-Family Housing Revenue, Series 1998A, AMT Insured: FHLMC 2.350% 01/15/29(a).......................................... 12,600 1,600 CA Riverside Electric Revenue, Series 1998, Insured: AMBAC 2.310% 10/01/11(a)(b)....................................... 1,600 5,965 CA Rowland Unified School District, GO, Series 2003, Insured: FSA 2.310% 08/01/22(a)(b)....................................... 5,965 16,300 CA Sacramento Cogeneration Authority, Cogeneration Project Revenue, Procter & Gamble Project, Series 2003, 6.500% 07/01/21(a).......................................... 16,805 5,000 Prerefunded 07/01/05 6.500% 07/01/14(a).......................................... 5,156 3,750 CA Sacramento County Housing Authority, Multi-Family Housing Revenue Refunding, Sun Valley Apartments Project, Series F, 2.310% 02/15/31(a).......................................... 3,750 10,200 CA Sacramento County Multi-Family Housing Revenue Refunding, Woodbridge Apartments Project, Series 2004B, 2.260% 06/15/34(a).......................................... 10,200
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $12,000 CA Sacramento County Housing Authority, Multi-Family Housing Revenue Refunding, Pointe Natomas Apartments Project, Series 2001E, 2.260% 02/15/31(a).......................................... $ 12,000 3,580 CA San Bernardino County Housing Authority, Multi-Family Housing Revenue, Indian Knoll Apartments Project, Series 1985A, Insured: FNMA 2.310% 06/01/05(a).......................................... 3,580 3,500 Multi-Family Housing Revenue, 2.290% 06/01/05(a).......................................... 3,500 3,030 Multi-Family Revenue Refunding, Arrowview Park Apartments Project, Series 1992A, LOC: Redlands Federal Bank 2.260% 09/01/22(a).......................................... 3,030 3,300 CA San Bernardino County, Certificates of Participation, County Center Refinancing Project, Series 1996, 2.280% 07/01/15(a).......................................... 3,300 1,075 CA San Diego Unified Port District Revenue, Series A, Insured: MBIA 4.000% 09/01/05............................................. 1,083 14,000 CA San Francisco City & County Housing Authority, Multi-Family Revenue, Series 2004, LOC: Citibank N.A. 2.300% 09/01/49(a).......................................... 14,000 12,700 CA San Francisco City & County Redevelopment Agency, Multi-Family Housing Revenue Refunding, Fillmore Center Project, Series 1992A, LOC: Credit Suisse 2.290% 12/01/17(a).......................................... 12,700 15,925 Fillmore Center Project, Series 1992B-1, Insured: Credit Suisse Boston 2.290% 12/01/17(a).......................................... 15,925 3,000 Series 1992, AMT, LOC: Credit Suisse 2.300% 12/01/17(a).......................................... 3,000 7,200 South Harbor Project, Series 1986, LOC: Credit Local de France 2.270% 12/01/16(a).......................................... 7,200 16,140 Multi-Family Housing Revenue, Notre Dame Apartments Project, Series 2000G, AMT, LOC: Citibank N.A. 2.320% 12/01/33(a).......................................... 16,140 8,305 CA San Francisco City & County, Multi-Family Housing Revenue, 8th & Howard Family Apartments, Series 2000B, AMT, LOC: Citibank N.A. 2.210% 12/01/34(a).......................................... 8,305
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 84 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $23,000 CA San Joaquin Transportation Authority, 2.060% 07/19/05(a).......................................... $ 23,000 CA San Jose Financing Authority 1,798 2.100% 07/01/05(a).......................................... 1,798 1,367 2.170% 07/01/05(a).......................................... 1,367 885 2.200% 07/01/05(a).......................................... 885 6,520 Lease Revenue, Series 2003, Insured: AMBAC 2.300% 06/01/10(a)(b)....................................... 6,520 450 Series 2004, LOC: State ST/Calstrs 2.020% 07/01/05(a).......................................... 450 10,496 CA San Jose Multi-Family Financing Authority, LOC: State Street Bank & Trust LOC: California State Teachers Retirement System 1.850% 07/01/05(a).......................................... 10,496 6,494 CA San Jose Multi-Family Housing Revenue, Sunset Square Apartments Project, Series E, 2.370% 06/01/34(a).......................................... 6,494 11,500 Pollard Plaza Apartments Project, Series 2002D, 2.280% 08/01/35(a).......................................... 11,500 3,700 Series 1990, LOC: Wells Fargo & Company 2.300% 02/01/20(a).......................................... 3,700 5,190 CA San Ramon Valley Unified School District, Series 2004, 2.300% 08/01/23(a)(b)....................................... 5,190 4,365 CA Santa Rosa High School District, GO, Series 2004, Insured: MBIA 2.300% 08/01/11(a)(b)....................................... 4,365 15,965 CA Santa Rosa Housing Authority, Multi-Family Housing Revenue, Apple Creek Apartments, Series 1995E, Insured: FHLMC 2.300% 03/01/12(a).......................................... 15,965 3,040 CA Santa Rosa Wastewater Revenue, 2.380% 09/01/31(a)(b)....................................... 3,040 500 CA Saratoga California Unified School District, Certificates of Participation, School Facility Bridge Funding, Series 2001, Insured: FSA 2.230% 09/01/26(a).......................................... 500 37,830 CA Schools Cash Reserve Program Authority, Series 2004A, 3.000% 07/06/05............................................. 37,962 15,500 CA Simi Valley Community Development Agency, Multi-Family Housing Revenue, Series 1985A, 2.300% 05/01/10(a).......................................... 15,500 18,975 CA South Coast Local Education Agencies, TRAN, Series 2004, 3.000% 06/30/05............................................. 19,033 15,000 CA Southern California Home Financing Authority, Single Family Revenue, Series 2004B, AMT, 1.450% 02/01/34(a).......................................... 15,000
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $15,980 Series 2004B, 2.320% 02/01/35(a).......................................... $ 15,980 4,930 CA Southern California Public Power Authority, Power Project Revenue, Series 2003, Insured: AMBAC 2.300% 07/01/11(a)(b)....................................... 4,930 5,175 CA State Department of Water Resources Revenue, Series 2004, Insured: FGIC 2.300% 12/01/10(a)(b)....................................... 5,175 15,250 CA State Department of Water Resources, Power Supply Revenue, 0.536% 05/01/09(a)(b)....................................... 15,250 Series 2002 B-6, 1,900 2.280% 05/01/22(a).......................................... 1,900 5,200 Series 2002C-11, LOC: Bank of Nova Scotia LOC: KBC Bank N.V. 2.230% 05/01/22(a).......................................... 5,200 12,075 Series 2003, Insured: MBIA 2.300% 05/01/11(a)(b)....................................... 12,075 11,000 Series C-10, LOC: Landesbank Hessen-Thuringen Girozentrale 2.220% 05/01/22(a).......................................... 11,000 45,100 Supply Revenue, Series 2002C-11, LOC: KBC Bank N.V. 2.280% 05/01/22(a).......................................... 45,100 12,000 CA State Economic Recovery Revenue, LOC: Bank Of New York Series 2004C-10, LOC: Banque Nationale de Paris 2.270% 07/01/23(a).......................................... 12,000 4,700 CA State Economic Recovery, 2.310% 07/01/12(a)(b)....................................... 4,700 9,375 GO, Series 2004, Citibank N.A. Liquidity Facility 1.700% 07/01/23(a)(c)....................................... 9,375 80,020 Series C-11, LOC: BNP Paribas 2.240% 07/01/23(a).......................................... 80,020 5,700 Series C-16, Insured: FSA LOC: Dexia Credit Local 2.290% 07/01/23(a).......................................... 5,700 3,100 Series C-4, LOC: JPMorgan Chase Bank 2.330% 07/01/23(a).......................................... 3,100 4,935 CA Statewide Communities Development Authority Revenue, Fairfax Senior Citizens Housing Project, Series 2000A, 2.290% 09/15/30(a).......................................... 4,935 5,000 Hanna Boys Center Project, Series 2002, LOC: Northern Trust Company 2.250% 12/31/29(a).......................................... 5,000 3,900 IDR, Multiple Peptide Systems Project, Series 2002A, AMT, LOC: Bank of the West 2.400% 12/01/17(a).......................................... 3,900
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 85 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $ 6,000 CA Statewide Communities Development Authority, Multi-Family Revenue, Maple Square Apartments Project, Series 2004, AMT, 2.370% 08/01/39(a).......................................... $ 6,000 10,900 Canion County Apartments, Series 2002M, 2.340% 12/01/34(a).......................................... 10,900 7,350 Greentree Senior Apartments, Series 2000P, AMT, Insured: FNMA Liquidity Facility 2.310% 11/15/30(a).......................................... 7,350 3,000 TRAN, Series 2004B-1, Insured: FSA 3.500% 07/29/05............................................. 3,019 15,000 CA State, 3.000% 06/30/05............................................. 15,034 5,970 CA Transit Finance Authority Revenue, Series 1997, Insured: FSA LOC: First Boston 2.270% 10/01/27(a).......................................... 5,970 3,000 CA Transmission Agency, 1.880% 04/11/05(a).......................................... 3,000 18,270 CA Transmission Agency of Northern California, California-Oregon Transmission Project, 1.940% 04/01/05(a).......................................... 18,270 9,100 CA Unified High School District, Certificates of Participation, Series 2001, 2.230% 06/01/13(a).......................................... 9,100 7,635 CA University of California Revenue, Series 2003, Insured: FSA 2.300% 09/01/09(a)(b)....................................... 7,635 CA University Of California, 10,000 1.920% 04/01/05(a).......................................... 10,000 13,100 2.000% 05/02/05(a).......................................... 13,100 5,000 2.060% 07/19/05(a).......................................... 5,000 2,600 CA Vallecitos Water District, Water Revenue, Certificates of Participation, Oaks Reservoir Project, Series 1998, LOC: Credit Local de France 2.230% 07/01/30(a).......................................... 2,600 7,755 CA Vallejo, Certificates of Participation, Capital Improvement Project, Series 2003, LOC: Union Bank of California 2.330% 12/01/23(a).......................................... 7,755 7,845 Water Revenue, Series 2001A, LOC: KBC Bank NV 2.370% 06/01/31(a).......................................... 7,845
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CALIFORNIA -- (CONTINUED) $ 5,970 CA West Contra Costa Unified School District, GO, Series 2004, Insured: FGIC 2.300% 08/01/24(a)(b)....................................... $ 5,970 ---------- 2,059,814 ---------- PUERTO RICO -- 3.9% 16,135 PR Commonwealth of Puerto Rico Highway & Transportation Authority Revenue, Series 1999, Insured: AMBAC 2.280% 01/01/19(a)(b)....................................... 16,135 19,295 Series 2003, Insured: FGIC 2.280% 01/01/11(a)(c)....................................... 19,295 PR Commonwealth of Puerto Rico Infrastructure Financing Authority, 9,725 2.290% 10/01/34(a)(b)....................................... 9,725 9,000 2.290% 10/01/34(a)(b)....................................... 9,000 7,000 PR Commonwealth of Puerto Rico, GO, Series 2001, Insured: FSA 2.300% 07/01/27(a)(b)....................................... 7,000 5,065 PR Public Financing Corporation, Series 2004, 2.290% 08/01/30(a)(b)....................................... 5,065 1,750 PR Puerto Rico Electric Power Authority, 2.290% 07/01/12(a)(b)....................................... 1,750 14,210 PR Puerto Rico Public Buildings Authority Revenue Series 2004, Insured: FGIC 2.280% 01/01/13(a)(b)....................................... 14,210 ---------- 82,180 ---------- TOTAL MUNICIPAL BONDS AND NOTES (Cost $2,141,994)........................................... 2,141,994 ---------- TOTAL INVESTMENTS (Cost $2,141,994)(d).............................. 100.8% 2,141,994 ---------- OTHER ASSETS AND LIABILITIES (NET).................. (0.8)% (16,500) ---------- NET ASSETS.......................................... 100.0% $2,125,494 ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 86 NATIONS MONEY MARKET FUNDS Nations California Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 - --------------- (a) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $460,717, which represents 21.8% of net assets. (c) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized costs, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $69,500, which represents 3.3% of net assets (See Note 6). (d) Cost for federal income tax purposes is $2,141,994. See Note 5 for additional information. ABBREVIATIONS: AMBAC -- Ambac Assurance Corp. AMT -- Alternative Minimum Tax FGIC -- Financial Guaranty Insurance Co. FHLMC -- Insured by Federal Home Loan Mortgage Corp. FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance Inc. GO -- General Obligation IDR -- Industrial Development Revenue LOC -- Letter of Credit MBIA -- MBIA Insurance Corp. SPA -- Standby Purchase Agreement SBPA -- Standby Bond Purchase Agreement TRAN -- Tax Revenue Anticipation Note VRDB -- Variable Rate Demand Bond
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 87 NATIONS MONEY MARKET FUNDS Nations New York Tax-Exempt Reserves INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- MUNICIPAL BONDS AND NOTES -- 99.4% NEW YORK -- 93.7% $ 100 NY Auburn New York City School District, GO, Series 1997, Insured: FGIC 4.550% 12/01/05(a).......................................... $ 101 800 NY City Housing Development Corp. Multifamily Rental Housing Revenue, Brittany Development, Series 2001, 2.270% 06/15/29(a).......................................... 800 150 Lyric Development, Series 2001, 2.270% 11/15/31(a).......................................... 150 2,000 NY Dutchess County Industrial Development Agency, Marist College, Series 2005, LOC: Bank of New York 2.300% 07/01/35(a).......................................... 2,000 3,000 NY East Farmingdale Volunteer Fire Company Income Revenue, Volunteer Fire Department Project, Series 2002, LOC: Citibank N.A. 2.280% 11/01/22(a).......................................... 3,000 790 NY Erie County Industrial Development Agency, DePaul Community Facilities Project, Series 1996, LOC: Bank of New York 2.350% 11/01/16(a)(b)....................................... 790 3,000 NY Erie County, GO, Series 2004, LOC: Citigroup Global Markets 3.000% 07/13/05(a).......................................... 3,008 2,750 NY Forest City, New Rochelle, Series 2003, LOC: JPMorgan Chase Bank 2.330% 06/01/11(a)(b)....................................... 2,750 185 NY Great Neck North Water Authority Water Systems Revenue, Refunding, Series 1993, Insured: FGIC LOC: State Street Bank & Trust Co. 2.270% 01/01/20(a).......................................... 185 1,800 NY Hempstead Industrial Development Revenue, Refunding, Trigen-Nassau Energy, LOC: Societe Generale 2.310% 09/15/15(a).......................................... 1,800 700 NY Jay Street Development Corp. Certificate Facility Lease Revenue, New York City Jay Street Project, Series 2001, LOC: Toronto-Dominion Bank 2.280% 05/01/21(a).......................................... 700 Series 2003, LOC: DEPFA Bank 1,000 2.230% 05/01/22(a).......................................... 1,000 500 2.280% 05/01/22(a).......................................... 500 3,500 NY Liberty Development Corp. Revenue, 377 Greenwich LLC, Series 2004, LOC: Wells Fargo Bank N.A. 2.270% 12/01/39(a).......................................... 3,500 300 NY Long Island Power Authority Electric Systems Revenue, Series 1998, LOC: Westdeutsche Landesbank Girozentrale 2.250% 05/01/33(a).......................................... 300
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 400 NY Long Island Power Authority Systems Revenue, Series 1998, LOC: Dexia Credit Local Liquidity Facility 2.280% 05/01/33(a).......................................... $ 400 1,100 LOC: Westdeutsche Landesbank Girozentrale 2.230% 05/01/33(a).......................................... 1,100 4,000 NY Metropolitan Transitional Authority Revenue, Series 1992, Insured: AMBAC 9.100% 07/01/05............................................. 4,071 1,500 Series 2003, Insured: AMBAC 1.630% 11/15/10(a)(c)....................................... 1,500 150 NY Middletown New York City School District, Series 2002, Insured: FSA 2.500% 11/01/05............................................. 150 2,500 NY Monroe County Industrial Development Agency Civic Facility Revenue, St. Ann's Home Company Project, Series 2000, LOC: HSBC Bank USA 2.280% 07/01/30(a).......................................... 2,500 400 St. Ann's Home For Aged Project, Series 2000, LOC: HSBC Bank USA 2.280% 07/01/30(a).......................................... 400 3,500 NY Nassau County Interim Finance Authority, Sales Tax Secured, Series 2002, Insured: FSA LOC: Dexia Credit Local 2.210% 11/15/22(a).......................................... 3,500 1,900 NY New York City Finance Authority Revenue, Series 2003, Insured: MBIA 1.670% 11/01/08(a)(c)....................................... 1,900 1,100 NY New York City Housing Development Corp., Series 2004, LOC: Citibank N.A. 2.280% 06/01/36(a).......................................... 1,100 1,200 NY New York City Housing Development Corp. Multifamily Revenue, 63 Wall Street, Series 2003, LOC: HSBC Bank USA 2.260% 12/01/36(a).......................................... 1,200 1,200 Mortgage Atlantic Court Apartments, Series 2003, LOC: HSBC Bank USA 2.280% 12/01/36(a).......................................... 1,200 600 Mortgage First Avenue Development, Series 2002, 2.270% 10/15/35(a).......................................... 600 1,000 NY New York City Municipal Water 2.130% 07/14/05(a).......................................... 1,000 3,800 NY New York City Water & Sewer Systems Revenue, Series 2003, LOC: Toronto-Dominion Bank 2.220% 06/15/18(a).......................................... 3,800 400 NY New York City Transitional Finance Authority Revenue, New York City Recovery, Series 2002, LOC: Bank of New York 2.270% 11/01/22(a).......................................... 400 800 Series 2002, LOC: Landesbank Hessen-Thuringen 2.230% 11/01/22(a).......................................... 800
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 88 NATIONS MONEY MARKET FUNDS Nations New York Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 400 NY New York City Trust Cultural Resources Revenue, Pierpont Morgan Library, Series 2004, LOC: JPMorgan Chase Bank 2.280% 02/01/34(a).......................................... $ 400 1,000 NY New York City 2.150% 07/14/05(a).......................................... 1,000 1,580 Series 1995, 6.625% 08/01/25............................................. 1,620 1,460 GO, Series 1995, 8.000% 08/01/05............................................. 1,489 540 Series 1995, Escrowed to Maturity, Insured: MBIA 8.000% 08/01/05............................................. 551 1,665 GO, Series 2004, Insured: Continental Insurance Co. LOC: DEPFA Bank 2.280% 08/15/29(a).......................................... 1,665 300 Series 1994, LOC: Bayerische Landesbank 2.230% 08/15/24(a).......................................... 300 990 NY New York Transitional Finance Authority Revenue, Series 2003, LOC: Citigroup Global Markets 2.300% 08/01/20(a)(b)....................................... 990 1,000 NY Newburgh Industrial Development Agency Multifamily Housing Revenue, Series 2005, 2.410% 07/01/41(a)(b)....................................... 1,000 1,200 NY/NJ Port Authority, Series 2003, Insured: AMBAC 2.360% 12/15/32(a)(b)....................................... 1,200 125 NY Norwich School District, Series 2000, Insured: FSA 4.625% 06/15/05............................................. 126 965 NY Oneida County Industrial Development Agency Revenue, Hamilton College, Series 2002, Insured: MBIA LOC: Bank of New York 2.270% 09/15/32(a).......................................... 965 1,235 NY Port Authority, Series 2004, Insured: MBIA 2.330% 11/01/16(a)(b)....................................... 1,235 1,000 NY Sales Tax Asset Receivable, Series 688, Insured: MBIA 2.300% 10/15/12(a)(b)....................................... 1,000 50 NY State Dormitory Authority Revenue, Barnard College, Series 1996, Insured: AMBAC 5.000% 07/01/05............................................. 50 500 Leake and Watts Services, Inc., Series 2004, Insured: MBIA 3.000% 07/01/05............................................. 501 2,000 New York University, Series 2001, Insured: AMBAC 5.250% 07/01/05............................................. 2,016 300 Yeshiva University, Series 1998, 4.250% 07/01/05............................................. 302 800 NY State Housing Finance Agency Revenue, 900 8th Avenue Housing, Series 2002, LOC: Keybank N.A. 2.310% 11/01/35(a).......................................... 800
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $ 500 Chelsea Apartments, Series 2003, 2.320% 11/15/36(a).......................................... $ 500 450 Housing South Cove Plaza, Series 1999, 2.320% 11/01/30(a).......................................... 450 500 NY State Local Government Assistance Corporation, Refunding, Series 1998, Insured: FGIC 4.250% 04/01/05............................................. 500 2,000 Series 1993, LOC: Westdeutsche Landesbank Girozentrale 2.220% 04/01/22(a).......................................... 2,000 1,700 Series 1994, LOC: Westdeutsche Landesbank Girozentrale 2.210% 04/01/23(a).......................................... 1,700 2,000 Series 1995, 6.000% 04/01/24(a).......................................... 2,040 LOC: Scotiabank 2,500 2.200% 04/01/25(a).......................................... 2,500 200 2.240% 04/01/25(a).......................................... 200 NY State Power Authority Revenue, 1,600 1.920% 04/01/05(a).......................................... 1,600 2,000 1.950% 04/06/05(a).......................................... 2,000 1,000 1.980% 05/06/05(a).......................................... 1,000 1,000 Series 1985, LOC: First Union National Bank 2.150% 03/01/20............................................. 1,000 1,100 NY State Thruway Authority General Revenue, 1.950% 04/07/05............................................. 1,100 2,600 Series 2004, 2.250% 10/06/05............................................. 2,604 500 NY State Thruway Authority Highway & Bridge Trust Fund, Series 1995, Insured: MBIA 6.000% 04/01/05............................................. 500 160 Series 2000, Insured: FSA 4.900% 04/01/05............................................. 160 315 NY State Thruway Authority Revenue, Series 2004, Insured: AMBAC 2.300% 04/01/12(a)(b)....................................... 315 1,700 NY State, GO, Series 2000, LOC: Dexia Credit Local De France 1.580% 03/15/30............................................. 1,700 3,900 NY Syracuse Industrial Development Agency, Byrne Dairy, Inc., Series 1988, AMT, LOC: Chase Manhattan Bank 2.380% 08/01/08(a)(b)....................................... 3,900 1,500 NY Syracuse Revenue Anticipation Notes, Series 2004, LOC: Bank of New York 2.750% 06/30/05............................................. 1,504 710 NY Tompkins County Industrial Development Agency Revenue, Care Community Kendal Ithaca, Series 2000, LOC: Wachovia Bank N.A. 2.220% 06/01/25(a).......................................... 710 1,000 NY Triborough Bridge & Tunnel Authority Revenue, Refunding, Series 2001, Insured: AMBAC LOC: Bayerische Landesbank 2.270% 01/01/32(a).......................................... 1,000 350 LOC: State Street Bank & Trust Co. 2.270% 01/01/32(a).......................................... 350
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 89 NATIONS MONEY MARKET FUNDS Nations New York Tax-Exempt Reserves INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- NEW YORK -- (CONTINUED) $1,500 Refunding, Series 2002, Insured: AMBAC LOC: Westdeutsche Landesbank Girozentrale 2.230% 01/01/33(a).......................................... $ 1,500 170 Series 2002, Insured: MBIA LOC: Merrill Lynch Capital Services 2.300% 05/15/10(a)(b)... 170 160 NY Unified Free School District, Manhasset, GO, Series 2004, Insured: FGIC 3.250% 09/15/05(a).......................................... 161 70 NY Westchester County Industrial Development Agency Civic Facility Revenue, Westchester Jewish Project, Series 1998, LOC: Chase Manhattan Bank 2.350% 10/01/28(a)(b)....................................... 70 -------- TOTAL NEW YORK................................................ 94,649 -------- PUERTO RICO -- 5.7% 2,960 PR Commonwealth of Puerto Rico Aqueduct and Sewer Authority Revenue, Series 1985, Insured: FSA 9.000% 07/01/09............................................. 3,012 870 PR Commonwealth of Puerto Rico Highway & Transportation Authority Revenue, Series 1999, Insured: AMBAC 2.280% 01/01/19(a)(b)....................................... 870 1,500 PR Commonwealth of Puerto Rico, GO, Series 2001, Insured: FSA 2.300% 07/01/27(a)(b)....................................... 1,500 400 PR Electric Power Authority, Refunding Series W Insured: MBIA 6.500% 07/01/05(a).......................................... 405 -------- TOTAL PUERTO RICO............................................. 5,787 -------- TOTAL MUNICIPAL BONDS AND NOTES (Cost $100,436)............................................. 100,436 -------- TOTAL INVESTMENTS (Cost $100,436)(d)................................ 99.4% 100,436 OTHER ASSETS AND LIABILITIES (NET).................. 0.6% 613 -------- NET ASSETS.......................................... 100.0% $101,049 ========
- --------------- Notes to Investment Portfolio: (a) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $15,790, which represents 15.6% of net assets. (c) Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the value at which the Fund has valued the investment. Illiquid securities are valued at amortized cost, which approximates the fair market value, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended. At March 31, 2005, these securities amounted to $3,400, which represents 3.4% of net assets (See Note 6). (d) Cost for federal income tax purposes is $100,436. See Note 5 for additional information. ABBREVIATIONS: AMBAC -- Ambac Assurance Corp. AMT -- Alternative Minimum Tax FGIC -- Financial Guaranty Insurance, Co. FSA -- Financial Security Assurance, Inc. GO -- General Obligation MBIA -- MBIA Insurance Corp. LOC -- Letter of Credit
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 90 [This page intentionally left blank] 91 NATIONS MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
MONEY CASH MARKET RESERVES RESERVES --------------------------------- (IN THOUSANDS) ASSETS: Investments, at cost........................................ $ 50,641,435 $ 11,394,656 -------------- -------------- Investments, at value....................................... 48,460,133 10,042,716 Repurchase agreements, at value............................. 2,181,302 1,351,940 Cash........................................................ 7,758 -- Receivable for Fund shares sold............................. 3,310 -- Receivable for investment securities sold................... -- -- Interest receivable......................................... 134,033 24,085 Receivable from investment advisor/administrator............ 2,553 576 Receivable from distributor................................. 97 44 Other assets................................................ 113 24 -------------- -------------- Total assets.............................................. 50,789,299 11,419,385 -------------- -------------- LIABILITIES: Payable for Fund shares redeemed............................ 300 2 Investment advisory fee payable............................. 6,505 1,358 Administration fee payable.................................. 4,347 907 Shareholder servicing and distribution fees payable......... 8,600 653 Due to custodian............................................ -- 6 Distributions payable....................................... 40,016 9,555 Payable for investment securities purchased................. 157,725 -- Accrued Trustees' fees and expenses......................... 401 73 Accrued expenses and other liabilities...................... 1,493 264 -------------- -------------- Total liabilities......................................... 219,387 12,818 -------------- -------------- Net assets.................................................. $ 50,569,912 $ 11,406,567 ============== ============== NET ASSETS CONSIST OF: Undistributed net investment income......................... $ 10 $ 313 Accumulated net realized gain/(loss) on investments......... (2,630) (732) Paid-in capital............................................. 50,572,532 11,406,986 -------------- -------------- Net assets.................................................. $ 50,569,912 $ 11,406,567 ============== ==============
- --------------- (a)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 92 NATIONS MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
CALIFORNIA NEW YORK TREASURY GOVERNMENT MUNICIPAL TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT RESERVES RESERVES RESERVES RESERVES RESERVES RESERVES - ----------------------------------------------------------------------------------------------------------------------------- $ 8,933,049 $ 3,574,843 $ 6,127,933 $ 3,220,659 $ 2,141,994 $ 100,436 -------------- -------------- -------------- -------------- -------------- -------------- 3,169,351 3,574,843 6,127,933 3,220,659 2,141,994 100,436 5,763,698 -- -- -- -- -- --(a) -- 3 2 792 1 -- 254 -- 255 43 -- -- -- 45,013 100,457 10,035 649 23,238 9,308 30,681 16,539 12,601 -- 480 170 643 303 187 30 36 33 27 --(a) 1 -- 29 8 9 6 4 85 -------------- -------------- -------------- -------------- -------------- -------------- 8,956,832 3,584,616 6,204,309 3,338,221 2,165,657 101,201 -------------- -------------- -------------- -------------- -------------- -------------- -- 5 -- 60 11,235 -- 1,072 465 821 417 280 15 716 310 547 279 187 10 1,459 637 532 209 623 8 -- 2 -- -- -- -- 8,287 1,707 2,387 3,614 465 24 -- -- 86,233 50,203 27,154 -- 278 124 73 132 63 26 252 135 345 191 156 69 -------------- -------------- -------------- -------------- -------------- -------------- 12,064 3,385 90,938 55,105 40,163 152 -------------- -------------- -------------- -------------- -------------- -------------- $ 8,944,768 $ 3,581,231 $ 6,113,371 $ 3,283,116 $ 2,125,494 $ 101,049 ============== ============== ============== ============== ============== ============== $ 45 $ 252 $ 205 $ 94 $ 115 $ 11 (953) (233) -- 2 (29) 1 8,945,676 3,581,212 6,113,166 3,283,020 2,125,408 101,037 -------------- -------------- -------------- -------------- -------------- -------------- $ 8,944,768 $ 3,581,231 $ 6,113,371 $ 3,283,116 $ 2,125,494 $ 101,049 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 93 NATIONS MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
CASH MONEY MARKET RESERVES RESERVES --------------------------------------- CAPITAL CLASS SHARES: Net assets.................................................. $ 18,286,170,994 $ 7,148,039,800 Number of shares outstanding................................ 18,287,900,074 7,148,370,024 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 TRUST CLASS SHARES: Net assets.................................................. $ 3,456,699,818 $ 10,932,696 Number of shares outstanding................................ 3,457,060,410 10,931,681 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 LIQUIDITY CLASS SHARES Net assets.................................................. $ 1,206,319,247 $ 492,231,879 Number of shares outstanding................................ 1,206,301,264 492,186,918 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 ADVISER CLASS SHARES: Net assets.................................................. $ 11,085,234,299 $ 1,740,827,821 Number of shares outstanding................................ 11,085,969,750 1,740,853,514 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 INVESTOR CLASS SHARES: Net assets.................................................. $ 1,814,403,404 $ 85,980,953 Number of shares outstanding................................ 1,815,091,678 85,967,527 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 MARKET CLASS SHARES: Net assets.................................................. $ 12,581 $ -- Number of shares outstanding................................ 12,581 -- Net asset value and redemption price per share.............. $ 1.00 $ -- DAILY CLASS SHARES: Net assets.................................................. $ 9,560,013,239 $ 3,588,049 Number of shares outstanding................................ 9,560,394,130 3,586,656 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 SERVICE CLASS SHARES: Net assets.................................................. $ -- $ 1,761,507 Number of shares outstanding................................ -- 1,762,871 Net asset value and redemption price per share.............. $ -- $ 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 94 NATIONS MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
TREASURY GOVERNMENT MUNICIPAL TAX-EXEMPT CALIFORNIA TAX- NEW YORK TAX- RESERVES RESERVES RESERVES RESERVES EXEMPT RESERVES EXEMPT RESERVES - ------------------------------------------------------------------------------------------------------------------------- $ 1,570,296,538 $ 1,132,047,153 $ 3,338,132,991 $ 1,049,209,895 $ 105,822,571 $ 2,851,897 1,570,852,082 1,131,882,974 3,338,074,422 1,049,178,369 105,824,425 2,850,020 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 656,082,868 $ 250,280,920 $ 407,158,517 $ 2,052,864,306 $ 339,137,480 $ 12,626,734 656,538,063 250,245,307 407,099,744 2,053,227,207 339,144,158 12,621,583 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 413,479,864 $ 410,736,908 $ 345,841,680 $ 3,391,776 $ 16,584,997 $ -- 413,491,102 410,698,586 345,804,903 3,391,695 16,585,385 -- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ -- $ 4,608,621,040 $ 804,270,706 $ 474,652,913 $ 11,183,323 $ 593,135,576 $ -- 4,609,447,628 804,455,359 474,687,042 11,183,166 593,097,245 -- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ -- $ 368,395,642 $ 460,840,783 $ 84,348,381 $ 11,280,149 $ 244,229,541 $ -- 368,713,129 461,048,162 84,382,419 11,244,925 244,244,533 -- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- $ 11,469,022 -- -- -- -- -- 11,466,586 $ -- $ -- $ -- $ -- $ -- $ 1.00 $ 256,064,070 $ 304,322,260 $ 591,206,163 $ 36,441,454 $ 742,981,128 $ -- 256,259,660 304,274,410 591,133,652 36,327,235 742,978,876 -- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ --
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 95 NATIONS MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
CASH MONEY MARKET RESERVES RESERVES --------------------------------------- INVESTOR A SHARES: Net assets.................................................. $ 256,502,982 $ -- Number of shares outstanding................................ 256,586,658 -- Net asset value and redemption price per share.............. $ 1.00 $ -- INVESTOR B SHARES: Net assets.................................................. $ 22,076,209 $ 6,470,049 Number of shares outstanding................................ 22,076,417 6,469,443 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 INVESTOR C SHARES: Net assets.................................................. $ 1,543,186 $ 988,420 Number of shares outstanding................................ 1,543,243 988,442 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 INSTITUTIONAL CLASS SHARES: Net assets.................................................. $ 4,869,930,409 $ 1,915,745,398 Number of shares outstanding................................ 4,869,968,307 1,915,804,160 Net asset value and redemption price per share.............. $ 1.00 $ 1.00 MARSICO SHARES: Net assets.................................................. $ 11,005,404 $ -- Number of shares outstanding................................ 11,004,129 -- Net asset value and redemption price per share.............. $ 1.00 $ --
- --------------- (a) Amount represents less than $500 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 96 NATIONS MONEY MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
TREASURY GOVERNMENT MUNICIPAL TAX-EXEMPT CALIFORNIA TAX- NEW YORK TAX- RESERVES RESERVES RESERVES RESERVES EXEMPT RESERVES EXEMPT RESERVES - ------------------------------------------------------------------------------------------------------------------------- $ 632,568,688 $ 31,654,201 $ -- $ 28,933,521 $ -- $ -- 633,208,449 31,651,140 -- 28,897,093 -- -- $ 1.00 $ 1.00 $ -- $ 1.00 $ -- $ -- $ 237,996 $ 704,206 $ 46,530 $ -- $ 6,552 $ -- 238,021 703,995 46,524 -- 6,552 -- $ 1.00 $ 1.00 $ 1.00 $ -- $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ -- $ 439,021,625 $ 186,373,969 $ 871,983,719 $ 89,811,278 $ 83,596,191 $ 74,101,271 439,074,725 186,358,609 871,965,758 89,809,950 83,596,173 74,095,009 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ --
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 97 NATIONS MONEY MARKET FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
CASH MONEY MARKET RESERVES RESERVES --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 936,849 $ 178,070 -------------- -------------- EXPENSES: Investment advisory fee..................................... 79,985(a) 15,329 Administration fee.......................................... 53,324(a) 10,219 Transfer agent fees......................................... 2,307 411 Custodian fees.............................................. 2,704 524 Trustees' fees and expenses................................. 28 28 Registration and filing fees................................ 156 119 Legal and audit fees........................................ 146 147 Printing expense............................................ 1,232 71 Other....................................................... 1,729 440 -------------- -------------- Subtotal................................................ 141,611 27,288 Shareholder servicing and distribution fees: Trust Class Shares........................................ 3,539 8 Institutional Class Shares................................ 1,999 679 Liquidity Class Shares.................................... 3,017 1,148 Adviser Class Shares...................................... 28,633 4,093 Investor Class Shares..................................... 6,902 318 Market Class Shares....................................... --(b) -- Daily Class Shares........................................ 53,506 22 Service Class Shares...................................... -- 468 Investor A Shares......................................... 1,215 -- Investor B Shares......................................... 307 86 Investor C Shares......................................... 26 9 Marsico Shares............................................ 41 -- -------------- -------------- Total expenses.......................................... 240,796 34,119 Fees waived by investment advisor, administrator and/or distributor (see Note 3).................................. (36,153) (7,338) Fees reduced by credits allowed by the custodian (see Note 3)........................................................ (58) (12) -------------- -------------- Net expenses............................................ 204,585 26,769 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 732,264 151,301 -------------- -------------- Net realized gain/(loss) on investments..................... (1,229) (733) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 731,035 $ 150,568 ============== ==============
- --------------- (a)These fees include revenue earned by Banc of America Capital Management, LLC and BACAP Distributors, LLC from investments by affiliated funds. (b)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 98 NATIONS MONEY MARKET FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
CALIFORNIA NEW YORK TREASURY GOVERNMENT MUNICIPAL TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT RESERVES RESERVES RESERVES RESERVES RESERVES RESERVES - ------------------------------------------------------------------------------------------------------------------------ $ 149,436 $ 67,639 $ 80,516 $ 43,388 $ 29,376 $ 1,352 -------------- -------------- -------------- -------------- -------------- -------------- 13,752 5,948 7,995 4,452(a) 3,069 133 9,168 3,965 5,330 2,968(a) 2,046 88 393 173 237 189 107 4 547 202 299 168 115 11 28 28 28 28 27 28 136 136 121 125 11 -- 133 137 133 134 122 152 47 57 444 210 145 53 457 143 183 106 74 3 -------------- -------------- -------------- -------------- -------------- -------------- 24,661 10,789 14,770 8,380 5,716 472 828 308 436 1,985 324 20 227 109 226 38 34 23 936 841 679 7 19 -- 9,769 2,216 1,192 28 1,221 -- 1,496 1,959 380 57 1,037 -- -- -- -- -- -- 49 1,585 1,939 3,546 251 4,212 -- -- -- -- -- -- -- 3,307 110 -- 182 -- -- 3 8 --(b) -- --(b) -- -- -- 3 -- --(b) -- -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- 42,812 18,279 21,232 10,928 12,563 564 (6,661) (3,155) (4,382) (2,446) (1,632) (295) (46) (40) -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- 36,105 15,084 16,850 8,482 10,931 269 -------------- -------------- -------------- -------------- -------------- -------------- 113,331 52,555 63,666 34,906 18,445 1,083 -------------- -------------- -------------- -------------- -------------- -------------- (896) (233) 12 34 15 2 -------------- -------------- -------------- -------------- -------------- -------------- $ 112,435 $ 52,322 $ 63,678 $ 34,940 $ 18,460 $ 1,085 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 99 NATIONS MONEY MARKET FUNDS STATEMENTS OF CHANGES IN NET ASSETS
CASH RESERVES --------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 732,264 $ 537,151 Net realized gain/(loss) on investments..................... (1,229) (621) -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 731,035 536,530 Distributions to shareholders from net investment income: Capital Class Shares...................................... (319,840) (291,496) Institutional Class Shares................................ (75,952) (46,866) Trust Class Shares........................................ (52,009) (40,135) Liquidity Class Shares.................................... (16,756) (12,519) Adviser Class Shares...................................... (151,858) (72,290) Investor Class Shares..................................... (23,218) (19,690) Market Class Shares....................................... (1) (11,306) Daily Class Shares........................................ (89,338) (39,807) Service Class Shares...................................... -- (940) Investor A Shares......................................... (2,975) (1,887) Investor B Shares......................................... (155) (104) Investor C Shares......................................... (13) (7) Marsico Shares............................................ (139) (120) Net increase/(decrease) in net assets from shares of beneficial interest transactions.......................... (8,464,225) (12,253,850) -------------- -------------- Net increase/(decrease) in net assets....................... (8,465,444) (12,254,487) NET ASSETS: Beginning of year........................................... 59,035,356 71,289,843 -------------- -------------- End of year................................................. $ 50,569,912 $ 59,035,356 ============== ============== Undistributed net investment income at end of year.......... $ 10 $ -- ============== ==============
- --------------- (a) Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 100 NATIONS MONEY MARKET FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MONEY MARKET RESERVES TREASURY RESERVES GOVERNMENT RESERVES ------------------------------- ------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 3/31/05 3/31/04 - ----------------------------------------------------------------------------------------------------------------- $ 151,301 $ 122,458 $ 113,331 $ 73,165 $ 52,555 $ 36,622 (733) 149 (896) 46 (233) 24 -------------- -------------- -------------- -------------- -------------- -------------- 150,568 122,607 112,435 73,211 52,322 36,646 (94,098) (96,966) (29,053) (21,502) (18,875) (14,359) (27,046) (7,796) (8,055) (5,483) (3,961) (2,770) (112) (1,791) (10,803) (7,213) (4,613) (3,253) (6,618) (3,632) (4,942) (3,057) (4,738) (2,294) (21,974) (8,225) (46,947) (22,555) (10,888) (7,121) (1,088) (450) (4,358) (3,662) (6,161) (4,262) -- (3,356) -- (3,376) -- (1,305) (35) (17) (2,189) (2,008) (3,033) (1,132) (307) (201) -- (346) -- (33) -- -- (6,983) (3,959) (277) (91) (44) (31) (2) (1) (4) (3) (4) (2) -- --(a) -- -- -- -- -- -- -- -- (1,012,015) (1,029,071) (293,590) (2,188,059) (1,000,404) 148,088 -------------- -------------- -------------- -------------- -------------- -------------- (1,012,773) (1,028,931) (294,487) (2,188,010) (1,000,632) 148,111 12,419,340 13,448,271 9,239,255 11,427,265 4,581,863 4,433,752 -------------- -------------- -------------- -------------- -------------- -------------- $ 11,406,567 $ 12,419,340 $ 8,944,768 $ 9,239,255 $ 3,581,231 $ 4,581,863 ============== ============== ============== ============== ============== ============== $ 313 $ 189 $ 45 $ 46 $ 252 $ 232 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 101 NATIONS MONEY MARKET FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MUNICIPAL RESERVES ------------------------------------ YEAR ENDED YEAR ENDED 3/31/05 3/31/04 ------------------------------------ (IN THOUSANDS) Net investment income/(loss)................................ $ 63,666 $ 28,371 Net realized gain/(loss) on investments..................... 12 130 -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 63,678 28,501 Distributions to shareholders from net investment income: Capital Class Shares...................................... (38,182) (14,719) Institutional Class Shares(a)............................. (7,511) (3,346) Trust Class Shares........................................ (5,044) (3,887) Liquidity Class Shares.................................... (3,165) (1,087) Adviser Class Shares(a)................................... (4,830) (2,477) Investor Class Shares..................................... (950) (703) Market Class Shares(a).................................... -- (397) Daily Class Shares........................................ (3,982) (1,737) Service Class Shares...................................... -- (14) Investor A Shares......................................... -- -- Investor B Shares......................................... --(c) --(c) Investor C Shares(b)...................................... (1) (5) Net increase/(decrease) in net assets from shares of beneficial interest transactions.......................... 1,757,188 1,078,199 -------------- -------------- Net increase/(decrease) in net assets....................... 1,757,201 1,078,328 NET ASSETS: Beginning of year........................................... 4,356,170 3,277,842 -------------- -------------- End of year................................................. $ 6,113,371 $ 4,356,170 ============== ============== Undistributed net investment income at end of year.......... $ 205 $ 131 ============== ==============
- --------------- (a)New York Tax-Exempt Reserves' Adviser Class, Institutional Class and Market Class Shares re-commenced operations on April 14, 2003, August 25, 2003 and August 25, 2003, respectively. (b)California Tax-Exempt Reserves' Investor C Shares commenced operations on August 1, 2003. (c)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 102 NATIONS MONEY MARKET FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
TAX-EXEMPT RESERVES CALIFORNIA TAX-EXEMPT RESERVES NEW YORK TAX-EXEMPT RESERVES ------------------------------- -------------------------------------- ---------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 3/31/05 3/31/04 - --------------------------------------------------------------------------------------------------------------------------- $ 34,906 $ 22,084 $ 18,445 $ 10,744 $ 1,083 $ 380 34 (10) 15 (3) 2 10 -------------- -------------- -------------- -------------- -------------- -------------- 34,940 22,074 18,460 10,741 1,085 390 (10,151) (4,048) (1,737) (1,258) (17) (45) (1,184) (566) (981) (380) (728) (191) (22,733) (16,452) (3,743) (2,790) (249) (102) (28) (57) (103) (15) -- -- (111) (55) (4,912) (2,591) -- (9) (133) (415) (2,521) (1,669) -- -- -- -- -- -- (89) (33) (262) (148) (4,447) (2,041) -- -- -- (342) -- -- -- -- (303) -- -- -- -- -- -- -- --(c) --(c) -- -- -- -- --(c) --(c) -- -- 505,234 (233,616) (38,023) (103,098) 22,062 52,471 -------------- -------------- -------------- -------------- -------------- -------------- 505,269 (233,625) (38,007) (103,101) 22,064 52,481 2,777,847 3,011,472 2,163,501 2,266,602 78,985 26,504 -------------- -------------- -------------- -------------- -------------- -------------- $ 3,283,116 $ 2,777,847 $ 2,125,494 $ 2,163,501 $ 101,049 $ 78,985 ============== ============== ============== ============== ============== ============== $ 94 $ 92 $ 115 $ 74 $ 11 $ 2 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 103 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A)
CASH RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold....................................................... $ 118,555,513 $ 206,816,532 Issued as reinvestment of distributions.................... 174,374 156,008 Redeemed................................................... (125,211,166) (215,288,442) ------------- ------------- Net decrease............................................... (6,481,279) (8,315,902) ============= ============= INSTITUTIONAL CLASS SHARES: Sold....................................................... $ 13,814,109 $ 17,296,638 Issued as reinvestment of distributions.................... 69,288 41,505 Redeemed................................................... (14,364,156) (16,528,656) ------------- ------------- Net increase/(decrease).................................... $ (480,759) $ 809,487 ============= ============= TRUST CLASS SHARES: Sold....................................................... $ 4,435,072 $ 14,516,326 Issued as reinvestment of distributions.................... 1,152 981 Redeemed................................................... (5,059,998) (15,442,551) ------------- ------------- Net decrease............................................... $ (623,774) $ (925,244) ============= ============= LIQUIDITY CLASS SHARES: Sold....................................................... $ 3,913,170 $ 4,113,327 Issued as reinvestment of distributions.................... 16,054 11,638 Redeemed................................................... (4,066,296) (4,353,675) ------------- ------------- Net decrease............................................... $ (137,072) $ (228,710) ============= ============= ADVISER CLASS SHARES: Sold....................................................... $ 40,427,373 $ 42,387,776 Issued as reinvestment of distributions.................... 35,194 24,266 Redeemed................................................... (41,470,395) (37,153,479) ------------- ------------- Net increase/(decrease).................................... $ (1,007,828) $ 5,258,563 ============= ============= INVESTOR CLASS SHARES: Sold....................................................... $ 3,049,889 $ 3,848,282 Issued as reinvestment of distributions.................... 20,875 17,815 Redeemed................................................... (3,577,682) (5,166,110) ------------- ------------- Net decrease............................................... $ (506,918) $ (1,300,013) ============= ============= MARKET CLASS SHARES: Sold....................................................... $ 112 $ 2,794,797 Issued as reinvestment of distributions.................... --(b) 22 Redeemed................................................... (131) (6,568,687) ------------- ------------- Net decrease............................................... $ (19) $ (3,773,868) ============= ============= DAILY CLASS SHARES: Sold....................................................... $ 6,061,337 $ 12,299,532 Issued as reinvestment of distributions.................... 89,335 37,884 Redeemed................................................... (5,337,121) (15,226,607) ------------- ------------- Net increase/(decrease).................................... $ 813,551 $ (2,889,191) ============= ============= SERVICE CLASS SHARES:(C) Sold....................................................... $ -- $ 1,602,658 Issued as reinvestment of distributions.................... -- 98 Redeemed................................................... -- (2,364,554) ------------- ------------- Net decrease............................................... $ -- $ (761,798) ============= ============= INVESTOR A SHARES: Sold....................................................... $ 65,301 $ 176,067 Issued as reinvestment of distributions.................... 2,950 1,848 Redeemed................................................... (96,999) (271,036) ------------- ------------- Net decrease............................................... $ (28,748) $ (93,121) ============= ============= INVESTOR B SHARES: Sold....................................................... $ 11,633 $ 9,174 Issued as reinvestment of distributions.................... 136 92 Redeemed................................................... (20,247) (33,205) ------------- ------------- Net decrease............................................... $ (8,478) $ (23,939) ============= ============= INVESTOR C SHARES: Sold....................................................... $ 4,159 $ 3,189 Issued as reinvestment of distributions.................... 11 6 Redeemed................................................... (4,134) (6,498) ------------- ------------- Net increase/(decrease).................................... $ 36 $ (3,303) ============= ============= MARSICO SHARES: Sold....................................................... $ 7,173 $ 34,214 Issued as reinvestment of distributions.................... 147 112 Redeemed................................................... (10,257) (41,137) ------------- ------------- Net decrease............................................... $ (2,937) $ (6,811) ============= ============= Total net decrease......................................... $ (8,464,225) $ (12,253,850) ============= =============
- --------------- (a) Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b) Amount represents less than 500 shares and/or $500, as applicable. (c) Cash Reserves Service Class Shares were fully redeemed on October 30, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 104 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
MONEY MARKET RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold...................................................... $ 45,995,178 $ 54,073,187 Issued as reinvestment of distributions................... 50,658 41,652 Redeemed.................................................. (47,961,385) (55,143,790) ------------ ------------ Net decrease.............................................. $ (1,915,549) $ (1,028,951) ============ ============ INSTITUTIONAL CLASS SHARES: Sold...................................................... $ 5,180,238 $ 4,400,821 Issued as reinvestment of distributions................... 26,712 7,288 Redeemed.................................................. (4,228,570) (4,191,670) ------------ ------------ Net increase.............................................. $ 978,380 $ 216,439 ============ ============ TRUST CLASS SHARES: Sold...................................................... $ 75,905 $ 802,416 Issued as reinvestment of distributions................... 9 9 Redeemed.................................................. (74,345) (853,509) ------------ ------------ Net increase/(decrease)................................... $ 1,569 $ (51,084) ============ ============ LIQUIDITY CLASS SHARES: Sold...................................................... $ 4,149,220 $ 1,841,629 Issued as reinvestment of distributions................... 6,295 3,479 Redeemed.................................................. (4,100,620) (1,905,081) ------------ ------------ Net increase/(decrease)................................... $ 54,895 $ (59,973) ============ ============ ADVISER CLASS SHARES: Sold...................................................... $ 6,064,462 $ 6,461,623 Issued as reinvestment of distributions................... 3,200 2,062 Redeemed.................................................. (6,118,330) (5,312,452) ------------ ------------ Net increase/(decrease)................................... $ (50,668) $ 1,151,233 ============ ============ INVESTOR CLASS SHARES: Sold...................................................... $ 28,293 $ 70,336 Issued as reinvestment of distributions................... 8 2 Redeemed.................................................. (32,309) (41,497) ------------ ------------ Net increase/(decrease)................................... $ (4,008) $ 28,841 ============ ============ MARKET CLASS SHARES:(B) Sold...................................................... $ -- $ 742,000 Issued as reinvestment of distributions................... -- -- Redeemed.................................................. -- (1,977,000) ------------ ------------ Net decrease.............................................. $ -- $ (1,235,000) ============ ============ DAILY CLASS SHARES: Sold...................................................... $ 4,832 $ 8,242 Issued as reinvestment of distributions................... 35 17 Redeemed.................................................. (5,056) (9,237) ------------ ------------ Net decrease.............................................. $ (189) $ (978) ============ ============ SERVICE CLASS SHARES: Sold...................................................... $ 150,867 $ 251,386 Issued as reinvestment of distributions................... 308 76 Redeemed.................................................. (225,371) (294,185) ------------ ------------ Net decrease.............................................. $ (74,196) $ (42,723) ============ ============ INVESTOR B SHARES: Sold...................................................... $ 1,827 $ 1,873 Issued as reinvestment of distributions................... 40 28 Redeemed.................................................. (4,350) (8,458) ------------ ------------ Net decrease.............................................. $ (2,483) $ (6,557) ============ ============ INVESTOR C SHARES: Sold...................................................... $ 1,451 $ 806 Issued as reinvestment of distributions................... 3 2 Redeemed.................................................. (1,220) (1,126) ------------ ------------ Net increase/(decrease)................................... $ 234 $ (318) ============ ============ Total net decrease........................................ $ (1,012,015) $ (1,029,071) ============ ============
- --------------- (a)Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b)Money Market Reserves Market Class Shares were fully redeemed on September 25, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 105 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
TREASURY RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold....................................................... $ 29,698,009 $ 34,549,770 Issued as reinvestment of distributions.................... 23,542 16,639 Redeemed................................................... (30,271,513) (35,006,522) ------------ ------------ Net decrease............................................... $ (549,962) $ (440,113) ============ ============ INSTITUTIONAL CLASS SHARES: Sold....................................................... $ 3,009,676 $ 3,013,425 Issued as reinvestment of distributions.................... 7,714 4,904 Redeemed................................................... (3,076,503) (3,058,866) ------------ ------------ Net decrease............................................... $ (59,113) $ (40,537) ============ ============ TRUST CLASS SHARES: Sold....................................................... $ 2,892,983 $ 1,037,654 Issued as reinvestment of distributions.................... 24 44 Redeemed................................................... (3,045,412) (1,137,962) ------------ ------------ Net decrease............................................... $ (152,405) $ (100,264) ============ ============ LIQUIDITY CLASS SHARES: Sold....................................................... $ 1,897,191 $ 1,621,676 Issued as reinvestment of distributions.................... 4,295 2,665 Redeemed................................................... (1,835,691) (1,661,604) ------------ ------------ Net increase/(decrease).................................... $ 65,795 $ (37,263) ============ ============ ADVISER CLASS SHARES: Sold....................................................... $ 18,238,833 $ 18,323,739 Issued as reinvestment of distributions.................... 7,039 4,433 Redeemed................................................... (17,656,022) (17,032,325) ------------ ------------ Net increase............................................... $ 589,850 $ 1,295,847 ============ ============ INVESTOR CLASS SHARES: Sold....................................................... $ 1,142,957 $ 1,151,602 Issued as reinvestment of distributions.................... 2,541 2,586 Redeemed................................................... (1,227,850) (1,376,738) ------------ ------------ Net decrease............................................... $ (82,352) $ (222,550) ============ ============ MARKET CLASS SHARES:(B) Sold....................................................... $ -- $ 1,332,000 Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- (2,667,000) ------------ ------------ Net decrease............................................... $ -- $ (1,335,000) ============ ============ DAILY CLASS SHARES: Sold....................................................... $ 392,027 $ 3,322,054 Issued as reinvestment of distributions.................... 2,188 1,280 Redeemed................................................... (429,468) (4,191,043) ------------ ------------ Net decrease............................................... $ (35,253) $ (867,709) ============ ============ SERVICE CLASS SHARES:(B) Sold....................................................... $ -- $ 993,834 Issued as reinvestment of distributions.................... -- 23 Redeemed................................................... -- (1,286,086) ------------ ------------ Net decrease............................................... $ -- $ (292,229) ============ ============ INVESTOR A SHARES: Sold....................................................... $ 5,057,768 $ 5,732,471 Issued as reinvestment of distributions.................... 124 140 Redeemed................................................... (5,127,921) (5,880,672) ------------ ------------ Net decrease............................................... $ (70,029) $ (148,061) ============ ============ INVESTOR B SHARES: Sold....................................................... $ 5 $ 20 Issued as reinvestment of distributions.................... 1 1 Redeemed................................................... (127) (197) ------------ ------------ Net decrease............................................... $ (121) $ (176) ============ ============ INVESTOR C SHARES:(B) Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- --(c) Redeemed................................................... -- (4) ------------ ------------ Net decrease............................................... $ -- $ (4) ============ ============ Total net decrease......................................... $ (293,590) $ (2,188,059) ============ ============
- --------------- (a) Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b) Treasury Reserves Market Class, Service Class and Investor C Shares were fully redeemed on September 25, 2003, October 30, 2003, and July 23, 2003, respectively. (c) Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 106 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
GOVERNMENT RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold....................................................... $ 8,299,094 $ 12,202,011 Issued as reinvestment of distributions.................... 16,327 12,624 Redeemed................................................... (8,472,356) (12,697,803) ----------- ------------ Net decrease............................................... $ (156,935) $ (483,168) =========== ============ INSTITUTIONAL CLASS SHARES: Sold....................................................... $ 2,390,819 $ 3,229,216 Issued as reinvestment of distributions.................... 3,593 2,581 Redeemed................................................... (2,646,080) (2,875,559) ----------- ------------ Net increase/(decrease).................................... $ (251,668) $ 356,238 =========== ============ TRUST CLASS SHARES: Sold....................................................... $ 1,195,619 $ 1,183,365 Issued as reinvestment of distributions.................... 11 16 Redeemed................................................... (1,237,604) (1,271,587) ----------- ------------ Net decrease............................................... $ (41,974) $ (88,206) =========== ============ LIQUIDITY CLASS SHARES: Sold....................................................... $ 1,523,532 $ 1,220,430 Issued as reinvestment of distributions.................... 3,953 1,837 Redeemed................................................... (1,417,615) (1,096,945) ----------- ------------ Net increase............................................... $ 109,870 $ 125,322 =========== ============ ADVISER CLASS SHARES: Sold....................................................... $ 2,246,079 $ 3,491,015 Issued as reinvestment of distributions.................... 5,152 5,341 Redeemed................................................... (2,551,644) (2,978,047) ----------- ------------ Net increase/(decrease).................................... $ (300,413) $ 518,309 =========== ============ INVESTOR CLASS SHARES: Sold....................................................... $ 1,863,974 $ 2,504,548 Issued as reinvestment of distributions.................... 5,858 4,125 Redeemed................................................... (2,201,591) (2,294,594) ----------- ------------ Net increase/(decrease).................................... $ (331,759) $ 214,079 =========== ============ MARKET CLASS SHARES:(B) Sold....................................................... $ -- $ 603,000 Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- (1,105,000) ----------- ------------ Net decrease............................................... $ -- $ (502,000) =========== ============ DAILY CLASS SHARES: Sold....................................................... $ 652,890 $ 950,860 Issued as reinvestment of distributions.................... 3,033 1,131 Redeemed................................................... (703,628) (912,784) ----------- ------------ Net increase/(decrease).................................... $ (47,705) $ 39,207 =========== ============ SERVICE CLASS SHARES:(B) Sold....................................................... $ -- $ 45,000 Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- (81,000) ----------- ------------ Net decrease............................................... $ -- $ (36,000) =========== ============ INVESTOR A SHARES: Sold....................................................... $ 99,122 $ 128,922 Issued as reinvestment of distributions.................... 267 65 Redeemed................................................... (78,996) (123,793) ----------- ------------ Net increase............................................... $ 20,393 $ 5,194 =========== ============ INVESTOR B SHARES: Sold....................................................... $ 374 $ 51 Issued as reinvestment of distributions.................... 4 3 Redeemed................................................... (591) (941) ----------- ------------ Net decrease............................................... $ (213) $ (887) =========== ============ INVESTOR C SHARES:(B) Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- ----------- ------------ Net increase/(decrease).................................... $ -- $ -- =========== ============ Total net increase/(decrease).............................. $(1,000,404) $ 148,088 =========== ============
- --------------- (a) Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b) Government Reserves Market Class, Service Class and Investor C Shares were fully redeemed on September 25, 2003, September 25, 2003 and January 6, 2003, respectively. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 107 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
MUNICIPAL RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold....................................................... $ 15,487,712 $ 6,479,111 Issued as reinvestment of distributions.................... 23,701 8,654 Redeemed................................................... (14,161,329) (5,879,486) ------------ ----------- Net increase............................................... $ 1,350,084 $ 608,279 ============ =========== INSTITUTIONAL CLASS SHARES: Sold....................................................... $ 3,232,749 $ 2,162,113 Issued as reinvestment of distributions.................... 7,135 3,139 Redeemed................................................... (2,847,671) (1,889,698) ------------ ----------- Net increase............................................... $ 392,213 $ 275,554 ============ =========== TRUST CLASS SHARES: Sold....................................................... $ 915,330 $ 1,028,790 Issued as reinvestment of distributions.................... 105 211 Redeemed................................................... (985,416) (1,057,781) ------------ ----------- Net decrease............................................... $ (69,981) $ (28,780) ============ =========== LIQUIDITY CLASS SHARES: Sold....................................................... $ 2,120,925 $ 1,032,916 Issued as reinvestment of distributions.................... 1,898 1,000 Redeemed................................................... (1,926,794) (1,004,745) ------------ ----------- Net increase............................................... $ 196,029 $ 29,171 ============ =========== ADVISER CLASS SHARES: Sold....................................................... $ 1,786,826 $ 1,701,764 Issued as reinvestment of distributions.................... 2,325 1,858 Redeemed................................................... (1,821,050) (1,481,952) ------------ ----------- Net increase/(decrease).................................... $ (31,899) $ 221,670 ============ =========== INVESTOR CLASS SHARES: Sold....................................................... $ 177,673 $ 315,896 Issued as reinvestment of distributions.................... 949 694 Redeemed................................................... (241,464) (258,693) ------------ ----------- Net increase/(decrease).................................... $ (62,842) $ 57,897 ============ =========== MARKET CLASS SHARES:(B) Sold....................................................... $ -- $ 568,000 Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- (718,000) ------------ ----------- Net decrease............................................... $ -- $ (150,000) ============ =========== DAILY CLASS SHARES: Sold....................................................... $ 751,254 $ 804,886 Issued as reinvestment of distributions.................... 3,983 1,737 Redeemed................................................... (769,150) (728,181) ------------ ----------- Net increase/(decrease).................................... $ (13,913) $ 78,442 ============ =========== SERVICE CLASS SHARES:(B) Sold....................................................... $ -- $ 17,000 Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- (31,000) ------------ ----------- Net decrease............................................... $ -- $ (14,000) ============ =========== INVESTOR B SHARES: Sold....................................................... $ 45 $ 2 Issued as reinvestment of distributions.................... --(c) --(c) Redeemed................................................... (46) (13) ------------ ----------- Net decrease............................................... $ (1) $ (11) ============ =========== INVESTOR C SHARES: Sold....................................................... $ 191 $ -- Issued as reinvestment of distributions.................... --(c) --(c) Redeemed................................................... (2,693) (23) ------------ ----------- Net decrease............................................... $ (2,502) $ (23) ============ =========== Total net increase......................................... $ 1,757,188 $ 1,078,199 ============ ===========
- --------------- (a) Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b) Municipal Reserves Market Class and Service Class Shares were fully redeemed on September 25, 2003. (c) Amount represents less than 500 shares and/or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 108 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
TAX-EXEMPT RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold...................................................... $ 5,501,962 $ 4,204,304 Issued as reinvestment of distributions................... 2,911 1,547 Redeemed.................................................. (4,997,750) (3,938,887) ----------- ----------- Net increase.............................................. $ 507,123 $ 266,964 =========== =========== INSTITUTIONAL CLASS SHARES: Sold...................................................... $ 650,052 $ 389,439 Issued as reinvestment of distributions................... 1,066 535 Redeemed.................................................. (629,821) (344,809) ----------- ----------- Net increase.............................................. $ 21,297 $ 45,165 =========== =========== TRUST CLASS SHARES: Sold...................................................... $ 2,436,533 $ 1,857,824 Issued as reinvestment of distributions................... 173 195 Redeemed.................................................. (2,412,427) (2,241,101) ----------- ----------- Net increase/(decrease)................................... $ 24,279 $ (383,082) =========== =========== LIQUIDITY CLASS SHARES: Sold...................................................... $ 38,913 $ 45,661 Issued as reinvestment of distributions................... 26 55 Redeemed.................................................. (41,339) (41,842) ----------- ----------- Net increase/(decrease)................................... $ (2,400) $ 3,874 =========== =========== ADVISER CLASS SHARES: Sold...................................................... $ 10,909 $ 22,778 Issued as reinvestment of distributions................... 111 53 Redeemed.................................................. (10,101) (22,228) ----------- ----------- Net increase.............................................. $ 919 $ 603 =========== =========== INVESTOR CLASS SHARES: Sold...................................................... $ 10,463 $ 65,026 Issued as reinvestment of distributions................... 101 338 Redeemed.................................................. (21,335) (181,489) ----------- ----------- Net decrease.............................................. $ (10,771) $ (116,125) =========== =========== DAILY CLASS SHARES: Sold...................................................... $ 57,672 $ 84,813 Issued as reinvestment of distributions................... 262 150 Redeemed.................................................. (71,277) (99,640) ----------- ----------- Net decrease.............................................. $ (13,343) $ (14,677) =========== =========== INVESTOR A SHARES: Sold...................................................... $ 20,336 $ 259,664 Issued as reinvestment of distributions................... 303 329 Redeemed.................................................. (42,509) (296,331) ----------- ----------- Net decrease.............................................. $ (21,870) $ (36,338) =========== =========== Total net increase/(decrease)............................. $ 505,234 $ (233,616) =========== ===========
- --------------- (a)Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 109 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
CALIFORNIA TAX-EXEMPT RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold...................................................... $ 334,272 $ 542,456 Issued as reinvestment of distributions................... 1,638 1,181 Redeemed.................................................. (399,406) (546,580) --------- --------- Net decrease.............................................. $ (63,496) $ (2,943) ========= ========= INSTITUTIONAL CLASS SHARES: Sold...................................................... $ 450,676 $ 270,301 Issued as reinvestment of distributions................... 978 370 Redeemed.................................................. (494,590) (145,677) --------- --------- Net increase/(decrease)................................... $ (42,936) $ 124,994 ========= ========= TRUST CLASS SHARES: Sold...................................................... $ 757,184 $ 560,525 Issued as reinvestment of distributions................... 170 240 Redeemed.................................................. (712,443) (701,793) --------- --------- Net increase/(decrease)................................... $ 44,911 $(141,028) ========= ========= LIQUIDITY CLASS SHARES: Sold...................................................... $ 48,179 $ 15,069 Issued as reinvestment of distributions................... 103 15 Redeemed.................................................. (32,792) (16,987) --------- --------- Net increase/(decrease)................................... $ 15,490 $ (1,903) ========= ========= ADVISER CLASS SHARES: Sold...................................................... $ 854,341 $ 903,192 Issued as reinvestment of distributions................... 4,908 2,577 Redeemed.................................................. (741,915) (932,106) --------- --------- Net increase/(decrease)................................... $ 117,334 $ (26,337) ========= ========= INVESTOR CLASS SHARES: Sold...................................................... $ 589,966 $ 886,161 Issued as reinvestment of distributions................... 2,521 1,645 Redeemed.................................................. (717,701) (878,569) --------- --------- Net increase/(decrease)................................... $(125,214) $ 9,237 ========= ========= DAILY CLASS SHARES: Sold...................................................... $ 786,286 $ 825,579 Issued as reinvestment of distributions................... 4,447 2,039 Redeemed.................................................. (774,646) (892,935) --------- --------- Net increase/(decrease)................................... $ 16,087 $ (65,317) ========= ========= INVESTOR B SHARES: Sold...................................................... $ -- $ -- Issued as reinvestment of distributions................... --(b) --(b) Redeemed.................................................. --(b) -- --------- --------- Net increase/(decrease)................................... $ -- $ -- ========= ========= INVESTOR C SHARES:(C)(D) Sold...................................................... $ -- $ 225 Issued as reinvestment of distributions................... -- --(b) Redeemed.................................................. (199) (26) --------- --------- Net increase/(decrease)................................... $ (199) $ 199 ========= ========= Total net decrease........................................ $ (38,023) $(103,098) ========= =========
- --------------- (a)Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b)Amount represents less than 500 shares and/or $500, as applicable. (c)California Tax-Exempt Reserves' Investor C Shares commenced operations on August 1, 2003. (d)California Tax-Exempt Reserves' Investor C Shares were fully redeemed on April 29, 2004. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 110 NATIONS MONEY MARKET FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY(A) (CONTINUED)
NEW YORK TAX-EXEMPT RESERVES -------------------------------- YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------------------- (IN THOUSANDS) CAPITAL CLASS SHARES: Sold....................................................... $ 16,827 $ 6,834 Issued as reinvestment of distributions.................... 7 35 Redeemed................................................... (15,845) (14,491) --------- -------- Net increase/(decrease).................................... $ 989 $ (7,622) ========= ======== INSTITUTIONAL CLASS SHARES:(B) Sold....................................................... $ 137,649 $113,732 Issued as reinvestment of distributions.................... 728 191 Redeemed................................................... (112,498) (65,707) --------- -------- Net increase............................................... $ 25,879 $ 48,216 ========= ======== TRUST CLASS SHARES: Sold....................................................... $ 100,325 $ 39,913 Issued as reinvestment of distributions.................... -- -- Redeemed................................................... (103,630) (41,004) --------- -------- Net decrease............................................... $ (3,305) $ (1,091) ========= ======== LIQUIDITY CLASS SHARES: Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== ADVISER CLASS SHARES:(B)(C) Sold....................................................... $ 10,000 $ 6,271 Issued as reinvestment of distributions.................... -- 8 Redeemed................................................... (10,000) (6,279) --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== INVESTOR CLASS SHARES: Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== MARKET CLASS SHARES:(B) Sold....................................................... $ 14,590 $ 39,326 Issued as reinvestment of distributions.................... 89 33 Redeemed................................................... (16,180) (26,391) --------- -------- Net increase/(decrease).................................... $ (1,501) $ 12,968 ========= ======== DAILY CLASS SHARES: Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== SERVICE CLASS SHARES: Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== INVESTOR B SHARES: Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== INVESTOR C SHARES: Sold....................................................... $ -- $ -- Issued as reinvestment of distributions.................... -- -- Redeemed................................................... -- -- --------- -------- Net increase/(decrease).................................... $ -- $ -- ========= ======== Total net increase......................................... $ 22,062 $ 52,471 ========= ========
- --------------- (a) Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions is the same as the amounts shown above for such transactions. (b) New York Tax-Exempt Reserves Adviser Class, Institutional Class and Market Class Shares re-commenced operations on April 14, 2003, August 25, 2003 and August 25, 2003, respectively. (c) New York Tax-Exempt Reserves Adviser Class Shares were fully redeemed on August 24, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 111 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- CASH RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0158 $(0.0158) Year ended 3/31/2004........................................ 1.00 0.0100 (0.0100) Year ended 3/31/2003........................................ 1.00 0.0161 (0.0161) Year ended 3/31/2002........................................ 1.00 0.0320 (0.0320) Year ended 3/31/2001........................................ 1.00 0.0628 (0.0628) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0154 $(0.0154) Year ended 3/31/2004........................................ 1.00 0.0096 (0.0096) Year ended 3/31/2003........................................ 1.00 0.0158 (0.0158) Year ended 3/31/2002........................................ 1.00 0.0316 (0.0316) Period ended 3/31/2001(e)................................... 1.00 0.0192 (0.0192) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0148 $(0.0148) Year ended 3/31/2004........................................ 1.00 0.0090 (0.0090) Year ended 3/31/2003........................................ 1.00 0.0151 (0.0151) Year ended 3/31/2002........................................ 1.00 0.0310 (0.0310) Year ended 3/31/2001........................................ 1.00 0.0618 (0.0618) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0143 $(0.0143) Year ended 3/31/2004........................................ 1.00 0.0085 (0.0085) Year ended 3/31/2003........................................ 1.00 0.0146 (0.0146) Year ended 3/31/2002........................................ 1.00 0.0305 (0.0305) Year ended 3/31/2001........................................ 1.00 0.0613 (0.0613) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0133 $(0.0133) Year ended 3/31/2004........................................ 1.00 0.0075 (0.0075) Year ended 3/31/2003........................................ 1.00 0.0136 (0.0136) Year ended 3/31/2002........................................ 1.00 0.0295 (0.0295) Year ended 3/31/2001........................................ 1.00 0.0603 (0.0603) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0123 $(0.0123) Year ended 3/31/2004........................................ 1.00 0.0065 (0.0065) Year ended 3/31/2003........................................ 1.00 0.0126 (0.0126) Year ended 3/31/2002........................................ 1.00 0.0285 (0.0285) Year ended 3/31/2001........................................ 1.00 0.0593 (0.0593)
- --------------- (a) Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b) The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c) The Reimbursement from Investment Adviser (see Note 3) is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (d) The effect of interest expense on the operating expense ratio was less than 0.01%. (e) Cash Reserves Institutional Class Shares commenced operations on November 30, 2000. (f) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 112 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS RATIO OF --------------- OPERATING RATIO OF RATIO OF NET ASSET NET ASSETS EXPENSES TO NET INVESTMENT OPERATING VALUE END OF AVERAGE INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD NET TO AVERAGE AVERAGE PERIOD RETURN(A) (000) ASSETS(B) NET ASSETS NET ASSETS(B) - ------------------------------------------------------------------------------------ $1.00 1.59% $18,286,171 0.20% 1.53% 0.27% 1.00 1.01 24,767,958 0.20(c) 1.01 0.26 1.00 1.63 33,084,072 0.20(d) 1.62 0.26 1.00 3.25 39,231,604 0.20(d) 2.92 0.27 1.00 6.46 20,037,526 0.20 6.22 0.27 $1.00 1.55% $ 4,869,930 0.24% 1.52% 0.31% 1.00 0.97 5,350,799 0.24(c) 0.97 0.30 1.00 1.59 4,541,350 0.24(d) 1.58 0.30 1.00 3.21 3,257,737 0.24(d) 2.88 0.31 1.00 1.90 651,116 0.24(f) 6.18(f) 0.31(f) $1.00 1.49% $ 3,456,700 0.30% 1.47% 0.37% 1.00 0.91 4,080,552 0.30(c) 0.91 0.36 1.00 1.53 5,005,841 0.30(d) 1.52 0.36 1.00 3.14 2,686,258 0.30(d) 2.82 0.37 1.00 6.36 2,676,204 0.30 6.12 0.37 $1.00 1.44% $ 1,206,319 0.35% 1.39% 0.52% 1.00 0.86 1,343,416 0.35(c) 0.86 0.99 1.00 1.47 1,572,140 0.35(d) 1.47 1.11 1.00 3.09 1,742,687 0.35(d) 2.77 1.12 1.00 6.30 1,476,883 0.35 6.07 1.12 $1.00 1.34% $11,085,234 0.45% 1.33% 0.52% 1.00 0.76 12,093,316 0.45(c) 0.76 0.51 1.00 1.37 6,834,801 0.45(d) 1.37 0.51 1.00 2.99 7,873,470 0.45(d) 2.67 0.52 1.00 6.20 5,939,163 0.45 5.97 0.52 $1.00 1.23% $ 1,814,403 0.55% 1.18% 0.62% 1.00 0.66 2,321,369 0.55(c) 0.66 0.61 1.00 1.27 3,621,418 0.55(d) 1.27 0.61 1.00 2.89 4,966,158 0.55(d) 2.57 0.62 1.00 6.09 7,585,825 0.55 5.87 0.62
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 113 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- CASH RESERVES (CONTINUED) MARKET CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0113 $(0.0113) Year ended 3/31/2004........................................ 1.00 0.0055 (0.0055) Year ended 3/31/2003........................................ 1.00 0.0116 (0.0116) Year ended 3/31/2002........................................ 1.00 0.0275 (0.0275) Year ended 3/31/2001........................................ 1.00 0.0583 (0.0583) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0098 $(0.0098) Year ended 3/31/2004........................................ 1.00 0.0040 (0.0040) Year ended 3/31/2003........................................ 1.00 0.0102 (0.0102) Year ended 3/31/2002........................................ 1.00 0.0260 (0.0260) Year ended 3/31/2001........................................ 1.00 0.0568 (0.0568) SERVICE CLASS SHARES Period ended 10/30/2003(g).................................. $1.00 $0.0015 $(0.0015) Year ended 3/31/2003........................................ 1.00 0.0061 (0.0061) Year ended 3/31/2002........................................ 1.00 0.0220 (0.0220) Year ended 3/31/2001........................................ 1.00 0.0528 (0.0528) Period ended 3/31/2000(e)................................... 1.00 0.0404 (0.0404) INVESTOR A SHARES Year ended 3/31/2005........................................ $1.00 $0.0113 $(0.0113) Year ended 3/31/2004........................................ 1.00 0.0055 (0.0055) Period ended 3/31/2003(e)(i)................................ 1.00 0.0117 (0.0117) INVESTOR B SHARES Year ended 3/31/2005........................................ $1.00 $0.0060 $(0.0060) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0053 (0.0053) Year ended 3/31/2002........................................ 1.00 0.0210 (0.0210) Year ended 3/31/2001........................................ 1.00 0.0518 (0.0518) INVESTOR C SHARES Year ended 3/31/2005........................................ $1.00 $0.0060 $(0.0060) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0053 (0.0053) Year ended 3/31/2002........................................ 1.00 0.0210 (0.0210) Year ended 3/31/2001........................................ 1.00 0.0518 (0.0518) MARSICO SHARES Year ended 3/31/2005........................................ $1.00 $0.0123 $(0.0123) Year ended 3/31/2004........................................ 1.00 0.0065 (0.0065) Period ended 3/31/2003(e)(i)................................ 1.00 0.0127 (0.0127)
- --------------- (a) Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b) The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c) The Reimbursement from Investment Adviser (see Note 3) is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (d) The effect of interest expense on the operating expense ratio was less than 0.01%. (e) Cash Reserves Service Class, Investor A and Marsico Shares commenced operations on April 28, 1999, May 13, 2002 and May 13, 2002, respectively. (f) Annualized. (g) Cash Reserves Service Class Shares were fully redeemed on October 30, 2003. (h) Amount represents less than $500. (i) The total returns for the period ended March 31, 2003 reflect the historical return information for the Nations Prime Fund Investor A Shares and Marsico Shares, which were reorganized into Nations Cash Reserves Investor A Shares and Marsico Shares on May 10, 2002. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 114 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS RATIO OF --------------- OPERATING RATIO OF RATIO OF NET ASSET NET ASSETS EXPENSES TO NET INVESTMENT OPERATING VALUE END OF AVERAGE INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD NET TO AVERAGE AVERAGE PERIOD RETURN(A) (000) ASSETS(B) NET ASSETS NET ASSETS(B) - -------------------------------------------------------------------------------------------------------- $1.00 1.13% $ 13 0.65% 0.90% 0.72% 1.00 0.55 32 0.65(c) 0.56 0.71 1.00 1.17 3,774,034 0.65(d) 1.17 0.71 1.00 2.78 3,844,641 0.65(d) 2.47 0.72 1.00 5.99 3,342,882 0.65 5.77 0.72 $1.00 0.98% $ 9,560,013 0.80% 1.00% 0.87% 1.00 0.40 8,746,651 0.80(c) 0.41 0.86 1.00 1.02 11,635,944 0.80(d) 1.02 0.86 1.00 2.63 14,018,697 0.80(d) 2.32 0.87 1.00 5.83 14,589,888 0.80 5.62 0.87 $1.00 0.15% $ --(h) (1.01)%(c)(f) 0.20%(f) 1.27%(f) 1.00 0.62 761,802 1.20(d) 0.62 1.26 1.00 2.22 1,037,281 1.20(d) 1.92 1.27 1.00 5.41 913,512 1.20 5.22 1.27 1.00 4.11 512,318 1.20(d)(f) 4.37(f) 1.29(f) $1.00 1.13% $ 256,503 0.65% 1.10% 0.72% 1.00 0.56 285,257 0.65(c) 0.56 0.71 1.00 1.18 378,382 0.65(d)(f) 1.17(f) 0.71(f) $1.00 0.60% $ 22,076 1.16% 0.56% 1.37% 1.00 0.25 30,554 0.97(c) 0.24 1.36 1.00 0.54 54,493 1.28(d) 0.54 1.36 1.00 2.12 37,408 1.30(d) 1.82 1.37 1.00 5.30 27,360 1.30 5.12 1.37 $1.00 0.60% $ 1,543 1.18% 0.55% 1.37% 1.00 0.25 1,508 0.98(c) 0.23 1.36 1.00 0.54 4,811 1.28(d) 0.54 1.36 1.00 2.12 1,357 1.30(d) 1.82 1.37 1.00 5.30 1,717 1.30 5.12 1.37 $1.00 1.23% $ 11,005 0.55% 1.19% 0.62% 1.00 0.66 13,944 0.55(c) 0.66 0.61 1.00 1.28 20,755 0.55(d)(f) 1.27(f) 0.61(f)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 115 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- MONEY MARKET RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0157 $(0.0157) Year ended 3/31/2004........................................ 1.00 0.0098 (0.0098) Year ended 3/31/2003........................................ 1.00 0.0155 (0.0155) Year ended 3/31/2002........................................ 1.00 0.0311 (0.0311) Year ended 3/31/2001........................................ 1.00 0.0625 (0.0625) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0153 $(0.0153) Year ended 3/31/2004........................................ 1.00 0.0094 (0.0094) Year ended 3/31/2003........................................ 1.00 0.0151 (0.0151) Year ended 3/31/2002........................................ 1.00 0.0307 (0.0307) Period ended 3/31/2001(d)................................... 1.00 0.0221 (0.0221) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0147 $(0.0147) Year ended 3/31/2004........................................ 1.00 0.0088 (0.0088) Year ended 3/31/2003........................................ 1.00 0.0145 (0.0145) Year ended 3/31/2002........................................ 1.00 0.0301 (0.0301) Year ended 3/31/2001........................................ 1.00 0.0615 (0.0615) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0142 $(0.0142) Year ended 3/31/2004........................................ 1.00 0.0083 (0.0083) Year ended 3/31/2003........................................ 1.00 0.0139 (0.0139) Year ended 3/31/2002........................................ 1.00 0.0296 (0.0296) Year ended 3/31/2001........................................ 1.00 0.0610 (0.0610) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0132 $(0.0132) Year ended 3/31/2004........................................ 1.00 0.0073 (0.0073) Year ended 3/31/2003........................................ 1.00 0.0129 (0.0129) Year ended 3/31/2002........................................ 1.00 0.0286 (0.0286) Year ended 3/31/2001........................................ 1.00 0.0600 (0.0600) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0122 $(0.0122) Year ended 3/31/2004........................................ 1.00 0.0063 (0.0063) Year ended 3/31/2003........................................ 1.00 0.0119 (0.0119) Year ended 3/31/2002........................................ 1.00 0.0276 (0.0276) Year ended 3/31/2001........................................ 1.00 0.0501 (0.0501)
- --------------- (a) Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b) The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c) The effect of interest expense on the operating expense ratio was less than 0.01%. (d) Money Market Reserves Institutional Class commenced operations on November 17, 2000. (e) Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 116 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS RATIO OF --------------- OPERATING RATIO OF RATIO OF NET ASSET NET ASSETS EXPENSES TO NET INVESTMENT OPERATING VALUE END OF AVERAGE INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD NET TO AVERAGE AVERAGE PERIOD RETURN(A) (000) ASSETS(B) NET ASSETS NET ASSETS(B) - ------------------------------------------------------------------------------------ $1.00 1.58% $ 7,148,040 0.20% 1.50% 0.27% 1.00 0.98 9,064,090 0.20 0.98 0.26 1.00 1.56 10,092,837 0.20(c) 1.54 0.26 1.00 3.16 11,084,336 0.20 2.85 0.28 1.00 6.43 6,103,253 0.20(c) 6.19 0.27 $1.00 1.54% $ 1,915,745 0.24% 1.59% 0.31% 1.00 0.94 937,474 0.24 0.94 0.30 1.00 1.52 721,023 0.24(c) 1.50 0.30 1.00 3.12 535,650 0.24 2.81 0.32 1.00 2.23 574,968 0.24(c)(e) 6.15(e) 0.31(e) $1.00 1.48% $ 10,933 0.30% 1.32% 0.37% 1.00 0.88 9,344 0.30 0.88 0.36 1.00 1.46 60,342 0.30(c) 1.44 0.36 1.00 3.05 1,311,771 0.30 2.75 0.38 1.00 6.33 67,422 0.30(c) 6.09 0.37 $1.00 1.42% $ 492,232 0.35% 1.44% 0.52% 1.00 0.83 437,371 0.35 0.83 1.00 1.00 1.41 497,339 0.35(c) 1.39 1.11 1.00 3.00 566,000 0.35 2.70 1.13 1.00 6.27 1,085,231 0.35(c) 6.04 1.12 $1.00 1.32% $ 1,740,828 0.45% 1.34% 0.52% 1.00 0.73 1,791,613 0.45 0.73 0.51 1.00 1.31 640,364 0.45(c) 1.29 0.51 1.00 2.90 967,747 0.45 2.60 0.53 1.00 6.17 622,177 0.45(c) 5.94 0.52 $1.00 1.22% $ 85,981 0.55% 1.20% 0.62% 1.00 0.63 89,996 0.55 0.63 0.61 1.00 1.21 61,153 0.55(c) 1.19 0.61 1.00 2.80 44,170 0.55 2.50 0.63 1.00 5.12 90,380 0.55(c) 5.84 0.62
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 117 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- MONEY MARKET RESERVES (CONTINUED) MARKET CLASS SHARES Period ended 9/25/2003(e)................................... $1.00 $0.0028 $(0.0028) Year ended 3/31/2003........................................ 1.00 0.0109 (0.0109) Year ended 3/31/2002........................................ 1.00 0.0266 (0.0266) Year ended 3/31/2001........................................ 1.00 0.0580 (0.0580) Year ended 3/31/2000........................................ 1.00 0.0490 (0.0490) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0097 $(0.0097) Year ended 3/31/2004........................................ 1.00 0.0038 (0.0038) Year ended 3/31/2003........................................ 1.00 0.0095 (0.0095) Year ended 3/31/2002........................................ 1.00 0.0251 (0.0251) Year ended 3/31/2001........................................ 1.00 0.0565 (0.0565) SERVICE CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0080 $(0.0080) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0056 (0.0056) Year ended 3/31/2002........................................ 1.00 0.0211 (0.0211) Year ended 3/31/2001........................................ 1.00 0.0525 (0.0525) INVESTOR B SHARES Year ended 3/31/2005........................................ $1.00 $0.0060 $(0.0060) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0049 (0.0049) Year ended 3/31/2002........................................ 1.00 0.0201 (0.0201) Year ended 3/31/2001........................................ 1.00 0.0515 (0.0515) INVESTOR C SHARES Year ended 3/31/2005........................................ $1.00 $0.0060 $(0.0060) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0049 (0.0049) Year ended 3/31/2002........................................ 1.00 0.0201 (0.0201) Year ended 3/31/2001........................................ 1.00 0.0208 (0.0208)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Annualized. (e)Money Market Reserves Market Class Shares were fully redeemed on September 25, 2003. (f) Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 118 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS(B) NET ASSETS NET ASSETS(B) - ------------------------------------------------------------------------------------------------------ $1.00 0.28% $ --(f) 0.65%(d) 0.53%(d) 0.72%(d) 1.00 1.11 1,235,160 0.65(c) 1.09 0.71 1.00 2.69 1,422,125 0.65 2.40 0.73 1.00 5.96 1,292,998 0.65(c) 5.74 0.72 1.00 5.01 1,021,002 0.65(c) 5.19 0.78 $1.00 0.97% $ 3,588 0.80% 0.95% 0.87% 1.00 0.38 3,778 0.80 0.38 0.86 1.00 0.95 4,756 0.80(c) 0.94 0.86 1.00 2.54 4,501 0.80 2.25 0.88 1.00 5.80 7,561 0.80(c) 5.59 0.87 $1.00 0.80% $ 1,762 0.95% 0.53% 1.07% 1.00 0.25 75,965 0.95 0.23 1.22 1.00 0.56 118,713 1.19(c) 0.55 1.26 1.00 2.13 139,024 1.20 1.85 1.28 1.00 5.38 203,160 1.20(c) 5.19 1.27 $1.00 0.60% $ 6,470 1.16% 0.56% 1.37% 1.00 0.25 8,955 0.94 0.24 1.36 1.00 0.49 15,512 1.26(c) 0.48 1.36 1.00 2.03 9,407 1.30 1.75 1.38 1.00 5.27 6,907 1.30(c) 5.09 1.37 $1.00 0.60% $ 988 1.13% 0.49% 1.37% 1.00 0.25 754 0.93 0.25 1.36 1.00 0.49 1,072 1.27(c) 0.47 1.36 1.00 2.03 408 1.30 1.75 1.38 1.00 2.08 340 1.30(c) 5.09 1.37
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 119 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- TREASURY RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0144 $(0.0144) Year ended 3/31/2004........................................ 1.00 0.0093 (0.0093) Year ended 3/31/2003........................................ 1.00 0.0150 (0.0150) Year ended 3/31/2002........................................ 1.00 0.0302 (0.0302) Year ended 3/31/2001........................................ 1.00 0.0603 (0.0603) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0140 $(0.0140) Year ended 3/31/2004........................................ 1.00 0.0089 (0.0089) Year ended 3/31/2003........................................ 1.00 0.0146 (0.0146) Year ended 3/31/2002........................................ 1.00 0.0298 (0.0298) Period ended 3/31/2001(d)................................... 1.00 0.0206 (0.0206) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0134 $(0.0134) Year ended 3/31/2004........................................ 1.00 0.0083 (0.0083) Year ended 3/31/2003........................................ 1.00 0.0140 (0.0140) Year ended 3/31/2002........................................ 1.00 0.0292 (0.0292) Year ended 3/31/2001........................................ 1.00 0.0593 (0.0593) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0129 $(0.0129) Year ended 3/31/2004........................................ 1.00 0.0078 (0.0078) Year ended 3/31/2003........................................ 1.00 0.0136 (0.0136) Year ended 3/31/2002........................................ 1.00 0.0287 (0.0287) Year ended 3/31/2001........................................ 1.00 0.0588 (0.0588) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0119 $(0.0119) Year ended 3/31/2004........................................ 1.00 0.0068 (0.0068) Year ended 3/31/2003........................................ 1.00 0.0126 (0.0126) Year ended 3/31/2002........................................ 1.00 0.0277 (0.0277) Year ended 3/31/2001........................................ 1.00 0.0578 (0.0578) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0109 $(0.0109) Year ended 3/31/2004........................................ 1.00 0.0058 (0.0058) Year ended 3/31/2003........................................ 1.00 0.0116 (0.0116) Year ended 3/31/2002........................................ 1.00 0.0267 (0.0267) Year ended 3/31/2001........................................ 1.00 0.0568 (0.0568)
- --------------- (a) Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b) The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c) The effect of interest expense on the operating expense ratio was less than 0.01%. (d) Treasury Reserves Institutional Class Shares commenced operations on November 21, 2000. (e) Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 120 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS(B) NET ASSETS NET ASSETS(B) - ---------------------------------------------------------------------------------------------- $1.00 1.45% $1,570,292 0.20% 1.41% 0.27% 1.00 0.94 2,120,480 0.20 0.94 0.26 1.00 1.51 2,560,626 0.20 1.52 0.26 1.00 3.06 3,715,126 0.20 2.81 0.27 1.00 6.20 1,900,312 0.20(c) 5.99 0.27 $1.00 1.41% $ 439,022 0.24% 1.42% 0.31% 1.00 0.90 498,188 0.24 0.90 0.30 1.00 1.47 538,719 0.24 1.48 0.30 1.00 3.02 383,265 0.24 2.77 0.31 1.00 2.08 29,572 0.24(c)(e) 5.95(e) 0.31(e) $1.00 1.35% $ 656,083 0.30% 1.31% 0.37% 1.00 0.84 808,567 0.30 0.84 0.36 1.00 1.41 908,826 0.30 1.42 0.36 1.00 2.96 399,582 0.30 2.71 0.37 1.00 6.09 315,854 0.30(c) 5.89 0.37 $1.00 1.30% $ 413,480 0.35% 1.32% 0.52% 1.00 0.79 347,723 0.35 0.79 1.03 1.00 1.36 384,984 0.35 1.37 1.16 1.00 2.90 370,139 0.35 2.66 1.17 1.00 6.04 348,850 0.35(c) 5.84 1.17 $1.00 1.20% $4,608,621 0.45% 1.20% 0.52% 1.00 0.68 4,019,140 0.45 0.69 0.51 1.00 1.26 2,723,279 0.45 1.27 0.51 1.00 2.80 2,568,691 0.45 2.56 0.52 1.00 5.93 1,918,597 0.45(c) 5.74 0.52 $1.00 1.10% $ 368,396 0.55% 1.02% 0.62% 1.00 0.58 450,784 0.55 0.59 0.61 1.00 1.16 673,332 0.55 1.17 0.61 1.00 2.70 688,990 0.55 2.46 0.62 1.00 5.83 700,202 0.55(c) 5.64 0.62
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 121 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- TREASURY RESERVES (CONTINUED) MARKET CLASS SHARES Period ended 9/25/2003(f)................................... $1.00 $0.0027 $(0.0027) Year ended 3/31/2003........................................ 1.00 0.0106 (0.0106) Year ended 3/31/2002........................................ 1.00 0.0257 (0.0257) Year ended 3/31/2001........................................ 1.00 0.0557 (0.0557) Year ended 3/31/2000........................................ 1.00 0.0459 (0.0459) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0085 $(0.0085) Year ended 3/31/2004........................................ 1.00 0.0033 (0.0033) Year ended 3/31/2003........................................ 1.00 0.0090 (0.0090) Year ended 3/31/2002........................................ 1.00 0.0242 (0.0242) Year ended 3/31/2001........................................ 1.00 0.0543 (0.0543) SERVICE CLASS SHARES Period ended 10/30/2003(f).................................. $1.00 $0.0015 $(0.0015) Year ended 3/31/2003........................................ 1.00 0.0051 (0.0051) Year ended 3/31/2002........................................ 1.00 0.0202 (0.0202) Year ended 3/31/2001........................................ 1.00 0.0503 (0.0503) Period ended 3/31/2000(e)................................... 1.00 0.0358 (0.0358) INVESTOR A SHARES Year ended 3/31/2005........................................ $1.00 $0.0099 $(0.0099) Year ended 3/31/2004........................................ 1.00 0.0048 (0.0048) Period ended 3/31/2003(d)(h)................................ 1.00 0.0107 (0.0107) INVESTOR B SHARES Year ended 3/31/2005........................................ $1.00 $0.0051 $(0.0051) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0047 (0.0047) Year ended 3/31/2002........................................ 1.00 0.0192 (0.0192) Year ended 3/31/2001........................................ 1.00 0.0493 (0.0493) INVESTOR C SHARES Period ended 7/23/2003(f)................................... $1.00 $0.0008 $(0.0008) Period ended 3/31/2003(d)................................... 1.00 0.0017 (0.0017)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Treasury Reserves Investor A and Investor C Shares commenced operations on May 13, 2002 and July 16, 2002, respectively. (e)Annualized. (f) Treasury Reserves Market Class, Service Class and Investor C Shares were fully redeemed on September 25, 2003, October 30, 2003, and July 23, 2003, respectively. (g)Amount represents less than $500. (h)The total return for the period ended March 31, 2003 reflect the historical return information for the Nations Treasury Fund Investor A Shares, which were reorganized into Nations Treasury Reserves Investor A Shares on May 10, 2002. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 122 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS(B) NET ASSETS NET ASSETS(B) - ------------------------------------------------------------------------------------------------------ $1.00 0.27% $ --(g) 0.65%(e) 0.49%(e) 0.72%(e) 1.00 1.06 1,334,965 0.65 1.07 0.71 1.00 2.60 1,381,945 0.65 2.36 0.72 1.00 5.72 1,369,949 0.65(c) 5.54 0.72 1.00 4.68 1,511,932 0.65(c) 4.61 0.73 $1.00 0.85% $ 256,064 0.80% 0.83% 0.87% 1.00 0.33 291,341 0.80 0.34 0.86 1.00 0.91 1,159,050 0.80 0.92 0.86 1.00 2.44 1,301,678 0.80 2.21 0.87 1.00 5.56 981,837 0.80(c) 5.39 0.87 $1.00 0.15% $ --(g) 0.95%(e) 0.19%(e) 1.26%(e) 1.00 0.52 292,215 1.19 0.53 1.26 1.00 2.04 330,420 1.20 1.81 1.27 1.00 5.14 343,240 1.20(c) 4.99 1.27 1.00 3.63 244,035 1.20(c)(e) 4.06(e) 1.28(e) $1.00 1.00% $ 632,569 0.65% 0.95% 0.72% 1.00 0.48 702,673 0.65 0.49 0.71 1.00 1.07 850,729 0.65(e) 1.07(e) 0.71(e) $1.00 0.51% $ 238 1.12% 0.47% 1.37% 1.00 0.25 359 0.90 0.24 1.36 1.00 0.47 535 1.22 0.50 1.36 1.00 1.93 180 1.30 1.71 1.37 1.00 5.04 237 1.30(c) 4.89 1.37 $1.00 0.08% $ --(g) 1.05%(e) 0.09%(e) 1.37%(e) 1.00 0.15 5 1.26(e) 0.46(e) 1.36(e)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 123 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- GOVERNMENT RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0152 $(0.0152) Year ended 3/31/2004........................................ 1.00 0.0095 (0.0095) Year ended 3/31/2003........................................ 1.00 0.0151 (0.0151) Year ended 3/31/2002........................................ 1.00 0.0303 (0.0303) Year ended 3/31/2001........................................ 1.00 0.0615 (0.0615) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0148 $(0.0148) Year ended 3/31/2004........................................ 1.00 0.0091 (0.0091) Year ended 3/31/2003........................................ 1.00 0.0147 (0.0147) Year ended 3/31/2002........................................ 1.00 0.0299 (0.0299) Period ended 3/31/2001(d)................................... 1.00 0.0210 (0.0210) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0142 $(0.0142) Year ended 3/31/2004........................................ 1.00 0.0085 (0.0085) Year ended 3/31/2003........................................ 1.00 0.0141 (0.0141) Year ended 3/31/2002........................................ 1.00 0.0293 (0.0293) Year ended 3/31/2001........................................ 1.00 0.0605 (0.0605) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0137 $(0.0137) Year ended 3/31/2004........................................ 1.00 0.0080 (0.0080) Year ended 3/31/2003........................................ 1.00 0.0136 (0.0136) Year ended 3/31/2002........................................ 1.00 0.0286 (0.0286) Year ended 3/31/2001........................................ 1.00 0.0600 (0.0600) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0127 $(0.0127) Year ended 3/31/2004........................................ 1.00 0.0070 (0.0070) Year ended 3/31/2003........................................ 1.00 0.0126 (0.0126) Year ended 3/31/2002........................................ 1.00 0.0278 (0.0278) Year ended 3/31/2001........................................ 1.00 0.0590 (0.0590)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Government Reserves Institutional Class Shares commenced operations on November 21, 2000. (e)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 124 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS(B) NET ASSETS NET ASSETS(B) - ---------------------------------------------------------------------------------------------- $1.00 1.53% $1,132,047 0.20% 1.51% 0.27% 1.00 0.96 1,289,052 0.20 0.96 0.26 1.00 1.52 1,772,133 0.20 1.48 0.27 1.00 3.07 1,818,554 0.20 2.70 0.28 1.00 6.32 852,138 0.20(c) 6.06 0.29 $1.00 1.49% $ 186,374 0.24% 1.45% 0.31% 1.00 0.92 438,059 0.24 0.92 0.30 1.00 1.48 81,814 0.24 1.44 0.31 1.00 3.03 86,551 0.24 2.66 0.32 1.00 2.12 260,087 0.24(e) 6.02(e) 0.33(e) $1.00 1.43% $ 250,281 0.30% 1.50% 0.37% 1.00 0.86 292,272 0.30 0.86 0.36 1.00 1.42 380,478 0.30 1.38 0.37 1.00 2.97 289,252 0.30 2.60 0.38 1.00 6.22 222,765 0.30(c) 5.96 0.39 $1.00 1.38% $ 410,737 0.35% 1.41% 0.52% 1.00 0.81 300,885 0.35 0.81 0.99 1.00 1.37 175,562 0.35 1.33 1.12 1.00 2.91 164,296 0.35 2.55 1.13 1.00 6.16 468,083 0.35(c) 5.91 1.14 $1.00 1.28% $ 804,271 0.45% 1.23% 0.52% 1.00 0.70 1,104,735 0.45 0.71 0.51 1.00 1.27 586,412 0.45 1.23 0.52 1.00 2.81 794,855 0.45 2.45 0.53 1.00 6.06 1,190,853 0.45(c) 5.81 0.54
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 125 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- GOVERNMENT RESERVES (CONTINUED) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0117 $(0.0117) Year ended 3/31/2004........................................ 1.00 0.0060 (0.0060) Year ended 3/31/2003........................................ 1.00 0.0116 (0.0116) Year ended 3/31/2002........................................ 1.00 0.0268 (0.0268) Year ended 3/31/2001........................................ 1.00 0.0580 (0.0580) MARKET CLASS SHARES Period ended 9/25/2003(d)................................... $1.00 $0.0028 $(0.0028) Year ended 3/31/2003........................................ 1.00 0.0106 (0.0106) Year ended 3/31/2002........................................ 1.00 0.0258 (0.0258) Year ended 3/31/2001........................................ 1.00 0.0570 (0.0570) Year ended 3/31/2000........................................ 1.00 0.0471 (0.0471) Period ended 3/31/1999(e)................................... 1.00 0.0431 (0.0431) Year ended 4/30/1998........................................ 1.00 0.0508 (0.0508) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0092 $(0.0092) Year ended 3/31/2004........................................ 1.00 0.0035 (0.0035) Year ended 3/31/2003........................................ 1.00 0.0091 (0.0091) Year ended 3/31/2002........................................ 1.00 0.0243 (0.0243) Year ended 3/31/2001........................................ 1.00 0.0554 (0.0554) SERVICE CLASS SHARES Period ended 9/25/2003(d)................................... $1.00 $0.0012 $(0.0012) Year ended 3/31/2003........................................ 1.00 0.0052 (0.0052) Year ended 3/31/2002........................................ 1.00 0.0203 (0.0203) Year ended 3/31/2001........................................ 1.00 0.0515 (0.0515) Period ended 3/31/2000(f)................................... 1.00 0.0348 (0.0348) INVESTOR A SHARES Year ended 3/31/2005........................................ $1.00 $0.0107 $(0.0107) Year ended 3/31/2004........................................ 1.00 0.0050 (0.0050) Period ended 3/31/2003(f)(i)................................ 1.00 0.0108 (0.0108) INVESTOR B SHARES Year ended 3/31/2005........................................ $1.00 $0.0056 $(0.0056) Year ended 3/31/2004........................................ 1.00 0.0025 (0.0025) Year ended 3/31/2003........................................ 1.00 0.0045 (0.0045) Year ended 3/31/2002........................................ 1.00 0.0193 (0.0193) Year ended 3/31/2001........................................ 1.00 0.0505 (0.0505) INVESTOR C SHARES Period ended 1/06/2003(d)................................... $1.00 $0.0037 $(0.0037) Year ended 3/31/2002........................................ 1.00 0.0193 (0.0193) Year ended 3/31/2001........................................ 1.00 0.0505 (0.0505) Period ended 3/31/2000(f)................................... 1.00 0.0126 (0.0126)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)Government Reserves Market Class, Service Class and Investor C Shares were fully redeemed on September 25, 2003, September 25, 2003 and January 6, 2003, respectively. (e)Fiscal year end changed to March 31. Prior to this, the fiscal year end was April 30. (f) Government Reserves Service Class, Investor A and Investor C Shares commenced operations on June 8, 1999, May 13, 2002 and December 21, 1999, respectively. (g)Annualized. (h)Amount represents less than $500. (i) The total return for the period ended March 31, 2003 reflect the historical return information for the Nations Government Money Market Fund Investor A Shares, which were reorganized into Nations Government Reserves Investor A Shares on May 10, 2002. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 126 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS(B) NET ASSETS NET ASSETS(B) - ------------------------------------------------------------------------------------------------------ $1.00 1.18% $ 460,841 0.55% 1.10% 0.62% 1.00 0.60 792,634 0.55 0.61 0.61 1.00 1.17 578,548 0.55 1.13 0.62 1.00 2.71 1,001,552 0.55 2.35 0.63 1.00 5.95 331,555 0.55(c) 5.71 0.64 $1.00 0.28% $ --(h) 0.65%(g) 0.51%(g) 0.72%(g) 1.00 1.07 502,090 0.65 1.08 0.72 1.00 2.61 561,082 0.65 2.25 0.73 1.00 5.85 488,016 0.65(c) 5.61 0.74 1.00 4.81 370,000 0.65(c) 4.81 0.74 1.00 4.39 334,000 0.61(g) 4.64(g) 0.89(g) 1.00 5.20 274,499 0.55 5.08 0.90 $1.00 0.93% $ 304,322 0.80% 0.94% 0.87% 1.00 0.35 352,046 0.80 0.36 0.86 1.00 0.92 312,836 0.80 0.88 0.87 1.00 2.45 317,287 0.80 2.10 0.88 1.00 5.69 259,937 0.80(c) 5.46 0.89 $1.00 0.12% $ --(h) 0.97%(g) 0.19%(g) 1.27%(g) 1.00 0.52 36,006 1.19 0.49 1.27 1.00 2.05 36,505 1.20 1.70 1.28 1.00 5.27 26,001 1.20(c) 5.06 1.29 1.00 3.53 10,000 1.20(c)(g) 4.26(g) 1.29(g) $1.00 1.08% $ 31,654 0.65% 1.13% 0.72% 1.00 0.50 11,263 0.65 0.51 0.71 1.00 1.08 6,069 0.65(g) 1.03(g) 0.72(g) $1.00 0.57% $ 704 1.15% 0.55% 1.37% 1.00 0.25 917 0.92 0.24 1.36(a) 1.00 0.45 1,804 1.26 0.42 1.37(a) 1.00 1.94 2,105 1.30 1.60 1.38(a) 1.00 5.17 990 1.30 4.96 1.39(a) $1.00 0.37% $ --(h) 1.30%(g) 0.57%(g) 1.37%(g) 1.00 1.95 982 1.30 1.60 1.38 1.00 5.17 160 1.30(c) 4.96 1.39 1.00 1.26 746 1.30(c)(g) 4.16(g) 1.39(g)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 127 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- MUNICIPAL RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0128 $(0.0128) Year ended 3/31/2004........................................ 1.00 0.0089 (0.0089) Year ended 3/31/2003........................................ 1.00 0.0127 (0.0127) Year ended 3/31/2002........................................ 1.00 0.0215 (0.0215) Year ended 3/31/2001........................................ 1.00 0.0392 (0.0392) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0124 $(0.0124) Year ended 3/31/2004........................................ 1.00 0.0085 (0.0085) Year ended 3/31/2003........................................ 1.00 0.0123 (0.0123) Year ended 3/31/2002........................................ 1.00 0.0163 (0.0163) Period ended 3/31/2001(b)................................... 1.00 0.0110 (0.0110) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0118 $(0.0118) Year ended 3/31/2004........................................ 1.00 0.0079 (0.0079) Year ended 3/31/2003........................................ 1.00 0.0117 (0.0117) Year ended 3/31/2002........................................ 1.00 0.0205 (0.0205) Year ended 3/31/2001........................................ 1.00 0.0382 (0.0382) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0113 $(0.0113) Year ended 3/31/2004........................................ 1.00 0.0074 (0.0074) Year ended 3/31/2003........................................ 1.00 0.0113 (0.0113) Year ended 3/31/2002........................................ 1.00 0.0200 (0.0200) Year ended 3/31/2001........................................ 1.00 0.0377 (0.0377) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0103 $(0.0103) Year ended 3/31/2004........................................ 1.00 0.0064 (0.0064) Year ended 3/31/2003........................................ 1.00 0.0103 (0.0103) Year ended 3/31/2002........................................ 1.00 0.0190 (0.0190) Year ended 3/31/2001........................................ 1.00 0.0367 (0.0367) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0093 $(0.0093) Year ended 3/31/2004........................................ 1.00 0.0054 (0.0054) Year ended 3/31/2003........................................ 1.00 0.0093 (0.0093) Year ended 3/31/2002........................................ 1.00 0.0180 (0.0180) Year ended 3/31/2001........................................ 1.00 0.0357 (0.0357)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)Municipal Reserves Institutional Class commenced operations on November 21, 2000. (c)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 128 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ---------------------------------------------------------------------------------------------- $1.00 1.28% $3,338,133 0.20% 1.33% 0.28% 1.00 0.90 1,988,042 0.20 0.88 0.27 1.00 1.28 1,379,684 0.20 1.23 0.28 1.00 2.18 456,528 0.20 2.03 0.30 1.00 3.99 145,248 0.20 3.93 0.29 $1.00 1.24% $ 871,984 0.24% 1.33% 0.32% 1.00 0.86 479,770 0.24 0.84 0.31 1.00 1.24 204,206 0.24 1.19 0.32 1.00 1.64 85,432 0.24 1.99 0.34 1.00 1.10 16,116 0.24(c) 3.89(c) 0.33(c) $1.00 1.18% $ 407,159 0.30% 1.16% 0.38% 1.00 0.80 477,139 0.30 0.78 0.37 1.00 1.18 505,903 0.30 1.13 0.38 1.00 2.07 491,711 0.30 1.93 0.40 1.00 3.88 488,191 0.30 3.83 0.39 $1.00 1.13% $ 345,842 0.35% 1.17% 0.53% 1.00 0.74 149,812 0.35 0.73 0.96 1.00 1.13 120,637 0.35 1.08 1.13 1.00 2.02 45,728 0.35 1.88 1.15 1.00 3.83 35,569 0.35 3.78 1.14 $1.00 1.03% $ 474,653 0.45% 1.01% 0.53% 1.00 0.64 506,550 0.45 0.63 0.52 1.00 1.03 284,866 0.45 0.98 0.53 1.00 1.92 158,556 0.45 1.78 0.55 1.00 3.73 129,807 0.45 3.68 0.54 $1.00 0.93% $ 84,348 0.55% 0.88% 0.63% 1.00 0.54 147,189 0.55 0.53 0.62 1.00 0.93 89,289 0.55 0.88 0.63 1.00 1.82 48,022 0.55 1.68 0.65 1.00 3.63 57,017 0.55 3.58 0.64
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 129 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- MUNICIPAL RESERVES (CONTINUED) MARKET CLASS SHARES Period ended 9/25/2003(b)................................... $1.00 $0.0023 $(0.0023) Year ended 3/31/2003........................................ 1.00 0.0083 (0.0083) Year ended 3/31/2002........................................ 1.00 0.0170 (0.0170) Year ended 3/31/2001........................................ 1.00 0.0347 (0.0347) Year ended 3/31/2000........................................ 1.00 0.0284 (0.0284) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0068 $(0.0068) Year ended 3/31/2004........................................ 1.00 0.0031 (0.0031) Year ended 3/31/2003........................................ 1.00 0.0067 (0.0067) Year ended 3/31/2002........................................ 1.00 0.0155 (0.0155) Year ended 3/31/2001........................................ 1.00 0.0332 (0.0332) SERVICE CLASS SHARES Period ended 9/25/2003(b)................................... $1.00 $0.0012 $(0.0012) Year ended 3/31/2003........................................ 1.00 0.0052 (0.0052) Year ended 3/31/2002........................................ 1.00 0.0123 (0.0123) Year ended 3/31/2001........................................ 1.00 0.0292 (0.0292) Period ended 3/31/2000(d)................................... 1.00 0.0048 (0.0048) INVESTOR B SHARES Year ended 3/31/2005........................................ $1.00 $0.0032 $(0.0032) Year ended 3/31/2004........................................ 1.00 0.0019 (0.0019) Year ended 3/31/2003........................................ 1.00 0.0045 (0.0045) Year ended 3/31/2002........................................ 1.00 0.0113 (0.0113) Year ended 3/31/2001........................................ 1.00 0.0282 (0.0282) INVESTOR C SHARES Period ended 2/3/2005(g).................................... $1.00 $0.0022 $(0.0022) Year ended 3/31/2004........................................ 1.00 0.0019 (0.0019) Year ended 3/31/2003........................................ 1.00 0.0044 (0.0044) Period ended 3/31/2002(d)................................... 1.00 0.0000(f) (0.0000)(f)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)Municipal Reserves Market Class and Service Class Shares were fully redeemed on September 25, 2003. (c)Amount represents less than $500. (d)Municipal Reserves Service Class and Investor C Shares commenced operations on January 21, 2000 and March 28, 2002, respectively. (e)Annualized. (f) Amount represents less than $0.0001 or 0.01%, as applicable. (g)Municipal Reserves Investor C Shares were fully redeemed on February 3, 2005. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 130 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ----------------------------------------------------------------------------------------------- $1.00 0.23% $ --(c) 0.65%(e) 0.43%(e) 0.72%(e) 1.00 0.83 150,014 0.65 0.78 0.73 1.00 1.72 223,008 0.65 1.58 0.75 1.00 3.52 169,001 0.65 3.48 0.74 1.00 2.87 149,000 0.65 2.84 0.75 $1.00 0.68% $591,206 0.80% 0.67% 0.88% 1.00 0.31 605,118 0.78 0.30 0.87 1.00 0.68 526,658 0.80 0.63 0.88 1.00 1.56 637,172 0.80 1.43 0.90 1.00 3.37 554,876 0.80 3.33 0.89 $1.00 0.12% $ --(c) 0.91%(e) 0.17%(e) 1.27%(e) 1.00 0.52 14,001 0.96 0.47 1.28 1.00 1.24 15,001 1.16 1.03 1.30 1.00 2.96 10,000 1.20 2.93 1.29 1.00 0.48 1,000 1.20(e) 2.29(e) 1.30(e) $1.00 0.32% $ 46 1.11% 0.31% 1.38% 1.00 0.19 47 0.90 0.18 1.37 1.00 0.45 59 1.03 0.40 1.38 1.00 1.14 71 1.22 0.93 1.40 1.00 2.86 64 1.30 2.83 1.39 $1.00 0.22% $ -- 1.04% 0.21% 1.38% 1.00 0.19 2,503 0.90 0.18 1.37 1.00 0.45 2,525 1.01 0.42 1.38 1.00 0.00(f) 95 1.30(e) 0.93(e) 1.40(e)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 131 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- TAX-EXEMPT RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0125 $(0.0125) Year ended 3/31/2004........................................ 1.00 0.0086 (0.0086) Period ended 3/31/2003(b)................................... 1.00 0.0095 (0.0095) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0121 $(0.0121) Year ended 3/31/2004........................................ 1.00 0.0082 (0.0082) Period ended 3/31/2003(b)................................... 1.00 0.0090 (0.0090) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0115 $(0.0115) Year ended 3/31/2004........................................ 1.00 0.0076 (0.0076) Year ended 3/31/2003........................................ 1.00 0.0113 (0.0113) Year ended 3/31/2002........................................ 1.00 0.0204 (0.0204) Year ended 3/31/2001........................................ 1.00 0.0383 (0.0383) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0110 $(0.0110) Year ended 3/31/2004........................................ 1.00 0.0071 (0.0071) Period ended 3/31/2003(b)................................... 1.00 0.0059 (0.0059) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0100 $(0.0100) Year ended 3/31/2004........................................ 1.00 0.0061 (0.0061) Period ended 3/31/2003(b)................................... 1.00 0.0060 (0.0060) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0090 $(0.0090) Year ended 3/31/2004........................................ 1.00 0.0051 (0.0051) Year ended 3/31/2003........................................ 1.00 0.0089 (0.0089) Year ended 3/31/2002........................................ 1.00 0.0179 (0.0179) Year ended 3/31/2001........................................ 1.00 0.0358 (0.0358)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)Tax-Exempt Reserves Capital Class, Institutional Class, Liquidity Class and Adviser Class Shares commenced operations on June 13, 2002, June 18, 2002, September 3, 2002 and August 9, 2002, respectively. (c)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 132 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ---------------------------------------------------------------------------------------- $1.00 1.26% $1,049,210 0.20% 1.31% 0.28% 1.00 0.87 542,057 0.20 0.84 0.27 1.00 0.96 275,095 0.20(c) 1.13(c) 0.28(c) $1.00 1.22% $ 89,811 0.24% 1.23% 0.32% 1.00 0.82 68,512 0.24 0.80 0.31 1.00 0.91 23,348 0.24(c) 1.09(c) 0.32(c) $1.00 1.15% $2,052,864 0.30% 1.15% 0.38% 1.00 0.76 2,028,564 0.30 0.74 0.37 1.00 1.14 2,411,508 0.30 1.03 0.38 1.00 2.06 2,606,052 0.30 2.00 0.33 1.00 3.89 2,383,067 0.30 3.80 0.33 $1.00 1.10% $ 3,392 0.35% 0.92% 0.53% 1.00 0.71 5,792 0.35 0.69 0.99 1.00 0.59 1,918 0.35(c) 0.98(c) 1.13(c) $1.00 1.00% $ 11,183 0.45% 0.98% 0.53% 1.00 0.61 10,264 0.45 0.59 0.52 1.00 0.60 9,661 0.45(c) 0.88(c) 0.53(c) $1.00 0.90% $ 11,280 0.55% 0.82% 0.63% 1.00 0.51 22,071 0.55 0.49 0.62 1.00 0.89 138,285 0.55 0.78 0.63 1.00 1.81 210,389 0.55 1.75 0.68 1.00 3.63 239,923 0.55 3.55 0.68
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 133 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- TAX-EXEMPT RESERVES (CONTINUED) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0065 $(0.0065) Year ended 3/31/2004........................................ 1.00 0.0028 (0.0028) Year ended 3/31/2003........................................ 1.00 0.0063 (0.0063) Year ended 3/31/2002........................................ 1.00 0.0154 (0.0154) Year ended 3/31/2001........................................ 1.00 0.0333 (0.0333) INVESTOR A SHARES Year ended 3/31/2005........................................ $1.00 $0.0080 $(0.0080) Year ended 3/31/2004........................................ 1.00 0.0041 (0.0041) Year ended 3/31/2003........................................ 1.00 0.0079 (0.0079) Year ended 3/31/2002........................................ 1.00 0.0169 (0.0169) Year ended 3/31/2001........................................ 1.00 0.0348 (0.0348)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 134 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - --------------------------------------------------------------------------------------- $1.00 0.65% $ 36,441 0.80% 0.63% 0.88% 1.00 0.28 49,784 0.78 0.26 0.87 1.00 0.64 64,516 0.80 0.53 0.88 1.00 1.55 96,175 0.80 1.50 1.03 1.00 3.38 93,290 0.80 3.30 1.03 $1.00 0.80% $ 28,934 0.65% 0.75% 0.73% 1.00 0.41 50,803 0.65 0.39 0.72 1.00 0.79 87,141 0.65 0.68 0.73 1.00 1.70 80,108 0.65 1.65 0.68 1.00 3.53 51,705 0.65 3.45 0.68
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 135 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- CALIFORNIA TAX-EXEMPT RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0123 $(0.0123) Year ended 3/31/2004........................................ 1.00 0.0083 (0.0083) Year ended 3/31/2003........................................ 1.00 0.0115 (0.0115) Year ended 3/31/2002........................................ 1.00 0.0199 (0.0199) Period ended 3/31/2001(b)................................... 1.00 0.0153 (0.0153) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0119 $(0.0119) Year ended 3/31/2004........................................ 1.00 0.0079 (0.0079) Year ended 3/31/2003........................................ 1.00 0.0106 (0.0106) Year ended 3/31/2002........................................ 1.00 0.0061 (0.0061) Period ended 3/31/2001(b)................................... 1.00 0.0003 (0.0003) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0113 $(0.0113) Year ended 3/31/2004........................................ 1.00 0.0073 (0.0073) Year ended 3/31/2003........................................ 1.00 0.0105 (0.0105) Year ended 3/31/2002........................................ 1.00 0.0189 (0.0189) Year ended 3/31/2001........................................ 1.00 0.0323 (0.0323) LIQUIDITY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0108 $(0.0108) Year ended 3/31/2004........................................ 1.00 0.0068 (0.0068) Year ended 3/31/2003........................................ 1.00 0.0101 (0.0101) Period ended 3/31/2002(b)................................... 1.00 0.0095 (0.0095) ADVISER CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0098 $(0.0098) Year ended 3/31/2004........................................ 1.00 0.0058 (0.0058) Year ended 3/31/2003........................................ 1.00 0.0091 (0.0091) Year ended 3/31/2002........................................ 1.00 0.0174 (0.0174) Year ended 3/31/2001........................................ 1.00 0.0308 (0.0308)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)California Tax-Exempt Reserves Capital Class, Institutional Class and Liquidity Class Shares commenced operations on October 3, 2000, March 28, 2001 and August 10, 2001, respectively. (c)Annualized. (d)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 136 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ---------------------------------------------------------------------------------- $1.00 1.24% $105,823 0.20% 1.21% 0.28% 1.00 0.84 169,317 0.20 0.83 0.27 1.00 1.17 172,261 0.20 1.15 0.27 1.00 2.01 102,040 0.20 1.38 0.28 1.00 1.54 30 0.20(c) 3.33(c) 0.28(c) $1.00 1.20% $ 83,596 0.24% 1.16% 0.32% 1.00 0.80 126,531 0.24 0.79 0.31 1.00 1.08 1,537 0.24 1.11 0.31 1.00 0.63 --(d) 0.24 1.34 0.32 1.00 0.03 1,000 0.24(c) 3.29(c) 0.32(c) $1.00 1.14% $339,137 0.30% 1.15% 0.38% 1.00 0.74 294,225 0.30 0.73 0.37 1.00 1.07 435,253 0.30 1.05 0.37 1.00 1.91 360,892 0.30 1.27 0.38 1.00 3.27 338,801 0.30 3.23 0.38 $1.00 1.09% $ 16,585 0.35% 1.37% 0.53% 1.00 0.69 1,095 0.35 0.68 1.07 1.00 1.01 2,998 0.35 1.00 1.12 1.00 0.95 1,150 0.35(c) 1.23(c) 1.13(c) $1.00 0.98% $593,136 0.45% 1.01% 0.53% 1.00 0.59 475,799 0.45 0.58 0.52 1.00 0.91 502,135 0.45 0.90 0.52 1.00 1.75 298,268 0.45 1.13 0.53 1.00 3.12 318,737 0.45 3.08 0.53
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 137 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- CALIFORNIA TAX-EXEMPT RESERVES (CONTINUED) INVESTOR CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0088 $(0.0088) Year ended 3/31/2004........................................ 1.00 0.0048 (0.0048) Year ended 3/31/2003........................................ 1.00 0.0081 (0.0081) Year ended 3/31/2002........................................ 1.00 0.0164 (0.0164) Year ended 3/31/2001........................................ 1.00 0.0298 (0.0298) DAILY CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0063 $(0.0063) Year ended 3/31/2004........................................ 1.00 0.0026 (0.0026) Year ended 3/31/2003........................................ 1.00 0.0056 (0.0056) Year ended 3/31/2002........................................ 1.00 0.0139 (0.0139) Year ended 3/31/2001........................................ 1.00 0.0273 (0.0273) INVESTOR B SHARES Year ended 3/31/2005........................................ $1.00 $0.0029 $(0.0029) Year ended 3/31/2004........................................ 1.00 0.0019 (0.0019) Year ended 3/31/2003........................................ 1.00 0.0022 (0.0022) Year ended 3/31/2002........................................ 1.00 0.0037 (0.0037) Period ended 3/31/2001(b)................................... 1.00 0.0038 (0.0038) INVESTOR C SHARES Period ended 4/29/2004(e)................................... $1.00 $0.0001 $(0.0001) Year ended 3/31/2004(b)..................................... 1.00 0.0011 (0.0011)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)California Tax-Exempt Reserves Investor B and Investor C Shares commenced operations on December 29, 2000 and August 1, 2003, respectively. (c)Annualized. (d)Amount represents less than $500. (e)California Tax-Exempt Reserves Investor C Shares were fully redeemed on April 29, 2004. (f) Amount represents less than $0.001 or 0.01%, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 138 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ------------------------------------------------------------------------------------------- $1.00 0.88% $244,229 0.55% 0.85% 0.63% 1.00 0.48 369,440 0.55 0.48 0.62 1.00 0.81 360,205 0.55 0.80 0.62 1.00 1.65 240,724 0.55 1.03 0.63 1.00 3.02 226,491 0.55 2.98 0.63 $1.00 0.63% $742,981 0.80% 0.63% 0.88% 1.00 0.26 726,888 0.77 0.26 0.87 1.00 0.56 792,206 0.80 0.55 0.87 1.00 1.40 814,077 0.80 0.78 0.88 1.00 2.76 755,635 0.80 2.73 0.88 $1.00 0.29% $ 7 1.14% 0.31% 1.38% 1.00 0.19 7 0.86 0.17 1.37 1.00 0.22 7 0.97 0.40 1.37 1.00 0.37 --(d) 1.30 0.28 1.38 1.00 0.38 64 1.30(c) 2.23(c) 1.38(c) $1.00 0.01% $ --(d) 0.96%(c) 0.16%(c) 1.38%(c) 1.00 0.11 199 0.84(c) 0.19(c) 1.37(c)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 139 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- NEW YORK TAX-EXEMPT RESERVES CAPITAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0125 $(0.0125) Year ended 3/31/2004........................................ 1.00 0.0090 (0.0090) Year ended 3/31/2003........................................ 1.00 0.0122 (0.0122) Period ended 3/31/2002(b)................................... 1.00 0.0013 (0.0013) INSTITUTIONAL CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0121 $(0.0121) Year ended 3/31/2004(d)..................................... 1.00 0.0050 (0.0050) Period ended 12/22/2002(e).................................. 1.00 0.0091 (0.0091) Period ended 3/31/2002(b)................................... 1.00 0.0013 (0.0013) TRUST CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0115 $(0.0115) Year ended 3/31/2004........................................ 1.00 0.0080 (0.0080) Year ended 3/31/2003........................................ 1.00 0.0112 (0.0112) Period ended 3/31/2002(b)................................... 1.00 0.0012 (0.0012) LIQUIDITY CLASS SHARES Period ended 12/22/2002(e).................................. $1.00 $0.0094 $(0.0094) Period ended 3/31/2002(b)................................... 1.00 0.0013 (0.0013) ADVISER CLASS SHARES Period ended 8/24/2003(g)................................... $1.00 $0.0025 $(0.0025) Period ended 12/22/2002(e).................................. 1.00 0.0070 (0.0070) Period ended 3/31/2002(b)................................... 1.00 0.0008 (0.0008) INVESTOR CLASS SHARES Period ended 12/22/2002(e).................................. $1.00 $0.0069 $(0.0069) Period ended 3/31/2002(b)................................... 1.00 0.0008 (0.0008) MARKET CLASS SHARES Year ended 3/31/2005........................................ $1.00 $0.0080 $(0.0080) Year ended 3/31/2004(d)..................................... 1.00 0.0025 (0.0025) Period ended 12/22/2002(e).................................. 1.00 0.0068 (0.0068) Period ended 3/31/2002(b)................................... 1.00 0.0008 (0.0008)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)New York Tax-Exempt Reserves Capital Class, Institutional Class, Trust Class, Liquidity Class, Adviser Class, Investor Class and Market Class Shares commenced operations on February 15, 2002. (c)Annualized. (d)New York Tax-Exempt Reserves Institutional Class and Market Class Shares recommenced operations on August 25, 2003. (e)New York Tax-Exempt Reserves Institutional Class, Liquidity Class, Adviser Class, Investor Class and Market Class Shares were fully redeemed on December 22, 2002. (f) Amount represents less than $500. (g)New York Tax-Exempt Reserves' Adviser Class Shares re-commenced operations on April 14, 2003 and was fully redeemed on August 24, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 140 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ---------------------------------------------------------------------------------- $1.00 1.26% $ 2,852 0.20% 1.20% 0.53% 1.00 0.91 1,862 0.20 0.93 0.47 1.00 1.23 9,483 0.13 1.27 0.78 1.00 0.13 20,015 0.20(c) 1.03(c) 4.51(c) $1.00 1.22% $74,101 0.24% 1.30% 0.57% 1.00 0.50 48,222 0.24 0.89 0.53 1.00 0.91 --(f) 0.17(c) 1.23(c) 0.82(c) 1.00 1.16 1 0.24(c) 0.99(c) 4.55(c) $1.00 1.16% $12,627 0.30% 1.23% 0.63% 1.00 0.81 15,931 0.30 0.83 0.57 1.00 1.13 17,021 0.23 1.17 0.88 1.00 0.12 826 0.30(c) 0.93(c) 4.61(c) $1.00 0.94% $ --(f) 0.28%(c) 1.12%(c) 1.63%(c) 1.00 0.13 1 0.35(c) 0.88(c) 5.36(c) $1.00 0.25% $ --(f) 0.45%(c) 0.68%(c) 1.23%(c) 1.00 0.70 --(f) 0.38(c) 1.02(c) 1.03(c) 1.00 0.08 1 0.45(c) 0.78(c) 4.76(c) $1.00 0.69% $ --(f) 0.48%(c) 0.92%(c) 1.13%(c) 1.00 0.08 1 0.55(c) 0.68(c) 4.86(c) $1.00 0.80% $11,469 0.65% 0.82% 0.98% 1.00 0.25 12,970 0.65(c) 0.48(c) 0.78(c) 1.00 0.68 --(f) 0.58(c) 0.82(c) 1.23(c) 1.00 0.08 1 0.65(c) 0.58(c) 4.96(c)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 141 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET DIVIDENDS VALUE NET FROM NET BEGINNING INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INCOME ---------------------------------------------- NEW YORK TAX-EXEMPT RESERVES (CONTINUED) DAILY CLASS SHARES Period ended 12/22/2002(c).................................. $1.00 $0.0043 $(0.0043) Period ended 3/31/2002(b)................................... 1.00 0.0004 (0.0004) SERVICE CLASS SHARES Period ended 12/22/2002(c).................................. $1.00 $0.0018 $(0.0018) Period ended 3/31/2002(b)................................... 1.00 0.0000(e) (0.0000)(e) INVESTOR B SHARES Period ended 12/22/2002(c).................................. $1.00 $0.0018 $(0.0018) Period ended 3/31/2002(b)................................... 1.00 0.0000(e) (0.0000)(e) INVESTOR C SHARES Period ended 12/22/2002(c).................................. $1.00 $0.0018 $(0.0018) Period ended 3/31/2002(b)................................... 1.00 0.0000(e) (0.0000)(e)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)Annualized. (c)New York Tax-Exempt Reserves Daily Class, Service Class, Investor B and Investor C Shares were fully redeemed on December 22, 2002. (d)Amount represents less than $500. (e)Amount represents less than $0.0001 or 0.01%, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 142 NATIONS MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO END OF TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ---------------------------------------------------------------------------------- $1.00 0.43% $ --(d) 0.73%(b) 0.67%(b) 1.38%(b) 1.00 0.04 1 0.80(b) 0.43(b) 5.11(b) $1.00 0.18% $ --(d) 1.13%(b) 0.27%(b) 1.78%(b) 1.00 0.00(e) 1 1.20(b) 0.03(b) 5.51(b) $1.00 0.18% $ --(d) 1.23%(b) 0.17%(b) 1.88%(b) 1.00 0.00(e) 1 1.30(b) (0.07)(b) 5.61(b) $1.00 0.18% $ --(d) 1.23%(b) 0.17%(b) 1.88%(b) 1.00 0.00(e) 1 1.30(b) (0.07)(b) 5.61(b)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 143 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain only to the money market portfolios of Funds Trust (each, a "Fund" and collectively, the "Funds"): Nations Cash Reserves Nations Money Market Reserves Nations Treasury Reserves Nations Government Reserves Nations Municipal Reserves Nations Tax-Exempt Reserves Nations California Tax-Exempt Reserves Nations New York Tax-Exempt Reserves Financial Statements for the other portfolios of Funds Trust are presented under separate cover. The Funds are authorized to issue an unlimited number of shares without par value and currently offer eleven classes of shares: Capital Class Shares, Institutional Class Shares, Trust Class Shares, Liquidity Class Shares, Adviser Class Shares, Investor Class Shares, Market Class Shares, Daily Class Shares, Service Class Shares, Investor B Shares and Investor C Shares. Cash Reserves, Treasury Reserves, Government Reserves and Tax-Exempt Reserves also offer Investor A Shares. Cash Reserves also offers Marsico Shares. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Securities are valued on the basis of amortized cost, which approximates current market value. Amortized cost valuation involves initially valuing an instrument at its cost and thereafter assuming a constant accretion to maturity of any discount or amortization of any premium, as long as the effect of fluctuating interest rates on the market value of the instrument is not significant. Restricted securities and certain other assets may be valued under procedures adopted by the Board of Trustees. Repurchase agreements: Each Fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, a Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the obligation of the Fund to resell, the underlying debt obligation at an agreed-upon price and date, thereby determining the yield during the Fund's holding period. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the Fund's holding period. The value of the collateral must be at least equal at all times to the total amount of the repurchase obligation, including interest. Generally, in the event of counterparty default, the Fund has the right to use the collateral to offset losses incurred. There would be a potential loss to the Fund in the event the Fund is delayed or prevented from exercising its right to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period the Fund seeks to assert its right. The Funds' investment adviser, under the oversight of the Board of Trustees, monitors the value of collateral received as well as the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks. Reverse repurchase agreements: Each Fund may enter into reverse repurchase agreements with institutions that the Funds' investment adviser has determined are creditworthy. Under the terms of a typical reverse repurchase agreement, a Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it is required to have segregated assets with a current value at least equal to 144 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) the Fund's obligations arising under the reverse repurchase agreement. Reverse repurchase agreements involve the risk that the market value of the securities purchased with the proceeds from the sale of securities received by the Fund may decline below the price of the securities that the Fund is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use of proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. For the year ended March 31, 2005, there were no open reverse repurchase agreements. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Each Fund's investment income and realized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. Dividends and distributions to shareholders: It is the policy of each Fund to declare dividends from net investment income daily and to pay such dividends monthly. Each Fund will distribute net realized short-term capital gains at least annually after the fiscal year in which the capital gains were earned or more frequently to seek to maintain a net asset value of $1.00 per share, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. Indemnifications: In the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Funds Trust's organizational documents, the Trustees and Officers of the Funds Trust are indemnified against certain liabilities that may arise out of their duties to the Funds Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Funds. Under the terms of the Investment Advisory Agreement, BACAP is entitled to receive an advisory fee, calculated daily and payable monthly, at the maximum annual rate of 0.15% of each Fund's average daily net assets. BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Under the administration agreement, BACAP Distributors is currently entitled to receive a fee, computed daily and paid monthly, at the maximum annual rate of 0.10% of each Fund's average daily net assets. For the year ended March 31, 2005, BACAP Distributors earned an annual rate of 0.06% of the Funds' average daily net assets (net of waivers and sub-administration fees) for its administration services. The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of Funds Trust's assets. 145 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) PFPC Inc. serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Capital and Trust Class Shares of the Funds. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Capital Class shares and Trust Class shares of the Funds. For the year March 31, 2005, Bank of America earned the following sub-transfer agent fees from the Funds for providing such services and these amounts are included in "Transfer agent fees" in each Fund's Statement of operations.
SUB-TRANSFER AGENT FEE FUND (000) - -------------------------------------------------------------------------- Cash Reserves............................................... $160 Money Market Reserves....................................... 11 Treasury Reserves........................................... 28 Government Reserves......................................... 22 Municipal Reserves.......................................... 20 Tax-Exempt Reserves......................................... 68 California Tax-Exempt Reserves.............................. 10 New York Tax-Exempt Reserves................................ 2
BACAP Distributors serves as distributor of the Funds' shares. For the year ended March 31, 2005, the Funds were informed that the distributors received the following:
CONTINGENT DEFERRED SALES CHARGE (000) -------------------------------------------------- FUND INVESTOR INVESTOR A INVESTOR B INVESTOR C - ---------------------------------------------------------------------------------------------------------------- Cash Reserves............................................... $ --* $ -- $137,428 $4,638 Money Market Reserves....................................... -- -- 44,459 -- Treasury Reserves........................................... -- -- 2,270 -- Government Reserves......................................... -- -- 5,398 -- Municipal Reserves.......................................... -- -- --* -- Tax-Exempt Reserves......................................... -- -- -- -- California Tax-Exempt Reserves.............................. -- -- -- -- New York Tax-Exempt Reserves................................ -- -- -- --
- --------------- *Amount represents less than $500. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, pays its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. Each Fund's fee will not exceed $15,000 per year. As of March 31, 2005, the fees paid for the Office of the Chief Compliance Officer were as follows:
FUND (000) - ------------------------------------------------------------------- Cash Reserves............................................... $ 8 Money Market Reserves....................................... 8 Treasury Reserves........................................... 8 Government Reserves......................................... 8 Municipal Reserves.......................................... 8 Tax-Exempt Reserves......................................... 8 California Tax-Exempt Reserves.............................. 8 New York Tax-Exempt Reserves................................ 3
These amounts are included in "Other expenses" on the Statements of operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible 146 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) mutual funds selected by the participants or, if no funds are selected, on the rate of return of the Nations Treasury Reserves. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. A significant portion of certain share classes represents investments by fiduciary accounts over which Bank of America has either sole or joint discretion. Certain other affiliated Nations Funds have made daily investments of cash balances in Cash Reserves and Tax-Exempt Reserves pursuant to an exemptive order received from the Securities and Exchange Commission. At March 31, 2005, approximately 2.20% and 3.71% of the net assets of the Cash Reserves and Tax-Exempt Reserves, respectively, was held by other affiliated Nations Funds. The fees earned by BACAP and BACAP Distributors from such investments are included in its Statement of operations as "Investment advisory fee" and "Administration fee". 3. TOTAL OPERATING EXPENSE LIMITATIONS BACAP and/or its affiliates may, from time to time, reduce their fees payable by each Fund. BACAP has contractually agreed to reimburse expenses and/or waive fees through July 31, 2006 to the extent that total expenses (excluding interest expense and shareholder servicing, shareholder administration and distribution fees) exceed an annual rate of 0.20% of each Fund's average daily net assets. BACAP and/or BACAP Distributors is entitled to recover from the Funds any fees waived or expenses reimbursed by BACAP and/or BACAP Distributors during the three year period following the date of such waiver or reimbursement, to the extent that such recovery would not cause the affected fund to exceed the expense limitations in effect at the time of recovery. There is no guarantee that these expense limitations will continue. At March 31, 2005, the amounts potentially recoverable by BACAP and/or BACAP Distributors pursuant to this arrangement are as follows:
AMOUNT RECOVERED AMOUNT OF POTENTIAL RECOVERY EXPIRING: DURING THE ----------------------------------------- TOTAL POTENTIAL YEAR ENDED FUND 3/31/08 3/31/07 3/31/06 RECOVERY 3/31/05 - --------------------------------------------------------------------------------------------------------------------- Cash Reserves............................ $34,904,875 $40,691,765 $41,801,556 $117,398,196 $ -- Money Market Reserves.................... 6,835,699 8,258,169 7,901,140 22,995,008 -- Treasury Reserves........................ 6,279,401 6,498,721 6,180,619 18,958,741 -- Government Reserves...................... 2,818,040 3,129,314 3,046,272 8,993,626 -- Municipal Reserves....................... 4,109,837 2,700,355 1,982,384 8,792,576 -- Tax-Exempt Reserves...................... 2,442,542 2,014,609 1,996,391 6,453,542 -- California Tax-Exempt Reserves........... 1,624,369 1,512,909 1,496,692 4,633,970 -- New York Tax-Exempt Reserves............. 294,863 135,951 371,623 802,437 --
Cash Reserves, Money Market Reserves, Treasury Reserves and Government Reserves each have an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statements of operations. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. 4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted distribution plans ("Distribution Plans") for Liquidity Class Shares, Market Class Shares, Daily Class Shares, Investor Class Shares, Investor A Shares, Investor B Shares, Investor C Shares and Service Class Shares of the Funds. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940 Act, permit the Funds to compensate or reimburse the distributor and/or selling agents for activities or expenses primarily intended to result in the sale of the classes' shares. 147 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Funds Trust also has adopted shareholder servicing plans ("Servicing Plans") for the Liquidity, Adviser, Market, Daily, Investor, Investor A, Investor B, Investor C, Service Class and Marsico Shares of the Funds. The Servicing Plans permit the Funds to compensate or reimburse servicing agents for shareholder services provided by the servicing agents. Funds Trust also has adopted shareholder administration plans ("Administration Plans") for the Investor A, Investor B, Investor C, Trust Class, Marsico Shares and Institutional Class Shares of the Funds. Under the Administration Plans, a Fund may pay servicing agents that have entered into a shareholder administration agreement with Funds Trust for certain shareholder support services that are provided by the servicing agents to holders of the classes' shares. Payments under these plans are made at an annual rate and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of each Fund directly to the applicable share class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP Distributors. For the year ended March 31, 2005, annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT RATE (AFTER FEE PLAN WAIVERS) LIMIT ------------------------ DISTRIBUTION PLANS: Liquidity Class............................................. 0.15%* 0.25%** Investor Class, Investor A Shares........................... 0.10% 0.10% Market Class................................................ 0.20% 0.20% Daily Class................................................. 0.35% 0.35% Service Class............................................... 0.55% 0.55% Investor B and Investor C Shares............................ 0.75% 0.75% SERVICING PLANS: Liquidity Class............................................. 0.15%* 0.25%** Adviser, Investor, Market, Daily, Service Class, Investor A, Investor B, Investor C Shares and Marsico Shares........................................ 0.25% 0.25% ADMINISTRATION PLANS: Trust Class, Investor A, Investor B, Investor C Shares and Marsico Shares...................... 0.10% 0.10% Institutional Class......................................... 0.04% 0.04%
- --------------- *BACAP Distributors has contractually agreed to waive Distribution Plan fees and/or Shareholder Servicing Plan fees through July 31, 2006 as a percentage of each Fund's Liquidity Class Shares average daily net assets at an annual rate of 0.10%, not to exceed an annual combined waiver of 0.10%. **To the extent that any Liquidity Class Shares of the Funds reimburse expenses or make payments pursuant to the Distribution Plan and/or the Shareholder Servicing Plan, the total of such reimbursements and payments may not exceed, on an annual basis, 0.25% of the average daily net assets of any such Fund's Liquidity Class Shares. Under the Distribution Plan for the Liquidity Class Shares, Funds Trust is currently not reimbursing BACAP Distributors for distribution expenses for Liquidity Class Shares. Unreimbursed expenses incurred by BACAP Distributors in a given year may not be recovered by BACAP Distributors in subsequent years. 148 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the year ended March 31, 2005, BACAP Distributors voluntarily waived distribution fees, expressed as an average annualized percentage of each Fund's daily net assets of its respective share class as follows:
FUND CLASS RATE - --------------------------------------------------------------------------------------------------- California Tax-Exempt Reserves.............. Investor B.................................. 0.16% California Tax-Exempt Reserves.............. Investor C.................................. 0.34% Cash Reserves............................... Investor B.................................. 0.14% Cash Reserves............................... Investor C.................................. 0.12% Government Reserves......................... Investor B.................................. 0.15% Money Market Reserves....................... Service Class............................... 0.05% Money Market Reserves....................... Investor B.................................. 0.15% Money Market Reserves....................... Investor C.................................. 0.18% Municipal Reserves.......................... Investor B.................................. 0.19% Municipal Reserves.......................... Investor C.................................. 0.26% Treasury Reserves........................... Investor B.................................. 0.18% Treasury Reserves........................... Daily....................................... 0.00%
5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for distribution reclassifications and redemption based payments treated as dividends paid deduction were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED/ (OVERDISTRIBUTED) OR (ACCUMULATED) ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME (LOSS) GAIN/LOSS CAPITAL FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------- Cash Reserves............................................... $ -- $ 23 $(23) Money Market Reserves....................................... 149 (149) -- Treasury Reserves........................................... -- 8 (8) Government Reserves......................................... 15 (19) 4 Municipal Reserves.......................................... 73 (75) 2 Tax-Exempt Reserves......................................... 1 (10) 9 California Tax-Exempt Reserves.............................. 40 (40) -- New York Tax-Exempt Reserves................................ 9 (10) 1
Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications. 149 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 --------------------------------------- --------------------------------------- TAX-EXEMPT ORDINARY LONG-TERM TAX-EXEMPT ORDINARY LONG-TERM INCOME INCOME CAPITAL GAINS INCOME INCOME CAPITAL GAINS FUND (000) (000)* (000) (000) (000)* (000) - ----------------------------------------------------------------------------------------------------------------------------- Cash Reserves............................ $ -- $732,254 $-- $ -- $537,167 $ -- Money Market Reserves.................... -- 151,326 -- -- 122,458 8 Treasury Reserves........................ -- 113,331 -- -- 73,162 -- Government Reserves...................... -- 52,550 -- -- 36,623 -- Municipal Reserves....................... 63,476 179 9 28,323 49 -- Tax-Exempt Reserves...................... 34,858 46 2 22,039 45 -- California Tax-Exempt Reserves........... 18,393 38 13 10,737 --** 8 New York Tax-Exempt Reserves............. 1,069 14 -- 378 2 --
- --------------- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. ** Amount represents less than $500. As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED TAX-EXEMPT ORDINARY LONG-TERM INCOME INCOME CAPITAL GAINS FUND (000) (000)* (000)* - ------------------------------------------------------------------------------------------------------------- Cash Reserves............................................... $ -- $ 10 $ -- Money Market Reserves....................................... -- 314 -- Treasury Reserves........................................... -- 45 -- Government Reserves......................................... -- 252 -- Municipal Reserves.......................................... 116 90 -- Tax-Exempt Reserves......................................... 57 37 2 California Tax-Exempt Reserves.............................. 107 8 -- New York Tax-Exempt Reserves................................ 9 3 --
- --------------- *Amounts may include post October loss deferrals. The following capital loss carryforwards, determined as of March 31, 2005, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING IN 2006 IN 2007 IN 2010 IN 2011 IN 2012 IN 2013 FUND (000) (000) (000) (000) (000) (000) - -------------------------------------------------------------------------------------------------------------- Cash Reserves........................... $-- $41 $-- $67 $1,292 $1,216 Money Market Reserves................... -- -- -- -- -- 733 Treasury Reserves....................... 9 -- 17 21 -- 422 Government Reserves..................... -- -- -- -- -- 133
During the year ended March 31, 2005, the following Funds had capital losses expired as follows:
CAPITAL LOSSES EXPIRED FUND (000) - ---------------------------------------------------------------------------- Cash Reserves............................................... $23 Treasury Reserves........................................... 8
150 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Under the current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended March 31, 2005, the following Funds have elected to defer losses occurring between November 1, 2004 and March 31, 2005 under these rules, as follows:
CAPITAL LOSSES DEFERRED FUND (000) - ---------------------------------------------------------------------------- Cash Reserves............................................... $ 16 Money Market Reserves....................................... --* Treasury Reserves........................................... 483 Government Reserves......................................... 100 California Tax-Exempt Reserves.............................. 28
Such deferred losses will be treated as arising on the first day of the fiscal year ending March 31, 2006. - --------------- *Amount represents less than $500. 6. RESTRICTED SECURITIES A restricted security is a security which has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933. The Funds do not have the right to demand that such securities be registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. No Fund will invest more than 10% of the value of its net assets in securities that are considered illiquid. The following securities are considered both illiquid and restricted as to resale. CASH RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - -------------------------------------------------------------------------------------------------------------------------- Deutsche Bank AG, (New York): 2.770%+ 04/20/05++...................... 03/30/04 $700,000 $1.00 $ 700,000 1.3% $700,000 Davis Square Funding, Ltd., Series 2003-1A, Class A1E, 2.900%+ 10/16/38++...................... 10/15/03 150,000 1.00 150,000 0.3 150,000 GE Life Annuity, 2.960%+ 05/16/05++(a)................... 05/27/03 100,000 1.00 100,000 0.2 100,000 Goldman Sachs Group Inc., 2.860%+ 09/19/07++...................... 03/07/05 510,000 1.00 510,000 1.0 510,000 Jackson National Life Insurance Company, 3.090%+ 01/01/50++(a)................... 06/14/96 50,000 1.00 50,000 0.1 50,000 Monumental Life 2.840%+ 05/31/05++(a)................... 03/25/02 300,000 1.00 300,000 0.6 300,000 NewCastle CDO, Ltd., Series 3A, Class 1MM 2.880%+ 09/24/38++...................... 09/10/03 175,000 1.00 175,000 0.4 175,000 Phoenix-Mistic CBO, Ltd., Series 2002-1A, Class A1A, 3.489%+ 03/15/06........................ 08/14/02 245,000 1.00 245,061 0.5 245,228 Phoenix-Mistic CBO, Ltd., Series 2002-1A, Class A1B2, 3.329%+ 09/15/14++...................... 09/11/03 40,000 1.00 40,000 0.1 40,000 Putnam Structured Product CDO, Series 2001-1A, Class A1MB, 2.481%+ 11/25/05........................ 11/22/02 50,000 1.00 50,000 0.1 50,000
151 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - -------------------------------------------------------------------------------------------------------------------------- Saturn Ventures II Inc. 2.816%+ 05/07/05++...................... 11/05/04 $100,000 $1.00 $ 100,000 0.2% $100,000 Transamerica Occidental Life Insurance Company: 3.030%+ 08/30/05++(a)................... 07/31/00 125,000 1.00 125,000 0.3 125,000 2.930%+ 08/30/05++(a)................... 07/31/00 117,000 1.00 117,000 0.2 117,000 2.870%+ 08/30/05++(a)................... 07/31/00 20,000 1.00 20,000 0.0* 20,000 2.720%+ 08/30/05++(a)................... 10/01/03 100,000 1.00 100,000 0.2 100,000 Travelers Insurance 2.823%+ 07/29/05++.................... 07/30/04 182,000 1.00 182,000 0.4 182,000 Winston Funding Ltd., Series 2003-1, Class A1MB, 2.560%+ 04/23/09++...................... 05/28/03 121,400 1.00 121,400 0.2 121,400 ---------- --- $3,085,461 6.1% ========== ===
- --------------- + Floating rate security. The interest rate shown reflects the rate in effect at March 31, 2005. ++ Reset date. Interest rates reset either daily, weekly, monthly or quarterly. * Amount represents less than 0.1%. (a)Fair valued security (see Note 1). MONEY MARKET RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - -------------------------------------------------------------------------------------------------------------------------- Davis Square Funding, Ltd., Series 2003-1A, Class A1E, 2.900%+ 10/16/38++........................ 10/15/03 $ 42,500 $1.00 $ 42,500 0.4% $ 42,500 G-Star Ltd. 2.900%+ 06/25/22++........................ 12/30/04 60,999 1.00 61,000 0.6 60,999 Goldman Sachs Group Inc., 2.860%+ 09/13/07++........................ 03/07/05 140,000 1.00 140,000 1.2 140,000 Phoenix-Mistic CBO, Ltd., Series 2002-1A, Class A1A, 3.489%+ 03/15/06++........................ 08/14/02 50,000 1.00 50,012 0.4 50,000 Saturn Ventures II Inc. 2.816%+ 05/07/05++........................ 11/05/04 44,397 1.00 44,397 0.4 44,397 Winston Funding Ltd., Series 2003-1, Class A1MB, 2.560%+ 04/23/09++........................ 05/27/03 50,000 1.00 50,000 0.4 50,000 -------- --- $387,909 3.4% ======== ===
- --------------- + Floating rate security. The interest rate shown reflects the rate in effect at March 31, 2005. ++ Reset date. Interest rates reset either daily, weekly, monthly or quarterly. TREASURY RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - -------------------------------------------------------------------------------------------------------------------------- Deutsche Bank Securities Inc., 1.200% 04/26/05........................... 03/26/04 $200,000 $1.00 $200,000 2.2% $200,000 ======== ===
152 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) MUNICIPAL RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - ---------------------------------------------------------------------------------------------------------------------------- Atlanta, Georgia Airport Revenue, Series 2001, AMT, (FGIC Insured, Merrill Lynch Capital Services SBPA), 1.260** 01/01/25............................ 04/03/03 $12,960 $1.00 $ 12,960 0.2% $12,960 Illinois Health Facilities Authority Revenue, Series 2004, Insured: MBIA 2.150%** 12/23/05........................... 09/29/04 25,840 1.00 25,840 0.4 25,840 Clark County, Nevada School District GO, Series 2003, (MBIA Insured, Merrill Lynch Capital Services SBPA), 1.670%** 06/15/10........................... 11/06/03 13,425 1.00 13,425 0.2 13,425 Dallas-Fort Worth, Texas International Airport Revenue, Series 2003, AMT, (Merrill Lynch Capital Services SBPA), 2.370%** 05/01/11........................... 05/16/03 9,840 1.00 9,840 0.2 9,840 Huntsville, Alabama Solid Waste Disposal Authority and Resources Recovery Revenue, Series 2003, AMT, (MBIA Insured, Merrill Lynch Capital Services SBPA), 1.700%** 10/01/12........................... 07/24/03 3,450 1.00 3,450 0.1 3,450 Metropolitan Transitional Authority New York Revenue, Series 2003, (MBIA Insured, Merrill Lynch Capital Services SBPA), 2.310%** 05/15/10........................... 06/23/04 5,995 1.00 5,995 0.1 5,968 Mississippi Development Bank Special Obligation, Series 2004, Insured: AMBAC 1.650%** 01/01/26........................... 05/20/04 17,325 1.00 17,325 0.3 17,325 New York, New York City Transitional Finance Authority, Series 2003, (MBIA-IBC Insured, Lloyds TSB Bank PLC SBPA), 1.670%** 11/01/08........................... 08/03/04 8,095 1.00 8,095 0.2 8,095 Oklahoma Housing Finance Agency Single Family Revenue, (Home Ownership Loan Program) Series 2001PT-1288, AMT, (GNMA Collateral Agreement, Merrill Lynch SBPA), 2.370%** 09/01/29........................... 12/14/01 2,385 1.00 2,385 0.0* 2,385 Port of Seattle, Washington Revenue, Series 2003, AMT, (MBIA Insured, Merrill Lynch Capital Services SBPA), 1.660%** 07/01/11........................... 08/21/03 4,320 1.00 4,320 0.1 4,320 Sedgwick & Shawnee Counties, Kansas Single Family Revenue, Series 2002, 2.370%** 12/01/27........................... 07/18/02 2,595 1.00 2,595 0.0* 2,595 Wisconsin State, Health & Educational Facilities Authority Revenue, Series 2003, (MBIA Insured), 2.150%** 08/15/19........................... 08/28/03 17,160 1.00 17,160 0.3 17,160 DC Metropolitan Area Transportation Authority, Series 2003, Insured: MBIA 1.950%** 01/01/10........................... 03/23/05 8,360 1.00 8,314 0.1 8,360 -------- --- $131,704 2.2% ======== ===
- --------------- *Amount represents less than 0.1%. **Variable rate note. The interest rate shown reflects the rate in effect at March 31, 2005. These securities are subject to demand features of either one, seven or thirty days. 153 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) TAX-EXEMPT RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - ---------------------------------------------------------------------------------------------------------------------------- Houston Texas Independent School District, GO, Series 2004, Insured: FSA, 1.800%** 06/14/05............................ 06/17/04 $ 9,995 $1.00 $ 9,995 0.3% $ 9,995 Houston Texas Water & Sewer Systems Revenue, Series 2002, Insured: MBIA, 2.300%** 12/01/23............................ 05/01/03 12,495 1.00 12,495 0.4 12,495 Metropolitan New York Transitional Authority Revenue, Series 2003, Insured: AMBAC, 1.630%** 11/15/10............................ 08/28/03 7,485 1.00 7,485 0.2 7,485 Mississippi Development Bank Special Obligation, Series 2004, Insured: AMBAC, 1.650%** 01/01/26............................ 05/20/04 10,000 1.00 10,000 0.3 10,000 Wisconsin State Health & Educational Facility Authority Revenue, Series 2003, Insured: MBIA, 2.150%** 08/15/19............................ 11/09/04 8,580 1.00 8,580 0.3 8,580 ------- --- $48,555 1.5% ======= ===
- --------------- **Variable rate note. The interest rate shown reflects the rate in effect at March 31, 2005. These securities are subject to demand features of either one, seven or thirty days. CALIFORNIA TAX-EXEMPT RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - ---------------------------------------------------------------------------------------------------------------------------- California Community College Financing Authority Revenue, Series 2004D, (Lehman Liquidity Company Liquidity Facility), 2.310%** 07/29/05............................ 07/01/04 $35,390 $1.00 $35,390 1.7% $35,390 California State, Economic Recovery, GO, Series 2004, (Citibank N.A. Liquidity Facility), 1.700% 07/01/23.............................. 05/19/04 9,375 1.00 9,375 0.4 9,375 Colton, California Joint United School District GO, Series 2004, (FGIC Insured, Merrill Lynch Capital Services SBPA), 1.600%** 02/01/12............................ 07/16/04 5,440 1.00 5,440 0.3 5,440 Puerto Rico Commonwealth Highway & Transportation Authority, Series 2003, Insured: FGIC, 2.280%** 01/01/11............................ 12/13/04 19,295 1.00 19,295 0.9 19,295 ------- --- $69,500 3.3% ======= ===
- --------------- **Variable rate note. The interest rate shown reflects the rate in effect at March 31, 2005. These securities are subject to demand features of either one, seven or thirty days. 154 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) NEW YORK TAX-EXEMPT RESERVES
FAIR PERCENTAGE HISTORICAL PAR VALUE VALUE VALUE OF NET COST ACQUISITION 3/31/05 PER UNIT 3/31/05 ASSETS 3/31/05 SECURITY DATE (000) 3/31/05 (000) 3/31/05 (000) - ------------------------------------------------------------------------------------------------------------------------------- Metropolitan Transitional Authority New York Revenue, Series 2002, (AMBAC Issued, Merrill Lynch Capital Services SBPA), 1.630%** 05/15/10............................... 06/23/04 $1,500 $1.00 $1,500 1.5% $1,500 New York, New York City Transitional Finance Authority, Series 2003, (MBIA-IBC Insured, Lloyds TSB Bank PLC SBPA), 1.670%** 11/01/08............................... 12/09/04 1,900 1.00 1,900 1.9 1,900 ------ --- $3,400 3.4% ====== ===
- --------------- **Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2004. These securities are subject to demand features of either one, seven or thirty days. 7. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Funds had no borrowings outstanding at March 31, 2005. During the year ended March 31, 2005, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST FUND (000) RATE - -------------------------------------------------------------------------------------- Cash Reserves............................................... $452 2.00%
- --------------- *The average amount outstanding was calculated based on daily balances in the period. 8. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee 155 NATIONS MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders cannot currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. 156 NATIONS MONEY MARKET FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Cash Reserves, Nations Money Market Reserves, Nations Treasury Reserves, Nations Government Reserves, Nations Municipal Reserves, Nations Tax-Exempt Reserves, Nations California Tax-Exempt Reserves and Nations New York Tax-Exempt Reserves (constituting part of Nations Funds Trust, hereafter collectively referred to as the "Funds") at March 31, 2005, the results of each of their operations, for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 157 NATIONS MONEY MARKET FUNDS TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2005, the following percentage of distributions made from net investment income of the Nations Money Market Funds are exempt for Federal income tax purposes. A portion of the income may also be subject to Federal Alternative Minimum Tax.
FEDERAL EXEMPT FUND PERCENTAGE - ---------------------------------------------------------------------------- Municipal Reserves.......................................... 99.70% Tax-Exempt Reserves......................................... 99.85% California Tax-Exempt Reserves.............................. 99.73% New York Tax-Exempt Reserves................................ 98.70%
For the fiscal year ended March 31, 2005, the amount of long-term capital gains designated by Funds Trust were as follows:
FUND TOTAL - --------------------------------------------------------------------- California Tax-Exempt Reserves.............................. $12,616 Municipal Reserves.......................................... 11,391 Tax-Exempt Reserves......................................... 11,417
158 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel); William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director - Operation Hope; Trustee -- The Chandler School; R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance): Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina;
159 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
160 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 161 NATIONS MONEY MARKET FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Board of Trustees (the "Board") of Nations Funds Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not "interested persons" of the Trust, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory agreement and approve any newly proposed terms therein. In this regard, the Board reviewed and re-approved, during the most recent six months covered by this report, an investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for Nations Cash Reserves, Nations Money Market Reserves, Nations Treasury Reserves, Nations Government Reserves, Nations Municipal Reserves, Nations Tax-Exempt Reserves, Nations California Tax-Exempt Reserves and Nations New York Tax-Exempt Reserves (the "Advisory Agreement"). The funds identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at a meeting held on November 17-18, 2004, the Board, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the re-approval of the Advisory Agreement. Nature, Extent and Quality of Services The Board received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP under the Advisory Agreement. The most recent investment adviser registration form ("Form ADV") for BACAP was provided to the Board, as were responses of BACAP to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Board reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by, investment personnel of BACAP. In this regard, the Board specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Board received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds and BACAP. The Board considered the investment and legal compliance programs of each of these two entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Board also considered the Funds' Chief Compliance Officer's report and recommendations. The Board evaluated the ability of BACAP, based on its resources, reputation and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Board considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Board considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Board concluded that it was generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP. Fund Performance and Expenses The Board considered the one-year, three-year and five-year performance results for each of the Funds, as relevant. It also considered these results in comparison to the performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that of expenses to provide a more accurate basis of comparison. The Board was provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. 162 NATIONS MONEY MARKET FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) The Board was not presented with any relevant data to analyze the performance of Nations New York Tax-Exempt Reserves and the Nations Tax-Exempt Reserves because of the Funds' recent inception dates. Accordingly, no determination could be made as to the performance of these two Funds. The Board also considered information in the Lipper data that ranked each Fund based on (i) each Fund's one-year performance compared to actual management fees, (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Boards of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Board (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Board considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Board also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Board noted that each Fund's performance was better than, or not substantially below, each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Board received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. It also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. The Board noted that the overall expense ratios of each of the Funds, except Nations Money Market Reserves, were lower than, or not appreciably above, each Fund's Peer Group's median total expense ratio and did not require significant additional consideration by the Boards. The Board also noted that Nations Money Market Reserves required additional review as a result of its 5th quintile rating in Total Expenses, but noted that the Fund ranks in the 3rd quintile when compared to its Universe. The Board also observed that the Fund performed higher than, or not substantially below, the median performance for its Universe. Based on the above-referenced considerations and other factors, the Board concluded that the overall performance and expense results supported the re-approval of the Advisory Agreements for each Fund. Investment Advisory Fee Rates The Board reviewed and considered the contractual investment advisory fee rates, combined with the administrative fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). In addition, the Board reviewed and considered the fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). The Board noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain of its affiliates relating to trading in mutual fund shares. At the November meetings, the Board also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Board also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. Additionally, the Boards received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Boards concluded that the respective Net Advisory Rates 163 NATIONS MONEY MARKET FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) for the Funds, except Nations Money Market Reserves, were lower than, or not appreciably higher than, the median rates of each Fund's Peer Group and did not warrant significant additional consideration. The Board noted that the Advisory Agreement Rates and Net Advisory Rates for Nations Money Market Reserves were appreciably above the median rates of the Fund's Universe and necessitated additional review. The Board also noted, however, that the Fund performed higher than, or not substantially below, the median level of all funds in its Universe. The Board concluded that these and other factors supported the Advisory Agreement Rates and the Net Advisory Rates, and approved the Advisory Agreement for all of the Funds. Profitability The Board received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates. The Board concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. Economies of Scale The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board observed that the Advisory Agreements for the Funds did not offer breakpoints. However, the Board considered the Advisory Agreement Rates of the Funds and concluded that the fees were fair and equitable based on relevant factors, including the Funds' performance results. Information About Services to Other Clients The Board also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP to its other clients, including other institutional investors. The Board concluded that the Advisory Agreement Rates and the Net Advisory Rates were within a reasonable range of the fee rates offered to other BACAP clients. Where rates offered to other clients were appreciably lower, the Board concluded, based on information provided by BACAP, that the costs associated with managing and operating a registered open-end fund, compared with an institutional investor account, provided a justification for the higher fee rates charged to the Funds. Other Benefits to BACAP The Board received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP as a result of their relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates). The Board also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, including whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Board also reviewed the policy of BACAP regarding the allocation of portfolio investment opportunities among the Funds and other clients. Other Factors and Broader Review The Board also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Board noted that the Funds in the Nations Funds complex are generally utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. 164 NATIONS MONEY MARKET FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) As discussed above, the Board reviews detailed materials received from BACAP annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Funds receive throughout the year. In this regard, the Board reviews reports of BACAP at least in each of their quarterly meetings, which include, among other things, a detailed portfolio review, and detailed fund performance reports. In addition, the Board interview the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and their evaluation of the information provided to them, the Board concluded that re-approval of the Advisory Agreements for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Board unanimously re-approved the Advisory Agreements. 165 SHAREHOLDER MEETING RESULTS (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - --------------------- --- -------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
166 [This page intentionally left blank] THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF BANC OF AMERICA CAPITAL MANAGEMENT INTERNATIONAL/ GLOBAL Within each category, FUNDS the funds are listed from aggressive to conservative. EQUITY Nations Marsico FUNDS International FIXED Opportunities Fund INCOME FUNDS GROWTH FUNDS Nations International MONEY Equity Fund MARKET Nations Small FUNDS TAXABLE Company Fund Nations International INCOME FUNDS Value Fund Nations Marsico Nations Cash Nations High Yield 21st Century Fund Nations Global Reserves Bond Fund Value Fund Nations MidCap Nations Money Nations Strategic Growth Fund Market Reserves Income Fund Nations Marsico LOWER RISK/REWARD POTENTIAL Nations Government Nations Bond Fund Focused Equities Reserves Fund Nations Intermediate Nations Treasury Bond Fund Nations Marsico Reserves Growth Fund Nations Government Nations Tax-Exempt Securities Fund Reserves BLEND FUNDS SPECIALTY FUNDS Nations Short- Nations Municipal Intermediate Nations Asset Reserves Government Fund Allocation Fund INDEX FUNDS Nations California Nations Short-Term Nations Strategic Nations SmallCap Index Fund Tax-Exempt Reserves Income Fund Growth Fund Nations MidCap Index Fund Nations New York Tax-Exempt Reserves TAX-EXEMPT VALUE FUNDS Nations LargeCap Index Fund INCOME FUNDS Nations SmallCap Nations LargeCap Enhanced Nations Municipal Value Fund Core Fund Income Fund Nations MidCap Nations State-Specific Value Fund ASSET ALLOCATION Long-Term Municipal PORTFOLIOS Bond Funds (CA, FL) Nations Value Fund Nations LifeGoal Nations Intermediate Growth Portfolio Municipal Bond Fund Nations LifeGoal Balanced Nations State-Specific Growth Portfolio Intermediate Municipal Bond Funds (CA, FL, Nations LifeGoal Income and GA, KS, MD, NC, SC, Growth Portfolio TN, TX, VA) Nations LifeGoal Nations Short-Term Income Portfolio Municipal Income Fund OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/057V-0405 (05/05) 05/5727
Nations Global Value Fund Nations International International/Global Value Fund Stock Funds Nations International Equity Fund Nations Marsico International Opportunities Annual report for the year ended Fund March 31, 2005 [NATIONS FUNDS LOGO] A description of the policies and procedures that the funds use to determine how to vote proxies and a copy of the funds' voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment adviser to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [CHRISTOPHER WILSON PHOTO] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS DISCLOSURE OF FUND EXPENSES AND PORTFOLIO HOLDINGS Nations Global Value Fund 3 Nations International Value Fund 10 Nations International Equity Fund 17 Nations Marsico International Opportunities Fund 24 FINANCIAL STATEMENTS Investment portfolios 30 Statements of assets and liabilities 41 Statements of operations 42 Statements of changes in net assets 44 Schedules of capital stock activity 46 Financial highlights 50 Notes to financial statements 58 Report of independent registered public accounting firm 70 Nations Master Investment Trust Schedule of investments -- Nations International Value Master Portfolio 73 Statement of assets and liabilities 76 Statement of operations 77 Statement of changes in net assets 78 Financial highlights 78 Notes to financial statements 79 Report of independent registered public accounting firm 85 Fund governance 86 Board consideration and re-approval of investment advisory and sub-advisory agreements 89 Shareholder meeting results 94
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. [This page intentionally left blank] NATIONS GLOBAL VALUE FUND LARGE CAP INVESTMENT COMMITTEE COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S MANAGEMENT TEAM SHARES ITS VIEWS ON NATIONS GLOBAL VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term capital appreciation by investing primarily in equity securities of domestic and foreign issuers, including issuers in emerging market countries. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Global Value Fund Investor A Shares provided shareholders with a total return of 8.64%.** - -------------------------------------------------------------------------------- SUBJECT TO CERTAIN LIMITED EXCEPTIONS, NATIONS GLOBAL VALUE FUND IS NO LONGER ACCEPTING NEW INVESTMENTS FROM CURRENT OR PROSPECTIVE INVESTORS. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Global Value Fund is managed using an approach to value investing developed by Benjamin Graham. Graham believed that, because of the irrationality of equity markets, a stock's price and its fair value often detach from one another in the short term. This irrationality can materialize on the upside, lifting prices to dangerously lofty heights. It can also appear on the downside, dragging prices for select stocks to bargain levels. Value investors target the latter situation, purchasing out-of-favor stocks that are believed to trade at substantial discounts to their fair values. We believe that the market prices of these undervalued stocks will climb as the markets recognize their inherent worth. Of course, this process often takes time -- and, once purchased, a stock's price may even decline further in the short term. With this in mind, we exercise patience and manage our holdings from a long-term perspective. Typically, we expect to hold a stock for as long as three to five years. It is important to understand that the fund's weights for industries and countries are not the product of top-down forecasts or opinions regarding interest rates, economic growth or other macroeconomic variables. Instead, these weights stem from our company-by-company search for compelling investment opportunities in markets around the world. Overall, by approaching the short-term vagaries of the markets with confidence and a rational, objective analysis, we aim to purchase attractively priced stocks and deliver superior long-term results. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. Source for all statistical data -- Brandes Investment Partners, L.P. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. SOME OF THE COUNTRIES THE FUND INVESTS IN ARE CONSIDERED EMERGING ECONOMIES, WHICH MEANS THERE MAY BE GREATER RISKS ASSOCIATED WITH INVESTING THERE THAN IN MORE DEVELOPED COUNTRIES. IN ADDITION, CONCENTRATION OF INVESTMENTS IN A SINGLE REGION MAY RESULT IN GREATER VOLATILITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 NATIONS GLOBAL VALUE FUND LARGE CAP INVESTMENT COMMITTEE COMMENTARY (continued) HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, the Nations Global Value Fund (Investor A Shares) returned 8.64%. The MSCI World Index*** posted a 10.56% return for the same period. The fund benefited from an overweight in Netherlands stocks and an overweight in diversified telecommunications services stocks relative to its benchmark. However, stock selection and an underweight in the United States had a negative impact on the fund's relative performance as did an underweight in oil and gas stocks. WHAT FACTORS PROVED TO BE FAVORABLE TO FUND PERFORMANCE?**** From a country perspective, the fund's overweight in the Netherlands provided the most substantial benefit to relative performance. Stock selection in the United Kingdom and an overweight in German investments also contributed to results. On an industry basis, the fund's overweight in diversified telecommunications services helped. In terms of individual stocks, the fund's positions in BAE Systems, ING Groep NV and Marks & Spencer Group were the largest contributors to the fund's solid performance for the period. WHAT FACTORS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE? Stock selection and an underweight in US stocks were largely responsible for the fund's underperformance relative to its benchmark. Stock selection in France, as well as stock selection and an overweight in Japan, also hurt. On an industry basis, the fund's exposure in oil and gas was lower than the sector's weight in the MSCI World Index, which contributed to the fund's underperformance relative to the index. In terms of individual stocks, investments in Hitachi, Alcatel SA and Merck & Co. had the largest negative influence on the period's return. DID CURRENCY HAVE AN IMPACT ON THE FUND'S PERFORMANCE? For US-based investors, the decline in the value of the dollar relative to other currencies tended to bolster the period's results. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? During the 12 months ended March 31, 2005, the fund's country and industry exposures shifted slightly due to stock-specific buying and selling as well as changes in the prices of holdings. For example, exposure to the pharmaceuticals industry increased, while exposure to the United States decreased. The fund's industry and country weights are not the product of top-down forecasts or opinions but stem from our company-by-company search for compelling investment opportunities. While we offer no predictions regarding the short-term direction of global equity markets, we believe the fund remains well positioned to deliver a competitive long-term return, relative to its benchmark. We believe that the fund's holdings are ***The MSCI World Index is an unmanaged index consisting of securities listed on exchanges in the major European and Asian countries, Australia and the U.S. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 4 NATIONS GLOBAL VALUE FUND LARGE CAP INVESTMENT COMMITTEE COMMENTARY (continued) undervalued relative to a variety of standard measures and that the fund has the potential to benefit if the market recognizes their true worth. --------------------------------------------------- Brandes Investment Partners, L.P. is the investment sub-advisor to Nations Global Value Fund. The fund is team-managed by an investment committee, whose members are senior portfolio management and research analysts of the firm, including Messrs. Charles Brandes, Glenn Carlson, Brent Woods, William Pickering, and Amelia Morris who are members of the firm's Investment Oversight Committee. The Investment Oversight Committee monitors the investment process of and establishes broad standards and practices to be followed by each of Brandes' Investment Committees. Charles Brandes has been Chairman of Brandes since 2002, and Managing Partner from 1996-2002. Chief Executive Officer (CEO) Glenn Carlson has been with Brandes since 1996, serving as Managing Partner from 1996-2002, co-CEO from 2002-2004, and CEO since 2004. Brent Woods has been Managing Director of Investments since 2002, and served as Managing Partner from 1998-2002. William Pickering is Director of Investments, and Amelia Morris is Investment Group Director, both serving Brandes since 1998. 5 NATIONS GLOBAL VALUE FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,109.55 1,018.60 6.68 6.39 1.27 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,108.60 1,017.35 7.99 7.64 1.52 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1.104.81 1,013.61 11.91 11.40 2.27 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,104.71 1,013.61 11.91 11.40 2.27
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 6 NATIONS GLOBAL VALUE FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 7 NATIONS GLOBAL VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 1.7% Brazil 3.0% Italy 3.1% France 4.5% Spain 5.8% Switzerland 9.3% Netherlands 9.5% Germany 12.0% United Kingdom 13.2% Japan 37.9% United States
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Unilever 3.4% ------------------------------------------------- 2 Nestle SA 3.4% ------------------------------------------------- 3 BAE Systems 3.1% ------------------------------------------------- 4 GlaxoSmithKline 2.9% ------------------------------------------------- 5 Kroger 2.6% ------------------------------------------------- 6 Schering-Plough 2.6% ------------------------------------------------- 7 Safeway 2.5% ------------------------------------------------- 8 Nippon Telegraph & Telephone 2.5% ------------------------------------------------- 9 Merck & Co. 2.5% ------------------------------------------------- 10 Zurich Financial Services AG 2.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
8 NATIONS GLOBAL VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
LIPPER GLOBAL LARGE-CAP NATIONS GLOBAL VALUE FUND VALUE FUNDS AVERAGE MSCI WORLD INDEX ------------------------- ----------------------- ---------------- Apr. 16 2001 9425 10000 10000 2002 9889 10242 9402 2003 6924 7554 7114 2004 11771 11575 10234 Mar. 31 2005 12788 12685 11314
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
LIPPER GLOBAL LARGE-CAP NATIONS GLOBAL VALUE FUND VALUE FUNDS AVERAGE MSCI WORLD INDEX ------------------------- ----------------------- ---------------- Apr. 16 2001 10000 10000 10000 2002 10492 10242 9402 2003 7346 7554 7114 2004 12489 11575 10234 Mar. 31 2005 13568 12685 11314
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (4/16/01 through 3/31/05) 8.02% 6.41%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Global Value Fund from the inception of the share class. The MSCI World Index is an unmanaged index consisting of securities listed on exchanges in the major European and Asian countries, Australia and the U.S. Funds in the Lipper Global Large-Cap Value Funds Average invest at least 25% of their portfolio in securities traded outside the United States and may own U.S. securities as well. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/16/01 4/16/01 4/16/01 4/16/01 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 8.84% 8.64% 2.43% 7.85% 2.89% 7.84% 6.85% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 9.20% 8.95% 6.82% 8.16% 7.29% 8.15% 8.15% SINCE INCEPTION 8.29% 8.02% 6.41% 7.23% 6.61% 7.23% 7.23%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 9 NATIONS INTERNATIONAL VALUE FUND LARGE CAP INVESTMENT COMMITTEE COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S MANAGEMENT TEAM SHARES ITS VIEWS ON NATIONS INTERNATIONAL VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term capital appreciation by investing primarily in equity securities of foreign issuers, including emerging market countries. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations International Value Fund Investor A Shares provided shareholders with a total return of 13.38%.** - -------------------------------------------------------------------------------- SUBJECT TO CERTAIN LIMITED EXCEPTIONS, NATIONS INTERNATIONAL VALUE FUND IS NO LONGER ACCEPTING NEW INVESTMENTS FROM CURRENT OR PROSPECTIVE INVESTORS. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations International Value Fund is managed using an approach to value investing developed by Benjamin Graham. Graham believed that, because of the irrationality of equity markets, a stock's price and its fair value often detach from one another in the short term. This irrationality can materialize on the upside, lifting prices to dangerously lofty heights. It can also appear on the downside, dragging prices for select stocks to bargain levels. Value investors target the latter situation, purchasing out-of-favor stocks that are trading at substantial discounts to their fair values. We believe that the market prices of these undervalued stocks will climb as the markets recognize their inherent worth. Of course, this process often takes time -- and, once purchased, a stock's price may even decline further in the short term. With this in mind, we exercise patience and manage our holdings from a long-term perspective. Typically, we expect to hold a stock for as long as three to five years. It is also important to understand that the fund's industry and country weights are not the product of top-down forecasts or opinions regarding interest rates, economic growth or other macroeconomic variables. Instead, these weights stem from our company-by-company search for compelling investment opportunities in international equity markets. Overall, by approaching the short-term vagaries of the markets with confidence and a rational, objective analysis, we aim to purchase attractively priced stocks and deliver superior long-term results. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. Source for all statistical data -- Brandes Investment Partners, L.P. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. SOME OF THE COUNTRIES THE FUND INVESTS IN ARE CONSIDERED EMERGING ECONOMIES, WHICH MEANS THERE MAY BE GREATER RISKS ASSOCIATED WITH INVESTING THERE THAN IN MORE DEVELOPED COUNTRIES. IN ADDITION, CONCENTRATION OF INVESTMENTS IN A SINGLE REGION MAY RESULT IN GREATER VOLATILITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 10 NATIONS INTERNATIONAL VALUE FUND LARGE CAP INVESTMENT COMMITTEE COMMENTARY (continued) HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations International Value Fund (Investor A Shares) returned 13.38%. The MSCI EAFE Index*** posted a 15.06% return for the same period. In a generally favorable environment for international stocks, the fund generated strong performance for the period. The fund's exposure to emerging markets contributed to performance because emerging markets stocks significantly outperformed developed markets for the period. The fund's underweight in France, United Kingdom and Australia weighed on performance during the period. WHAT FACTORS PROVED TO BE FAVORABLE TO FUND PERFORMANCE?**** The fund benefited from an overweight in Singapore, as well as exposure to emerging markets, Brazil and South Korea. On an industry basis, overweight in diversified telecommunication services contributed to performance. Investments in Banca Intesa S.p.A., Japan Tobacco and Telecom Italia S.p.A. were the largest contributors to investment results on an individual security basis. WHAT FACTORS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE? The fund's exposure to France, the United Kingdom and Australia was underweight the index. In addition, the fund's holdings in France tended to underperform the country's contribution to the MSCI EAFE Index. The fund also had less exposure to oil and gas stocks during a period in which energy was a strong performer. Individual holdings Hitachi, Nippon Telegraph & Telephone and Alcatel SA also detracted from performance. DID CURRENCY HAVE AN IMPACT ON THE FUND'S PERFORMANCE? For US-based investors, the decline in the value of the dollar relative to other currencies tended to bolster the period's results. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? During the 12 months ended March 31, 2005, the fund's country and industry exposures shifted slightly due to stock-specific buying and selling, as well as changes in the prices of holdings. For example, exposure to the food products industry increased, while exposure to Japan decreased. The fund's weights for industries and countries are not the product of top-down forecasts or opinions but stem from our company-by-company search for compelling investment opportunities. While we offer no predictions regarding the short-term direction of international equity markets, we believe the fund remains well positioned to deliver competitive long-term results. We believe that the fund's holdings are undervalued relative to standard valuation measures and that the fund has the potential to benefit if the market recognizes our assessment of their worth. --------------------------------------------------- ***The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged, market capitalization index that is designed to measure developed market equity performance, excluding U.S. and Canada. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 11 NATIONS INTERNATIONAL VALUE FUND LARGE CAP INVESTMENT COMMITTEE COMMENTARY (continued) Brandes Investment Partners, L.P. is the investment sub-advisor to Nations International Value Fund. The fund is team-managed by an investment committee, whose members are senior portfolio management and research analysts of the firm, including Messrs. Charles Brandes, Glenn Carlson, Brent Woods, William Pickering, and Amelia Morris who are members of the firm's Investment Oversight Committee. The Investment Oversight Committee monitors the investment process of and establishes broad standards and practices to be followed by each of Brandes' Investment Committees. Charles Brandes has been Chairman of Brandes since 2002, and Managing Partner from 1996-2002. Chief Executive Officer (CEO) Glenn Carlson has been with Brandes since 1996, serving as Managing Partner from 1996-2002, co-CEO from 2002-2004, and CEO since 2004. Brent Woods has been Managing Director of Investments since 2002, and served as Managing Partner from 1998-2002. William Pickering is Director of Investments, and Amelia Morris is Investment Group Director, both serving Brandes since 1998. 12 NATIONS INTERNATIONAL VALUE FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,137.92 1,019.75 5.54 5.24 1.04 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,136.57 1,018.50 6.87 6.49 1.29 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,132.64 1,014.76 10.85 10.25 2.04 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,132.64 1,014.76 10.85 10.25 2.04
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 13 NATIONS INTERNATIONAL VALUE FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 14 NATIONS INTERNATIONAL VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 4.5% Singapore 4.1% Brazil 4.8% France 6.5% Spain 8.3% Switzerland 10.1% Netherlands 10.4% United States 11.4% Germany 16.2% Japan 16.7% United Kingdom 7.0% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Nestle SA 4.3% ------------------------------------------------- 2 Unilever 4.3% ------------------------------------------------- 3 GlaxoSmithKline 3.1% ------------------------------------------------- 4 Telefonica SA 3.0% ------------------------------------------------- 5 Deutsche Telekom AG 2.8% ------------------------------------------------- 6 Banco Bilbao Vizcaya Argentaria SA 2.8% ------------------------------------------------- 7 Koninklijke Ahold NV 2.4% ------------------------------------------------- 8 Portugal Telecom SGPS SA 2.3% ------------------------------------------------- 9 Sumitomo Mitsui Financial Group 2.2% ------------------------------------------------- 10 DBS Group Holdings 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
15 NATIONS INTERNATIONAL VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS INTERNATIONAL VALUE LIPPER INTERNATIONAL MULTI- FUND MSCI EAFE INDEX CAP CORE FUNDS AVERAGE --------------------------- --------------- --------------------------- Dec. 27 1995 9425 10000 10000 9591 10289 10349 1997 11437 10438 11407 15359 12381 13851 1999 15628 13131 13695 21232 16426 18696 2001 21079 12178 14157 20984 11194 13259 2003 14905 8553 10081 26705 13475 15523 Mar. 31 2005 30281 15506 17633
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS INTERNATIONAL VALUE LIPPER INTERNATIONAL MULTI- FUND MSCI EAFE INDEX CAP CORE FUNDS AVERAGE --------------------------- --------------- --------------------------- Dec. 27 1995 10000 10000 10000 10176 10289 10349 1997 12135 10438 11407 16296 12381 13851 1999 16581 13131 13695 22527 16426 18696 2001 22365 12178 14157 22264 11194 13259 2003 15814 8553 10081 28334 13475 15523 Mar. 31 2005 32128 15506 17633
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/27/95 through 3/31/05) 13.43% 12.71%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations International Value Fund from the inception of the share class. The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged, market capitalization index that is designed to measure developed market equity performance, excluding U.S. and Canada. Funds in the Lipper International Multi-Cap Core Funds Average invest their assets in securities with primary trading markets outside of the United States. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. Index performance is from 1/1/96. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B+ INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/27/95 12/27/95 5/22/98 6/15/98 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 13.63% 13.38% 6.86% 12.54% 7.54% 12.54% 11.54% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 13.27% 13.00% 10.80% 12.15% 11.35% 12.15% 12.15% 5 YEARS 7.62% 7.36% 6.09% 6.57% 6.25% 6.56% 6.56% SINCE INCEPTION 13.65% 13.43% 12.71% 12.80% 12.80% 11.62% 11.62%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. (+)Investor B Shares commenced operations on May 22, 1998 and have no performance prior to that date. Performance prior to May 22, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. Inception date for Investor A Shares is December 27, 1995. 16 NATIONS INTERNATIONAL EQUITY FUND MANAGEMENT TEAMS COMMENTARY* - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term capital growth by investing primarily in equity securities of non-United States companies in Europe, Australia, the Far East and other regions, including developing countries. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations International Equity Fund Investor A Shares provided shareholders with a total return of 10.88%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Marsico Capital Management, LLC (Marsico Capital) combines top-down economic analysis with bottom-up stock selection. Marsico Capital's top-down approach takes into consideration such macro-economic factors as interest rates, inflation, demographics, the regulatory environment, and the global competitive landscape. In evaluating a particular company, Marsico Capital may look for qualities such as specific market expertise or dominance, franchise durability, pricing power, solid fundamentals, strong and ethical management, apparent commitment to shareholder interests and reasonable valuations in the context of projected growth rates. Causeway Capital Management LLC (Causeway) uses a bottom-up analysis and a disciplined value approach. Causeway seeks to invest in companies that it believes are currently undervalued by the market. Causeway makes investment decisions based on the following factors: low price-to-earnings ratios relative to the sector; high yields or share repurchases, low price-to-book value ratios and low price-to-cash flow ratios relative to the market; and financial strength. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12-month period ended March 31, 2005, Nations International Equity Fund (Investor A Shares) returned 10.88%, compared with the MSCI EAFE Index, which returned 15.06%.*** The Marsico Capital portion of the fund trailed the index. Investments in media, financials, and energy, as well as an overweight position in information technology, detracted from performance relative to the benchmark. Investments in the hotels, *The outlook for this fund may differ from that presented for other Nations Funds mutual funds. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or expense reimbursements by the International Equity Fund investment advisor and/or other service providers, which have the effect of increasing total return. Had Investor A Shares provided all sales charges, fees and expenses been considered, the total returns would have been lower. ***The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged, market capitalization index that is designed to measure developed market equity performance, excluding U.S. and Canada. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. Sources for all statistical data -- Marsico Capital Management, LLC and Causeway Capital Management LLC. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. SOME OF THE COUNTRIES THE FUND INVESTS IN ARE CONSIDERED EMERGING ECONOMIES, WHICH MEANS THERE MAY BE GREATER RISKS ASSOCIATED WITH INVESTING THERE THAN IN MORE DEVELOPED COUNTRIES. IN ADDITION, CONCENTRATION OF INVESTMENTS IN A SINGLE REGION MAY RESULT IN GREATER VOLATILITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 17 NATIONS INTERNATIONAL EQUITY FUND MANAGEMENT TEAMS COMMENTARY (continued) restaurants and leisure; retailing; and household and personal products industries were the best performers in this segment of the portfolio. The Causeway portfolio outperformed the index primarily through superior stock selection among its investments in European companies. Holdings in telecommunications services, banks, capital goods and diversified financials industries contributed to its outperformance. WHAT FACTORS PROVED TO BE FAVORABLE TO FUND PERFORMANCE?**** Within the Marsico Capital portfolio, stock selection and an emphasis on the hotels, restaurants and leisure industry group helped performance. Holdings in Wynn Resorts and Shangri-La Asia emerged as the two largest contributors to performance on an individual stock level. Positions in Japanese retailer Yamada Denki, Swiss bank UBS AG, energy company Total SA and Shoppers Drug Mart, a Canadian drug store chain, were also strong performers. The single largest contributor to Causeway's performance was Spanish travel reservations system provider, Amadeus Global Travel. Amadeus was the subject of a buyout by a consortium of private equity firms during the period. Other top contributors included French toll road operator Vinci SA, Dutch financial services giant ING Groep NV, Allied Irish Banks and Spanish tobacco company, Altadis SA. WHAT FACTORS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE? Media holdings EMI Group, and Yamaha were among the largest detractors from performance. Stock selection in the financials sector also had a significantly negative effect on results. The portfolio had little exposure to energy companies, which were strong performers, during most of the period. A decision to increase these holdings hurt the fund's return when the sector later cooled. An overweight in the semiconductor and semiconductor equipment industry hurt performance, as did positioning in the industrial and utilities sector. The fund's investments in South Korea and Canada, which are not represented in the benchmark, also hindered performance because they underperformed. DID CURRENCY HAVE AN IMPACT ON THE FUND'S PERFORMANCE? Currency factors had a material negative impact on the Marsico Capital portfolio's performance. Although it stabilized late in the reporting period, the US dollar weakened considerably compared to several major world currencies. This had a particularly negative effect on several of the Marsico Capital portfolio's dollar-based positions such as Tyco International (no longer held at March 31, 2005), NTL, and Wynn Resorts, as well as certain holdings whose "home" currency tends to be highly correlated with the dollar. However, the decline in the U.S. dollar had a generally positive effect on the Causeway portfolio. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? Overall, holdings are widely diversified. As of March 31, 2005, sector allocations in the Marsico Capital portion of the fund emphasized investments in financial, ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 18 NATIONS INTERNATIONAL EQUITY FUND MANAGEMENT TEAMS COMMENTARY (continued) consumer discretionary and energy companies. The Causeway portion of the fund has emphasized pharmaceuticals, tobacco, utilities, airport and toll road concessions management, mail delivery and logistics and telecommunications services. --------------------------------------------------- The fund is managed by Marsico Capital and Causeway; both are investment sub-advisors to the fund. Each sub-advisor manages approximately one-half of the fund's assets. James G. Gendelman manages Marsico Capital's portion of Nations International Equity Fund. He has been with Marsico Capital since April 2000. James Doyle, Jonathan Eng, Harry Hartford and Sarah Ketterer have co-managed Causeway's portion of Nations International Equity Fund since May 2004. They have all been with Causeway since July 2001. 19 NATIONS INTERNATIONAL EQUITY FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-2 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,131.49 1,020.04 5.21 4.94 0.98 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,129.54 1,018.80 6.53 6.19 1.23 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,125.80 1,015.06 10.49 9.95 1.98 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,125.11 1,015.06 10.49 9.95 1.98
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. 20 NATIONS INTERNATIONAL EQUITY FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 21 NATIONS INTERNATIONAL EQUITY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 3.1% Hong Kong 3.3% Ireland 3.8% South Korea 4.9% Canada 5.1% Netherlands 7.5% Switzerland 12.8% France 13.0% United States 13.9% Japan 21.2% United Kingdom 11.4% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS --------------------------------------------------- 1 Sanofi-Aventis SA 2.9% --------------------------------------------------- 2 Vinci SA 2.8% --------------------------------------------------- 3 UBS AG 2.3% --------------------------------------------------- 4 Promise 2.0% --------------------------------------------------- 5 Samsung Electronics 1.8% --------------------------------------------------- 6 Enterprise Inns 1.8% --------------------------------------------------- 7 Astellas Pharma 1.7% --------------------------------------------------- 8 Total SA 1.7% --------------------------------------------------- 9 Takefuji 1.4% --------------------------------------------------- 10 GlaxoSmithKline 1.3% --------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
22 NATIONS INTERNATIONAL EQUITY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS INTERNATIONAL EQUITY LIPPER INTERNATIONAL LARGE- FUND MSCI EAFE INDEX CAP CORE FUNDS AVERAGE ---------------------------- --------------- --------------------------- Mar. 31 1995 9425 10000 10000 11258 11233 11791 1997 11380 11396 12974 13174 13517 15673 1999 13647 14336 15883 19043 17933 21629 2001 13799 13295 15676 12979 12221 14385 2003 10032 9338 10780 15319 14711 16031 Mar. 31 2005 16985 16929 17857
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS INTERNATIONAL EQUITY LIPPER INTERNATIONAL LARGE- FUND MSCI EAFE INDEX CAP CORE FUNDS AVERAGE ---------------------------- --------------- --------------------------- Mar. 31 1995 10000 10000 10000 11945 11233 11791 1997 12074 11396 12974 13978 13517 15673 1999 14480 14336 15883 20205 17933 21629 2001 14641 13295 15676 13771 12221 14385 2003 10644 9338 10780 16254 14711 16031 Mar. 31 2005 18022 16929 17857
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 6.07% 5.44%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations International Equity Fund over the last 10 years. The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged, market capitalization index that is designed to measure developed market equity performance, excluding U.S. and Canada. Funds in the Lipper International Large-Cap Core Funds Average invest their assets in securities with primary trading markets outside of the United States. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/2/91 6/3/92 6/7/93 6/17/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 11.10% 10.88% 4.52% 10.09% 5.09% 10.00% 9.00% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 9.31% 9.38% 7.24% 8.21% 7.35% 8.75% 8.75% 5 YEARS -2.20% -2.26% -3.41% -3.16% -3.52% -2.90% -2.90% 10 YEARS 6.21% 6.07% 5.44% 5.16% 5.16% 5.35% 5.35% SINCE INCEPTION 5.98% 5.70% 5.21% 5.15% 5.15% 5.19% 5.19%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 23 NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks long-term capital growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Marsico International Opportunities Fund Investor A Shares provided shareholders with a total return of 5.24%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Marsico Capital Management, LLC (Marsico Capital) combines top-down economic analysis with bottom-up stock selection. Marsico Capital's top-down approach takes into consideration such macro-economic factors as interest rates, inflation, demographics, the regulatory environment, and the global competitive landscape. In evaluating a particular company, Marsico Capital may look for qualities such as specific market expertise or dominance, franchise durability, pricing power, solid fundamentals, strong and ethical management, apparent commitment to shareholder interests and reasonable valuations in the context of projected growth rates. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12-month period ended March 31, 2005, Nations Marsico International Opportunities Fund (Investor A Shares) had a total return of 5.24%. This return compares with the MSCI EAFE Index, the fund's benchmark, which returned 15.06%.*** Investments in the hotels, restaurants and leisure; retailing; and household and personal products industry groups were the primary contributors to the fund's performance for the reporting period. The fund underperformed its benchmark primarily because of disappointing returns for its investments in the financials, information technology and energy sectors. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. ***The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged, market capitalization index that is designed to measure developed market equity performance, excluding U.S. and Canada. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. Source for all statistical data -- Marsico Capital Management, LLC. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. SOME OF THE COUNTRIES THE FUND INVESTS IN ARE CONSIDERED EMERGING ECONOMIES, WHICH MEANS THERE MAY BE GREATER RISKS ASSOCIATED WITH INVESTING THERE THAN IN MORE DEVELOPED COUNTRIES. IN ADDITION, CONCENTRATION OF INVESTMENTS IN A SINGLE REGION MAY RESULT IN GREATER VOLATILITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 24 NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND PORTFOLIO MANAGER COMMENTARY (continued) WHAT FACTORS PROVED TO BE FAVORABLE TO FUND PERFORMANCE?**** The fund did well by owning more hotels, restaurants and leisure stocks than its benchmark. Stock selection within the sector was also a positive factor for performance. Positions in Wynn Resorts and Shangri-La Asia were the two largest contributors to the fund's performance. A position in Japanese retailer Yamada Denki led the retailing industry to contribute to the fund's performance results for the period. Within the household and personal products industry, the fund's position in Shoppers Drug Mart was also a strong performer. WHAT FACTORS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE? Stock selection in the financials sector detracted from investment results. Positions in Kookmin Bank (no longer held at March 31, 2005) and Mitsubishi Tokyo Financial Group had the largest negative effect on the fund's performance for the reporting period. An overweight investment posture (as compared to the fund's benchmark index) in the semiconductor and semiconductor equipment industry was the primary reason that the fund trailed the benchmark. Other factors, such as stock selection and underweights in the industrials and utilities sectors, also hindered performance. DID CURRENCY HAVE AN IMPACT ON THE FUND'S PERFORMANCE? Currency factors had a material negative impact on the fund's performance. Although it stabilized late in the reporting period, the US dollar weakened considerably compared to several major world currencies. This had a particularly negative effect on several of the Fund's dollar-based positions such as Tyco International (no longer held at March 31, 2005), NTL and Wynn Resorts, as well as certain holdings whose "home" currency tends to be highly correlated with the dollar. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? As of March 31, 2005, the fund's sector allocation emphasized the financials, consumer discretionary and energy sectors. In addition, the fund's holdings remain widely diversified in that every one of the ten major sector groups is represented in the fund. --------------------------------------------------- Marsico Capital is the investment sub-advisor to Nations Marsico International Opportunities Fund. James G. Gendelman has managed the fund since August 2000 and has been with Marsico Capital since April 2000. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 25 NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,103.12 1,019.35 5.87 5.64 1.12 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,101.37 1,018.10 7.18 6.89 1.37 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,097.73 1,014.41 11.04 10.60 2.11 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,096.63 1,014.41 11.03 10.60 2.11
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 26 NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 27 NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 3.1% Italy 3.7% Mexico 3.8% Germany 4.2% Hong Kong 7.1% Canada 8.6% Switzerland 13.1% United Kingdom 13.8% France 15.1% United States 17.7% Japan 9.8% Other
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 UBS AG 4.8% ------------------------------------------------- 2 Enterprise Inns 3.6% ------------------------------------------------- 3 Vinci SA 3.4% ------------------------------------------------- 4 Sanofi-Aventis SA 3.0% ------------------------------------------------- 5 InterContinental Hotels Group 2.7% ------------------------------------------------- 6 Canadian National Railway 2.5% ------------------------------------------------- 7 Total SA 2.5% ------------------------------------------------- 8 Promise 2.4% ------------------------------------------------- 9 Yamada Denki 2.3% ------------------------------------------------- 10 Swiss Life Holding 2.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE SECURITIES IN WHICH THE FUND INVESTS.
28 NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS MARSICO INTERNATIONAL OPPORTUNITIES LIPPER INTERNATIONAL MULTI- FUND MSCI EAFE INDEX CAP FUNDS AVERAGE --------------------------- --------------- --------------------------- Aug. 1 2000 9425 10000 10000 2001 7549 8058 7357 2002 7842 7407 6788 2003 6531 5660 5072 2004 10507 8916 7894 Mar. 31 2005 11058 10259 8698
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS MARSICO INTERNATIONAL OPPORTUNITIES LIPPER INTERNATIONAL MULTI- FUND MSCI EAFE INDEX CAP FUNDS AVERAGE --------------------------- --------------- --------------------------- Aug. 1 2000 10000 10000 10000 2001 8010 8058 7357 2002 8320 7407 6788 2003 6930 5660 5072 2004 11148 8916 7894 Mar. 31 2005 11733 10259 8698
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (8/1/00 through 3/31/05) 3.48% 2.18%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico International Opportunities Fund from the inception of the share class. The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged, market capitalization index that is designed to measure developed market equity performance, excluding U.S. and Canada. Funds in the Lipper International Multi-Cap Funds Average invest their assets in securities with primary trading markets outside of the United States. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 8/1/00 8/1/00 8/1/00 8/1/00 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 5.55% 5.24% -0.78% 4.45% -0.55% 4.45% 3.45% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 12.43% 12.14% 9.94% 11.29% 10.48% 11.29% 11.29% SINCE INCEPTION 3.76% 3.48% 2.18% 2.71% 2.32% 2.71% 2.71%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 29 NATIONS FUNDS Nations Global Value Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMON STOCKS -- 98.6% CONSUMER DISCRETIONARY -- 11.3% AUTO COMPONENTS -- 0.5% 135,100 Goodyear Tire & Rubber Co.(a)(b).............................. $ 1,804 -------- AUTOMOBILES -- 5.6% 156,800 DaimlerChrysler AG............................................ 7,045 370,700 Ford Motor Co. ............................................... 4,200 118,500 General Motors Corp.(b)....................................... 3,483 154,700 Volkswagen AG................................................. 7,383 -------- 22,111 -------- HOUSEHOLD DURABLES -- 1.0% 270,000 Matsushita Electric Industrial Co., Ltd. ..................... 3,988 -------- LEISURE EQUIPMENT AND PRODUCTS -- 1.1% 121,000 Fuji Photo Film Co., Ltd. .................................... 4,434 -------- MULTILINE RETAIL -- 2.3% 1,359,961 Marks & Spencer Group PLC..................................... 8,891 -------- SPECIALTY RETAIL -- 0.8% 127,200 Toys "R" Us, Inc.(a).......................................... 3,277 -------- 44,505 -------- CONSUMER STAPLES -- 18.0% FOOD AND STAPLES RETAILING -- 9.5% 345,900 Albertson's, Inc.(b).......................................... 7,143 1,079,400 J. Sainsbury PLC.............................................. 5,900 374,580 Koninklijke Ahold NV(a)....................................... 3,145 136,120 Koninklijke Ahold NV(a)(c).................................... 1,143 641,319 Kroger Co.(a)................................................. 10,280 534,200 Safeway, Inc.(a).............................................. 9,899 -------- 37,510 -------- FOOD PRODUCTS -- 6.8% 48,300 Nestle SA, Registered Shares.................................. 13,261 162,400 Unilever NV................................................... 11,081 246,100 Unilever PLC.................................................. 2,432 -------- 26,774 -------- TOBACCO -- 1.7% 102,500 Altria Group, Inc. ........................................... 6,702 -------- 70,986 -------- ENERGY -- 2.3% OIL AND GAS -- 2.3% 347,900 El Paso Corp.(b).............................................. 3,681 40,600 Lukoil, ADR................................................... 5,497 -------- 9,178 -------- FINANCIALS -- 20.8% COMMERCIAL BANKS -- 10.8% 226,679 ABN AMRO Holding NV........................................... 5,639 890,178 Banca Intesa S.p.A. .......................................... 4,535
VALUE SHARES (000) - --------------------------------------------------------------------------------------- COMMERCIAL BANKS -- (CONTINUED) 367,780 Banco Bilbao Vizcaya Argentaria SA............................ $ 6,003 242,100 Banco Santander Central Hispano SA............................ 2,954 258,100 Bayerische Vereinsbank AG(a).................................. 6,323 64,525 Hypo Real Estate Holding AG................................... 2,672 755 Mitsubishi Tokyo Financial Group, Inc. ....................... 6,565 1,144 Sumitomo Mitsui Financial Group, Inc.(b)...................... 7,765 -------- 42,456 -------- DIVERSIFIED FINANCIAL SERVICES -- 1.2% 73,186 ING Groep NV.................................................. 2,216 72,700 JPMorgan Chase & Co. ......................................... 2,516 -------- 4,732 -------- INSURANCE -- 8.8% 711,600 Aegon NV...................................................... 9,627 56,600 Loews Corp. .................................................. 4,162 596 Millea Holdings, Inc. ........................................ 8,693 22,000 Muenchener Rueckversicherungs AG, Registered Shares........... 2,651 39,600 Zurich Financial Services AG(a)............................... 6,974 15,400 Zurich Financial Services AG(a)(c)............................ 2,712 -------- 34,819 -------- 82,007 -------- HEALTH CARE -- 15.5% HEALTH CARE PROVIDERS AND SERVICES -- 1.5% 509,400 Tenet Healthcare Corp.(a)(b).................................. 5,873 -------- PHARMACEUTICALS -- 14.0% 325,600 Bristol-Myers Squibb Co. ..................................... 8,290 491,200 GlaxoSmithKline PLC........................................... 11,259 299,300 Merck & Co., Inc. ............................................ 9,688 296,000 Pfizer, Inc. ................................................. 7,776 133,500 Sankyo Co., Ltd. ............................................. 2,821 61,949 Sanofi-Aventis................................................ 5,237 554,900 Schering-Plough Corp. ........................................ 10,072 -------- 55,143 -------- 61,016 -------- INDUSTRIALS -- 5.2% AEROSPACE AND DEFENSE -- 3.1% 2,519,100 BAE Systems PLC............................................... 12,353 -------- ELECTRICAL EQUIPMENT -- 2.1% 1,298,000 Hitachi Ltd. ................................................. 8,082 -------- 20,435 -------- INFORMATION TECHNOLOGY -- 4.0% COMMUNICATIONS EQUIPMENT -- 1.8% 587,600 Alcatel SA(a)................................................. 7,148 -------- IT SERVICES -- 0.4% 201,500 Unisys Corp.(a)............................................... 1,423 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 30 NATIONS FUNDS Nations Global Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- OFFICE ELECTRONICS -- 0.9% 249,700 Xerox Corp.(a)................................................ $ 3,783 -------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.9% 330,000 Micron Technology, Inc.(a).................................... 3,412 -------- 15,766 -------- MATERIALS -- 0.9% CHEMICALS -- 0.9% 80,800 Akzo Nobel NV................................................. 3,698 -------- TELECOMMUNICATION SERVICES -- 19.9% DIVERSIFIED TELECOMMUNICATION SERVICES -- 19.9% 312,800 BellSouth Corp. .............................................. 8,224 49,700 Brasil Telecom Participacoes SA, ADR.......................... 1,623 1,664,893 BT Group PLC.................................................. 6,465 426,603 Deutsche Telekom AG, Registered Shares(a)..................... 8,544 22,790 KT Corp. ..................................................... 884 272,820 KT Corp., ADR................................................. 5,814 2,231 Nippon Telegraph & Telephone Corp. ........................... 9,783 285,500 SBC Communications, Inc. ..................................... 6,763 342,100 Tele Norte Leste Participacoes SA, ADR........................ 5,292 1,911,493 Telecom Italia S.p.A. ........................................ 7,266 498,341 Telefonica SA................................................. 8,705 167,500 Telefonos de Mexico SA de CV, ADR............................. 5,784 92,800 Verizon Communications, Inc. ................................. 3,294 -------- 78,441 -------- UTILITIES -- 0.7% ELECTRIC UTILITIES -- 0.7% 33,810 E.ON AG....................................................... 2,903 -------- TOTAL COMMON STOCKS (Cost $331,216)............................................. 388,935 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 1.4% 5,461,000 Nations Cash Reserves, Capital Class Shares(d)................ $ 5,461 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $5,461)............................................... 5,461 -------- PAR (000) - ---------- REPURCHASE AGREEMENTS(E) -- 4.6% $ 4,804 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $4,850 (repurchase proceeds $4,804)......................... 4,804 5,765 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $5,841 (repurchase proceeds $5,765)..................................................... 5,765 7,507 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $7,625 (repurchase proceeds $7,508)..................................................... 7,507 -------- TOTAL REPURCHASE AGREEMENTS (Cost $18,076).............................................. 18,076 -------- TOTAL INVESTMENTS (Cost $354,753)(f)................................ 104.6% 412,472 OTHER ASSETS AND LIABILITIES (NET).................. (4.6)% (18,281) -------- NET ASSETS.......................................... 100.0% $394,191 ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 31 NATIONS FUNDS Nations Global Value Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 - --------------- Notes to Investment Portfolio: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $18,852 and $17,575, respectively. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $3,855, which represents 1.0% of net assets. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 9). (f) Cost for federal income tax purposes is $354,753. See Note 5 for additional information.
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - ----------------------------------------------------------------- United States* $149,280 36.2% Japan 52,131 12.6 United Kingdom 47,299 11.5 Germany 37,521 9.1 Netherlands 36,550 8.8 Switzerland 22,947 5.6 Spain 17,663 4.3 France 12,385 3.0 Italy 11,802 2.9 Brazil 6,915 1.7 South Korea 6,698 1.6 Mexico 5,784 1.4 Russia 5,497 1.3 ---------------------- $412,472 100.0% ----------------------
*Includes Short-Term Obligations. Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges. ABBREVIATION: ADR -- American Depositary Receipt
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 32 NATIONS FUNDS Nations International Value Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE (000) - ---------------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 100.0% Investment in Nations Master Investment Trust, International Value Master Portfolio*....................... $3,761,650 ---------- TOTAL INVESTMENTS................................... 100.1% 3,761,650 ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............ (0.1)% (2,926) ---------- NET ASSETS.......................................... 100.0% $3,758,724 ==========
- --------------- * The financial statements of the International Value Master Portfolio, including its portfolio of investments, are included elsewhere within this report and should be read in conjunction with the International Value Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 33 NATIONS FUNDS Nations International Equity Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ COMMON STOCKS -- 95.3% CONSUMER DISCRETIONARY -- 15.8% AUTOMOBILES -- 1.6% 225,000 Honda Motor Co., Ltd. ........................................ $ 11,296 97,725 Regie National Usines Renault................................. 8,751 ---------- 20,047 ---------- HOTELS, RESTAURANTS AND LEISURE -- 5.4% 1,508,949 Enterprise Inns PLC........................................... 21,984 1,386,995 InterContinental Hotels Group PLC............................. 16,184 121,972 Kerzner International Ltd.(a)................................. 7,468 7,001,518 Shangri-La Asia Ltd.(b)....................................... 10,234 1,608,000 Shangri-La Asia Ltd.(b)(c).................................... 2,350 137,759 Wynn Resorts Ltd.(a).......................................... 9,332 ---------- 67,552 ---------- HOUSEHOLD DURABLES -- 2.2% 457,219 Koninklijke Philips Electronics NV............................ 12,627 65,000 Sony Corp. ................................................... 2,595 433,480 Thomson....................................................... 11,718 ---------- 26,940 ---------- LEISURE EQUIPMENT AND PRODUCTS -- 0.6% 726,500 Konica Minolta Holdings, Inc. ................................ 7,363 ---------- MEDIA -- 3.8% 1,359,682 EMI Group PLC................................................. 6,070 195,982 Grupo Televisa SA, ADR........................................ 11,524 337,854 JC Decaux SA(a)............................................... 9,246 183,990 Reed Elsevier NV.............................................. 2,781 821,900 Reed Elsevier PLC............................................. 8,519 1,171,100 Reuters Group PLC............................................. 9,029 ---------- 47,169 ---------- SPECIALTY RETAIL -- 2.2% 1,820,022 Kingfisher PLC................................................ 9,930 141,086 Natura Cosmeticos SA.......................................... 3,853 264,500 Yamada Denki Co., Ltd. ....................................... 13,898 ---------- 27,681 ---------- 196,752 ---------- CONSUMER STAPLES -- 5.1% BEVERAGES -- 0.6% 497,075 Diageo PLC.................................................... 7,007 ---------- FOOD AND STAPLES RETAILING -- 0.5% 124,690 Carrefour SA.................................................. 6,634 ---------- FOOD PRODUCTS -- 1.3% 72,284 Unilever NV................................................... 4,933 1,209,864 Unilever PLC.................................................. 11,957 ---------- 16,890 ---------- HOUSEHOLD PRODUCTS -- 0.6% 226,727 Reckitt Benckiser PLC......................................... 7,206 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ PERSONAL PRODUCTS -- 0.5% 177,077 Shoppers Drug Mart Corp. ..................................... $ 5,907 ---------- TOBACCO -- 1.6% 146,632 Altadis SA(b)................................................. 6,012 724,994 British American Tobacco PLC.................................. 12,781 86 Japan Tobacco, Inc. .......................................... 957 ---------- 19,750 ---------- 63,394 ---------- ENERGY -- 7.9% ENERGY EQUIPMENT AND SERVICES -- 0.5% 1,230,276 British Energy Group PLC(a)(b)................................ 6,463 ---------- OIL AND GAS -- 7.4% 574,091 BP PLC........................................................ 5,950 131,432 CNOOC Ltd.(b)................................................. 7,191 18,120,000 PetroChina Co., Ltd. ......................................... 11,268 169,339 Petroleo Brasileiro SA, ADR(b)................................ 7,481 81,950 Royal Dutch Petroleum Co. .................................... 4,912 476,723 Sasol Ltd. ................................................... 11,125 1,150,900 Shell Transport & Trading Co. PLC............................. 10,330 367,655 Talisman Energy, Inc. ........................................ 12,578 87,827 Total SA...................................................... 20,603 ---------- 91,438 ---------- 97,901 ---------- FINANCIALS -- 27.9% CAPITAL MARKETS -- 3.3% 215,400 Credit Suisse Group........................................... 9,280 80,319 Macquarie Bank Ltd. .......................................... 2,984 343,416 UBS AG........................................................ 29,101 ---------- 41,365 ---------- COMMERCIAL BANKS -- 10.5% 306,330 ABN AMRO Holding NV........................................... 7,620 503,219 Allied Irish Banks PLC........................................ 10,562 513,018 Anglo Irish Bank Corp. PLC.................................... 12,882 1,291,250 Banca Intesa S.p.A. .......................................... 6,578 260,956 Bayerische Vereinsbank AG(a).................................. 6,393 141,837 BNP Paribas................................................... 10,074 525,120 Depfa Bank PLC................................................ 8,326 260,606 Erste Bank der oesterreichischen Sparkassen AG............................................... 13,667 377,092 ForeningsSparbanken AB........................................ 8,941 337,279 ICICI Bank Ltd., ADR.......................................... 6,988 1,035,618 Lloyds TSB Group PLC.......................................... 9,355 1,333 Mitsubishi Tokyo Financial Group, Inc. ....................... 11,590 352,896 Royal Bank of Scotland Group PLC.............................. 11,229 638,000 United Overseas Bank Ltd. .................................... 5,570 ---------- 129,775 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 34 NATIONS FUNDS Nations International Equity Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- 5.0% 81,080 Acom Co. Ltd. ................................................ $ 5,496 427,067 ING Groep NV.................................................. 12,932 367,750 Promise Co., Ltd. ............................................ 25,202 262,700 Takefuji Corp. ............................................... 17,733 ---------- 61,363 ---------- INSURANCE -- 6.1% 789,294 Aviva PLC..................................................... 9,471 430,763 AXA SA........................................................ 11,505 234,400 Manulife Financial Corp.(b)................................... 11,189 464 Millea Holdings, Inc. ........................................ 6,767 512,665 Riunione Adriatica di Sicurta S.p.A. ......................... 12,093 91,165 Swiss Life Holding(a)......................................... 13,752 65,384 Zurich Financial Services AG(a)............................... 11,514 ---------- 76,291 ---------- REAL ESTATE -- 3.0% 8,579,000 CapitaLand Ltd.(b)............................................ 12,224 4,001,872 Hang Lung Properties Ltd. .................................... 5,798 1,946,000 Henderson Land Development Co. Ltd. .......................... 8,658 927,000 Sumitomo Realty & Development Co. Ltd. ....................... 11,215 ---------- 37,895 ---------- 346,689 ---------- HEALTH CARE -- 7.1% PHARMACEUTICALS -- 7.1% 612,800 Astellas Pharma, Inc. ........................................ 20,797 720,960 GlaxoSmithKline PLC........................................... 16,524 179,763 Novartis AG................................................... 8,416 424,048 Sanofi-Aventis................................................ 35,850 91,051 Schering AG................................................... 6,071 ---------- 87,658 ---------- INDUSTRIALS -- 11.0% AEROSPACE AND DEFENSE -- 0.9% 2,187,792 BAE Systems PLC............................................... 10,728 ---------- AIR FREIGHT AND LOGISTICS -- 1.8% 409,608 Deutsche Post AG.............................................. 9,998 447,264 TPG NV........................................................ 12,759 ---------- 22,757 ---------- AIRLINES -- 0.4% 1,070,900 British Airways PLC(a)........................................ 5,342 ---------- BUILDING PRODUCTS -- 1.1% 326,323 CRH PLC....................................................... 8,597 6,790 Geberit AG.................................................... 4,990 ---------- 13,587 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 0.4% 246,805 Vedior NV..................................................... 4,401 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ CONSTRUCTION AND ENGINEERING -- 3.2% 319,300 Barratt Developments PLC...................................... $ 3,979 242,334 Vinci SA...................................................... 35,022 ---------- 39,001 ---------- ELECTRICAL EQUIPMENT -- 0.6% 116,319 Fanuc Ltd. ................................................... 7,297 ---------- MARINE -- 0.0% 5,350 Frontline Ltd. ............................................... 257 1,872 Ship Finance International Ltd. .............................. 38 ---------- 295 ---------- ROAD AND RAIL -- 1.2% 240,837 Canadian National Railway Co. ................................ 15,247 ---------- TRANSPORTATION INFRASTRUCTURE -- 1.4% 844,850 BAA PLC....................................................... 9,315 1,769,032 Macquarie Airports............................................ 4,475 122,502 Macquarie Airports(c)......................................... 310 1,225,550 Macquarie Infrastructure Group................................ 3,413 ---------- 17,513 ---------- 136,168 ---------- INFORMATION TECHNOLOGY -- 6.8% COMMUNICATIONS EQUIPMENT -- 0.5% 214,109 Telefonaktiebolaget LM Ericsson, ADR(b)............................................ 6,038 ---------- COMPUTERS AND PERIPHERALS -- 0.7% 115,667 Research In Motion Ltd.(a).................................... 8,839 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.3% 533,920 Celestica, Inc. .............................................. 7,176 38,700 Keyence Corp. ................................................ 8,987 ---------- 16,163 ---------- INTERNET SOFTWARE AND SERVICES -- 0.5% 137,000 Trend Micro, Inc. ............................................ 5,905 ---------- OFFICE ELECTRONICS -- 1.2% 285,342 Canon, Inc. .................................................. 15,340 ---------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.6% 4,573,286 ARM Holdings PLC.............................................. 9,095 45,532 Samsung Electronics Co., Ltd. ................................ 22,508 ---------- 31,603 ---------- 83,888 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 35 NATIONS FUNDS Nations International Equity Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ MATERIALS -- 3.4% CHEMICALS -- 2.9% 475,251 BOC Group PLC................................................. $ 9,151 144,827 Lonza Group AG, Registered Shares............................. 8,894 422,981 Reliance Industries Ltd., GDR(b)(c)........................... 10,787 67,558 Syngenta AG(a)................................................ 7,079 ---------- 35,911 ---------- METALS AND MINING -- 0.5% 443,384 BHP Billiton PLC.............................................. 5,957 ---------- 41,868 ---------- TELECOMMUNICATION SERVICES -- 8.6% DIVERSIFIED TELECOMMUNICATION SERVICES -- 6.8% 2,396,500 BT Group PLC.................................................. 9,306 201,039 Cesky Telecom AS, GDR, Registered Shares(b)(c)..................................... 3,780 3,074,000 China Netcom Corp., Ltd.(a)................................... 4,316 31,948 France Telecom SA............................................. 959 290,760 France Telecom SA(c).......................................... 8,729 154,110 KT Corp. ..................................................... 5,979 91,745 NTL, Inc.(a).................................................. 5,841 712,010 Portugal Telecom SGPS SA...................................... 8,365 43,076 SK Telecom Co., Ltd. ......................................... 7,254 2,761,018 Telecom Corp. of New Zealand Ltd. ............................ 11,929 509,035 Telefonica SA................................................. 8,892 1,011,420 Telenor ASA(b)................................................ 9,130 ---------- 84,480 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 1.8% 208,678 America Movil SA de CV, ADR................................... 10,768 4,386,196 Vodafone Group PLC............................................ 11,645 ---------- 22,413 ---------- 106,893 ---------- UTILITIES -- 1.7% ELECTRIC UTILITIES -- 0.5% 315,870 Enel S.p.A. .................................................. 3,030 310,530 Enel S.p.A.(c)................................................ 2,978 ---------- 6,008 ---------- GAS UTILITIES -- 1.2% 2,065,764 Centrica PLC.................................................. 9,007 434,087 Enagas........................................................ 6,635 ---------- 15,642 ---------- 21,650 ---------- TOTAL COMMON STOCKS (Cost $1,015,225)........................................... 1,182,861 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------ INVESTMENT MANAGEMENT COMPANY -- 4.8% 59,456,000 Nations Cash Reserves, Capital Class Shares(d)..................................... $ 59,456 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $59,456).............................................. 59,456 ---------- PREFERRED STOCK -- 0.8% HEALTH CARE -- 0.8% HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.8% 88,635 Fresenius AG.................................................. 10,308 ---------- TOTAL PREFERRED STOCK (Cost $9,317)............................................... 10,308 ---------- PAR (000) - ----------- REPURCHASE AGREEMENTS(E) -- 6.4% $ 20,934 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $21,133 (repurchase proceeds $20,936)....................... 20,934 25,121 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $25,451 (repurchase proceeds $25,123).................................................... 25,121 32,705 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $33,221 (repurchase proceeds $32,708).................................................... 32,705 ---------- TOTAL REPURCHASE AGREEMENTS (Cost $78,760).............................................. 78,760 ---------- TOTAL INVESTMENTS (Cost $1,162,758)(f).............................. 107.3% 1,331,385 OTHER ASSETS AND LIABILITIES (NET).................. (7.3)% (90,608) ---------- NET ASSETS.......................................... 100.0% $1,240,777 ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 36 NATIONS FUNDS Nations International Equity Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 - --------------- Notes to Investment Portfolio: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $64,696 and $76,458 respectively. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $28,934, which represents 2.3% of net assets. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 9). (f) Cost for federal income tax purposes is $1,172,408. See Note 5 for additional information.
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - ------------------------------------------------------------------ United Kingdom $ 263,514 19.8% Japan 172,437 13.0 United States* 160,858 12.1 France 159,093 12.0 Switzerland 93,028 7.0 Netherlands 62,965 4.7 Canada 60,974 4.6 South Korea 46,866 3.5 Ireland 40,366 3.0 Hong Kong 38,547 2.9 Germany 32,769 2.5 Italy 24,680 1.9 Mexico 22,292 1.7 Spain 21,538 1.6 Singapore 17,794 1.3 India 17,774 1.3 Sweden 15,236 1.1 Austria 13,666 1.0 New Zealand 11,929 0.9 Brazil 11,334 0.9 China 11,268 0.8 Australia 11,182 0.8 Norway 9,130 0.7 Portugal 8,365 0.6 Czech Republic 3,780 0.3 ------------------------ $1,331,385 100.0% ------------------------
*Includes Short-Term Obligations. Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges. ABBREVIATIONS: ADR -- American Depositary Receipt GDR -- Global Depositary Receipt
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 NATIONS FUNDS Nations Marsico International Opportunities Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- COMMON STOCKS -- 94.8% CONSUMER DISCRETIONARY -- 22.4% AUTOMOBILES -- 1.4% 175,845 Regie National Usines Renault................................. $ 15,746 ---------- HOTELS, RESTAURANTS AND LEISURE -- 11.2% 2,690,977 Enterprise Inns PLC........................................... 39,204 2,491,723 InterContinental Hotels Group PLC............................. 29,074 219,475 Kerzner International Ltd.(a)................................. 13,438 13,355,665 Shangri-La Asia Ltd.(b)....................................... 19,522 2,104,000 Shangri-La Asia Ltd.(b)(c).................................... 3,075 247,455 Wynn Resorts Ltd.(a).......................................... 16,763 ---------- 121,076 ---------- HOUSEHOLD DURABLES -- 2.4% 116,900 Sony Corp. ................................................... 4,666 778,656 Thomson....................................................... 21,050 ---------- 25,716 ---------- MEDIA -- 4.5% 2,446,602 EMI Group PLC................................................. 10,922 352,042 Grupo Televisa SA, ADR........................................ 20,700 605,766 JC Decaux SA(a)............................................... 16,580 ---------- 48,202 ---------- SPECIALTY RETAIL -- 2.9% 227,611 Natura Cosmeticos SA.......................................... 6,216 17,300 Natura Cosmeticos SA(c)....................................... 472 476,800 Yamada Denki Co., Ltd. ....................................... 25,053 ---------- 31,741 ---------- 242,481 ---------- CONSUMER STAPLES -- 2.2% HOUSEHOLD PRODUCTS -- 1.2% 408,651 Reckitt Benckiser PLC(a)...................................... 12,988 ---------- PERSONAL PRODUCTS -- 1.0% 326,255 Shoppers Drug Mart Corp. ..................................... 10,884 ---------- 23,872 ---------- ENERGY -- 10.9% ENERGY EQUIPMENT AND SERVICES -- 1.1% 2,172,989 British Energy Group PLC(a)(b)................................ 11,415 ---------- OIL AND GAS -- 9.8% 1,036,964 BP PLC........................................................ 10,747 235,798 CNOOC Ltd.(b)................................................. 12,901 304,184 Petroleo Brasileiro SA, ADR(b)................................ 13,438 855,284 Sasol Ltd. ................................................... 19,959 654,682 Talisman Energy, Inc. ........................................ 22,397 114,082 Total SA...................................................... 26,763 ---------- 106,205 ---------- 117,620 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- FINANCIALS -- 30.1% CAPITAL MARKETS -- 5.4% 145,073 Macquarie Bank Ltd. .......................................... $ 5,390 617,941 UBS AG........................................................ 52,363 ---------- 57,753 ---------- COMMERCIAL BANKS -- 11.1% 919,852 Anglo Irish Bank Corp. PLC.................................... 23,097 2,323,000 Banca Intesa S.p.A. .......................................... 11,835 469,562 Bayerische Vereinsbank AG(a).................................. 11,503 466,845 Erste Bank der oesterreichischen Sparkassen AG................ 24,482 676,134 ForeningsSparbanken AB........................................ 16,031 606,895 ICICI Bank Ltd., ADR.......................................... 12,575 2,391 Mitsubishi Tokyo Financial Group, Inc. ....................... 20,790 ---------- 120,313 ---------- DIVERSIFIED FINANCIAL SERVICES -- 3.4% 382,250 Promise Co., Ltd. ............................................ 26,196 153,990 Takefuji Corp. ............................................... 10,394 ---------- 36,590 ---------- INSURANCE -- 5.4% 835 Millea Holdings, Inc. ........................................ 12,178 919,220 Riunione Adriatica di Sicurta S.p.A. ......................... 21,683 164,026 Swiss Life Holding(a)......................................... 24,744 ---------- 58,605 ---------- REAL ESTATE -- 4.8% 15,277,000 CapitaLand Ltd.(b)............................................ 21,768 7,147,200 Hang Lung Properties Ltd. .................................... 10,355 1,665,000 Sumitomo Realty & Development Co., Ltd. ...................... 20,143 ---------- 52,266 ---------- 325,527 ---------- HEALTH CARE -- 5.9% PHARMACEUTICALS -- 5.9% 612,000 Astellas Pharma, Inc. ........................................ 20,771 377,509 Sanofi-Aventis................................................ 31,915 163,263 Schering AG................................................... 10,885 ---------- 63,571 ---------- INDUSTRIALS -- 7.2% CONSTRUCTION AND ENGINEERING -- 3.5% 257,176 Vinci SA...................................................... 37,168 ---------- ELECTRICAL EQUIPMENT -- 1.2% 209,319 Fanuc Ltd. ................................................... 13,132 ---------- ROAD AND RAIL -- 2.5% 432,000 Canadian National Railway Co. ................................ 27,349 ---------- 77,649 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 38 NATIONS FUNDS Nations Marsico International Opportunities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- Information technology -- 8.4% COMMUNICATIONS EQUIPMENT -- 1.0% 383,902 Telefonaktiebolaget LM Ericsson, ADR(a)(b).................... $ 10,827 ---------- COMPUTERS AND PERIPHERALS -- 1.5% 209,012 Research In Motion Ltd.(a).................................... 15,973 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.5% 69,600 Keyence Corp. ................................................ 16,164 ---------- INTERNET SOFTWARE AND SERVICES -- 0.9% 245,000 Trend Micro, Inc. ............................................ 10,559 ---------- OFFICE ELECTRONICS -- 1.0% 204,000 Canon, Inc. .................................................. 10,966 ---------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.5% 8,200,003 ARM Holdings PLC.............................................. 16,308 21,220 Samsung Electronics Co., Ltd. ................................ 10,490 ---------- 26,798 ---------- 91,287 ---------- MATERIALS -- 4.3% CHEMICALS -- 3.3% 259,590 Lonza Group AG................................................ 15,942 759,797 Reliance Industries Ltd., GDR(b)(c)........................... 19,375 ---------- 35,317 ---------- METALS AND MINING -- 1.0% 797,746 BHP Billiton PLC.............................................. 10,718 ---------- 46,035 ---------- TELECOMMUNICATION SERVICES -- 3.4% DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.6% 363,267 Cesky Telecom AS, GDR, Registered Shares(b)(c)................ 6,831 164,599 NTL, Inc.(a).................................................. 10,480 ---------- 17,311 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 1.8% 374,847 America Movil SA de CV, ADR................................... 19,342 ---------- 36,653 ---------- TOTAL COMMON STOCKS (Cost $931,191)............................................. 1,024,695 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 3.8% 40,782,000 Nations Cash Reserves, Capital Class Shares(d)................ $ 40,782 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $40,782).............................................. 40,782 ---------- PREFERRED STOCK -- 1.7% HEALTH CARE -- 1.7% HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.7% 160,165 Fresenius AG.................................................. 18,626 ---------- TOTAL PREFERRED STOCK (Cost $16,875).............................................. 18,626 ---------- PAR (000) - ------------ Repurchase agreements(e) -- 8.8% $ 25,176 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $25,415 (repurchase proceeds $25,178)....................... 25,176 30,212 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $30,609 (repurchase proceeds $30,214).................................................... 30,212 39,331 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $39,951 (repurchase proceeds $39,334).................................................... 39,331 ---------- TOTAL REPURCHASE AGREEMENTS (Cost $94,719).............................................. 94,719 ---------- TOTAL INVESTMENTS (Cost $1,083,567)(f).............................. 109.1% 1,178,822 OTHER ASSETS AND LIABILITIES (NET).................. (9.1)% (97,990) ---------- NET ASSETS.......................................... 100.0% $1,080,832 ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 39 NATIONS FUNDS Nations Marsico International Opportunities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 - --------------- Notes to Investment Portfolio: (a) Non-income producing security. (b) All or a portion of security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $84,330 and $92,036 respectively. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $29,753, which represents 2.8% of net assets. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 9). (f) Cost for federal income tax purposes is $1,090,396. See Note 5 for additional information.
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - ------------------------------------------------------------------ Japan $ 191,012 16.2% United States* 162,744 13.8 France 149,221 12.7 United Kingdom 141,378 12.0 Switzerland 93,050 7.9 Canada 76,603 6.5 Hong Kong 45,852 3.9 Germany 41,015 3.5 Mexico 40,042 3.4 Italy 33,518 2.8 India 31,949 2.7 Sweden 26,858 2.3 Austria 24,482 2.1 Ireland 23,096 1.9 Singapore 21,767 1.8 Brazil 20,127 1.7 South Africa 19,959 1.7 Bahamas 13,438 1.1 South Korea 10,490 0.9 Czech Republic 6,831 0.6 Australia 5,390 0.5 ------------------------ $1,178,822 100.0% ------------------------
*Includes Short-Term Obligations. Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges. ABBREVIATIONS: ADR -- American Depositary Receipt GDR -- Global Depositary Receipt
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 40 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
GLOBAL INTERNATIONAL INTERNATIONAL INTERNATIONAL VALUE VALUE EQUITY OPPORTUNITIES ----------------------------------------------------------------------------------- (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost........ $ 349,292 $ 3,160,217 $ 1,103,302 $ 1,042,785 Affiliated investments, at cost............ 5,461 -- 59,456 40,782 ----------------- ----------------- ----------------- ----------------- Non-affiliated investments, at value....... 407,011 3,761,650 1,271,929 1,138,040 Affiliated investments, at value........... 5,461 -- 59,456 40,782 Cash....................................... 9 -- 56 64 Foreign currency (cost $37, $--, $867 and $901, respectively)...................... 37 -- 869 905 Receivable for investment securities sold..................................... -- -- 23,842 17,000 Receivable for Fund shares sold............ 113 2,256 2,814 3,971 Dividends receivable....................... 963 -- 3,944 1,767 Interest receivable........................ 2 -- 36 46 Receivable from investment advisor......... -- 373 300 -- Receivable for foreign tax reclaims........ 15 -- -- 63 Other assets............................... 8 -- 6 8 ----------------- ----------------- ----------------- ----------------- Total assets........................... 413,619 3,764,279 1,363,252 1,202,646 ----------------- ----------------- ----------------- ----------------- LIABILITIES: Collateral on securities loaned............ (18,076) -- (78,760) (94,719) Investment advisory fee payable............ (306) -- (711) (726) Administration fee payable................. (58) (556) (179) (200) Shareholder servicing and distribution fees payable.................................. (143) (454) (17) (41) Payable for investment securities purchased................................ -- -- (41,254) (25,333) Payable for Fund shares redeemed........... (682) (4,236) (896) (616) Accrued Trustees' fees and expenses........ (35) (42) (145) (43) Accrued expenses and other liabilities..... (128) (267) (513) (136) ----------------- ----------------- ----------------- ----------------- Total liabilities...................... (19,428) (5,555) (122,475) (121,814) ----------------- ----------------- ----------------- ----------------- NET ASSETS................................. $ 394,191 $ 3,758,724 $ 1,240,777 $ 1,080,832 ================= ================= ================= ================= NET ASSETS CONSIST OF: Undistributed net investment income/(loss)............................ $ (75) $ 574 $ 10,885 $ 384 Accumulated net realized gain/(loss) on investments.............................. 12,430 131,660 (24,615) 41,178 Unrealized appreciation/(depreciation) on: Investments.............................. 57,719 601,433 168,627 95,255 Foreign currency translations............ 3 -- (20) 65 Paid-in capital............................ 324,114 3,025,057 1,085,900 943,950 ----------------- ----------------- ----------------- ----------------- NET ASSETS................................. $ 394,191 $ 3,758,724 $ 1,240,777 $ 1,080,832 ================= ================= ================= ================= PRIMARY A SHARES: Net assets................................. $ 134,337,411 $ 2,577,677,048 $ 1,199,711,576 $ 991,889,201 Number of shares outstanding............... 11,153,564 114,951,478 89,235,863 86,061,668 Net asset value and redemption price per share.................................... $ 12.04 $ 22.42 $ 13.44 $ 11.53 INVESTOR A SHARES: Net assets................................. $ 126,679,139 $ 906,848,077 $ 28,526,911 $ 52,794,006 Number of shares outstanding............... 10,575,284 40,592,841 2,144,942 4,627,363 Net asset value and redemption price per share.................................... $ 11.98 $ 22.34 $ 13.30 $ 11.41 Maximum sales charge....................... 5.75% 5.75% 5.75% 5.75% Maximum offering price per share........... $ 12.71 $ 23.70 $ 14.11 $ 12.11 INVESTOR B SHARES: Net assets................................. $ 34,324,113 $ 111,401,745 $ 9,975,549 $ 16,618,273 Number of shares outstanding............... 2,914,747 5,063,950 801,809 1,503,949 Net asset value and offering price per share(a)................................. $ 11.78 $ 22.00 $ 12.44 $ 11.05 INVESTOR C SHARES: Net assets................................. $ 98,850,490 $ 162,797,166 $ 2,562,982 $ 19,530,348 Number of shares outstanding............... 8,393,565 7,407,062 207,957 1,766,960 Net asset value and offering price per share(a)................................. $ 11.78 $ 21.98 $ 12.32 $ 11.05
- --------------- (a)The redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 41 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
GLOBAL INTERNATIONAL INTERNATIONAL INTERNATIONAL VALUE VALUE EQUITY OPPORTUNITIES ----------------------------------------------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $523, $--, $1,707 and $593, respectively)........ $ 9,509 $ -- $ 22,227 $ 12,922 Dividend income from affiliated funds.............. 104 -- 678 769 Interest........................................... --(a) -- 2 --(a) Securities lending................................. 99 -- 453 478 Allocated from Portfolio: Dividends (Net of foreign withholding taxes of $9,283)(b)....................................... -- 84,826 -- -- Dividend income from affiliated funds(b)........... -- 946 -- -- Interest(b)........................................ -- --(a) -- -- Securities lending(b).............................. -- 1,177 -- -- Expenses (Net of waiver of $--, $1,584, $-- and $--)(b).......................................... -- (30,904) -- -- -------------- -------------- -------------- -------------- Total investment income........................ 9,712 56,045 23,360 14,169 -------------- -------------- -------------- -------------- EXPENSES: Investment advisory fee............................ 3,565 -- 7,886 6,150 Administration fee................................. 804 6,079 2,075 1,691 Transfer agent fees................................ 227 1,388 245 204 Custodian fees..................................... 82 -- 388 241 Legal and audit fees............................... 149 62 162 158 Registration and filing fees....................... 44 52 39 48 Trustees' fees and expenses........................ 28 6 28 28 Interest expense................................... -- -- 1 -- Printing expense................................... 83 145 98 58 Other.............................................. 28 11 395 39 Non-recurring costs (see Note 10).................. -- 974 281 -- -------------- -------------- -------------- -------------- Subtotal....................................... 5,010 8,717 11,598 8,617 Shareholder servicing and distribution fees: Investor A Shares................................ 318 2,058 67 79 Investor B Shares................................ 344 1,099 94 121 Investor C Shares................................ 989 1,644 22 127 -------------- -------------- -------------- -------------- Total expenses................................. 6,661 13,518 11,781 8,944 Fees reduced by credits allowed by the custodian (see Note 3)..................................... --(a) -- (7) (4) Reimbursement from investment advisor (see Note 2)............................................... -- -- (879) -- Cost assumed by Bank of America Corporation (see Note 10)......................................... -- (974) (281) -- -------------- -------------- -------------- -------------- Net expenses................................... 6,661 12,544 10,614 8,940 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME/(LOSS)....................... 3,051 43,501 12,746 5,229 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions............................ 27,619 -- 134,337 49,079 Security transactions allocated from Portfolio(b)................................... -- 310,158 -- -- Foreign currencies and net other assets.......... (99) -- 1,244 81 Foreign currencies and net other assets allocated from Portfolio(b).............................. -- (626) -- -- -------------- -------------- -------------- -------------- Net realized gain/(loss) on investments............ 27,520 309,532 135,581 49,160 -------------- -------------- -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities....................................... 1,149 -- (34,827) (3,413) Securities allocated from Portfolio(b)........... -- 106,501 -- -- Foreign currencies and net other assets.......... 8 -- 75 49 -------------- -------------- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments....... 1,157 106,501 (34,752) (3,364) -------------- -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments...................................... 28,677 416,033 100,829 45,796 -------------- -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................. $ 31,728 $ 459,534 $ 113,575 $ 51,025 ============== ============== ============== ==============
- --------------- (a)Amount represents less than $500. (b)Allocated from Nations International Value Master Portfolio. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 42 [This page intentionally left blank] 43 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
GLOBAL VALUE --------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 3,051 $ 788 Net realized gain/(loss) on investments..................... 27,520 19,822 Net realized gain/(loss) on investments allocated from Portfolio(a).............................................. -- -- Net change in unrealized appreciation/(depreciation) of investments............................................... 1,157 113,541 Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio(a)................... -- -- -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 31,728 134,151 Distributions to shareholders from net investment income: Primary A Shares.......................................... (1,657) (669) Investor A Shares......................................... (1,279) (401) Investor B Shares......................................... (93) -- Investor C Shares......................................... (258) -- Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... (10,386) (1,081) Investor A Shares......................................... (9,611) (998) Investor B Shares......................................... (2,649) (306) Investor C Shares......................................... (7,641) (848) Net increase/(decrease) in net assets from Fund share transactions.............................................. (12,182) 113,819 -------------- -------------- Net increase/(decrease) in net assets....................... (14,028) 243,667 NET ASSETS: Beginning of year........................................... 408,219 164,552 -------------- -------------- End of year................................................. $ 394,191 $ 408,219 ============== ============== Undistributed net investment income/(loss) or distributions in excess of net investment income at end of year......... $ (75) $ (59) ============== ==============
- --------------- (a)Allocated from Nations International Value Master Portfolio. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 44 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERNATIONAL VALUE INTERNATIONAL EQUITY INTERNATIONAL OPPORTUNITIES - ----------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 3/31/05 3/31/04 - ------------------------------------------------------------------------------------------------------- $ 43,501 $ 30,977 $ 12,746 $ 7,830 $ 5,229 $ 484 -- -- 135,581 58,090 49,160 14,489 309,532 103,776 -- -- -- -- -- -- (34,752) 260,782 (3,364) 99,184 106,501 1,577,873 -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- 459,534 1,712,626 113,575 326,702 51,025 114,157 (34,798) (24,973) (2,945) (9,144) (4,477) (202) (10,034) (6,417) (13) (231) (138) -- (472) (289) -- (45) -- -- (687) (417) -- (7) -- -- (90,717) -- -- -- (9,182) (2,407) (30,477) -- -- -- (387) (70) (4,057) -- -- -- (162) (48) (6,042) -- -- -- (164) (24) (88,584) (399,295) 173,550 55,529 498,034 333,861 -------------- -------------- -------------- -------------- -------------- -------------- 193,666 1,281,235 284,167 372,804 534,549 445,267 3,565,058 2,283,823 956,610 583,806 546,283 101,016 -------------- -------------- -------------- -------------- -------------- -------------- $ 3,758,724 $ 3,565,058 $ 1,240,777 $ 956,610 $ 1,080,832 $ 546,283 ============== ============== ============== ============== ============== ============== $ 574 $ 3,626 $ 10,885 $ 2,103 $ 384 $ (250) ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 45 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
GLOBAL VALUE YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 84 $ 1,023 5,511 $ 57,989 Issued as reinvestment of distributions................... 198 2,276 25 277 Redeemed(a)............................................... (1,048) (12,315) (1,572) (16,294) ------ -------- ------ -------- Net increase/(decrease)................................... (766) $ (9,016) 3,964 $ 41,972 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 922 $ 10,729 5,783 $ 59,599 Shares issued upon conversion from Investor B shares...... 9 95 3 32 Issued as reinvestment of distributions................... 572 6,553 82 883 Redeemed(a)............................................... (1,523) (18,029) (1,829) (19,308) ------ -------- ------ -------- Net increase/(decrease)................................... (20) $ (652) 4,039 $ 41,206 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 58 $ 649 1,051 $ 10,524 Shares redeemed upon conversion into Investor A shares.... (9) (95) (3) (32) Issued as reinvestment of distributions................... 179 2,000 21 215 Redeemed(a)............................................... (293) (3,396) (244) (2,538) ------ -------- ------ -------- Net increase/(decrease)................................... (65) $ (842) 825 $ 8,169 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 250 $ 2,806 3,226 $ 32,565 Issued as reinvestment of distributions................... 462 5,162 53 548 Redeemed(a)............................................... (835) (9,640) (1,061) (10,641) ------ -------- ------ -------- Net increase/(decrease)................................... (123) $ (1,672) 2,218 $ 22,472 ====== ======== ====== ======== Total net increase/(decrease)............................. (974) $(12,182) 11,046 $113,819 ====== ======== ====== ========
- --------------- (a)Net of redemption fees of $1 and $1 for Primary A, $1 and $1 for Investor A, $-- and $--(b) for Investor B and $-- and $--(b) for Investor C for the years ended March 31, 2005 and March 31, 2004, respectively. (b)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 46 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
INTERNATIONAL VALUE YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 2,689 $ 56,237 3,534 $ 59,636 Issued as reinvestment of distributions................... 2,600 57,638 526 10,033 Redeemed(a)............................................... (10,506) (221,235) (22,478) (380,125) ------- --------- ------- --------- Net increase/(decrease)................................... (5,217) $(107,360) (18,418) $(310,456) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 8,493 $ 181,990 9,233 $ 156,413 Shares issued upon conversion from Investor B shares...... 22 447 10 191 Shares issued upon conversion from Investor C shares...... --(b) 9 -- -- Issued as reinvestment of distributions................... 1,448 31,919 266 5,055 Redeemed(a)............................................... (7,784) (165,152) (12,598) (212,015) ------- --------- ------- --------- Net increase/(decrease)................................... 2,179 $ 49,213 (3,089) $ (50,356) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 41 $ 876 32 $ 545 Shares redeemed upon conversion into Investor A shares.... (22) (447) (10) (191) Issued as reinvestment of distributions................... 170 3,651 12 230 Redeemed(a)............................................... (667) (13,941) (879) (14,689) ------- --------- ------- --------- Net increase/(decrease)................................... (478) $ (9,861) (845) $ (14,105) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 240 $ 5,085 194 $ 3,250 Shares redeemed upon conversion into Investor A shares.... --(b) (9) -- -- Issued as reinvestment of distributions................... 206 4,421 14 262 Redeemed(a)............................................... (1,434) (30,073) (1,724) (27,890) ------- --------- ------- --------- Net increase/(decrease)................................... (988) $ (20,576) (1,516) $ (24,378) ======= ========= ======= ========= Total net increase/(decrease)............................. (4,504) $ (88,584) (23,868) $(399,295) ======= ========= ======= =========
- --------------- (a)Net of redemption fees of $30 and $7 for Primary A, $10 and $2 for Investor A, $1 and $--(b) for Investor B, and $2 and $--(b) for Investor C for the years ended March 31, 2005 and March 31, 2004, respectively. (b)Amount represents less than 500 shares or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 47 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
INTERNATIONAL EQUITY YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- -------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 22,319 $ 283,046 36,951 $ 357,412 Issued as reinvestment of distributions................... 96 1,297 369 4,201 Redeemed(a)............................................... (8,836) (108,756) (31,162) (304,519) ------ --------- ------- --------- Net increase/(decrease)................................... 13,579 $ 175,587 6,158 $ 57,094 ====== ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 475 $ 5,857 1,713 $ 16,621 Shares issued upon conversion from Investor B shares...... --(b) 1 --(b) 2 Shares issued upon conversion from Investor C shares...... 4 45 -- -- Issued as reinvestment of distributions................... 1 10 16 183 Redeemed(a)............................................... (618) (7,580) (1,825) (17,839) ------ --------- ------- --------- Net increase/(decrease)................................... (138) $ (1,667) (96) $ (1,033) ====== ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 83 $ 998 78 $ 774 Shares redeemed upon conversion into Investor A shares.... --(b) (1) --(b) (2) Issued as reinvestment of distributions................... -- -- 4 41 Redeemed(a)............................................... (162) (1,833) (144) (1,369) ------ --------- ------- --------- Net increase/(decrease)................................... (79) $ (836) (62) $ (556) ====== ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 71 $ 817 117 $ 1,119 Shares redeemed upon conversion into Investor A shares.... (4) (45) -- -- Issued as reinvestment of distributions................... -- -- --(b) 4 Redeemed(a)............................................... (26) (306) (119) (1,099) ====== ========= ======= ========= Net increase/(decrease)................................... 41 $ 466 (2) $ 24 ====== ========= ======= ========= Total net increase/(decrease)............................. 13,403 $ 173,550 5,998 $ 55,529 ====== ========= ======= =========
- --------------- (a)Net of redemption fees of $19 and $12 for Primary A, $1 and $--(b) for Investor A, $--(b) and $--(b) for Investor B, and $--(b) and $--(b) for Investor C for the years ended March 31, 2005 and March 31, 2004, respectively. (b)Amount represents less than 500 shares or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 48 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
INTERNATIONAL OPPORTUNITIES YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 48,328 $537,931 35,348 $340,526 Issued as reinvestment of distributions................... 203 2,198 56 529 Redeemed(a)............................................... (8,141) (91,462) (3,357) (32,239) ------ -------- ------ -------- Net increase/(decrease)................................... 40,390 $448,667 32,047 $308,816 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 3,272 $ 36,374 1,686 $ 16,791 Shares issued upon conversion from Investor B shares...... 68 716 --(b) 3 Issued as reinvestment of distributions................... 32 352 5 44 Redeemed(a)............................................... (536) (5,900) (228) (2,240) ------ -------- ------ -------- Net increase/(decrease)................................... 2,836 $ 31,542 1,463 $ 14,598 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 816 $ 8,741 508 $ 4,880 Shares redeemed upon conversion into Investor A shares.... (68) (716) --(b) (3) Issued as reinvestment of distributions................... 11 119 3 31 Redeemed(a)............................................... (84) (902) (92) (892) ------ -------- ------ -------- Net increase/(decrease)................................... 675 $ 7,242 419 $ 4,016 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 1,124 $ 11,987 680 $ 6,730 Issued as reinvestment of distributions................... 7 77 1 11 Redeemed(a)............................................... (139) (1,481) (34) (310) ------ -------- ------ -------- Net increase/(decrease)................................... 992 $ 10,583 647 $ 6,431 ====== ======== ====== ======== Total net increase/(decrease)............................. 44,893 $498,034 34,576 $333,861 ====== ======== ====== ========
- --------------- (a)Net of redemption fees of $35 and $2 for Primary A, $2 and $--(b) for Investor A, $1 and $--(b) for Investor B, and $1 and $--(b) for Investor C for the years ended March 31, 2005 and March 31, 2004, respectively. (b)Amount represents less than 500 shares or $500, as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 49 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
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)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS ------------------------------------------------------------------------------------------------- GLOBAL VALUE PRIMARY A SHARES Year ended 3/31/2005......... $12.10 $ 0.14 $ 0.85 $ 0.99 $(0.14) $(0.91) Year ended 3/31/2004......... 7.21 0.07 4.99 5.06 (0.06) (0.11) Year ended 3/31/2003......... 10.50 0.07 (3.16) (3.09) (0.04) (0.16) Period ended 3/31/2002(e).... 10.00 0.06 0.47 0.53 (0.01) (0.02) INVESTOR A SHARES Year ended 3/31/2005......... $12.04 $ 0.11 $ 0.85 $ 0.96 $(0.11) $(0.91) Year ended 3/31/2004......... 7.18 0.05 4.96 5.01 (0.04) (0.11) Year ended 3/31/2003......... 10.47 0.05 (3.15) (3.10) (0.03) (0.16) Period ended 3/31/2002(e).... 10.00 0.04 0.45 0.49 --(c) (0.02) INVESTOR B SHARES Year ended 3/31/2005......... $11.86 $ 0.02 $ 0.84 $ 0.86 $(0.03) $(0.91) Year ended 3/31/2004......... 7.11 (0.03) 4.89 4.86 -- (0.11) Year ended 3/31/2003......... 10.40 (0.01) (3.12) (3.13) -- (0.16) Period ended 3/31/2002(e).... 10.00 (0.03) 0.45 0.42 -- (0.02) INVESTOR C SHARES Year ended 3/31/2005......... $11.86 $ 0.02 $ 0.84 $ 0.86 $(0.03) $(0.91) Year ended 3/31/2004......... 7.11 (0.03) 4.89 4.86 -- (0.11) Year ended 3/31/2003......... 10.40 (0.01) (3.12) (3.13) -- (0.16) Period ended 3/31/2002(e).... 10.00 (0.03) 0.45 0.42 -- (0.02)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Amount represents less than $0.01 per share. (d)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (e)Global Value Primary A, Investor A, Investor B and Investor C Shares commenced operation on April 16, 2001. (f) Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 50 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- NET INCREASE RATIO OF RATIO OF NET RATIO OF IN NET ASSET NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING TOTAL VALUE FROM VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO DIVIDENDS AND REDEMPTION END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS FEES PERIOD RETURN(B) (000) ASSETS NET ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- $(1.05) $ --(c) $12.04 8.84% $134,337 1.27%(d) 1.19% 18% 1.27%(d) (0.17) --(c) 12.10 70.38 144,242 1.30(d) 0.69 28 1.30(d) (0.20) -- 7.21 (29.77) 57,373 1.40 0.87 15 1.40 (0.03) -- 10.50 5.24 49,246 1.40(d)(f) 0.66(f) 19 1.63(d)(f) $(1.02) $ --(c) $11.98 8.64% $126,679 1.52%(d) 0.94% 18% 1.52%(d) (0.15) --(c) 12.04 70.00 127,609 1.55(d) 0.44 28 1.55(d) (0.19) -- 7.18 (29.98) 47,111 1.65 0.62 15 1.65 (0.02) -- 10.47 4.92 26,172 1.65(d)(f) 0.41(f) 19 1.88(d)(f) $(0.94) $ -- $11.78 7.85% $ 34,324 2.27%(d) 0.19% 18% 2.27%(d) (0.11) --(c) 11.86 68.56 35,343 2.30(d) (0.31) 28 2.30(d) (0.16) -- 7.11 (30.41) 15,310 2.40 (0.13) 15 2.40 (0.02) -- 10.40 4.18 11,804 2.40(d)(f) (0.34)(f) 19 2.63(d)(f) $(0.94) $ -- $11.78 7.84% $ 98,850 2.27%(d) 0.19% 18% 2.27%(d) (0.11) --(c) 11.86 68.56 101,025 2.30(d) (0.31) 28 2.30(d) (0.16) -- 7.11 (30.41) 44,758 2.40 (0.13) 15 2.40 (0.02) -- 10.40 4.18 30,914 2.40(d)(f) (0.34)(f) 19 2.63(d)(f)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 51 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS ------------------------------------------------------------------------------------------------- INTERNATIONAL VALUE(C) PRIMARY A SHARES Year ended 3/31/2005......... $20.71 $0.29 $ 2.51 $ 2.80 $(0.30) $(0.79) Year ended 3/31/2004......... 11.65 0.19 9.07 9.26 (0.20) -- Year ended 3/31/2003......... 16.67 0.16 (4.92) (4.76) (0.17) (0.09) Year ended 3/31/2002......... 17.30 0.22 (0.29) (0.07) (0.20) (0.36) Year ended 3/31/2001......... 18.78 0.32 (0.39) (0.07) (0.21) (1.20) INVESTOR A SHARES Year ended 3/31/2005......... $20.64 $0.23 $ 2.51 $ 2.74 $(0.25) $(0.79) Year ended 3/31/2004......... 11.62 0.15 9.04 9.19 (0.17) -- Year ended 3/31/2003......... 16.61 0.15 (4.92) (4.77) (0.13) (0.09) Year ended 3/31/2002......... 17.26 0.18 (0.29) (0.11) (0.18) (0.36) Year ended 3/31/2001......... 18.77 0.27 (0.39) (0.12) (0.19) (1.20) INVESTOR B SHARES Year ended 3/31/2005......... $20.35 $0.08 $ 2.45 $ 2.53 $(0.09) $(0.79) Year ended 3/31/2004......... 11.47 0.02 8.91 8.93 (0.05) -- Year ended 3/31/2003......... 16.39 0.03 (4.84) (4.81) (0.02) (0.09) Year ended 3/31/2002......... 17.07 0.07 (0.30) (0.23) (0.09) (0.36) Year ended 3/31/2001......... 18.64 0.16 (0.40) (0.24) (0.13) (1.20) INVESTOR C SHARES Year ended 3/31/2005......... $20.33 $0.08 $ 2.45 $ 2.53 $(0.09) $(0.79) Year ended 3/31/2004......... 11.46 0.02 8.90 8.92 (0.05) -- Year ended 3/31/2003......... 16.39 0.02 (4.82) (4.80) (0.04) (0.09) Year ended 3/31/2002......... 17.07 0.04 (0.27) (0.23) (0.09) (0.36) Year ended 3/31/2001......... 18.65 0.16 (0.41) (0.25) (0.13) (1.20)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of International Value Master Portfolio. (d)Amount represents less than $0.01 per share. (e)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 10) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.12% for Primary A Shares, 1.37% for Investor A Shares and 2.12% each for Investor B and Investor C Shares. (f) The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.17% for Primary A Shares, 1.42% for Investor A Shares and 2.17% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 52 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- NET INCREASE RATIO OF RATIO OF NET RATIO OF IN NET ASSET NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING TOTAL VALUE FROM VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO DIVIDENDS AND REDEMPTION END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS FEES YEAR RETURN(B) (000) ASSETS NET ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- $(1.09) $ --(d) $22.42 13.63% $2,577,677 1.08% 1.35% -- 1.15%(e) (0.20) --(d) 20.71 79.67 2,488,701 1.11 1.14 -- 1.20(f) (0.26) -- 11.65 (28.81) 1,614,750 1.17 1.16 -- 1.23 (0.56) -- 16.67 (0.18) 2,059,558 1.19 1.36 -- 1.23 (1.41) -- 17.30 (0.50) 1,163,899 1.13 1.89 -- 1.23 $(1.04) $ --(d) $22.34 13.38% $ 906,848 1.33% 1.10% -- 1.40%(e) (0.17) --(d) 20.64 79.17 792,857 1.36 0.89 -- 1.45(f) (0.22) -- 11.62 (28.97) 482,196 1.42 0.91 -- 1.48 (0.54) -- 16.61 (0.46) 798,587 1.44 1.11 -- 1.48 (1.39) -- 17.26 (0.72) 353,646 1.38 1.64 -- 1.48 $(0.88) $ --(d) $22.00 12.54% $ 111,402 2.08% 0.35% -- 2.15%(e) (0.05) --(d) 20.35 77.89 112,798 2.11 0.14 -- 2.20(f) (0.11) -- 11.47 (29.54) 73,283 2.17 0.16 -- 2.23 (0.45) -- 16.39 (1.16) 116,374 2.19 0.36 -- 2.23 (1.33) -- 17.07 (1.42) 80,655 2.13 0.89 -- 2.23 $(0.88) $ --(d) $21.98 12.54% $ 162,797 2.08% 0.35% -- 2.15%(e) (0.05) --(d) 20.33 77.85 170,702 2.11 0.14 -- 2.20(f) (0.13) -- 11.46 (29.52) 113,594 2.17 0.16 -- 2.23 (0.45) -- 16.39 (1.16) 149,979 2.19 0.36 -- 2.23 (1.33) -- 17.07 (1.45) 48,784 2.13 0.89 -- 2.23
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 53 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS ------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY PRIMARY A SHARES Year ended 3/31/2005......... $12.13 $ 0.16 $ 1.19 $ 1.35 $(0.04) $ -- Year ended 3/31/2004......... 8.01 0.13 4.11 4.24 (0.12) -- Year ended 3/31/2003(i)...... 10.49 0.10 (2.53) (2.43) (0.05) -- Year ended 3/31/2002(i)...... 11.12 0.09 (0.72) (0.63) --(c) -- Year ended 3/31/2001(i)...... 16.74 0.12 (4.47) (4.35) (0.11) (1.16) INVESTOR A SHARES Year ended 3/31/2005......... $12.00 $ 0.13 $ 1.18 $ 1.31 $(0.01) $ -- Year ended 3/31/2004......... 7.93 0.08 4.09 4.17 (0.10) -- Year ended 3/31/2003(i)...... 10.30 0.08 (2.47) (2.39) (0.04) -- Year ended 3/31/2002(i)...... 10.95 0.06 (0.71) (0.65) -- -- Year ended 3/31/2001(i)...... 16.51 0.07 (4.38) (4.31) (0.09) (1.16) INVESTOR B SHARES Year ended 3/31/2005......... $11.30 $ 0.03 $ 1.11 $ 1.14 $ -- $ -- Year ended 3/31/2004......... 7.50 --(c) 3.85 3.85 (0.05) -- Year ended 3/31/2003(i)...... 9.87 0.02 (2.38) (2.36) (0.01) -- Year ended 3/31/2002(i)...... 10.56 (0.01) (0.68) (0.69) -- -- Year ended 3/31/2001(i)...... 16.06 -- (4.27) (4.27) (0.07) (1.16) INVESTOR C SHARES Year ended 3/31/2005......... $11.20 $ 0.03 $ 1.09 $ 1.12 $ -- $ -- Year ended 3/31/2004......... 7.43 --(c) 3.82 3.82 (0.05) -- Year ended 3/31/2003(i)...... 9.63 0.01 (2.33) (2.32) (0.01) -- Year ended 3/31/2002(i)...... 10.30 (0.01) (0.66) (0.67) -- -- Year ended 3/31/2001(i)...... 15.72 (0.02) (4.17) (4.19) (0.07) (1.16)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Amount represents less than $0.01 per share. (d)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (e)The effect of interest expense on the operating expense ratio was less than 0.01%. (f) The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 10) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.10% for Primary A Shares, 1.35% for Investor A Shares and 2.10% each for Investor B and Investor C Shares. (g)The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (h)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 1.13% for Primary A Shares, 1.38% for Investor A Shares and 2.13% each for Investor B and Investor C Shares. (i) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of International Equity Master Portfolio. (j) Rate represents the International Equity Master Portfolio. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 54 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
NET INCREASE RATIO OF RATIO OF NET IN NET ASSET NET ASSET NET ASSETS OPERATING INVESTMENT TOTAL VALUE FROM VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO DIVIDENDS AND REDEMPTION END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER DISTRIBUTIONS FEES PERIOD RETURN(B) (000) ASSETS NET ASSETS RATE - --------------------------------------------------------------------------------------------------------------------- $(0.04) $ --(c) $13.44 11.10% $1,199,712 1.01%(d)(e) 1.26% 153% (0.12) --(c) 12.13 53.06 917,391 1.12(d)(e)(g) 0.99 86 (0.05) --(c) 8.01 (23.19) 556,619 1.18 1.10 100(j) --(c) -- 10.49 (5.65) 474,738 1.16 0.88 85(j) (1.27) -- 11.12 (27.40) 724,572 1.15 0.89 92(j) $(0.01) $ --(c) $13.30 10.88% $ 28,527 1.26%(d)(e) 1.01% 153% (0.10) --(c) 12.00 52.71 27,396 1.37(d)(e)(g) 0.74 86 (0.04) 0.06 7.93 (22.71) 18,870 1.43 0.85 100(j) -- -- 10.30 (5.94) 30,067 1.41 0.63 85(j) (1.25) -- 10.95 (27.54) 46,770 1.40 0.64 92(j) $ -- $ --(c) $12.44 10.09% $ 9,976 2.01%(d)(e) 0.26% 153% (0.05) --(c) 11.30 51.39 9,956 2.12(d)(e)(g) (0.01) 86 (0.01) --(c) 7.50 (23.96) 7,068 2.18 0.10 100(j) -- -- 9.87 (6.53) 14,408 2.16 (0.12) 85(j) (1.23) -- 10.56 (28.11) 20,747 2.15 (0.11) 92(j) $ -- $ --(c) $12.32 10.00% $ 2,563 2.01%(d)(e) 0.26% 153% (0.05) --(c) 11.20 51.43 1,867 2.12(d)(e)(g) (0.01) 86 (0.01) 0.13 7.43 (22.78) 1,249 2.18 0.10 100(j) -- -- 9.63 (6.50) 1,245 2.16 (0.12) 85(j) (1.23) -- 10.30 (28.22) 1,166 2.15 (0.11) 92(j) WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ----------------- RATIO OF OPERATING TOTAL EXPENSES TO DIVIDENDS AND AVERAGE NET DISTRIBUTIONS ASSETS - ------------- ----------------- $(0.04) 1.13%(d)(f) (0.12) 1.15(d)(h) (0.05) 1.18 --(c) 1.16 (1.27) 1.16 $(0.01) 1.38%(d)(f) (0.10) 1.40(d)(h) (0.04) 1.43 -- 1.41 (1.25) 1.41 $ -- 2.13%(d)(f) (0.05) 2.15(d)(h) (0.01) 2.18 -- 2.16 (1.23) 2.16 $ -- 2.13%(d)(f) (0.05) 2.15(d)(h) (0.01) 2.18 -- 2.16 (1.23) 2.16
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 55 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
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)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS ------------------------------------------------------------------------------------------------- INTERNATIONAL OPPORTUNITIES PRIMARY A SHARES Year ended 3/31/2005......... $11.15 $ 0.08 $ 0.52 $ 0.60 $(0.06) $(0.16) Year ended 3/31/2004......... 6.98 0.02 4.24 4.26 (0.01) (0.08) Year ended 3/31/2003......... 8.36 0.04 (1.42) (1.38) -- -- Year ended 3/31/2002......... 8.03 (0.01) 0.34 0.33 -- -- Period ended 3/31/2001(f).... 10.00 --(c) (1.97) (1.97) -- -- INVESTOR A SHARES Year ended 3/31/2005......... $11.05 $ 0.05 $ 0.51 $ 0.56 $(0.04) $(0.16) Year ended 3/31/2004......... 6.93 --(c) 4.20 4.20 -- (0.08) Year ended 3/31/2003......... 8.32 0.01 (1.40) (1.39) -- -- Year ended 3/31/2002......... 8.01 (0.01) 0.32 0.31 -- -- Period ended 3/31/2001(f).... 10.00 (0.01) (1.98) (1.99) -- -- INVESTOR B SHARES Year ended 3/31/2005......... $10.75 $(0.03) $ 0.49 $ 0.46 $ -- $(0.16) Year ended 3/31/2004......... 6.79 (0.07) 4.11 4.04 -- (0.08) Year ended 3/31/2003......... 8.22 (0.04) (1.39) (1.43) -- -- Year ended 3/31/2002......... 7.97 (0.07) 0.32 0.25 -- -- Period ended 3/31/2001(f).... 10.00 (0.08) (1.95) (2.03) -- -- INVESTOR C SHARES Year ended 3/31/2005......... $10.75 $(0.03) $ 0.49 $ 0.46 $ -- $(0.16) Year ended 3/31/2004......... 6.80 (0.07) 4.10 4.03 -- (0.08) Year ended 3/31/2003......... 8.22 (0.05) (1.37) (1.42) -- -- Year ended 3/31/2002......... 7.97 (0.07) 0.32 0.25 -- -- Period ended 3/31/2001(f).... 10.00 (0.09) (1.94) (2.03) -- --
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)Amount represents less than $0.01 per share. (d)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (e)The effect of interest expense on the operating expense ratio was less than 0.01%. (f) International Opportunities Primary A, Investor A, Investor B and Investor C Shares commenced operations on August 1, 2000. (g)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 56 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- NET INCREASE RATIO OF RATIO OF NET RATIO OF IN NET ASSET NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING TOTAL VALUE FROM VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO DIVIDENDS AND REDEMPTION END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS FEES PERIOD RETURN(B) (000) ASSETS NET ASSETS RATE NET ASSETS - ------------------------------------------------------------------------------------------------------------------------------ $(0.22) $ --(c) $11.53 5.55% $991,889 1.12%(d) 0.72% 165% 1.12%(d) (0.09) --(c) 11.15 61.25 509,262 1.17(d) 0.21 121 1.17(d) -- -- 6.98 (16.51) 95,093 1.48(d) 0.58 193 1.80(d) -- -- 8.36 4.11 2,700 1.42(d)(e) (0.08) 307 4.02(d) -- -- 8.03 (19.70) 1,477 1.47(g) 0.12(g) 442 6.28(g) $(0.20) $ --(c) $11.41 5.24% $ 52,794 1.37%(d) 0.47% 165% 1.37%(d) (0.08) --(c) 11.05 60.87 19,785 1.42(d) (0.04) 121 1.42(d) -- -- 6.93 (16.71) 2,272 1.73(d) 0.33 193 2.05(d) -- -- 8.32 3.87 1,526 1.67(d)(e) (0.33) 307 4.27(d) -- -- 8.01 (19.90) 2,797 1.72(g) (0.13)(g) 442 6.53(g) $(0.16) $ --(c) $11.05 4.45% $ 16,618 2.12%(d) (0.28)% 165% 2.12%(d) (0.08) --(c) 10.75 59.77 8,905 2.17(d) (0.79) 121 2.17(d) -- -- 6.79 (17.40) 2,782 2.48(d) (0.42) 193 2.80(d) -- -- 8.22 3.14 1,951 2.42(d)(e) (1.08) 307 5.02(d) -- -- 7.97 (20.30) 2,031 2.47(g) (0.88)(g) 442 7.28(g) $(0.16) $ --(c) $11.05 4.45% $ 19,530 2.12%(d) (0.28)% 165% 2.12%(d) (0.08) --(c) 10.75 59.53 8,331 2.17(d) (0.79) 121 2.17(d) -- -- 6.80 (17.27) 869 2.48(d) (0.42) 193 2.80(d) -- -- 8.22 3.14 869 2.42(d)(e) (1.08) 307 5.02(d) -- -- 7.97 (20.30) 974 2.47(g) (0.88)(g) 442 7.28(g)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 57 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain only to the international stock portfolios of Funds Trust (each a "Fund" and collectively, the "Funds"): Global Value Fund International Value Fund International Equity Fund International Opportunities Fund Financial statements for the other portfolios of Funds Trust are presented under separate cover. The Funds currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. Subject to certain limited exceptions, Global Value Fund and International Value Fund are no longer accepting new investments from current or prospective investors. Please see the Fund's current prospectus for more information. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. International Value Fund (the "Feeder Fund") seeks to achieve its investment objective by investing substantially all of its assets in International Value Master Portfolio (the "Master Portfolio"), a series of Nations Master Investment Trust (the "Master Trust"), another open-end management investment company in the Nations Funds family. The Master Portfolio has the same investment objective as that of its corresponding Feeder Fund. The values of the Feeder Fund's investments in the Master Portfolio included in the Investment portfolio reflects the Feeder Fund's proportionate beneficial interests in the net assets of the Master Portfolio (87.8% for International Value Master Portfolio at March 31, 2005). The financial statements of the Master Portfolio, including its Investment portfolio, are included elsewhere within this report and should be read in conjunction with the Feeder Fund's financial statements. Another fund not registered under the 1940 Act and managed by Banc of America Capital Management, LLC ("BACAP"), whose financial statements are not presented here, also invests in the Master Portfolio. International Equity Fund and International Opportunities Fund operate in a master-feeder structure. The Funds seek to achieve their investment objective by investing substantially all of their assets in International Equity Master Portfolio and International Opportunities Master Portfolio of the Master Trust, respectively, which has the same investment objective as their corresponding Feeder Fund. Because the value of each Fund's investment in the International Equity Master Portfolio and the International Opportunities Master Portfolio as of and for the year ended March 31, 2005 represented substantially all of the beneficial interests in the International Equity Master Portfolio and the International Opportunities Master Portfolio, the financial statements for the International Equity Fund and the International Opportunities Fund reflect their consolidation of the International Equity Master Portfolio and the International Opportunities Master Portfolio. Separate financial statements for the International Equity Master Portfolio and the International Opportunities Master Portfolio have not been prepared and references in this report to International Equity Fund and International Opportunities Fund should be read to include references to the corresponding Master Portfolios. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments in a specific country, industry or region. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts 58 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Securities, including futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on Nasdaq are generally valued at the Nasdaq official closing price. Securities traded only over-the-counter are generally valued at the mean of the latest bid and asked prices. Securities which are primarily traded on foreign securities exchanges are generally valued at the last available sale price on their respective exchanges where primarily traded. Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Certain debt security prices provided by the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities on comparable securities. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. The valuation of the Feeder Fund's investment in its corresponding Master Portfolio is based on the reported net asset value of that Master Portfolio. The Master Portfolio uses valuation policies consistent with those described above. Trading in securities on most foreign exchanges and over the counter markets is normally completed before the close of the domestic stock market and may also take place on days when the domestic market is closed. If events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Fund's net assets are calculated, such securities may be valued at fair value in accordance with procedures adopted by the Board of Trustees. Nations Funds has retained an independent fair value pricing service to assist in the fair valuation process for Funds that primarily invest in international securities. Futures contracts: All Funds may invest in futures contracts for the purposes of hedging against changes in values of the Fund's securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity market. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. At March 31, 2005, the Funds had no open futures contracts. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, and the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Foreign currency transactions: 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 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 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 securities are not separately identified 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 securities. Forward foreign currency transactions: Generally, each Fund may enter into forward foreign currency contracts only under two circumstances: (i) when a Fund enters into a contract for the purchase or sale of a security denominated in a 59 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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; or (ii) when the investment advisor or sub-advisor believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by a Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a 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. 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 a Fund's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency 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 use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. Repurchase agreements: Each Fund may engage in repurchase agreement transactions with institutions that the Funds' investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date, except that if the ex-dividend date has passed, 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 share classes based upon the relative net assets of each class of shares. The Feeder Fund records its share of the investment income and realized and unrealized gains and losses reported by the Master Portfolio on a daily basis. The investment income and realized and unrealized gains and losses are allocated daily to investors in the Master Portfolio based upon the relative value of their investments in the Master Portfolio. Dividends and distributions to shareholders: Distributions from net investment income are declared and paid annually. The Funds may, however, declare and pay distributions from net investment income more frequently. Each Fund will distribute net realized capital gains (including net short-term capital gains), at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on ex-dividend date. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. 60 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 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. Expenses: General expenses of Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. The Feeder Fund records its share of the expenses reported by the Master Portfolio on a daily basis. The expenses are allocated daily to investors in the Master Portfolio based upon the relative value of the Feeder Fund's investments in the Master Portfolio. Indemnification: In the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Funds Trust's organizational documents, the Trustees and Officers of the Funds Trust are indemnified against certain liabilities that may arise out of their duties to the Funds Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust and Master Trust have entered into investment advisory agreements (the "Investment Advisory Agreements") with BACAP, a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Funds. Effective December 1, 2004, BACAP 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:
FEES ON FEES ON FEES ON FEES ON FEES ON FEES ON AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS FIRST $500 MILLION TO $1 BILLION TO $1.5 BILLION TO $3 BILLION TO OVER $500 MILLION $1 BILLION $1.5 BILLION $3 BILLION $6 BILLION $6 BILLION -------------------------------------------------------------------------------------------------- Global Value................. 0.90% 0.85% 0.80% 0.75% 0.73% 0.71% International Equity......... 0.70% 0.65% 0.60% 0.55% 0.53% 0.51% International Opportunities.............. 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
The Feeder Fund indirectly pays for investment advisory and sub-advisory services through its investment in its corresponding Master Portfolio (See Note 2 of Notes to financial statements of the Master Portfolio). Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL RATE ----------- Global Value................................................ 0.90% International Equity........................................ 0.80% International Opportunities................................. 0.80%
In addition, prior to December 1, 2004, BACAP voluntarily waived a portion of its investment advisory fee for the International Equity Fund at the annual rate of 0.09% of the International Equity Fund's average daily net assets. For the year ended March 31, 2005, the effective investment advisory fee rates for the Funds were as follows:
EFFECTIVE FEE RATE --------- Global Value................................................ 0.90% International Equity........................................ 0.76% International Opportunities................................. 0.80%
61 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Funds Trust has, on behalf of the Global Value Fund, entered into a sub-advisory agreement with BACAP and Brandes Investment Partners, L.P. ("Brandes") pursuant to which Brandes is entitled to receive a sub-advisory fee from BACAP at the maximum annual rate of 0.50% of the first $1 billion of the Fund's average daily net assets and 0.45% over $1 billion of the Fund's average daily net assets. The International Equity Fund is a "multi-manager" fund, which means that it is managed by more than one sub-advisor. Effective May 11, 2004, Causeway Capital Management LLC ("Causeway") became co-investment sub-advisor with Marsico Capital Management, LLC ("Marsico"). Pursuant to the sub-advisory agreement, Causeway and Marsico are each entitled to receive a fee from BACAP at the maximum annual rate of 0.43% and 0.45%, respectively, of the Fund's average daily net assets that they manage. Prior to May 11, 2004, INVESCO Global Asset Management (N.A.), Inc. ("INVESCO"), Putnam Investment Management, LLC ("Putnam") and Marsico Capital Management, LLC ("Marsico") each managed approximately one-third of the assets of the Fund. Pursuant to the sub-advisory agreement, INVESCO, Putnam and Marsico were each entitled to receive a fee from BACAP at the maximum annual rate of 0.65% of the first $60 million, 0.55% of the next $130 million, 0.45% of the next $200 million and 0.40% over $390 million of the Funds' average daily net assets that they managed. Master Trust has, on behalf of the International Opportunities Fund, entered into a sub-advisory agreement with BACAP and Marsico Capital Management, LLC ("Marsico"), a wholly-owned subsidiary of Bank of America, pursuant to which Marsico is entitled to receive a sub-advisory fee from BACAP at the maximum annual rate of 0.45% of the Fund's average daily net assets. BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Effective December 1, 2004, BACAP Distributors is entitled to receive an administration fee, computed daily and paid monthly, based on the following annual rates:
ANNUAL RATE ----------- Global Value................................................ 0.17% International Value......................................... 0.17% International Equity........................................ 0.17% International Opportunities................................. 0.22%
Prior to December 1, 2004, BACAP received a monthly administration fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL RATE ----------- Global Value................................................ 0.22% International Value......................................... 0.17% International Equity........................................ 0.22% International Opportunities................................. 0.22%
For the year ended March 31, 2005, the effective administration fee rates for the Funds were as follows:
ANNUAL RATE ----------- Global Value................................................ 0.20% International Value......................................... 0.17% International Equity........................................ 0.20% International Opportunities................................. 0.22%
The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of Funds Trust's assets. PFPC Inc. serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A Shares of the Funds. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Primary A shares of each Fund. For the year ended March 31, 2005, 62 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Bank of America earned the following sub-transfer agent fees from the Funds for providing such services and these amounts are included in "Transfer agent fees" in each Fund's Statements of operations:
SUB-TRANSFER AGENT FEE FUND (000) - ------------------------------------------------------------------------------------ Global Value................................................ $ 4 International Value......................................... 49 International Equity........................................ 18 International Opportunities................................. 22
BACAP Distributors serves as distributor of the Funds' shares. For the year ended March 31, 2005, the Funds were informed that the Distributor received the following:
FRONT END CONTINGENT DEFERRED SALES CHARGE SALES CHARGE (000) (000) ------------ -------------------------------------- FUND INVESTOR A INVESTOR A INVESTOR B INVESTOR C - -------------------------------------------------------------------------------------------------------------------- Global Value................................................ $ 5 $-- $ 36 $ 9 International Value......................................... 28 --* 131 2 International Equity........................................ 18 -- 7 --* International Opportunities................................. 384 --* 18 3
- --------------- *Amount represents less than $500. The Funds are also entitled to a 2% redemption fee on the proceeds of Fund shares that are purchased after August 1, 2002 and are redeemed (either by selling shares or exchanging into another Fund) within 90 days of their purchase. The redemption fee is designed to offset brokerage commissions and other costs associated with short term trading in and out of Funds. The redemption fees are included as an increase to Paid-in capital on the Statements of assets and liabilities and as a decrease to shares redeemed in the Schedules of capital stock activity. For the year ended March 31, 2005, the Funds received the following in redemption fees:
REDEMPTION FEE (000) --------------------------------------------------- FUND PRIMARY A INVESTOR A INVESTOR B INVESTOR C - ----------------------------------------------------------------------------------------------------------------- Global Value................................................ $ 1 $ 1 $-- $-- International Value......................................... 30 10 1 2 International Equity........................................ 19 1 --* --* International Opportunities................................. 35 2 1 1
- --------------- *Amount represents less than $500. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, pays its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. Each Fund's fee will not exceed $15,000 per year. As of March 31, 2005, the fees paid for the Office of Chief Compliance Officer were as follows:
FUND (000) - -------------------------------------------------------------------- Global Value................................................ $6 International Value......................................... 8 International Equity........................................ 8 International Opportunities................................. 8
These amounts are included in "Other expenses" on the Statements of Operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of 63 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, another portfolio of Funds Trust. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. A significant portion of each Fund's Primary Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. The Funds have made daily investments of cash balances in the Nations Cash Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Fund from such investments is included in their Statements of operations as "Dividend income from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Funds. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADVISORY FEES ADMINISTRATION FEES (EARNED BY BACAP) (EARNED BY BACAP DISTRIBUTORS) FUND (000) (000) - -------------------------------------------------------------------------------------------------------------- Global Value............................................. $ 8 $ 4 International Equity..................................... 50 26 International Opportunities.............................. 57 29
3. TOTAL OPERATING EXPENSE LIMITATIONS BACAP and/or its affiliates may, from time to time, reduce its fees payable by each Fund. BACAP has contractually agreed to reimburse expenses and/or waive fees through July 31, 2006 to the extent that total expenses (excluding interest expense and shareholder servicing and distribution fees) exceed an annual rate of 1.40% of Global Value Fund's average daily net assets and 1.50% of International Opportunities Fund's average daily net assets. There is no guarantee that these expense limitations will continue after this date. BACAP and/or BACAP Distributors is entitled to recover from Global Value Fund any fees waived or expenses reimbursed by BACAP and/or BACAP Distributors during the three year period following the date of such waiver or reimbursement, to the extent that such recovery would not cause the Global Value Fund to exceed the expense limitation in effect at the time of recovery. There is no guarantee that these expense limitations will continue. At March 31, 2005, there were no amounts potentially recoverable by BACAP and/or BACAP Distributors pursuant to this arrangement. Each Fund has an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statements of Operations. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. 4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Fund and a combined distribution and shareholder servicing plan for Investor A Shares of each Fund. 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 1940 Act, permit the Funds to compensate or reimburse 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 and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of each Fund directly to the applicable share class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP Distributors. 64 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, the annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT PLAN RATE LIMIT ------------------- Investor A Combined Shareholder Servicing and Distribution Plan...................................................... 0.25% 0.25% Investor B and Investor C Shareholder Servicing Plans....... 0.25% 0.25% Investor B and Investor C Distribution Plans................ 0.75% 0.75%
5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for foreign currency transactions, non-deductible net operating losses, distribution reclassifications, reclassifications of gains due to sales of passive foreign investment companies, allocations of realized gains due to tax rules and redemption based payments treated as dividend paid deduction were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT INCOME/ REALIZED PAID-IN (LOSS) GAIN/(LOSS) CAPITAL FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------------ Global Value..................................... $ 220 $(1,077) $ 857 International Value.............................. (562) (7,663) 8,225 International Equity............................. (1,006) 985 21 International Opportunities...................... 20 (1,908) 1,888
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 ------------------------- ------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME* CAPITAL GAINS INCOME* CAPITAL GAINS FUND (000) (000) (000) (000) - -------------------------------------------------------------------------------------------------------------------- Global Value................................................ $10,508 $ 23,066 $ 4,303 $ -- International Value......................................... 45,991 131,293 32,096 -- International Equity........................................ 2,958 -- 9,427 -- International Opportunities................................. 10,940 3,570 1,573 1,178
- --------------- *For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 65 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED/ (ACCUMULATED) UNDISTRIBUTED LONG-TERM NET UNREALIZED ORDINARY CAPITAL GAINS/ APPRECIATION INCOME** (LOSS)** (DEPRECIATION)* FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------------ Global Value................................................ $ 2,239 $ 10,114 $ 57,722 International Value......................................... 8,626 123,610 601,433 International Equity........................................ 12,144 (16,110) 158,843 International Opportunities................................. 15,438 33,017 88,427
- --------------- * The differences between book-basis and tax-basis net unrealized appreciation/(depreciation) are primarily due to deferral of losses from wash sales and mark-to-market of foreign currency forwards and passive foreign investment companies. **Amounts may include post-October loss deferrals and ending foreign tax payables. Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION)* FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------- Global Value................................................ $ 71,160 $(13,441) $ 57,719 International Value......................................... N/A** N/A** N/A** International Equity........................................ 175,872 (16,895) 158,977 International Opportunities................................. 108,737 (20,311) 88,426
- --------------- * Difference between book basis and tax basis unrealized gain/(loss) are primarily due to deferred wash sale losses and mark-to-market of passive foreign investment companies. **See corresponding Master Portfolio for tax basis information. The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
EXPIRING IN 2011 FUND (000) - --------------------------------------------------------------------------- International Equity........................................ $16,110
During the year ended March 31, 2005, the following Funds utilized capital losses as follows:
CAPITAL LOSSES UTILIZED FUND (000) - ----------------------------------------------------------------------------- International Value......................................... $ 38,916 International Equity........................................ 129,312
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, 2005, the following Funds elected to defer losses occurring between November 1, 2004 and March 31, 2005 under these rules, as follows:
CURRENCY LOSSES DEFERRED FUND (000) - ----------------------------------------------------------------------------- Global Value................................................ $10
66 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005, were as follows:
PURCHASES SALES (000) (000) ------------------------ Global Value................................................ $ 69,679 $ 117,405 International Equity........................................ 1,663,620 964,717 International Opportunities................................. 1,664,085 1,203,897
There were no purchases or sales of long-term U.S. government securities for the year ended March 31, 2005. 7. SHARES OF BENEFICIAL INTEREST As of March 31, 2005, an unlimited number of shares of beneficial interest without par value were authorized for Funds Trust. Fund Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any authorized but unissued shares into one or more additional classes or series of shares. Investor B Shares generally convert to Investor A Shares based on the following conditions:
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1997 and November 15, 1998 $0 - $249,999 Nine years $250,000 - $499,999 Six years $500,000 - $999,999 Five years - -- before August 1, 1997 Nine years
See Schedules of capital stock activity. 8. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. During the year ended March 31, 2005, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST (000) RATE ------------------------ International Equity........................................ $30 1.51%
- --------------- *The average amount outstanding was calculated based on daily balances in the period. 9. SECURITIES LENDING Under an agreement with BNY, the Funds may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of borrower default, the Fund has the right to use the collateral to offset any losses incurred. In the event the Fund is 67 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. The Fund bears the risk of loss with respect to the investment of collateral. The income earned by each Fund from securities lending is included in its Statement of operations. At March 31, 2005, the following Funds had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) - ------------------------------------------------------------------------------------------------ Global Value................................................ $17,575 $18,076 International Equity........................................ 76,458 78,760 International Opportunities................................. 92,036 94,719
10. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders cannot currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes 68 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. For the fiscal year ended March 31, 2005, Bank of America Corporation has assumed $6.7 million of legal, shareholder communications, audit related, transfer agent, consulting and Trustee costs and fees incurred by the Funds impacted in connection with the regulatory and civil litigation matters discussed above. These non-recurring costs were allocated to the Funds based on their respective average nets assets for the year ended March 31, 2005. These non-recurring costs on a per Fund basis are shown in that Fund's respective Statement of operations. Because these costs were borne by Bank of America Corporation and not any Fund, an offsetting waiver of these costs is also presented in each respective Fund's Statement of operations as, "Costs assumed by Bank of America Corporation". The impact to the expense ratio of each impacted Fund is reflected in the Fund's Financial highlights. 69 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Global Value Fund, Nations International Value Fund, Nations International Equity Fund and Nations Marsico International Opportunities Fund (constituting part of Nations Funds Trust, hereafter referred to as the "Funds") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 70 UNAUDITED INFORMATION FEDERAL INCOME TAX INFORMATION NATIONS GLOBAL VALUE FUND For the fiscal year ended March 31, 2005, the Fund designates long-term capital gains of $23,722,003. Foreign taxes paid during the fiscal year ended March 31, 2005, amounting to $538,376 will be passed through to shareholders as 100% allowable foreign tax credits on Form 1099-DIV for the calendar year ending December 31, 2005. Gross income derived from sources within foreign countries amounted to $6,400,711 for the fiscal year ended March 31, 2005. 27.45% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable for the year ended March 31, 2005, qualified for the corporate dividends received deduction. For non-corporate shareholders 53.43% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS INTERNATIONAL VALUE FUND For the fiscal year ended March 31, 2005, the Fund designates long-term capital gains of $139,809,776. Foreign taxes paid during the fiscal year ended March 31, 2005, amounting to $7,239,389 will be passed through to shareholders as 100% allowable foreign tax credits on Form 1099-DIV for the calendar year ending December 31, 2005. Gross income derived from sources within foreign countries amounted to $84,816,207 for the fiscal year ended March 31, 2005. For non-corporate shareholders 79.46% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS INTERNATIONAL EQUITY FUND Foreign taxes paid during the fiscal year ended March 31, 2005, amounting to $1,958,961 will be passed through to shareholders as 100% allowable foreign tax credits on Form 1099-DIV for the year ending December 31, 2005. Gross income derived from sources within foreign countries amounted to $22,165,675 for the fiscal year ended March 31, 2005. For non-corporate shareholders 100.00% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. 71 UNAUDITED INFORMATION (CONTINUED) NATIONS MARSICO INTERNATIONAL OPPORTUNITIES FUND For the fiscal year ended March 31, 2005, the Fund designates long-term capital gains of $4,930,430. Foreign taxes paid during the fiscal year ended March 31, 2005, amounting to $676,052 will be passed through to shareholders as 100% allowable foreign tax credits on Form 1099-DIV for the calendar year ending December 31, 2005. Gross income derived from sources within foreign countries amounted to $12,877,610 for the fiscal year ended March 31, 2005. For non-corporate shareholders 31.24% of the ordinary income (including short-term capital gains) distributed by the Fund or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. 72 NATIONS MASTER INVESTMENT TRUST Nations International Value Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- COMMON STOCKS -- 98.7% CONSUMER DISCRETIONARY -- 8.2% AUTOMOBILES -- 3.8% 654,200 DaimlerChrysler AG............................................ $ 29,392 524,962 Regie National Usines Renault................................. 47,008 1,781,900 Volkswagen AG................................................. 85,038 ---------- 161,438 ---------- HOTELS, RESTAURANTS AND LEISURE -- 0.6% 5,820,000 Compass Group PLC............................................. 26,559 ---------- HOUSEHOLD DURABLES -- 1.0% 2,809,310 Matsushita Electric Industrial Co., Ltd., ADR(a).............. 41,353 ---------- MEDIA -- 0.9% 17,026,100 ITV PLC....................................................... 41,020 ---------- MULTILINE RETAIL -- 1.9% 366,400 Marks & Spencer Group PLC..................................... 2,396 2,009,480 Marks & Spencer Group PLC, ADR................................ 78,828 ---------- 81,224 ---------- 351,594 ---------- CONSUMER STAPLES -- 15.8% BEVERAGES -- 0.8% 949,690 InBev NV...................................................... 33,338 ---------- FOOD AND STAPLES RETAILING -- 4.8% 298,700 Carrefour SA.................................................. 15,893 7,383,700 Koninklijke Ahold NV(b)....................................... 61,991 4,922,466 Koninklijke Ahold NV(b)(c).................................... 41,328 22,784,965 Wm. Morrison Supermarkets PLC................................. 84,387 ---------- 203,599 ---------- FOOD PRODUCTS -- 8.6% 670,200 Nestle SA, Registered Shares.................................. 184,011 1,514,768 Unilever NV................................................... 103,355 8,125,500 Unilever PLC.................................................. 80,301 ---------- 367,667 ---------- TOBACCO -- 1.6% 6,375 Japan Tobacco, Inc. .......................................... 70,926 ---------- 675,530 ---------- ENERGY -- 3.4% OIL AND GAS -- 3.4% 636,870 Lukoil, ADR................................................... 86,232 3,594,400 Nippon Oil Corp. ............................................. 25,573 914,000 Petroleo Brasilerio SA, ADR(a)................................ 35,162 ---------- 146,967 ----------
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- FINANCIALS -- 25.6% COMMERCIAL BANKS -- 17.8% 3,072,880 ABN AMRO Holding NV(a)........................................ $ 76,238 14,352,650 Banca Intesa S.p.A. .......................................... 73,121 1,294,000 Banco Bilbao Vizcaya Argentaria SA(c)......................... 21,123 5,992,233 Banco Bilboa Vizcaya Argentaria SA, ADR(a).................... 97,494 2,622,400 Banco Santander Central Hispano SA............................ 32,003 2,113,700 Bayerische Vereinsbank AG, ADR(a)(b).......................... 51,782 845,480 Bayerische Vereinsbank AG(b)(c)............................... 20,713 3,043,556 Commerzbank AG................................................ 66,176 263,453 DBS Group Holdings Ltd., ADR.................................. 9,520 8,994,000 DBS Group Holdings Ltd., ADR(c)............................... 81,253 253,261 Hypo Real Estate Holding AG, ADR(b)........................... 10,487 7,971,641 Mitsubishi Tokyo Financial Group, Inc., ADR(a)................ 68,955 7,142,000 Oversea-Chinese Banking Corp., Ltd. .......................... 59,758 2,986 Sumitomo Mitsui Financial Group, Inc.(a)...................... 20,268 10,757,100 Sumitomo Mitsui Financial Group, Inc., ADR.................... 73,015 ---------- 761,906 ---------- DIVERSIFIED FINANCIAL SERVICES -- 2.1% 1,557,678 ING Groep NV.................................................. 47,169 2,550,900 Jardine Matheson Holdings Ltd., ADR........................... 44,386 ---------- 91,555 ---------- INSURANCE -- 5.7% 4,446,900 Aegon NV...................................................... 60,165 3,200,000 Mitsui Sumitomo Insurance Co., Ltd. .......................... 29,409 22,958,200 Royal & Sun Alliance Insurance Group PLC...................... 34,054 22,958,200 Royal & Sun Alliance Insurance Group PLC(c)................... 34,054 3,479,619 Zurich Financial Services AG, ADR(a).......................... 61,278 1,400,740 Zurich Financial Services AG, ADR(a)(c)....................... 24,668 ---------- 243,628 ---------- 1,097,089 ---------- HEALTH CARE -- 8.9% PHARMACEUTICALS -- 8.9% 1,767,600 Daiichi Pharmaceutical Co., Ltd. ............................. 41,480 5,733,600 GlaxoSmithKline PLC........................................... 131,419 1,125,000 Ono Pharmaceutical Co. Ltd. .................................. 58,795 1,844,200 Sankyo Co., Ltd. ............................................. 38,967 855,086 Sanofi-Aventis................................................ 72,291
SEE NOTES TO FINANCIAL STATEMENTS. 73 NATIONS MASTER INVESTMENT TRUST Nations International Value Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- HEALTH CARE -- (CONTINUED) 556,100 Schering AG................................................... $ 37,076 26,000 Taisho Pharmaceutical Co., Ltd. .............................. 554 ---------- 380,582 ---------- INDUSTRIALS -- 8.0% AEROSPACE AND DEFENSE -- 2.8% 4,485,630 BAE Systems PLC, ADR.......................................... 87,982 13,599,000 Bombardier, Inc., Class B..................................... 30,349 ---------- 118,331 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 0.6% 1,509,000 Dai Nippon Printing Co., Ltd. ................................ 24,675 ---------- ELECTRICAL EQUIPMENT -- 1.7% 1,199,825 Hitachi Ltd., ADR(a).......................................... 74,545 ---------- MACHINERY -- 2.9% 1,226,400 Heidelberger Druckmaschinen AG(b)(c).......................... 39,050 23,160,268 Invensys PLC(b)(c)............................................ 6,783 18,541,415 Invensys PLC, ADR(a)(b)....................................... 10,862 25,327,000 Mitsubishi Heavy Industries Ltd. ............................. 67,485 ---------- 124,180 ---------- 341,731 ---------- INFORMATION TECHNOLOGY -- 1.6% COMMUNICATIONS EQUIPMENT -- 1.6% 1,894,200 Alcatel SA(a)(b).............................................. 23,042 3,835,200 Alcatel SA, ADR(a)............................................ 46,291 ---------- 69,333 ---------- MATERIALS -- 2.3% CHEMICALS -- 1.6% 970,000 Akzo Nobel NV, ADR(a)......................................... 44,601 1,159,620 Imperial Chemical Industries PLC, ADR......................... 23,656 ---------- 68,257 ---------- METALS AND MINING -- 0.7% 2,813,700 Corus Group PLC, ADR(a)(b).................................... 28,812 ---------- 97,069 ---------- TELECOMMUNICATION SERVICES -- 20.5% DIVERSIFIED TELECOMMUNICATION SERVICES -- 20.5% 241,760 Brasil Telecom Participacoes SA, ADR.......................... 7,893 1,152,030 BT Group PLC, ADR(a).......................................... 44,860 2,878,864 Compania Anonima Nacional Telefonos de Venezuela, ADR......... 54,468 6,010,800 Deutsche Telekom AG, ADR(a)................................... 119,976 2,914,300 KT Corp., ADR................................................. 62,104 2,571,180 Nippon Telegraph & Telephone Corp., ADR....................... 56,180
VALUE SHARES (000) - ------------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- (CONTINUED) 8,194,176 Portugal Telecom SGPS SA, ADR................................. $ 96,609 2,291,700 Swisscom AG, ADR(a)........................................... 84,289 2,164,000 Tele Norte Leste Participacoes SA, ADR........................ 33,477 1,649,181 Telecom Italia S.p.A., ADR(a)................................. 62,240 2,067,200 Telecom Corp. of New Zealand, ADR(a).......................... 71,670 2,446,232 Telefonica SA, ADR............................................ 127,131 1,618,920 Telefonos de Mexico SA de CV, ADR............................. 55,901 ---------- 876,798 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 0.0% 7,626 Tele Leste Celular Participacoes SA, ADR(a)(b)................ 65 98,437 Tele Centro Oeste Celular Participacoes SA, ADR(a)............ 976 92,996 Telesp Celular Participacoes SA, ADR.......................... 556 61,418 Tim Participacoes SA, ADR..................................... 922 ---------- 2,519 ---------- 879,317 ---------- UTILITIES -- 4.4% ELECTRIC UTILITIES -- 4.4% 11,414,270 Centrais Electricas Brasileiras SA, ADR(b).................... 76,424 1,071,780 E.On AG(a).................................................... 30,814 6,114,300 Korea Electric Power Corp., ADR(a)............................ 82,176 ---------- 189,414 ---------- TOTAL COMMON STOCKS (Cost $3,516,753)........................................... 4,228,626 ---------- PREFERRED STOCKS -- 0.5% TELECOMMUNICATION SERVICES -- 0.5% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.5% 663,200 Telecomunicacoes Brasileiras SA, ADR(a)....................... 19,200 ---------- TOTAL PREFERRED STOCKS (Cost $38,155).............................................. 19,200 ---------- INVESTMENT MANAGEMENT COMPANY -- 0.5% 22,945,000 Nations Cash Reserves, Capital Class Shares(d)................ 22,945 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $22,945).............................................. 22,945 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 74 NATIONS MASTER INVESTMENT TRUST Nations International Value Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE UNITS (000) - ------------------------------------------------------------------------------------------- RIGHTS -- 0.0% TELECOMMUNICATION SERVICES -- 0.0% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.0% Embratel participacoes SA 168,143 8.730% 04/07/05(a)(b)(e)(f)................................. $ -- ---------- TOTAL RIGHTS (Cost $0)................................................... -- ---------- PAR (000) - ------------ REPURCHASE AGREEMENTS(G) -- 9.9% $ 112,782 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $113,855 (repurchase proceeds $112,791)..................... 112,782 135,338 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $137,116 (repurchase proceeds $135,349)................................................... 135,338 176,184 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $178,963 (repurchase proceeds $176,198)................................................... 176,184 ---------- TOTAL REPURCHASE AGREEMENTS (Cost $424,304)............................................. 424,304 ---------- TOTAL INVESTMENTS (Cost $4,002,157)(h).............................. 109.6% 4,695,075 OTHER ASSETS AND LIABILITIES, NET................... (9.6)% (410,827) ---------- NET ASSETS.......................................... 100.0% $4,284,248 ==========
- --------------- Notes to Investment Portfolio: (a) All or a portion of security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $267,787 and $412,207, respectively. (b) Non-income producing security. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $268,972, which represents 6.3% of net assets. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) Illiquid security. (f) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (g) This amount represents cash collateral received from securities lending activity (see Note 7). (h) Cost for federal income tax purposes is $4,002,157. See Note 4 for additional information.
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - ----------------------------------------------------------- United Kingdom $ 715,974 15.2% Japan 692,181 14.7 Germany 490,504 10.4 United States* 447,249 9.6 Netherlands 434,846 9.3 Switzerland 354,246 7.5 Spain 277,750 5.9 France 204,525 4.4 Brazil 174,675 3.7 Singapore 194,917 4,1 South Korea 144,280 3.1 Italy 135,362 2.9 Portugal 96,609 2.1 Russia 86,232 1.8 New Zealand 71,670 1.5 Mexico 55,901 1.2 Venezuela 54,468 1.2 Belgium 33,337 0.7 Canada 30,349 0.7 ------------------------ $4,695,075 100.0% ------------------------
* Includes Short-Term Obligations. ABBREVIATION: ADR -- American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 75 NATIONS MASTER INVESTMENT TRUST Nations International Value Master Portfolio STATEMENT OF ASSETS AND LIABILITIES March 31, 2005
NATIONS INTERNATIONAL VALUE MASTER PORTFOLIO ---------------- (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost......................... $ 3,979,212 Affiliated investments, at cost............................. 22,945 -------------- Non-affiliated investments, at value........................ 4,672,130 Affiliated investments, at value............................ 22,945 Cash........................................................ 53 Dividends receivable........................................ 16,204 Interest receivable......................................... 145 -------------- Total assets............................................ 4,711,477 -------------- LIABILITIES: Collateral on securities loaned............................. (424,304) Investment advisory fee payable............................. (2,556) Administration fee payable.................................. (186) Accrued Trustees' fees and expenses......................... (43) Accrued expenses and other liabilities...................... (140) -------------- Total liabilities....................................... (427,229) -------------- NET ASSETS.................................................. $ 4,284,248 ==============
SEE NOTES TO FINANCIAL STATEMENTS. 76 NATIONS MASTER INVESTMENT TRUST Nations International Value Master Portfolio STATEMENT OF OPERATIONS For the year ended March 31, 2005
NATIONS INTERNATIONAL VALUE MASTER PORTFOLIO ---------------- (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $8,828)...... $ 97,387 Dividend income from affiliated funds....................... 1,086 Securities lending.......................................... 1,350 -------------- Total investment income................................. 99,823 -------------- EXPENSES: Investment advisory fee..................................... 34,459 Administration fee.......................................... 2,053 Custodian fees.............................................. 605 Legal and audit fees........................................ 48 Other....................................................... 135 -------------- Total expenses.......................................... 37,300 Fees waived by investment advisor (see Note 3).............. (1,820) Fees reduced by credits allowed by the custodian (see Note 3)........................................................ (3) -------------- Net expenses............................................ 35,477 -------------- NET INVESTMENT INCOME....................................... 64,346 -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Security transactions..................................... 358,390 Foreign currencies and net other assets................... (625) -------------- Net realized gain/(loss) on investments..................... 357,765 -------------- Change in unrealized appreciation/(depreciation) of: Securities................................................ 120,430 Foreign currencies and net other assets................... 34 -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... 120,464 -------------- Net realized and unrealized gain/(loss) on investments...... 478,229 -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 542,575 ==============
SEE NOTES TO FINANCIAL STATEMENTS. 77 NATIONS MASTER INVESTMENT TRUST Nations International Value Master Portfolio STATEMENT OF CHANGES IN NET ASSETS
NATIONS INTERNATIONAL VALUE MASTER PORTFOLIO ----------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 ----------------------------------- (IN THOUSANDS) Net investment income....................................... $ 64,346 $ 49,096 Net realized gain/(loss) on investments..................... 357,765 133,706 Net change in unrealized appreciation/(depreciation) of investments............................................... 120,464 1,853,832 -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 542,575 2,036,634 Contributions............................................... 242,589 220,561 Withdrawals................................................. (604,410) (887,216) -------------- -------------- Net increase/(decrease) in net assets....................... 180,754 1,369,979 NET ASSETS: Beginning of year........................................... 4,103,494 2,733,515 -------------- -------------- End of year................................................. $ 4,284,248 $ 4,103,494 ============== ==============
FINANCIAL HIGHLIGHTS
WITHOUT WAIVERS RATIO OF AND/OR EXPENSE OPERATING REIMBURSEMENTS EXPENSES --------------- RATIO OF INCLUDING RATIO OF NET RATIO OF OPERATING INTEREST INVESTMENT OPERATING EXPENSES EXPENSE INCOME/(LOSS) PORTFOLIO EXPENSES TO TOTAL TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER AVERAGE RETURN NET ASSETS NET ASSETS NET ASSETS RATE NET ASSETS ------------------------------------------------------------------------------ INTERNATIONAL VALUE MASTER PORTFOLIO: Year ended 3/31/2005...................... 13.85% 0.86%(a) 0.86%(a) 1.57% 21% 0.91%(a) Year ended 3/31/2004...................... 79.88 0.90(a) 0.90(a)(b) 1.34 15 0.96(a) Year ended 3/31/2003...................... (28.54) 0.90(a) 0.90(a)(b) 1.45 25 0.96(a) Year ended 3/31/2002...................... 0.08 0.93(a) 0.93(a)(b) 1.61 19 0.96(a) Year ended 3/31/2001...................... --(c) 0.87(a) 0.87(a)(b) 2.16 14 0.97(a)
- --------------- (a)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b)The effect of interest expense on the operating expense ratio was less than 0.01%. (c)Total return not required for period indicated. SEE NOTES TO FINANCIAL STATEMENTS. 78 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS Nations Master Investment Trust (the "Master Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. At March 31, 2005, the Master Trust offered twelve separate portfolios. These financial statements pertain only to the International Value Master Portfolio (the "Master Portfolio"). Financial statements for the other portfolios of the Master Trust are presented under separate cover. The following investors were invested in the Master Portfolio at March 31, 2005: INTERNATIONAL VALUE MASTER PORTFOLIO: Nations International Value Fund............................ 87.8% Nations International Value Fund (Offshore)................. 1.3% Banc of America Capital Management Funds VII - International Value Fund................................................ 10.9%
There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Master Portfolio to meet their obligations may be affected by economic and political developments in a specific country, industry or region. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolio in the preparation of its financial statements. Securities valuation: Securities, including futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on Nasdaq are generally valued at the Nasdaq official closing price. Securities traded only over-the-counter are generally valued at the mean of the latest bid and asked prices. Securities which are primarily traded on foreign securities exchanges are generally valued at the last available sale price on their respective exchanges where primarily traded. Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Certain debt security prices provided by the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities on comparable securities. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. Trading in securities on most foreign exchanges and over the counter markets is normally completed before the close of the domestic stock market and may also take place on days when the domestic market is closed. If events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Master Portfolio's net assets are calculated, such securities may be valued at fair value in accordance with procedures adopted by the Board of Trustees. Nations Funds has retained an independent fair value pricing service to assist in the fair valuation process for Funds that primarily invest in international securities. Repurchase agreements: The Master Portfolio may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, a Master Portfolio takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the obligation of the Master Portfolio to resell, the underlying debt obligation at an agreed-upon price and date, thereby determining the yield during the Master Portfolio's holding period. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the Master Portfolio's holding period. The value of the collateral must be at least equal at all times to the total amount of the repurchase obligation, including interest. Generally, in the event of counterparty default, the Master Portfolio has the right to use the collateral to offset losses incurred. There would be a potential loss to the Master Portfolio in the event the Master Portfolio is delayed or prevented from exercising its right to dispose of the collateral securities, including the risk of a 79 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) possible decline in the value of the underlying securities during the period the Master Portfolio seeks to assert its right. The Master Portfolio's investment advisor, under the oversight of the Board of Trustees, monitors the value of collateral received as well as the creditworthiness of those banks and dealers with which the Master Portfolio enters into repurchase agreements to evaluate potential risks. Futures contracts: A Master Portfolio may invest in futures contracts for the purposes of hedging against changes in values of the Master Portfolio's securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity market. Upon entering into a futures contract, the Master Portfolio is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by the Master Portfolio each day, depending on the daily fluctuation of the value of the contract. At March 31, 2005, the Master Portfolio had no open futures contracts. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Foreign currency transactions: The books and records of the Master Portfolio are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of the Master Portfolio and the amounts actually received. The effects of changes in foreign currency exchange rates on securities are not separately identified 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 securities. Forward foreign currency transactions: Generally, the Master Portfolio may enter into forward foreign currency contracts only under two circumstances: (i) when the Master Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency to "lock in" the U.S. exchange rate of the transaction, with such period being a short-dated contract covering the period between transaction date and settlement date; or (ii) when the investment advisor or sub-advisor 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 Master Portfolio as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or offset. At March 31, 2005, the Master Portfolio had no open forward foreign currency contracts. Forward foreign currency contracts will be used primarily to protect the Master Portfolio from adverse currency movements and will generally not be entered into for terms greater than one year. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of the Master Portfolio's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency contract would limit the risk of loss due to 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 Statement of assets and liabilities. In addition, the Master Portfolio 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. 80 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Master Portfolio is informed of the ex-dividend date. Each investor in the Master Portfolio is treated as an owner of its proportionate share of the net assets, income, expenses, realized and unrealized gains and losses of the Master Portfolio. Federal income taxes: The Master Portfolio is treated as a partnership for federal income tax purposes and therefore is not subject to federal income tax. Each investor in the Master Portfolio will be subject to taxation on its allocated share of the Master Portfolio's ordinary income and capital gains. The Master Portfolio may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Master Portfolio will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which they invest. Expenses: General expenses of the Master Trust are allocated to the Master Portfolio based upon its relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Master Portfolio are charged to such Master Portfolio. Indemnification: In the normal course of business, each Master Portfolio enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Master Portfolio's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Master Trust's organizational documents, the Trustees and Officers of the Master Trust are indemnified against certain liabilities that may arise out of their duties to the Master Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Master Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Master Portfolio. Effective December 1, 2004, BACAP 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 the Master Portfolio:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ----------------------------------------------------------------------------- First $500 million.......................................... 0.85% $500 million to $1 billion.................................. 0.80% $1 billion to $1.5 billion.................................. 0.75% $1.5 billion to $3 billion.................................. 0.70% $3 billion to $6 billion.................................... 0.68% Over $6 billion............................................. 0.66%
Prior to December 1, 2004, BACAP received a monthly investment advisory fee at the annual rate of 0.90% of the Master Portfolio's average daily net assets. For the year ended March 31, 2005, the effective investment advisory fee rate for the Master Portfolio was 0.84% of Master Portfolio's average daily net assets. The Master Trust has, on behalf of the Master Portfolio, entered into a sub-advisory agreement with BACAP and Brandes Investment Partners, L.P. ("Brandes"). Pursuant to the sub-advisory agreement, Brandes is entitled to receive a sub-advisory fee from BACAP at the annual rate of 0.50% of the Master Portfolio's average daily net assets. 81 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of the Master Trust. Under the administration agreement, BACAP Distributors is currently entitled to receive a fee, computed daily and paid monthly, at the annual rate of 0.05% of the Master Portfolio's average daily net assets. The Bank of New York ("BNY") serves as sub-administrator of the Master Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of the Master Trust's assets. No officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from the Master Trust for serving as a Trustee or officer of the Master Trust. The Master Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Master Portfolio's assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, a portfolio of Nations Funds Trust, another registered investment company advised by BACAP. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statement of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. The Master Portfolio has made daily investments of cash balances in the Nations Cash Reserves, a portfolio of Nations Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by the Master Portfolio from such investments is included in its Statement of operations as "Dividend income from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Master Portfolio. For year ended March 31, 2005, BACAP and BACAP Distributors earned advisory fees and administration fees of $86 and $44 respectively, related to investments in affiliated funds. 3. TOTAL OPERATING EXPENSE LIMITATIONS For the year ended March 31, 2005, BACAP voluntarily agreed to limit total annual operating expenses to 0.90% of the Master Portfolio's average daily net assets. There is no guarantee that this limitation will continue. The Master Portfolio has an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of operations. The Master Portfolio could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. 4. FEDERAL TAX INFORMATION Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION (DEPRECIATION) (000) (000) (000) ------------ ------------ -------------- Master Portfolio............................................ $945,238 $ (252,320) $692,918
5. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005 were $854,943 and $1,128,628, respectively. There were no purchases and sales of long-term U.S. government securities for the year ended March 31, 2005. 82 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. LINE OF CREDIT The Master Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. The Master Portfolio maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. During the year ended March 31, 2005, borrowings by the Master Portfolio under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST (000) RATE ----------------------- Master Portfolio............................................ $28 3.00%
---------------------- *The average amount outstanding was calculated based on daily balances in the period. 7. SECURITIES LENDING Under an agreement with BNY, the Master Portfolio may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Master Portfolio. Generally, in the event of borrower default, the Master Portfolio has the right to use the collateral to offset any losses incurred. In the event the Master Portfolio is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Master Portfolio. The Master Portfolio bears the risk of loss with respect to the investment of collateral. The income earned by the Master Portfolio from securities lending is included in its Statement of operations. At March 31, 2005, the Master Portfolio had securities on loan as follows:
MARKET VALUE OF MARKET VALUE OF LOANED SECURITIES COLLATERAL (000) (000) ----------------------------------- Master Portfolio............................................ $412,207 $424,304
8. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. - the investment advisor to and distributor of the Columbia Funds, respectively, - to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. 83 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. The Master Portfolio is not currently named as defendant in the MDL. The Master Portfolio can not predict if it will be added as a party to the MDL, and if it is added, whether the litigation will have any impact on it. 84 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS MASTER INVESTMENT TRUST In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations International Value Master Portfolio (constituting part of Nations Master Investment Trust, hereafter referred to as the "Portfolio") at March 31, 2005, the results of its operations for the year then ended, and the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolio's 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 85 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director -- Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
86 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
87 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 88 BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED) Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Boards of Trustees (the "Boards") of Nations Funds Trust and Nations Master Investment Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory and sub-advisory agreements and are not "interested persons" of the Trusts, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory and sub-advisory agreements and approve any newly proposed terms therein. In this regard, the Boards reviewed and re-approved, during the most recent six months covered by this report: (i) an investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for Nations Global Value Fund, Nations International Value Master Portfolio, Nations International Equity Master Portfolio and Nations Marsico International Opportunities Master Portfolio; (ii) an investment sub-advisory agreement with Brandes Investment Partners, L.P. ("Brandes") for Nations Global Value Fund and Nations International Value Master Portfolio; and (iii) an investment sub-advisory agreement with Marsico Capital Management, LLC ("Marsico Capital") for Nations International Equity Master Portfolio and Nations Marsico International Opportunities Master Portfolio. The investment advisory agreement with BACAP and the investment sub-advisory agreements with Brandes and Marsico Capital (the "Sub-Advisers") are each referred to as an "Advisory Agreement" and collectively referred to as the "Advisory Agreements." The funds and master portfolios identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at meetings held on November 17-18, 2004, the Boards, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the Sub-Advisers and the re-approval of the Advisory Agreements. Nature, Extent and Quality of Services The Boards received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP and the Sub-Advisers under the Advisory Agreements. The most recent investment adviser registration forms ("Forms ADV") for BACAP and the Sub-Advisers were provided to the Boards, as were responses of BACAP and the Sub-Advisers to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Boards reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by, investment personnel of BACAP and the Sub-Advisers. In this regard, the Boards specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Boards received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds, BACAP and the Sub-Advisers. The Boards considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Boards also considered the Funds' Chief Compliance Officer's report and recommendations. The Boards evaluated the ability of BACAP and the Sub-Advisers, based on their respective resources, reputations and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Boards considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Boards considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Boards concluded that they were generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP and the Sub-Advisers. Fund Performance and Expenses The Boards considered the one-year, three-year, five-year and ten-year performance results for each of the Funds, as relevant. They also considered these results in comparison to the performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the 89 BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (CONTINUED) (UNAUDITED) performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that of expenses to provide a more accurate basis of comparison. The Boards were provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. The Boards also considered information in the Lipper data that ranked each Fund based on: (i) each Fund's one-year performance compared to actual management fees, (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Boards of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Boards (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Boards considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Boards also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Boards noted that each Fund's performance was better than, or not substantially below, each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Boards received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. They also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. As with their review of each Fund's performance, Funds that performed poorly or below average with respect to their total expense ratios were highlighted by Management for further review by the Boards. The Boards noted that the total expense ratios of the Funds were lower than each Fund's Peer Group's median total expense ratio and did not require significant additional consideration by the Boards. Management also discussed the Lipper data and rankings, and other relevant information, for each Fund. Based on the above-referenced considerations and other factors, the Boards concluded that the overall performance and expense results supported the re-approval of the Advisory Agreements for each Fund. Investment Advisory and Sub-Advisory Fee Rates The Boards reviewed and considered the proposed contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). The Boards also reviewed and considered the proposed contractual investment sub-advisory fee rates (the "Sub-Advisory Agreement Rates") payable by BACAP to the Sub-Advisers for investment sub-advisory services. In addition, the Boards reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). The Boards noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain of its affiliates relating to trading in mutual fund shares. At the November meetings, the Board also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Board also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. 90 BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (CONTINUED) (UNAUDITED) Additionally, the Boards received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Boards concluded that the respective Net Advisory Rate for Nations International Equity Master Portfolio and Nations International Opportunities Master Portfolio were lower than the median rates of each Fund's Peer Group and did not warrant significant additional consideration. The Boards noted that Nations Global Value Fund and Nations International Value Master Portfolio required additional review as a result of the 5th quintile Peer Group ranking for the Advisory Agreement Rate and Net Advisory Rate of Nations Global Value Fund, and 4th and 5th quintile Peer Group rankings for the Advisory Agreement Rate and Net Advisory Rate, respectively, of Nations International Value Master Portfolio. However, the Boards also noted that the total expense ratio for each of these Funds was consistent with that of the other funds in their Peer Groups, with Nations Global Value Fund achieving a 1st quintile ranking as compared to its Peer Group. In addition, the Boards considered that the one- and three-year performance rankings for each Fund against its Universe were in the 1st quintile. The Boards concluded that these and other factors supported the Advisory Agreement Rates and the Net Advisory Rates, and approved the Advisory Agreements for all of the Funds. With regard to the Funds with a sub-adviser, the Boards also reviewed the Sub-Advisory Agreement Rates charged by Brandes and Marsico Capital, which serve as Sub-Advisers to certain of the Funds. The Boards concluded that the Sub-Advisory Agreement Rates were fair and equitable, based on their consideration of the factors described above. Profitability The Boards received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates, including Marsico Capital. The Boards concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. The Boards also received and considered a profitability analysis of Brandes based on its Sub-Advisory Agreement Rates, as well as on other relationships between the Funds and Brandes and its affiliates. The Boards observed the costs of providing portfolio management and other services to the Funds. The Boards also noted that the sub-advisory fees are paid to Brandes by BACAP and not directly by the Funds, and that the Boards separately determined that the Advisory Agreement Rates for these Funds were fair and equitable. Based on these factors, the Boards concluded that the profits and other ancillary benefits that Brandes and its affiliates received with regard to providing these services to the Funds were not unreasonable. Economies of Scale The Boards received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Boards concluded that any actual or potential economies of scale are, or will be, shared fairly with Fund shareholders, most particularly through the newly-approved Advisory Agreement Rate breakpoints effective December 1, 2004. The Nations Master Investment Trust Board did not approve such breakpoints for Nations Marsico International Opportunities Master Portfolio. However, the Board considered the Advisory Agreement Rate and the Sub-Advisory Agreement Rate of Nations Marsico International Opportunities Master Portfolio and concluded that the fees were fair and equitable based on relevant factors, including the Fund's performance results. The Boards noted that Brandes does not offer breakpoints in its Sub-Advisory Agreement Rates for the Funds. However, the Boards also noted that the sub-advisory fees are paid to Brandes by BACAP and not directly by the Funds, and that the Boards separately determined that the Advisory Agreement Rates for the sub-advised Funds were fair and equitable. They also noted that shareholders would receive benefits from any economies of scale through breakpoints in the Advisory Agreement Rates (except for Nations Marsico International Opportunities Master Portfolio, whose Advisory Agreement Rate did not offer breakpoints). 91 BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (CONTINUED) (UNAUDITED) The Boards acknowledged the inherent limitations of any analysis of an investment adviser's economies of scale and of any attempt to correlate breakpoints with such economies, stemming largely from the Boards' understanding that economies of scale are realized, if at all, by an investment adviser across a variety of products and services, not just with respect to a single fund. Information About Services to Other Clients The Boards also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP and Brandes to their other clients, including other registered investment companies and institutional investors. The Boards considered that Marsico Capital did not provide such information because it treats such information as confidential. The Boards concluded that the Advisory Agreement Rates, the Sub-Advisory Agreement Rates and the Net Advisory Rates were within a reasonable range of the fee rates offered to other BACAP and Brandes clients. Where rates offered to other clients of BACAP were appreciably lower, the Boards concluded, based on information provided by BACAP, that the costs associated with managing and operating a registered open-end fund, compared with an institutional investor account, provided a justification for the higher fee rates charged to the Funds. The Nations Master Investment Trust Board did not receive comparative fee rate materials for Marsico Capital, but concluded that the Sub-Advisory Agreement Rates were fair and equitable based on other considerations, including the performance of Funds as sub-advised by the Sub-Adviser. The Board also noted that the sub-advisory fees are paid to Marsico Capital by BACAP and not directly by the Funds, and that the Board separately determined that the Advisory Agreement Rates for the sub-advised Funds were fair and equitable. Other Benefits to BACAP and the Sub-Advisers The Boards received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates and the Sub-Advisers as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP and the Sub-Advisers with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP and the Sub-Advisers as a result of their relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates or a Sub-Adviser and its affiliates). The Boards also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, including whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Boards also reviewed the respective policies of BACAP and the Sub-Advisers regarding the allocation of portfolio investment opportunities among the Funds and other clients. Other Factors and Broader Review The Boards also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Boards noted that the Funds in the Nations Funds complex are generally utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. The Boards noted that Causeway Capital Management LLC ("Causeway") became a sub-adviser to Nations International Equity Master Portfolio in September 2004, and therefore is not yet subject to an annual re-approval requirement. Nonetheless, the Nations Master Investment Trust Board reviewed certain information related to Causeway as a part of its overall review of the Advisory Agreements of such Funds. As discussed above, the Boards review detailed materials received from BACAP and the Sub-Advisers annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Boards also regularly review and assess the quality of the services that the Funds receive throughout the year. In this regard, the Boards review reports of BACAP and the Sub-Advisers at least in each of their quarterly meetings, which include, among other things, a detailed portfolio review 92 BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (CONTINUED) (UNAUDITED) and detailed fund performance reports. In addition, the Boards confer with the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on their deliberations and their evaluation of the information provided to them, the Boards concluded that re-approval of the Advisory Agreements for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Boards unanimously re-approved the Advisory Agreements. 93 SHAREHOLDER MEETING RESULTS (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - --------------------- --- -------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
94 SHAREHOLDER MEETING RESULTS (CONTINUED) (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Master Investment Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 996,970,350 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - --------------------- --- -------- Edward J. Boudreau, Jr. .................................... 911,066,248 4,746,035 William P. Carmichael....................................... 911,023,809 4,788,474 William A. Hawkins.......................................... 911,084,335 4,727,948 R. Glenn Hilliard........................................... 911,060,388 4,751,895 Minor M. Shaw............................................... 911,038,474 4,773,809
95 THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF BANC OF AMERICA CAPITAL MANAGEMENT INTERNATIONAL/ GLOBAL WITHIN EACH CATEGORY, FUNDS THE FUNDS ARE LISTED FROM AGGRESSIVE TO CONSERVATIVE. EQUITY Nations Marsico FUNDS International FIXED Opportunities Fund INCOME FUNDS GROWTH FUNDS Nations International MONEY Equity Fund MARKET Nations Small FUNDS TAXABLE Company Fund Nations International INCOME FUNDS Value Fund Nations Marsico Nations Cash Nations High Yield 21st Century Fund Nations Global Reserves Bond Fund Value Fund Nations MidCap Nations Money Nations Strategic Growth Fund Market Reserves Income Fund Nations Marsico LOWER RISK/REWARD POTENTIAL Nations Government Nations Bond Fund Focused Equities Reserves Fund Nations Intermediate Nations Treasury Bond Fund Nations Marsico Reserves Growth Fund Nations Government Nations Tax-Exempt Securities Fund Reserves BLEND FUNDS SPECIALTY FUNDS Nations Short- Nations Municipal Intermediate Nations Asset Reserves Government Fund Allocation Fund INDEX FUNDS Nations California Nations Short-Term Nations Strategic Nations SmallCap Index Fund Tax-Exempt Reserves Income Fund Growth Fund Nations MidCap Index Fund Nations New York Tax-Exempt Reserves TAX-EXEMPT VALUE FUNDS Nations LargeCap Index Fund INCOME FUNDS Nations SmallCap Nations LargeCap Enhanced Nations Municipal Value Fund Core Fund Income Fund Nations MidCap Nations State-Specific Value Fund ASSET ALLOCATION Long-Term Municipal PORTFOLIOS Bond Funds (CA, FL) Nations Value Fund Nations LifeGoal Nations Intermediate Growth Portfolio Municipal Bond Fund Nations LifeGoal Balanced Nations State-Specific Growth Portfolio Intermediate Municipal Bond Funds (CA, FL, Nations LifeGoal Income and GA, KS, MD, NC, SC, Growth Portfolio TN, TX, VA) Nations LifeGoal Nations Short-Term Income Portfolio Municipal Income Fund OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/054V-0405 (05/05) 05/5784
Nations LargeCap Index Fund Nations LargeCap Enhanced Core Fund Index Funds Nations MidCap Index Fund Annual report for the year ended Nations SmallCap March 31, 2005 Index Fund [NATIONS FUNDS LOGO] A description of the policies and procedures that the funds use to determine how to vote proxies and a copy of the funds' voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment adviser to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [CHRISTOPHER WILSON PHOTO] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to help maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have also reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the better has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS PORTFOLIO COMMENTARY Nations LargeCap Index Fund 3 Nations LargeCap Enhanced Core Fund 9 Nations MidCap Index Fund 16 Nations SmallCap Index Fund 22 FINANCIAL STATEMENTS Investment portfolios 28 Statements of assets and liabilities 56 Statements of operations 57 Statements of changes in net assets 58 Schedules of capital stock activity 60 Financial highlights 64 Notes to financial statements 72 Report of independent registered public accounting firm 84 Tax information 85 Fund governance 86 Board consideration and re-approval of investment advisory agreement 89 Shareholder meeting results 92
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. NATIONS LARGECAP INDEX FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS LARGECAP INDEX FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks investment results that (before fees and expenses) correspond to the total return of the S&P 500 Index.** PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations LargeCap Index Fund Investor A Shares provided shareholders with a total return of 6.33%.*** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations LargeCap Index Fund seeks to provide investors with the potential for returns that closely approximate the fund's benchmark, the S&P 500 Index. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE PAST 12 MONTHS? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the United States, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? During the 12-month period ended March 31, 2005, Nations LargeCap Index Fund (Investor A Shares) returned 6.33%. The S&P 500 Index returned 6.69%. Prior to deducting fees and expenses, the fund's return was calculated at 6.87%, which was in line with the index return for the period. As an unmanaged index, the S&P 500 Index does not have fees or any of the other expenses of investing. WHICH SECTORS PROVED FAVORABLE FOR THE FUND?**** Within the S&P 500 Index, the best performing sectors for the reporting period were energy, utilities and industrials. All had positive double-digit returns, ranging from 15% to 45%. Sector returns within the fund's portfolio tend to mirror the benchmark, which is consistent with our investment objective. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***For standardized performance, please refer to the Performance table. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total return would have been lower. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 NATIONS LARGECAP INDEX FUND PORTFOLIO MANAGER COMMENTARY (continued) WHICH SECTORS PROVED UNFAVORABLE FOR THE FUND?**** The technology and financial sectors were poor performers during the period. Both posted negative returns. Sector performance for health care was disappointing for the period, although it did manage to post a positive return. Sector returns within the fund's portfolio tend to mirror the benchmark, which is consistent with our investment objective. -------------------------------------------- Vikram Kuriyan has managed Nations LargeCap Index Fund since February 2005. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to February 2005, the fund was managed by the Quantitative Strategies Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 4 NATIONS LARGECAP INDEX FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,068.66 1,024.23 0.72 0.71 0.14 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,067.22 1,022.99 2.01 1.97 0.39
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor and/or Administrator not reimbursed/waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 5 NATIONS LARGECAP INDEX FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 6 NATIONS LARGECAP INDEX FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 3.1% Telecommunication services 3.1% Utilities 3.2% Materials 8.6% Energy 10.1% Consumer staples 11.2% Consumer discretionary 11.6% Industrials 12.7% Health care 14.8% Information technology 19.4% Financials 2.2% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 General Electric 3.5% ------------------------------------------------- 2 Exxon Mobil 3.4% ------------------------------------------------- 3 Microsoft 2.2% ------------------------------------------------- 4 Citigroup 2.1% ------------------------------------------------- 5 Johnson & Johnson 1.8% ------------------------------------------------- 6 Pfizer 1.8% ------------------------------------------------- 7 Bank of America 1.6% ------------------------------------------------- 8 Wal-Mart Stores 1.5% ------------------------------------------------- 9 International Business Machines 1.3% ------------------------------------------------- 10 Intel 1.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
7 NATIONS LARGECAP INDEX FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES (AS OF 3/31/05) RETURN CHART]
NATIONS LARGECAP INDEX LIPPER S&P 500 INDEX FUND OBJECTIVE FUNDS AVERAGE S&P 500 INDEX ---------------------- ----------------------- ------------- Oct. 10 1995 10000 10000 10000 1996 11267 11295 11297 13414 13484 13537 1998 19663 19852 20035 23200 23438 23734 2000 27219 27476 27991 21182 21431 21923 2002 21118 21350 21975 15779 15976 16534 2004 21223 21448 22341 Mar. 31 2005 22565 22754 23836
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION (10/10/95 through 3/31/05) 8.97%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LargeCap Index Fund from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper S&P 500 Index Objective Funds Average are passively managed, limited-expense funds designed to replicate the performance of the S&P 500. The Index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A Shares may vary based on the differences in fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
PRIMARY A INVESTOR A Inception date 12/15/93 10/10/95 - -------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 6.57% 6.33% - -------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 2.50% 2.24% 5 YEARS -3.43% -3.68% 10 YEARS 10.46% -- SINCE INCEPTION 10.27% 8.97%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 8 NATIONS LARGECAP ENHANCED CORE FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS LARGECAP ENHANCED CORE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks, over the long term, to provide a total return that (before fees and expenses) exceeds the total return of the S&P 500 Index.** PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations LargeCap Enhanced Core Fund Investor A Shares provided shareholders with a total return of 6.59%.*** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Unlike traditional index funds, Nations LargeCap Enhanced Core Fund is an active, quantitatively managed mutual fund. We believe that maximizing the portfolio's exposure to attractive security selection factors, while simultaneously seeking to manage portfolio risk, may provide investors with the potential for positive incremental performance relative to the S&P 500 Index, the fund's benchmark. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE PAST 12 MONTHS? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the United States, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? During the 12-month period ended March 31, 2005, Nations LargeCap Enhanced Core Fund (Investor A Shares) returned 6.59%. The S&P 500 Index returned 6.69%. Prior to deducting fees and expenses, the fund's return was calculated at 7.39%, which was better than the index return for the period. As an unmanaged index, the S&P 500 Index does not have fees or any of the other expenses of investing. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***For standardized performance, please refer to the Performance table. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total return would have been lower. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 9 NATIONS LARGECAP ENHANCED CORE FUND PORTFOLIO MANAGER COMMENTARY (continued) PLEASE DESCRIBE THE INVESTMENT PROCESS. Our stock selection process uses quantitative analysis to determine the attractiveness of the portfolio. Our stock selection methodology is based on a proprietary adaptive model that evaluates both fundamental and technical data. A variety of security selection factors, including those traditionally classified as value, growth, price momentum and earnings momentum, have been dynamically evaluated to identify the factors we believe to be the most reliable predictors for generating returns above the benchmark index. As part of the investment process, we analyze all securities in the fund's benchmark in a comprehensive and uniform manner. In our opinion, the result of our analysis is a portfolio that maintains exposure to those attributes believed to be indicative of superior performance, while minimizing exposure to unpredictable sources of systematic or market risk. The risk management strategy is intended to produce a portfolio whose aggregate characteristics closely resemble the benchmark while muting exposure to systematic risk factors such as sector, size and style bias. Our investment process also employs other strategies to add incremental excess returns from sources that are uncorrelated to our primary security selection methodology. We believe market inefficiencies exist which can be identified and exploited. There are events -- for example, merger and acquisition activities -- which may create arbitrage opportunities that we can take advantage of to enhance portfolio returns. WHICH SECTORS PROVED FAVORABLE FOR THE FUND?**** Energy, health care and consumer staples were the largest contributors to the fund's excess return. Within the energy sector, the best performer was Valero Energy, an independent refiner. The aging of the "baby boomer" generation continues to have a positive effect on health care companies, especially those that manufacture and sell medical devices. An increase in orthopedic device and implant sales benefited the stocks of Biomet and Stryker. Within the consumer staples sector, Reynolds American saw a boost in its stock as it started to resolve its legal issues. WHICH SECTORS PROVED UNFAVORABLE FOR THE FUND?**** The fund had an underweight position in utilities, which hampered performance. This modest underweight cut across all sub-sectors within utilities and the fund was not able to participate fully in this sector's good performance for the period. Within the financials sector, fund performance was also hurt by an overweight position in American International Group. This stock suffered as unresolved legal and regulatory issues had a negative effect on the insurance industry. General Electric benefited from a boost in investor confidence during the second half of the period, after CEO Jeff Immelt announced a bullish multi-year earnings outlook. An underweight position in GE meant that the fund did not benefit as much as it could in this stock's rally. As a result, the fund's return in the industrials sector was not as strong as it could have been. -------------------------------------------- ****Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 10 NATIONS LARGECAP ENHANCED CORE FUND PORTFOLIO MANAGER COMMENTARY (continued) Vikram Kuriyan has managed Nations LargeCap Enhanced Core Fund since February 2005. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to February 2005, the fund was managed by the Quantitative Strategies Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 11 NATIONS LARGECAP ENHANCED CORE FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,075.44 1,022.44 2.59 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,074.05 1,021.19 3.88 3.78 0.75
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor and/or Administrator not reimbursed/waived a portion of expenses, total return would have been reduced. 12 NATIONS LARGECAP ENHANCED CORE FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 13 NATIONS LARGECAP ENHANCED CORE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 2.2% Utilities 2.2% Telecommunication services 3.9% Materials 9.6% Industrials 9.7% Consumer staples 10.5% Consumer discretionary 10.5% Energy 13.2% Health care 16.7% Information technology 16.7% Financials 4.8% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Exxon Mobil 3.6% ------------------------------------------------- 2 Microsoft 2.5% ------------------------------------------------- 3 General Electric 2.5% ------------------------------------------------- 4 Citigroup 2.0% ------------------------------------------------- 5 Wal-Mart Stores 1.8% ------------------------------------------------- 6 Johnson & Johnson 1.8% ------------------------------------------------- 7 Pfizer 1.8% ------------------------------------------------- 8 Intel 1.7% ------------------------------------------------- 9 ChevronTexaco 1.6% ------------------------------------------------- 10 Dell 1.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
14 NATIONS LARGECAP ENHANCED CORE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES (AS OF 3/31/05) RETURN CHART]
NATIONS LARGECAP ENHANCED LIPPER LARGE-CAP CORE CORE FUND FUNDS AVERAGE S&P 500 INDEX ------------------------- --------------------- ------------- July 31 1996 10000 10000 10000 12012 11657 11998 1998 17683 16681 17757 20330 18997 21035 2000 23388 22845 24809 18301 18299 19430 2002 18767 18004 19477 14031 13413 14654 2004 19233 17660 19801 Mar. 31 2005 20500 18372 21127
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION (7/31/96 through 3/31/05) 8.64%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LargeCap Enhanced Core Fund from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper Large-Cap Core Funds Average invest at least 75% of their equity assets in large-capitalization companies that typically have average price-to-earnings and price-to-book ratios compared to the S&P 500 Index. The Index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A Shares may vary based on the differences in fees paid by the shareholders investing in this class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
PRIMARY A INVESTOR A Inception date 7/31/96 7/31/96 - ------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 6.90% 6.59% - ------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 3.27% 2.99% 5 YEARS -2.33% -2.60% SINCE INCEPTION 8.91% 8.64%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 15 NATIONS MIDCAP INDEX FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS MIDCAP INDEX FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks investment results that (before fees and expenses) correspond to the total return of the S&P MidCap 400 Index.** PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations MidCap Index Fund Investor A Shares provided shareholders with a total return of 10.03%.*** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations MidCap Index Fund seeks to provide investors with the potential for returns that closely approximate the fund's benchmark, the S&P MidCap 400 Index. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE PAST 12 MONTHS? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the United States, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? During the 12-month period ended March 31, 2005, Nations MidCap Index Fund (Investor A Shares) returned 10.03%. The S&P MidCap 400 Index returned 10.43%. Prior to deducting fees and expenses, the fund's return was calculated at 10.57%, which was in line with the index. As an unmanaged index, the S&P MidCap 400 Index does not have fees or any of the other expenses of investing. During the reporting period, mid-cap stocks outpaced large-cap stocks. As measured by the S&P 500 Index, large-cap stocks returned 6.69% for the period.**** *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **The S&P MidCap 400 Index is an unmanaged index of 400 domestic stocks chosen for market size, liquidity and industry representation and weighted by market value. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***For standardized performance, please refer to the Performance table. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total return would have been lower. ****The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. INVESTING IN MID-CAP STOCKS MAY PRESENT SPECIAL RISKS, INCLUDING POSSIBLE ILLIQUIDITY AND GREATER PRICE VOLATILITY THAN STOCKS OF LARGER, MORE ESTABLISHED COMPANIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 16 NATIONS MIDCAP INDEX FUND PORTFOLIO MANAGER COMMENTARY (continued) WHICH SECTORS PROVED FAVORABLE FOR THE FUND?+ It was a very good year for energy, materials and utilities. These sectors had the best performance within the S&P MidCap 400 Index during the reporting period. They all posted positive returns ranging from 15% to 46%. Sector returns within the fund's portfolio tend to mirror the benchmark, which is consistent with our investment objective. WHICH SECTORS PROVED UNFAVORABLE FOR THE FUND?+ Technology had a difficult year within the S&P MidCap 400 Index. Sector returns within the fund's portfolio tend to mirror the benchmark, which is consistent with our investment objective. -------------------------------------------- Vikram Kuriyan has managed Nations MidCap Index Fund since February 2005. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to February 2005, the fund was managed by the Quantitative Strategies Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 17 NATIONS MIDCAP INDEX FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,116.23 1,024.23 0.74 0.71 0.14 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,115.48 1,022.99 2.06 1.97 0.39
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor and/or Administrator not reimbursed/waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 18 NATIONS MIDCAP INDEX FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 19 NATIONS MIDCAP INDEX FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.5% Telecommunication services 4.6% Consumer staples 5.4% Materials 7.2% Utilities 7.5% Energy 11.7% Health care 12.9% Industrials 13.9% Information technology 16.9% Financials 19.1% Consumer discretionary 0.3% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Murphy Oil 0.8% ------------------------------------------------- 2 D.R. Horton 0.8% ------------------------------------------------- 3 Legg Mason 0.8% ------------------------------------------------- 4 Lennar 0.8% ------------------------------------------------- 5 Weatherford International 0.8% ------------------------------------------------- 6 Coventry Health Care 0.7% ------------------------------------------------- 7 Patterson Companies 0.7% ------------------------------------------------- 8 Smith International 0.6% ------------------------------------------------- 9 Whole Foods Market 0.6% ------------------------------------------------- 10 Caesars Entertainment 0.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
20 NATIONS MIDCAP INDEX FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES (AS OF 3/31/05) RETURN CHART]
LIPPER MID-CAP CORE FUNDS NATIONS MIDCAP INDEX FUND AVERAGE S&P MIDCAP 400 INDEX ------------------------- ------------------------- -------------------- May 31 2000 10000 10000 10000 2001 9716 9564 9763 11464 10679 11607 2003 8715 8211 8885 12925 12119 13248 Mar. 31 2005 14221 13265 14628
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION (5/31/00 through 3/31/05) 7.56%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations MidCap Index Fund from the inception of the share class. The S&P MidCap 400 Index is an unmanaged index of 400 domestic stocks chosen for market size, liquidity and industry representation and weighted by market value. Funds in the Lipper Mid-Cap Core Funds Average invest at least 75% of their equity assets in mid-capitalization companies that typically have average price-to-earnings and price-to-book ratios compared to the S&P MidCap 400 Index. The Index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A Shares may vary based on the differences in fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
PRIMARY A INVESTOR A Inception date 3/31/00 5/31/00 - ------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 10.32% 10.03% - ------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 7.73% 7.45% 5 YEARS 6.52% -- SINCE INCEPTION 6.52% 7.56%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 21 NATIONS SMALLCAP INDEX FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS SMALLCAP INDEX FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks investment results that (before fees and expenses) correspond to the total return of the S&P SmallCap 600 Index.** PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations SmallCap Index Fund Investor A Shares provided shareholders with a total return of 12.58%.*** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations SmallCap Index Fund seeks to provide investors with the potential for returns that closely approximate the fund's benchmark, the S&P SmallCap 600 Index. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE PAST 12 MONTHS? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the United States, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. HOW DID THE FUND PERFORM DURING THE PAST 12 MONTHS? During the 12-month period ended March 31, 2005, Nations SmallCap Index Fund (Investor A Shares) returned 12.58%. The S&P SmallCap 600 Index returned 13.08%. Prior to deducting fees and expenses, the fund's return was calculated at 13.21%, which tracked index performance. As an unmanaged index, the S&P SmallCap 600 Index does not have fees or any of the other expenses of investing. Small-cap stocks sharply outperformed large-cap stocks during the reporting period. As measured by the S&P 500 Index, large-cap stocks returned 6.69% for the period.**** *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **The S&P SmallCap 600 Index is an unmanaged index of 600 common stocks weighted by market capitalization. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***For standardized performance, please refer to the Performance table. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total return would have been lower. ****The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. INVESTMENTS IN SMALL-CAP STOCKS MAY BE SUBJECT TO GREATER VOLATILITY AND PRICE FLUCTUATIONS BECAUSE THEY MAY BE THINLY TRADED AND LESS LIQUID THAN INVESTMENTS IN LARGER COMPANIES. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 22 NATIONS SMALLCAP INDEX FUND PORTFOLIO MANAGER COMMENTARY (continued) WHICH SECTORS PROVED FAVORABLE FOR THE FUND?+ The best performing sectors within the S&P SmallCap 600 Index were energy, materials and utilities. All had positive double digit returns ranging from 22% to 55%. Sector returns within the fund's portfolio tend to mirror the benchmark, which is consistent with our investment objective. WHICH SECTORS PROVED UNFAVORABLE FOR THE FUND?+ Technology was the worst performing sector within the S&P SmallCap 600 Index. This sector posted a negative return for the reporting period. Sector performance for telecommunications and financials, though positive, were below the S&P 600 average and among the worst performing within the index. Sector returns within the fund's portfolio tend to mirror the benchmark, which is consistent with our investment objective. -------------------------------------------- Vikram Kuriyan has managed Nations SmallCap Index Fund since February 2005. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Prior to February 2005, the fund was managed by the Quantitative Strategies Team. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 23 NATIONS SMALLCAP INDEX FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,105.71 1,023.88 1.10 1.06 0.21 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,104.31 1,022.64 2.41 2.32 0.46
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the Advisor and/or Administrator not reimbursed/waived a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 24 NATIONS SMALLCAP INDEX FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 25 NATIONS SMALLCAP INDEX FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 0.3% Telecommunication services 3.5% Consumer staples 4.5% Utilities 6.6% Materials 6.6% Energy 12.8% Health care 14.2% Financials 15.0% Information technology 17.6% Consumer discretionary 18.2% Industrials 0.7% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 NVR 0.9% ------------------------------------------------- 2 Cooper 0.6% ------------------------------------------------- 3 Massey Energy 0.6% ------------------------------------------------- 4 Polaris Industries 0.6% ------------------------------------------------- 5 Oshkosh Truck 0.6% ------------------------------------------------- 6 Patina Oil and Gas 0.6% ------------------------------------------------- 7 Roper Industries 0.5% ------------------------------------------------- 8 M.D.C. Holdings 0.5% ------------------------------------------------- 9 Pharmaceutical Product Development 0.5% ------------------------------------------------- 10 Timken 0.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
26 NATIONS SMALLCAP INDEX FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES (AS OF 3/31/05) RETURN CHART]
NATIONS SMALLCAP INDEX LIPPER SMALL-CAP CORE FUND FUNDS AVERAGE S&P SMALLCAP 600 INDEX ---------------------- --------------------- ---------------------- Oct. 15 1996 10000 10000 10000 1997 9848 9350 9833 14511 13451 14521 1999 11512 10757 11743 14121 15817 15349 2001 13830 15159 15152 16731 18010 18481 2003 12471 13417 13896 19421 21503 21746 Mar. 31 2004 21867 23197 24588
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION (10/15/96 through 3/31/05) 9.69%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations SmallCap Index Fund from the inception of the share class. The S&P SmallCap 600 Index is an unmanaged index of 600 common stocks weighted by market capitalization. Funds in the Lipper Small-Cap Core Funds Average invest at least 75% of their equity assets in small-capitalization companies that typically have average price-to-earnings and price-to-book ratios compared to the S&P SmallCap 600 Index. The Index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A Shares may vary based on the differences in fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
PRIMARY A INVESTOR A Inception date 10/15/96 10/15/96 - --------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 12.84% 12.58% - --------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 9.60% 9.33% 5 YEARS 9.43% 9.14% SINCE INCEPTION 9.98% 9.69%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 27 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- COMMON STOCKS -- 97.8% CONSUMER DISCRETIONARY -- 11.2% AUTO COMPONENTS -- 0.2% 9,650 Cooper Tire & Rubber Co. ..................................... $ 177 20,650 Dana Corp. ................................................... 264 77,175 Delphi Corp. ................................................. 346 24,150 Goodyear Tire & Rubber Co.(a)(b).............................. 323 26,350 Johnson Controls, Inc. ....................................... 1,469 17,875 Visteon Corp. ................................................ 102 ---------- 2,681 ---------- AUTOMOBILES -- 0.5% 251,975 Ford Motor Co. ............................................... 2,855 77,700 General Motors Corp.(b)....................................... 2,284 40,175 Harley-Davidson, Inc. ........................................ 2,320 ---------- 7,459 ---------- DISTRIBUTORS -- 0.1% 24,025 Genuine Parts Co. ............................................ 1,045 ---------- HOTELS, RESTAURANTS AND LEISURE -- 1.5% 72,550 Carnival Corp. ............................................... 3,759 20,350 Darden Restaurants, Inc. ..................................... 624 15,675 Harrah's Entertainment, Inc. ................................. 1,012 52,900 Hilton Hotels Corp. .......................................... 1,182 47,500 International Game Technology, Inc. .......................... 1,266 27,650 Marriott International, Inc., Class A......................... 1,849 175,050 McDonald's Corp. ............................................. 5,451 55,000 Starbucks Corp.(a)............................................ 2,841 29,275 Starwood Hotels & Resorts Worldwide, Inc. .................... 1,758 15,675 Wendy's International, Inc. .................................. 612 40,125 Yum! Brands, Inc. ............................................ 2,079 ---------- 22,433 ---------- HOUSEHOLD DURABLES -- 0.5% 11,075 Black & Decker Corp. ......................................... 875 17,375 Centex Corp. ................................................. 995 19,925 Fortune Brands, Inc. ......................................... 1,607 5,725 KB Home....................................................... 672 26,300 Leggett & Platt, Inc. ........................................ 760 10,925 Maytag Corp.(b)............................................... 153 37,850 Newell Rubbermaid, Inc. ...................................... 830 16,275 Pulte Homes, Inc. ............................................ 1,198 8,000 Snap-On, Inc. ................................................ 254 10,400 Stanley Works................................................. 471 9,225 Whirlpool Corp. .............................................. 625 ---------- 8,440 ---------- INTERNET AND CATALOG RETAIL -- 0.4% 166,800 eBay, Inc.(a)................................................. 6,215 ---------- LEISURE EQUIPMENT AND PRODUCTS -- 0.2% 13,325 Brunswick Corp. .............................................. 624 39,450 Eastman Kodak Co. ............................................ 1,284 22,925 Hasbro, Inc. ................................................. 469 57,300 Mattel, Inc. ................................................. 1,224 ---------- 3,601 ----------
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- MEDIA -- 3.9% 72,425 Clear Channel Communications, Inc.(b)......................... $ 2,496 304,406 Comcast Corp., Class A(a)..................................... 10,283 9,675 Dow Jones & Co., Inc. ........................................ 362 34,600 Gannett Co., Inc. ............................................ 2,736 58,150 Interpublic Group of Companies, Inc.(a)....................... 714 10,350 Knight-Ridder, Inc.(b)........................................ 696 26,200 McGraw-Hill Companies, Inc. .................................. 2,286 6,300 Meredith Corp. ............................................... 295 20,050 New York Times Co., Class A(b)................................ 733 396,500 News Corp., Class A........................................... 6,709 25,675 Omnicom Group, Inc............................................ 2,273 632,475 Time Warner, Inc.(a).......................................... 11,100 41,050 Tribune Co. .................................................. 1,637 40,150 Univision Communications, Inc., Class A(a).................... 1,112 234,650 Viacom, Inc., Class B......................................... 8,173 281,750 Walt Disney Co. .............................................. 8,095 ---------- 59,700 ---------- MULTILINE RETAIL -- 1.2% 15,575 Big Lots, Inc.(a)............................................. 187 9,675 Dillard's, Inc., Class A...................................... 260 41,450 Dollar General Corp. ......................................... 908 23,100 Family Dollar Stores, Inc. ................................... 701 23,300 Federated Department Stores, Inc. ............................ 1,483 39,350 J.C. Penney Co., Inc. ........................................ 2,043 44,825 Kohl's Corp.(a)............................................... 2,314 40,225 May Department Stores Co. .................................... 1,489 17,375 Nordstrom, Inc. .............................................. 962 14,360 Sears Holdings Corp.(a)....................................... 1,912 123,250 Target Corp. ................................................. 6,165 ---------- 18,424 ---------- SPECIALTY RETAIL -- 2.3% 31,075 Autonation, Inc.(a)........................................... 589 9,325 AutoZone, Inc.(a)............................................. 799 41,625 Bed Bath & Beyond, Inc.(a).................................... 1,521 41,150 Best Buy Co., Inc. ........................................... 2,222 26,350 Circuit City Stores, Inc. .................................... 423 101,300 Gap, Inc. .................................................... 2,212 302,175 Home Depot, Inc. ............................................. 11,555 52,575 Limited Brands................................................ 1,278 106,375 Lowe's Companies, Inc. ....................................... 6,073 43,050 Office Depot, Inc.(a)......................................... 955 12,825 OfficeMax, Inc. .............................................. 430 21,775 RadioShack Corp. ............................................. 533 17,425 Sherwin-Williams Co. ......................................... 766 68,175 Staples, Inc. ................................................ 2,143 19,975 Tiffany & Co. ................................................ 689 66,325 TJX Companies, Inc. .......................................... 1,634 29,575 Toys "R" Us, Inc.(a).......................................... 762 ---------- 34,584 ---------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.4% 26,300 Coach, Inc.(a)................................................ 1,489 16,800 Jones Apparel Group, Inc. .................................... 562 14,975 Liz Claiborne, Inc. .......................................... 601 31,675 NIKE, Inc., Class B........................................... 2,639
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- TEXTILES, APPAREL AND LUXURY GOODS -- (CONTINUED) 7,675 Reebok International Ltd. .................................... $ 340 13,775 V.F. Corp. ................................................... 815 ---------- 6,446 ---------- 171,028 ---------- CONSUMER STAPLES -- 10.1% BEVERAGES -- 2.2% 106,925 Anheuser-Busch Companies, Inc. ............................... 5,067 12,425 Brown-Forman Corp., Class B................................... 680 311,675 Coca-Cola Co. ................................................ 12,988 48,550 Coca-Cola Enterprises, Inc. .................................. 996 11,075 Molson Coors Brewing Co., Class B............................. 855 27,100 Pepsi Bottling Group, Inc. ................................... 755 230,950 PepsiCo, Inc. ................................................ 12,247 ---------- 33,588 ---------- FOOD AND STAPLES RETAILING -- 2.8% 50,650 Albertson's, Inc.(b).......................................... 1,046 65,025 Costco Wholesale Corp. ....................................... 2,873 55,025 CVS Corp. .................................................... 2,895 100,725 Kroger Co.(a)................................................. 1,615 61,600 Safeway, Inc.(a).............................................. 1,141 18,550 SUPERVALU, Inc. .............................................. 619 87,625 Sysco Corp. .................................................. 3,137 466,250 Wal-Mart Stores, Inc. ........................................ 23,364 140,550 Walgreen Co. ................................................. 6,243 ---------- 42,933 ---------- FOOD PRODUCTS -- 1.2% 85,800 Archer-Daniels-Midland Co. ................................... 2,109 44,850 Campbell Soup Co. ............................................ 1,301 70,950 ConAgra Foods, Inc. .......................................... 1,917 50,250 General Mills, Inc. .......................................... 2,470 48,175 H.J. Heinz Co. ............................................... 1,775 30,125 Hershey Foods Corp. .......................................... 1,821 48,300 Kellogg Co. .................................................. 2,090 18,675 McCormick & Co., Inc. ........................................ 643 108,600 Sara Lee Corp. ............................................... 2,407 26,950 Wrigley (Wm.) Jr. Co. ........................................ 1,767 ---------- 18,300 ---------- HOUSEHOLD PRODUCTS -- 1.8% 21,150 Clorox Co. ................................................... 1,332 72,275 Colgate-Palmolive Co. ........................................ 3,771 66,200 Kimberly-Clark Corp. ......................................... 4,351 347,125 Procter & Gamble Co. ......................................... 18,398 ---------- 27,852 ---------- PERSONAL PRODUCTS -- 0.7% 11,637 Alberto-Culver Co. ........................................... 557 64,925 Avon Products, Inc. .......................................... 2,788 136,425 Gillette Co. ................................................. 6,886 ---------- 10,231 ----------
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- TOBACCO -- 1.4% 284,625 Altria Group, Inc. ........................................... $ 18,612 16,000 Reynolds American, Inc. ...................................... 1,289 22,750 UST, Inc. .................................................... 1,176 ---------- 21,077 ---------- 153,981 ---------- ENERGY -- 8.6% ENERGY EQUIPMENT AND SERVICES -- 1.2% 46,500 Baker Hughes, Inc. ........................................... 2,069 22,400 BJ Services Co. .............................................. 1,162 69,375 Halliburton Co. .............................................. 3,000 19,475 Nabors Industries Ltd.(a)..................................... 1,152 23,100 National-Oilwell Varco, Inc.(a)............................... 1,079 18,700 Noble Corp. .................................................. 1,051 14,775 Rowan Companies, Inc. ........................................ 442 81,175 Schlumberger Ltd. ............................................ 5,721 44,150 Transocean, Inc.(a)........................................... 2,272 ---------- 17,948 ---------- OIL AND GAS -- 7.4% 11,700 Amerada Hess Corp. ........................................... 1,126 32,600 Anadarko Petroleum Corp. ..................................... 2,481 44,961 Apache Corp. ................................................. 2,753 9,100 Ashland, Inc. ................................................ 614 53,275 Burlington Resources, Inc. ................................... 2,667 289,575 ChevronTexaco Corp. .......................................... 16,885 95,727 ConocoPhillips................................................ 10,323 66,000 Devon Energy Corp. ........................................... 3,152 88,500 El Paso Corp. ................................................ 936 32,850 EOG Resources, Inc. .......................................... 1,601 878,700 Exxon Mobil Corp. ............................................ 52,371 22,450 Kerr-McGee Corp. ............................................. 1,759 15,075 Kinder Morgan, Inc. .......................................... 1,141 47,750 Marathon Oil Corp. ........................................... 2,240 54,625 Occidental Petroleum Corp. ................................... 3,888 9,500 Sunoco, Inc. ................................................. 983 37,250 Unocal Corp. ................................................. 2,298 35,350 Valero Energy Corp. .......................................... 2,590 78,425 Williams Companies, Inc. ..................................... 1,475 47,766 XTO Energy, Inc. ............................................. 1,569 ---------- 112,852 ---------- 130,800 ---------- FINANCIALS -- 19.4% CAPITAL MARKETS -- 2.8% 107,075 Bank of New York Co. ......................................... 3,111 15,625 Bear Stearns Companies, Inc. ................................. 1,561 157,525 Charles Schwab Corp. ......................................... 1,656 51,000 E*TRADE Financial Corp.(a).................................... 612 13,050 Federated Investors, Inc., Class B............................ 369 27,200 Franklin Resources, Inc. ..................................... 1,867 61,575 Goldman Sachs Group, Inc. .................................... 6,773 32,500 Janus Capital Group, Inc. .................................... 453 38,025 Lehman Brothers Holdings, Inc. ............................... 3,580 58,275 Mellon Financial Corp. ....................................... 1,663 128,075 Merrill Lynch & Co., Inc. .................................... 7,249 153,075 Morgan Stanley................................................ 8,764 27,975 Northern Trust Corp. ......................................... 1,215
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 29 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- CAPITAL MARKETS -- (CONTINUED) 45,900 State Street Corp. ........................................... $ 2,007 17,000 T. Rowe Price Group, Inc. .................................... 1,009 ---------- 41,889 ---------- COMMERCIAL BANKS -- 5.7% 48,875 AmSouth Bancorp............................................... 1,268 557,850 Bank of America Corp.(c)...................................... 24,601 75,475 BB&T Corp. ................................................... 2,950 23,375 Comerica, Inc. ............................................... 1,287 17,000 Compass Bancshares, Inc. ..................................... 772 71,525 Fifth Third Bancorp........................................... 3,074 16,950 First Horizon National Corp. ................................. 691 31,950 Huntington Bancshares, Inc. .................................. 764 55,925 KeyCorp....................................................... 1,815 13,500 M&T Bank Corp. ............................................... 1,378 28,625 Marshall & Ilsley Corp. ...................................... 1,195 81,400 National City Corp. .......................................... 2,727 64,737 North Fork Bancorporation, Inc. .............................. 1,796 38,850 PNC Financial Services Group, Inc. ........................... 2,000 63,915 Regions Financial Corp. ...................................... 2,071 46,600 SunTrust Banks, Inc. ......................................... 3,358 42,775 Synovus Financial Corp. ...................................... 1,192 255,000 U.S. Bancorp.................................................. 7,349 218,199 Wachovia Corp. ............................................... 11,108 233,325 Wells Fargo & Co. ............................................ 13,953 12,400 Zions Bancorporation.......................................... 856 ---------- 86,205 ---------- CONSUMER FINANCE -- 1.2% 161,325 American Express Co. ......................................... 8,287 33,975 Capital One Financial Corp. .................................. 2,540 175,812 MBNA Corp. ................................................... 4,316 40,375 Providian Financial Corp.(a).................................. 693 59,100 SLM Corp. .................................................... 2,946 ---------- 18,782 ---------- DIVERSIFIED FINANCIAL SERVICES -- 3.5% 29,000 CIT Group, Inc. .............................................. 1,102 719,025 Citigroup, Inc. .............................................. 32,313 489,007 JPMorgan Chase & Co. ......................................... 16,920 18,900 Moody's Corp. ................................................ 1,528 41,250 Principal Financial Group, Inc. .............................. 1,588 ---------- 53,451 ---------- INSURANCE -- 4.1% 39,150 Ace Ltd. ..................................................... 1,616 69,100 AFLAC, Inc. .................................................. 2,575 93,425 Allstate Corp. ............................................... 5,051 14,950 Ambac Financial Group, Inc. .................................. 1,117 358,375 American International Group, Inc. ........................... 19,858 43,550 Aon Corp. .................................................... 995 26,325 Chubb Corp. .................................................. 2,087 21,907 Cincinnati Financial Corp. ................................... 955 40,650 Hartford Financial Services Group, Inc. ...................... 2,787 18,800 Jefferson-Pilot Corp. ........................................ 922 24,025 Lincoln National Corp. ....................................... 1,084 21,975 Loews Corp. .................................................. 1,616 72,825 Marsh & McLennan Companies, Inc. ............................. 2,215 19,325 MBIA, Inc.(b)................................................. 1,010
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- INSURANCE -- (CONTINUED) 100,850 MetLife, Inc. ................................................ $ 3,943 27,550 Progressive Corp. ............................................ 2,528 72,125 Prudential Financial, Inc. ................................... 4,140 17,550 SAFECO Corp. ................................................. 855 92,116 St. Paul Travelers Companies, Inc. ........................... 3,383 14,900 Torchmark Corp. .............................................. 778 40,925 UnumProvident Corp.(b)........................................ 697 19,150 XL Capital Ltd., Class A...................................... 1,386 ---------- 61,598 ---------- REAL ESTATE -- 0.5% 13,200 Apartment Investment & Management Co., Class A, REIT.......... 491 27,500 Archstone-Smith Trust, REIT................................... 938 55,450 Equity Office Properties Trust, REIT.......................... 1,671 38,950 Equity Residential Properties, REIT........................... 1,254 25,300 Plum Creek Timber Co., Inc., REIT............................. 903 25,325 ProLogis Trust, REIT.......................................... 940 30,475 Simon Property Group, Inc., REIT.............................. 1,846 ---------- 8,043 ---------- THRIFTS AND MORTGAGE FINANCE -- 1.6% 79,898 Countrywide Financial Corp. .................................. 2,594 133,175 Fannie Mae.................................................... 7,251 94,700 Freddie Mac................................................... 5,985 38,900 Golden West Financial Corp. .................................. 2,353 13,275 MGIC Investment Corp. ........................................ 819 51,525 Sovereign Bancorp, Inc. ...................................... 1,142 120,175 Washington Mutual, Inc. ...................................... 4,747 ---------- 24,891 ---------- 294,859 ---------- HEALTH CARE -- 12.7% BIOTECHNOLOGY -- 1.2% 172,417 Amgen, Inc.(a)................................................ 10,036 27,025 Applera Corp. -- Applied Biosystems Group..................... 534 45,852 Biogen Idec, Inc.(a).......................................... 1,582 20,325 Chiron Corp.(a)(b)............................................ 713 34,150 Genzyme Corp.(a).............................................. 1,955 59,550 Gilead Sciences, Inc.(a)...................................... 2,132 34,200 MedImmune, Inc.(a)............................................ 814 ---------- 17,766 ---------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.1% 7,350 Bausch & Lomb, Inc. .......................................... 539 85,275 Baxter International, Inc. ................................... 2,898 34,850 Becton, Dickinson & Co. ...................................... 2,036 34,750 Biomet, Inc. ................................................. 1,261 104,550 Boston Scientific Corp.(a).................................... 3,062 14,425 C.R. Bard, Inc. .............................................. 982 16,125 Fisher Scientific International, Inc.(a)...................... 918 44,400 Guidant Corp. ................................................ 3,281 21,442 Hospira, Inc.(a).............................................. 692 166,450 Medtronic, Inc. .............................................. 8,481 6,825 Millipore Corp.(a)............................................ 296 17,825 PerkinElmer, Inc. ............................................ 368 49,700 St. Jude Medical, Inc.(a)..................................... 1,789
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 30 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- (CONTINUED) 51,550 Stryker Corp. ................................................ $ 2,300 22,025 Thermo Electron Corp.(a)...................................... 557 16,625 Waters Corp.(a)............................................... 595 33,975 Zimmer Holdings, Inc.(a)...................................... 2,643 ---------- 32,698 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 2.5% 40,500 Aetna, Inc. .................................................. 3,036 15,250 AmerisourceBergen Corp. ...................................... 874 59,650 Cardinal Health, Inc. ........................................ 3,328 62,900 Caremark Rx, Inc.(a).......................................... 2,502 18,125 CIGNA Corp. .................................................. 1,619 10,475 Express Scripts, Inc.(a)...................................... 913 56,775 HCA, Inc. .................................................... 3,041 33,600 Health Management Associates, Inc., Class A(b)................ 880 22,150 Humana, Inc.(a)............................................... 707 31,950 IMS Health, Inc. ............................................. 779 18,600 Laboratory Corp. of America Holdings(a)....................... 897 11,850 Manor Care, Inc. ............................................. 431 40,600 McKesson Corp. ............................................... 1,533 37,911 Medco Health Solutions, Inc.(a)............................... 1,879 12,575 Quest Diagnostics, Inc. ...................................... 1,322 64,412 Tenet Healthcare Corp.(a)(b).................................. 743 88,250 UnitedHealth Group, Inc. ..................................... 8,417 41,950 WellPoint, Inc.(a)............................................ 5,258 ---------- 38,159 ---------- PHARMACEUTICALS -- 6.9% 214,475 Abbott Laboratories........................................... 9,999 18,150 Allergan, Inc. ............................................... 1,261 268,875 Bristol-Myers Squibb Co. ..................................... 6,846 155,825 Eli Lilly & Co. .............................................. 8,118 48,350 Forest Laboratories, Inc.(a).................................. 1,787 409,225 Johnson & Johnson............................................. 27,484 33,275 King Pharmaceuticals, Inc.(a)................................. 276 303,875 Merck & Co., Inc. ............................................ 9,836 37,025 Mylan Laboratories, Inc.(b)................................... 656 1,026,635 Pfizer, Inc. ................................................. 26,970 202,975 Schering-Plough Corp. ........................................ 3,684 15,075 Watson Pharmaceuticals, Inc.(a)............................... 463 183,900 Wyeth......................................................... 7,757 ---------- 105,137 ---------- 193,760 ---------- INDUSTRIALS -- 11.6% AEROSPACE AND DEFENSE -- 2.1% 114,525 Boeing Co. ................................................... 6,695 27,500 General Dynamics Corp. ....................................... 2,944 16,500 Goodrich Corp. ............................................... 632 117,025 Honeywell International, Inc. ................................ 4,355 15,800 L-3 Communications Holdings, Inc. ............................ 1,122 55,175 Lockheed Martin Corp. ........................................ 3,369 49,553 Northrop Grumman Corp. ....................................... 2,675 62,300 Raytheon Co. ................................................. 2,411
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- (CONTINUED) 24,550 Rockwell Collins, Inc. ....................................... $ 1,168 70,450 United Technologies Corp. .................................... 7,162 ---------- 32,533 ---------- AIR FREIGHT AND LOGISTICS -- 1.0% 41,500 FedEx Corp. .................................................. 3,899 8,800 Ryder System, Inc. ........................................... 367 153,975 United Parcel Service, Inc., Class B.......................... 11,200 ---------- 15,466 ---------- AIRLINES -- 0.1% 19,200 Delta Air Lines, Inc.(a)(b)................................... 78 101,450 Southwest Airlines Co. ....................................... 1,444 ---------- 1,522 ---------- BUILDING PRODUCTS -- 0.2% 24,775 American Standard Companies, Inc. ............................ 1,152 61,675 Masco Corp. .................................................. 2,138 ---------- 3,290 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 0.9% 37,625 Allied Waste Industries, Inc.(a)(b)........................... 275 22,750 Apollo Group, Inc., Class A(a)................................ 1,685 14,000 Avery Dennison Corp. ......................................... 867 145,175 Cendant Corp. ................................................ 2,982 20,550 Cintas Corp. ................................................. 849 18,575 Equifax, Inc. ................................................ 570 22,700 H&R Block, Inc. .............................................. 1,148 16,575 Monster Worldwide, Inc.(a).................................... 465 31,725 Pitney Bowes, Inc. ........................................... 1,431 29,675 R.R. Donnelley & Sons Co. .................................... 938 22,100 Robert Half International, Inc. .............................. 596 78,200 Waste Management, Inc. ....................................... 2,256 ---------- 14,062 ---------- CONSTRUCTION AND ENGINEERING -- 0.0% 11,775 Fluor Corp. .................................................. 653 ---------- ELECTRICAL EQUIPMENT -- 0.4% 24,750 American Power Conversion Corp. .............................. 646 12,725 Cooper Industries Ltd., Class A............................... 910 57,725 Emerson Electric Co. ......................................... 3,748 24,125 Rockwell Automation, Inc. .................................... 1,367 ---------- 6,671 ---------- INDUSTRIAL CONGLOMERATES -- 4.8% 106,250 3M Co. ....................................................... 9,105 1,458,550 General Electric Co.(d) ...................................... 52,595 18,575 Textron, Inc. ................................................ 1,386 277,075 Tyco International Ltd. ...................................... 9,365 ---------- 72,451 ---------- MACHINERY -- 1.4% 47,150 Caterpillar, Inc. ............................................ 4,311 5,900 Cummins, Inc. ................................................ 415 37,850 Danaher Corp. ................................................ 2,022 33,950 Deere & Co. .................................................. 2,279 28,000 Dover Corp. .................................................. 1,058 21,000 Eaton Corp.(a)................................................ 1,373 37,825 Illinois Tool Works, Inc. .................................... 3,387 23,825 Ingersoll-Rand Co., Ltd., Class A............................. 1,898
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 31 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- MACHINERY -- (CONTINUED) 12,725 ITT Industries, Inc. ......................................... $ 1,148 9,050 Navistar International Corp.(a)............................... 329 23,950 Paccar, Inc. ................................................. 1,734 17,050 Pall Corp. ................................................... 462 16,575 Parker-Hannifin Corp. ........................................ 1,010 ---------- 21,426 ---------- ROAD AND RAIL -- 0.6% 52,100 Burlington Northern Santa Fe Corp. ........................... 2,810 29,675 CSX Corp. .................................................... 1,236 55,050 Norfolk Southern Corp. ....................................... 2,040 35,875 Union Pacific Corp. .......................................... 2,500 ---------- 8,586 ---------- TRADING COMPANIES AND DISTRIBUTORS -- 0.1% 11,475 W.W. Grainger, Inc. .......................................... 715 ---------- 177,375 ---------- INFORMATION TECHNOLOGY -- 14.8% COMMUNICATIONS EQUIPMENT -- 2.4% 111,575 ADC Telecommunications, Inc.(a)............................... 222 22,125 Andrew Corp.(a)............................................... 259 66,100 Avaya, Inc.(a)................................................ 772 78,725 CIENA Corp.(a)................................................ 136 889,500 Cisco Systems, Inc.(a)........................................ 15,913 27,175 Comverse Technology, Inc.(a).................................. 685 193,950 Corning, Inc.(a).............................................. 2,159 198,825 JDS Uniphase Corp.(a)......................................... 332 609,750 Lucent Technologies, Inc.(a).................................. 1,677 337,350 Motorola, Inc. ............................................... 5,050 226,450 QUALCOMM, Inc. ............................................... 8,299 20,900 Scientific-Atlanta, Inc. ..................................... 590 63,550 Tellabs, Inc.(a).............................................. 464 ---------- 36,558 ---------- COMPUTERS AND PERIPHERALS -- 3.8% 112,450 Apple Computer, Inc.(a)....................................... 4,686 338,375 Dell, Inc.(a)................................................. 13,000 331,000 EMC Corp.(a).................................................. 4,078 41,150 Gateway, Inc.(a).............................................. 166 398,426 Hewlett-Packard Co. .......................................... 8,742 224,700 International Business Machines Corp. ........................ 20,533 17,375 Lexmark International, Inc., Class A(a)....................... 1,389 25,600 NCR Corp.(a).................................................. 864 50,350 Network Appliance, Inc.(a).................................... 1,393 12,650 QLogic Corp.(a)............................................... 512 464,825 Sun Microsystems, Inc.(a)..................................... 1,878 ---------- 57,241 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.3% 59,525 Agilent Technologies, Inc.(a)................................. 1,322 25,225 Jabil Circuit, Inc.(a)........................................ 719 23,075 Molex, Inc. .................................................. 608 72,075 Sanmina-SCI Corp.(a).......................................... 376 133,625 Solectron Corp.(a)............................................ 464
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- (CONTINUED) 33,400 Symbol Technologies, Inc. .................................... $ 484 12,275 Tektronix, Inc. .............................................. 301 ---------- 4,274 ---------- INTERNET SOFTWARE AND SERVICES -- 0.4% 179,500 Yahoo!, Inc.(a)............................................... 6,085 ---------- IT SERVICES -- 1.1% 17,400 Affiliated Computer Services, Inc., Class A(a)................ 926 80,225 Automatic Data Processing, Inc. .............................. 3,606 26,250 Computer Sciences Corp.(a).................................... 1,204 19,525 Convergys Corp.(a)............................................ 291 71,225 Electronic Data Systems Corp. ................................ 1,472 110,375 First Data Corp. ............................................. 4,339 26,550 Fiserv, Inc.(a)............................................... 1,057 48,900 Paychex, Inc. ................................................ 1,605 18,100 Sabre Holdings Corp., Class A(b).............................. 396 39,775 SunGard Data Systems, Inc.(a)................................. 1,372 46,425 Unisys Corp.(a)............................................... 328 ---------- 16,596 ---------- OFFICE ELECTRONICS -- 0.1% 131,775 Xerox Corp.(a)................................................ 1,996 ---------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.0% 54,225 Advanced Micro Devices(a)..................................... 874 51,225 Altera Corp.(a)............................................... 1,013 51,225 Analog Devices, Inc.(a) ...................................... 1,851 229,475 Applied Materials, Inc.(a).................................... 3,729 42,425 Applied Micro Circuits Corp.(a)............................... 140 40,000 Broadcom Corp., Class A(a).................................... 1,197 55,275 Freescale Semiconductor, Inc., Class B(a)..................... 954 856,875 Intel Corp. .................................................. 19,905 27,075 KLA-Tencor Corp.(a) .......................................... 1,246 42,250 Linear Technology Corp. ...................................... 1,619 53,000 LSI Logic Corp.(a)............................................ 296 45,000 Maxim Integrated Products, Inc. .............................. 1,839 84,475 Micron Technology, Inc.(a).................................... 873 48,900 National Semiconductor Corp. ................................. 1,008 19,275 Novellus Systems, Inc.(a)..................................... 515 22,900 NVIDIA Corp.(a)............................................... 544 24,750 PMC-Sierra, Inc.(a)........................................... 218 26,700 Teradyne, Inc.(a)(b).......................................... 390 236,900 Texas Instruments, Inc. ...................................... 6,039 47,975 Xilinx, Inc. ................................................. 1,402 ---------- 45,652 ---------- SOFTWARE -- 3.7% 33,450 Adobe Systems, Inc. .......................................... 2,247 31,550 Autodesk, Inc................................................. 939 30,450 BMC Software, Inc.(a)......................................... 457 23,325 Citrix Systems, Inc.(a)....................................... 556 73,364 Computer Associates International, Inc. ...................... 1,988 53,350 Compuware Corp.(a)............................................ 384
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 32 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- SOFTWARE -- (CONTINUED) 42,400 Electronic Arts, Inc.(a)...................................... $ 2,195 25,500 Intuit, Inc.(a)............................................... 1,116 11,625 Mercury Interactive Corp.(a).................................. 551 1,392,450 Microsoft Corp. .............................................. 33,655 52,125 Novell, Inc.(a)(b)............................................ 311 620,175 Oracle Corp.(a)............................................... 7,740 37,175 Parametric Technology Corp.(a)................................ 208 70,825 Siebel Systems, Inc.(a)....................................... 646 97,650 Symantec Corp.(a)............................................. 2,083 58,125 VERITAS Software Corp.(a)..................................... 1,350 ---------- 56,426 ---------- 224,828 ---------- MATERIALS -- 3.2% CHEMICALS -- 1.7% 31,275 Air Products and Chemicals, Inc. ............................. 1,979 131,175 Dow Chemical Co. ............................................. 6,539 137,175 E.I. du Pont de Nemours and Co. .............................. 7,029 10,700 Eastman Chemical Co. ......................................... 631 30,375 Ecolab, Inc. ................................................. 1,004 16,775 Engelhard Corp. .............................................. 504 7,075 Great Lakes Chemical Corp. ................................... 227 15,450 Hercules, Inc.(a)............................................. 224 12,150 International Flavors and Fragrances, Inc. ................... 480 36,602 Monsanto Co. ................................................. 2,361 23,825 PPG Industries, Inc. ......................................... 1,704 44,425 Praxair, Inc. ................................................ 2,126 26,825 Rohm and Haas Co. ............................................ 1,288 9,450 Sigma-Aldrich Corp. .......................................... 579 ---------- 26,675 ---------- CONSTRUCTION MATERIALS -- 0.1% 14,125 Vulcan Materials Co. ......................................... 803 ---------- CONTAINERS AND PACKAGING -- 0.2% 15,125 Ball Corp. ................................................... 627 14,775 Bemis Co., Inc. .............................................. 460 20,450 Pactiv Corp.(a)............................................... 477 11,525 Sealed Air Corp.(a)........................................... 599 7,850 Temple-Inland, Inc. .......................................... 570 ---------- 2,733 ---------- METALS AND MINING -- 0.7% 119,950 Alcoa, Inc. .................................................. 3,645 12,300 Allegheny Technologies, Inc.(b)............................... 297 24,650 Freeport-McMoRan Copper & Gold, Inc., Class B................. 976 61,100 Newmont Mining Corp. ......................................... 2,581 21,950 Nucor Corp. .................................................. 1,263 13,325 Phelps Dodge Corp. ........................................... 1,356 15,750 United States Steel Corp.(b).................................. 801 ---------- 10,919 ---------- PAPER AND FOREST PRODUCTS -- 0.5% 35,750 Georgia-Pacific Corp. ........................................ 1,269 67,425 International Paper Co. ...................................... 2,480 15,250 Louisiana-Pacific Corp. ...................................... 383
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- (CONTINUED) 27,925 MeadWestvaco Corp. ........................................... $ 889 33,425 Weyerhaeuser Co. ............................................. 2,290 ---------- 7,311 ---------- 48,441 ---------- TELECOMMUNICATION SERVICES -- 3.1% DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.8% 41,650 ALLTEL Corp. ................................................. 2,284 110,175 AT&T Corp. ................................................... 2,066 252,000 BellSouth Corp. .............................................. 6,625 18,525 CenturyTel, Inc. ............................................. 608 46,125 Citizens Communications Co. .................................. 597 230,025 Qwest Communications International, Inc.(a)................... 851 454,625 SBC Communications, Inc. ..................................... 10,770 203,412 Sprint Corp. ................................................. 4,628 381,175 Verizon Communications, Inc. ................................. 13,532 ---------- 41,961 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 0.3% 155,075 Nextel Communications, Inc., Class A(a)....................... 4,407 ---------- 46,368 ---------- UTILITIES -- 3.1% ELECTRIC UTILITIES -- 2.1% 18,900 Allegheny Energy, Inc.(a)..................................... 390 26,925 Ameren Corp. ................................................. 1,320 52,775 American Electric Power Co., Inc. ............................ 1,798 39,850 CenterPoint Energy, Inc.(b)................................... 479 26,375 Cinergy Corp. ................................................ 1,069 33,350 Consolidated Edison, Inc. .................................... 1,407 23,975 DTE Energy Co. ............................................... 1,090 44,850 Edison International.......................................... 1,557 29,325 Entergy Corp. ................................................ 2,072 91,500 Exelon Corp. ................................................. 4,199 45,425 FirstEnergy Corp. ............................................ 1,906 53,800 FPL Group, Inc................................................ 2,160 49,625 PG&E Corp.(b)................................................. 1,692 12,625 Pinnacle West Capital Corp. .................................. 537 25,975 PPL Corp. .................................................... 1,402 34,000 Progress Energy, Inc. ........................................ 1,426 102,225 Southern Co. ................................................. 3,254 28,450 TECO Energy, Inc. ............................................ 446 33,075 TXU Corp. .................................................... 2,634 55,175 Xcel Energy, Inc. ............................................ 948 ---------- 31,786 ---------- GAS UTILITIES -- 0.1% 22,150 KeySpan Corp. ................................................ 863 6,075 Nicor, Inc. .................................................. 225 37,300 NiSource, Inc. ............................................... 850 5,200 Peoples Energy Corp. ......................................... 218 ---------- 2,156 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 33 NATIONS FUNDS Nations LargeCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ---------------------------------------------------------------------------------------- L-MULTI-UTILITIES AND UNREGULATED POWER -- 0.9% 89,250 AES Corp.(a).................................................. $ 1,462 73,550 Calpine Corp.(a)(b)........................................... 206 26,875 CMS Energy Corp.(a)........................................... 351 24,375 Constellation Energy Group, Inc. ............................. 1,260 46,875 Dominion Resources, Inc. ..................................... 3,489 129,075 Duke Energy Corp. ............................................ 3,615 45,550 Dynegy Holdings, Inc., Class A(a)............................. 178 32,750 Public Service Enterprise Group, Inc.(b)...................... 1,781 32,800 Sempra Energy................................................. 1,307 ---------- 13,649 ---------- 47,591 ---------- TOTAL COMMON STOCKS (Cost of $1,269,132)........................................ 1,489,031 ---------- INVESTMENT MANAGEMENT COMPANY -- 1.9% 28,856,000 Nations Cash Reserves, Capital Class Shares(e)................ 28,856 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $28,856)........................................... 28,856 ---------- PAR (000) - --------- L-REPURCHASE AGREEMENTS(F) -- 1.0% $ 4,455 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $4,497 (repurchase proceeds $4,455)......................... 4,455 3,903 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $3,954 (repurchase proceeds $3,903)..................................................... 3,903 6,961 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $7,071 (repurchase proceeds $6,962)..................................................... 6,961 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $15,319)........................................... 15,319 ----------
VALUE (000) - ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost of $1,313,307)(g)........................... 100.7% $1,533,206 ---------- OTHER ASSETS AND LIABILITIES, NET................... (0.7)% (9,915) ---------- NET ASSETS.......................................... 100.0% $1,523,291 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $21,183 and $14,867, respectively. (c) Investments in Affiliates as of March 31, 2005: Security Name: Bank of America Corp., effective April 1, 2004, the parent company of the Investment Advisor. Shares as of 04/01/04: 173,000 Shares purchased: 76,700 Shares sold: (6,025) Shares acquired from merger: 70,925 Shares acquired through 2 For 1 stock split: 243,250 Shares as of 03/31/05: 557,850 Net realized gain: $18
(d) Security pledged as collateral for open futures contracts. (e) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (f) This amount represents cash collateral received from securities lending activity (see note 11). (g) Cost for federal income tax purposes is $1,345,484. See Note 5 for additional information.
ACRONYM NAME - ------- ------------------------------------------------------ REIT Real Estate Investment Trust
At March 31, 2005, the Fund held investments in the following sectors:
SECTOR % OF NET ASSETS - ------ --------------- Financials..................................... 19.4% Information Technology......................... 14.8 Health Care.................................... 12.7 Industrials.................................... 11.6 Consumer Discretionary......................... 11.2 Consumer Staples............................... 10.1 Energy......................................... 8.6 Materials...................................... 3.2 Utilities...................................... 3.1 Telecommunication Services..................... 3.1 Investment Management Company.................. 1.9 Repurchase Agreements.......................... 1.0 Other Assets & Liabilities, Net................ (0.7) ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 34 NATIONS FUNDS Nations LargeCap Enhanced Core Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- COMMON STOCKS -- 95.2% CONSUMER DISCRETIONARY -- 10.5% AUTO COMPONENTS -- 0.0% 1,300 Dana Corp. ................................................... $ 17 -------- AUTOMOBILES -- 0.2% 4,700 Ford Motor Co. ............................................... 54 10,600 Harley-Davidson, Inc. ........................................ 612 -------- 666 -------- DISTRIBUTORS -- 0.1% 4,700 Genuine Parts Co. ............................................ 205 -------- HOTELS, RESTAURANTS AND LEISURE -- 1.7% 4,800 Carnival Corp. ............................................... 249 56,400 Darden Restaurants, Inc. ..................................... 1,730 10,700 Hilton Hotels Corp. .......................................... 239 47,700 International Game Technology, Inc. .......................... 1,272 7,500 Mandalay Resort Group......................................... 529 61,600 McDonald's Corp. ............................................. 1,918 -------- 5,937 -------- HOUSEHOLD DURABLES -- 0.6% 2,100 Fortune Brands, Inc. ......................................... 169 1,700 KB Home....................................................... 200 21,000 Pulte Homes, Inc. ............................................ 1,546 -------- 1,915 -------- INTERNET AND CATALOG RETAIL -- 0.3% 31,900 eBay, Inc.(a)................................................. 1,189 -------- LEISURE EQUIPMENT AND PRODUCTS -- 0.1% 8,400 Eastman Kodak Co. ............................................ 273 3,100 Mattel, Inc. ................................................. 67 -------- 340 -------- MEDIA -- 2.6% 7,200 Clear Channel Communications, Inc.(b)......................... 248 6,100 Gannett Co., Inc. ............................................ 482 19,800 Interpublic Group of Companies, Inc.(a)....................... 243 7,300 McGraw-Hill Companies, Inc. .................................. 637 137,500 Time Warner, Inc.(a).......................................... 2,413 82,200 Viacom, Inc., Class B......................................... 2,863 74,600 Walt Disney Co. .............................................. 2,144 -------- 9,030 -------- MULTILINE RETAIL -- 1.4% 20,600 Dillard's, Inc., Class A(b)................................... 554 27,000 Dollar General Corp. ......................................... 592 16,300 J.C. Penney Co., Inc. ........................................ 846 29,600 Nordstrom, Inc. .............................................. 1,639 1,889 Sears Holdings Corp.(a)....................................... 251 17,400 Target Corp. ................................................. 871 -------- 4,753 -------- SPECIALTY RETAIL -- 3.0% 7,800 Autonation, Inc.(a)........................................... 148 19,300 AutoZone, Inc.(a)............................................. 1,654 16,000 Bed Bath & Beyond, Inc.(a).................................... 585
VALUE SHARES (000) - -------------------------------------------------------------------------------------- SPECIALTY RETAIL -- (CONTINUED) 15,600 Best Buy Co., Inc. ........................................... $ 843 32,200 Circuit City Stores, Inc.(b).................................. 516 11,700 Gap, Inc. .................................................... 256 84,100 Home Depot, Inc. ............................................. 3,216 8,400 Lowe's Companies, Inc. ....................................... 480 18,000 Sherwin-Williams Co. ......................................... 791 23,500 Staples, Inc. ................................................ 738 39,900 TJX Companies, Inc. .......................................... 982 -------- 10,209 -------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.5% 15,000 Jones Apparel Group, Inc. .................................... 503 3,500 Liz Claiborne, Inc. .......................................... 141 4,200 NIKE, Inc., Class B........................................... 350 11,800 V.F. Corp. ................................................... 697 -------- 1,691 -------- 35,952 -------- CONSUMER STAPLES -- 9.7% BEVERAGES -- 1.8% 74,700 Coca-Cola Co. ................................................ 3,113 56,700 PepsiCo, Inc. ................................................ 3,007 -------- 6,120 -------- FOOD AND STAPLES RETAILING -- 2.6% 33,600 Albertson's, Inc.(b).......................................... 695 600 Costco Wholesale Corp. ....................................... 26 65,600 Kroger Co.(a)................................................. 1,051 6,600 SUPERVALU, Inc. .............................................. 220 19,700 Sysco Corp. .................................................. 705 124,400 Wal-Mart Stores, Inc. ........................................ 6,235 -------- 8,932 -------- FOOD PRODUCTS -- 1.6% 90,900 Archer-Daniels-Midland Co. ................................... 2,234 1,800 Campbell Soup Co. ............................................ 52 13,700 ConAgra Foods, Inc. .......................................... 370 1,000 H.J. Heinz Co. ............................................... 37 4,400 Hershey Foods Corp. .......................................... 266 12,100 Kellogg Co. .................................................. 524 90,300 Sara Lee Corp. ............................................... 2,001 -------- 5,484 -------- HOUSEHOLD PRODUCTS -- 1.9% 22,000 Kimberly-Clark Corp. ......................................... 1,446 91,800 Procter & Gamble Co. ......................................... 4,865 -------- 6,311 -------- PERSONAL PRODUCTS -- 0.7% 1,500 Alberto-Culver Co. ........................................... 71 21,700 Avon Products, Inc. .......................................... 932 28,600 Gillette Co. ................................................. 1,444 -------- 2,447 -------- TOBACCO -- 1.1% 52,000 Altria Group, Inc. ........................................... 3,401 4,300 Reynolds American, Inc. ...................................... 346 -------- 3,747 -------- 33,041 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 35 NATIONS FUNDS Nations LargeCap Enhanced Core Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- ENERGY -- 10.5% ENERGY EQUIPMENT AND SERVICES -- 1.4% 35,700 Baker Hughes, Inc. ........................................... $ 1,589 900 BJ Services Co. .............................................. 46 2,100 National-Oilwell Varco, Inc.(a)............................... 98 44,300 Schlumberger Ltd. ............................................ 3,122 -------- 4,855 -------- OIL AND GAS -- 9.1% 24,600 Amerada Hess Corp. ........................................... 2,367 13,500 Anadarko Petroleum Corp. ..................................... 1,027 16,500 Apache Corp. ................................................. 1,010 13,900 Burlington Resources, Inc. ................................... 696 95,100 ChevronTexaco Corp. .......................................... 5,545 26,700 ConocoPhillips................................................ 2,879 5,200 Devon Energy Corp. ........................................... 248 205,500 Exxon Mobil Corp.(c).......................................... 12,247 11,700 Marathon Oil Corp. ........................................... 549 16,300 Occidental Petroleum Corp. ................................... 1,160 14,400 Sunoco, Inc. ................................................. 1,491 2,300 Unocal Corp. ................................................. 142 24,300 Valero Energy Corp. .......................................... 1,782 -------- 31,143 -------- 35,998 -------- FINANCIALS -- 16.7% CAPITAL MARKETS -- 2.9% 25,500 Bank of New York Co., Inc. ................................... 741 9,800 Bear Stearns Companies, Inc. ................................. 979 6,100 E*TRADE Financial Corp.(a).................................... 73 7,300 Franklin Resources, Inc. ..................................... 501 18,600 Goldman Sachs Group, Inc. .................................... 2,046 14,100 Lehman Brothers Holdings, Inc. ............................... 1,328 31,600 Merrill Lynch & Co., Inc. .................................... 1,788 36,700 Morgan Stanley................................................ 2,101 5,300 Northern Trust Corp. ......................................... 230 1,600 State Street Corp. ........................................... 70 -------- 9,857 -------- COMMERCIAL BANKS -- 3.4% 4,300 AmSouth Bancorp............................................... 112 22,400 BB&T Corp. ................................................... 875 6,500 Comerica, Inc. ............................................... 358 14,600 Fifth Third Bancorp........................................... 627 28,400 KeyCorp....................................................... 922 2,500 Marshall & Ilsley Corp. ...................................... 104 43,800 National City Corp. .......................................... 1,467 800 PNC Financial Services Group, Inc. ........................... 41 81,700 U.S. Bancorp.................................................. 2,355 39,800 Wachovia Corp. ............................................... 2,027 45,200 Wells Fargo & Co. ............................................ 2,703 -------- 11,591 -------- CONSUMER FINANCE -- 1.1% 42,500 American Express Co. ......................................... 2,183 60,800 MBNA Corp. ................................................... 1,492 6,600 Providian Financial Corp.(a).................................. 114 100 SLM Corp. .................................................... 5 -------- 3,794 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 3.1% 3,900 CIT Group, Inc. .............................................. $ 149 153,000 Citigroup, Inc. .............................................. 6,875 99,300 JPMorgan Chase & Co. ......................................... 3,435 8,500 Principal Financial Group, Inc. .............................. 327 -------- 10,786 -------- INSURANCE -- 3.7% 29,300 Ace Ltd. ..................................................... 1,209 29,200 Allstate Corp. ............................................... 1,579 75,100 American International Group, Inc. ........................... 4,161 11,600 Hartford Financial Services Group, Inc. ...................... 795 13,200 Lincoln National Corp. ....................................... 596 2,700 MBIA, Inc. ................................................... 141 38,100 MetLife, Inc. ................................................ 1,490 13,800 Prudential Financial, Inc. ................................... 792 5,400 SAFECO Corp. ................................................. 263 100 St. Paul Travelers Companies, Inc. ........................... 4 32,400 UnumProvident Corp. .......................................... 551 14,700 XL Capital Ltd., Class A...................................... 1,064 -------- 12,645 -------- REAL ESTATE -- 0.6% 28,700 Archstone-Smith Trust, REIT................................... 979 25,200 Plum Creek Timber Co., Inc., REIT............................. 899 5,500 ProLogis Trust, REIT.......................................... 204 -------- 2,082 -------- THRIFTS AND MORTGAGE FINANCE -- 1.9% 52,400 Countrywide Financial Corp. .................................. 1,701 30,300 Fannie Mae.................................................... 1,650 31,000 Freddie Mac................................................... 1,959 2,100 MGIC Investment Corp. ........................................ 129 26,000 Washington Mutual, Inc. ...................................... 1,027 -------- 6,466 -------- 57,221 -------- HEALTH CARE -- 13.2% BIOTECHNOLOGY -- 1.3% 65,300 Amgen, Inc.(a)................................................ 3,802 38,800 Applera Corp. - Applied Biosystems Group...................... 765 -------- 4,567 -------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.1% 8,900 Becton, Dickinson & Co. ...................................... 520 4,600 Biomet, Inc. ................................................. 167 76,400 Boston Scientific Corp.(a).................................... 2,238 11,600 Guidant Corp. ................................................ 857 25,400 Medtronic, Inc. .............................................. 1,294 28,400 PerkinElmer, Inc. ............................................ 586 8,700 St. Jude Medical, Inc.(a)..................................... 313 600 Stryker Corp. ................................................ 27 8,400 Thermo Electron Corp.(a)...................................... 212 11,600 Zimmer Holdings, Inc.(a)...................................... 902 -------- 7,116 -------- HEALTH CARE PROVIDERS AND SERVICES -- 3.7% 13,600 Aetna, Inc. .................................................. 1,019 21,200 AmerisourceBergen Corp. ...................................... 1,215 27,300 Cardinal Health, Inc. ........................................ 1,523 31,500 Caremark Rx, Inc.(a).......................................... 1,253
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 36 NATIONS FUNDS Nations LargeCap Enhanced Core Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- (CONTINUED) 20,300 CIGNA Corp. .................................................. $ 1,813 12,900 Humana, Inc.(a)............................................... 412 7,800 Laboratory Corp. of America Holdings(a)....................... 376 27,900 McKesson Corp. ............................................... 1,053 14,400 Quest Diagnostics, Inc. ...................................... 1,514 8,900 UnitedHealth Group, Inc. ..................................... 849 14,000 WellPoint, Inc.(a)............................................ 1,755 -------- 12,782 -------- PHARMACEUTICALS -- 6.1% 57,500 Abbott Laboratories........................................... 2,681 53,700 Bristol-Myers Squibb Co. ..................................... 1,368 24,400 Forest Laboratories, Inc.(a).................................. 902 92,692 Johnson and Johnson........................................... 6,225 7,100 King Pharmaceuticals, Inc.(a)................................. 59 69,200 Merck & Co., Inc. ............................................ 2,240 229,600 Pfizer, Inc. ................................................. 6,031 31,500 Wyeth......................................................... 1,328 -------- 20,834 -------- 45,299 -------- INDUSTRIALS -- 9.6% AEROSPACE AND DEFENSE -- 1.9% 17,400 Boeing Co. ................................................... 1,017 5,800 Honeywell International, Inc. ................................ 216 49,000 Lockheed Martin Corp. ........................................ 2,992 19,400 Northrop Grumman Corp. ....................................... 1,048 16,700 Raytheon Co. ................................................. 646 6,600 United Technologies Corp. .................................... 670 -------- 6,589 -------- AIR FREIGHT AND LOGISTICS -- 1.0% 9,200 FedEx Corp. .................................................. 864 35,100 United Parcel Service, Inc., Class B.......................... 2,553 -------- 3,417 -------- AIRLINES -- 0.0% 9,900 Southwest Airlines Co. ....................................... 141 -------- BUILDING PRODUCTS -- 0.5% 46,600 Masco Corp. .................................................. 1,615 -------- COMMERCIAL SERVICES AND SUPPLIES -- 0.7% 79,500 Cendant Corp. ................................................ 1,633 18,400 H&R Block, Inc. .............................................. 931 -------- 2,564 -------- ELECTRICAL EQUIPMENT -- 0.7% 11,200 Cooper Industries Ltd., Class A............................... 802 11,400 Emerson Electric Co. ......................................... 740 16,100 Rockwell Automation, Inc. .................................... 911 -------- 2,453 -------- INDUSTRIAL CONGLOMERATES -- 3.9% 24,300 3M Co. ....................................................... 2,082 236,900 General Electric Co.(c)....................................... 8,543
VALUE SHARES (000) - -------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- (CONTINUED) 300 Textron, Inc. ................................................ $ 22 77,900 Tyco International Ltd. ...................................... 2,633 -------- 13,280 -------- MACHINERY -- 0.5% 13,400 Danaher Corp. ................................................ 716 5,800 Illinois Tool Works, Inc. .................................... 519 5,700 Ingersoll-Rand Co., Ltd., Class A............................. 454 -------- 1,689 -------- ROAD AND RAIL -- 0.3% 10,900 Burlington Northern Santa Fe Corp. ........................... 588 13,300 Norfolk Southern Corp. ....................................... 493 -------- 1,081 -------- TRADING COMPANIES AND DISTRIBUTORS -- 0.1% 2,900 W.W. Grainger, Inc. .......................................... 181 -------- 33,010 -------- INFORMATION TECHNOLOGY -- 16.7% COMMUNICATIONS EQUIPMENT -- 2.2% 9,100 Avaya, Inc.(a)................................................ 106 245,100 Cisco Systems, Inc.(a)........................................ 4,385 131,800 Motorola, Inc. ............................................... 1,973 17,700 QUALCOMM, Inc. ............................................... 650 17,100 Scientific-Atlanta, Inc. ..................................... 482 -------- 7,596 -------- COMPUTERS AND PERIPHERALS -- 4.9% 23,300 Apple Computer, Inc.(a)....................................... 971 139,300 Dell, Inc.(a)................................................. 5,352 144,400 EMC Corp.(a).................................................. 1,780 143,300 Hewlett-Packard Co. .......................................... 3,144 56,300 International Business Machines Corp. ........................ 5,144 19,400 Network Appliance, Inc.(a).................................... 536 -------- 16,927 -------- INTERNET SOFTWARE AND SERVICES -- 0.3% 30,000 Yahoo!, Inc.(a)............................................... 1,017 -------- IT SERVICES -- 0.3% 2,900 Affiliated Computer Services, Inc., Class A(a)................ 154 1 First Data Corp.(d)........................................... -- 15,200 Fiserv, Inc.(a)............................................... 605 12,200 Sabre Holdings Corp., Class A(b).............................. 267 -------- 1,026 -------- OFFICE ELECTRONICS -- 0.1% 10,400 Xerox Corp.(a)................................................ 158 -------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.5% 13,600 Advanced Micro Devices, Inc.(a)............................... 220 126,200 Applied Materials, Inc.(a).................................... 2,051 13,100 Freescale Semiconductor, Inc., Class B(a)..................... 226 256,000 Intel Corp. .................................................. 5,947 20,900 KLA-Tencor Corp.(a)........................................... 962
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 NATIONS FUNDS Nations LargeCap Enhanced Core Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- (CONTINUED) 12,000 Linear Technology Corp. ...................................... $ 459 48,000 Micron Technology, Inc.(a).................................... 496 25,100 National Semiconductor Corp. ................................. 517 37,900 Texas Instruments, Inc. ...................................... 966 -------- 11,844 -------- SOFTWARE -- 5.4% 3,900 Adobe Systems, Inc. .......................................... 262 86,600 Autodesk, Inc................................................. 2,577 75,100 Citrix Systems, Inc.(a)....................................... 1,789 534 Computer Associates International, Inc. ...................... 15 8,000 Intuit, Inc.(a)............................................... 351 359,500 Microsoft Corp.(c)............................................ 8,690 313,300 Oracle Corp.(a)............................................... 3,909 8,700 Parametric Technology Corp.(a)................................ 48 39,200 Symantec Corp.(a)............................................. 836 -------- 18,477 -------- 57,045 -------- MATERIALS -- 3.9% CHEMICALS -- 1.8% 46,400 Dow Chemical Co. ............................................. 2,313 27,900 E.I. du Pont de Nemours & Co. ................................ 1,430 4,600 Eastman Chemical Co. ......................................... 272 7,500 Ecolab, Inc. ................................................. 248 8,900 International Flavors & Fragrances, Inc. ..................... 351 13,000 Monsanto Co. ................................................. 838 10,700 PPG Industries, Inc. ......................................... 765 500 Rohm and Haas Co. ............................................ 24 -------- 6,241 -------- CONTAINERS AND PACKAGING -- 0.3% 10,200 Ball Corp. ................................................... 424 16,900 Pactiv Corp.(a)............................................... 394 6,400 Sealed Air Corp.(a)(b)........................................ 332 -------- 1,150 -------- METALS AND MINING -- 1.1% 24,800 Nucor Corp. .................................................. 1,427 10,400 Phelps Dodge Corp. ........................................... 1,058 24,700 United States Steel Corp. .................................... 1,256 -------- 3,741 -------- PAPER AND FOREST PRODUCTS -- 0.7% 44,500 Georgia-Pacific Corp. ........................................ 1,580 23,100 Louisiana-Pacific Corp. ...................................... 581 1,000 Weyerhaeuser Co. ............................................. 68 -------- 2,229 -------- 13,361 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 2.2% DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.9% 8,200 ALLTEL Corp. ................................................. $ 450 23,400 AT&T Corp.(b)................................................. 439 7,800 BellSouth Corp. .............................................. 205 95,500 SBC Communications, Inc. ..................................... 2,262 94,400 Verizon Communications, Inc. ................................. 3,351 -------- 6,707 -------- WIRELESS TELECOMMUNICATION SERVICES -- 0.3% 32,000 Nextel Communications, Inc., Class A(a)....................... 910 -------- 7,617 -------- UTILITIES -- 2.2% ELECTRIC UTILITIES -- 2.0% 14,100 American Electric Power Co., Inc. ............................ 481 36,900 Edison International(b)....................................... 1,282 11,900 Exelon Corp. ................................................. 546 29,000 FirstEnergy Corp. ............................................ 1,216 24,500 PG&E Corp.(b)................................................. 835 9,800 PPL Corp. .................................................... 529 24,000 TXU Corp. .................................................... 1,911 -------- 6,800 -------- MULTI-UTILITIES AND UNREGULATED POWER -- 0.2% 21,900 Duke Energy Corp. ............................................ 614 3,600 Sempra Energy................................................. 144 -------- 758 -------- 7,558 -------- TOTAL COMMON STOCKS (Cost of $277,172).......................................... 326,102 -------- INVESTMENT MANAGEMENT COMPANY -- 4.6% 15,831,000 Nations Cash Reserves, Capital Class Shares(e)................ 15,831 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $15,831)........................................... 15,831 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 38 NATIONS FUNDS Nations LargeCap Enhanced Core Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(F) -- 1.3% $ 1,287 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $1,299 (repurchase proceeds $1,287)......................... $ 1,287 1,236 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $1,252 (repurchase proceeds $1,236)..................................................... 1,236 2,012 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $2,044 (repurchase proceeds $2,012)..................................................... 2,012 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $4,535)............................................ 4,535 -------- CONTRACTS - --------- PURCHASED OPTIONS -- 0.3% Call options: Interest rate swaps: 166 Expiring on 04/21/05 If exercised, Deutsche Bank AG pays fixed (3.84%) and receives 3 month LIBOR, Swap expires 04/25/06(g)....................................... 51 10 Expiring on 07/06/06 If exercised, Morgan Stanley pays fixed (3.75%) and receives 3 month EURLIBOR, Swap expires 07/12/07(g).................. 101 7 Expiring on 05/16/05 If exercised, Ixis Financial Products pays fixed (4.77%) and receives 3 month LIBOR, Swap expires 05/18/35(g)............ 5 7 Expiring on 05/18/05 If exercised, Ixis Financial Products pays fixed (4.91%) and receives 3 month LIBOR, Swap expires 05/21/35(g)............ 16
- --------------------------------------------------------------------------------------
VALUE CONTRACTS (000) - --------- PURCHASED OPTIONS -- (CONTINUED) Call options: Interest rate swaps: 15 Expiring on 05/23/05 If exercised, Citibank N.A. pays fixed (5.00%) and receives 3 month LIBOR, Swap expires 05/26/15(g)..................... $ 183 S&P 500 Index: 200 Strike price: 1,225.00 Expires 06/18/05............................................ 218 100 Strike price: 1,250.00 Expires 12/17/05............................................ 284 1,000 Symantec Corp., Strike price: 30.00 Expires 04/16/05............................................ 3 -------- TOTAL PURCHASED OPTIONS (Cost of $1,303)............................................ 861 -------- TOTAL INVESTMENTS (Cost of $298,841)(h)............................. 101.4% 347,329 -------- OTHER ASSETS AND LIABILITIES, NET................... (1.4)% (4,669) -------- NET ASSETS.......................................... 100.0% $342,660 ========
- ------------------------------------------------------------ NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of the security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March, 31, 2005 is $4,304 and $4,450, respectively. (c) The security or a portion of the security is pledged as collateral for open futures contracts and written options. At March 31, 2005, the total market value of securities pledged amounted to $20,937. (d) Rounds to less than $500. (e) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (f) This amount represents cash collateral received from securities lending activity (see Note 11). (g) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (h) Cost for federal income tax purposes is $301,834. See Note 5 for additional information.
ACRONYM NAME - ------- ------------------------------------------------------ REIT Real Estate Investment Trust
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 39 NATIONS FUNDS Nations LargeCap Enhanced Core Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE CONTRACTS (000) - -------------------------------------------------------------------------------------- WRITTEN OPTIONS Call options: Interest rate swaps: (13) Expiring on 05/16/05 If exercised, Ixis Financial Products receives fixed (4.40%) and pays 3 month LIBOR Swap expires 05/18/15(g)............. $ (5) (12) Expiring on 04/21/05 If exercised, Deutsche Bank AG receives fixed (4.99%) and pays 3 month LIBOR Swap expires 04/25/06(g)................. (107) (13) Expiring on 05/16/05 If exercised, Citibank N.A. receives fixed (4.50%) and pays 3 month LIBOR Swap expires 05/20/15(g)...................... (12) (30) Expiring on 05/23/05. If exercised, Citibank N.A. receives fixed (4.81%) and pays 3 month LIBOR Swap expires 05/26/15(g)................................................. (174) (400) S&P 500 Index: Strike price: 1,250.00 Expiring on 06/18/05........................................ (208) (200) Strike price: 1,300.00 Expiring on 12/17/05........................................ (280) (2,000) Symantec Corp: Strike price: 32.5 Expiring on 04/16/05........................................ (5) -------- TOTAL WRITTEN OPTIONS (premium $(1,265)).......................................... $ (791) --------
At March 31, 2005, the Fund held investments in the following sectors:
SECTOR % OF NET ASSETS - ------ --------------- Financials..................................... 16.7% Information Technology......................... 16.7 Health Care.................................... 13.2 Energy......................................... 10.5 Consumer Discretionary......................... 10.5 Consumer Staples............................... 9.7 Industrials.................................... 9.6 Materials...................................... 3.9 Telecommunication Services..................... 2.2 Utilities...................................... 2.2 Investment Management Company.................. 4.6 Repurchase Agreements.......................... 1.3 Purchased Options.............................. 0.3 Other Asset & Liabilities, Net................. (1.4) ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 40 NATIONS FUNDS Nations MidCap Index Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- COMMON STOCKS -- 99.7% CONSUMER DISCRETIONARY -- 19.1% AUTO COMPONENTS -- 1.1% 109,050 Arvin Meritor, Inc.(a)........................................ $ 1,687 24,250 Bandag, Inc. ................................................. 1,139 87,450 BorgWarner, Inc. ............................................. 4,257 121,275 Gentex Corp.(a)............................................... 3,869 104,575 Lear Corp.(a)................................................. 4,639 50,425 Modine Manufacturing Co. ..................................... 1,479 ---------- 17,070 ---------- AUTOMOBILES -- 0.1% 71,725 Thor Industries, Inc. ........................................ 2,145 ---------- HOTELS, RESTAURANTS AND LEISURE -- 3.4% 126,312 Applebee's International, Inc. ............................... 3,481 55,025 Bob Evans Farms, Inc. ........................................ 1,290 103,100 Boyd Gaming Corp. ............................................ 5,377 137,475 Brinker International, Inc.(b)................................ 4,979 488,725 Caesars Entertainment, Inc.(b)................................ 9,672 74,025 CBRL Group, Inc.(a)........................................... 3,057 121,100 Cheesecake Factory, Inc.(a)(b)................................ 4,293 180,350 GTECH Holdings Corp. ......................................... 4,244 68,825 International Speedway Corp., Class A......................... 3,734 96,200 Krispy Kreme Doughnuts, Inc.(a)(b)............................ 734 105,150 Mandalay Resort Group......................................... 7,412 105,675 Outback Steakhouse, Inc. ..................................... 4,839 99,875 Ruby Tuesday, Inc.(a)......................................... 2,426 ---------- 55,538 ---------- HOUSEHOLD DURABLES -- 4.2% 107,450 American Greetings Corp., Class A............................. 2,738 54,800 Blyth Industries, Inc. ....................................... 1,745 456,649 D.R. Horton, Inc. ............................................ 13,352 82,675 Furniture Brands International, Inc.(a)....................... 1,803 100,300 Harman International Industries, Inc. ........................ 8,872 75,450 Hovnanian Enterprises, Inc.(b)................................ 3,848 224,625 Lennar Corp., Class A......................................... 12,732 92,650 Mohawk Industries, Inc.(a)(b)................................. 7,810 74,050 Ryland Group, Inc. ........................................... 4,593 96,675 Toll Brothers, Inc.(b)........................................ 7,623 87,875 Tupperware Corp.(a)........................................... 1,789 ---------- 66,905 ---------- LEISURE EQUIPMENT AND PRODUCTS -- 0.1% 110,450 Callaway Golf Co. ............................................ 1,414 ---------- MEDIA -- 2.4% 167,125 Belo Corp. ................................................... 4,034 76,600 Catalina Marketing Corp.(a)................................... 1,984 79,900 Emmis Communications Corp.(b)................................. 1,536 68,475 Entercom Communications Corp.(b).............................. 2,432 111,625 Harte-Hanks, Inc. ............................................ 3,076 70,650 Lee Enterprises, Inc. ........................................ 3,066 37,250 Media General, Inc., Class A.................................. 2,304 155,025 Readers Digest Association, Inc., Class A..................... 2,684
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- MEDIA -- (CONTINUED) 58,000 Scholastic Corp.(b)........................................... $ 2,140 79,850 Valassis Communications, Inc.(b).............................. 2,792 10,725 Washington Post Co., Class B.................................. 9,588 137,550 Westwood One, Inc.(b)......................................... 2,799 ---------- 38,435 ---------- MULTILINE RETAIL -- 1.1% 92,051 99 Cents Only Stores(a)(b).................................... 1,213 175,850 Dollar Tree Stores, Inc.(b)................................... 5,052 76,200 Neiman Marcus Group, Inc., Class A............................ 6,973 217,575 Saks, Inc. ................................................... 3,927 ---------- 17,165 ---------- SPECIALTY RETAIL -- 6.5% 135,725 Abercrombie & Fitch Co., Class A.............................. 7,769 114,500 Advance Auto Parts, Inc.(b)................................... 5,777 86,650 Aeropostale, Inc.(b).......................................... 2,838 206,600 American Eagle Outfitters, Inc. .............................. 6,105 109,925 AnnTaylor Stores Corp.(b)..................................... 2,813 98,850 Barnes & Noble, Inc.(b)....................................... 3,409 116,975 Borders Group, Inc. .......................................... 3,114 162,275 CarMax, Inc.(b)............................................... 5,112 278,100 Chico's FAS, Inc.(b).......................................... 7,859 154,125 Claire's Stores, Inc. ........................................ 3,551 242,825 Foot Locker, Inc. ............................................ 7,115 209,900 Michaels Stores, Inc. ........................................ 7,619 81,975 O'Reilly Automotive, Inc.(b).................................. 4,060 115,575 Pacific Sunwear of California, Inc.(b)........................ 3,234 106,000 Payless Shoesource, Inc.(b)................................... 1,674 227,200 PETsMART, Inc. ............................................... 6,532 134,525 Pier 1 Imports, Inc. ......................................... 2,452 69,675 Regis Corp. .................................................. 2,852 109,125 Rent-A-Center, Inc.(b)........................................ 2,980 228,650 Ross Stores, Inc. ............................................ 6,663 101,425 Urban Outfitters, Inc.(b)..................................... 4,865 182,325 Williams-Sonoma, Inc.(b)...................................... 6,700 ---------- 105,093 ---------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.2% 48,225 Timberland Co., Class A(b).................................... 3,421 ---------- 307,186 ---------- CONSUMER STAPLES -- 4.6% BEVERAGES -- 0.8% 160,300 Constellation Brands, Inc., Class A(b)........................ 8,475 165,300 PepsiAmericas, Inc. .......................................... 3,746 ---------- 12,221 ---------- FOOD AND STAPLES RETAILING -- 1.0% 108,250 BJ's Wholesale Club, Inc.(b).................................. 3,362 69,750 Ruddick Corp. ................................................ 1,615 100,075 Whole Foods Market, Inc. ..................................... 10,221 ---------- 15,198 ---------- FOOD PRODUCTS -- 2.1% 232,062 Dean Foods Co.(b)............................................. 7,960 163,225 Hormel Foods Corp. ........................................... 5,078 90,975 J. M. Smucker Co.(a).......................................... 4,576
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 41 NATIONS FUNDS Nations MidCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- FOOD PRODUCTS -- (CONTINUED) 47,725 Lancaster Colony Corp. ....................................... $ 2,031 156,025 Smithfield Foods, Inc.(b)..................................... 4,922 68,577 Tootsie Roll Industries, Inc. ................................ 2,057 472,900 Tyson Foods, Inc., Class A.................................... 7,888 ---------- 34,512 ---------- HOUSEHOLD PRODUCTS -- 0.6% 98,700 Church & Dwight Co., Inc. .................................... 3,501 110,075 Energizer Holdings, Inc.(b)................................... 6,582 ---------- 10,083 ---------- TOBACCO -- 0.1% 39,925 Universal Corp. .............................................. 1,827 ---------- 73,841 ---------- ENERGY -- 7.5% ENERGY EQUIPMENT AND SERVICES -- 4.0% 84,100 Cooper Cameron Corp.(b)....................................... 4,811 235,575 ENSCO International, Inc. .................................... 8,872 106,525 FMC Technologies, Inc.(b)..................................... 3,535 192,400 Grant Prideco, Inc.(b)........................................ 4,648 121,600 Hanover Compressor Co.(b)..................................... 1,468 79,050 Helmerich & Payne, Inc. ...................................... 3,138 262,625 Patterson-UTI Energy, Inc. ................................... 6,571 197,325 Pride International, Inc.(a)(b)............................... 4,902 165,175 Smith International, Inc. .................................... 10,361 94,475 Tidewater, Inc. .............................................. 3,671 215,175 Weatherford International Ltd.(b)............................. 12,467 ---------- 64,444 ---------- OIL AND GAS -- 3.5% 85,850 Forest Oil Corp.(a)(b)........................................ 3,477 136,100 Murphy Oil Corp.(c) .......................................... 13,437 98,250 Newfield Exploration Co.(b)................................... 7,296 91,975 Noble Energy, Inc.(a)......................................... 6,256 54,025 Overseas Shipholding Group, Inc. ............................. 3,399 225,550 Pioneer Natural Resources Co. ................................ 9,635 120,025 Plains Exploration & Production Co.(b)........................ 4,189 99,025 Pogo Producing Co. ........................................... 4,876 100,600 Western Gas Resources, Inc.(a)................................ 3,466 ---------- 56,031 ---------- 120,475 ---------- FINANCIALS -- 16.9% CAPITAL MARKETS -- 2.7% 118,425 A.G. Edwards, Inc. ........................................... 5,305 207,400 Eaton Vance Corp. ............................................ 4,861 103,575 Investors Financial Services Corp. ........................... 5,066 80,125 Jefferies Group, Inc. ........................................ 3,019 88,825 LaBranche & Co., Inc.(a)(b)................................... 826 169,337 Legg Mason, Inc. ............................................. 13,232 103,587 Raymond James Financial, Inc. ................................ 3,139 130,850 SEI Investments Co. .......................................... 4,732 Waddell & Reed Financial, Inc., 128,750 Class A(a).................................................... 2,542 ---------- 42,722 ----------
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- COMMERCIAL BANKS -- 4.0% 201,562 Associated Banc Corp. ........................................ $ 6,295 83,275 Bank of Hawaii Corp. ......................................... 3,769 70,450 City National Corp. .......................................... 4,919 226,700 Colonial BancGroup, Inc. ..................................... 4,652 247,150 Commerce Bancorp, Inc.(a)..................................... 8,025 75,950 Cullen Frost Bankers, Inc. ................................... 3,429 131,025 FirstMerit Corp.(a)........................................... 3,506 79,400 Greater Bay Bancorp.(a)....................................... 1,938 241,650 Hibernia Corp., Class A....................................... 7,735 123,300 Mercantile Bankshares Corp. .................................. 6,271 56,300 Silicon Valley Bancshares(b).................................. 2,480 197,425 TCF Financial Corp. .......................................... 5,360 52,150 Westamerica Bancorporation.................................... 2,700 104,925 Wilmington Trust Corp. ....................................... 3,683 ---------- 64,762 ---------- CONSUMER FINANCE -- 0.5% 236,550 AmeriCredit Corp.(b).......................................... 5,545 133,575 MoneyGram International, Inc. ................................ 2,523 ---------- 8,068 ---------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% 147,450 Leucadia National Corp.(a).................................... 5,065 ---------- INSURANCE -- 4.3% 83,075 Allmerica Financial Corp.(b).................................. 2,987 92,000 American Financial Group, Inc. ............................... 2,834 61,425 AmerUs Group Co. ............................................. 2,902 143,500 Arthur J. Gallagher & Co. .................................... 4,133 96,925 Brown & Brown, Inc.(a)........................................ 4,467 87,425 Everest Re Group Ltd. ........................................ 7,441 271,740 Fidelity National Financial, Inc. ............................ 8,951 127,025 First American Financial Corp.(a)............................. 4,184 105,850 HCC Insurance Holdings, Inc. ................................. 3,828 66,650 Horace Mann Educators Corp. .................................. 1,182 97,225 Ohio Casualty Corp.(b)........................................ 2,234 283,987 Old Republic International Corp. ............................. 6,614 108,100 Protective Life Corp. ........................................ 4,248 44,325 Stancorp Financial Group, Inc. ............................... 3,758 90,175 Unitrin, Inc. ................................................ 4,094 123,387 W.R. Berkley Corp. ........................................... 6,120 ---------- 69,977 ---------- REAL ESTATE -- 2.7% 130,725 AMB Property Corp. ........................................... 4,941 167,900 Developers Diversified Realty Corp............................ 6,674 83,700 Highwoods Properties, Inc. ................................... 2,245 98,375 Hospitality Properties Trust.................................. 3,972 134,225 Liberty Property Trust(a)..................................... 5,242 88,075 Mack-Cali Realty Corp. ....................................... 3,730 160,375 New Plan Excel Realty Trust(a)................................ 4,027 78,157 Rayonier, Inc. ............................................... 3,871 213,375 United Dominion Realty Trust, Inc. ........................... 4,453 131,600 Weingarten Realty Investors................................... 4,542 ---------- 43,697 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 42 NATIONS FUNDS Nations MidCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 2.4% 159,900 Astoria Financial Corp. ...................................... $ 4,046 122,325 Independence Community Bank Corp. ............................ 4,771 96,825 IndyMac Bancorp, Inc. ........................................ 3,292 379,903 New York Community Bancorp, Inc. ............................. 6,899 146,550 PMI Group, Inc. .............................................. 5,570 137,750 Radian Group, Inc. ........................................... 6,576 134,927 Washington Federal, Inc. ..................................... 3,145 83,775 Webster Financial Corp. ...................................... 3,804 ---------- 38,103 ---------- 272,394 ---------- HEALTH CARE -- 11.7% BIOTECHNOLOGY -- 1.7% 90,375 Cephalon, Inc.(a)(b).......................................... 4,232 102,950 Charles River Laboratories International, Inc.(b)............. 4,843 80,350 Invitrogen Corp.(b)........................................... 5,560 48,300 Martek Biosciences Corp.(a)(b)................................ 2,810 477,675 Millennium Pharmaceuticals, Inc.(b)........................... 4,022 164,100 Protein Design Labs, Inc.(b).................................. 2,624 59,800 Techne Corp.(b)............................................... 2,403 125,075 Vertex Pharmaceuticals, Inc.(b)............................... 1,171 ---------- 27,665 ---------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.9% 96,400 Beckman Coulter, Inc. ........................................ 6,406 176,650 Cytyc Corp.(b)................................................ 4,065 118,075 DENTSPLY International, Inc. ................................. 6,424 92,750 Edwards Lifesciences Corp.(b)................................. 4,009 77,600 Gen-Probe, Inc.(b)............................................ 3,458 91,500 Hillenbrand Industries, Inc. ................................. 5,076 55,800 INAMED Corp.(b)............................................... 3,899 107,925 STERIS Corp.(b)............................................... 2,725 208,000 Varian Medical Systems, Inc.(b)............................... 7,130 54,750 Varian, Inc.(b)............................................... 2,074 77,900 VISX, Inc.(b)................................................. 1,826 ---------- 47,092 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 5.2% 75,450 Apria Healthcare Group, Inc.(b)............................... 2,422 103,950 Community Health Systems, Inc.(b)............................. 3,629 97,750 Covance, Inc.(b).............................................. 4,654 165,412 Coventry Health Care, Inc.(b)................................. 11,271 172,925 Health Net, Inc.(b)........................................... 5,656 134,850 Henry Schein, Inc.(a)(b)...................................... 4,833 56,100 LifePoint Hospitals, Inc.(a)(b)............................... 2,459 156,300 Lincare Holdings, Inc.(b)..................................... 6,913 162,225 Omnicare, Inc. ............................................... 5,751 134,975 Pacificare Health Systems, Inc.(b)............................ 7,683 213,950 Patterson Companies, Inc.(b).................................. 10,687 105,600 Renal Care Group, Inc.(b)..................................... 4,007 122,375 Triad Hospitals, Inc.(b)...................................... 6,131 90,800 Universal Health Services, Inc., Class B...................... 4,758 118,800 VCA Antech, Inc.(b)........................................... 2,403 ---------- 83,257 ----------
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- PHARMACEUTICALS -- 1.9% 143,830 Barr Pharmaceuticals, Inc.(b)................................. $ 7,023 343,631 IVAX Corp.(b)................................................. 6,794 52,775 Par Pharmaceutical Companies, Inc.(a)(b)...................... 1,765 140,025 Perrigo Co. .................................................. 2,681 163,625 Sepracor, Inc.(b)............................................. 9,394 142,375 Valeant Pharmaceuticals International......................... 3,206 ---------- 30,863 ---------- 188,877 ---------- INDUSTRIALS -- 12.9% AEROSPACE AND DEFENSE -- 0.8% 58,875 Alliant Techsystems, Inc.(b).................................. 4,207 102,900 Precision Castparts Corp. .................................... 7,924 13,075 Sequa Corp., Class A(b)....................................... 678 ---------- 12,809 ---------- AIR FREIGHT AND LOGISTICS -- 1.0% 132,825 C.H. Robinson Worldwide, Inc. ................................ 6,844 Expeditors International of 165,950 Washington, Inc. ............................................. 8,887 ---------- 15,731 ---------- AIRLINES -- 0.3% 133,550 Airtran Holdings, Inc.(a)(b).................................. 1,209 40,150 Alaska Air Group, Inc.(b)..................................... 1,182 152,787 JetBlue Airways Corp.(b)...................................... 2,909 ---------- 5,300 ---------- BUILDING PRODUCTS -- 0.1% 64,700 York International Corp. ..................................... 2,535 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 4.6% 142,775 Adesa, Inc. .................................................. 3,335 38,775 Banta Corp. .................................................. 1,660 88,375 Brink's Co. .................................................. 3,058 159,650 Career Education Corp.(b)..................................... 5,470 138,202 ChoicePoint, Inc.(b).......................................... 5,543 124,875 Copart, Inc.(b)............................................... 2,942 141,300 Corinthian Colleges, Inc.(b).................................. 2,221 78,200 Deluxe Corp.(a)............................................... 3,117 100,825 DeVry, Inc.(b)................................................ 1,908 107,525 Dun & Bradstreet Corp.(b)..................................... 6,607 106,150 Education Management Corp.(b)................................. 2,967 108,825 Herman Miller, Inc. .......................................... 3,278 80,525 HNI Corp. .................................................... 3,620 71,525 ITT Educational Services, Inc.(b)............................. 3,469 42,700 Kelly Services, Inc. ......................................... 1,229 54,225 Korn/Ferry International(b)................................... 1,032 76,825 Laureate Education, Inc.(b)................................... 3,287 139,975 Manpower, Inc. ............................................... 6,092 219,025 Republic Services, Inc.(a).................................... 7,333
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 43 NATIONS FUNDS Nations MidCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- COMMERCIAL SERVICES AND SUPPLIES -- (CONTINUED) 76,618 Rollins, Inc. ................................................ $ 1,425 74,125 Sotheby's Holdings, Class A(a)(b)............................. 1,257 69,875 Stericycle, Inc.(b)........................................... 3,088 ---------- 73,938 ---------- CONSTRUCTION AND ENGINEERING -- 0.6% 75,750 Dycom Industries, Inc.(b)..................................... 1,741 57,675 Granite Construction(a)....................................... 1,515 88,550 Jacobs Engineering Group, Inc.(b)............................. 4,598 151,475 Quanta Services, Inc.(a)(b)................................... 1,156 ---------- 9,010 ---------- ELECTRICAL EQUIPMENT -- 0.8% 107,550 AMETEK, Inc. ................................................. 4,329 95,725 Hubbell, Inc., Class B........................................ 4,892 92,800 Thomas & Betts Corp.(b)....................................... 2,997 ---------- 12,218 ---------- INDUSTRIAL CONGLOMERATES -- 0.4% 48,400 Carlisle Companies, Inc. ..................................... 3,377 59,950 Teleflex, Inc. ............................................... 3,068 ---------- 6,445 ---------- MACHINERY -- 2.4% 140,675 Agco Corp.(b)................................................. 2,567 86,300 Crane Co. .................................................... 2,484 119,700 Donaldson Co., Inc. .......................................... 3,864 74,925 Federal Signal Corp. ......................................... 1,137 86,125 Flowserve Corp.(b)............................................ 2,228 107,387 Graco, Inc. .................................................. 4,334 64,650 Harsco Corp. ................................................. 3,854 58,450 Kennametal, Inc. ............................................. 2,776 51,125 Nordson Corp. ................................................ 1,882 157,675 Pentair, Inc. ................................................ 6,149 117,025 SPX Corp.(a).................................................. 5,065 28,750 Tecumseh Products Co., Class A................................ 1,139 66,300 Trinity Industries, Inc. ..................................... 1,868 ---------- 39,347 ---------- MARINE -- 0.2% 67,700 Alexander & Baldwin, Inc. .................................... 2,789 ---------- ROAD AND RAIL -- 1.0% 80,450 CNF, Inc. .................................................... 3,764 106,875 J.B. Hunt Transport Services, Inc. ........................... 4,678 96,325 Swift Transportation Co., Inc. (a)(b)......................... 2,133 98,743 Werner Enterprises, Inc. ..................................... 1,919 75,700 Yellow Roadway Corp.(a)(b).................................... 4,431 ---------- 16,925 ---------- TRADING COMPANIES AND DISTRIBUTORS -- 0.7% 106,350 Fastenal Co.(a)............................................... 5,882 76,975 GATX Corp. ................................................... 2,555 112,750 United Rentals, Inc.(a)(b).................................... 2,279 ---------- 10,716 ---------- 207,763 ----------
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 13.9% COMMUNICATIONS EQUIPMENT -- 1.6% 592,400 3Com Corp.(b)................................................. $ 2,109 106,475 ADTRAN, Inc. ................................................. 1,878 77,550 Avocent Corp.(b).............................................. 1,990 79,575 CommScope, Inc.(b)............................................ 1,190 57,100 F5 Networks, Inc.(b).......................................... 2,883 207,250 Harris Corp. ................................................. 6,767 76,425 Plantronics, Inc. ............................................ 2,910 152,800 Polycom, Inc.(a)(b)........................................... 2,590 155,125 Powerwave Technologies, Inc.(a)(b)............................ 1,201 161,925 UTStarcom, Inc.(a)(b)......................................... 1,773 ---------- 25,291 ---------- COMPUTERS AND PERIPHERALS -- 1.3% 111,625 Diebold, Inc. ................................................ 6,123 52,875 Imation Corp. ................................................ 1,837 185,375 McDATA Corp., Class A(a)(b)................................... 699 253,700 SanDisk Corp.(b).............................................. 7,053 165,950 Storage Technology Corp.(b)................................... 5,111 ---------- 20,823 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.0% 137,800 Amphenol Corp., Class A....................................... 5,104 180,475 Arrow Electronics, Inc.(b).................................... 4,575 187,850 Avnet, Inc.(b)................................................ 3,460 115,225 CDW Corp.(a).................................................. 6,531 134,725 KEMET Corp.(b)................................................ 1,044 103,762 National Instruments Corp. ................................... 2,807 66,825 Newport Corp.(b).............................................. 968 67,475 Plexus Corp.(a)(b)............................................ 777 90,850 Tech Data Corp.(b)............................................ 3,367 258,675 Vishay Intertechnology, Inc.(b)............................... 3,215 ---------- 31,848 ---------- IT SERVICES -- 2.7% 133,575 Acxiom Corp. ................................................. 2,796 103,225 Alliance Data Systems Corp.(b)................................ 4,170 188,150 BISYS Group, Inc.(b).......................................... 2,950 232,325 Ceridian Corp.(b)............................................. 3,961 97,125 Certegy, Inc. ................................................ 3,363 130,850 CheckFree Corp.(b)............................................ 5,333 207,025 Cognizant Technology Solutions Corp., Class A(b).............. 9,565 79,525 CSG Systems International, Inc.(b)............................ 1,295 117,800 DST Systems, Inc.(b).......................................... 5,440 86,950 Keane, Inc.(b)................................................ 1,133 159,725 MPS Group, Inc.(b)............................................ 1,679 131,925 Titan Corp.(b)................................................ 2,396 ---------- 44,081 ---------- OFFICE ELECTRONICS -- 0.3% 111,975 Zebra Technologies Corp., Class A(b).......................... 5,318 ---------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.0% 698,750 Atmel Corp.(b)................................................ 2,061 38,475 Cabot Microelectronics Corp.(a)(b)............................ 1,207
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 44 NATIONS FUNDS Nations MidCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- (CONTINUED) 142,325 Credence Systems Corp.(b)..................................... $ 1,126 119,175 Cree Research, Inc.(a)(b)..................................... 2,592 200,075 Cypress Semiconductor Corp.(b)................................ 2,521 Fairchild Semiconductor Corp., 186,450 Class A(b).................................................... 2,858 109,375 Integrated Circuit Systems, Inc.(b)........................... 2,091 163,725 Integrated Device Technology, Inc.(b)......................... 1,970 105,375 International Rectifier Corp.(b).............................. 4,795 234,400 Intersil Corp., Class A....................................... 4,060 217,475 Lam Research Corp.(b)......................................... 6,276 176,675 Lattice Semiconductor Corp.(b)................................ 949 95,250 LTX Corp.(b).................................................. 423 123,450 Micrel, Inc.(b)............................................... 1,138 322,750 Microchip Technology, Inc. ................................... 8,395 292,000 RF Micro Devices, Inc.(b)..................................... 1,524 115,300 Semtech Corp.(b).............................................. 2,061 70,675 Silicon Laboratories, Inc.(a)(b).............................. 2,100 214,250 TriQuint Semiconductor, Inc.(b)............................... 724 ---------- 48,871 ---------- SOFTWARE -- 3.0% 295,516 Activision, Inc.(b)........................................... 4,374 44,125 Advent Software, Inc.(b)...................................... 802 91,462 Ascential Software Corp.(b)................................... 1,695 420,975 Cadence Design Systems, Inc.(b)............................... 6,294 104,800 Fair Isaac Corp. ............................................. 3,609 132,825 Gartner, Inc.(b).............................................. 1,271 126,425 Jack Henry & Associates, Inc. ................................ 2,274 114,575 Macromedia, Inc.(b)........................................... 3,838 77,400 Macrovision Corp.(b).......................................... 1,764 249,475 McAfee, Inc.(b)............................................... 5,628 118,875 Mentor Graphics Corp.(b)...................................... 1,629 87,250 Retek, Inc.(b)................................................ 979 90,400 Reynolds & Reynolds Co., Class A.............................. 2,446 108,325 RSA Security, Inc.(b)......................................... 1,717 148,175 Sybase, Inc.(b)............................................... 2,735 226,025 Synopsys, Inc.(b)............................................. 4,091 55,600 Transaction Systems Architects, Inc., Class A(b).............. 1,287 121,525 Wind River Systems, Inc.(b)................................... 1,833 ---------- 48,266 ---------- 224,498 ---------- MATERIALS -- 5.4% CHEMICALS -- 3.0% 109,175 Airgas, Inc. ................................................. 2,608 71,525 Albemarle Corp. .............................................. 2,601 97,925 Cabot Corp. .................................................. 3,273 178,700 Crompton Corp. ............................................... 2,609 67,075 Cytec Industries, Inc. ....................................... 3,639 65,225 Ferro Corp. .................................................. 1,227 57,450 FMC Corp.(b).................................................. 3,071 104,800 Lubrizol Corp. ............................................... 4,259 338,675 Lyondell Chemical Co. ........................................ 9,456
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- CHEMICALS -- (CONTINUED) 32,000 Minerals Technologies, Inc. .................................. $ 2,105 110,425 Olin Corp. ................................................... 2,462 182,500 RPM International, Inc. ...................................... 3,336 43,125 Scotts Co., Class A(a)(b)..................................... 3,029 73,300 Sensient Technologies Corp. .................................. 1,580 80,225 Valspar Corp. ................................................ 3,734 ---------- 48,989 ---------- CONSTRUCTION MATERIALS -- 0.3% 73,475 Martin Marietta Materials, Inc. .............................. 4,109 ---------- CONTAINERS AND PACKAGING -- 0.6% 79,550 Longview Fibre Co. ........................................... 1,492 132,175 Packaging Corp. of America.................................... 3,211 154,100 Sonoco Products Co. .......................................... 4,446 ---------- 9,149 ---------- METALS AND MINING -- 1.1% 97,675 Arch Coal, Inc. .............................................. 4,201 183,200 Peabody Energy Corp. ......................................... 8,493 69,500 Steel Dynamics, Inc.(a)....................................... 2,394 124,500 Worthington Industries, Inc. ................................. 2,401 ---------- 17,489 ---------- PAPER AND FOREST PRODUCTS -- 0.4% 86,700 Bowater, Inc. ................................................ 3,266 58,100 P.H. Glatfelter Co. .......................................... 857 45,050 Potlatch Corp. ............................................... 2,120 ---------- 6,243 ---------- 85,979 ---------- TELECOMMUNICATION SERVICES -- 0.5% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.1% 381,975 Cincinnati Bell, Inc.(b)...................................... 1,623 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 0.4% 85,025 Telephone & Data Systems, Inc. ............................... 6,938 ---------- 8,561 ---------- UTILITIES -- 7.2% ELECTRIC UTILITIES -- 3.0% 180,975 Alliant Energy Corp.(a)....................................... 4,846 50,600 Black Hills Corp. ............................................ 1,673 197,025 DPL, Inc. .................................................... 4,926 119,750 Duquesne Light Holdings, Inc.(a).............................. 2,146 115,975 Great Plains Energy, Inc.(a).................................. 3,546 125,700 Hawaiian Electric Industries, Inc.(a)......................... 3,208 65,700 IDACORP, Inc. ................................................ 1,864 199,975 Northeast Utilities Co. ...................................... 3,854 83,000 NSTAR(a)...................................................... 4,507 292,650 Pepco Holdings, Inc. ......................................... 6,143 99,450 PNM Resources, Inc.(a)........................................ 2,653
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 45 NATIONS FUNDS Nations MidCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- (CONTINUED) 155,525 Puget Energy, Inc. ........................................... $ 3,428 182,900 Sierra Pacific Resources(a)(b)................................ 1,966 133,725 Westar Energy, Inc. .......................................... 2,894 ---------- 47,654 ---------- GAS UTILITIES -- 1.8% 119,825 AGL Resources, Inc. .......................................... 4,185 95,050 Equitable Resources, Inc. .................................... 5,460 121,875 National Fuel Gas Co.(a)...................................... 3,484 162,300 Oneok, Inc. .................................................. 5,002 131,950 Questar Corp. ................................................ 7,818 75,825 WGL Holdings, Inc.(a)......................................... 2,348 ---------- 28,297 ---------- MULTI-UTILITIES AND UNREGULATED POWER -- 2.2% 376,475 Aquila, Inc.(b)............................................... 1,442 228,825 Energy East Corp. ............................................ 6,000 184,237 MDU Resources Group, Inc. .................................... 5,088 140,150 OGE Energy Corp. ............................................. 3,777 175,875 Scana Corp. .................................................. 6,722 118,500 Vectren Corp. ................................................ 3,157 182,225 Wisconsin Energy Corp. ....................................... 6,469 58,675 WPS Resources Corp. .......................................... 3,105 ---------- 35,760 ---------- WATER UTILITIES -- 0.2% 145,231 Aqua America, Inc. ........................................... 3,538 ---------- 115,249 ---------- TOTAL COMMON STOCKS (Cost of $1,252,373)........................................ 1,604,823 ---------- INVESTMENT MANAGEMENT COMPANY -- 0.2% 3,377,000 Nations Cash Reserves, Capital Class Shares(d)................ 3,377 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $3,377).................................. 3,377 ---------- PAR (000) - ---------- REPURCHASE AGREEMENTS(E) -- 4.7% $ 20,108 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $20,299 (repurchase proceeds $20,110)....................... 20,108
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(E) -- (CONTINUED) $ 24,130 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $24,447 (repurchase proceeds $24,132) ................................................... $ 24,130 31,414 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $31,909 (repurchase proceeds $31,417) ................................................... 31,414 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $75,652)........................................... 75,652 ---------- TOTAL INVESTMENTS (Cost of $1,331,402)(f)........................... 104.6% 1,683,852 OTHER ASSETS AND LIABILITIES, NET................... (4.6)% (73,241) ---------- NET ASSETS.......................................... 100.0% $1,610,611 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) All or a portion of the security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March, 31, 2005 is $78,732 and $73,669, respectively. (b) Non-income producing security. (c) Security pledged as collateral for open futures contracts. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 11). (f) Cost for federal income tax purposes is $1,346,101. See Note 5 for additional information. At March 31, 2005, the Fund held investments in the following sectors:
SECTOR % OF NET ASSETS - ------ --------------- Consumer Discretionary......................... 19.1% Financials..................................... 16.9 Information Technology......................... 13.9 Industrials.................................... 12.9 Health Care.................................... 11.7 Energy......................................... 7.5 Utilities...................................... 7.2 Materials...................................... 5.4 Consumer Staples............................... 4.6 Telecommunication Services..................... 0.5 Investment Management Company.................. 0.2 Repurchase Agreements.......................... 4.7 Other Assets & Liabilities, Net................ (4.6) ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 46 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- COMMON STOCKS -- 99.3% CONSUMER DISCRETIONARY -- 17.6% AUTO COMPONENTS -- 0.2% 32,000 Midas, Inc.(a)................................................ $ 731 32,500 Standard Motor Products, Inc. ................................ 380 52,900 Superior Industries International, Inc.(b).................... 1,397 ---------- 2,508 ---------- AUTOMOBILES -- 0.4% 32,300 Coachmen Industries, Inc. .................................... 439 120,100 Fleetwood Enterprises, Inc.(a)(b)............................. 1,045 63,600 Monaco Coach Corp. ........................................... 1,027 65,500 Winnebago Industries, Inc.(b)................................. 2,070 ---------- 4,581 ---------- DISTRIBUTORS -- 0.2% 37,100 Advanced Marketing Services, Inc.(a).......................... 223 29,700 Building Material Holding Corp. .............................. 1,321 ---------- 1,544 ---------- HOTELS, RESTAURANTS AND LEISURE -- 3.9% 60,700 Argosy Gaming Co.(a).......................................... 2,787 75,200 Aztar Corp.(a)................................................ 2,148 73,700 Bally Total Fitness Holding Corp.(a)(b)....................... 256 78,550 CEC Entertainment, Inc.(a).................................... 2,876 43,100 IHOP Corp. ................................................... 2,055 78,900 Jack in the Box, Inc.(a)...................................... 2,927 52,100 Landry's Restaurants, Inc.(b)................................. 1,507 42,800 Lone Star Steakhouse & Saloon, Inc. .......................... 1,237 59,500 Marcus Corp. ................................................. 1,220 60,600 Multimedia Games, Inc.(a)(b).................................. 470 46,200 O'Charleys, Inc.(a)........................................... 1,004 55,900 P.F. Chang's China Bistro, Inc.(a)(b)......................... 3,343 65,500 Panera Bread Co., Class A(a)(b)............................... 3,703 30,600 Papa John's International, Inc.(a)............................ 1,062 86,100 Pinnacle Entertainment, Inc.(a)............................... 1,438 74,300 RARE Hospitality International, Inc.(a)....................... 2,294 90,600 Ryan's Restaurant Group, Inc.(a).............................. 1,316 76,850 Shuffle Master, Inc.(a)(b).................................... 2,227 130,100 Sonic Corp.(a)................................................ 4,345 59,700 Steak n Shake Co.(a).......................................... 1,155 118,400 Triarc Companies, Inc. ....................................... 1,637 56,700 WMS Industries, Inc.(a)(b).................................... 1,597 ---------- 42,604 ---------- HOUSEHOLD DURABLES -- 3.1% 48,400 Applica, Inc.(a).............................................. 245 23,900 Bassett Furniture Industries, Inc. ........................... 471 156,800 Champion Enterprises, Inc.(a)(b).............................. 1,474 29,200 Department 56, Inc.(a)........................................ 510 31,100 Enesco Group, Inc.(a)......................................... 207 76,700 Ethan Allen Interiors, Inc.(b)................................ 2,454 58,300 Fedders Corp. ................................................ 162 105,800 Interface, Inc., Class A(a)................................... 721
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- HOUSEHOLD DURABLES -- (CONTINUED) 112,800 La-Z-Boy, Inc.(b)............................................. $ 1,571 29,800 Libbey, Inc. ................................................. 626 81,932 M.D.C. Holdings, Inc.(b)...................................... 5,707 50,000 Meritage Corp.(a)............................................. 2,946 12,500 National Presto Industries, Inc. ............................. 504 12,300 NVR, Inc.(a)(c)............................................... 9,656 36,500 Russ Berrie and Co., Inc. .................................... 698 16,500 Skyline Corp. ................................................ 635 73,100 Standard Pacific Corp.(b)..................................... 5,277 ---------- 33,864 ---------- INTERNET AND CATALOG RETAIL -- 0.2% 107,300 Insight Enterprises, Inc.(a).................................. 1,884 40,900 J Jill Group, Inc.(a)......................................... 563 ---------- 2,447 ---------- LEISURE EQUIPMENT AND PRODUCTS -- 1.5% 40,100 Action Performance Companies, Inc.(b)......................... 530 34,200 Arctic Cat, Inc. ............................................. 925 56,700 JAKKS Pacific, Inc.(a)(b)..................................... 1,217 100,900 K2, Inc.(a)................................................... 1,388 36,300 Meade Instruments Corp.(a).................................... 106 67,500 Nautilus Group, Inc.(b)....................................... 1,604 93,000 Polaris Industries, Inc. ..................................... 6,531 113,150 SCP Pool Corp. ............................................... 3,605 52,400 Sturm, Ruger & Co., Inc. ..................................... 363 ---------- 16,269 ---------- MEDIA -- 0.6% 28,900 4Kids Entertainment, Inc.(a)(b)............................... 639 67,350 ADVO, Inc. ................................................... 2,522 67,500 Arbitron, Inc.(a) ............................................ 2,896 28,100 Thomas Nelson, Inc. .......................................... 665 ---------- 6,722 ---------- MULTILINE RETAIL -- 0.3% 85,150 Fred's, Inc.(b)............................................... 1,462 63,900 ShopKo Stores, Inc.(a)........................................ 1,420 ---------- 2,882 ---------- SPECIALTY RETAIL -- 5.2% 95,750 Aaron Rents, Inc. ............................................ 1,915 68,500 Burlington Coat Factory Warehouse Corp. ...................... 1,966 44,800 Cato Corp., Class A........................................... 1,445 45,000 Children's Place Retail Stores, Inc.(a)(b).................... 2,149 77,200 Christopher and Banks Corp.(b)................................ 1,359 47,100 Cost Plus, Inc.(a)(b)......................................... 1,266 56,000 Dress Barn, Inc.(a)........................................... 1,020 38,300 Electronics Boutique Holdings Corp.(a)(b)..................... 1,646 99,300 Finish Line, Inc., Class A.................................... 2,299 109,700 GameStop Corp., Class B(a).................................... 2,446 48,200 Genesco, Inc.(a).............................................. 1,370 56,700 Goody's Family Clothing, Inc. ................................ 512 50,000 Group 1 Automotive, Inc.(a)................................... 1,315 54,700 Guitar Center, Inc.(a)........................................ 2,999 66,900 Gymboree Corp.(a)............................................. 839
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 47 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- SPECIALTY RETAIL -- (CONTINUED) 41,300 Hancock Fabrics, Inc. ........................................ $ 307 48,900 Haverty Furniture Companies, Inc. ............................ 746 50,700 Hibbett Sporting Goods, Inc.(a)............................... 1,523 98,400 Hot Topic, Inc.(a)(b)......................................... 2,150 49,250 Jo-Ann Stores, Inc.(a)........................................ 1,384 97,700 Linens 'N Things, Inc.(a)(b).................................. 2,426 74,300 Men's Wearhouse, Inc.(a)(b)................................... 3,136 61,100 Movie Gallery, Inc. .......................................... 1,752 123,600 Pep Boys-Manny Moe & Jack, Inc. .............................. 2,173 79,900 Select Comfort Corp.(a)....................................... 1,633 77,400 Sonic Automotive, Inc. ....................................... 1,758 39,200 Stage Stores, Inc.(a)......................................... 1,505 73,600 Stein Mart, Inc.(a)........................................... 1,656 48,100 TBC Corp.(a).................................................. 1,340 75,000 Too, Inc.(a).................................................. 1,850 76,200 Tractor Supply Co.(a)......................................... 3,326 110,600 Zale Corp.(a)................................................. 3,287 ---------- 56,498 ---------- TEXTILES, APPAREL AND LUXURY GOODS -- 2.0% 29,600 Ashworth, Inc.(a)............................................. 337 39,300 Brown Shoe Co., Inc. ......................................... 1,347 121,450 Fossil, Inc.(a)............................................... 3,149 13,600 Haggar Corp................................................... 275 66,000 K-Swiss, Inc., Class A(b)..................................... 2,180 59,800 Kellwood Co.(b)............................................... 1,722 25,400 Oshkosh B'Gosh, Inc., Class A................................. 775 33,100 Oxford Industries, Inc. ...................................... 1,211 64,500 Phillips-Van Heusen Corp. .................................... 1,718 124,100 Quiksilver, Inc.(a)(b)........................................ 3,602 70,600 Russell Corp. ................................................ 1,276 78,200 Stride Rite Corp. ............................................ 1,040 124,000 Wolverine World Wide, Inc.(b)................................. 2,657 ---------- 21,289 ---------- 191,208 ---------- CONSUMER STAPLES -- 3.5% FOOD AND STAPLES RETAILING -- 1.0% 108,400 Casey's General Stores, Inc. ................................. 1,948 61,000 Great Atlantic and Pacific Tea Co., Inc.(a)(b)................ 909 70,900 Longs Drug Stores Corp.(b).................................... 2,426 27,400 Nash-Finch Co.(b)............................................. 1,041 101,100 Performance Food Group Co.(a)................................. 2,798 82,400 United Natural Foods, Inc.(a)(b).............................. 2,359 ---------- 11,481 ---------- FOOD PRODUCTS -- 1.6% 39,700 American Italian Pasta Co., Class A(b)........................ 1,088 162,500 Corn Products International, Inc. ............................ 4,223 83,500 Delta & Pine Land Co.(b)...................................... 2,255 85,100 Flowers Foods, Inc. .......................................... 2,401 71,900 Hain Celestial Group, Inc.(a)(b).............................. 1,340 17,000 J&J Snack Foods Corp. ........................................ 796 61,300 Lance, Inc. .................................................. 985
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- FOOD PRODUCTS -- (CONTINUED) 63,800 Ralcorp Holdings, Inc. ....................................... $ 3,021 33,300 Sanderson Farms, Inc. ........................................ 1,439 ---------- 17,548 ---------- HOUSEHOLD PRODUCTS -- 0.5% 92,400 Rayovac Corp.(a).............................................. 3,844 35,800 WD-40 Co. .................................................... 1,163 ---------- 5,007 ---------- PERSONAL PRODUCTS -- 0.3% 29,300 Natures Sunshine Products, Inc. .............................. 503 132,200 NBTY, Inc.(a)................................................. 3,317 ---------- 3,820 ---------- TOBACCO -- 0.1% 98,100 DIMON, Inc. .................................................. 613 ---------- 38,469 ---------- ENERGY -- 6.6% ENERGY EQUIPMENT AND SERVICES -- 3.0% 29,200 Atwood Oceanics, Inc.(a)...................................... 1,943 83,000 CAL Dive International, Inc.(a)............................... 3,760 31,200 CARBO Ceramics, Inc. ......................................... 2,189 25,800 Dril-Quip, Inc.(a)............................................ 793 46,100 Hydril Co.(a)................................................. 2,693 148,300 Input/Output, Inc.(a)(b)...................................... 956 63,300 Lone Star Technologies, Inc.(a)............................... 2,496 92,200 Maverick Tube Corp.(a)(b)..................................... 2,997 55,400 Oceaneering International, Inc.(a)............................ 2,078 50,300 Offshore Logistics, Inc.(a)................................... 1,676 39,500 SEACOR Holdings, Inc.(a)...................................... 2,518 48,450 TETRA Technologies, Inc.(a)(b)................................ 1,378 90,000 Unit Corp.(a)................................................. 4,065 72,200 Veritas DGC, Inc.(a).......................................... 2,163 60,300 W-H Energy Services, Inc.(a).................................. 1,443 ---------- 33,148 ---------- OIL AND GAS -- 3.6% 70,100 Cabot Oil and Gas Corp., Class A(b)........................... 3,866 89,900 Cimarex Energy Co.(a)(b)...................................... 3,506 58,700 Frontier Oil Corp.(b)......................................... 2,128 153,900 Patina Oil and Gas Corp. ..................................... 6,156 40,000 Penn Virginia Corp. .......................................... 1,836 35,800 Petroleum Development Corp.(a)................................ 1,349 54,000 Remington Oil and Gas Corp.(a)................................ 1,702 78,800 Southwestern Energy Co.(a).................................... 4,473 66,000 Spinnaker Exploration Co.(a).................................. 2,345 62,300 St. Mary Land and Exploration Co.(b).......................... 3,118 54,800 Stone Energy Corp.(a)......................................... 2,662 60,600 Swift Energy Co.(a)........................................... 1,724 130,000 Vintage Petroleum, Inc. ...................................... 4,090 ---------- 38,955 ---------- 72,103 ---------- FINANCIALS -- 14.2% CAPITAL MARKETS -- 0.4% 90,600 Investment Technology Group, Inc.(a).......................... 1,585
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 48 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- CAPITAL MARKETS -- (CONTINUED) 44,700 Piper Jaffray Companies, Inc.(a).............................. $ 1,636 34,600 SWS Group, Inc. .............................................. 555 ---------- 3,776 ---------- COMMERCIAL BANKS -- 5.5% 59,600 Boston Private Financial Holdings, Inc. ...................... 1,416 100,225 Chittenden Corp. ............................................. 2,614 66,200 Community Bank System, Inc. .................................. 1,517 113,500 EastWest Bancorp, Inc. ....................................... 4,190 82,750 First Bancorp Puerto Rico..................................... 3,496 98,900 First Midwest Bancorp, Inc. .................................. 3,212 50,450 First Republic Bank........................................... 1,633 86,900 Gold Banc Corp., Inc. ........................................ 1,219 97,200 Hudson United BanCorp......................................... 3,426 50,000 Irwin Financial Corp.(b)...................................... 1,151 50,400 Nara Bancorp, Inc. ........................................... 708 40,600 PrivateBancorp, Inc. ......................................... 1,275 71,600 Provident Bankshares Corp. ................................... 2,362 152,216 Republic Bancorp, Inc.(b)..................................... 2,061 56,700 Riggs National Corp.(b)....................................... 1,082 153,700 South Financial Group, Inc.(b)................................ 4,694 151,400 Southwest Bancorporation of Texas, Inc. ...................... 2,778 97,600 Sterling Bancshares, Inc. .................................... 1,386 100,500 Susquehanna Bancshares, Inc. ................................. 2,450 160,700 TrustCo Bank Corp. ........................................... 1,846 98,400 UCBH Holdings, Inc.(b)........................................ 3,926 96,500 Umpqua Holdings Corp.(b)...................................... 2,253 84,800 United Bankshares, Inc. ...................................... 2,810 90,800 Whitney Holding Corp. ........................................ 4,042 46,600 Wintrust Financial Corp. ..................................... 2,194 ---------- 59,741 ---------- CONSUMER FINANCE -- 0.2% 63,300 Cash America International, Inc. ............................. 1,388 44,500 Rewards Network, Inc.(a)...................................... 185 41,100 World Acceptance Corp.(a)..................................... 1,049 ---------- 2,622 ---------- DIVERSIFIED FINANCIAL SERVICES -- 0.1% 37,600 Financial Federal Corp.(b).................................... 1,330 ---------- INSURANCE -- 2.5% 64,400 Delphi Financial Group, Inc., Class A......................... 2,769 77,800 Hilb, Rogal and Hobbs Co.(b).................................. 2,785 44,700 Infinity Property and Casualty Corp. ......................... 1,397 39,100 LandAmerica Financial Group, Inc. ............................ 1,956 43,800 Philadelphia Consolidated Holding Co.(a)...................... 3,396 55,200 Presidential Life Corp. ...................................... 899 63,100 ProAssurance Corp.(a)(b)...................................... 2,492 50,000 RLI Corp.(b).................................................. 2,073 21,400 SCPIE Holdings, Inc.(a)....................................... 236 60,500 Selective Insurance Group, Inc. .............................. 2,797 39,100 Stewart Information Services Corp. ........................... 1,467
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- INSURANCE -- (CONTINUED) 87,000 UICI.......................................................... $ 2,110 42,400 Zenith National Insurance Corp.(b)............................ 2,199 ---------- 26,576 ---------- REAL ESTATE -- 3.2% 87,300 Capital Automotive, REIT(b)................................... 2,891 59,200 Colonial Properties Trust(b).................................. 2,275 112,300 Commercial Net Lease Realty, Inc., REIT....................... 2,072 67,500 CRT Properties, Inc. ......................................... 1,470 54,100 Entertainment Properties Trust, REIT.......................... 2,241 49,600 Essex Property Trust, Inc., REIT.............................. 3,427 63,300 Gables Residential Trust...................................... 2,108 69,000 Glenborough Realty Trust, Inc. ............................... 1,319 62,100 Kilroy Realty Corp., REIT(b).................................. 2,541 104,800 Lexington Corporate Properties Trust(b)....................... 2,299 109,850 New Century Financial Corp.(b)................................ 5,143 30,400 Parkway Properties, Inc., REIT................................ 1,421 100,500 Shurgard Storage Centers, Inc., Class A, REIT(b).............. 4,118 34,100 Sovran Self Storage, Inc., REIT(b)............................ 1,351 ---------- 34,676 ---------- THRIFTS AND MORTGAGE FINANCE -- 2.3% 45,200 Anchor BanCorp Wisconsin, Inc. ............................... 1,271 113,900 BankAtlantic Bancorp, Inc., Class A........................... 1,982 60,800 BankUnited Financial Corp., Class A........................... 1,633 133,300 Brookline Bancorp, Inc. ...................................... 1,986 84,900 Commercial Federal Corp. ..................................... 2,347 72,500 Dime Community Bancshares..................................... 1,102 51,200 Downey Financial Corp. ....................................... 3,150 35,700 FirstFed Financial Corp.(a)................................... 1,821 100,800 Flagstar BanCorp, Inc.(b)..................................... 1,971 153,300 Fremont General Corp.(b)...................................... 3,371 68,900 MAF Bancorp, Inc. ............................................ 2,862 49,250 Sterling Financial Corp.(a)................................... 1,759 ---------- 25,255 ---------- 153,976 ---------- HEALTH CARE -- 12.8% BIOTECHNOLOGY -- 0.2% 67,500 Arqule, Inc.(a)............................................... 319 65,220 Enzo Biochem, Inc.(a)......................................... 940 103,200 Regeneron Pharmaceuticals, Inc.(a)............................ 527 130,700 Savient Pharmaceuticals, Inc.(a).............................. 359 ---------- 2,145 ---------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 6.1% 80,400 Advanced Medical Optics, Inc.(a)(b)........................... 2,911 131,400 American Medical Systems Holdings, Inc.(a).................... 2,257 27,200 Analogic Corp. ............................................... 1,176 51,000 Arthrocare Corp.(a)........................................... 1,454 50,100 BioLase Technology, Inc.(b)................................... 426 36,300 Biosite, Inc.(a).............................................. 1,889
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 49 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- (CONTINUED) 64,500 CONMED Corp.(a)............................................... $ 1,943 92,500 Cooper Companies, Inc. ....................................... 6,743 48,600 Cyberonics, Inc.(a)(b)........................................ 2,147 29,400 Datascope Corp................................................ 899 56,700 Diagnostic Products Corp...................................... 2,739 43,100 DJ Orthopedics, Inc.(a)(b).................................... 1,080 56,000 Haemonetics Corp.(a).......................................... 2,361 45,100 Hologic, Inc.(a).............................................. 1,438 29,300 ICU Medical, Inc.(a)(b)....................................... 1,040 72,700 IDEXX Laboratories, Inc.(a)................................... 3,937 97,425 Immucor, Inc.(a).............................................. 2,941 53,000 Integra LifeSciences Holdings Corp.(a)(b)..................... 1,866 55,250 Intermagnetics General Corp.(a)............................... 1,345 68,000 Invacare Corp. ............................................... 3,035 24,600 Kensey Nash Corp.(a)(b)....................................... 666 76,200 Mentor Corp.(b)............................................... 2,446 57,100 Merit Medical Systems, Inc.(a)................................ 685 37,100 Osteotech, Inc.(a)............................................ 141 60,000 PolyMedica Corp.(b)........................................... 1,906 37,700 Possis Medical, Inc.(a)....................................... 316 74,000 ResMed, Inc.(a)............................................... 4,173 76,800 Respironics, Inc.(a).......................................... 4,475 36,000 SurModics, Inc.(a)(b)......................................... 1,149 86,500 Sybron Dental Specialties, Inc.(a)............................ 3,105 64,800 Theragenics Corp.(a).......................................... 223 63,700 Viasys Healthcare, Inc.(a).................................... 1,215 19,800 Vital Signs, Inc. ............................................ 789 46,200 Wilson Greatbatch Technologies, Inc.(a)(b).................... 843 ---------- 65,759 ---------- HEALTH CARE PROVIDERS AND SERVICES -- 5.4% 105,850 Accredo Health, Inc.(a)....................................... 4,701 32,900 Amedisys, Inc.(a)............................................. 995 71,500 American Healthways, Inc.(a)(b)............................... 2,361 109,950 AMERIGROUP Corp.(a)........................................... 4,020 63,200 AmSurg Corp.(a)(b)............................................ 1,599 89,600 Centene Corp.(a)(b)........................................... 2,687 70,700 Cerner Corp.(a)(b)............................................ 3,712 27,000 Chemed Corp. ................................................. 2,065 56,800 Cross Country Healthcare, Inc.(a)............................. 952 48,200 CryoLife, Inc.(a)(b).......................................... 298 28,000 Curative Health Services, Inc.(a)............................. 95 90,300 Dendrite International, Inc.(a)............................... 1,268 51,900 Gentiva Health Services, Inc.(a).............................. 840 140,600 Hooper Holmes, Inc. .......................................... 537 37,100 LabOne, Inc.(a)............................................... 1,279 38,800 LCA-Vision, Inc. ............................................. 1,292 77,800 NDC Health Corp. ............................................. 1,243 100,200 OCA, Inc.(a)(b)............................................... 426 74,150 Odyssey Healthcare, Inc.(a)................................... 872 85,500 Owens and Minor, Inc. ........................................ 2,321 56,700 PAREXEL International Corp.(a)................................ 1,332 49,200 Pediatrix Medical Group, Inc.(a).............................. 3,376 114,100 Pharmaceutical Product Development, Inc.(a)................... 5,528
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- (CONTINUED) 78,100 Priority Healthcare Corp., Class B(a)......................... $ 1,689 107,600 Province Healthcare Co.(a)(b)................................. 2,592 35,500 RehabCare Group, Inc.(a)...................................... 1,019 36,300 SFBC International, Inc.(a)................................... 1,279 57,700 Sierra Health Services, Inc.(a)............................... 3,686 40,400 Sunrise Senior Living, Inc.(a)(b)............................. 1,963 62,300 United Surgical Partners International, Inc.(a)............... 2,851 ---------- 58,878 ---------- PHARMACEUTICALS -- 1.1% 101,400 Alpharma, Inc., Class A(b).................................... 1,249 32,200 Bradley Pharmaceuticals, Inc.(a)(b)........................... 308 77,700 Connetics Corp.(a)(b)......................................... 1,965 117,500 Medicis Pharmaceutical Corp., Class A(b)...................... 3,523 154,500 MGI Pharma, Inc.(a)........................................... 3,904 50,700 Noven Pharmaceuticals, Inc.(a)................................ 860 ---------- 11,809 ---------- 138,591 ---------- INDUSTRIALS -- 18.2% AEROSPACE AND DEFENSE -- 2.6% 69,700 AAR Corp.(a).................................................. 948 24,600 Applied Signal Technology, Inc. .............................. 563 73,900 Armor Holdings, Inc.(a)....................................... 2,741 52,700 Ceradyne, Inc.(a)............................................. 1,179 45,600 Cubic Corp.(b)................................................ 863 46,300 Curtiss-Wright Corp. ......................................... 2,639 59,100 DRS Technologies, Inc.(a)..................................... 2,512 38,100 EDO Corp. .................................................... 1,145 57,975 Engineered Support Systems, Inc. ............................. 3,103 54,200 Esterline Technologies Corp.(a)............................... 1,872 111,000 GenCorp, Inc.(b).............................................. 2,220 49,200 Kaman Corp., Class A.......................................... 613 45,600 Mercury Computer Systems, Inc.(a)............................. 1,258 52,850 Moog, Inc., Class A(a)........................................ 2,389 71,700 Teledyne Technologies, Inc.(a)................................ 2,244 34,400 Triumph Group, Inc.(a)........................................ 1,340 ---------- 27,629 ---------- AIR FREIGHT AND LOGISTICS -- 0.4% 99,900 EGL, Inc.(a).................................................. 2,278 46,500 Forward Air Corp.(a)(b)....................................... 1,980 ---------- 4,258 ---------- AIRLINES -- 0.3% 77,100 Frontier Airlines, Inc.(a).................................... 808 65,700 Mesa Air Group, Inc.(a)(b).................................... 460 124,700 Skywest, Inc.(b).............................................. 2,318 ---------- 3,586 ---------- BUILDING PRODUCTS -- 1.0% 59,100 Apogee Enterprises, Inc. ..................................... 844 41,000 ElkCorp. ..................................................... 1,577 57,600 Griffon Corp.(a)(b)........................................... 1,233 118,500 Lennox International, Inc. ................................... 2,598
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 50 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- BUILDING PRODUCTS -- (CONTINUED) 91,400 Simpson Manufacturing Co., Inc. .............................. $ 2,824 37,000 Universal Forest Products, Inc. .............................. 1,437 ---------- 10,513 ---------- COMMERCIAL SERVICES AND SUPPLIES -- 3.9% 96,000 ABM Industries, Inc. ......................................... 1,846 50,700 Administaff, Inc. ............................................ 740 19,500 Angelica Corp. ............................................... 546 77,500 Bowne and Co., Inc. .......................................... 1,166 96,500 Brady Corp., Class A.......................................... 3,122 33,600 CDI Corp. .................................................... 743 68,100 Central Parking Corp. ........................................ 1,170 54,500 Coinstar, Inc.(a)............................................. 1,155 27,500 Consolidated Graphics, Inc.(a)................................ 1,447 16,800 CPI Corp. .................................................... 254 45,500 G&K Services, Inc., Class A................................... 1,833 41,500 Heidrick and Struggles International, Inc.(a)................. 1,526 35,100 Imagistics International, Inc.(a)............................. 1,226 22,500 Insurance Auto Auctions, Inc.(a).............................. 627 60,100 John H. Harland Co. .......................................... 2,065 92,000 Labor Ready, Inc.(a).......................................... 1,718 31,600 Mobile Mini, Inc.(a).......................................... 1,277 69,300 NCO Group, Inc.(a)............................................ 1,355 54,600 On Assignment, Inc.(a)........................................ 278 29,800 Pre-Paid Legal Services, Inc.(b).............................. 1,008 92,300 PRG-Schultz International, Inc.(a)............................ 462 49,300 School Specialty, Inc.(a)..................................... 1,931 34,100 Sourcecorp, Inc.(a)........................................... 686 131,900 Spherion Corp.(a)............................................. 988 56,800 Standard Register Co. ........................................ 715 122,100 Tetra Tech, Inc.(a)........................................... 1,541 71,500 United Stationers, Inc.(a).................................... 3,235 20,000 Vertrue, Inc.(a)(b)........................................... 709 47,900 Viad Corp. ................................................... 1,288 25,500 Volt Information Sciences, Inc.(a)............................ 616 103,150 Waste Connections, Inc.(a).................................... 3,584 70,400 Watson Wyatt and Co. Holdings................................. 1,915 ---------- 42,772 ---------- CONSTRUCTION AND ENGINEERING -- 0.7% 33,100 EMCOR Group, Inc.(a).......................................... 1,550 57,900 Insituform Technologies, Inc., Class A(a)..................... 840 138,500 Shaw Group, Inc.(a)(b)........................................ 3,019 85,200 URS Corp.(a).................................................. 2,450 ---------- 7,859 ---------- ELECTRICAL EQUIPMENT -- 1.6% 53,300 A.O. Smith Corp.(b)........................................... 1,539 93,700 Acuity Brands, Inc. .......................................... 2,530 84,900 Artesyn Technologies, Inc.(a)................................. 739 65,600 Baldor Electric Co............................................ 1,693 54,800 C&D Technologies, Inc. ....................................... 551 61,700 Magnetek, Inc.(a)............................................. 329 62,700 Regal Beloit Corp............................................. 1,805 91,100 Roper Industries, Inc. ....................................... 5,967
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- (CONTINUED) 66,400 Vicor Corp.................................................... $ 693 22,900 Woodward Governor Co.......................................... 1,642 ---------- 17,488 ---------- INDUSTRIAL CONGLOMERATES -- 0.2% 25,100 Standex International Corp. .................................. 685 71,700 Tredegar Corp. ............................................... 1,209 ---------- 1,894 ---------- MACHINERY -- 4.9% 68,600 Albany International Corp., Class A........................... 2,118 39,700 Astec Industries, Inc.(a)..................................... 875 45,900 Barnes Group, Inc. ........................................... 1,247 111,400 Briggs and Stratton Corp. .................................... 4,056 55,400 CLARCOR, Inc. ................................................ 2,879 37,200 Cuno, Inc.(a)................................................. 1,912 42,900 Gardner Denver, Inc.(a)....................................... 1,695 109,850 IDEX Corp. ................................................... 4,432 107,500 JLG Industries, Inc. ......................................... 2,317 61,100 Kaydon Corp. ................................................. 1,919 25,500 Lindsay Manufacturing Co. .................................... 487 34,800 Lydall, Inc. (a).............................................. 386 63,800 Manitowoc Co. ................................................ 2,577 93,420 Milacron, Inc.(a)(b).......................................... 285 79,100 Mueller Industries, Inc. ..................................... 2,227 78,400 Oshkosh Truck Corp. .......................................... 6,428 28,000 Robbins and Myers, Inc. ...................................... 616 62,200 Stewart and Stevenson Services, Inc. ......................... 1,424 31,700 Thomas Industries, Inc. ...................................... 1,257 197,200 Timken Co. ................................................... 5,391 46,700 Toro Co. ..................................................... 4,133 44,100 Valmont Industries, Inc. ..................................... 984 66,700 Wabash National Corp. ........................................ 1,627 62,200 Watts Water Technologies, Inc. ............................... 2,028 32,200 Wolverine Tube, Inc.(a)....................................... 288 ---------- 53,588 ---------- MARINE -- 0.2% 50,900 Kirby Corp.(a)................................................ 2,139 ---------- ROAD AND RAIL -- 1.6% 52,000 Arkansas Best Corp. .......................................... 1,965 131,351 Heartland Express, Inc. ...................................... 2,515 137,400 Kansas City Southern(a)....................................... 2,646 101,400 Knight Transportation, Inc.(b)................................ 2,502 131,100 Landstar System, Inc.(a)...................................... 4,293 60,500 USF Corp. .................................................... 2,920 ---------- 16,841 ---------- TRADING COMPANIES AND DISTRIBUTORS -- 0.8% 58,750 Applied Industrial Technologies, Inc. ........................ 1,598 142,900 Hughes Supply, Inc. .......................................... 4,251 15,400 Lawson Products, Inc. ........................................ 721 54,200 Watsco, Inc. ................................................. 2,282 ---------- 8,852 ---------- 197,419 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 51 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY -- 15.0% COMMUNICATIONS EQUIPMENT -- 1.1% 45,300 Audiovox Corp., Class A(a).................................... $ 577 24,100 Bel Fuse, Inc., Class B....................................... 730 101,350 Belden CDT, Inc.(b)........................................... 2,251 37,400 Black Box Corp.(b)............................................ 1,399 27,500 Brooktrout, Inc.(a)........................................... 309 103,100 C-COR.net Corp.(a)............................................ 627 48,500 Digi International, Inc.(a)................................... 665 156,200 Harmonic, Inc.(a)(b).......................................... 1,493 50,300 Inter-Tel, Inc.(b)............................................ 1,232 54,000 Network Equipment Technologies, Inc.(a)....................... 304 42,600 PC-Tel, Inc.(a)............................................... 314 99,700 Symmetricom, Inc.(a).......................................... 1,106 29,400 Tollgrade Communications, Inc.(a)............................. 203 52,200 ViaSat, Inc.(a)............................................... 976 ---------- 12,186 ---------- COMPUTERS AND PERIPHERALS -- 0.9% 241,200 Adaptec, Inc.(a).............................................. 1,155 73,400 Avid Technology, Inc.(a)...................................... 3,972 54,400 Hutchinson Technology, Inc.(a)................................ 1,892 150,900 Pinnacle Systems, Inc.(a)..................................... 844 33,700 SBS Technologies, Inc.(a)..................................... 376 56,800 Synaptics, Inc.(a)............................................ 1,318 ---------- 9,557 ---------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 4.2% 161,200 Aeroflex, Inc.(a)............................................. 1,504 62,200 Agilysys, Inc. ............................................... 1,223 74,700 Anixter International, Inc.(a)................................ 2,700 28,600 BEI Technologies, Inc. ....................................... 686 61,300 Bell Microproducts, Inc.(a)................................... 459 89,350 Benchmark Electronics, Inc.(a)................................ 2,844 86,100 Checkpoint Systems, Inc.(a)................................... 1,453 95,000 Cognex Corp. ................................................. 2,364 66,100 Coherent, Inc.(a)............................................. 2,232 79,400 CTS Corp. .................................................... 1,032 37,500 Daktronics, Inc.(a)........................................... 812 42,800 Dionex Corp.(a)............................................... 2,333 61,500 Electro Scientific Industries, Inc.(a)........................ 1,192 149,900 FLIR Systems, Inc.(a)(b)...................................... 4,542 45,800 Gerber Scientific, Inc.(a).................................... 333 50,700 Global Imaging Systems, Inc.(a)............................... 1,798 46,500 Itron, Inc.(a)................................................ 1,378 32,900 Keithley Instruments, Inc. ................................... 531 48,100 Littelfuse, Inc.(a)........................................... 1,378 78,600 Methode Electronics, Inc., Class A............................ 952 43,200 MTS Systems Corp. ............................................ 1,254 40,900 Park Electrochemical Corp. ................................... 829 81,400 Paxar Corp.(a)................................................ 1,737 36,600 Photon Dynamics, Inc.(a)(b)................................... 698 31,700 Planar Systems, Inc.(a)(b).................................... 286 42,900 RadiSys Corp.(a).............................................. 607 36,200 Rogers Corp.(a)(b)............................................ 1,448 27,300 ScanSource, Inc.(a)........................................... 1,415
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- (CONTINUED) 87,500 Technitrol, Inc.(a)........................................... $ 1,305 112,100 Trimble Navigation Ltd.(a).................................... 3,790 41,900 X-Rite, Inc. ................................................. 630 ---------- 45,745 ---------- INTERNET SOFTWARE AND SERVICES -- 0.8% 77,200 Digital Insight Corp.(a)...................................... 1,266 60,200 FindWhat.com(a)............................................... 624 46,700 j2 Global Communications, Inc.(a)(b).......................... 1,602 83,100 WebEx Communications, Inc.(a)................................. 1,794 51,300 Websense, Inc.(a)............................................. 2,761 64,000 Zix Corp.(a)(b)............................................... 239 ---------- 8,286 ---------- IT SERVICES -- 1.6% 64,600 CACI International, Inc., Class A(a).......................... 3,568 50,000 Carreker Corp.(a)............................................. 281 126,900 CIBER, Inc.(a)................................................ 923 105,600 eFunds Corp.(a)............................................... 2,357 77,100 Global Payments, Inc. ........................................ 4,972 37,600 Intrado, Inc.(a).............................................. 462 53,900 Mantech International Corp.(a)................................ 1,243 43,200 MAXIMUS, Inc. ................................................ 1,447 41,500 Pegasus Solutions, Inc.(a).................................... 490 27,600 Startek, Inc. ................................................ 464 44,850 Talx Corp. ................................................... 814 ---------- 17,021 ---------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.8% 54,400 Actel Corp.(a)................................................ 837 58,600 Advanced Energy Industries, Inc.(a)........................... 567 65,200 Alliance Semiconductor Corp.(a)............................... 162 67,900 ATMI, Inc.(a)................................................. 1,700 216,100 Axcelis Technologies, Inc.(a)................................. 1,578 97,300 Brooks Automation, Inc.(a).................................... 1,477 46,800 Cohu, Inc. ................................................... 746 79,800 Cymer, Inc.(a)................................................ 2,136 60,500 DSP Group, Inc.(a)............................................ 1,558 37,400 DuPont Photomasks, Inc.(a)(b)................................. 997 76,100 ESS Technology, Inc.(a)....................................... 401 90,300 Exar Corp.(a)................................................. 1,210 63,000 FEI Co.(a).................................................... 1,458 56,400 Helix Technology Corp. ....................................... 873 151,300 Kopin Corp.(a)................................................ 464 111,100 Kulicke and Soffa Industries, Inc.(a)(b)...................... 699 132,100 Microsemi Corp.(a)............................................ 2,152 57,300 Pericom Semiconductor Corp.(a)................................ 491 70,700 Photronics, Inc.(a)(b)........................................ 1,280 67,100 Power Integrations, Inc.(a)(b)................................ 1,402 32,700 Rudolph Technologies, Inc.(a)................................. 492 339,200 Skyworks Solutions, Inc.(a)................................... 2,154 40,300 Standard Microsystems Corp.(a)................................ 700 28,200 Supertex, Inc.(a)............................................. 516
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 52 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- (CONTINUED) 51,500 Ultratech, Inc.(a)............................................ $ 752 79,000 Varian Semiconductor Equipment Associates, Inc.(a)(b)......... 3,004 60,400 Veeco Instruments, Inc.(a).................................... 909 ---------- 30,715 ---------- SOFTWARE -- 3.6% 50,100 Altiris, Inc.(a).............................................. 1,195 68,100 ANSYS, Inc.(a)................................................ 2,330 65,600 Captaris, Inc.(a)............................................. 266 24,400 Catapult Communications Corp.(a).............................. 521 39,600 Concord Communications, Inc.(a)............................... 401 34,000 EPIQ Systems, Inc.(a)(b)...................................... 441 84,300 FactSet Research Systems, Inc.(b)............................. 2,783 89,300 FileNET Corp.(a).............................................. 2,034 86,500 Hyperion Solutions Corp.(a)................................... 3,816 93,200 Internet Security Systems, Inc.(a)............................ 1,705 62,900 JDA Software Group, Inc.(a)................................... 883 68,800 Kronos, Inc.(a)............................................... 3,516 65,000 Manhattan Associates, Inc.(a)(b).............................. 1,324 44,100 MapInfo Corp.(a).............................................. 531 81,800 MICROS Systems, Inc.(a)....................................... 3,003 49,700 MRO Software, Inc.(a)......................................... 697 92,400 Napster, Inc.(a)(b)........................................... 602 66,500 NYFIX, Inc.(a)(b)............................................. 358 53,500 Phoenix Technologies Ltd.(a).................................. 509 79,000 Progress Software Corp.(a).................................... 2,071 51,400 Radiant Systems, Inc.(a)...................................... 504 75,300 Serena Software, Inc.(a)(b)................................... 1,789 48,900 Sonic Solutions(b)............................................ 736 35,700 SPSS, Inc.(a)................................................. 621 99,600 Take-Two Interactive Software, Inc.(a)(b)..................... 3,894 84,800 THQ, Inc.(a).................................................. 2,386 81,600 Verity, Inc.(a)............................................... 771 ---------- 39,687 ---------- 163,197 ---------- MATERIALS -- 6.6% CHEMICALS -- 1.6% 50,700 Arch Chemicals, Inc. ......................................... 1,443 56,400 Cambrex Corp. ................................................ 1,201 73,400 Georgia Gulf Corp. ........................................... 3,375 61,900 H.B. Fuller Co. .............................................. 1,795 59,600 MacDermid, Inc. .............................................. 1,937 29,000 Material Sciences Corp.(a).................................... 390 61,300 OM Group, Inc.(a)............................................. 1,865 88,000 Omnova Solutions, Inc.(a)..................................... 473 19,100 Penford Corp. ................................................ 310 198,400 PolyOne Corp.(a).............................................. 1,762 20,900 Quaker Chemical Corp. ........................................ 429 66,300 Schulman (A.), Inc. .......................................... 1,155 69,200 Wellman, Inc. ................................................ 1,001 ---------- 17,136
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.9% 80,700 Florida Rock Industries, Inc. ................................ $ 4,747 86,400 Headwaters, Inc.(a)(b)........................................ 2,835 48,000 Texas Industries, Inc. ....................................... 2,580 ---------- 10,162 ---------- CONTAINERS AND PACKAGING -- 0.7% 77,000 AptarGroup, Inc. ............................................. 4,002 61,600 Caraustar Industries, Inc.(a)................................. 795 42,600 Chesapeake Corp. ............................................. 895 70,700 Myers Industries, Inc. ....................................... 998 72,100 Rock-Tenn Co., Class A........................................ 959 ---------- 7,649 ---------- METALS AND MINING -- 2.8% 28,000 A.M. Castle and Co.(a)........................................ 353 58,765 Aleris International, Inc.(a)................................. 1,466 55,900 AMCOL International Corp. .................................... 1,049 41,500 Brush Engineered Materials, Inc.(a)........................... 790 52,500 Carpenter Technology Corp. ................................... 3,119 59,600 Century Aluminum Co.(a)....................................... 1,803 46,800 Cleveland-Cliffs, Inc.(b)..................................... 3,410 127,500 Commercial Metals Co. ........................................ 4,321 164,400 Massey Energy Co. ............................................ 6,583 53,900 Quanex Corp. ................................................. 2,874 64,200 Reliance Steel and Aluminum Co. .............................. 2,569 46,900 RTI International Metals, Inc.(a)............................. 1,097 54,100 Ryerson Tull, Inc.(b)......................................... 685 26,200 Steel Technologies, Inc. ..................................... 629 ---------- 30,748 ---------- PAPER AND FOREST PRODUCTS -- 0.6% 72,100 Buckeye Technologies, Inc.(a)................................. 779 26,400 Deltic Timber Corp. .......................................... 1,032 32,400 Neenah Paper, Inc.(b)......................................... 1,089 35,100 Pope & Talbot, Inc. .......................................... 617 32,700 Schweitzer-Mauduit International, Inc. ....................... 1,097 111,800 Wausau-Mosinee Paper Corp. ................................... 1,581 ---------- 6,195 ---------- 71,890 ---------- TELECOMMUNICATION SERVICES -- 0.3% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3% 45,800 Commonwealth Telephone Enterprises, Inc.(a)................... 2,159 114,200 General Communication, Inc., Class A(a)....................... 1,043 ---------- 3,202 ---------- WIRELESS TELECOMMUNICATION SERVICES -- 0.0% 38,000 Boston Communications Group, Inc.(a).......................... 270 ---------- 3,472 ---------- UTILITIES -- 4.5% ELECTRIC UTILITIES -- 1.2% 64,200 ALLETE, Inc. ................................................. 2,687 26,300 Central Vermont Public Service Corp. ......................... 591
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 53 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
VALUE SHARES (000) - ----------------------------------------------------------------------------------------- ELECTRIC UTILITIES -- (CONTINUED) 34,100 CH Energy Group, Inc. ........................................ $ 1,558 105,800 Cleco Corp. .................................................. 2,254 102,500 El Paso Electric Co.(a)....................................... 1,948 11,100 Green Mountain Power Corp. ................................... 325 29,500 UIL Holdings Corp. ........................................... 1,494 74,100 Unisource Energy Corp. ....................................... 2,295 ---------- 13,152 ---------- GAS UTILITIES -- 3.0% 171,500 Atmos Energy Corp. ........................................... 4,631 24,400 Cascade Natural Gas Corp. .................................... 487 79,100 Energen Corp. ................................................ 5,268 45,500 Laclede Group, Inc. .......................................... 1,329 57,600 New Jersey Resources Corp. ................................... 2,507 59,700 Northwest Natural Gas Co. .................................... 2,159 165,600 Piedmont Natural Gas Co.(b)................................... 3,815 209,831 Southern Union Co.(a)......................................... 5,269 78,000 Southwest Gas Corp. .......................................... 1,884 111,400 UGI Corp. .................................................... 5,060 ---------- 32,409 ---------- MULTI-UTILITIES AND UNREGULATED POWER -- 0.2% 104,800 Avista Corp. ................................................. 1,834 ---------- WATER UTILITIES -- 0.1% 36,100 American States Water Co. .................................... 914 ---------- 48,309 ---------- TOTAL COMMON STOCKS (cost of $761,129).......................................... 1,078,634 ---------- INVESTMENT MANAGEMENT COMPANY -- 0.5% 5,600,000 Nations Cash Reserves, Capital Class Shares(d)................ 5,600 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (cost of $5,600)............................................ 5,600 ---------- UNITS - ---------- 2,188 Timco Aviation Services, Inc. Expires 12/31/07(a)(f)(g)................................... -- TOTAL WARRANTS ---------- (cost of $0)................................................ -- ---------- PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- Repurchase agreements(e) -- 8.6% $ 24,943 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $25,180 (repurchase proceeds $24,945)....................... $ 24,943 29,932 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $30,325 (repurchase proceeds $29,934).................................................... 29,932 38,967 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/31/35, market value $39,582 (repurchase proceeds $38,970).................................................... 38,967 TOTAL REPURCHASE AGREEMENTS ---------- (Cost of $93,842)........................................... 93,842 ---------- TOTAL INVESTMENTS (cost of $860,571)(h)............................. 108.4% 1,178,076 OTHER ASSETS AND LIABILITIES, NET................... (8.4)% (91,626) ---------- NET ASSETS.......................................... 100.0% $1,086,450 ==========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) All or a portion of the security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $69,584 and $91,163, respectively. (c) Security pledged as collateral for open futures contracts. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) This amount represents cash collateral received from securities lending activity (see Note 11). (f) Rounds to less than $500. (g) Illiquid security. (h) Cost for federal income tax purposes is $906,007. See Note 5 for additional information.
ACRONYM NAME - ------- ------------------------------------------------------- REIT Real Estate Investment Trust
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 54 NATIONS FUNDS Nations SmallCap Index Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following sectors:
SECTOR % OF NET ASSETS - ------ --------------- Industrials.................................... 18.2% Consumer Discretionary......................... 17.6 Information Technology......................... 15.0 Financials..................................... 14.2 Health Care.................................... 12.8 Energy......................................... 6.6 Materials...................................... 6.6 Utilities...................................... 4.5 Consumer Staples............................... 3.5 Telecommunication Services..................... 0.3 Investment Management Company.................. 0.5 Repurchase Agreements.......................... 8.6 Warrants....................................... 0.0 Other Assets & Liabilities, Net................ (8.4) ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 55 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2005
LARGECAP LARGECAP MIDCAP SMALLCAP INDEX ENHANCED CORE INDEX INDEX -------------------------------------------------------------------------------- (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost............ $ 1,269,917 $ 283,010 $ 1,328,025 $ 854,971 Affiliated investments, at cost................ 43,390 15,831 3,377 5,600 ----------------- -------------- ----------------- ----------------- Non-affiliated investments, at value........... 1,479,749 331,498 1,680,475 1,172,476 Affiliated investments, at value............... 53,457 15,831 3,377 5,600 Cash........................................... 522 111 -- 1 Receivable for Fund shares sold................ 3,929 606 1,896 2,161 Dividends receivable........................... 2,030 478 1,007 844 Interest receivable............................ 2 -- 5 28 Unrealized appreciation on swap contracts...... -- 1,564 -- -- Receivable from investment advisor............. 205 58 445 42 Receivable for variation margin................ --(a) -- 2 17 Other assets................................... 3 6 3 2 ----------------- -------------- ----------------- ----------------- Total assets............................... 1,539,897 350,152 1,687,210 1,181,171 ================= ============== ================= ================= LIABILITIES: Collateral on securities loaned................ (15,319) (4,535) (75,652) (93,842) Investment advisory fee payable................ (130) (104) (138) (93) Administration fee payable..................... (130) (49) (138) (93) Shareholder servicing and distribution fees payable...................................... (8) (4) (2) (3) Unrealized depreciation on swap contracts...... -- (1,265) -- -- Variation margin due to broker................. (41) (22) -- -- Written options, at value (premium $--, $1,265, $--, and $--, respectively).................. -- (791) -- -- Payable for Fund shares redeemed............... (775) (558) (421) (462) Accrued Trustees' fees and expenses............ (88) (81) (46) (81) Accrued expenses and other liabilities......... (115) (83) (202) (147) ----------------- -------------- ----------------- ----------------- Total liabilities.......................... (16,606) (7,492) (76,599) (94,721) ================= ============== ================= ================= NET ASSETS..................................... $ 1,523,291 $ 342,660 $ 1,610,611 $ 1,086,450 ================= ============== ================= ================= NET ASSETS CONSIST OF: Undistributed net investment income............ $ 5,913 $ 1,039 $ 6,234 $ 1,575 Accumulated net realized gain/(loss) on investments.................................. (215,397) 7,227 4,617 (41,003) Unrealized appreciation/(depreciation) on: Investments................................ 219,899 48,488 352,450 317,505 Swap contracts............................. -- 299 -- -- Futures.................................... (699) (348) (80) (80) Written options and swaptions.............. -- 474 -- -- Paid-in capital................................ 1,513,575 285,481 1,247,390 808,453 ----------------- -------------- ----------------- ----------------- NET ASSETS..................................... $ 1,523,291 $ 342,660 $ 1,610,611 $ 1,086,450 ================= ============== ================= ================= PRIMARY A SHARES: Net assets..................................... $ 1,486,202,627 $ 325,007,541 $ 1,601,004,880 $ 1,072,113,143 Number of shares outstanding................... 65,132,078 24,157,812 146,369,148 55,731,133 Net asset value and redemption price per share........................................ $ 22.82 $ 13.45 $ 10.94 $ 19.24 ================= ============== ================= ================= INVESTOR A SHARES: Net assets..................................... $ 37,088,197 $ 17,652,532 $ 9,606,335 $ 14,337,049 Number of shares outstanding................... 1,636,287 1,315,899 879,659 748,465 Net asset value and redemption price per share........................................ $ 22.67 $ 13.41 $ 10.92 $ 19.16 ================= ============== ================= =================
- --------------- (a)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 56 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
LARGECAP LARGECAP MIDCAP SMALLCAP INDEX ENHANCED CORE INDEX INDEX --------------------------------------------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $--, $--, $--and $2, respectively)..................... $ 25,992 $ 5,574 $ 20,263 $ 10,453 Dividend income from affiliated funds and investments....................................... 1,379 212 290 120 Interest............................................ -- 33 -- 7 Securities lending.................................. 14 --(a) 89 285 -------------- -------------- -------------- -------------- Total investment income......................... 27,385 5,819 20,642 10,865 -------------- -------------- -------------- -------------- EXPENSES: Investment advisory fee............................. 1,328 1,094 1,532 1,303 Administration fee.................................. 1,328 594 1,532 989 Transfer agent fees................................. 299 76 398 240 Custodian fees...................................... 94 28 103 103 Legal and audit fees................................ 160 128 121 120 Registration and filing fees........................ 27 24 28 29 Trustees fees and expenses.......................... 28 27 27 27 Interest expense.................................... -- -- 3 2 Printing expense.................................... 16 20 26 30 Other............................................... 45 89 48 35 Non-recurring costs (see Note 12)................... 362 78 417 269 -------------- -------------- -------------- -------------- Subtotal........................................ 3,687 2,158 4,235 3,147 Shareholder servicing and distribution fees -- Investor A Shares......................... 86 45 21 34 -------------- -------------- -------------- -------------- Total expenses.................................. 3,773 2,203 4,256 3,181 Fees waived by investment advisor, administrator and/or distributor (see Note 3)................... (1,465) (641) (1,675) (797) Fees reduced by credits allowed by the custodian (see Note 3)...................................... (1) --(a) -- (2) Cost assumed by Bank of America Corporation (see Note 12).......................................... (362) (78) (417) (269) -------------- -------------- -------------- -------------- Net expenses.................................... 1,945 1,484 2,164 2,113 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME/(LOSS)........................ 25,440 4,335 18,478 8,752 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Investments....................................... (14,083) 15,538 56,798 23,222 Affiliated investments............................ 18 -- -- -- Written options................................... -- (1,557) -- -- Futures contracts................................. 4,338 666 418 (232) Swap contracts.................................... -- 680 -- -- Foreign currency and net other assets............. -- 12 -- -- -------------- -------------- -------------- -------------- Net realized gain/(loss) on investments............. (9,727) 15,339 57,216 22,990 -------------- -------------- -------------- -------------- Change in unrealized appreciation/(depreciation) of: Investments....................................... 68,272 (2,149) 83,019 90,139 Written options................................... -- 2,072 -- -- Futures contracts................................. (1,081) (452) (336) (150) Swap contracts.................................... -- 227 -- -- -------------- -------------- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments.................................... 67,191 (302) 82,683 89,989 -------------- -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments....................................... 57,464 15,037 139,899 112,979 -------------- -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ $ 82,904 $ 19,372 $ 158,377 $ 121,731 ============== ============== ============== ==============
- --------------- (a)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 57 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
LARGECAP INDEX -------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 -------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 25,440 $ 17,007 Net realized gain/(loss) on investments..................... (9,727) 4,439 Net change in unrealized appreciation/(depreciation) of investments............................................... 67,191 307,577 -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 82,904 329,023 Distributions to shareholders from net investment income: Primary A Shares.......................................... (23,524) (15,474) Investor A Shares......................................... (556) (339) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... -- -- Investor A Shares......................................... -- -- Net increase/(decrease) in net assets from Fund share transactions.............................................. 185,901 23,512 -------------- -------------- Net increase/(decrease) in net assets....................... 244,725 336,722 -------------- -------------- NET ASSETS: Beginning of year........................................... 1,278,566 941,844 -------------- -------------- End of year................................................. $ 1,523,291 $ 1,278,566 ============== ============== Undistributed net investment income at end of year.......... $ 5,913 $ 4,553 ============== ==============
- --------------- (a)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 58 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
LARGECAP ENHANCED CORE MIDCAP INDEX SMALLCAP INDEX ------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 3/31/05 3/31/04 - ------------------------------------------------------------------------------------------------------- $ 4,335 $ 3,006 $ 18,478 $ 11,527 $ 8,752 $ 4,344 15,339 46,325 57,216 14,150 22,990 23,882 (302) 27,069 82,683 426,588 89,989 288,515 -------------- -------------- -------------- -------------- -------------- -------------- 19,372 76,400 158,377 452,265 121,731 316,741 (5,588) (2,749) (15,091) (10,400) (8,128) (3,994) (284) (172) (69) (34) (75) (55) (14,431) -- (40,572) (3) (40,318) (2,685) (1,059) -- (225) --(a) (592) (38) 79,735 (15,761) 38,963 164,214 87,031 91,338 -------------- -------------- -------------- -------------- -------------- -------------- 77,745 57,718 141,383 606,042 159,649 401,307 -------------- -------------- -------------- -------------- -------------- -------------- 264,915 207,197 1,469,228 863,186 926,801 525,494 -------------- -------------- -------------- -------------- -------------- -------------- $ 342,660 $ 264,915 $ 1,610,611 $ 1,469,228 $ 1,086,450 $ 926,801 ============== ============== ============== ============== ============== ============== $ 1,039 $ 971 $ 6,234 $ 2,916 $ 1,575 $ 1,026 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 59 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
LARGECAP INDEX YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 17,582 $ 397,570 11,905 $ 238,760 Issued as reinvestment of distributions................... 629 14,700 484 10,358 Redeemed.................................................. (10,246) (228,675) (11,321) (227,179) ------- --------- ------- --------- Net increase/(decrease)................................... 7,965 $ 183,595 1,068 $ 21,939 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 488 $ 10,799 563 $ 11,259 Issued as reinvestment of distributions................... 21 485 14 297 Redeemed.................................................. (406) (8,978) (498) (9,983) ------- --------- ------- --------- Net increase/(decrease)................................... 103 $ 2,306 79 $ 1,573 ======= ========= ======= ========= Total increase/(decrease)................................. 8,068 $ 185,901 1,147 $ 23,512 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 60 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
LARGECAP ENHANCED CORE YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 9,236 $123,029 4,127 $ 50,326 Issued as reinvestment of distributions................... 150 1,940 13 173 Redeemed.................................................. (3,345) (44,296) (5,176) (63,846) ------ -------- ------ -------- Net increase/(decrease)................................... 6,041 $ 80,673 (1,036) $(13,347) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 203 $ 2,669 238 $ 2,880 Issued as reinvestment of distributions................... 84 1,074 10 136 Redeemed.................................................. (353) (4,681) (436) (5,430) ------ -------- ------ -------- Net increase/(decrease)................................... (66) $ (938) (188) $ (2,414) ====== ======== ====== ======== Total net increase/(decrease)............................. 5,975 $ 79,735 (1,224) $(15,761) ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 61 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MIDCAP INDEX YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 26,306 $ 269,827 47,839 $ 412,961 Issued as reinvestment of distributions................... 1,319 13,858 232 2,280 Redeemed.................................................. (23,579) (246,360) (29,438) (254,761) ------- --------- ------- --------- Net increase/(decrease)................................... 4,046 $ 37,325 18,633 $ 160,480 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 786 $ 8,121 772 $ 7,146 Issued as reinvestment of distributions................... 24 258 3 32 Redeemed.................................................. (650) (6,741) (370) (3,444) ------- --------- ------- --------- Net increase/(decrease)................................... 160 $ 1,638 405 $ 3,734 ======= ========= ======= ========= Total net increase/(decrease)............................. 4,206 $ 38,963 19,038 $ 164,214 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 62 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SMALLCAP INDEX YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- -------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 12,964 $ 237,107 16,332 $ 246,720 Issued as reinvestment of distributions................... 680 11,973 89 1,481 Redeemed.................................................. (8,852) (162,859) (10,149) (157,131) ------ --------- ------- --------- Net increase/(decrease)................................... 4,792 $ 86,221 6,272 $ 91,070 ====== ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 466 $ 8,450 927 $ 13,277 Issued as reinvestment of distributions................... 33 571 5 76 Redeemed.................................................. (452) (8,211) (906) (13,085) ------ --------- ------- --------- Net increase/(decrease)................................... 47 $ 810 26 $ 268 ====== ========= ======= ========= Total net increase/(decrease)............................. 4,839 $ 87,031 6,298 $ 91,338 ====== ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 63 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INCOME/ GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD (LOSS)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------- LARGECAP INDEX PRIMARY A SHARES Year ended 3/31/2005...................... $21.79 $0.43(d) $ 1.01 $ 1.44 $(0.41) $ -- Year ended 3/31/2004...................... 16.37 0.30 5.39 5.69 (0.27) -- Year ended 3/31/2003...................... 22.09 0.25 (5.77) (5.52) (0.20) -- Year ended 3/31/2002...................... 22.35 0.24 (0.27) (0.03) (0.23) -- Year ended 3/31/2001...................... 28.90 0.24 (6.55) (6.31) (0.24) --(i) INVESTOR A SHARES Year ended 3/31/2005...................... $21.65 $0.37(d) $ 1.01 $ 1.38 $(0.36) $ -- Year ended 3/31/2004...................... 16.27 0.24 5.37 5.61 (0.23) -- Year ended 3/31/2003...................... 21.98 0.20 (5.75) (5.55) (0.16) -- Year ended 3/31/2002...................... 22.24 0.18 (0.26) (0.08) (0.18) -- Year ended 3/31/2001...................... 28.76 0.17 (6.52) (6.35) (0.17) --(i)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)Net investment income per share reflects a special dividend. The effect of this dividend amounted to $0.07 per share. (e)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.25% for Primary A Shares and 0.50% for Investor A Shares. (f)The Reimbursement from Investment Advisor is included in the ratio of operating expenses to average net asset (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (g)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.47% for Primary A Shares and 0.72% for Investor A Shares. (h)The effect of interest expense on the operating expense ratio was less than 0.01%. (i)Amount represents less than $0.01 per share. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 64 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET OPERATING INVESTMENT OPERATING DIVIDENDS VALUE NET ASSETS EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL END OF PERIOD AVERAGE NET TO AVERAGE NET TURNOVER AVERAGE NET DISTRIBUTIONS PERIOD RETURN(B) (000) ASSETS(C) ASSETS RATE ASSETS(C) - ----------------------------------------------------------------------------------------------------------------- $(0.41) $22.82 6.57% $1,486,203 0.14% 1.92% 4% 0.28%(e) (0.27) 21.79 34.82 1,245,378 0.26(f) 1.48 1 0.50(g) (0.20) 16.37 (25.05) 918,184 0.35(h) 1.39 6 0.69 (0.23) 22.09 (0.09) 1,283,450 0.35(h) 1.05 7 0.68 (0.24) 22.35 (21.94) 2,021,690 0.35(h) 0.88 8 0.68 $(0.36) $22.67 6.33% $ 37,088 0.39% 1.67% 4% 0.53%(e) (0.23) 21.65 34.50 33,188 0.51(f) 1.23 1 0.75(g) (0.16) 16.27 (25.28) 23,660 0.60(h) 1.14 6 0.94 (0.18) 21.98 (0.30) 33,238 0.60(h) 0.80 7 0.93 (0.17) 22.24 (22.18) 27,417 0.60(h) 0.63 8 0.93
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 65 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INCOME/ GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD (LOSS)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------- LARGECAP ENHANCED CORE PRIMARY A SHARES Year ended 3/31/2005...................... $13.59 $0.20(d) $ 0.67 $ 0.87 $(0.24) $(0.77) Year ended 3/31/2004...................... 10.00 0.15 3.59 3.74 (0.15) -- Year ended 3/31/2003...................... 14.00 0.14 (3.53) (3.39) (0.07) (0.54) Year ended 3/31/2002...................... 14.90 0.13 0.38 0.51 (0.12) (1.29) Year ended 3/31/2001...................... 22.04 0.13 (4.46) (4.33) (0.12) (2.69) INVESTOR A SHARES Year ended 3/31/2005...................... $13.56 $0.17(d) $ 0.66 $ 0.83 $(0.21) $(0.77) Year ended 3/31/2004...................... 9.98 0.11 3.59 3.70 (0.12) -- Year ended 3/31/2003...................... 13.99 0.10 (3.51) (3.41) (0.06) (0.54) Year ended 3/31/2002...................... 14.89 0.09 0.39 0.48 (0.09) (1.29) Year ended 3/31/2001...................... 22.04 0.08 (4.47) (4.39) (0.07) (2.69)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)Net investment income per share reflects a special dividend. The effect of this dividend amounted to $0.04 per share. (e)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.72% for Primary A Shares and 0.97% for Investor A Shares. (f)The effect of interest expense on the operating expense ratio was less than 0.01%. (g)The Reimbursement from Investment Advisor is included in the ratio of operating expenses to average net asset (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (h)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.73% for Primary A Shares and 0.98% for Investor A Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 66 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSET OPERATING INVESTMENT OPERATING TOTAL VALUE NET ASSETS EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO DIVIDENDS END OF TOTAL END OF PERIOD AVERAGE NET TO AVERAGE NET TURNOVER AVERAGE NET AND DISTRIBUTIONS PERIOD RETURN(B) (000) ASSETS(C) ASSETS RATE ASSETS(C) - ---------------------------------------------------------------------------------------------------------------------- $(1.01) $13.45 6.90% $325,008 0.50% 1.52% 218% 0.75%(e) (0.15) 13.59 37.41 246,181 0.50(f)(g) 1.23 307 0.76(h) (0.61) 10.00 (25.03) 191,535 0.50(f) 1.26 366 0.80 (1.41) 14.00 2.80 190,130 0.50(f) 0.89 345 0.75 (2.81) 14.90 (21.49) 345,795 0.50(f) 0.67 97 0.70 $(0.98) $13.41 6.59% $ 17,653 0.75% 1.27% 218% 1.00%(e) (0.12) 13.56 37.08 18,734 0.75(f)(g) 0.98 307 1.01(h) (0.60) 9.98 (25.24) 15,663 0.75(f) 1.01 366 1.05 (1.38) 13.99 2.55 25,420 0.75(f) 0.64 345 1.00 (2.76) 14.89 (21.75) 32,402 0.75(f) 0.42 97 0.95
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 67 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INCOME/ GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD (LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------- MIDCAP INDEX PRIMARY A SHARES Year ended 3/31/2005(b)................... $10.27 $0.13 $ 0.91 $ 1.04 $(0.10) $(0.27) Year ended 3/31/2004(b)................... 6.96 0.09 3.29 3.38 (0.07) --(e) Year ended 3/31/2003(b)................... 9.31 0.06 (2.25) (2.19) (0.04) (0.12) Year ended 3/31/2002(b)................... 8.39 0.07 1.46 1.53 (0.06) (0.55) Period ended 3/31/2001(i)................. 10.00 0.08 (0.72) (0.64) (0.08) (0.89) INVESTOR A SHARES Year ended 3/31/2005(b)................... $10.26 $0.10 $ 0.91 $ 1.01 $(0.08) $(0.27) Year ended 3/31/2004(b)................... 6.96 0.06 3.30 3.36 (0.06) --(e) Year ended 3/31/2003(b)................... 9.33 0.05 (2.26) (2.21) (0.04) (0.12) Year ended 3/31/2002(b)................... 8.41 0.05 1.46 1.51 (0.04) (0.55) Period ended 3/31/2001(i)................. 9.55 0.05 (0.24) (0.19) (0.06) (0.89)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. not reflect the deduction of any applicable sales charges. (b)Per share net investment income/(loss) has been calculated using the monthly average shares method. (c)The effect of interest expense on the operating expense ratio was less than 0.01%. (d)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.25% for Primary A Shares and 0.50% for Investor A Shares. (e)Amount represents less than $0.01 per share. (f)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (g)The Reimbursement from Investment Advisor is included in the ratio of operating expenses to average net asset (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (h)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.47% for Primary A Shares and 0.72% for Investor A Shares. (i)MidCap Index Primary A and Investor A Shares were first offered on March 31, 2000 and May 31, 2000, respectively. (j)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 68 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE RATIO OF REIMBURSEMENTS OPERATING ---------------- EXPENSES RATIO OF NET RATIO OF TOTAL NET ASSET INCLUDING INVESTMENT OPERATING DIVIDENDS VALUE NET ASSETS RATIO OF OPERATING INTEREST EXPENSE INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL END OF PERIOD EXPENSES TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS RATE NET ASSETS - --------------------------------------------------------------------------------------------------------------------------------- $(0.37) $10.94 10.32% $1,601,005 0.14%(c) 0.14%(c) 1.21% 18% 0.28%(d) (0.07) 10.27 48.67 1,461,843 0.25(c)(f)(g) 0.25(f)(g) 0.95 9 0.50(f)(h) (0.16) 6.96 (23.77) 860,997 0.35(f) 0.35(f) 0.84 15 0.70(f) (0.61) 9.31 18.29 679,205 0.35(f) 0.35(f) 0.82 16 0.72(f) (0.97) 8.39 (7.27) 342,503 0.35(f) 0.36(f) 0.82 69 0.75(f) $(0.35) $10.92 10.03% $ 9,606 0.39%(c) 0.39%(c) 0.96% 18% 0.53%(d) (0.06) 10.26 48.31 7,385 0.50(c)(f)(g) 0.50(f)(g) 0.70 9 0.75(f)(h) (0.16) 6.96 (23.98) 2,189 0.60(f) 0.60(f) 0.59 15 0.95(f) (0.59) 9.33 17.99 1,123 0.60(f) 0.60(f) 0.57 16 0.97(f) (0.95) 8.41 (2.84) 215 0.60(f)(j) 0.60(f)(j) 0.57(j) 69 1.00(f)(j)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 69 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INCOME/ GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD (LOSS)(A) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------- SMALLCAP INDEX PRIMARY A SHARES Year ended 3/31/2005...................... $17.95 $0.16 $ 2.04 $ 2.20 $(0.14) $(0.77) Year ended 3/31/2004...................... 11.59 0.09 6.40 6.49 (0.08) (0.05) Year ended 3/31/2003...................... 15.63 0.07 (4.00) (3.93) (0.05) (0.06) Year ended 3/31/2002...................... 13.24 0.06 2.73 2.79 (0.07) (0.33) Year ended 3/31/2001...................... 13.53 0.08 (0.31) (0.23) (0.06) -- INVESTOR A SHARES Year ended 3/31/2005...................... $17.88 $0.12 $ 2.03 $ 2.15 $(0.10) $(0.77) Year ended 3/31/2004...................... 11.57 0.05 6.39 6.44 (0.08) (0.05) Year ended 3/31/2003...................... 15.60 0.03 (3.99) (3.96) (0.01) (0.06) Year ended 3/31/2002...................... 13.22 0.03 2.72 2.75 (0.04) (0.33) Year ended 3/31/2001...................... 13.52 0.04 (0.32) (0.28) (0.02) --
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (c)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 12) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.29% for Primary A Shares and 0.54% for Investor A Shares. (f)The Reimbursement from Investment Advisor is included in the ratio of operating expenses to average net asset (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (g)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.51% for Primary A Shares and 0.76% for Investor A Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 70 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE RATIO OF REIMBURSEMENTS OPERATING ---------------- EXPENSES RATIO OF NET RATIO OF TOTAL NET ASSET INCLUDING INVESTMENT OPERATING DIVIDENDS VALUE NET ASSETS RATIO OF OPERATING INTEREST EXPENSE INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL END OF PERIOD EXPENSES TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(B) (000) NET ASSETS(C) NET ASSETS(C) NET ASSETS RATE NET ASSETS(C) - ------------------------------------------------------------------------------------------------------------------------------ $(0.91) $19.24 12.84% $1,072,113 0.21% 0.21%(d) 0.89% 16% 0.32%(e) (0.13) 17.95 56.11 914,267 0.31(f) 0.31(d)(f) 0.57 16 0.53(g) (0.11) 11.59 (25.26) 517,680 0.40 0.40 0.51 26 0.76 (0.40) 15.63 21.30 499,084 0.40 0.40 0.46 18 0.76 (0.06) 13.24 (1.74) 256,465 0.41 0.41 0.56 65 0.79 $(0.87) $19.16 12.58% $ 14,337 0.46% 0.46%(d) 0.64% 16% 0.57%(e) (0.13) 17.88 55.73 12,534 0.56(f) 0.56(d)(f) 0.32 16 0.78(g) (0.07) 11.57 (25.46) 7,814 0.65 0.65 0.26 26 1.01 (0.37) 15.60 20.97 8,724 0.65 0.65 0.21 18 1.01 (0.02) 13.22 (2.06) 6,517 0.66 0.66 0.31 65 1.04
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 71 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain only to the four index portfolios of Funds Trust (each a "Fund" and collectively, the "Funds"): LargeCap Index Fund LargeCap Enhanced Core Fund MidCap Index Fund SmallCap Index Fund Financial statements for the other portfolios of Funds Trust are presented under separate cover. The Funds are authorized to issue an unlimited number of shares without par value and currently offer two classes of shares: Primary A Shares and Investor A Shares. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of the other class. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Securities, including options and futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on Nasdaq are generally valued at the Nasdaq official closing price. Securities traded only over-the-counter are generally valued at the mean of the latest bid and asked prices. Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. Futures contracts: All Funds may invest in futures contracts for the purposes of hedging against changes in values of the Fund's securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity markets. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Funds may purchase put options on stock index futures contracts, stock indices, swap contracts ("swaptions") or equity securities for the purpose of hedging the relevant portion of their portfolio securities against an anticipated market-wide decline or against declines in the values of individual portfolio securities, and may purchase call options on such futures contracts as a hedge against a market advance when they are not fully invested. A Fund may 72 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) write options on such futures contracts primarily for the purpose of terminating existing positions. The Funds may also engage these techniques for non-hedging purposes. The Funds may write covered call options and put options on securities in which they are permitted to invest from time to time in seeking to attain each Fund's objective. Call options written by a Fund give the holder the right to buy the underlying securities from the Fund at a stated exercise price; put options give the holder the right to sell the underlying security to the Fund at a stated price. In the case of put options, a Fund is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Funds may also write combinations of covered puts and calls on the same underlying security. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Funds typically receive a premium from writing a put or call option, which would increase the Funds' return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received. A Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Fund. Foreign currency transactions: 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 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 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 securities are not separately identified 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 securities. Swaps: The Funds may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with their investment objective and policies to obtain a desired return at a lower cost than if the Funds had invested directly in the asset that yielded the desired return. Swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest or total return throughout the lives of the agreements. The interest to be paid or received on swaps is included in net realized gain/(loss) on investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statements of assets and liabilities. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Fund's basis in the swap and the proceeds from (or cost of) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. If there is a default by the counterparty to a swap contract, a Fund will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Fund will succeed in pursuing 73 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) contractual remedies. A Fund thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. Repurchase agreements: Each Fund may engage in repurchase agreement transactions with institutions that the Funds' investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Each Fund's investment income and realized and unrealized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. The Funds estimate components of distributions from real estate investment trusts (REITs). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. If the Funds no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. Dividends and distributions to shareholders: Distributions from net investment income are declared and paid at least annually for each of the Funds. The Funds may, however, declare and pay distributions from net investment income more frequently. Each Fund will distribute net realized capital gains (including net realized short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on ex-dividend date. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. Indemnification: In the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Funds Trust's organizational documents, the Trustee and Officers of the Funds Trust are indemnified against certain 74 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) liabilities that may arise out of their duties to the Funds Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Funds. Effective December 1, 2004, BACAP 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:
FEES ON FEES ON FEES ON FEES ON FEES ON AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE FEES ON NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS AVERAGE FIRST $500 MILLION $1 BILLION $1.5 BILLION $3 BILLION NET ASSETS $500 TO TO TO TO OVER MILLION $1 BILLION $1.5 BILLION $3 BILLION $6 BILLION $6 BILLION - ----------------------------------------------------------------------------------------------------------------------- LargeCap Index Fund......... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% LargeCap Enhanced Core Fund...................... 0.35% 0.30% 0.25% 0.20% 0.18% 0.16% MidCap Index Fund........... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% SmallCap Index Fund......... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL RATE - --------------------------------------------------------------------------- LargeCap Index Fund......................................... 0.10% LargeCap Enhanced Core Fund................................. 0.40% MidCap Index Fund........................................... 0.10% SmallCap Index Fund......................................... 0.15%
For the year ended March 31, 2005, the effective investment advisory fee rates for the Funds were as follows:
EFFECTIVE FEE RATE - ----------------------------------------------------------------------------------- LargeCap Index Fund......................................... 0.10% LargeCap Enhanced Core Fund................................. 0.38% MidCap Index Fund........................................... 0.10% SmallCap Index Fund......................................... 0.13%
BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Effective December 1, 2004, BACAP Distributors is entitled to receive an administration fee, computed daily and paid monthly, at the following annual rates:
ANNUAL RATE - --------------------------------------------------------------------------- LargeCap Index Fund......................................... 0.10% LargeCap Enhanced Core Fund................................. 0.17% MidCap Index Fund........................................... 0.10% SmallCap Index Fund......................................... 0.10%
Prior to December 1, 2004, BACAP Distributors received a monthly administration fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL RATE - --------------------------------------------------------------------------- LargeCap Index Fund......................................... 0.10% LargeCap Enhanced Core Fund................................. 0.23% MidCap Index Fund........................................... 0.10% SmallCap Index Fund......................................... 0.10%
75 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, the effective administration fee rates for the LargeCap Index Fund, MidCap Index Fund, SmallCap Index Fund and the LargeCap Enhanced Core Fund were 0.10%, 0.10%, 0.10% and 0.21% respectively. The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of Funds Trust's assets. PFPC Inc. serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A Shares of the Funds. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Primary A shares of each Fund. For the year ended March 31, 2005, Bank of America earned the following sub-transfer agent fees from the Funds for providing such services and these amounts are included in "Transfer agent fees" in each Fund's Statement of operations.
SUB-TRANSFER AGENT FEE FUND (000) - -------------------------------------------------------------------------------------- LargeCap Index.............................................. $17 LargeCap Enhanced Core...................................... 8 MidCap Index................................................ 42 SmallCap Index.............................................. 27
BACAP Distributors serves as distributor of the Funds' shares. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, pays its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. Each Fund's fee will not exceed $15,000 per year. As of March 31, 2005, the fees paid for the Office of the Chief Compliance Officer were as follows:
FUND (000) - --------------------------------------------------------------------- LargeCap Index Fund......................................... $8 LargeCap Enhanced Core Fund................................. 5 MidCap Index Fund........................................... 8 SmallCap Index Fund......................................... 8
These amounts are included in "Other expenses" on the Statements of Operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, another portfolio of Funds Trust. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. Certain Funds have made daily investments of cash balances in Nations Cash Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Fund from such investments is included in its Statement of operations as "Dividend income from affiliated funds and investments". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Funds. 76 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADMINISTRATION FEES ADVISORY FEES (EARNED BY BACAP (EARNED BY BACAP) DISTRIBUTORS) FUND (000) (000) - ------------------------------------------------------------------------------------------- LargeCap Index Fund.............................. $37 $19 LargeCap Enhanced Core Fund...................... 15 8 MidCap Index Fund................................ 23 12 SmallCap Index Fund.............................. 9 5
A significant portion of each Fund's Primary A Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. 3. TOTAL OPERATING EXPENSE LIMITATIONS BACAP and/or its affiliates may, from time to time, reduce its fees payable by each Fund. BACAP and/or BACAP Distributors has contractually agreed to reimburse expenses and/or waive fees through July 31, 2006 to the extent that total expenses (excluding interest expense and shareholder servicing and distribution fees), as a percentage of the respective Fund's average daily net assets, exceed the following annual rates:
FUND ANNUAL RATE - --------------------------------------------------------------------------- LargeCap Index Fund and MidCap Index Fund................... 0.14% SmallCap Index Fund......................................... 0.21% LargeCap Enhanced Core Fund................................. 0.50%
BACAP and/or BACAP Distributors is entitled to recover from LargeCap Index Fund, LargeCap Enhanced Core Fund and SmallCap Index Fund any fees waived or expenses reimbursed by BACAP and/or BACAP Distributors during the three year period following the date of such waiver or reimbursement, to the extent that such recovery would not cause the affected fund to exceed the expense limitations in effect at the time of recovery. There is no guarantee that these expense limitations will continue. At March 31, 2005, the amounts potentially recoverable by BACAP and/or BACAP Distributors pursuant to this arrangement are as follows:
AMOUNT AMOUNT OF POTENTIAL RECOVERY EXPIRING: RECOVERED DURING -------------------------------------- TOTAL POTENTIAL PERIOD ENDED 3/31/08 3/31/07 3/31/06 RECOVERY 3/31/05 FUND (000) (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------- LargeCap Index...................... $1,465 $2,494 $3,143 $7,102 $-- LargeCap Enhanced Core.............. 641 582 496 1,719 -- SmallCap Index...................... 797 1,510 1,815 4,122 --
Each Fund has an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. 4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted a combined shareholder servicing and distribution plan for the Investor A Shares of each Fund. The shareholder servicing and distribution plan permits the Funds to compensate or reimburse servicing agents for shareholder services provided by the servicing agents. The plan, adopted pursuant to Rule 12b-1 under the 1940 Act, also permits the Funds to compensate or reimburse 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 and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of 77 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) each Fund directly to the applicable class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP Distributors. For the year ended March 31, 2005, the annual rate in effect and plan limit, as a percentage of average daily net assets, was as follows:
CURRENT RATE (AFTER FEE PLAN WAIVERS) LIMIT ------------------- Investor A Combined Shareholder Servicing and Distribution Plan...................................................... 0.25% 0.25%
5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for redemption based payments treated as dividend paid deduction and foreign currency transactions among the components of the Funds' net assets as follows:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED FUND INCOME GAIN/(LOSS) PAID-IN CAPITAL - ------------------------------------------------------------------------------------------------ LargeCap Index..................... $ -- $ -- $ -- LargeCap Enhanced Core............. 1,605 (1,605) -- MidCap Index....................... -- (2,278) 2,278 SmallCap Index..................... -- (1,005) 1,005
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 ------------------------- ------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME CAPITAL GAINS INCOME CAPITAL GAINS FUND (000) (000) (000) (000) - ---------------------------------------------------------------------------------------------------------- LargeCap Index.................................... $24,080 $ -- $15,813 $ -- LargeCap Enhanced Core............................ 14,436 6,926 2,921 -- MidCap Index...................................... 17,696 38,261 10,434 3 SmallCap Index.................................... 11,844 37,269 4,049 2,723
- --------------- *For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED/ (ACCUMULATED) UNDISTRIBUTED LONG-TERM NET UNREALIZED ORDINARY CAPITAL GAINS/ APPRECIATION/ FUND INCOME* (LOSS) (DEPRECIATION)** - -------------------------------------------------------------------------------------------------------------- LargeCap Index........................................... $ 5,912 $(183,919) $187,722 LargeCap Enhanced Core................................... 8,654 2,290 46,234 MidCap Index............................................. 11,732 13,737 337,751 SmallCap Index........................................... 2,828 3,100 272,069
- --------------- *For tax purposes, the undistributed net investment income amounts may include straddle loss deferrals. **The differences between book-basis and tax-basis net unrealized appreciation/(depreciation) are primarily due to deferral of losses from wash sales. 78 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ FUND APPRECIATION DEPRECIATION (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------ LargeCap Index.............................................. $398,455 $(210,733) $187,722 LargeCap Enhanced Core...................................... 49,970 (4,475) 45,495 MidCap Index................................................ 423,000 (85,249) 337,751 SmallCap Index.............................................. 337,990 (65,921) 272,069
The following capital loss carryforwards, determined as of March 31, 2005, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
EXPIRING IN EXPIRING IN EXPIRING IN 2009 2010 2011 FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------- LargeCap Index.............................................. $29,894 $39,881 $114,143
During the year ended March 31, 2005, the following Fund utilized capital losses as follows:
CAPITAL LOSSES UTILIZED FUND (000) - ----------------------------------------------------------------------------- LargeCap Index.............................................. $1,095
6. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005, were as follows:
PURCHASES SALES (000) (000) ----------------------- LargeCap Index.............................................. $235,643 $ 50,625 LargeCap Enhanced Core...................................... 643,842 596,984 MidCap Index................................................ 293,060 277,995 SmallCap Index.............................................. 199,525 158,554
7. FUTURES CONTRACTS At March 31, 2005, the following Funds had futures contracts open:
MARKET UNREALIZED VALUE OF CONTRACT VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------- LARGECAP INDEX: S&P 500 Futures (long position) Expiring June 2005(a)....................................... 106 $32,072 $31,373 $(699) LARGECAP ENHANCED CORE: S&P 500 Futures (long position) Expiring June 2005(a)....................................... 57 17,218 16,870 (348) MIDCAP INDEX: MidCap 400 Futures (long position) Expiring June 2005(a)....................................... 13 4,365 4,285 (80) SMALLCAP INDEX: Russell 2000 Futures (long position) Expiring June 2005(a)....................................... 21 6,568 6,488 (80)
- --------------- (a)Securities have been segregated as collateral for each Fund's open futures contracts. 79 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. WRITTEN OPTIONS Written options for the LargeCap Enhanced Core Fund for the year ended March 31, 2005, aggregated the following:
PREMIUM NUMBER OF RECEIVED SUMMARY OF WRITTEN OPTIONS CONTRACTS (000) - ---------------------------------------------------------------------------------- Options outstanding at March 31, 2004....................... (502,105) $(1,446) Options written............................................. (5,981) (4,473) Options terminated in closing purchase transactions......... 3,097 3,760 Options exercised........................................... 1,000 230 Options expired............................................. 501,321 664 -------- ------- Options outstanding at March 31, 2005....................... (2,668) $(1,265) ======== =======
9. SWAP CONTRACTS At March 31, 2005, the LargeCap Enhanced Core Fund had the following swap contracts outstanding:
UNREALIZED NOTIONAL PAYMENTS APPRECIATION/ AMOUNT PAYMENTS MADE BY RECEIVED BY (DEPRECIATION) DESCRIPTION (000) THE FUND THE FUND (000) - ----------------------------------------------------------------------------------------------------------------------------- Contract with Citigroup, Effective July 24, 2003, Notional Amount X Notional Amount X expiring July 22, (SPX Corp. Index) (SPX Corp. Index) 2005(a).................... $ 16,827 Max (0, Vol@2-Strike@2) Max (0, Strike@2-Vol@2) $ 489 Notional Amount X Notional Amount X Contract with Citigroup, (Nextel Communications, (Nextel Communications, Effective October 22, 2004, Inc., Class A Index) Inc., Class A Index) expiring May 20, 2005(a)... 3,333 Max (0, Vol@2-Strike@2) Max (0, Strike@2-Vol@2) (279) Contract with Citigroup, Effective January 25, 2005, Notional Amount X Notional Amount X expiring June 17, (Viacom, Inc, Class B) (Viacom, Inc, Class B) 2005(a).................... 5,682 Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) 47 Contract with Deutsche Bank, Effective October 22, 2004, Notional Amount X Notional Amount X expiring April 15, (Intel Corp. Index) (Intel Corp. Index) 2005(a).................... 3,870 Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) (170) Contract with Deutsche Bank, Effective June 26, 2003, Notional Amount X Notional Amount X expiring June 23, (NDX Index) (NDX Index) 2005(a).................... 8,803 Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) (384) Contract with Deutsche Bank, Effective June 26, 2003, Notional Amount X Notional Amount X expiring June 23, (SPX Corp. Index) (SPX Corp. Index) 2005(a).................... 17,157 Max (0, Vol@2-Strike@2) Max (0, Strike@2-Vol@2) 472 Contract with Deutsche Bank, Effective July 24, 2003, Notional Amount X Notional Amount X expiring July 22, (NDX Index) (NDX Index) 2005(a).................... 8,666 Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) (406) Contract with Deutsche Bank, Effective January 31, 2005, Notional Amount X Notional Amount X expiring December 16, (Eurostoxx 50 Index) (Eurostoxx 50 Index) 2005(a).................... 7,862 Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) (15) Contract with Citigroup, Effective January 25, 2005, Notional Amount X Notional Amount X expiring June 17, (SPX Corp. Index) (SPX Corp. Index) 2005(a).................... (13,509) Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) 67 Contract with Citigroup, Effective January 31, 2005, Notional Amount X Notional Amount X expiring December 16, (SPX Corp. Index) (SPX Corp. Index) 2005(a).................... (9,929) Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) (11)
80 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
UNREALIZED NOTIONAL PAYMENTS APPRECIATION/ AMOUNT PAYMENTS MADE BY RECEIVED BY (DEPRECIATION) DESCRIPTION (000) THE FUND THE FUND (000) - ----------------------------------------------------------------------------------------------------------------------------- Contract with Deutsche Bank, Effective October 22, 2004, Notional Amount X Notional Amount X expiring April 15, (SPX Corp. Index) (SPX Corp. Index) 2005(a).................... $(15,480) Max (0, Vol@2-Strike@2) Max (0, Strike@2-Vol@2) $ 236 Contract with Citigroup, Notional Amount X Notional Amount X Effective October 25, 2004, (SPX Corp. Index) X (SPX Corp. Index) expiring May 20, 2005(a)... (17,485) Max (0, Strike@2-Vol@2) Max (0, Vol@2-Strike@2) 253 ----- Total unrealized appreciation............... $ 299 =====
- --------------- (a)Fair value. 10. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. During the year ended March 31, 2005, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST FUND (000) RATE - -------------------------------------------------------------------------------------- MidCap Index................................................ $ 21 3.09% SmallCap Index.............................................. 131 2.09
- --------------- *The average amount outstanding was calculated based on daily balances in the period 11. SECURITIES LENDING Under an agreement with BNY, the Funds may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of borrower default, the Fund has the right to use the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. The Fund bears the risk of loss with respect to the investment of collateral. The income earned by each Fund from securities lending is included in its Statement of Operations. At March 31, 2005, the following Funds had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) - ------------------------------------------------------------------------------------------------ LargeCap Index.............................................. $14,867 $15,319 LargeCap Enhanced Core...................................... 4,450 4,535 MidCap Index................................................ 73,669 75,652 SmallCap Index.............................................. 91,163 93,842
81 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 12. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. 82 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the fiscal year ended March 31, 2005, Bank of America Corporation has assumed $6.7 million of legal, shareholder communications, audit related, transfer agent, consulting and Trustee costs and fees incurred by the Funds impacted in connection with the regulatory and civil litigation matters discussed above. These non-recurring costs were allocated to the Funds based on their respective average nets assets for the year ended March 31, 2005. These non-recurring costs on a per Fund basis are shown in that Fund's respective Statement of operations. Because these costs were borne by Bank of America Corporation and not any Fund, an offsetting waiver of these costs is also presented in each respective Fund's Statement of operations as, "Costs assumed by Bank of America Corporation". The impact to the expense ratio of each impacted Fund is reflected in the Fund's Financial highlights. 83 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations LargeCap Index Fund, Nations LargeCap Enhanced Core Fund, Nations MidCap Index Fund and Nations SmallCap Index Fund (constituting part of Nations Funds Trust, hereafter referred to as the "Funds") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 84 NATIONS FUNDS FEDERAL INCOME TAX INFORMATION (UNAUDITED) NATIONS LARGECAP INDEX FUND 100.00% of the ordinary income (including short-term capital gains) distributed by the Fund, for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 100.00% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS LARGECAP ENHANCED CORE FUND For the fiscal year ended March 31, 2005, the Fund designates long-term capital gains of $6,926,503. 34.06% of the ordinary income (including short-term capital gains) distributed by the Fund, for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 31.72% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS MIDCAP INDEX FUND For the fiscal year ended March 31, 2005, the Fund designates long-term capital gains of $40,193,152. 76.22% of the ordinary income (including short-term capital gains) distributed by the Fund, for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 76.06% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS SMALLCAP INDEX FUND For the fiscal year ended March 31, 2005, the Fund designates long-term capital gains of $38,148,581. 75.26% of the ordinary income (including short-term capital gains) distributed by the Fund, for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 74.96% of the ordinary income (including short-term capital gains) distributed by the Fund, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. 85 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director -- Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
86 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
87 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 88 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Board of Trustees (the "Board") of Nations Funds Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreements and are not "interested persons" of the Trust, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory agreement and approve any newly proposed terms therein. In this regard, the Board reviewed and re-approved, during the most recent six months covered by this report, an investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for Nations LargeCap Index Fund, Nations LargeCap Enhanced Core Fund, Nations MidCap Index Fund, and Nations SmallCap Index Fund (the "Advisory Agreement"). The funds identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at a meeting held on November 17-18, 2004, the Board, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the re-approval of the Advisory Agreement. NATURE, EXTENT AND QUALITY OF SERVICES The Board received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP under the Advisory Agreement. The most recent investment adviser registration form ("Form ADV") for BACAP was provided to the Board, as were responses of BACAP to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Board reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by investment personnel of BACAP. In this regard, the Board specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Board received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds and BACAP. The Board considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Board also considered the Funds' Chief Compliance Officer's report and recommendations. The Board evaluated the ability of BACAP, including its resources, reputation and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Board considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Board considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Board concluded that it was generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP. FUND PERFORMANCE AND EXPENSES The Board considered the one-year, three-year and five-year performance results for each of the Funds, as relevant. It also considered these results in comparison to the performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain Funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that of expenses to provide a more accurate basis of comparison. The Board was provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. The Board also considered information in the Lipper data that ranked each Fund based on (i) each Fund's one-year performance compared to actual management fees, (ii) each Fund's one-year performance compared to total expenses (iii) each Fund's 3-year performance compared to actual management fees; and (iv) each Fund's 3-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Boards of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance 89 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Board (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Board considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Board also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Board noted that each Fund's performance was better than, or not substantially below each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Board received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. It also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. The Board noted that the total expense ratios of the Funds were lower than each Fund's Peer Group's median overall ratio and did not require significant additional consideration by the Boards. Management also discussed the Lipper data and rankings, and other relevant information, for each Fund. Based on the above-referenced considerations and other factors, the Board concluded that the overall performance and expense results supported the re-approval of the Advisory Agreement for each Fund. INVESTMENT ADVISORY FEE RATES The Board reviewed and considered the proposed contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). In addition, the Board reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). The Board noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain affiliates relating to trading in mutual fund shares. At the November meetings, the Board also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Board also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. Additionally, the Boards received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Boards concluded that the respective Net Advisory Rates for each of the Funds were lower than, or not appreciably higher than, the median rates of each Fund's Peer Group and did not warrant significant additional consideration. The Board concluded that these and other factors supported the Advisory Agreement Rates and the Net Advisory Rates, and approved the Advisory Agreement for all of the Funds. PROFITABILITY The Board received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates. The Board concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. 90 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) ECONOMIES OF SCALE The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board concluded that any actual or potential economies of scale are, or will be, shared fairly with Fund shareholders, including most particularly through the newly-approved Advisory Agreement Rate breakpoints effective December 1, 2004. The Board did not approve such breakpoints for Nations LargeCap Index Fund, Nations MidCap Index Fund and Nations SmallCap Index Fund. However, the Board considered the Advisory Agreement Rates of these Funds and concluded that the fees were fair and equitable based on relevant factors, including the Funds' performance results. The Board acknowledged the inherent limitations of any analysis of an investment adviser's economies of scale and of any attempt to correlate breakpoints with such economies, stemming largely from the Board's understanding that economies of scale are realized, if at all, by an investment adviser across a variety of products and services, not just in respect of a single fund. INFORMATION ABOUT SERVICES TO OTHER CLIENTS The Board also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP to its other clients, including institutional separate account investors. The Board concluded that the Advisory Agreement Rate and the Net Advisory Rate for Nations LargeCap Enhanced Core Fund were within a reasonable range of the fee rates offered to other BACAP clients. Although the rates offered to other clients were appreciably lower than for this Fund, the Board concluded, based on information provided by BACAP, that the costs associated with managing and operating a registered open-end fund, compared with an institutional investor, provided a justification for the higher fee rates charged to the Fund. The Board also noted that BACAP did not service other clients comparable to Nations LargeCap Index Fund, Nations MidCap Index Fund and Nations SmallCap Index Fund and therefore did not receive information about BACAP's services to other clients for these Funds. OTHER BENEFITS TO BACAP The Board received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP as a result of its relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates). The Board also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Board also reviewed the respective policies of BACAP regarding the allocation of portfolio investment opportunities among the Funds and other clients. OTHER FACTORS AND BROADER REVIEW The Board also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Board noted that the Funds in the Nations Funds complex are generally utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. As discussed above, the Board reviews detailed materials received from BACAP annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Funds receive throughout the year. In this regard, the Board reviews reports of BACAP at least in each of its quarterly meetings, which includes, among other things, a detailed portfolio review and detailed fund performance reports. In addition, the Board interviews the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and its evaluation of the information provided to it, the Board concluded that re-approval of the Advisory Agreement for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Board unanimously re-approved the Advisory Agreement. 91 SHAREHOLDER MEETING RESULTS RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: Proposal 1.
ELECTION OF TRUSTEES: FOR WITHHELD - --------------------- -------------- ----------- Edward J. Boudreau, Jr...................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
92 THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF BANC OF AMERICA CAPITAL MANAGEMENT INTERNATIONAL/ GLOBAL WITHIN EACH CATEGORY, FUNDS THE FUNDS ARE LISTED FROM AGGRESSIVE TO CONSERVATIVE. EQUITY Nations Marsico FUNDS International FIXED Opportunities Fund INCOME FUNDS GROWTH FUNDS Nations International MONEY Equity Fund MARKET Nations Small FUNDS TAXABLE Company Fund Nations International INCOME FUNDS Value Fund Nations Marsico Nations Cash Nations High Yield 21st Century Fund Nations Global Reserves Bond Fund Value Fund Nations MidCap Nations Money Nations Strategic Growth Fund Market Reserves Income Fund Nations Marsico LOWER RISK/REWARD POTENTIAL Nations Government Nations Bond Fund Focused Equities Reserves Fund Nations Intermediate Nations Treasury Bond Fund Nations Marsico Reserves Growth Fund Nations Government Nations Tax-Exempt Securities Fund Reserves BLEND FUNDS SPECIALTY FUNDS Nations Short- Nations Municipal Intermediate Nations Asset Reserves Government Fund Allocation Fund INDEX FUNDS Nations California Nations Short-Term Nations Strategic Nations SmallCap Index Fund Tax-Exempt Reserves Income Fund Growth Fund Nations MidCap Index Fund Nations New York Tax-Exempt Reserves TAX-EXEMPT VALUE FUNDS Nations LargeCap Index Fund INCOME FUNDS Nations SmallCap Nations LargeCap Enhanced Nations Municipal Value Fund Core Fund Income Fund Nations MidCap Nations State-Specific Value Fund ASSET ALLOCATION Long-Term Municipal PORTFOLIOS Bond Funds (CA, FL) Nations Value Fund Nations LifeGoal Nations Intermediate Growth Portfolio Municipal Bond Fund Nations LifeGoal Balanced Nations State-Specific Growth Portfolio Intermediate Municipal Bond Funds (CA, FL, Nations LifeGoal Income and GA, KS, MD, NC, SC, Growth Portfolio TN, TX, VA) Nations LifeGoal Nations Short-Term Income Portfolio Municipal Income Fund OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/058V-0405 (05/05) 05/5817
Nations Short-Term Income Fund Nations Short-Intermediate Government Fund Nations Government Securities Fund Nations Intermediate Bond Fund Government & Corporate Nations Bond Fund Bond Funds Nations Strategic Income Fund Nations High Yield Annual report for the year ended Bond Fund March 31, 2005 [NATIONS FUNDS LOGO] A description of the policies and procedures that the funds use to determine how to vote proxies and a copy of the funds' voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment advisor to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [CHRISTOPHER WILSON PHOTO] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS PORTFOLIO COMMENTARY Nations Short-Term Income Fund 3 Nations Short-Intermediate Government Fund 9 Nations Government Securities Fund 15 Nations Intermediate Bond Fund 21 Nations Bond Fund 28 Nations Strategic Income Fund 35 Nations High Yield Bond Fund 42 FINANCIAL STATEMENTS Investment portfolios 49 Statements of assets and liabilities 82 Statements of operations 84 Statements of changes in net assets 86 Schedules of capital stock activity 90 Financial highlights 98 Notes to financial statements 112 Report of independent registered public accounting firm 128 Tax information 129 Investment portfolios -- Nations Master Investment Trust Nations Intermediate Bond Master Portfolio 131 Nations High Yield Bond Master Portfolio 138 Statements of assets and liabilities 148 Statements of operations 150 Statement of changes in net assets 151 Financial highlights 151 Notes to financial statements 152 Report of independent registered public accounting firm 162 Fund governance 163 Board consideration and approval of investment advisory and sub-advisory agreements 166 Shareholder meeting results 171
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. NATIONS SHORT-TERM INCOME FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS SHORT-TERM INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income consistent with minimal fluctuations of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Short-Term Income Fund Investor A Shares provided shareholders with a total return of negative 0.19%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund's investment style and philosophy are based upon the belief that the total return and the overall consistency of returns may be achieved through a disciplined risk-management process. It is our view that yield is the most significant and predictable component of total return. We manage interest-rate risk by keeping the fund's duration relatively close to its benchmark the Merrill Lynch 1-3 Year Treasury Index.*** We analyze the yield curve and position the portfolio to take advantage of opportunities as they present themselves. We emphasize a quantitative approach to sector allocation, sector rotation and security selection. The end result of our process is an approach to fixed income investing that is conservative but which is applied aggressively in pursuit of superior risk-adjusted returns. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations Short-Term Income Fund (Investor A Shares) returned negative 0.19%, compared with negative 0.35% for its benchmark, the Merrill Lynch 1-3 Year Treasury Index. In a generally weak environment for bonds, the slight negative return of the fund can be attributed to the rise in short-term interest rates during the period. However, the fund did better than its benchmark because of the way it was structured. HOW DID THE FUND'S STRUCTURE HELP ITS RETURN IN A GENERALLY WEAK ENVIRONMENT?+ We used a "barbelled" structure, which helped us achieve a higher total return than the index without raising the fund's duration relative to the index. We invested part of the portfolio in floating rate bonds, whose coupons increase as interest rates rise and which have a duration that is close to zero. We invested the balance of the portfolio in relatively longer-term securities, which were the best performers during the period. The combination resulted in a duration that was shorter than the index. Duration is a measure, expressed in years, of interest-rate sensitivity. It's similar to *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 1.00%, which may apply to purchases of Investor A Shares. The performance shown includes the effects of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which has the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of short-term US Treasury bonds with maturities of one to three years. All dividends are reinvested. It is not available for investment and does not reflect fees, brokerage commission or other expenses of investing. +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 NATIONS SHORT-TERM INCOME FUND PORTFOLIO MANAGERS' COMMENTARY (continued) maturity, but because it takes into consideration the entire stream of future principal and interest payments and how long it will take to collect them, the duration is a more complex and accurate measure of a fund's exposure to changing interest rates. WHAT OTHER INVESTMENT DECISIONS HELPED THE FUND'S PERFORMANCE? We also invested in corporate bonds, mortgage-backed bonds and asset-backed bonds, each of which added value to the fund. WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE DURING THE PERIOD? Looking back, the fund might have benefited more had we barbelled the portfolio earlier in the reporting period. But generally speaking, it was a challenging environment for the bond market. Yields rose -- and prices declined -- on all but the longest-term bonds as investors responded to mixed economic news and the Federal Reserve seven interest rate hikes. We believe that the fund's negative return, while better than the return of the fund's benchmark, was more a reflection of the economic environment than any other strategic decision. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? The fund's positioning should continue to offer a yield advantage for the fund. We have kept duration shorter than the index because we believe that interest rates are likely to continue to move higher. Duration is a measure of the fund's interest rate sensitivity, and if interest rates rise, a shorter duration should help cushion the fund against price declines. In addition, we continue to favor floating rate securities, which are positioned to withstand rising interest rates because their yields reset. --------------------------------------------------- Leonard Aplet has co-managed the Nations Short-Term Income Fund since November 2004. Mr. Aplet is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Richard Cutts has co-managed the fund since November 2004. Mr. Cutts is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Prior to November 2004, the fund was managed by the Fixed Income Management Team of Banc of America Capital Management, LLC. 4 NATIONS SHORT-TERM INCOME FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,000.35 1,022.49 2.44 2.47 0.49 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 999.15 1,021.24 3.69 3.73 0.74 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 995.41 1,017.50 7.41 7.49 1.49 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 995.41 1,017.50 7.41 7.49 1.49
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of expenses, total return would have been reduced. 5 NATIONS SHORT-TERM INCOME FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 6 NATIONS SHORT-TERM INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 39.8% Corporate fixed-income bonds and notes 25.0% Asset-backed securities 14.1% Mortgage-backed securities 9.7% Government agencies and obligations 8.6% Collateralized mortgage obligations 2.8% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 U.S. Treasury Inflation Index Note, 3.625% 01/15/08 3.3% ------------------------------------------------- 2 Federal Home Loan Bank, Discount Note 04/08/05 3.0% ------------------------------------------------- 3 Federal National Mortgage Association TBA, 5.000% 04/15/20 3.0% ------------------------------------------------- 4 Federal Home Loan Mortgage, 4.000% 06/01/11 2.7% ------------------------------------------------- 5 IMPAC Secured Assets Common Owner Trust, 2.920% 12/25/31 2.2% ------------------------------------------------- 6 Federal Home Loan Mortgage, 4.500% 10/01/14 2.2% ------------------------------------------------- 7 Federal Home Loan Mortgage, 5.500% 11/15/21 2.1% ------------------------------------------------- 8 Countrywide Asset-Backed Certificates, 3.120% 07/25/35 1.9% ------------------------------------------------- 9 Federal Home Loan Mortgage, 4.500% 03/15/20 1.8% ------------------------------------------------- 10 Aames Mortgage Investment Trust, 2.990% 01/25/35 1.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
7 NATIONS SHORT-TERM INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
MERRILL LYNCH 1-3 YEAR TREASURY NATIONS SHORT-TERM INCOME FUND INDEX ------------------------------ ------------------------------- Mar. 31 1995 9900 10000 10684 10775 1997 11223 11348 11971 12200 1999 12671 12942 13021 13425 2001 14230 14714 14928 15508 2003 15825 16496 16178 16877 Mar. 31 2005 16145 16820
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
MERRILL LYNCH 1-3 YEAR TREASURY NATIONS SHORT-TERM INCOME FUND INDEX ------------------------------ ------------------------------- Mar. 31 1995 10000 10000 10792 10775 1997 11336 11348 12092 12200 1999 12799 12942 13153 13425 2001 14373 14714 15079 15508 2003 15985 16496 16342 16877 Mar. 31 2005 16313 16820
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.02% 4.91%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Short-Term Income Fund over the last 10 years. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of short-term US Treasury bonds with maturities of one to three years. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** NAV** CDSC*** Inception date 9/30/92 10/2/92 6/7/93 10/2/92 - --------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -0.04% -0.19% -1.17% -1.03% -1.03% -2.01% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 2.88% 2.65% 2.31% 1.86% 1.86% 1.86% 5 YEARS 4.62% 4.40% 4.18% 3.61% 3.60% 3.60% 10 YEARS 5.23% 5.02% 4.91% 4.51% 4.46% 4.46% SINCE INCEPTION 4.97% 4.73% 4.65% 4.31% 4.25% 4.25%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 1.00%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 8 NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND PORTFOLIO MANAGER COMMENTARY* ON NOVEMBER 17, 2004 MARIE SCHOFIELD TOOK OVER AS MANAGER OF NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND. IN THE FOLLOWING INTERVIEW, MS. SCHOFIELD SHARES HER VIEWS ON NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The Fund seeks high current income consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Short-Intermediate Government Fund Investor A Shares provided shareholders with a total return of negative 1.03%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund's investment style and philosophy are based upon our belief that competitive total returns can be achieved through the active management of interest rate sensitivity, yield curve positioning, and sector selection. We combine quantitative models with fundamental research to seek relative value within these strategies. Nations Short-Intermediate Government Fund seeks to outperform the Lehman Brothers U.S. Intermediate Government Index.*** The index comprises all US Treasury and agency issues with maturities from one to ten years and has an average duration of 3.5 years. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations Short-Intermediate Government Fund (Investor A Shares) returned negative 1.03% compared with negative 0.55% for its benchmark, the Lehman Brothers U.S. Intermediate Government Index. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THIS PERIOD? Domestic economic news was generally positive. The US economy grew at an annualized rate of approximately 3.9% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down, depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. Responding to this generally favorable economic environment, the Federal Reserve (the Fed) began to raise a key short-term interest rate -- the federal funds rate -- in June 2004. After seven one-quarter percentage point increases, the federal funds rate stood at 2.75% on March 31, 2005. Short term and the shortest intermediate-term bonds were hurt more by these interest-rate hikes than other maturity ranges. Treasury securities in particular were hurt more than other types of bonds. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effects of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which has the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***Lehman Brothers U.S. Intermediate Government Index, an unmanaged index, comprises US government agency and US Treasury securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 9 NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND PORTFOLIO MANAGER COMMENTARY (continued) HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?+ Upon assuming management responsibility for the fund, we began to restructure some of the holdings in an effort to raise the fund's yield. We reduced the fund's Treasury exposure from 58% to 49%, reduced Agency holdings from 35% to 33% and cut back on the fund's cash position, from 2.0% to 0.5%. We used the proceeds from these sales to add to the fund's position in 15-year mortgage-backed securities and also to government agency collateralized mortgage obligations and asset-backed securities, which resulted in a significant pick-up in the fund's yield. These moves also resulted in a slightly longer duration for the fund, closer to that of its benchmark. At the end of the period, the fund's duration was generally in line with its benchmark. WHAT INVESTMENT DECISIONS HELPED THE FUND'S PERFORMANCE? We believe that our efforts to add higher-yielding securities helped performance during the period and have the potential to help offset the impact of rising interest rates going forward. By keeping the fund's duration in line with its benchmark, we also hope to reduce the fund's volatility relative to the index. WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE DURING THE PERIOD? The fund's heavy exposure to Treasuries, which were the period's weakest performers, was a drag on performance. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We expect short-term interest rates to continue to move higher, because the Fed has said that it would raise rates in an effort to control inflation. In this environment, we believe that the fund's emphasis on yield should help mitigate the negative impact of higher short-term interest rates going forward. --------------------------------------------------- Marie Schofield has managed the Nations Short-Intermediate Government Fund since November 2004. Ms. Schofield is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. On March 21, 2005, the Board of Trustees approved a proposal to reorganize the Nations Short-Intermediate Government Fund into the Nations Short-Term Income Fund, subject to shareholder approval and the satisfaction of certain other conditions. If approved, the effective date of the reorganization is expected to occur in September or October 2005 or such a date as the parties may agree. Prior to November 2004, the fund was managed by the Fixed Income Management Team of Banc of America Capital Management, LLC. +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP, AND VICE VERSA. PRICES AND YIELDS OF THIS FUND ARE NOT GUARANTEED BY THE US GOVERNMENT. 10 NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 995.76 1,022.04 2.89 2.92 0.58 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 994.56 1,020.79 4.13 4.18 0.83 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 990.83 1,017.05 7.84 7.95 1.58 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 988.48 1,017.05 7.83 7.95 1.58
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 11 NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 12 NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 90.0% Government agencies and obligations 11.0% Mortgage-backed securities 3.2% Asset-backed securities 3.0% Collateralized mortgage obligations (7.2)% Other*
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. * DUE TO THE TIMING AND NATURE OF THE FUND'S LIABILITIES, TOTAL INVESTMENTS MAY EXCEED THE FUND'S TOTAL NET ASSETS AT PERIOD END. TOP 10 HOLDINGS ------------------------------------------------- 1 U.S. Treasury Notes, 3.625% 01/15/10 17.8% ------------------------------------------------- 2 U.S. Treasury Notes, 2.875% 11/30/06 14.6% ------------------------------------------------- 3 Federal Home Loan Bank, Discount Note 04/19/05 8.4% ------------------------------------------------- 4 U.S. Treasury Notes, 2.000% 08/31/05 6.1% ------------------------------------------------- 5 U.S. Treasury Notes, 3.000% 11/15/07 5.8% ------------------------------------------------- 6 Federal National Mortgage Association, 2.375% 02/15/07 5.6% ------------------------------------------------- 7 Federal Home Loan Mortgage, 4.750% 12/08/10 4.8% ------------------------------------------------- 8 Federal National Mortgage Association TBA, 5.500% 04/15/20 4.3% ------------------------------------------------- 9 Federal Home Loan Mortgage, 4.375% 07/30/09 4.1% ------------------------------------------------- 10 Federal National Mortgage Association TBA, 4.500% 04/15/20 4.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
13 NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS SHORT-INTERMEDIATE LEHMAN BROTHERS U.S. INTERMEDIATE GOVERNMENT FUND GOVERNMENT INDEX -------------------------- --------------------------------- Mar. 31 1995 9675 10000 10367 10910 1997 10758 11428 11685 12500 1999 12241 13323 12416 13644 2001 13820 15276 14431 16036 2003 15941 17792 16347 18429 Mar. 31 2005 16197 18326
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS SHORT-INTERMEDIATE LEHMAN BROTHERS U.S. INTERMEDIATE GOVERNMENT FUND GOVERNMENT INDEX -------------------------- --------------------------------- Mar. 31 1995 10000 10000 10715 10910 1997 11119 11428 12077 12500 1999 12652 13323 12833 13644 2001 14285 15276 14916 16036 2003 16476 17792 16896 18429 Mar. 31 2005 16722 18326
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.28% 4.94%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Short-Intermediate Government Fund over the last 10 years. The Lehman Brothers U.S Intermediate Government Index is an unmanaged index of US government agency and US Treasury securities. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 8/1/91 8/5/91 6/7/93 6/17/92 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -0.78% -1.03% -4.16% -1.77% -4.65% -1.77% -2.73% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.14% 3.88% 2.74% 3.11% 2.79% 3.11% 3.11% 5 YEARS 5.69% 5.44% 4.75% 4.64% 4.64% 4.65% 4.65% 10 YEARS 5.51% 5.28% 4.94% 4.60% 4.60% 4.64% 4.64% SINCE INCEPTION 5.81% 5.60% 5.35% 4.20% 4.20% 4.47% 4.47%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 14 NATIONS GOVERNMENT SECURITIES FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HER VIEWS ON NATIONS GOVERNMENT SECURITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND HER OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks high current income consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Government Securities Fund Investor A Shares provided shareholders with a total return of 0.08%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund's investment style and philosophy are based upon our belief that competitive total returns may be achieved through the active management of interest rate sensitivity, yield curve positioning and sector selection. We combine quantitative models with fundamental factors to seek relative value within these strategies. The goal of Nations Government Securities Fund is to outperform the Lipper General U.S. Government Funds Category.+ HOW DID THE FUND PERFORM FOR THE PERIOD? For the 12-month period ended March 31, 2005, Nations Government Securities Fund (Investor A Shares) returned 0.08% compared with 0.11% for the Lehman Brothers U.S. Government Index*** and 0.46% for the Lipper General U.S. Government Funds Category. The fund's relatively light exposure to mortgage securities during the first half of the period detracted from fund performance. WHAT ECONOMIC AND MARKET FACTORS AFFECTED THE BOND MARKET DURING THE PERIOD? The economy grew at a moderate pace during the fiscal year ended March 31, 2005, as corporate profits and employment rose. Although still relatively low, inflation rose during the period and the Federal Reserve (the Fed) responded by gradually raising a key short-term interest rate -- the federal funds rate -- from 1.00% to 2.75% over the 12-month period. In this environment, short-term rates rose more than longer-term rates. The two-year Treasury rose 2.21 percentage points (from 1.57% to 3.78%) while the 10-year Treasury rose 0.64 percentage points (from 3.84% to 4.48%). Bond sectors with yield advantages over Treasuries, such as mortgage-backed and asset-backed securities, and corporate bonds performed better than comparable Treasury issues during the period. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. The performance shown includes the effects of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which has the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. +Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper General U.S. Government Funds Category invest at least 65% of their assets in US government and agency issues. ***The Lehman Brothers U.S. Government Index is an unmanaged index of government bonds with an average maturity of approximately nine years. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. WHEN INTEREST RATES GO UP, BOND PRICES GENERALLY DROP, AND VICE VERSA. PRICES AND YIELDS OF THIS FUND ARE NOT GUARANTEED BY THE US GOVERNMENT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 15 NATIONS GOVERNMENT SECURITIES FUND PORTFOLIO MANAGER COMMENTARY (continued) HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?++ We significantly increased the fund's exposure to agency mortgage-backed securities from 3% to 55% of net assets over the period, while reducing the fund's agency debt and Treasury exposure. Agency debt was 26% of fund assets at the beginning of the period and only 1% at the period's close, while Treasuries were cut back from 61% to 35% of net assets. We made these changes because mortgages have historically produced better returns than comparable Treasuries in an environment of rising rates. We initiated a 2% position in investment-grade corporate bonds because of the long-term yield advantage they offered over Treasuries. WHAT INVESTMENT DECISIONS HELPED THE FUND'S PERFORMANCE? The fund's exposure to agency debt in the first half of the period helped as that sector performed better than comparable Treasuries. The fund's increased exposure to the mortgage sector in the second half of the period also helped performance as this sector outperformed comparable Treasuries. Careful management of the fund's interest rate sensitivity also helped as rates rose and the time horizon over which mortgage bond investors expected to receive their money back lengthened. WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE DURING THE PERIOD? We believe the fund had less exposure to mortgage bonds than its peer group during the first half of the period, which hurt performance as that sector performed well. Also, the fund had more exposure to the middle part of the yield curve (three-to five-year maturities). This positioning detracted from performance later in the period compared to a combination of shorter and longer term maturities. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We will continue to look for relative value primarily in the Treasury and agency mortgage-backed sectors and will continue to manage interest rate sensitivity. The Fed is expected to continue its program of measured interest rate increases. We will watch for changes in economic growth and other factors that could increase inflationary pressures. --------------------------------------------------- Ann T. Peterson has managed the Nations Government Securities Fund since October 2004. Ms. Peterson is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. On March 21, 2005, the Board of Trustees approved a proposal to reorganize the Nations Government Securities Fund into the Columbia Federal Securities Fund, subject to shareholder approval and the satisfaction of certain other conditions. If approved and other conditions are met, the effective date of the reorganization is expected to occur in September or October 2005 or such a date as the parties may agree. Prior to October 2004, the fund was managed by the Fixed Income Management Team of Banc of America Capital Management, LLC. ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC 16 NATIONS GOVERNMENT SECURITIES FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,004.79 1,021.24 3.70 3.73 0.74 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,004.49 1,020.00 4.95 4.99 0.99 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 999.80 1,016.26 8.68 8.75 1.74 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 999.80 1,016.26 8.68 8.75 1.74
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of expenses, total return would have been reduced. 17 NATIONS GOVERNMENT SECURITIES FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 18 NATIONS GOVERNMENT SECURITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 73.3% Government agencies and obligations 56.0% Mortgage-backed securities 2.2% Corporate fixed-income bonds and notes 2.0% Collateralized mortgage obligations 0.4% Asset-backed securities (33.9)% Other*
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. * DUE TO THE TIMING AND NATURE OF THE FUND'S LIABILITIES, TOTAL INVESTMENTS MAY EXCEED THE FUND'S TOTAL NET ASSETS AT PERIOD END. TOP 10 HOLDINGS ------------------------------------------------- 1 Federal Home Loan Bank, Discount Note 04/01/05 24.5% ------------------------------------------------- 2 Federal Home Loan Mortgage, Discount Note 04/12/05 16.0% ------------------------------------------------- 3 Federal National Mortgage Association, 6.000% 08/01/34 13.7% ------------------------------------------------- 4 Federal Home Loan Mortgage TBA, 5.000% 04/15/20 13.0% ------------------------------------------------- 5 Federal Home Loan Mortgage TBA, 5.500% 03/15/35 9.0% ------------------------------------------------- 6 U.S. Treasury Bonds, 6.875% 08/15/25 8.3% ------------------------------------------------- 7 U.S. Treasury Notes, 08/15/05-05/15/17 6.1% ------------------------------------------------- 8 Federal National Mortgage Association TBA, 6.500% 04/15/35 5.6% ------------------------------------------------- 9 Federal National Mortgage Association TBA, 5.000% 04/15/20-04/15/35 4.8% ------------------------------------------------- 10 U.S. Treasury Notes, 4.375% 08/15/12 4.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
19 NATIONS GOVERNMENT SECURITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS GOVERNMENT SECURITIES LEHMAN BROTHERS U.S. GOVERNMENT FUND INDEX ----------------------------- ------------------------------- Mar. 31 1995 9525 10000 10226 11047 1997 10513 11521 11709 12921 1999 12313 13784 12411 14128 2001 13864 15870 14342 16496 2003 16156 18706 16647 19499 Mar. 31 2005 16660 19522
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS GOVERNMENT SECURITIES LEHMAN BROTHERS U.S. GOVERNMENT FUND INDEX ----------------------------- ------------------------------- Mar. 31 1995 10000 10000 10736 11047 1997 11038 11521 12293 12921 1999 12927 13784 13030 14128 2001 14555 15870 15057 16496 2003 16962 18706 17477 19499 Mar. 31 2005 17495 19522
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.75% 5.24%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Government Securities Fund over the last 10 years. The Lehman Brothers U.S. Government Index is an unmanaged index of government bonds with an average maturity of approximately nine years. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/11/91 4/17/91 6/7/93 7/6/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.33% 0.08% -4.70% -0.66% -5.52% -0.66% -1.63% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.38% 5.13% 3.43% 4.34% 3.41% 4.35% 4.35% 5 YEARS 6.32% 6.07% 5.03% 5.27% 4.94% 5.31% 5.31% 10 YEARS 6.02% 5.75% 5.24% 5.09% 5.09% 5.08% 5.08% SINCE INCEPTION 6.03% 5.78% 5.41% 4.44% 4.44% 4.56% 4.56%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 20 NATIONS INTERMEDIATE BOND FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGER SHARES HIS VIEWS ON NATIONS INTERMEDIATE BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks to obtain interest income and capital appreciation. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Intermediate Bond Fund Investor A Shares provided shareholders with a total return of negative 0.99%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund's investment style and philosophy are based upon our belief that the level and consistency of total return that we seek may be achieved through a disciplined risk-management process. We strive to manage interest-rate risk by using a quantitative approach to sector allocation, sector rotation and relative value security selection. The investment strategy of Nations Intermediate Bond Fund is designed to outperform the Lehman Brothers U.S. Intermediate Government/Credit Index.*** The index includes all publicly issued investment-grade corporate, US Treasury, and US government and agency securities with maturities of one to ten years. The index has an average duration of 3.5 years and is well matched to the fund's peer group, the Lipper Short-Intermediate Investment Grade Debt Funds Category.+ Duration is a measure of a fund's interest-rate sensitivity. HOW DID THE FUND PERFORM? For the 12-month period ended March 31, 2005, Nations Intermediate Bond Fund (Investor A Shares) returned negative 0.99%. The fund's performance was lower than its benchmark, the Lehman Brothers U.S. Intermediate Government/Credit Index, which returned negative 0.32%, and the average return of the Lipper Short- Intermediate Investment Grade Debt Funds Category, which was negative 0.34%. The fund's exposure to economically-sensitive bonds was lower than the sector's weight in its benchmark, which accounted for its slight relative performance *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effects of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which has the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***Lehman Brothers U.S. Intermediate Government/Credit Index is an unmanaged index of all publicly issued investment grade corporate, US Treasury and US Government and agency securities with maturities between one to ten years. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Short-Intermediate Investment Grade Debt Funds Category invest at least 65% of their assets in investment grade debt issues with dollar-weighted average maturities of one to five years. BOND INVESTING POSES SPECIAL RISKS, INCLUDING THE CREDIT QUALITY OF INDIVIDUAL ISSUERS, POSSIBLE PREPAYMENTS, MARKET OR ECONOMIC DEVELOPMENTS AND YIELD AND SHARE PRICE FLUCTUATIONS DUE TO CHANGES IN INTEREST RATES. WHEN INTEREST RATES GO UP, BOND PRICES TYPICALLY DROP, AND VICE VERSA. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 21 NATIONS INTERMEDIATE BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) shortfall in a period that was generally negative for all segments of the bond market. WHAT WAS THE ECONOMIC AND MARKET ENVIRONMENT DURING THE 12-MONTH PERIOD? During the fiscal year ended March, 31, 2005, the US economy continued to expand at a healthy pace, giving rise to concerns about accelerating inflation. In this environment, the Federal Reserve (the Fed) reversed its policy of keeping interest rates low in order to stimulate economic growth and began raising short-term interest rates. Between June 2004 and March 2005, the Fed boosted rates seven times, each time by one quarter of a percentage point. By the end of March, the federal funds rate, the rate banks charge for overnight loans, had risen from 1.00% to 2.75%. Short-term interest rates went up the most. Historically, the entire bond market would have seen interest rates increase, however, the longest-term rate moved unexpectedly lower. HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?++ We expected that an expanding economy would benefit corporate bonds. Therefore, we had a higher-than-index weight in the corporate sector. We favored securities issued by utilities and high quality financial companies. We also increased exposure to asset-backed securities, which provided an attractive yield advantage over other high quality securities. WHAT INVESTMENT DECISIONS HELPED THE FUND'S PERFORMANCE? Nearly every sector of the domestic bond market outperformed US Treasury securities for the period. As a result, our decision to underweight US Treasuries and overweight corporate and asset-backed securities helped performance in a very difficult environment. Also, holding fewer bonds with short-term maturities limited the loss of principal when short-term yields moved higher and bond prices declined. WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE DURING THE PERIOD? Although it would have been a challenge to mitigate the negative performance that occurred across the spectrum of bonds, the fund might have benefited from having more exposure to economically sensitive securities, such as lower quality industrial bonds. These bonds performed well during this reporting period. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We believe that the Fed is likely to continue to raise interest rates gradually, a policy that is likely to result in a more volatile investment environment for bonds. We plan to maintain an underweight in the intermediate part of the maturity spectrum. This should allow us to take advantage of rising short-term interest rates and more stable long-term interest rates. We will also keep a higher-than-index position in corporate and asset-backed securities, which, in our opinion, have the potential to outperform modestly for the rest of 2005. ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. 22 NATIONS INTERMEDIATE BOND FUND PORTFOLIO MANAGER COMMENTARY (continued) Brian Drainville has managed the Nations Intermediate Bond Fund since November 2004. Mr. Drainville is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Prior to November 2004, the fund was managed by the Fixed Income Management Team of Banc of America Capital Management, LLC. 23 NATIONS INTERMEDIATE BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ---------------------- ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 994.32 1,021.79 3.13 3.18 0.63 - --------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 993.02 1,020.54 4.37 4.43 0.88 - --------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 989.38 1,016.80 8.08 8.20 1.63 - --------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 989.58 1,016.80 8.09 8.20 1.63
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 24 NATIONS INTERMEDIATE BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 25 NATIONS INTERMEDIATE BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 49.6% Corporate fixed-income bonds and notes 35.1% Government agencies and obligations 8.8% Asset-backed securities 4.7% Collateralized mortgage obligations 2.9% Mortgage-backed securities (1.1)% Other*
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. * DUE TO THE TIMING AND NATURE OF THE FUND'S LIABILITIES, TOTAL INVESTMENTS MAY EXCEED THE FUND'S TOTAL NET ASSETS AT PERIOD END. TOP 10 HOLDINGS ------------------------------------------------- 1 U.S. Treasury Notes, 4.250% 08/15/13- 11/15/14 4.1% ------------------------------------------------- 2 Federal National Mortgage Association, 5.250% 06/15/06-01/15/09 3.3% ------------------------------------------------- 3 U.S. Treasury Notes, 6.500% 02/15/10 2.9% ------------------------------------------------- 4 U.S. Treasury Notes, 1.875% 11/30/05 2.3% ------------------------------------------------- 5 U.S. Treasury STRIPS, 05/15/06-11/15/08 1.9% ------------------------------------------------- 6 U.S. Treasury Bonds, 7.250% 05/15/16 1.2% ------------------------------------------------- 7 Morgan Stanley Capital I, 4.970% 12/15/41 1.2% ------------------------------------------------- 8 U.S. Treasury Bonds, 3.125% 04/15/09 1.2% ------------------------------------------------- 9 General Electric Capital, 3.190% 06/22/09 1.1% ------------------------------------------------- 10 U.S. Treasury Notes, 4.625% 05/15/06 1.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
26 NATIONS INTERMEDIATE BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS U.S. INTERMEDIATE NATIONS INTERMEDIATE BOND FUND GOVERNMENT CREDIT INDEX ------------------------------ --------------------------------- Mar. 31 1995 9675 10000 10531 10956 1997 10945 11482 11871 12592 1999 12548 13419 12710 13700 2001 14092 15366 14608 16159 2003 16132 18056 16805 19013 Mar. 31 2005 16633 18954
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS U.S. INTERMEDIATE NATIONS INTERMEDIATE BOND FUND GOVERNMENT CREDIT INDEX ------------------------------ --------------------------------- Mar. 31 1995 10000 10000 10885 10956 1997 11313 11482 12270 12592 1999 12969 13419 13137 13700 2001 14566 15366 15099 16159 2003 16674 18056 17369 19013 Mar. 31 2005 17196 18954
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 5.57% 5.22%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Intermediate Bond Fund over the last 10 years. The Lehman Brothers U.S. Intermediate Government/Credit Index is an unmanaged index of all publicly issued investment grade corporate, US Treasury and US government and agency securities with maturities between one to ten years. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B++ INVESTOR C PRIMARY A+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 1/24/94 10/20/99 11/20/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -0.73% -0.99% -4.16% -1.73% -4.59% -1.74% -2.69% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 4.67% 4.43% 3.28% 3.65% 3.03% 3.65% 3.65% 5 YEARS 5.79% 5.53% 4.83% 4.75% 4.75% 6.06% 6.06% 10 YEARS 5.67% 5.57% 5.22% 5.15% 5.15% -- -- SINCE INCEPTION 5.24% 5.15% 4.84% 4.78% 4.78% 5.26% 5.26%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. +Primary A Shares commenced operations on May 21, 1999 and have no performance prior to that date. Performance prior to May 21, 1999 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. These 12b-1 fees are not applicable to Primary A Shares. Inception date for Investor A Shares is January 24, 1994. ++Investor B Shares commenced operations on October 20, 1999 and have no performance prior to that date. Performance prior to October 20, 1999 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. Inception date for Investor A Shares is January 24, 1994. 27 NATIONS BOND FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks total return by investing in investment grade fixed-income securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Bond Fund Investor A Shares provided shareholders with a total return of 1.21%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The fund's investment style is based on the premise that value can be added through strategic shifts in sector allocation and portfolio composition. The fund's management team follows a top-down approach in the development of its fixed-income strategy, focusing on macroeconomic trends, industry sector and issuer fundamentals and relative value, and curve and duration positioning. Nations Bond Fund seeks to outperform the Lehman Brothers U.S. Aggregate Index,*** a broad-based measure of the bond market as a whole. The index has an average duration between four and five years and includes all publicly issued investment grade corporate, AAA-rated asset-backed, agency mortgage-backed securities, US Treasury, US agency and investment grade commercial mortgage-backed securities with maturities longer than one year. The index is well matched to the Lipper Intermediate Investment Grade Debt Funds Category.+ HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations Bond Fund (Investor A Shares) returned 1.21% compared with 1.15% for its benchmark, the Lehman Brothers U.S. Aggregate Index. The Lipper Intermediate Investment Grade Debt Funds Category returned 0.81% over the same time period. HOW DID ECONOMIC AND MARKET TRENDS AFFECT THE FUND DURING THE PERIOD? The period began with solid economic trends in place, including a large pickup in employment growth. Inflation seemed well contained, but pricing pressures were evident, especially among commodities, such as oil. Yet, companies were under *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effects of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which has the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***Lehman Brothers U.S. Aggregate Index is an unmanaged index made up of US government agency and US Treasury securities, corporate bonds and mortgage-backed securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper Intermediate Investment Grade Debt Funds Category invest at least 65% of the assets in investment grade debt issues with dollar-weighted average maturities of five to ten years. BOND INVESTING POSES SPECIAL RISKS, INCLUDING THE CREDIT QUALITY OF INDIVIDUAL ISSUERS, POSSIBLE PREPAYMENTS, MARKET OR ECONOMIC DEVELOPMENTS AND YIELD AND SHARE PRICE FLUCTUATIONS DUE TO CHANGES IN INTEREST RATES. WHEN INTEREST RATES GO UP, BOND PRICES TYPICALLY DROP, AND VICE VERSA. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 28 NATIONS BOND FUND PORTFOLIO MANAGERS' COMMENTARY (continued) pressure to keep costs low and productivity high. Consumer spending remained high, and business sentiment improved, which pointed to an increase in capital spending. These factors led the Federal Reserve (the Fed) to initiate a policy of measured short-term interest rate increases, which came as no surprise to the financial markets because the Fed took care to lay out its intentions in its official remarks to Congress and other announcements. In response, short-term interest and some intermediate-term interest rates moved higher. However, long-term rates moved unexpectedly lower, which helped 30-year bonds generate the strongest returns for the period. All sectors were affected by rising interest rates, but Treasuries and agencies were affected the most and both sectors produced only small returns. The lowest-quality sectors, such as high-yield, emerging and international markets, produced the most generous returns. Likewise, among investment grade issues, the lowest-quality segment generated the best returns. The government agency mortgage market seemed unaffected by the regulatory cloud and scrutiny surrounding Fannie Mae and Freddie Mac. In fact, this sector generally outperformed most other investment- grade sectors, including corporate issues. Within the corporate sector, utility bonds, which are generally of lower quality than other sectors, exhibited strong performance. HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?++ Throughout the period, we maintained a lower weight in government securities than the benchmark -- a decision that helped performance as non-Treasury sectors of the market fared best for the period. A small position in foreign securities, including those denominated in foreign currencies, also added to performance. Other sector decisions also aided performance. During the first half of the reporting period, the fund was overweight in investment grade and high-yield corporate bonds. In the second half, we increased the fund's mortgage and asset-backed positions to an overweight and these weights made a positive contribution to performance. A decision to keep the fund's duration short to neutral detracted from return early in the period. Duration is a measure, expressed in years, of interest-rate sensitivity. It's similar to maturity, but because it takes into consideration the entire stream of future principal and interest payments and how long it will take to collect them, the duration is a more complex and accurate measure of a fund's exposure to changing interest rates. Generally speaking, we shorten duration when we expect interest rates to rise and lengthen it when we expect interest rates to fall. Short-term interest rates rose during the period, but long-term rates declined until the last weeks of the period, when the fund's duration was an aid to performance. WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE DURING THE PERIOD? Looking back, the fund would have done better if it had owned a bigger position in mortgage-backed securities earlier in the period. Also, the fund gave up some ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. 29 NATIONS BOND FUND PORTFOLIO MANAGERS' COMMENTARY (continued) performance in the final weeks of the period, when corporate and high-yield securities suffered a reversal of fortune. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We believe that rising interest rates and slowing economic growth, an inevitable result of the Fed's recent policy on interest rates, are likely to have a major impact on corporate performance. As a result, we have scaled back exposure to corporate bonds. We also trimmed mortgage holdings slightly because we think their performance may have peaked after a period of outperformance. We also maintained a relatively light exposure to government securities. We used some of these proceeds to add to the international sector, where the fund remains overweight because we see the potential for higher returns. The period ended with the fund's duration at or near neutral. However, if economic growth slows significantly, we might lengthen duration relative to the benchmark on the expectation that interest rates could come down, in which case a longer duration could help capture added return for the fund. -------------------------------------------- Leonard Aplet has co-managed Nations Bond Fund since October 2004. Mr. Aplet is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary Investment management division of Bank of America Corporation. Marie Schofield has co-managed Nations Bond Fund since October 2004. Ms. Schofield is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary Investment management division of Bank of America Corporation. Kevin Cronk has co-managed Nations Bond Fund since October 2004. Mr. Cronk is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary Investment management division of Bank of America Corporation. Laura Ostrander has co-managed Nations Bond Fund since October 2004. Ms. Ostrander is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary Investment management division of Bank of America Corporation. Thomas LaPointe has co-managed Nations Bond Fund since October 2004. Mr. LaPointe is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary Investment management division of Bank of America Corporation. Brian Drainville has co-managed Nations Bond Fund since March 2004. Mr. Drainville is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary Investment management division of Bank of America Corporation. The fund was formally managed by the Fixed Income Management Team. 30 NATIONS BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,006.23 1,022.09 2.85 2.87 0.57 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,004.99 1,020.84 4.10 4.13 0.82 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,001.25 1,017.10 7.83 7.90 1.57 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,001.25 1,017.10 7.83 7.90 1.57
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 31 NATIONS BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 32 NATIONS BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 34.4% Corporate fixed-income bonds and notes 33.8% Mortgage-backed securities 30.1% Government agencies and obligations 21.9% Asset-backed securities 3.1% Collateralized mortgage obligations 0.5% Municipal bonds (23.8)% Other*
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. * DUE TO THE TIMING AND NATURE OF THE FUND'S LIABILITIES, TOTAL INVESTMENTS MAY EXCEED THE FUND'S TOTAL NET ASSETS AT PERIOD END. TOP 10 HOLDINGS ------------------------------------------------- 1 Federal National Mortgage Association TBA, 5.000% 04/15/20-04/15/35 13.2% ------------------------------------------------- 2 Federal National Mortgage Association TBA, 6.500% 04/15/35 5.8% ------------------------------------------------- 3 Federal Home Loan Bank, Discount Notes 4.7% ------------------------------------------------- 4 Federal Home Loan Mortgage TBA, 4.500% 03/15/20-03/15/35 3.4% ------------------------------------------------- 5 Government National Mortgage Association, 5.500% 03/15/35 3.2% ------------------------------------------------- 6 Federal Home Loan Bank, 04/13/05 2.8% ------------------------------------------------- 7 Federal Home Loan Mortgage, Discount Notes 2.7% ------------------------------------------------- 8 Federal National Mortgage Association TBA, 5.500% 03/15/35 2.1% ------------------------------------------------- 9 U.S. Treasury Bonds, 6.250% 08/15/23-05/15/30 2.0% ------------------------------------------------- 10 Federal National Mortgage Association, 4.3750% 07/17/13 2.0% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
33 NATIONS BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS U.S. AGGREGATE NATIONS BOND FUND INDEX ----------------- ------------------------------ Mar. 31 1995 9675 10000 10561 11079 1997 10952 11623 12081 13017 1999 12732 13861 12827 14121 2001 14252 15890 14816 16740 2003 16157 18697 17113 19707 Mar. 31 2005 17326 19932
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
LEHMAN BROTHERS U.S. AGGREGATE NATIONS BOND FUND INDEX ----------------- ------------------------------ Mar. 31 1995 10000 10000 10916 11079 1997 11320 11623 12487 13017 1999 13160 13861 13257 14121 2001 14730 15890 15314 16740 2003 16700 18697 17688 19707 Mar. 31 2005 17902 19932
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 6.00% 5.65%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Bond Fund over the last 10 years. The Lehman Brothers U.S. Aggregate Index is, an unmanaged index made up of US government agency and US Treasury securities, corporate bonds and mortgage-backed securities. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/30/92 11/19/92 6/7/93 11/16/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.56% 1.21% -2.07% 0.55% -2.34% 0.45% -0.51% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.60% 5.34% 4.20% 4.56% 4.25% 4.56% 4.56% 5 YEARS 6.47% 6.19% 5.50% 5.42% 5.42% 5.40% 5.40% 10 YEARS 6.25% 6.00% 5.65% 5.32% 5.32% 5.34% 5.34% SINCE INCEPTION 6.09% 5.85% 5.56% 4.87% 4.87% 5.25% 5.25%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 34 NATIONS STRATEGIC INCOME FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON THE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks total return with an emphasis on current income by investing in a diversified portfolio of fixed income securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations Strategic Income Fund Investor A Shares provided shareholders with a total return of 2.48%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. We believe that fixed-income performance and the consistency of total returns can be enhanced through a disciplined process that manages interest-rate risk. We emphasize adding value through strategic shifts in sector allocation and composition. In managing the fund, the managers employ a multi-sector strategy. In addition to investing in US government and investment-grade debt securities, the fund may invest up to 35% of its assets in non-investment grade securities that are rated "B" or better by a nationally recognized rating agency. The fund also may invest up to one-third of its assets in foreign securities. The security selection process seeks relative value across different asset classes and maturity levels. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations Strategic Income Fund (Investor A Shares) returned 2.48% compared with 1.15% for its benchmark, the *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A shares. The performance shown includes the effects of fee waivers and/or expense reimbursements by the investment advisor and/or other service providers, which has the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. SOME OF THE COUNTRIES THE UNDERLYING FUNDS INVEST IN ARE CONSIDERED EMERGING ECONOMIES, WHICH MEANS THERE MAY BE GREATER RISKS ASSOCIATED WITH INVESTING THERE THAN IN MORE DEVELOPED COUNTRIES. IN ADDITION, CONCENTRATION OF INVESTMENTS IN A SINGLE REGION MAY RESULT IN GREATER VOLATILITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 35 NATIONS STRATEGIC INCOME FUND PORTFOLIO MANAGERS' COMMENTARY (continued) Lehman Brothers U.S. Aggregate Index.*** The Lipper Multi-Sector Income Funds Category+ returned 5.14% over that same time period. HOW DID YOU MANAGE THE FUND DURING THE PERIOD? As part of the process of assuming management responsibility for the fund, we initiated a fundamental restructuring of the fund's holdings during the period. We sold a majority of the fund's investment-grade corporate bonds and used the proceeds to purchase non-dollar-denominated foreign bonds. We also realigned the portfolio's high-yield holdings. WHAT INVESTMENT DECISIONS HELPED THE FUND'S PERFORMANCE?++ With 25% of the portfolio in the high-yield market and another 10% in emerging market debt, the fund outperformed its benchmark. These two asset classes were among the best performers in the fixed income market during the period. A combination of low yields and an improving economic environment allowed for a widespread improvement in the credit quality of individual issuers. WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE DURING THE PERIOD? For most of the period, the fund had no exposure to non-dollar bonds, which benefited from the weakness in the US dollar. In addition, many foreign markets outperformed the US Treasury market in local currency terms, so the fund would have benefited had we committed to these markets earlier. Also, the high-yield portion of the portfolio underperformed its benchmark prior to our restructuring efforts. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? We plan to monitor with care the fund's positions in the high-yield and emerging market areas now that their yield advantage over higher quality bonds has declined to levels that are low by historical standards. However, the geopolitical factors that have caused the dollar to weaken remain in place. In particular, we continue to own European government bonds, which we believe have the potential to outperform US Treasury securities if domestic yields move higher. ------------------------------------------ Laura Ostrander has co-managed Nations Strategic Income Fund since November 2004. She is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. ***The Lehman Brothers U.S. Aggregate Index is an unmanaged index made up of US government agency and US Treasury securities, corporate bonds and mortgage-backed securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +Lipper Inc. is an independent mutual fund performance monitor. Funds in the Lipper Multi-Sector Income Funds Category seek current income by allocating assets among several different fixed income securities sectors (with no more than 65% in any one sector except for defensive purposes), including US government and foreign governments, with a significant portion of assets in securities rated below investment grade. ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. 36 NATIONS STRATEGIC INCOME FUND PORTFOLIO MANAGERS' COMMENTARY (continued) Kevin Cronk has co-managed Nations Strategic Income Fund since March 2005. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Thomas LaPointe has co-managed Nations Strategic Income Fund since March 2005. He is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. On March 21, 2005, the Board of Trustees approved a proposal to reorganize the Nations Strategic Income Fund into the Columbia Strategic Income Fund, subject to shareholder approval and the satisfaction of certain other conditions. If approved and other conditions are met, the effective date of the reorganization is expected to occur in September or October 2005 or on such a date to which the parties may agree. The fund was formally managed by the Fixed Income Management Team of Banc of America Capital Management, LLC. 37 NATIONS STRATEGIC INCOME FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,008.58 1,021.04 3.91 3.93 0.78 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,007.33 1,019.80 5.15 5.19 1.03 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,003.59 1,016.06 8.89 8.95 1.78 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,003.59 1,016.06 8.89 8.95 1.78
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of expenses, total return would have been reduced. 38 NATIONS STRATEGIC INCOME FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 39 NATIONS STRATEGIC INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 58.6% Government agencies and obligations 31.0% Corporate fixed-income bonds and notes 18.8% Mortgage-backed securities 5.4% Asset-backed securities (13.8)% Other*
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. * DUE TO THE TIMING AND NATURE OF THE FUND'S LIABILITIES, TOTAL INVESTMENTS MAY EXCEED THE FUND'S TOTAL NET ASSETS AT PERIOD END. TOP 10 HOLDINGS ------------------------------------------------- 1 Federal Home Loan Mortgage, Discount Notes 04/12/05 11.6% ------------------------------------------------- 2 Federal National Mortgage Association TBA, 6.500% 04/15/35 9.4% ------------------------------------------------- 3 Federal National Mortgage Association TBA, 5.000% 04/15/20 6.2% ------------------------------------------------- 4 Federal Home Loan Mortgage, Discount Notes 04/19/05 6.2% ------------------------------------------------- 5 U.S. Treasury STRIPS, 11/15/08-05/15/23 4.1% ------------------------------------------------- 6 Federal National Mortgage Association TBA, 5.500% 03/15/35 2.6% ------------------------------------------------- 7 Federal Republic of Brazil, 3.125% 04/15/12 2.3% ------------------------------------------------- 8 Russian Federation, 5.000% 03/31/30 2.2% ------------------------------------------------- 9 U.S. Treasury Notes, 4.750% 06/15/09 2.0% ------------------------------------------------- 10 United Mexican States, 11.500% 05/15/26 1.4% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
40 NATIONS STRATEGIC INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
BLENDED LEHMAN AGGREGATE BOND, CITIGROUP ALL BB & B- RATED HIGH YIELD MARKET INDEX AND J.P. MORGAN NATIONS STRATEGIC INCOME LEHMAN BROTHERS U.S. EMERGING MARKET BOND FUND AGGREGATE INDEX GLOBAL INDEX ------------------------ -------------------- --------------------------- Mar. 31 1995 9525 10000 10000 10567 11079 11514 1997 11065 11623 12542 12260 13017 14237 1999 12841 13861 14803 12674 14121 15255 2001 14043 15890 16815 14471 16740 17587 2003 15504 18697 19352 16965 19707 21374 Mar. 31 2005 17382 19932 22021
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
BLENDED LEHMAN AGGREGATE BOND, CITIGROUP ALL BB & B- RATED HIGH YIELD MARKET INDEX AND J.P. MORGAN NATIONS STRATEGIC INCOME LEHMAN BROTHERS U.S. EMERGING MARKET BOND FUND AGGREGATE INDEX GLOBAL INDEX ------------------------ -------------------- --------------------------- Mar. 31 1995 10000 10000 10000 11094 11079 11514 1997 11617 11623 12542 12871 13017 14237 1999 13481 13861 14803 13306 14121 15255 2001 14743 15890 16815 15193 16740 17587 2003 16277 18697 19352 17811 19707 21374 Mar. 31 2005 18249 19932 22021
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/95 through 3/31/05) 6.20% 5.68%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Strategic Income Fund over the last 10 years. The Lehman Brothers U.S. Aggregate Index is an unmanaged index made up of US government agency and US Treasury securities, corporate bonds and mortgage-backed securities. The blend index consists of 65% of the Lehman Brothers U.S. Aggregate Index, 25% of the Citigroup All BB&B-Rated High Yield Market Index and 10% of the J.P. Morgan Emerging Market Bond Global Index. The Citigroup All BB&B-Rated High Yield Market Index is an unmanaged index that includes US dollar-denominated bonds rated B or BB and the J.P. Morgan Emerging Market Bond Global Index is an unmanaged index that covers 27 emerging market countries. The indices are unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/30/92 11/25/92 6/7/93 11/9/92 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 2.74% 2.48% -2.37% 1.72% -3.19% 1.72% 0.74% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 6.56% 6.31% 4.59% 5.51% 4.61% 5.51% 5.51% 5 YEARS 6.78% 6.52% 5.50% 5.75% 5.43% 5.73% 5.73% 10 YEARS 6.47% 6.20% 5.68% 5.51% 5.51% 5.54% 5.54% SINCE INCEPTION 6.83% 6.55% 6.13% 5.31% 5.31% 5.97% 5.97%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 41 NATIONS HIGH YIELD BOND FUND PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE FUND'S PORTFOLIO MANAGERS SHARE THEIR VIEWS ON NATIONS HIGH YIELD BOND FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The fund seeks maximum income by investing in a diversified portfolio of high yield debt securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations High Yield Bond Fund Investor A Shares provided shareholders with a total return of 7.64%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Our investment philosophy emphasizes current yield while looking for total return through investments in a diversified portfolio of high-yield debt securities. We believe that high-yield managers can add value through superior credit selection, which may reduce default rates and result in attractive risk-adjusted returns. The primary focus of our investment strategy is to preserve invested capital. To this end, we seek to identify securities that offer what we call a margin of safety. These are securities with strong asset coverage or significant free cash flow. The secondary focus of our investment process is to generate total return through an identified catalyst for price appreciation. In our view, companies that can significantly reduce debt through free cash flow, new equity or an identified restructuring may present potential opportunities for price appreciation. HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Nations High Yield Bond Fund (Investor A Shares) returned 7.64% compared with 7.83% for its benchmark, the Credit Suisse First Boston (CSFB) High Yield Index.*** The fund outperformed its peer group, the Lipper High Current Yield Funds Category+, whose average return was 6.30% over the same period. Strong performance from selected bonds reflected a generally positive environment for the high-yield market during the period. The fund's higher-than-usual cash position also helped shore up performance when the high-yield market declined during the first quarter of 2005. *The outlook for this fund may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total returns would have been lower. ***The Credit Suisse First Boston (CSFB) High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the high yield debt market. The index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. Funds in the Lipper High Current Yield Funds Category aim at high (relative) current yield from fixed income securities and have no quality or maturity restrictions. INVESTING IN HIGH YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 42 NATIONS HIGH YIELD BOND FUND PORTFOLIO MANAGERS' COMMENTARY (continued) WHAT MARKET AND ECONOMIC FACTORS AFFECTED THE FUND DURING THE 12-MONTH PERIOD? The high-yield market was the beneficiary of healthy economic growth, which boosted returns through 2004. However, in March of 2005 the high-yield market fell abruptly as uncertainty about the economy, interest rates and inflation unsettled the markets. By the end of the first quarter of 2005, the yield differential between high-yield bonds and Treasury issues of comparable maturities had narrowed to a point that was close to the sector's historical low. As a result, investors did not feel that they would receive enough additional yield for the added risk associated with the sector. Specialty chemicals, steel and restaurants were the top-performing sectors for the period while airlines, consumer durables and autos were the weakest. The fund had less exposure to consumer durables than the index, which helped performance. However, an overweight in airlines relative to the index held back results. The fund also had less exposure to restaurants, because few of them met our overall investment criteria. This underweight was a negative for performance because the restaurant sector did well. HOW DID YOU MANAGE THE FUND IN LIGHT OF THE ECONOMIC AND MARKET ENVIRONMENT? As the yield spread between high-yield and Treasury bonds narrowed, we diversified the portfolio among a broader range of industries. Also, as companies in the portfolio refinanced higher-cost debt to take advantage of lower interest rates, some of the higher-yielding issues in the portfolio were called: the issuing companies bought them back. As a result, the portfolio's cash position exceeded its normal level at a time when there were fewer attractive securities available for purchase. While we prefer not to hold high levels of cash, it actually enhanced results during the first quarter of the year when the high-yield market slumped. WHAT INVESTMENT DECISIONS HELPED THE FUND'S PERFORMANCE?++ The three best performers for the portfolio were Ono Finance, Goodyear Tire and Rubber and Georgia-Pacific. We held positions in Ono Finance, an international cable company, whose bonds rose in value as its operational performance improved. Because the bonds were denominated in foreign currency, they also benefited from a weakening US dollar. Goodyear Tire and Rubber benefited from a turnaround that is underway within the company, and paper products giant Georgia-Pacific gained because its improved credit strength could lead to a ratings upgrade. WHAT INVESTMENT DECISIONS HINDERED OVERALL PERFORMANCE OF THE FUND? The fund's airline bonds continued to suffer as skyrocketing jet fuel prices continued to plague carriers. Delta Airlines avoided bankruptcy, thanks to a favorable settlement with its pilots' union. Other disappointments included Collins and Aikman Products, a maker of automotive instrument panels, fabrics and other ++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- MacKay Shields LLC. 43 NATIONS HIGH YIELD BOND FUND PORTFOLIO MANAGERS' COMMENTARY (continued) systems, which was the victim of a sagging auto sector. Independent power producer Calpine also lost ground as investors raised questions about its liquidity. HOW HAVE YOU POSITIONED THE FUND TO REFLECT YOUR OUTLOOK FOR THE PERIOD AHEAD? In an environment of narrower yield spreads, we plan to boost holdings in floating rate debt, whose interest payments are adjusted periodically to reflect current interest rates. As a result, these securities have typically exhibited lower price fluctuation than fixed-rate securities. We also plan to sell bonds that have reached our price targets. And the fund's above-normal cash level is likely to persist until we believe that the high-yield market offers better value. Even if cash slows performance somewhat, we prefer to stick with our proven investment process rather than deviating from it simply to deploy cash. We plan to use the fund's cash tactically, taking prompt action when opportunities arise. We also plan to focus on bonds that are already in the market rather than on new issues. --------------------------------------------------- The fund is managed by the High Yield Portfolio Management Team of MacKay Shields LLC, investment sub-advisor to the fund. 44 NATIONS HIGH YIELD BOND FUND SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,041.69 1,020.74 4.28 4.23 0.84 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,041.54 1,019.50 5.55 5.49 1.09 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,037.00 1,015.76 9.34 9.25 1.84 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,037.10 1,015.76 9.34 9.25 1.84
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the 45 NATIONS HIGH YIELD BOND FUND SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 46 NATIONS HIGH YIELD BOND FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 79.6% Corporate fixed-income bonds and notes 4.8% Convertible bonds 2.1% Preferred stocks 1.6% Common stocks 0.6% Asset-backed securities 11.2% Other 0.1% Warrants
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Sovereign Real Estate Investment 1.2% ------------------------------------------------- 2 El Paso Production Holding, 7.750% 06/01/13 1.1% ------------------------------------------------- 3 Goodyear Tire & Rubber, 11.000% 03/01/11 1.1% ------------------------------------------------- 4 Laboratory Corp. of America Holdings, 09/11/21 1.0% ------------------------------------------------- 5 Calpine, 8.500% 07/15/10 1.0% ------------------------------------------------- 6 Georgia-Pacific, 8.875% 05/15/31 1.0% ------------------------------------------------- 7 Ono Finance PLC, 10.500% 05/15/14 1.0% ------------------------------------------------- 8 Calpine Canada, 8.500% 05/01/08 1.0% ------------------------------------------------- 9 Terra Capital, 12.875% 10/15/08 0.9% ------------------------------------------------- 10 Quintiles Transnational, 10.000% 10/01/13 0.9% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
47 NATIONS HIGH YIELD BOND FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS HIGH YIELD BOND FUND CSFB HIGH YIELD INDEX ---------------------------- --------------------- Feb. 14 2000 9525 10000 9494 9850 9688 9894 9803 9962 9346 9458 9872 9925 9796 9863 9427 9471 2001 10119 10007 10433 10259 10027 10023 9436 9741 2002 10314 10318 11067 11030 12209 12104 12613 12472 2003 13526 13199 13821 13552 13759 13526 14283 14133 2004 15123 14778 Mar. 31 2005 14874 14614
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS HIGH YIELD BOND FUND CSFB HIGH YIELD INDEX ---------------------------- --------------------- Feb. 14 2000 10000 10000 9967 9850 10171 9894 10291 9962 9812 9458 10364 9925 10284 9863 9897 9471 2001 10624 10007 10953 10259 10527 10023 9906 9741 2002 10828 10318 11619 11030 12818 12104 13242 12472 2003 14201 13199 14511 13552 14445 13526 14996 14133 2004 15877 14778 Mar. 31 2005 15618 14614
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (2/14/00 through 3/31/05) 9.09% 8.05%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations High Yield Bond Fund from the inception of the share class. The Credit Suisse First Boston (CSFB) High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the high yield debt market. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. Index performance is from 2/29/00. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 2/14/00 2/14/00 2/17/00 3/8/00 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 7.76% 7.64% 2.51% 6.89% 2.13% 6.80% 5.85% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 12.76% 12.55% 10.74% 11.69% 10.88% 11.69% 11.69% 5 YEARS 9.71% 9.40% 8.35% 8.62% 8.35% 8.58% 8.58% SINCE INCEPTION 9.43% 9.09% 8.05% 8.31% 8.18% 8.30% 8.30%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 48 NATIONS FUNDS Nations Short-Term Income Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 39.8% BASIC MATERIALS -- 1.0% CHEMICALS -- 0.3% $ 2,500 Equistar Chemicals LP 6.500% 02/15/06............................................. $ 2,525 963 Lyondell Chemical Co. 9.875% 05/01/07............................................. 987 ---------- 3,512 ---------- FOREST PRODUCTS AND PAPER -- 0.7% 4,000 International Paper Co. 4.250% 01/15/09............................................. 3,946 2,750 Louisiana Pacific Corp. 8.500% 08/15/05............................................. 2,790 ---------- 6,736 ---------- 10,248 ---------- COMMUNICATIONS -- 4.2% MEDIA -- 2.0% 2,510 Comcast Cable Communications, Inc. 6.375% 01/30/06............................................. 2,555 5,000 Gannett Co., Inc. 5.500% 04/01/07............................................. 5,124 2,750 Lenfest Communications Inc. 8.375% 11/01/05............................................. 2,813 1,000 Reed Elsevier Capital 7.000% 05/15/05............................................. 1,004 4,641 Time Warner, Inc. 8.110% 08/15/06............................................. 4,862 3,500 Viacom, Inc. 5.625% 05/01/07............................................. 3,582 ---------- 19,940 ---------- TELECOMMUNICATIONS -- 2.2% 4,000 Deutsche Telekom International Finance BV(f) (8.500% 06/15/10)........................................... 4,600 3,000 SBC Communications, Inc. 5.750% 05/02/06............................................. 3,054 2,500 Sprint Capital Corp. 6.375% 05/01/09............................................. 2,641 6,000 Verizon Global Funding Corp. 7.250% 12/01/10............................................. 6,659 4,000 Vodafone Group PLC 7.750% 02/15/10............................................. 4,518 ---------- 21,472 ---------- 41,412 ---------- CONSUMER CYCLICAL -- 5.0% AUTO MANUFACTURERS -- 0.7% 3,000 DaimlerChrysler NA Holding Corp. 4.750% 01/15/08............................................. 2,986 4,000 Toyota Motor Credit Corp. 2.800% 01/18/06............................................. 3,968 ---------- 6,954 ---------- AUTO PARTS AND EQUIPMENT -- 0.2% 1,500 Lear Corp. 7.960% 05/15/05............................................. 1,507 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- HOME BUILDERS -- 0.6% $ 1,675 D.R. Horton, Inc. 10.500% 04/01/05............................................ $ 1,675 2,000 KB Home 9.500% 02/15/11............................................. 2,118 2,000 Toll Corp. 8.000% 05/01/09............................................. 2,030 ---------- 5,823 ---------- HOUSEWARES -- 0.4% 4,000 Newell Rubbermaid, Inc. 2.000% 05/01/05............................................. 3,994 ---------- LODGING -- 1.1% 2,000 Ameristar Casinos, Inc. 10.750% 02/15/09............................................ 2,185 2,000 Harrah's Operating Co., Inc. 7.875% 12/15/05............................................. 2,040 702 HMH Properties, Inc. 7.875% 08/01/08............................................. 716 1,500 ITT Corp. 6.750% 11/15/05............................................. 1,511 1,500 MGM Mirage 7.250% 10/15/06............................................. 1,549 2,895 Park Place Entertainment Corp. 7.875% 12/15/05............................................. 2,957 ---------- 10,958 ---------- RETAIL -- 1.8% 5,000 Home Depot, Inc. 5.375% 04/01/06(a).......................................... 5,062 5,000 Target Corp. 5.950% 05/15/06............................................. 5,103 7,485 Wal-Mart Stores, Inc. 4.000% 01/15/10............................................. 7,285 ---------- 17,450 ---------- TOYS/GAMES/HOBBIES -- 0.2% 2,306 Hasbro, Inc. 5.600% 11/01/05............................................. 2,325 ---------- 49,011 ---------- CONSUMER NON-CYCLICAL -- 4.0% BEVERAGES -- 0.7% 2,000 Constellation Brands, Inc. 8.625% 08/01/06............................................. 2,090 5,000 Diageo Capital PLC 3.500% 11/19/07............................................. 4,909 ---------- 6,999 ---------- COSMETICS/PERSONAL CARE -- 0.7% 5,950 Procter & Gamble Co. 4.750% 06/15/07............................................. 6,032 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 49 NATIONS FUNDS Nations Short-Term Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- FOOD -- 1.1% $ 5,710 General Mills, Inc. 5.125% 02/15/07............................................. $ 5,806 1,900 Kellogg Co. 6.000% 04/01/06............................................. 1,934 2,860 Kroger Co. 7.800% 08/15/07............................................. 3,062 ---------- 10,802 ---------- HEALTHCARE SERVICES -- 0.7% 4,000 UnitedHealth Group, Inc. 3.375% 08/15/07............................................. 3,917 3,000 WellPoint Health Networks, Inc. 6.375% 06/15/06............................................. 3,076 ---------- 6,993 ---------- PHARMACEUTICALS -- 0.8% 5,000 Abbott Laboratories 5.625% 07/01/06............................................. 5,093 3,000 GlaxoSmithKline Capital PLC 2.375% 04/16/07............................................. 2,903 ---------- 7,996 ---------- 38,822 ---------- ENERGY -- 2.0% OIL AND GAS -- 1.5% 3,000 BP Capital Markets 4.000% 04/29/05............................................. 3,002 4,000 Devon Energy Corp. 2.750% 08/01/06............................................. 3,912 2,472 Parker & Parsley Petroleum Co. 8.875% 04/15/05............................................. 2,476 5,550 USX Corp. 6.850% 03/01/08............................................. 5,899 ---------- 15,289 ---------- PIPELINES -- 0.5% 4,325 Kinder Morgan Energy Partners LP 6.750% 03/15/11............................................. 4,692 ---------- 19,981 ---------- FINANCIALS -- 19.0% BANKS -- 3.3% 5,191 Fifth Third Bank 2.700% 01/30/07............................................. 5,052 1,980 Key Bank N.A. 4.100% 06/30/05............................................. 1,985 5,000 Marshall & Ilsley Corp. 5.750% 09/01/06............................................. 5,127 11,000 US Bancorp 2.750% 03/30/06............................................. 10,872 10,000 Wachovia Corp. 3.625% 02/17/09............................................. 9,678 ---------- 32,714 ---------- CAPITAL MARKETS -- 0.5% 5,500 Merrill Lynch & Co. 4.125% 01/15/09............................................. 5,394 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 13.4% $ 6,125 American General Finance 5.875% 07/14/06............................................. $ 6,261 9,500 Bank One N.A. 5.500% 03/26/07............................................. 9,745 9,500 Bear Stearns Cos., Inc. 3.000% 03/30/06............................................. 9,411 2,500 Capital One Bank 4.875% 05/15/08............................................. 2,518 8,000 Caterpillar Financial Services Corp. 5.950% 05/01/06............................................. 8,167 4,000 CIT Group, Inc. 5.500% 11/30/07............................................. 4,096 Citigroup, Inc. 4,000 5.500% 08/09/06............................................. 4,075 4,000 6.750% 12/01/05............................................. 4,079 7,000 Countrywide Home Loans, Inc. 4.125% 09/15/09............................................. 6,745 4,000 Credit Suisse First Boston USA, Inc. 4.625% 01/15/08............................................. 4,018 3,000 Diageo Finance BV 3.000% 12/15/06............................................. 2,942 7,500 Ford Motor Credit Co. 7.375% 10/28/09............................................. 7,533 General Electric Capital Corp. 5,000 5.000% 02/15/07(a).......................................... 5,076 11,000 6.500% 12/10/07............................................. 11,585 5,000 General Motors Acceptance Corp. 7.750% 01/19/10............................................. 4,802 6,000 Goldman Sachs Group, Inc. 4.125% 01/15/08............................................. 5,949 7,500 Household Finance Corp. 6.400% 06/17/08............................................. 7,908 4,000 John Deere Capital Corp. 3.900% 01/15/08............................................. 3,940 7,000 Lehman Brothers Holdings, Inc. 4.000% 01/22/08............................................. 6,909 635 Midland Funding II 11.750% 07/23/05............................................ 648 7,000 Morgan Stanley 3.875% 01/15/09............................................. 6,807 4,000 National Rural Utilities Cooperative Finance Corp. 6.000% 05/15/06............................................. 4,089 459 Pemex Finance Ltd. 6.550% 02/15/08............................................. 473 4,000 Wells Fargo Financial, Inc. 4.875% 06/12/07............................................. 4,064 ---------- 131,840 ---------- INSURANCE -- 0.8% 1,500 Allstate Financial Global Fund 6.150% 02/01/06(b).......................................... 1,528 699 Hartford Financial Services Group, Inc. 2.375% 06/01/06............................................. 683 5,000 Prudential Insurance Co. of America 6.375% 07/23/06(b).......................................... 5,163 ---------- 7,374 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 50 NATIONS FUNDS Nations Short-Term Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- SAVINGS AND LOANS -- 1.0% $ 6,000 Washington Mutual, Inc. 4.200% 01/15/10............................................. $ 5,839 3,750 World Savings Bank 4.125% 03/10/08............................................. 3,716 ---------- 9,555 ---------- 186,877 ---------- INDUSTRIALS -- 1.0% BUILDING MATERIALS -- 0.2% 750 American Standard, Inc. 7.375% 04/15/05............................................. 751 1,313 Hanson Overseas BV 6.750% 09/15/05............................................. 1,331 ---------- 2,082 ---------- ENVIRONMENTAL CONTROL -- 0.3% 3,000 Waste Management, Inc. 7.375% 08/01/10............................................. 3,344 ---------- PACKAGING AND CONTAINERS -- 0.5% 2,594 Ball Corp. 7.750% 08/01/06............................................. 2,675 2,000 Smurfit-Stone Container Corp. 9.750% 02/01/11............................................. 2,140 ---------- 4,815 ---------- 10,241 ---------- TECHNOLOGY -- 1.7% COMPUTERS -- 1.2% 5,000 Hewlett-Packard Co. 5.500% 07/01/07............................................. 5,131 5,000 International Business Machines Corp. 4.875% 10/01/06............................................. 5,067 1,500 Unisys Corp. 7.875% 04/01/08(a).......................................... 1,508 ---------- 11,706 ---------- SOFTWARE -- 0.5% 4,775 First Data Corp. 4.700% 11/01/06............................................. 4,816 ---------- 16,522 ---------- UTILITIES -- 1.9% ELECTRIC -- 1.3% 1,321 AES Corp. 8.500% 11/01/07(a).......................................... 1,340 2,425 Kansas Gas & Electric 6.500% 08/01/05............................................. 2,450 4,500 Scottish Power PLC 4.910% 03/15/10(a).......................................... 4,500 Virginia Electric & Power Co. 1,000 5.375% 02/01/07............................................. 1,020 3,562 5.750% 03/31/06............................................. 3,622 ---------- 12,932 ---------- ELECTRIC UTILITIES -- 0.3% 3,000 Centerpoint Energy Bank 12.750% 11/11/05(g)......................................... 3,180 ----------
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- GAS -- 0.3% $ 2,660 Sempra Energy 4.750% 05/15/09............................................. $ 2,645 ---------- 18,757 ---------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost $400,051)............................................. 391,871 ---------- ASSET-BACKED SECURITIES -- 25.0% 17,523 Aames Mortgage Investment Trust 2.990% 01/25/35............................................. 17,578 4,052 American Express Credit Account Master Trust 1.690% 01/15/09............................................. 3,947 1,098 AmeriCredit Automobile Receivables Trust 5.370% 06/12/08............................................. 1,107 BMW Vehicle Owner Trust 4,254 1.940% 02/25/07............................................. 4,236 2,000 2.530% 02/25/08............................................. 1,973 Capital Auto Receivables Asset Trust 688 2.270% 01/17/06............................................. 688 221 4.180% 10/15/07............................................. 221 3,216 Chase Credit Card Master Trust 3.490% 07/16/07............................................. 3,217 Chase Manhattan Auto Owner Trust 2,881 1.520% 05/15/07............................................. 2,861 10,000 2.080% 05/15/08............................................. 9,837 1,500 2.260% 11/15/07............................................. 1,484 3,953 2.570% 02/16/10............................................. 3,843 741 4.240% 09/15/08............................................. 744 CIT Equipment Collateral 407 3.970% 12/21/09............................................. 402 1,955 4.670% 12/21/09............................................. 1,959 Citibank Credit Card Issuance Trust 5,000 2.500% 04/07/08............................................. 4,933 5,575 5.650% 06/16/08............................................. 5,686 1,250 6.900% 10/15/07............................................. 1,272 Countrywide Asset-Backed Certificates 10,000 3.110% 8/25/35.............................................. 10,000 19,000 3.120% 7/25/35.............................................. 19,000 17,000 3.140% 8/25/35.............................................. 17,000 Daimler Chrysler Auto Trust 5,000 2.580% 04/08/09............................................. 4,849 3,881 4.490% 10/06/08............................................. 3,900 807 4.630% 12/06/06............................................. 809 8,500 Discover Card Master Trust 5.750% 12/15/08............................................. 8,683 133 First Plus Home Loan Trust 7.720% 05/10/24............................................. 133 Ford Credit Auto Owner Trust 1,179 2.640% 01/15/07............................................. 1,180 3,034 3.790% 09/16/06............................................. 3,039 1,725 5.180% 10/16/06............................................. 1,736 1,294 Harley Davidson Motorcycle Trust 3.090% 06/15/10............................................. 1,285
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 51 NATIONS FUNDS Nations Short-Term Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- (CONTINUED) Honda Auto Receivables Owner Trust $ 1,478 1.920% 11/20/06............................................. $ 1,473 4,000 2.790% 03/16/09............................................. 3,909 623 Household Automotive Trust 2.840% 03/19/07............................................. 623 9,995 Irwin Home Equity 3.190% 09/25/17............................................. 9,997 5,000 John Deere Owner Trust 2.320% 12/17/07............................................. 4,906 5,000 MBNA Credit Card Master Note Trust 6.550% 12/15/08............................................. 5,155 181 MMCA Automobile Trust 5.750% 06/15/07............................................. 182 Morgan Stanley ABS Capital 14,000 2.910% 02/25/35............................................. 14,000 10,249 2.830% 05/25/34............................................. 10,249 Nissan Auto Receivables Owner Trust 1,950 1.510% 08/15/07............................................. 1,933 1,500 2.610% 07/15/08............................................. 1,475 3,000 3.330% 01/15/08............................................. 2,990 1,497 4.280% 10/16/06............................................. 1,500 10,072 Novastar Home Equity Loan 3.040% 05/25/33............................................. 10,118 Residential Asset Mortgage Products Inc. 16,000 3.000% 03/25/35............................................. 16,000 3,300 3.360% 03/25/33............................................. 3,309 8,203 Terwin Mortgage Trust 3.100% 07/25/34............................................. 8,258 Toyota Auto Receivables Owner Trust 4,000 2.200% 03/15/10............................................. 3,934 7,389 4.000% 07/15/08............................................. 7,391 685 USAA Auto Owner Trust 3.910% 04/16/07............................................. 685 ---------- TOTAL ASSET-BACKED SECURITIES (Cost $247,653)............................................. 245,689 ---------- MORTGAGE-BACKED SECURITIES -- 14.1% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.8% Federal Home Loan Mortgage Corp. 7,790 4.000% 10/15/26............................................. 7,663 20,046 5.500% 11/15/21............................................. 20,382 ---------- 28,045 ---------- MORTGAGE-BACKED OBLIGATIONS -- 11.3% 8,959 Federal National Mortgage Association 5.875% 02/02/06............................................. 9,114 Federal Home Loan Mortgage Corp. 26,589 4.000% 06/01/11............................................. 26,165 22,035 4.500% 10/01/14............................................. 21,726 18,000 TBA 4.500% 03/15/20(c).......................................... 17,618
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS -- (CONTINUED) Federal National Mortgage Association $ 4,807 4.500% 11/01/14............................................. $ 4,758 63 7.500% 11/01/09............................................. 64 30,000 TBA 5.000% 04/15/20(c).......................................... 29,972 1,570 Government National Mortgage Association 3.375% 04/20/22............................................. 1,592 ---------- 111,009 ---------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $141,048)............................................. 139,054 ---------- SHARES (000) - -------- INVESTMENT MANAGEMENT COMPANY -- 8.1% 79,684 Nations Cash Reserves, Capital Class Shares(d)................ 79,684 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $79,684).............................................. 79,684 ---------- PAR (000) - -------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.6% $ 13,472 Bear Stearns Asset Backed Securities, Inc. 2.240% 10/25/34............................................. 13,504 14,416 Homebanc Mortgage Trust 3.020% 12/25/34............................................. 14,443 17,330 IMPAC CMB Trust 2.970% 03/25/35............................................. 17,330 22,000 IMPAC Secured Assets Common Owner Trust 2.920% 12/25/31............................................. 21,989 17,438 Mortgage IT Trust 2.530% 12/25/34............................................. 17,466 ---------- 84,732 ---------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $84,672).............................................. 84,732 ---------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 6.6% FOREIGN GOVERNMENT BONDS -- 1.5% 3,368 Quebec Province 5.500% 04/11/06............................................. 3,434 5,000 Swedish Export Credit 2.875% 01/26/07............................................. 4,897 7,000 United Mexican States 4.625% 10/08/08............................................. 6,913 ---------- 15,244 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 52 NATIONS FUNDS Nations Short-Term Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - --------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 5.1% $ 30,098 U.S. Treasury Inflation Index Note 3.625% 01/15/08(a).......................................... $ 32,370 18,000 U.S. Treasury Note 3.125% 09/15/08(a).......................................... 17,477 ---------- 49,847 ---------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $65,724).............................................. 65,091 ---------- SHORT-TERM OBLIGATIONS -- 3.1% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 3.1% FEDERAL HOME LOAN BANK -- 3.1% 30,000 Federal Home Loan Bank Discount Note 04/08/05(e)................................................. 29,985 ---------- TOTAL SHORT-TERM OBLIGATIONS (Cost $29,985).............................................. 29,985 ---------- REPURCHASE AGREEMENTS(H) -- 2.4% 6,205 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $6,264 (repurchase proceeds $6,205)......................... 6,205 7,446 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $7,544 (repurchase proceeds $7,447)..................................................... 7,447 9,695 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/01/35 market value $9,848 (repurchase proceeds $9,696)... 9,696 ---------- TOTAL REPURCHASE AGREEMENTS (cost of $23,348)........................................... 23,348 ---------- TOTAL INVESTMENTS (Cost $1,072,165)(i).............................. 107.7% 1,059,454 ---------- OTHER ASSETS AND LIABILITIES (NET).................. (7.7)% (75,353) ---------- NET ASSETS.......................................... 100.0% $ 984,101 ==========
- --------------- Notes to Investment Portfolio: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $23,945 and $22,733, respectively. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $6,691, which represents 0.7% of net assets. (c) Security, or a portion thereof, purchased on a delayed delivery basis. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) Security pledged as collateral for TBA's. (f) Step bond. (g) Loan participation agreement. (h) This amount represents cash collateral received from securities lending activity (See Note 12). (i) Cost for federal income tax purposes is $1,072,165. See Note 5 for additional information. ACRONYM: TBA -- To Be Announced At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------------------------------------------------------ Asset-Back Securities...................... 25.0 Financials................................. 19.0 Mortgage-Backed Securities................. 14.1 Government Agencies & Obligations.......... 9.7 Collateralized Mortgage Obligations........ 8.6 Investment Management Company.............. 8.1 Consumer Cyclical.......................... 5.0 Communications............................. 4.2 Consumer Non-Cyclical...................... 4.0 Repurchase Agreements...................... 2.4 Energy..................................... 2.0 Utilities.................................. 1.9 Technology................................. 1.7 Basic Materials............................ 1.0 Industrials................................ 1.0 Other Assets & Liabilities, Net............ (7.7) ----- 100.0 =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 53 NATIONS FUNDS Nations Short-Intermediate Government Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 81.6% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 81.6% Federal Farm Credit Bank $ 700 2.625% 09/17/07............................................. $ 676 8,000 4.900% 03/21/06............................................. 8,088 Federal Home Loan Bank 1,500 1.500% 05/13/05............................................. 1,497 6,000 2.000% 02/13/06............................................. 5,920 1,000 2.625% 07/15/08............................................. 951 2,500 3.625% 11/14/08............................................. 2,444 5,050 3.875% 06/14/13(a).......................................... 4,778 5,500 4.500% 11/15/12(a).......................................... 5,454 2,250 4.875% 05/15/07............................................. 2,288 Federal Home Loan Mortgage Corp. 2,000 1.500% 08/15/05............................................. 1,989 3,500 2.125% 11/15/05............................................. 3,471 5,000 3.875% 01/12/09(a).......................................... 4,899 15,000 4.375% 07/30/09............................................. 14,755 17,000 4.750% 12/08/10............................................. 16,928 Federal National Mortgage Association 20,400 2.375% 02/15/07(a).......................................... 19,819 3,000 4.125% 04/15/14(a).......................................... 2,848 4,000 4.625% 10/15/13(a).......................................... 3,945 5,900 5.000% 01/15/07............................................. 6,007 2,000 5.375% 11/15/11............................................. 2,076 3,000 6.125% 03/15/12............................................. 3,246 3,400 6.625% 11/15/10............................................. 3,739 U.S. Treasury Bonds 4,850 6.250% 08/15/23(a).......................................... 5,647 1,025 6.875% 08/15/25............................................. 1,286 U.S. Treasury Notes 21,800 2.000% 08/31/05(a).......................................... 21,708 52,500 2.875% 11/30/06(a).......................................... 51,786 21,215 3.000% 11/15/07(a).......................................... 20,754 65,070 3.625% 01/15/10(a).......................................... 63,512 9,955 4.250% 11/15/14(a).......................................... 9,749 --------- 290,260 --------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $293,575)............................................. 290,260 --------- SHARES (000) - -------- INVESTMENT MANAGEMENT COMPANY -- 0.8% 3,044 Nations Cash Reserves, Capital Class Shares(b)................ 3,044 --------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $3,044)............................................... 3,044 --------- PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES -- 11.0% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5% $ 3,436 Federal Home Loan Mortgage Corp., Interest Only 5.500% 01/15/23-05/15/27.................................... $ 303 1,483 Federal National Mortgage Association 6.000% 04/25/17............................................. 1,544 --------- 1,847 --------- MORTGAGE-BACKED OBLIGATIONS -- 10.5% 750 Federal Home Loan Mortgage Corp. 6.750% 03/15/31............................................. 915 Federal National Mortgage Association 1,590 5.500% 08/25/17............................................. 1,614 889 9.000% 04/01/16(f).......................................... 946 TBA 15,000 4.500% 04/15/20............................................. 14,663 15,000 5.500% 04/15/20............................................. 15,281 3,804 3.375% 04/20/22-06/20/29(c)................................. 3,857 --------- 37,276 --------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $39,236).............................................. 39,123 --------- ASSET-BACKED SECURITIES -- 3.2% 2,365 Credit-Based Asset Servicing and Securitization Corp. 4.134% 12/25/35(d).......................................... 2,324 789 First Alliance Mortgage Loan Trust 8.225% 09/20/27(f).......................................... 788 1,900 GMAC Mortgage Corporation Loan Trust 3.970% 09/25/34............................................. 1,872 GSAA Home Equity Trust 1,090 4.220% 08/25/34(e).......................................... 1,079 GSMTG Securities Corp. 1,900 4.736% 06/25/34(e).......................................... 1,905 257 Oakwood Mortgage Investors Inc. 2.820% 05/15/13(c).......................................... 218 930 Residential Asset Mortgage Products Inc. 3.981% 04/25/29............................................. 912 2,180 Residential Funding Mortgage Securities II 4.760% 07/25/28(d).......................................... 2,146 --------- TOTAL ASSET-BACKED SECURITIES (Cost $11,451).............................................. 11,244 --------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.0% COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.4% 5,000 Small Business Administration Participation Certificates 4.880% 11/01/24............................................. 4,944 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 54 NATIONS FUNDS Nations Short-Intermediate Government Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.6% $ 1,820 Citigroup Commercial Mortgage Trust 4.733% 10/15/41............................................. $ 1,772 15,534 Merrill Lynch Mortgage Investors, Inc., Interest Only 1.051% 12/15/30............................................. 469 3,249 PNC Mortgage Acceptance Corp. 5.910% 03/12/34............................................. 3,359 --------- 5,600 --------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $10,761).............................................. 10,544 --------- SHORT-TERM OBLIGATIONS -- 8.4% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 8.4% 30,000 Federal Home Loan Bank Discount Note 04/19/05(f).............. 29,960 --------- TOTAL SHORT-TERM OBLIGATIONS (Cost $29,960).............................................. 29,960 --------- REPURCHASE AGREEMENTS(G) -- 45.1% 29,363 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $29,642 (repurchase proceeds $29,365)....................... 29,365 50,011 Repurchase agreement with Credit Suisse First Boston Corp. dated 03/31/05, due 04/01/05 at 2.849%, collateralized by U.S. Government Agency securities with various maturities to 11/15/30, market value $50,292 (repurchase proceeds $50,015).................................................... 50,015 35,236 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $35,699 (repurchase proceeds $35,239).................................................... 35,239 45,873 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/01/35, market value $46,597 (repurchase proceeds $45,877).................................................... 45,877 --------- TOTAL REPURCHASE AGREEMENTS (Cost of $160,496).......................................... 160,496 ---------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $548,523)(h)................................ 153.1% $ 544,671 --------- OTHER ASSETS AND LIABILITIES (NET)................................. (53.1)% (188,830) --------- NET ASSETS.......................................... $ 355,841 100.0% =========
- --------------- Notes to investment portfolio: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $157,582 and $156,224, respectively. (b) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (c) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (d) Step bond. (e) Variable rate demand notes. These securities are payable upon demand and are secured by letters of credit or other credit support agreements from banks. The interest rates change periodically and the interest rates shown reflect the rates at March 31, 2005. (f) Security pledged as collateral for open futures contracts and TBA's. (g) This amount represents cash collateral received from securities lending activity (See Note 12). (h) Cost for federal income tax purposes is $548,566. See Note 5 for additional information. ACRONYM: TBA -- To Be Announced At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------------------------------------------------------ Government Agencies & Obligations.......... 90.0 Repurchase Agreements...................... 45.1 Mortgage-Backed Securities................. 11.0 Asset-Backed Securities.................... 3.2 Collateralized Mortgage Obligations........ 3.0 Investment Management Company.............. 0.8 Other Assets & Liabilities, Net............ (53.1) ----- 100.0 =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 55 NATIONS FUNDS Nations Government Securities Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES -- 56.0% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.0% $ 1,700 Federal Home Loan Mortgage Corp., Interest Only 5.500% 01/15/23-05/15/27.................................... $ 150 Federal National Mortgage Association 773 5.500% 08/25/17............................................. 785 720 6.000% 04/25/17............................................. 750 -------- 1,685 -------- MORTGAGE-BACKED OBLIGATIONS -- 55.0% Federal Home Loan Mortgage Corp. 7 7.500% 08/01/08............................................. 7 19 7.500% 06/01/09............................................. 20 72 8.000% 08/01/07-09/01/09.................................... 75 215 8.500% 01/01/06-09/01/20.................................... 231 54 9.000% 05/01/09-12/01/16(f)................................. 57 68 9.500% 04/01/18-01/01/29.................................... 75 9 10.000% 09/01/18............................................ 10 TBA 20,950 5.000% 04/15/20............................................. 20,950 14,500 5.500% 03/15/35............................................. 14,537 Federal National Mortgage Association 30 4.324% 08/01/36(a).......................................... 30 21,518 6.000% 08/01/34(f).......................................... 22,000 4,906 6.565% 07/01/16............................................. 5,395 5 8.250% 04/01/09-04/01/09.................................... 5 37 8.500% 12/01/11-02/01/17.................................... 38 89 9.000% 12/01/16-09/01/24.................................... 97 1,213 9.500% 01/01/19-08/01/21.................................... 1,343 76 10.000% 10/01/06-04/01/20................................... 83 TBA 7,850 5.000% 04/15/20-04/15/35.................................... 7,787 3,500 5.500% 04/15/20............................................. 3,566 1,750 6.000% 04/15/20............................................. 1,807 8,750 6.500% 04/15/35............................................. 9,078 Government National Mortgage Association 83 6.000% 12/15/10............................................. 86 26 7.000% 02/15/09-06/15/23.................................... 27 414 7.500% 04/15/22-12/15/25.................................... 446 480 8.000% 11/15/15-07/15/29.................................... 517 210 8.500% 10/15/09-12/15/22.................................... 231 4 9.000% 06/15/07............................................. 4 2 9.500% 11/15/05-02/15/06.................................... 2 47 10.000% 08/15/05-11/15/20................................... 53 35 10.500% 01/15/18-04/15/21................................... 40 12 13.000% 02/15/11-04/15/11................................... 13 -------- 88,610 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $90,443).............................................. 90,295 -------- PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 32.5% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 32.5% $ 1,750 Federal Home Loan Bank 3.875% 06/14/13............................................. $ 1,656 U.S. Treasury Bonds 1,600 5.375% 02/15/31(b).......................................... 1,744 200 6.250% 08/15/23(b).......................................... 233 10,700 6.875% 08/15/25............................................. 13,427 U.S. Treasury Notes 4,895 1.875% 12/31/05(b).......................................... 4,844 1,000 3.250% 01/15/09(b).......................................... 972 400 3.500% 08/15/09(b).......................................... 390 500 3.625% 07/15/09(b).......................................... 490 510 3.875% 05/15/09(b).......................................... 506 2,055 4.000% 02/15/14(b).......................................... 1,983 1,350 4.250% 08/15/14(b)(f)....................................... 1,324 7,500 4.375% 08/15/12(b).......................................... 7,518 5,100 6.500% 02/15/10(b).......................................... 5,616 12,050 08/15/05-05/15/17(c)........................................ 9,848 4,500 U.S. Treasury STRIPS 05/15/23(c)................................................. 1,816 -------- 52,367 -------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $52,294).............................................. 52,367 -------- SHARES (000) - ------- INVESTMENT MANAGEMENT COMPANY -- 2.2% 3,419 Nations Cash Reserves, Capital Class Shares(d)................ 3,419 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $3,419)............................................... 3,419 -------- PAR (000) - ------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 2.2% BASIC MATERIALS -- 0.7% CHEMICALS -- 0.7% $ 1,000 Dow Chemical Co. 6.125% 02/01/11............................................. $ 1,070 -------- COMMUNICATIONS -- 0.7% TELECOMMUNICATIONS -- 0.7% 1,000 Verizon Global Funding Corp. 7.250% 12/01/10............................................. 1,110 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 56 NATIONS FUNDS Nations Government Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- FINANCIALS -- 0.8% DIVERSIFIED FINANCIAL SERVICES -- 0.8% $ 477 Export Funding Trust 8.210% 12/29/06............................................. $ 494 1,000 General Motors Acceptance Corp. 7.000% 02/01/12............................................. 903 -------- 1,397 -------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost $3,728)............................................... 3,577 -------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.0% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% Vendee Mortgage Trust, Interest Only 11,102 0.448% 09/15/27(a)(e)....................................... 122 12,617 0.305% 03/15/29(a)(e)....................................... 98 -------- 220 -------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.9% 9,315 Merrill Lynch Mortgage Investors, Inc., Interest Only 1.017% 12/15/30(a).......................................... 281 2,672 PNC Mortgage Acceptance Corp. 5.910% 03/12/34(a).......................................... 2,762 -------- 3,043 -------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $3,478)............................................... 3,263 -------- ASSET-BACKED SECURITIES -- 0.4% 505 First Alliance Mortgage Loan Trust 8.225% 09/20/27(f).......................................... 503 150 Oakwood Mortgage Investors Inc. 2.820% 05/15/13(a).......................................... 128 -------- TOTAL ASSET-BACKED SECURITIES (Cost $661)................................................. 631 -------- SHORT-TERM OBLIGATIONS -- 40.8% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 40.8% 39,450 Federal Home Loan Bank Discount Note(c) 04/01/05.................................................... 39,450 25,850 Federal Home Loan Mortgage Corp. Discount Note(c) 04/12/05.................................................... 25,828 500 U.S. Treasury Notes 2.750% 08/15/07(b).......................................... 488 -------- 65,766 -------- TOTAL SHORT-TERM OBLIGATIONS (Cost $65,777).............................................. 65,766 --------
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(G) -- 16.4% $ 7,043 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities, with various maturities to 05/15/29, market value $7,043 (repurchase proceeds $7,043)................... $ 7,043 8,452 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities, with various maturities to 05/20/33, market value $8,563 (repurchase proceeds $8,453)..................................................... 8,453 11,004 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities, with various maturities to 03/31/35, market value $11,178 (repurchase proceeds $11,005).................................................... 11,005 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $26,501)........................................... 26,501 -------- TOTAL INVESTMENTS (Cost $246,301)(h)................................ 152.5% 245,819 -------- OTHER ASSETS AND LIABILITIES (NET)................................. (52.5)% (84,673) -------- NET ASSETS.......................................... 100.0% $161,146 ========
- --------------- Notes to Investment Portfolio: (a) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $26,013 and $25,954, respectively. (c) Zero coupon bond. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) Restricted and illiquid security. (f) Security pledged as collateral for open futures contracts and TBA's. (g) This amount represents cash collateral received from securities lending activity (see Note 12). (h) Cost for federal income tax purposes is $246,388. See Note 5 for additional information. ACRONYMS: STRIPS -- Separate Trading of Registered Interest and Principal of Securities TBA -- To Be Announced
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 57 NATIONS FUNDS Nations Government Securities Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ---------------------------------------------------------- Government Agencies & Obligations........ 73.3 Mortgage-Backed Securities............... 56.0 Repurchase Agreements.................... 16.4 Investment Management Company............ 2.2 Collateralized Mortgage Obligations...... 2.0 Financials............................... 0.8 Communications........................... 0.7 Basic Materials.......................... 0.7 Asset-Backed Securities.................. 0.4 Other Assets & Liabilities, Net.......... (52.5) ----- 100.0 =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 58 NATIONS FUNDS Nations Intermediate Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE - --------------------------------------------------------------------------------------------- INVESTMENT COMPANIES Investment in Nations Master Investment Trust, Intermediate Bond Master Portfolio*.............................................................. $ 628,297 --------------- TOTAL INVESTMENTS........................................... 100.1% 628,297 TOTAL OTHER ASSETS AND LIABILITIES (NET).................... (0.1) (323) ----------- --------------- NET ASSETS.................................................. 100.0% $ 627,974 =========== ===============
- --------------- *The financial statements of the Intermediate Bond Master Portfolio, including its investment portfolio, are included elsewhere within this report and should be read in conjunction with the Intermediate Bond Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 59 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ CORPORATE FIXED-INCOME BONDS AND NOTES -- 34.4% BASIC MATERIALS -- 1.7% CHEMICALS -- 0.9% $ 2,108 E.I. Dupont De Nemours & Co. 3.375% 11/15/07............................................. $ 2,060 Dow Chemical Co. 1,994 6.125% 02/01/11............................................. 2,134 2,716 7.375% 11/01/29............................................. 3,309 Eastman Chemical Co. 1,218 3.250% 06/15/08............................................. 1,167 2,428 6.300% 11/15/18............................................. 2,593 700 Equistar Chemicals LP 10.625% 05/01/11............................................ 786 190 Huntsman International LLC 7.375% 01/01/15(a)(b)....................................... 189 Praxair, Inc. 1,989 4.750% 07/15/07............................................. 2,004 2,325 6.500% 03/01/08............................................. 2,442 410 Rhodia SA 8.875% 06/01/11(b).......................................... 399 ---------- 17,083 ---------- FOREST PRODUCTS AND PAPER -- 0.5% 210 Abitibi-Consolidated, Inc. 8.375% 04/01/15............................................. 203 230 Fraser Papers, Inc. 8.750% 03/15/15............................................. 215 2,317 International Paper Co. 4.250% 01/15/09............................................. 2,286 EUR 865 JSG Holding PLC 11.500% 10/01/15(a)(b)...................................... 1,046 $ 1,705 MeadWestvaco Corp. 6.850% 04/01/12............................................. 1,902 320 Newark Group, Inc. 9.750% 03/15/14............................................. 325 245 Norske Skog Canada 8.625% 06/15/11............................................. 254 200 Tembec Industries, Inc. 8.500% 02/01/11............................................. 190 2,710 Westvaco Corp. 8.200% 01/15/30............................................. 3,424 ---------- 9,845 ---------- IRON/STEEL -- 0.0% 500 Wise Metals Group LLC 10.250% 05/15/12(b)......................................... 505 ---------- METALS AND MINING -- 0.3% 3,385 Alcoa, Inc. 7.375% 08/01/10............................................. 3,806 1,683 CODELCO, Inc. 5.500% 10/15/13(a).......................................... 1,701 130 Hudson Bay Mining and Smelting Co., Ltd. 9.625% 01/15/12(a).......................................... 130 ---------- 5,637 ---------- 33,070 ----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ COMMUNICATIONS -- 4.9% ADVERTISING -- 0.1% $ 1,200 Advanstar Communications, Inc. 12.000% 02/15/11............................................ $ 1,287 500 WDAC Subsidiary Corp. 8.375% 12/01/14(a)(b)....................................... 465 ---------- 1,752 ---------- MEDIA -- 2.3% 400 CBD Media Holdings LLC, Inc. 9.250% 07/15/12............................................. 408 1,275 Charter Communications LLC (9.920% 04/01/11)(c)........................................ 979 1,550 Comcast Cable Communications, Inc. 7.125% 06/15/13............................................. 1,724 4,000 Comcast Corp. 7.050% 03/15/33............................................. 4,474 1,600 CSC Holdings, Inc. 6.750% 04/15/12(a).......................................... 1,588 1,000 Dex Media East LLC/Dex Media East Finance Co. 9.875% 11/15/09............................................. 1,100 600 Dex Media, Inc. 11/15/13(c) (9.000% 11/15/08)........................................... 456 240 DirecTV Holdings LLC/DirecTV Financing Co. 8.375% 03/15/13............................................. 260 215 Fisher Communications, Inc. 8.625% 09/15/14............................................. 230 280 Granite Broadcasting Corp. 9.750% 12/01/10(b).......................................... 260 460 Hollinger, Inc. 12.875% 03/01/11(a)......................................... 507 6,456 Liberty Media Corp. 3.500% 09/25/06............................................. 6,363 News America Holdings, Inc. 166 6.625% 01/09/08............................................. 174 3,650 8.150% 10/17/36............................................. 4,514 647 9.250% 02/01/13............................................. 807 840 News America, Inc. 6.550% 03/15/33............................................. 875 Paxson Communications 01/15/09(c) 175 (12.250% 01/15/06).......................................... 163 390 10.750% 07/15/08(b)......................................... 387 500 Primedia, Inc. 8.875% 05/15/11............................................. 521 500 Quebecor Media, Inc. 11.125% 07/15/11............................................ 553 500 Sinclair Broadcast Group, Inc. 8.750% 12/15/11............................................. 525 1,000 Spanish Broadcasting System, Inc. 9.625% 11/01/09............................................. 1,048 2,159 TCI Communications, Inc., 9.875% 06/15/22............................................. 3,040 Time Warner, Inc. 3,000 6.150% 05/01/07............................................. 3,097 1,740 8.110% 08/15/06............................................. 1,823 2,472 9.125% 01/15/13............................................. 3,054
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 60 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ MEDIA -- (CONTINUED) $ 1,852 Viacom, Inc. 5.625% 05/01/07............................................. $ 1,896 2,179 Walt Disney Co. 5.500% 12/29/06............................................. 2,222 355 XM Satellite Radio, Inc. 8.243% 05/01/09(d).......................................... 360 ---------- 43,408 ---------- TELECOMMUNICATIONS -- 2.5% 250 American Towers, Inc. 7.250% 12/01/11............................................. 258 3,803 BellSouth Corp. 5.000% 10/15/06............................................. 3,854 500 Cincinnati Bell, Inc. 8.375% 01/15/14(b).......................................... 493 445 Dobson Communications Corp. 8.875% 10/01/13(b).......................................... 349 Inmarsat Finance PLC 11/15/12(c) 350 (10.375% 11/15/08).......................................... 247 360 Intelsat Bermuda Ltd. 8.250% 01/15/13(a).......................................... 364 1,000 Nextel Communications, Inc. 7.375% 08/01/15............................................. 1,056 500 Nextel Partners, Inc. 8.125% 07/01/11............................................. 531 870 Qwest Capital Funding, Inc. 7.250% 02/15/11(b).......................................... 811 1,000 Qwest Services Corp. 14.000% 12/15/10(a)......................................... 1,158 315 Rogers Wireless, Inc. 9.750% 06/01/16............................................. 372 7,197 SBC Communications, Inc. 5.750% 05/02/06............................................. 7,329 Sprint Capital Corp. 1,009 6.125% 11/15/08............................................. 1,055 5,223 8.375% 03/15/12............................................. 6,104 2,977 8.750% 03/15/32............................................. 3,862 95 Telcordia Technologies 10.000% 03/15/13(a)......................................... 94 7,873 Telus Corp. 7.500% 06/01/07............................................. 8,380 Time Warner Telecom, Inc. 350 9.750% 07/15/08(b).......................................... 341 205 10.125% 02/01/11(b)......................................... 198 175 US LEC Corp. 10.670% 10/01/09(d)......................................... 179 500 US Unwired, Inc. 10.000% 06/15/12............................................ 554 159 Verizon Global Funding Corp. 7.750% 12/01/30............................................. 192 9,157 Verizon Pennsylvania, Inc. 5.650% 11/15/11............................................. 9,402
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ TELECOMMUNICATIONS -- (CONTINUED) $ 500 Western Wireless Corp. 9.250% 07/15/13............................................. $ 570 270 Zeus Special Subsidiary Ltd. 02/01/15(a)(c) (9.250% 02/01/10)........................................... 170 ---------- 47,923 ---------- 93,083 ---------- CONSUMER CYCLICAL -- 2.7% AIRLINES -- 0.2% Continental Airlines, Inc. 2,957 7.461% 04/01/15............................................. 2,778 500 7.568% 12/01/06............................................. 398 760 Northwest Airlines, Inc. 9.875% 03/15/07(b).......................................... 566 ---------- 3,742 ---------- APPAREL -- 0.2% 3,300 Jones Apparel Group, Inc. 6.125% 11/15/34(a).......................................... 3,077 650 Levi Strauss & Co. 9.750% 01/15/15(a)(b)....................................... 639 300 Phillips-Van Heusen Corp. 8.125% 05/01/13............................................. 314 ---------- 4,030 ---------- AUTO MANUFACTURERS -- 0.7% 6,697 DaimlerChrysler NA Holding Corp. 4.050% 06/04/08............................................. 6,503 7,734 Ford Motor Co. 7.450% 07/16/31(b).......................................... 6,996 215 Navistar International Corp. 7.500% 06/15/11............................................. 217 ---------- 13,716 ---------- AUTO PARTS AND EQUIPMENT -- 0.1% 400 Cooper-Standard Automotive, Inc. 8.375% 12/15/14(a).......................................... 324 250 Delco Remy International, Inc. 9.375% 04/15/12(b).......................................... 210 350 Dura Operating Corp. 8.625% 04/15/12............................................. 323 700 Goodyear Tire & Rubber Co. 7.857% 08/15/11(b).......................................... 676 ---------- 1,533 ---------- DISTRIBUTION/WHOLESALE -- 0.0% 130 Buhrmann US, Inc. 7.875% 03/01/15(a)(b)....................................... 130 ---------- ENTERTAINMENT -- 0.2% 605 AMC Entertainment, Inc. 9.875% 02/01/12(b).......................................... 638 600 LCE Acquisition Corp. 9.000% 08/01/14(a).......................................... 597 170 Mohegan Tribal Gaming Authority 6.125% 02/15/13(a).......................................... 167 310 Penn National Gaming, Inc. 6.750% 03/01/15(a)(b)....................................... 305
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 61 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ENTERTAINMENT -- (CONTINUED) $ 370 River Rock Entertainment Authority 9.750% 11/01/11............................................. $ 405 280 Seneca Gaming Corp. 7.250% 05/01/12............................................. 279 665 Six Flags, Inc. 9.625% 06/01/14............................................. 613 600 Warner Music Group 7.375% 04/15/14............................................. 618 230 WMG Holdings Corp. 9.760% 12/15/14(a).......................................... 232 ---------- 3,854 ---------- HOME BUILDERS -- 0.4% 3,662 Beazer Homes USA, Inc. 6.500% 11/15/13............................................. 3,580 1,820 K. Hovnanian Enterprises, Inc. 6.500% 01/15/14............................................. 1,779 2,455 KB Home 5.750% 02/01/14............................................. 2,351 ---------- 7,710 ---------- HOME FURNISHINGS -- 0.0% 280 ALH Finance LLC 8.500% 01/15/13(b).......................................... 273 300 WII Components, Inc. 10.000% 02/15/12............................................ 308 ---------- 581 ---------- LEISURE TIME -- 0.1% 500 AMF Bowling Worldwide, Inc. 10.000% 03/01/10............................................ 512 330 Equinox Holdings, Inc. 9.000% 12/15/09(b).......................................... 347 300 Hard Rock Hotel, Inc. 8.875% 06/01/13............................................. 323 195 K2, Inc. 7.375% 07/01/14............................................. 202 475 Town Sports International, Inc. 02/01/14(c) (11.00%, 02/01/09).......................................... 279 ---------- 1,663 ---------- LODGING -- 0.1% 270 Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12............................................ 289 285 Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10............................................ 335 500 MGM Mirage 6.750% 09/01/12............................................. 504 145 Pinnacle Entertainment, Inc. 8.250% 03/15/12(b).......................................... 145 500 Wynn Las Vegas LLC 6.625% 12/01/14(a).......................................... 475 ---------- 1,748 ---------- RETAIL -- 0.7% 500 Asbury Automotive Group, Inc. 8.000% 03/15/14............................................. 485
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ RETAIL -- (CONTINUED) $ 2,028 CVS Corp. 5.298% 01/11/27(a).......................................... $ 2,029 250 Finlay Fine Jewelry Corp. 8.375% 06/01/12............................................. 236 240 Kohl's Corp. 6.700% 02/01/06............................................. 245 240 Landry's Restaurants, Inc. 7.500% 12/15/14(a).......................................... 233 Rite Aid Corp. 90 7.500% 01/15/15(a).......................................... 86 270 9.250% 06/01/13(b).......................................... 269 310 Saks, Inc. 7.000% 12/01/13............................................. 281 140 Suburban Propane Partners 6.875% 12/15/13(a).......................................... 138 Target Corp. 1,320 5.375% 06/15/09(b).......................................... 1,362 2,876 5.400% 10/01/08............................................. 2,966 4,057 Wal-Mart Stores, Inc. 5.450% 08/01/06............................................. 4,136 ---------- 12,466 ---------- 51,173 ---------- CONSUMER NON-CYCLICAL -- 2.2% AGRICULTURE -- 0.0% 295 North Atlantic Trading Co., Inc. 9.250% 03/01/12(b).......................................... 222 ---------- BEVERAGES -- 0.2% 2,856 Anheuser-Busch Companies, Inc. 5.950% 01/15/33............................................. 3,050 240 Constellation Brands, Inc. 8.125% 01/15/12............................................. 257 ---------- 3,307 ---------- COMMERCIAL SERVICES -- 0.2% 265 Corrections Corp. of America 6.250% 03/15/13(a).......................................... 253 300 Dollar Financial Group, Inc. 9.750% 11/15/11............................................. 320 310 GEO Group, Inc. 8.250% 07/15/13............................................. 316 1,000 Language Line, Inc. 11.125% 06/15/12............................................ 1,043 500 NationsRent Companies, Inc. 9.500% 10/15/10............................................. 535 345 Service Corp. International 7.700% 04/15/09............................................. 355 500 Vertis, Inc. 10.875% 06/15/09(b)......................................... 483 ---------- 3,305 ---------- COSMETICS/PERSONAL CARE -- 0.1% 295 DEL Laboratories, Inc. 8.000% 02/01/12(a).......................................... 283 250 Elizabeth Arden, Inc. 7.750% 01/15/14............................................. 258 1,926 Procter & Gamble Co. 4.750% 06/15/07............................................. 1,953
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 62 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ COSMETICS/PERSONAL CARE -- (CONTINUED) Revlon Consumer Products $ 190 8.625% 02/01/08(b).......................................... $ 175 230 9.500% 04/01/11(a).......................................... 226 ---------- 2,895 ---------- FOOD -- 0.8% 5,772 Cadbury-Schweppes US Finance LLC 5.125% 10/01/13(a).......................................... 5,734 70 Dole Food Co., Inc. 8.625% 05/01/09............................................. 74 6,630 Fred Myer, Inc. 7.450% 03/01/08............................................. 7,105 700 Merisant Co. 10.250% 07/15/13(a)......................................... 602 600 Pinnacle Foods Holding Corp. 8.250% 12/01/13(b).......................................... 513 600 Stater Brothers Holdings, Inc. 8.125% 06/15/12............................................. 579 440 United Agri Products 8.250% 12/15/11............................................. 458 ---------- 15,065 ---------- HEALTHCARE PRODUCTS -- 0.0% 1,300 MQ Associates, Inc. 08/15/12(b)(c) (12.250% 08/15/07).......................................... 741 ---------- HEALTHCARE SERVICES -- 0.5% 115 DaVita, Inc. 7.250% 03/15/15(a).......................................... 112 500 InSight Health Services Corp. 9.875% 11/01/11............................................. 490 170 Select Medical Corp. 7.625% 02/01/15(a).......................................... 170 750 Tenet Healthcare Corp. 9.875% 07/01/14............................................. 780 145 US Oncology Holdings, Inc. 8.620% 03/15/15(a).......................................... 137 500 US Oncology, Inc. 9.000% 08/15/12(a).......................................... 528 6,769 WellPoint Health Networks, Inc. 6.375% 06/15/06............................................. 6,941 ---------- 9,158 ---------- HOUSEHOLD PRODUCTS/WARES -- 0.2% 600 Amscan Holdings, Inc. 8.750% 05/01/14............................................. 582 1,926 Fortune Brands, Inc. 2.875% 12/01/06............................................. 1,891 475 Playtex Products, Inc. 9.375% 06/01/11(b).......................................... 494 ---------- 2,967 ----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ PHARMACEUTICALS -- 0.1% $ 1,819 Bristol-Myers Squibb Co. 4.750% 10/01/06............................................. $ 1,842 435 Elan Finance PLC 7.750% 11/15/11(a)(b)....................................... 325 160 Warner Chilcott Corp. 8.750% 02/01/15(a).......................................... 161 ---------- 2,328 ---------- TELECOMMUNICATIONS -- 0.1% 500 American Cellular Corp. 10.000% 08/01/11............................................ 460 400 AXtel SA 11.000% 12/15/13............................................ 423 410 Horizon PCS, Inc. 11.375% 07/15/12(a)......................................... 465 500 Rural Cellular Corp. 8.250% 03/15/12............................................. 510 ---------- 1,858 ---------- 41,846 ---------- DIVERSIFIED -- 0.4% HOLDING COMPANIES DIVERSIFIED -- 0.4% 500 Atlantic Broadband Finance LLC 9.375% 01/15/14(a)(b)....................................... 480 Hutchison Whampoa International Ltd. 6,000 6.250% 01/24/14(a).......................................... 6,240 1,000 7.450% 11/24/33(a).......................................... 1,101 ---------- 7,821 ---------- ENERGY -- 3.2% OIL AND GAS -- 2.3% 3,500 Amerada Hess Corp. 7.300% 08/15/31............................................. 3,946 230 Chesapeake Energy Corp. 7.500% 06/15/14............................................. 243 500 Compton Petroleum Corp. 9.900% 05/15/09............................................. 543 Conoco Funding Co. 3,495 5.450% 10/15/06............................................. 3,570 4,830 6.350% 10/15/11............................................. 5,264 220 Delta Petroleum Corp. 7.000% 04/01/15(a).......................................... 212 3,225 Gazprom International SA 7.201% 02/01/20(a).......................................... 3,290 1,040 Nexen, Inc. 7.875% 03/15/32............................................. 1,269 600 Ocean Rig Norway AS 10.250% 06/01/08............................................ 614 3,075 Pemex Project Funding Master Trust 7.375% 12/15/14(b).......................................... 3,290 6,526 Pioneer Natural Resources Co. 6.500% 01/15/08............................................. 6,835 240 Premcor Refining Group, Inc. 7.500% 06/15/15............................................. 247 200 Pride International, Inc. 7.375% 07/15/14............................................. 212
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 63 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ OIL AND GAS -- (CONTINUED) $ 7,032 USX Corp. 6.650% 02/01/06............................................. $ 7,184 5,520 XTO Energy, Inc. 7.500% 04/15/12............................................. 6,323 ---------- 43,042 ---------- PIPELINES -- 0.9% 1,674 CenterPoint Energy Resources Corp. 7.875% 04/01/13............................................. 1,940 1,000 Coastal Corp. 7.750% 06/15/10............................................. 1,000 3,144 Consolidated Natural Gas Co. 5.375% 11/01/06............................................. 3,201 4,046 Duke Capital LLC 4.370% 03/01/09............................................. 3,977 750 Dynegy Holdings, Inc. 6.875% 04/01/11(b).......................................... 666 900 Sonat, Inc. 7.625% 07/15/11............................................. 889 3,991 Teppco Partners LP 7.625% 02/15/12............................................. 4,519 500 Williams Companies, Inc. 8.125% 03/15/12............................................. 548 ---------- 16,740 ---------- 59,782 ---------- FINANCIALS -- 13.6% BANKS -- 3.4% 2,100 Bank of New York Co., Inc. 3.900% 09/01/07............................................. 2,082 10,455 Bank One Corp. 6.000% 08/01/08............................................. 10,938 1,220 Chinatrust Commercial Bank 5.625% 12/17/49(a)(b)(i).................................... 1,193 7,489 First Union National Bank 5.800% 12/01/08............................................. 7,810 479 Korea Development Bank 7.250% 05/15/06............................................. 495 2,861 Mellon Funding Corp. 4.875% 06/15/07............................................. 2,901 5,096 National City Bank 4.625% 05/01/13............................................. 4,956 5,628 PNC Funding Corp. 5.750% 08/01/06............................................. 5,752 5,292 Popular North America, Inc. 6.125% 10/15/06............................................. 5,435 6,000 Rabobank Capital Funding II 5.260% 12/29/49(a)(i)....................................... 6,027 6,846 Union Planters Corp. 4.375% 12/01/10............................................. 6,658 US Bank NA 3,654 2.850% 11/15/06............................................. 3,586 6,752 6.375% 08/01/11............................................. 7,314 ---------- 65,147 ----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- 8.1% $ 120 Altra Industrial Motion, Inc. 9.000% 12/01/11(a).......................................... $ 119 American Express Co. 1,887 3.750% 11/20/07............................................. 1,858 2,746 4.750% 06/17/09............................................. 2,765 4,535 5.500% 09/12/06............................................. 4,627 2,090 American General Finance Corp. 2.750% 06/15/08............................................. 1,978 Bear Stearns Companies, Inc. 6,256 4.500% 10/28/10............................................. 6,149 1,944 5.700% 01/15/07............................................. 1,993 2,415 Capital One Bank 5.000% 06/15/09............................................. 2,426 Caterpillar Financial Services Corp. 3,142 2.350% 09/15/06............................................. 3,070 4,968 5.950% 05/01/06............................................. 5,072 2,752 CIT Group, Inc. 7.375% 04/02/07............................................. 2,910 6,000 Citicorp 8.040% 12/15/19(a).......................................... 7,127 2,557 Citigroup Global Markets Holdings, Inc. 6.500% 02/15/08............................................. 2,707 10,093 Countrywide Home Loans, Inc. 5.500% 08/01/06............................................. 10,262 Credit Suisse First Boston USA, Inc. 700 4.625% 01/15/08(b).......................................... 704 3,452 6.125% 11/15/11............................................. 3,662 265 E*Trade Financial Corp. 8.000% 06/15/11............................................. 273 1,600 Ford Motor Credit Co. 7.375% 02/01/11............................................. 1,590 3,225 Fund American Companies, Inc. 5.875% 05/15/13............................................. 3,274 8,000 General Electric Capital Corp. 6.750% 03/15/32............................................. 9,235 General Motors Acceptance Corp. 4,263 6.150% 04/05/07............................................. 4,182 2,782 6.875% 09/15/11............................................. 2,517 295 Global Cash Access LLC/Global Cash Finance Corp. 8.750% 03/15/12............................................. 313 Goldman Sachs Group, Inc. 1,200 4.125% 01/15/08............................................. 1,190 5,858 6.600% 01/15/12............................................. 6,339 HSBC Finance Corp. 4,336 5.875% 02/01/09............................................. 4,512 1,907 6.375% 11/27/12............................................. 2,062 3,546 7.200% 07/15/06............................................. 3,683 2,000 7.875% 03/01/07............................................. 2,130 150 Innophos Investments 10.771% 02/15/15(a)(d)...................................... 149 International Lease Finance Corp. 6,760 3.500% 04/01/09............................................. 6,470 1,743 4.500% 05/01/08............................................. 1,732 7,008 JPMorgan Chase & Co. 7.250% 06/01/07............................................. 7,420
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 64 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 600 LaBranche & Co., Inc. 11.000% 05/15/12............................................ $ 636 4,530 Lehman Brothers Holdings, Inc. 7.000% 02/01/08............................................. 4,834 2,213 MassMutual Global Funding II 2.550% 07/15/08(a).......................................... 2,088 Merrill Lynch & Co., Inc. 2,538 2.070% 06/12/06............................................. 2,486 2,717 3.700% 04/21/08............................................. 2,664 5,640 6.000% 02/17/09............................................. 5,900 4,509 Morgan Stanley 6.750% 04/15/11............................................. 4,914 National Rural Utilities Cooperative Finance Corp. 2,226 3.250% 10/01/07............................................. 2,163 2,700 5.750% 08/28/09............................................. 2,812 EUR 120 Nycomed SA 11.750% 09/15/13(a)......................................... 147 $ 6,773 Prudential Funding LLC 6.600% 05/15/08(a).......................................... 7,181 3,000 UFJ Finance Aruba AEC 6.750% 07/15/13............................................. 3,230 Virgin River Casino Corp./RBG LLC/B&BB, Inc. 175 01/15/13(a)(c) (12.750%, 01/15/09).......................... 112 104 9.000% 01/15/12(a).......................................... 108 350 Visant Corp. 7.625% 10/01/12............................................. 346 ---------- 154,121 ---------- INSURANCE -- 0.1% 938 Metlife, Inc. 5.375% 12/15/12............................................. 958 ---------- REAL ESTATE -- 0.4% EOP Operating LP 3,822 4.750% 03/15/14............................................. 3,584 3,136 7.000% 07/15/11(b).......................................... 3,454 ---------- 7,038 ---------- REAL ESTATE INVESTMENT TRUST (REITS) -- 1.0% 5,483 Camden Property Trust 5.375% 12/15/13............................................. 5,501 2,311 Health Care Property Investors, Inc. 6.450% 06/25/12............................................. 2,482 5,439 iStar Financial, Inc. 4.875% 01/15/09............................................. 5,370 5,283 Simon Property Group LP 3.750% 01/30/09............................................. 5,070 680 Thornburg Mortgage, Inc. 8.000% 05/15/13............................................. 707 ---------- 19,130 ----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ SAVINGS AND LOANS -- 0.6% Washington Mutual, Inc. $ 6,200 4.625% 04/01/14............................................. $ 5,857 6,302 5.625% 01/15/07............................................. 6,444 ---------- 12,301 ---------- 258,695 ---------- INDUSTRIALS -- 1.9% AEROSPACE AND DEFENSE -- 0.4% 205 Argo-Tech Corp. 9.250% 06/01/11............................................. 220 1,050 BE Aerospace, Inc. 8.875% 05/01/11............................................. 1,063 3,782 Northrop Grumman Corp. 7.125% 02/15/11............................................. 4,218 2,200 Raytheon Co. 5.375% 04/01/13(b).......................................... 2,232 65 Sequa Corp. 9.000% 08/01/09............................................. 70 295 TransDigm, Inc. 8.375% 07/15/11............................................. 303 ---------- 8,106 ---------- BUILDING MATERIALS -- 0.1% 360 ACIH, Inc. 12/15/12(a)(c) (11.500%, 12/15/07).......................... 254 220 Associated Materials, Inc. 03/01/14(b)(c) (11.250%, 03/01/09).......................... 153 150 Nortek, Inc. 8.500% 09/01/14............................................. 145 180 RMCC Acquisition Co. 9.500% 11/01/12(a).......................................... 176 240 US Concrete, Inc. 8.375% 04/01/14............................................. 239 ---------- 967 ---------- ELECTRICAL COMPONENTS AND EQUIPMENT -- 0.0% 500 Coleman Cable, Inc. 9.875% 10/01/12(a).......................................... 510 ---------- ELECTRONICS -- 0.0% 500 Flextronics International Ltd. 6.250% 11/15/14............................................. 475 160 Sanmina-SCI Corp. 6.750% 03/01/13(a).......................................... 150 ---------- 625 ---------- ENGINEERING AND CONSTRUCTION -- 0.0% 500 J. Ray McDermott SA 11.000% 12/15/13(a)......................................... 560 ---------- ENVIRONMENTAL CONTROL -- 0.4% Allied Waste NA, Inc. 175 7.250% 03/15/15(a).......................................... 165 1,000 7.875% 04/15/13............................................. 998 5,056 Waste Management, Inc. 7.375% 08/01/10............................................. 5,635
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 65 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ENVIRONMENTAL CONTROL -- (CONTINUED) $ 500 Waste Services, Inc. 9.500% 04/15/14(a)(b)....................................... $ 505 ---------- 7,303 ---------- MACHINERY DIVERSIFIED -- 0.0% 335 Douglas Dynamics LLC 7.750% 01/15/12(a)(b)....................................... 328 ---------- METAL FABRICATE/HARDWARE -- 0.1% 750 FastenTech, Inc. 11.500% 05/01/11(a)......................................... 805 750 Mueller Holdings, Inc. 04/15/14(c) (14.750%, 04/15/09)............................. 518 385 TriMas Corp. 9.875% 06/15/12............................................. 393 ---------- 1,716 ---------- MISCELLANEOUS MANUFACTURING -- 0.2% 355 Bombardier, Inc. 6.300% 05/01/14(a)(b)....................................... 297 2,108 General Electric Co. 5.000% 02/01/13............................................. 2,105 275 JB Poindexter & Co., Inc. 8.750% 03/15/14(a).......................................... 274 500 Koppers, Inc. 9.875% 10/15/13............................................. 558 180 Reddy Ice Holdings, Inc. 11/01/12(a)(c) (10.500% 11/01/08)........................... 129 220 Samsonite Corp. 8.875% 06/01/11............................................. 230 ---------- 3,593 ---------- PACKAGING AND CONTAINERS -- 0.1% 500 Crown European Holdings SA 10.875% 03/01/13............................................ 580 280 Jefferson Smurfit Corp. 8.250% 10/01/12............................................. 288 400 Owens-Brockway Glass Container 6.750% 12/01/14(a).......................................... 392 ---------- 1,260 ---------- TRANSPORTATION -- 0.6% 4,184 Burlington Northern Santa Fe Corp. 6.750% 07/15/11............................................. 4,592 3,339 Canadian National Railway Co. 6.900% 07/15/28............................................. 3,892 CHC Helicopter Corp. 500 7.375% 05/01/14(a).......................................... 487 185 7.375% 05/01/14............................................. 180 385 QDI Capital Corp. 9.000% 11/15/10............................................. 377 800 Ship Finance International Ltd. 8.500% 12/15/13............................................. 792
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ TRANSPORTATION -- (CONTINUED) $ 1,000 Stena AB 7.000% 12/01/16............................................. $ 925 210 TFM SA de CV 10.250% 06/15/07............................................ 223 ---------- 11,468 ---------- 36,436 ---------- TECHNOLOGY -- 0.5% COMPUTERS -- 0.5% 6,394 Hewlett-Packard Co. 5.750% 12/15/06............................................. 6,556 3,173 International Business Machines Corp. 4.875% 10/01/06............................................. 3,215 ---------- 9,771 ---------- SEMICONDUCTORS -- 0.0% 365 Amkor Technology, Inc. 9.250% 02/15/08(b).......................................... 349 ---------- 10,120 ---------- UTILITIES -- 3.3% ELECTRIC -- 3.3% 5,830 AEP Texas Central Co. 6.650% 02/15/33............................................. 6,496 1,804 Appalachian Power Co. 3.600% 05/15/08............................................. 1,751 600 Calpine Corp. 12.390% 07/15/10(a)(b)...................................... 471 510 Calpine Generating Co. LLC 11.050% 04/01/11(b)(d)...................................... 487 2,980 Con Edison Co. 4.700% 06/15/09............................................. 2,996 912 Dominion Resources, Inc. 5.000% 03/15/13............................................. 899 500 Edison Mission Energy 9.875% 04/15/11............................................. 578 2,125 Exelon Generation Co. LLC 5.350% 01/15/14............................................. 2,133 FirstEnergy Corp. 2,626 6.450% 11/15/11............................................. 2,771 1,341 7.375% 11/15/31............................................. 1,519 636 FPL Energy National Wind 5.608% 03/10/24(a).......................................... 629 2,190 Kiowa Power Partners LLC 5.737% 03/30/21(a).......................................... 2,143 4,302 Midamerican Energy Holdings Co. 5.000% 02/15/14............................................. 4,198 3,631 NiSource Finance Corp. 5.400% 07/15/14............................................. 3,657 700 Orion Power Holdings, Inc. 12.000% 05/01/10............................................ 851 Pacific Gas & Electric Co. 976 4.200% 03/01/11............................................. 940 1,377 6.050% 03/01/34............................................. 1,414 1,416 Pepco Holdings, Inc. 5.500% 08/15/07............................................. 1,449 7,344 Progress Energy, Inc. 6.050% 04/15/07............................................. 7,575
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 66 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ELECTRIC -- (CONTINUED) $ 500 PSEG Energy Holdings LLC 8.625% 02/15/08............................................. $ 528 1,701 Public Service Electric & Gas Co. 4.000% 11/01/08............................................. 1,670 3,248 Southern Co. Capital Funding Inc. 5.300% 02/01/07............................................. 3,340 1,753 Southern Power Co. 6.250% 07/15/12............................................. 1,883 245 Texas Genco LLC 6.875% 12/15/14(a).......................................... 246 TXU Corp. 3,450 5.550% 11/15/14(a).......................................... 3,272 5,000 6.550% 11/15/34(a).......................................... 4,739 3,516 Virginia Electric & Power Co. 5.375% 02/01/07............................................. 3,584 ---------- 62,219 ---------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost $649,880)............................................. 654,245 ---------- MORTGAGE-BACKED SECURITIES -- 33.8% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.0% Federal Home Loan Mortgage Corp. 10,000 4.000% 11/15/16............................................. 9,615 18,935 5.500% 01/15/23-05/15/27, Interest Only..................... 1,671 Federal National Mortgage Association 10,000 4.500% 04/25/17............................................. 9,839 8,781 5.500% 08/25/17............................................. 8,916 8,178 6.000% 04/25/17............................................. 8,515 16 8.250% 03/25/06............................................. 16 ---------- 38,572 ---------- MORTGAGE-BACKED OBLIGATIONS -- 31.8% Federal Home Loan Mortgage Corp. 21,034 6.500% 11/01/32............................................. 21,861 2,000 6.750% 03/15/31............................................. 2,439 299 8.500% 11/01/26............................................. 326 56 8.000% 11/01/09-04/01/10.................................... 59 TBA 15,000 5.500% 03/15/35(e).......................................... 15,038 20,000 6.000% 03/15/35(e).......................................... 20,463 67,000 4.500% 03/15/20-03/15/35(e)................................. 64,695 Federal National Mortgage Association 71 4.185% 08/01/36(d).......................................... 72 198 6.000% 09/01/16-04/25/17.................................... 204 12,216 6.500% 05/01/32-05/01/33.................................... 12,705 357 7.000% 10/01/11............................................. 374 644 8.000% 12/01/09............................................. 657 110 10.000% 09/01/18............................................ 123
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ MORTGAGE-BACKED OBLIGATIONS -- (CONTINUED) TBA $ 39,000 5.500% 03/15/35(e).......................................... $ 39,048 105,500 6.500% 04/15/35(e).......................................... 109,455 254,086 5.000% 04/15/20-04/15/35(e)................................. 251,420 Government National Mortgage Association 59,559 5.500% 03/15/35............................................. 60,080 2,758 7.500% 12/15/23-07/20/28.................................... 2,970 209 8.500% 12/15/05-02/15/25.................................... 230 35 8.000% 11/15/07-05/15/17.................................... 37 12 9.500% 06/15/09-09/15/09.................................... 13 13 13.000% 01/15/11-02/15/11................................... 15 2,303 7.000% 01/15/30............................................. 2,438 ---------- 604,722 ---------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $646,746)............................................. 643,294 ---------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 22.7% FOREIGN GOVERNMENT BONDS -- 6.3% JPY 475,000 African Development Bank 1.950% 03/23/10............................................. 4,743 USD 1,000 Aries Vermoegensverwaltungs GmbH 9.600% 10/25/14............................................. 1,203 EUR 870 Corp. Andina de Fomento 6.375% 06/18/09............................................. 1,257 JPY 300,000 Eksportfinans A/S 1.800% 06/21/10............................................. 2,976 European Investment Bank EUR 860 3.625% 10/15/13............................................. 1,127 GBP 190 7.625% 12/07/07............................................. 383 USD 2,425 Export-Import Bank of Korea 4.625% 03/16/10(b).......................................... 2,388 Federal Republic of Brazil 1,804 3.125% 04/15/12(d).......................................... 1,694 1,925 10.250% 06/17/13(b)......................................... 2,093 1,715 14.500% 10/15/09............................................ 2,154 Federal Republic of Germany EUR 3,110 4.250% 07/04/14............................................. 4,253 EUR 2,575 5.250% 07/04/10............................................. 3,694 Government of Canada CAD 2,240 5.250% 06/01/13............................................. 1,977 CAD 400 5.500% 06/01/10............................................. 355 EUR 725 Government of Finland 5.375% 07/04/13............................................. 1,069 JPY 120,000 Inter-American Development Bank 1.900% 07/08/09............................................. 1,196 JPY 315,000 International Bank for Reconstruction & Development 2.000% 02/18/08............................................. 3,095 EUR 1,570 Irish Treasury Bond 5.000% 04/18/13............................................. 2,263 NOK 3,975 Kingdom of Norway 6.000% 05/16/11............................................. 708
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 67 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT BONDS -- (CONTINUED) Kingdom of Spain EUR 2,765 5.000% 07/30/12............................................. $ 3,966 Kingdom of Sweden SEK 2,110 4.000% 12/01/09............................................. 311 SEK 4,730 5.500% 10/08/12............................................. 759 AUD 620 New South Wales Treasury Corp. 7.000% 12/01/10............................................. 504 New Zealand Government NZD 1,325 6.000% 11/15/11............................................. 932 NZD 250 6.500% 02/15/06............................................. 178 USD 600 Peoples Republic of China 4.750% 10/29/13(b).......................................... 591 JPY 515,000 Province of Ontario 1.875% 01/25/10............................................. 5,128 JPY 330,000 Republic of Italy 0.375% 10/10/06............................................. 3,100 Republic of Bulgaria EUR 590 7.500% 01/15/13............................................. 949 USD 250 8.250% 01/15/15............................................. 304 1,649 Republic of Chile 5.500% 01/15/13............................................. 1,685 Republic of Colombia 1,578 9.750% 04/09/11............................................. 1,736 EUR 665 11.500% 05/31/11............................................ 1,049 Republic of France EUR 2,640 4.750% 10/25/12............................................. 3,736 EUR 2,330 5.500% 10/25/10............................................. 3,389 EUR 730 Republic of Greece 5.350% 05/18/11............................................. 1,053 EUR 5,620 Republic of Italy 4.250% 11/01/09-02/01/15.................................... 7,652 Republic of Panama USD 660 8.875% 09/30/27............................................. 711 825 9.375% 07/23/12(b).......................................... 933 Republic of Peru EUR 170 7.500% 10/14/14............................................. 229 USD 1,490 9.125% 02/21/12............................................. 1,676 1,580 Republic of Philippines 10.625% 03/16/25(b)......................................... 1,691 Republic of Poland 580 5.250% 01/15/14............................................. 589 PLN 2,700 6.000% 05/24/09............................................. 875 USD 450 6.250% 07/03/12............................................. 487 2,768 Republic of South Africa 6.500% 06/02/14............................................. 2,906 2,000 Republic of Venezuela 9.250% 09/15/27(b).......................................... 1,986 Russian Federation 3/31/30 2,470 (5.000% 03/31/07)(b)(c)..................................... 2,531 580 8.750% 07/24/05............................................. 589 1,200 10.000% 06/26/07(b)......................................... 1,320 United Kingdom Treasury GBP 1,810 5.000% 09/07/14............................................. 3,501 GBP 255 6.250% 11/25/10............................................. 520
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT BONDS -- (CONTINUED) United Mexican States USD 3,056 6.375% 01/16/13............................................. $ 3,171 EUR 840 7.375% 03/13/08............................................. 1,210 USD 8,141 7.500% 04/08/33............................................. 8,629 8,545 8.375% 01/14/11............................................. 9,724 AUD 755 Victoria Treasury Corp. 7.500% 08/15/08............................................. 613 ---------- 119,541 ---------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 16.4% Federal Home Loan Bank $ 54,000 04/13/05(f)(g).............................................. 53,951 25,000 04/22/05(f)................................................. 24,961 2,300 3.625% 11/14/08............................................. 2,249 2,500 3.875% 06/14/13(b).......................................... 2,365 Federal Home Loan Mortgage Corp. 4,000 2.875% 05/15/07............................................. 3,910 4,078 4.500% 01/15/13(b).......................................... 4,009 7,510 4.875% 11/15/13............................................. 7,542 1,620 5.125% 01/15/12............................................. 2,315 3,634 5.750% 03/15/09............................................. 3,814 5,250 6.000% 06/15/11............................................. 5,631 Federal National Mortgage Association 320,000 2.125% 10/09/07............................................. 3,134 4,000 3.250% 02/15/09............................................. 3,841 7,000 4.125% 04/15/14(b).......................................... 6,645 40,000 4.375% 07/17/13............................................. 38,315 5,249 5.250% 01/15/09............................................. 5,410 2,567 7.250% 05/15/30............................................. 3,309 U.S. Treasury Bonds 5,300 5.375% 02/15/31(b).......................................... 5,777 32,500 6.250% 08/15/23-05/15/30(b)................................. 38,362 2,674 U.S. Treasury Inflation Index Notes 3.875% 01/15/09............................................. 2,950 U.S. Treasury Notes 2,996 1.625% 01/15/15............................................. 2,952 2,500 2.000% 08/31/05(b).......................................... 2,489 21,500 3.000% 11/15/07(b).......................................... 21,033 3,000 3.125% 01/31/07(b).......................................... 2,966 20,000 3.625% 01/15/10(b).......................................... 19,521 10,600 4.000% 02/15/15(b).......................................... 10,184 70,650 U.S. Treasury STRIPS 11/15/13-05/15/23(f)........................................ 34,131 ---------- 311,766 ---------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $429,217)............................................. 431,307 ---------- ASSET-BACKED SECURITIES -- 21.9% 15,000 American Express Credit Account Master Trust 3.160% 11/15/07(d).......................................... 15,001
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 68 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES -- (CONTINUED) AmeriCredit Automobile Receivables Trust $ 1,771 1.490% 05/07/07............................................. $ 1,767 1,100 5.370% 06/12/08............................................. 1,109 700 AQ Finance NIM Trust 3.110% 08/25/08(a)(d)....................................... 701 394 Argent NIM Trust 4.550% 04/25/34(a).......................................... 394 Bank One Issuance Trust 9,000 2.930% 06/15/10(d).......................................... 9,022 2,089 2.940% 06/16/08............................................. 2,083 4,250 3.040% 02/17/09(d).......................................... 4,256 Bear Stearns Asset Backed Security, Inc. 9,710 2.960% 02/25/35(d).......................................... 9,710 10,038 3.200% 03/25/35(d).......................................... 10,044 1,564 3.350% 08/25/34(d).......................................... 1,572 10,000 Bear Stearns Commercial Mortgage Securities, Inc. 3.869% 02/11/41............................................. 9,695 1,891 BMW Vehicle Owner Trust 1.940% 02/25/07............................................. 1,883 189 Bombardier Capital Mortgage Securitization Corp. 6.230% 04/15/28............................................. 192 Capital Auto Receivables Asset Trust 1,108 2.860% 01/16/06(d).......................................... 1,108 1,236 3.090% 01/15/09(d).......................................... 1,239 796 4.180% 10/15/07............................................. 798 3,500 Capital One Master Trust 4.550% 02/15/08............................................. 3,502 10,000 Capital One Multi-Asset Execution Trust 3.490% 07/15/08(d).......................................... 10,015 377 Capital One Prime Auto Receivables Trust 1.470% 06/15/06............................................. 376 1,003 CDC Mortgage Capital Trust 3.080% 03/25/34(d).......................................... 1,003 2,630 Chase Credit Card Master Trust 3.710% 07/16/07(d).......................................... 2,631 1,561 Chase Funding Mortgage Loan 2.960% 11/25/18(d).......................................... 1,561 68 Chase Funding Net Interest Margin 5.000% 01/27/35(a).......................................... 68 Chase Manhattan Auto Owner Trust 2,881 1.520% 05/15/07............................................. 2,861 1,720 2.040% 12/15/09............................................. 1,683 2,000 2.260% 11/15/07............................................. 1,979 1,500 2.780% 06/15/10............................................. 1,475 14,548 CIT Equipment Collateral 4.670% 12/21/09............................................. 14,577 4,100 Citibank Credit Card Issuance Trust 4.400% 05/15/07............................................. 4,107
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES -- (CONTINUED) $ 488 ContiMortgage Home Equity Trust 6.880% 01/15/28............................................. $ 493 Countrywide Asset-Backed Certificates 10,000 2.890% 05/25/35(d).......................................... 10,000 12,184 2.940% 10/25/26(d).......................................... 12,184 13,000 2.970% 03/25/35(d).......................................... 13,000 1,964 First Alliance Mortgage Loan Trust 7.625% 07/25/25............................................. 1,960 468 First Plus Home Loan Trust 7.720% 05/10/24............................................. 468 Ford Credit Auto Owner Trust 4,718 2.860% 01/15/07(d).......................................... 4,719 5,000 3.160% 08/15/07............................................. 4,933 6,610 5.180% 10/16/06............................................. 6,652 50,160 GMAC Commercial Mortgage Securities, Inc., Interest Only 1.519% 07/15/29(d).......................................... 1,962 5,000 GMAC Mortgage Corp. Loan Trust 2.930% 06/25/34(d).......................................... 5,002 3,500 Gracechurch Card Funding PLC 3.000% 02/17/09(d).......................................... 3,504 Harley-Davidson Motorcycle Trust 533 1.340% 01/15/08............................................. 531 489 1.890% 02/15/11............................................. 474 3,171 2.180% 01/15/09............................................. 3,144 2,661 2.960% 02/15/12............................................. 2,622 Honda Auto Receivables Owner Trust 2,947 1.690% 02/21/07............................................. 2,928 1,478 1.920% 11/20/06............................................. 1,473 144 3.000% 05/18/06............................................. 144 2,944 Household Automotive Trust 2.310% 04/17/08............................................. 2,919 7,673 Irwin Home Equity 3.020% 09/25/17(d).......................................... 7,674 15,327 Keycorp Student Loan Trust 3.010% 07/25/29(d).......................................... 15,443 8,340 Long Beach Mortgage Loan Trust 2.930% 03/25/35(d).......................................... 8,340 12,920 MBNA Credit Card Master Note Trust 2.920% 08/17/09(d).......................................... 12,945 7,000 MBNA Master Credit Card Trust USA 3.110% 02/15/08(d).......................................... 7,004 125 MMCA Automobile Trust 5.750% 06/15/07............................................. 126 Morgan Stanley ABS Capital 10,000 2.910% 02/25/35(d).......................................... 10,000 11,974 3.030% 05/25/34(d).......................................... 11,974 1,321 Oakwood Mortgage Investors Inc. 3.040% 05/15/13(d).......................................... 1,123 5,820 Oncor Electric Delivery Transition Bond Co. 2.260% 02/15/09............................................. 5,724
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 69 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ ASSET-BACKED SECURITIES -- (CONTINUED) $ 10,750 Onyx Acceptance Auto Trust 3.380% 01/15/08............................................. $ 10,715 17,000 Popular ABS Mortgage Pass-Through Trust 2.940% 04/25/35(d).......................................... 17,000 9,000 Renaissance Home Equity Loan Trust 2.870% 05/25/35(d).......................................... 9,000 5,989 Residential Asset Mortgage Products, Inc. 3.020% 08/25/22(d).......................................... 5,990 2,652 Securitized Asset Backed Receivables LLC Trust 3.100% 02/25/34(d).......................................... 2,652 SLM Student Loan Trust 4,500 2.730% 10/25/12(d).......................................... 4,501 11,500 2.730% 04/25/14(d).......................................... 11,510 4,500 2.740% 01/25/13(d).......................................... 4,505 9,000 2.740% 01/25/13(b)(d)....................................... 8,982 15,281 2.810% 04/25/17(d).......................................... 15,315 12,529 2.860% 01/25/12(d).......................................... 12,575 5,922 Structured Asset Investment Loan Trust 2.970% 03/25/35(d).......................................... 5,922 10,732 The Money Store Home Equity Trust 2.960% 08/15/29(d).......................................... 10,732 9,585 Volkswagen Auto Lease Trust 3.940% 10/20/10............................................. 9,489 WFS Financial Owner Trust 1,993 1.510% 07/20/07............................................. 1,982 3,465 2.340% 08/22/11............................................. 3,395 6,149 World Omni Auto Receivables Trust 4.490% 08/20/08............................................. 6,169 ---------- TOTAL ASSET-BACKED SECURITIES (Cost $419,540)............................................. 416,311 ---------- SHARES (000) - ----------- INVESTMENT MANAGEMENT COMPANY -- 6.6% 125,216 Nations Cash Reserves, Capital Class Shares(h)..................................... 125,216 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $125,216)............................................. 125,216 ----------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.1% COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.0% Bear Stearns Alt-A Trust $ 6,345 3.200% 10/25/33............................................. $ 6,352 9,724 3.130% 01/25/35(d).......................................... 9,724 8,932 Homebanc Mortgage Trust 3.100% 03/25/35(d).......................................... 8,932 9,904 IMPAC CMB Trust 3.110% 04/25/35(d).......................................... 9,907 7,000 IMPAC Secured Assets Common Owner Trust 3.120% 12/25/31(d).......................................... 6,996 8,944 MLCC Mortgage Investors, Inc. 3.080% 02/25/30(d).......................................... 8,944 5,904 Residential Accredit Loans 3.150% 03/25/34(d).......................................... 5,910 ---------- 56,765 ---------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 0.1% 78,953 Merrill Lynch Mortgage Investors, Inc., Interest Only 1.017% 12/15/30(d).......................................... 2,384 ---------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $60,224).............................................. 59,149 ---------- MUNICIPAL BONDS -- 0.5% EDUCATION -- 0.5% REVENUE BOND -- 0.5% 10,267 Arizona Educational Loan Marketing Corp. 3.010% 12/01/13(d).......................................... 10,267 ---------- TOTAL MUNICIPAL BONDS (Cost $10,278).............................................. 10,267 ---------- SHORT-TERM OBLIGATIONS -- 7.4% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 7.4% 90,000 Federal Home Loan Bank Discount Notes 04/08/05(f)............. 89,953 51,000 Federal Home Loan Mortgage Corp. Discount Notes 04/08/05(f)... 50,958 ---------- 140,911 ---------- TOTAL SHORT-TERM OBLIGATIONS (Cost $140,912)............................................. 140,911 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 70 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- (CONTINUED) REPURCHASE AGREEMENTS(J) -- 6.9% $ 35,131 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $35,465 (repurchase proceeds $35,134)....................... $ 35,134 42,158 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $42,712 (repurchase proceeds $42,161).................................................... 42,161 54,882 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/01/35, market value $55,748 (repurchase proceeds $54,887).................................................... 54,887 ---------- TOTAL REPURCHASE AGREEMENTS (Cost $132,182)............................................. 132,182 ---------- TOTAL INVESTMENTS (Cost $2,614,195)(k).............................. 137.3% 2,612,882 ---------- OTHER ASSETS AND LIABILITIES (NET).................. (37.3)% (709,848) ---------- NET ASSETS.......................................... 100.0% $1,903,034 ==========
- --------------- Notes to Investment Portfolio: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $78,109, which represents 4.1% of net assets. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $127,988 and $126,690, respectively. (c) Step bond. (d) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (e) Security, or a portion thereof, purchased on a delayed delivery basis. (f) Zero coupon bond. (g) Security pledged as collateral for open futures contracts and TBA's. (h) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (i) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (j) This amount represents cash collateral received from securities lending activity (see Note 12). (k) Cost for federal income tax purposes is $2,614,634. See Note 5 for additional information. ACRONYMS: AUD -- Australian Dollar CAD -- Canadian Dollar EUR -- Euro Currency GBP -- Great Britain Pound JPY -- Japanese Yen NOK -- Norwegian Krone NZD -- New Zealand Dollar PLN -- Polish Zloty SEK -- Swedish Krona STRIPS -- Separate Trading of Registered Interest and Principal of Securities TBA -- To Be Announced
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 71 NATIONS FUNDS Nations Bond Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------------------------------------------------------ Mortgage-Backed Securities................. 33.8 Government Agencies & Obligations.......... 30.1 Asset-Back Securities...................... 21.9 Financials................................. 13.6 Repurchase Agreements...................... 6.9 Investment Management Company.............. 6.6 Communications............................. 4.9 Utilities.................................. 3.3 Energy..................................... 3.2 Collateralized Mortgage Obligations 3.1 Consumer Cyclical.......................... 2.7 Consumer Non-Cyclical...................... 2.2 Industrials................................ 1.9 Basic Materials............................ 1.7 Municipal Bonds............................ 0.5 Technology................................. 0.5 Diversified................................ 0.4 Other Assets & Liabilities, Net (37.3) ----- 100.0 =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 72 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 40.8% FOREIGN GOVERNMENT BONDS -- 27.4% Aries Vermoegensverwaltungs GmbH EUR 250 7.750% 10/25/09(a).......................................... $ 366 USD 250 9.600% 10/25/14............................................. 301 EUR 350 Corp. Andina de Fomento 6.375% 06/18/09............................................. 506 GBP 100 European Investment Bank 7.625% 12/07/07............................................. 202 Federal Republic of Brazil USD 5,669 3.125% 04/15/12(b).......................................... 5,322 1,250 12.750% 01/15/20............................................ 1,544 Federal Republic of Germany EUR 1,250 4.250% 07/04/14............................................. 1,710 EUR 1,270 5.250% 07/04/10............................................. 1,822 EUR 440 6.000% 07/04/07............................................. 614 Government of Canada CAD 2,575 5.250% 06/01/13............................................. 2,273 CAD 1,000 5.500% 06/01/10............................................. 888 USD 400 Government of Malaysia 7.500% 07/15/11............................................. 453 Kingdom of Norway NOK 5,300 5.500% 05/15/09............................................. 909 NOK 5,080 6.000% 05/16/11............................................. 905 EUR 500 Kingdom of Spain 5.500% 07/30/17............................................. 759 Kingdom of Sweden SEK 15,700 5.000% 01/28/09............................................. 2,392 SEK 9,265 6.750% 05/05/14............................................. 1,630 AUD 1,605 New South Wales Treasury Corp. 7.000% 12/01/10............................................. 1,306 New Zealand Government NZD 3,345 6.000% 11/15/11............................................. 2,353 NZD 1,050 6.500% 02/15/06............................................. 748 NZD 1,305 7.000% 07/15/09............................................. 954 Republic of Bulgaria EUR 200 7.500% 01/15/13............................................. 322 USD 750 8.250% 01/15/15............................................. 912 300 8.250% 01/15/15(a).......................................... 363 971 Republic of Chile 5.500% 01/15/13............................................. 992 Republic of Colombia 751 9.750% 04/09/11............................................. 827 300 10.750% 01/15/13............................................ 335 300 11.750% 02/25/20............................................ 357 Republic of France EUR 1,000 4.750% 10/25/12............................................. 1,415 EUR 350 5.500% 10/25/10............................................. 509 EUR 310 Republic of Greece 5.350% 05/18/11............................................. 447
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- FOREIGN GOVERNMENT BONDS -- (CONTINUED) EUR 2,135 Republic of Italy 5.000% 02/01/12............................................. $ 3,047 Republic of Panama USD 400 8.875% 09/30/27(c).......................................... 430 400 9.375% 07/23/12............................................. 452 Republic of Peru 680 5.000% 03/07/17(d).......................................... 636 EUR 380 7.500% 10/14/14............................................. 510 Republic of Philippines USD 1,200 8.875% 04/15/08............................................. 1,284 200 10.625% 03/16/25(c)......................................... 214 PLN 6,040 Republic of Poland 6.000% 05/24/09............................................. 1,957 Republic of South Africa ZAR 4,500 3.000% 08/31/10............................................. 871 USD 176 6.500% 06/02/14............................................. 185 500 7.375% 04/25/12............................................. 550 Republic of Venezuela 571 3.625% 12/18/07(b).......................................... 568 250 9.250% 09/15/27(c).......................................... 248 Russian Federation 03/31/30 4,800 (5.000% 03/31/07)(e)........................................ 4,918 500 8.750% 07/24/05............................................. 507 United Kingdom Treasury GBP 710 5.000% 09/07/14............................................. 1,373 GBP 400 7.500% 12/07/06............................................. 790 GBP 600 9.000% 07/12/11............................................. 1,399 United Mexican States USD 1,041 7.500% 04/08/33............................................. 1,102 1,150 8.125% 12/30/19............................................. 1,318 550 9.875% 02/01/10............................................. 655 2,050 11.500% 05/15/26............................................ 3,101 AUD 2,420 Victoria Treasury Corp. 7.500% 08/15/08............................................. 1,964 -------- 62,515 -------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 13.4% $ 280 Federal Farm Credit Bank 2.500% 03/15/06............................................. 277 300 Federal Home Loan Bank 2.000% 02/13/06............................................. 296 Federal Home Loan Mortgage Corp. 1,000 1.875% 02/15/06............................................. 985 750 4.250% 06/15/05............................................. 752 1,280 5.125% 10/15/08(c).......................................... 1,314 1,010 5.750% 03/15/09............................................. 1,060 Federal National Mortgage Association 3,003 4.375% 07/17/13............................................. 2,877
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 73 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- (CONTINUED) U.S. Treasury Bonds $ 1,825 4.750% 05/15/14(c).......................................... $ 1,859 1,740 6.875% 08/15/25............................................. 2,184 U.S. Treasury Notes 2,550 2.750% 06/30/06............................................. 2,524 2,290 4.250% 08/15/13(c).......................................... 2,258 4,650 4.750% 06/15/09............................................. 4,631 13,800 U.S. Treasury STRIPS 11/15/08-05/15/23(g)........................................ 9,407 -------- 30,424 -------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost $90,890).............................................. 92,939 -------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 31.0% BASIC MATERIALS -- 1.4% CHEMICALS -- 0.4% 500 Equistar Chemicals LP 10.625% 05/01/11............................................ 562 150 Huntsman International LLC 7.375% 01/01/15(a)(c)....................................... 149 325 Rhodia SA 8.875% 06/01/11(c).......................................... 316 -------- 1,027 -------- FOREST PRODUCTS AND PAPER -- 0.8% 160 Abitibi-Consolidated, Inc. 8.375% 04/01/15............................................. 155 180 Fraser Papers, Inc. 8.750% 03/15/15............................................. 169 EUR 695 JSG Holding PLC 11.500% 10/01/15(a)(h)...................................... 840 $ 255 Newark Group, Inc. 9.750% 03/15/14............................................. 259 200 Norske Skog Canada 8.625% 06/15/11............................................. 207 90 Tembec Industries, Inc. 8.500% 02/01/11............................................. 85 -------- 1,715 -------- IRON/STEEL -- 0.1% 300 Wise Metals Group LLC 10.250% 05/15/12............................................ 303 -------- METALS AND MINING -- 0.1% 132 CODELCO, Inc. 5.500% 10/15/13(a).......................................... 133 100 Hudson Bay Mining and Smelting Co., Ltd. 9.625% 01/15/12(a).......................................... 100 -------- 233 -------- 3,278 --------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- COMMUNICATIONS -- 5.4% ADVERTISING -- 0.2% $ 360 Advanstar Communications, Inc. 12.000% 02/15/11............................................ $ 387 -------- MEDIA -- 2.9% 190 CBD Media Holdings LLC, Inc. 9.250% 07/15/12............................................. 194 1,030 Charter Communications LLC 9.920% 04/01/11(e).......................................... 791 1,200 CSC Holdings, Inc. 6.750% 04/15/12(a).......................................... 1,191 1,000 Dex Media East LLC/Dex Media East Finance Co. 9.875% 11/15/09............................................. 1,100 400 Dex Media, Inc. 11/15/13 (9.000% 11/15/08)(e)........................................ 304 200 DirecTV Holdings LLC 8.375% 03/15/13............................................. 216 165 Fisher Communications, Inc. 8.625% 09/15/14............................................. 176 155 Granite Broadcasting Corp. 9.750% 12/01/10(c).......................................... 144 460 Hollinger, Inc. 12.875% 03/01/11(a)......................................... 507 Paxson Communications 390 10.750% 07/15/08(c)......................................... 387 01/15/09 165 (12.250% 01/15/06)(e)....................................... 153 300 Primedia, Inc. 8.875% 05/15/11............................................. 313 500 Quebecor Media, Inc. 11.125% 07/15/11............................................ 553 500 Sinclair Broadcast Group, Inc. 8.750% 12/15/11............................................. 525 -------- 6,554 -------- TELECOMMUNICATIONS -- 2.3% 200 American Towers, Inc. 7.250% 12/01/11............................................. 207 223 BellSouth Corp. 5.000% 10/15/06............................................. 226 500 Cincinnati Bell, Inc. 8.375% 01/15/14(c).......................................... 493 500 Dobson Cellular Systems, Inc. 8.375% 11/01/11(a).......................................... 510 275 Intelsat Bermuda Ltd. 8.250% 01/15/13(a).......................................... 278 600 Nextel Communications, Inc. 7.375% 08/01/15............................................. 634 515 Qwest Capital Funding, Inc. 7.250% 02/15/11(c).......................................... 480 1,000 Qwest Services Corp. 13.500% 12/15/10(a)......................................... 1,158 245 Rogers Wireless, Inc. 9.750% 06/01/16............................................. 289 430 SBC Communications, Inc. 5.750% 05/02/06............................................. 438
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 74 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- (CONTINUED) $ 75 Telcordia Technologies 10.000% 03/15/13(a)......................................... $ 74 Time Warner Telecom, Inc. 146 9.750% 07/15/08(c).......................................... 142 170 10.125% 02/01/11(c)......................................... 163 150 US LEC Corp. 11.890% 10/01/09(b)......................................... 153 205 Zeus Special Subsidiary Ltd. 02/01/15(a)(e) (9.250% 02/01/10)......................................... 130 -------- 5,375 -------- 12,316 -------- CONSUMER CYCLICAL-- 5.7% AIRLINES-- 0.3% 500 Continental Airlines, Inc. 7.568% 12/01/06............................................. 398 500 Northwest Airlines, Inc. 9.875% 03/15/07(c).......................................... 373 -------- 771 -------- APPAREL -- 0.3% 505 Levi Strauss & Co. 9.750% 01/15/15(a).......................................... 496 210 Phillips-Van Heusen Corp. 8.125% 05/01/13............................................. 220 -------- 716 -------- AUTO MANUFACTURERS -- 0.1% 165 Navistar International Corp. 7.500% 06/15/11............................................. 165 -------- AUTO PARTS AND EQUIPMENT -- 0.8% 315 Cooper-Standard Automotive, Inc. 8.375% 12/15/14(a).......................................... 256 200 Delco Remy International, Inc. 9.375% 04/15/12(c).......................................... 168 350 Dura Operating Corp. 8.625% 04/15/12............................................. 323 1,000 Goodyear Tire & Rubber Co. 7.857% 08/15/11(c).......................................... 965 -------- 1,712 -------- DISTRIBUTION/WHOLESALE -- 0.1% 100 Buhrmann US, Inc. 7.875% 03/01/15(a).......................................... 100 -------- ENTERTAINMENT -- 1.2% 480 AMC Entertainment, Inc. 9.875% 02/01/12............................................. 507 325 LCE Acquisition Corp. 9.000% 08/01/14(a).......................................... 323 130 Mohegan Tribal Gaming Authority 6.125% 02/15/13(a).......................................... 127 245 Penn National Gaming, Inc. 6.750% 03/01/15(a).......................................... 241 275 River Rock Entertainment Authority 9.750% 11/01/11............................................. 301 205 Seneca Gaming Corp. 7.250% 05/01/12............................................. 204
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ENTERTAINMENT -- (CONTINUED) $ 445 Six Flags, Inc. 9.625% 06/01/14............................................. $ 411 400 Warner Music Group 7.375% 04/15/14............................................. 412 175 WMG Holdings Corp. 9.760% 12/15/14(a)(b)....................................... 176 -------- 2,702 -------- HOME FURNISHINGS -- 0.2% 210 ALH Finance LLC 8.500% 01/15/13............................................. 205 200 WII Components, Inc. 10.000% 02/15/12............................................ 205 -------- 410 -------- LEISURE TIME -- 0.6% 500 AMF Bowling Worldwide, Inc. 10.000% 03/01/10............................................ 512 260 Equinox Holdings, Inc. 9.000% 12/15/09(c).......................................... 273 200 Hard Rock Hotel, Inc. 8.875% 06/01/13............................................. 216 145 K2, Inc. 7.375% 07/01/14............................................. 150 370 Town Sports International, Inc. 02/01/14(e) (11.000% 02/01/09)........................................ 217 -------- 1,368 -------- LODGING -- 1.3% 210 Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12............................................ 226 1,522 HMH Properties, Inc. 7.875% 08/01/08............................................. 1,552 225 Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10............................................ 264 500 MGM Mirage 6.750% 09/01/12............................................. 504 500 Wynn Las Vegas LLC 6.625% 12/01/14(a).......................................... 475 -------- 3,021 -------- RETAIL -- 0.8% 500 Asbury Automotive Group, Inc. 8.000% 03/15/14............................................. 485 200 Finlay Fine Jewelry Corp. 8.375% 06/01/12............................................. 189 175 Landry's Restaurants, Inc. 7.500% 12/15/14(a).......................................... 170 Rite Aid Corp. 70 7.500% 01/15/15(a).......................................... 67 275 9.250% 06/01/13............................................. 274 245 Saks, Inc. 7.000% 12/01/13............................................. 222 105 Suburban Propane Partners 6.875% 12/15/13(a).......................................... 103 145 Target Corp. 5.400% 10/01/08............................................. 150
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 75 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- RETAIL -- (CONTINUED) $ 166 Wal-Mart Stores, Inc. 5.450% 08/01/06............................................. $ 169 -------- 1,829 -------- 12,794 -------- CONSUMER NON-CYCLICAL -- 5.2% AGRICULTURE -- 0.1% 230 North Atlantic Trading Co., Inc. 9.250% 03/01/12(c).......................................... 173 -------- BEVERAGES -- 0.1% 240 Constellation Brands, Inc. 8.125% 01/15/12............................................. 257 -------- COMMERCIAL SERVICES -- 1.3% 210 Corrections Corp. of America 6.250% 03/15/13(a).......................................... 201 200 Dollar Financial Group, Inc. 9.750% 11/15/11............................................. 212 240 GEO Group, Inc. 8.250% 07/15/13............................................. 245 1,000 Language Line, Inc. 11.125% 06/15/12............................................ 1,043 500 NationsRent Companies, Inc. 9.500% 10/15/10............................................. 535 290 Service Corp. International 7.700% 04/15/09............................................. 299 500 Vertis, Inc. 10.875% 06/15/09(c)......................................... 483 -------- 3,018 -------- COSMETICS/PERSONAL CARE -- 0.3% 225 DEL Laboratories, Inc. 8.000% 02/01/12(a).......................................... 215 190 Elizabeth Arden, Inc. 7.750% 01/15/14............................................. 196 63 Procter & Gamble Co. 4.750% 06/15/07............................................. 64 Revlon Consumer Products 155 8.625% 02/01/08............................................. 143 180 9.500% 04/01/11(a).......................................... 177 -------- 795 -------- FOOD -- 0.7% 55 Dole Food Co., Inc. 8.625% 05/01/09............................................. 58 300 Merisant Co. 9.500% 07/15/13(a).......................................... 258 400 Pinnacle Foods Holding Corp. 8.250% 12/01/13............................................. 342 400 Stater Brothers Holdings, Inc. 8.125% 06/15/12............................................. 386 505 United Agri Products 8.250% 12/15/11............................................. 525 -------- 1,569 -------- HEALTHCARE SERVICES -- 1.4% 85 DaVita, Inc. 7.250% 03/15/15(a).......................................... 83
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- HEALTHCARE SERVICES -- (CONTINUED) $ 500 InSight Health Services Corp. 9.875% 11/01/11............................................. $ 490 1,000 MedQuest, Inc. 11.875% 08/15/12............................................ 980 125 Select Medical Corp. 7.625% 02/01/15(a).......................................... 125 750 Tenet Healthcare Corp. 9.875% 07/01/14............................................. 780 110 US Oncology Holdings, Inc. 8.620% 03/15/15(a)(b)....................................... 103 500 US Oncology, Inc. 9.000% 08/15/12(a).......................................... 528 -------- 3,089 -------- HOUSEHOLD PRODUCTS/WARES -- 0.4% 400 Amscan Holdings, Inc. 8.750% 05/01/14............................................. 388 114 Fortune Brands, Inc. 2.875% 12/01/06............................................. 112 300 Playtex Products, Inc. 9.375% 06/01/11(c).......................................... 312 -------- 812 -------- PHARMACEUTICALS -- 0.2% 340 Elan Finance PLC 7.750% 11/15/11(a)(c)....................................... 254 125 Warner Chilcott Corp. 8.750% 02/01/15(a).......................................... 126 -------- 380 -------- TELECOMMUNICATIONS -- 0.7% 500 American Cellular Corp. 10.000% 08/01/11............................................ 460 250 AXtel SA 11.000% 12/15/13............................................ 265 410 Horizon PCS, Inc. 11.375% 07/15/12(a)......................................... 465 500 Rural Cellular Corp. 8.250% 03/15/12............................................. 510 -------- 1,700 -------- 11,793 -------- ENERGY -- 2.3% OIL AND GAS -- 1.7% 125 Chesapeake Energy Corp. 7.500% 06/15/14............................................. 132 500 Compton Petroleum Corp. 9.900% 05/15/09............................................. 543 175 Delta Petroleum Corp. 7.000% 04/01/15(a).......................................... 169 2,000 El Paso Production Holding Co. 7.750% 06/01/13............................................. 2,025 240 Premcor Refining Group, Inc. 7.500% 06/15/15............................................. 247 160 Pride International, Inc. 7.375% 07/15/14............................................. 170
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 76 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- OIL AND GAS -- (CONTINUED) $ 246 USX Corp. 6.650% 02/01/06............................................. $ 251 340 XTO Energy, Inc. 7.500% 04/15/12............................................. 389 -------- 3,926 -------- PIPELINES -- 0.6% 750 Dynegy Holdings, Inc. 9.875% 07/15/10(a).......................................... 803 500 Williams Companies, Inc. 8.125% 03/15/12............................................. 548 -------- 1,351 -------- 5,277 -------- FINANCIALS -- 4.0% BANKS -- 0.7% 125 Bank of New York Co., Inc. 3.900% 09/01/07............................................. 124 623 Bank One Corp. 6.000% 08/01/08............................................. 652 382 First Union National Bank 5.800% 12/01/08............................................. 397 70 Mellon Funding Corp. 4.875% 06/15/07............................................. 71 187 US Bancorp 5.100% 07/15/07............................................. 191 181 US Bank NA 2.850% 11/15/06............................................. 178 -------- 1,613 -------- DIVERSIFIED FINANCIAL SERVICES -- 3.0% 100 Altra Industrial Motion, Inc. 9.000% 12/01/11(a).......................................... 99 102 American Express Co. 3.750% 11/20/07............................................. 100 325 5.500% 09/12/06............................................. 332 Caterpillar Financial Services Corp. 239 5.950% 05/01/06............................................. 244 186 2.350% 09/15/06............................................. 182 155 CIT Group, Inc. 7.375% 04/02/07............................................. 164 138 Citigroup Global Markets Holdings, Inc. 6.500% 02/15/08............................................. 146 541 Countrywide Home Loans, Inc. 5.500% 08/01/06............................................. 550 200 E*Trade Financial Corp. 8.000% 06/15/11(a).......................................... 206 230 Global Cash Access LLC/Global Cash Finance Corp. 8.750% 03/15/12............................................. 244 211 HSBC Finance Corp. 7.200% 07/15/06............................................. 219 115 Innophos Investments 10.771% 02/15/15(a)(b)...................................... 114 244 John Deere Capital Corp. 3.125% 12/15/05............................................. 243 345 JPMorgan Chase & Co. 7.250% 06/01/07............................................. 365
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 400 LaBranche & Co., Inc. 11.000% 05/15/12............................................ $ 424 127 MassMutual Global Funding II 2.550% 07/15/08(a).......................................... 120 154 Merrill Lynch & Co., Inc. 3.700% 04/21/08............................................. 151 1,016 Midland Funding II 11.750% 07/23/05............................................ 1,036 136 National Rural Utilities Cooperative Finance Corp. 3.250% 10/01/07............................................. 132 EUR 100 Nycomed SA 11.750% 09/15/13(a)......................................... 123 $ 388 Prudential Funding LLC 6.600% 05/15/08(a).......................................... 411 891 Scotia Pacific Co. LLC 7.110% 01/20/14............................................. 757 135 Virgin River Casino Corp./RBG LLC/B&BB, Inc. 9.000% 01/15/12(a).......................................... 141 200 Visant Corp. 7.625% 10/01/12............................................. 199 -------- 6,702 -------- REAL ESTATE INVESTMENT TRUST (REITS) -- 0.3% 680 Thornburg Mortgage, Inc. 8.000% 05/15/13............................................. 707 -------- 9,022 -------- INDUSTRIALS -- 5.5% AEROSPACE AND DEFENSE -- 0.5% 160 Argo-Tech Corp. 9.250% 06/01/11............................................. 172 750 BE Aerospace, Inc. 8.875% 05/01/11............................................. 759 50 Sequa Corp. 9.000% 08/01/09............................................. 54 180 TransDigm, Inc. 8.375% 07/15/11............................................. 185 -------- 1,170 -------- BUILDING MATERIALS -- 1.0% 260 ACIH, Inc. 12/15/12(a)(e) (11.500% 12/15/07)........................................ 183 180 Associated Materials, Inc. 03/01/14(e) (11.250% 03/01/09)........................................ 125 1,500 Building Materials Corp. of America 7.750% 07/15/05............................................. 1,508 120 Nortek, Inc. 8.500% 09/01/14............................................. 116 135 RMCC Acquisition Co. 9.500% 11/01/12(a).......................................... 132 185 US Concrete, Inc. 8.375% 04/01/14............................................. 184 -------- 2,248 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 77 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ELECTRICAL COMPONENTS AND EQUIPMENT -- 0.2% $ 500 Coleman Cable, Inc. 9.875% 10/01/12(a).......................................... $ 510 -------- ELECTRONICS -- 0.3% 500 Flextronics International Ltd. 6.250% 11/15/14............................................. 475 120 Sanmina-SCI Corp. 6.750% 03/01/13(a).......................................... 113 -------- 588 -------- ENGINEERING AND CONSTRUCTION -- 0.2% 500 J. Ray McDermott SA 11.000% 12/15/13(a)......................................... 560 -------- ENVIRONMENTAL CONTROL -- 0.4% Allied Waste NA, Inc. 130 7.250% 03/15/15(a).......................................... 124 700 7.875% 04/15/13............................................. 698 -------- 822 -------- MACHINERY DIVERSIFIED -- 0.1% 265 Douglas Dynamics LLC 7.750% 01/15/12(a).......................................... 260 -------- METAL FABRICATE/HARDWARE -- 0.6% 475 FastenTech, Inc. 11.500% 05/01/11(a)......................................... 510 750 Mueller Holdings, Inc. 04/15/14(e) (14.750% 04/15/09)........................................ 517 310 TriMas Corp. 9.875% 06/15/12............................................. 316 -------- 1,343 -------- MISCELLANEOUS MANUFACTURING -- 0.6% 280 Bombardier, Inc. 6.300% 05/01/14(a).......................................... 235 129 General Electric Co. 5.000% 02/01/13............................................. 129 215 JB Poindexter & Co., Inc. 8.750% 03/15/14(a).......................................... 214 500 Koppers, Inc. 9.875% 10/15/13............................................. 557 140 Reddy Ice Holdings, Inc. 10.500% 11/01/12(a)(e) (10.500% 11/01/08)........................................ 100 175 Samsonite Corp. 8.875% 06/01/11............................................. 183 -------- 1,418 --------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- PACKAGING AND CONTAINERS -- 0.4% $ 400 Crown European Holdings SA 10.875% 03/01/13............................................ $ 464 200 Jefferson Smurfit Corp. 8.250% 10/01/12............................................. 206 300 Owens-Brockway Glass Container 6.750% 12/01/14(a).......................................... 294 -------- 964 -------- TRANSPORTATION -- 1.2% CHC Helicopter Corp. 500 7.375% 05/01/14............................................. 487 140 7.375% 05/01/14(a).......................................... 136 295 QDI Capital Corp. 9.000% 11/15/10............................................. 289 700 Ship Finance International Ltd. 8.500% 12/15/13............................................. 693 1,000 Stena AB 7.000% 12/01/16............................................. 925 160 TFM SA de CV 10.250% 06/15/07............................................ 170 -------- 2,700 -------- 12,583 -------- TECHNOLOGY -- 0.2% COMPUTERS -- 0.1% 188 International Business Machines Corp. 4.875% 10/01/06............................................. 191 -------- SEMICONDUCTORS -- 0.1% 285 Amkor Technology, Inc. 9.250% 02/15/08(c).......................................... 272 -------- 463 -------- UTILITIES -- 1.3% ELECTRIC -- 1.3% 400 Calpine Corp. 8.500% 07/15/10(a)(c)....................................... 313 410 Calpine Generating Co. LLC 11.050% 04/01/11(b)(c)...................................... 391 195 Con Edison Co. 6.625% 12/15/05............................................. 198 500 Edison Mission Energy 9.875% 04/15/11............................................. 578 700 Orion Power Holdings, Inc. 12.000% 05/01/10............................................ 851 500 PSEG Energy Holdings LLC 8.625% 02/15/08............................................. 528 205 Texas Genco LLC 6.875% 12/15/14(a).......................................... 206 -------- 3,065 -------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost $72,831).............................................. 70,591 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 78 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES -- 18.8% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% $ 1,137 Federal Home Loan Mortgage Corp., Interest Only 5.500% 01/15/23-05/15/27.................................... $ 101 -------- MORTGAGE-BACKED OBLIGATIONS -- 18.7% 406 Federal Home Loan Mortgage Corp. 6.750% 03/15/31............................................. 494 Federal National Mortgage Association 320 6.500% 05/01/32-05/01/33.................................... 333 394 2.625% 11/15/06............................................. 386 TBA 5,808 5.500% 03/15/35(i).......................................... 5,815 20,691 6.500% 04/15/35(i).......................................... 21,467 14,187 5.000% 04/15/20(i).......................................... 14,174 -------- 42,669 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $42,993).............................................. 42,770 -------- SHARES (000) - ----------- INVESTMENT MANAGEMENT COMPANY -- 4.0% 9,216 Nations Cash Reserves, Capital Class Shares(j)..................................... 9,216 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $9,216)............................................... 9,216 -------- PAR (000) - ----------- ASSET-BACKED SECURITIES -- 5.4% $ 226 American Express Credit Account Master Trust 1.690% 01/15/09............................................. 220 AmeriCredit Automobile Receivables Trust 940 2.070% 08/06/08............................................. 922 329 5.370% 06/12/08............................................. 332 623 Bank One Auto Securitization Trust 1.820% 09/20/07............................................. 616
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- (CONTINUED) $ 1,126 BMW Vehicle Owner Trust 3.320% 02/25/09............................................. $ 1,107 24 Capital Auto Receivables Asset Trust 4.180% 10/15/07............................................. 24 411 CIT Equipment Collateral 4.670% 12/21/09............................................. 411 1,130 Citibank Credit Card Issuance Trust 2.500% 04/07/08............................................. 1,115 212 Discover Card Master Trust 5.750% 12/15/08............................................. 217 14 First Plus Home Loan Trust 05/10/24 (7.720% 05/10/05)(e)........................................ 14 Ford Credit Auto Owner Trust 485 2.700% 06/15/07............................................. 481 2,503 3.540% 11/15/08............................................. 2,464 200 5.180% 10/16/06............................................. 201 1,403 Honda Auto Receivables Owner Trust 3.060% 10/21/09............................................. 1,370 1,391 Household Automotive Trust 2.310% 04/17/08............................................. 1,379 563 Nissan Auto Receivables Owner Trust 2.700% 12/17/07............................................. 556 800 Volkswagen Auto Loan Enhanced Trust 2.270% 10/22/07............................................. 794 -------- TOTAL ASSET-BACKED SECURITIES (Cost $12,399).............................................. 12,223 -------- SHORT-TERM OBLIGATIONS -- 17.8% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 17.8% Federal Home Loan Mortgage Corp. Discount Notes 14,187 04/19/05(g)................................................. 14,168 26,499 04/12/05(g)................................................. 26,477 -------- TOTAL SHORT-TERM OBLIGATIONS (Cost $40,645).............................................. 40,645 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 79 NATIONS FUNDS Nations Strategic Income Fund INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(K) -- 5.1% $ 3,088 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $3,117 (repurchase proceeds $3,088)......................... $ 3,088 3,706 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $3,755 (repurchase proceeds $3,706)..................................................... 3,706 4,825 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/01/35, market value $4,901 (repurchase proceeds $4,826)..................................................... 4,826 -------- TOTAL REPURCHASE AGREEMENTS (Cost of $11,620)........................................... 11,620 -------- TOTAL INVESTMENTS (Cost $280,594)(l)................................ 122.9% 280,004 -------- OTHER ASSETS AND LIABILITIES (NET).................. (22.9)% (52,237) -------- NET ASSETS.......................................... 100.0% $227,767 ========
- --------------- Notes to Investment Portfolio: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $16,944, which represents 7.7% of net assets. (b) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (c) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $11,351 and $11,170, respectively. (d) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (e) Step bond. (f) Security pledged as collateral for TBA's. (g) Zero coupon bond. (h) Pay-in-kind securities. (i) Security, or a portion thereof, purchased on a delayed delivery basis. (j) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (k) This amount represents cash collateral received from securities lending activity (see Note 12). (l) Cost for federal income tax purposes is $280,615. See note 5 for additional information. ACRONYMS: AUD -- Australian Dollar CAD -- Canadian Dollar EUR -- Euro Currency GBP -- Great Britain Pound NOK -- Norwegian Krone NZD -- New Zealand Dollar PLN -- Polish Zloty SEK -- Swedish Krona STRIPS -- Separate Trading of Registered Interest and Principal of Securities TBA -- To Be Announced ZAR -- South African Rand
At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------------------------------------------------------ Government Agencies & Obligations.......... 58.6 Mortgage-Backed Securities................. 18.8 Consumer Cyclical.......................... 5.7 Industrials................................ 5.5 Asset-Back Securities...................... 5.4 Communications............................. 5.4 Consumer Non-Cyclical...................... 5.2 Repurchase Agreements...................... 5.1 Financials................................. 4.0 Investment Management Company.............. 4.0 Energy..................................... 2.3 Basic Materials............................ 1.4 Utilities.................................. 1.3 Technology................................. 0.2 Other Assets & Liabilities, Net............ (22.9) ----- 100.0 =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 80 NATIONS FUNDS Nations High Yield Bond Fund INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE - --------------------------------------------------------------------------------------------- INVESTMENT COMPANIES Investment in Nations Master Investment Trust, High Yield Bond Master Portfolio*.............................................................. $ 1,025,370 --------------- TOTAL INVESTMENTS........................................... 100.3% 1,025,370 TOTAL OTHER ASSETS AND LIABILITIES (NET).................... (0.3) (3,401) ----------- --------------- NET ASSETS.................................................. 100.0% $ 1,021,969 =========== ===============
- --------------- *The financial statements of the High Yield Bond Master Portfolio, including its investment portfolio, are included elsewhere within this report and should be read in conjunction with the High Yield Bond Fund's financial statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 81 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
SHORT- SHORT-TERM INTERMEDIATE INCOME GOVERNMENT --------------------------------------- (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost......................... $ 969,133 $ 384,983 Repurchase Agreements....................................... 23,348 160,496 Investment in master........................................ -- -- Affiliated investments, at cost............................. 79,684 3,044 ----------------- ----------------- Non-affiliated investments, at value........................ 956,422 381,131 Repurchase Agreements....................................... 23,348 160,496 Investment in master........................................ -- -- Affiliated investments, at value............................ 79,684 3,044 Cash........................................................ 722 31 Foreign currency (Cost $--, $--, $--, $--, $710, $--, $--)...................................................... -- -- Unrealized appreciation on forward foreign exchange contracts................................................. -- -- Receivable for investment securities sold................... 2,207 -- Receivable for Fund shares sold............................. 372 266 Dividends receivable........................................ -- -- Interest receivable......................................... 7,378 2,946 Receivable from investment advisor.......................... -- -- Receivable for variation margin............................. -- 41 Other assets................................................ -- 1 ----------------- ----------------- Total assets............................................ 1,070,133 547,956 ----------------- ----------------- LIABILITIES: Collateral on securities loaned............................. $ (23,348) $ (160,496) Payable to foreign custodian................................ -- -- Shareholder servicing and distribution fees payable......... (26) (27) Investment advisory fee payable............................. (254) (87) Administration fee payable.................................. (102) (44) Unrealized depreciation on forward foreign exchange contracts................................................. -- -- Payable for investment securities purchased................. (57,707) (30,004) Income distribution payable................................. (1,707) (852) Payable for Fund shares redeemed............................ (2,498) (348) Accrued Trustees' fees and expenses......................... (70) (88) Accrued expenses and other liabilities...................... (320) (169) ----------------- ----------------- Total liabilities....................................... (86,032) (192,115) ----------------- ----------------- NET ASSETS.................................................. $ 984,101 $ 355,841 ================= ================= NET ASSETS CONSIST OF: Undistributed net investment income/(distributions in excess of net investment income)................................. $ 270 $ 106 Accumulated net realized gain/(loss) on investments......... (5,600) (2,334) Net unrealized appreciation/(depreciation) of: Investments................................................. (12,711) (3,852) Futures contracts........................................... -- (24) Swaps....................................................... -- -- Foreign currency and net other assets....................... -- -- Paid-in capital............................................. 1,002,142 361,945 ----------------- ----------------- NET ASSETS.................................................. $ 984,101 $ 355,841 ================= ================= PRIMARY A SHARES: Net assets.................................................. $ 926,514,057 $ 299,648,340 Number of shares outstanding................................ 94,501,434 72,739,601 Net asset value, offering and redemption price per share.... $ 9.80 $ 4.12 INVESTOR A SHARES: Net assets.................................................. $ 38,129,671 $ 32,799,029 Number of shares outstanding................................ 3,882,123 7,967,291 Net asset value, offering and redemption price per share.... $ 9.82 $ 4.12 Maximum sales charge........................................ 1.00% 3.25% Maximum offering price per share............................ $ 9.92 $ 4.26 INVESTOR B SHARES: Net assets.................................................. $ 1,477,081 $ 19,086,312 Number of shares outstanding................................ 150,552 4,632,685 Net asset value, offering and redemption price per share(a).................................................. $ 9.81 $ 4.12 INVESTOR C SHARES: Net assets.................................................. $ 17,980,569 $ 4,307,161 Number of shares outstanding................................ 1,832,195 1,047,181 Net asset value, offering and redemption price per share(a).................................................. $ 9.81 $ 4.11
- --------------- (a)The redemption price per share is equal to net asset value less any applicable contingent deferred sales charges. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 82 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
GOVERNMENT INTERMEDIATE STRATEGIC HIGH YIELD SECURITIES BOND BOND INCOME BOND - ----------------------------------------------------------------------------------------------------- $ 216,381 $ -- $ 2,356,797 $ 259,758 $ -- 26,501 -- 132,182 11,620 -- -- 632,489 -- -- 975,782 3,419 -- 125,216 9,216 -- ----------------- ----------------- ----------------- ----------------- ----------------- 215,899 -- 2,355,484 259,168 -- 26,501 -- 132,182 11,620 -- -- 628,297 -- -- 1,025,370 3,419 -- 125,216 9,216 -- 7 -- 439 591 -- -- -- 702 -- -- -- -- 16 13 -- 12 -- 9,481 1,268 -- 34 511 1,486 67 1,379 -- -- -- -- -- 783 -- 17,822 3,375 -- -- -- 31 3 31 41 -- 234 -- -- -- -- -- 3 -- ----------------- ----------------- ----------------- ----------------- ----------------- 246,696 628,808 2,643,093 285,324 1,026,780 ----------------- ----------------- ----------------- ----------------- ----------------- $ (26,501) $ -- $ (132,182) $ (11,620) $ -- -- -- -- (5) -- (38) (15) (16) (34) (190) (54) -- (558) (91) -- (19) (69) (245) (28) (165) -- -- (1) (1) -- (58,232) -- (599,033) (43,942) -- (366) -- (5,378) (768) -- (200) (592) (2,183) (834) (4,260) (84) (43) (108) (70) (29) (56) (115) (355) (164) (167) ----------------- ----------------- ----------------- ----------------- ----------------- (85,550) (834) (740,059) (57,557) (4,811) ----------------- ----------------- ----------------- ----------------- ----------------- $ 161,146 $ 627,974 $ 1,903,034 $ 227,767 $ 1,021,969 ================= ================= ================= ================= ================= $ (294) $ 316 $ 3,094 $ 368 $ 2,394 (634) (2,700) 5,348 (10,296) 11,647 (482) (4,192) (1,313) (590) 49,588 (45) -- (337) -- -- -- -- -- -- -- -- -- 11 5 -- 162,601 634,550 1,896,231 238,280 958,340 ----------------- ----------------- ----------------- ----------------- ----------------- $ 161,146 $ 627,974 $ 1,903,034 $ 227,767 $ 1,021,969 ================= ================= ================= ================= ================= $ 86,914,070 $ 594,656,897 $ 1,861,447,560 $ 167,591,373 $ 707,834,139 8,307,278 62,821,914 189,711,109 16,624,201 75,551,824 $ 10.46 $ 9.47 $ 9.81 $ 10.08 $ 9.37 $ 39,936,802 $ 21,279,319 $ 30,409,001 $ 28,367,813 $ 134,980,376 3,822,518 2,240,454 3,101,461 2,816,751 14,505,270 $ 10.45 $ 9.50 $ 9.80 $ 10.07 $ 9.31 4.75% 3.25% 3.25% 4.75% 4.75% $ 10.97 $ 9.82 $ 10.13 $ 10.57 $ 9.77 $ 33,136,125 $ 8,564,661 $ 9,706,887 $ 29,068,242 $ 130,088,628 3,167,065 906,349 989,641 2,884,470 14,010,020 $ 10.46 $ 9.45 $ 9.81 $ 10.08 $ 9.29 $ 1,159,376 $ 3,472,709 $ 1,470,218 $ 2,739,460 $ 49,066,210 111,134 328,309 149,967 272,001 5,304,625 $ 10.43 $ 10.58 $ 9.80 $ 10.07 $ 9.25
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 83 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
SHORT- SHORT-TERM INTERMEDIATE INCOME GOVERNMENT --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest (Net of foreign withholding taxes of $--, $--, $--, $--, $18, $12, $--, respectively)......................... $ 31,809 $ 12,601 Dividends (Net of foreign withholding taxes of $--, $--, $--, $--, $--, $-- and $1, respectively).................. -- -- Dividend income from affiliated funds....................... 880 68 Securities lending.......................................... 38 76 Allocated from portfolio: Interest(a)................................................. -- -- Dividends (Net of foreign withholding taxes of $--, $--, $--, $--, $--, $-- and $1, respectively)(a)............... -- -- Dividend income from affiliated funds(a).................... -- -- Securities lending(a)....................................... -- -- Expenses (Net of fees waived by administrator of $--, $--, $--, $273, $--, $--, and $--, respectively)(a)............ -- -- -------------- -------------- Total investment income................................. 32,727 12,745 -------------- -------------- EXPENSES: Investment advisory fee..................................... 3,445 1,118 Administration fee.......................................... 2,243 738 Transfer agent fees......................................... 330 110 Custodian fees.............................................. 85 29 Legal and audit fees........................................ 113 112 Registration and filing fees................................ 45 34 Trustees' fees and expenses................................. 25 25 Printing expense............................................ 56 29 Non-recurring costs (see Note 14)........................... 313 101 Other....................................................... 79 31 -------------- -------------- Subtotal................................................ 6,734 2,327 Shareholder servicing and distribution fees: Investor A Shares......................................... 230 88 Investor B Shares......................................... 16 224 Investor C Shares......................................... 245 53 -------------- -------------- Total expenses.......................................... 7,225 2,692 Fees waived by investment advisor, administrator (see Note 3)........................................................ (865) -- Fees reduced by credits allowed by the custodian (see Note 3)........................................................ (21) (5) Costs assumed by Bank of America Corporation (see Note 14)....................................................... (313) (101) -------------- -------------- Net expenses............................................ 6,026 2,586 -------------- -------------- NET INVESTMENT INCOME....................................... 26,701 10,159 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... (6,160) (1,923) Swap contracts............................................ 434 307 Written options expired................................... -- 4 Futures contracts closed.................................. 372 (273) Foreign currency and net other assets..................... (920) -- Allocated from Portfolio: Security transactions(a).................................. -- -- Swap Contracts(a)......................................... -- -- Foreign currency and net other assets(a).................. -- -- -------------- -------------- Net realized gain/(loss) on investments..................... (6,274) (1,885) -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities................................................ (21,648) (12,176) Swap contracts............................................ 250 174 Futures contracts......................................... (200) (233) Foreign currency and net other assets..................... 421 -- Securities allocated from Portfolio(a).................... -- -- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... (21,177) (12,235) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (27,451) (14,120) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (750) $ (3,961) ============== ==============
- --------------- (a)Allocated from Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio, respectively. (b)Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 84 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
GOVERNMENT INTERMEDIATE STRATEGIC HIGH YIELD SECURITIES BOND BOND INCOME BOND - -------------------------------------------------------------------------------------- $ 6,781 $ -- $ 77,954 $ 6,375 $ -- -- -- -- 5,462 -- 74 -- 2,560 469 -- 20 -- 147 6 -- -- 25,142 -- -- 83,217 -- -- -- -- 722 -- 227 -- -- 1,978 -- 69 -- -- 451 -- (2,750) -- -- (6,609) -------------- -------------- -------------- -------------- -------------- 6,875 22,688 80,661 12,312 79,759 -------------- -------------- -------------- -------------- -------------- 839 -- 7,919 1,150 -- 318 1,110 4,112 457 1,955 52 193 588 68 327 18 -- 188 24 -- 116 77 118 119 76 37 73 44 39 65 25 6 27 25 6 30 -- 36 50 100 48 -- 565 -- -- 30 37 152 43 11 -------------- -------------- -------------- -------------- -------------- 1,513 1,496 13,749 1,975 2,540 108 60 84 75 405 375 100 112 311 1,370 13 40 16 31 549 -------------- -------------- -------------- -------------- -------------- 2,009 1,696 13,961 2,392 4,864 (180) -- (1,057) (157) -- 0(b) -- (23) (2) -- (48) -- (565) -- -- -------------- -------------- -------------- -------------- -------------- 1,781 1,696 12,316 2,233 4,864 -------------- -------------- -------------- -------------- -------------- 5,094 20,992 68,345 10,079 74,895 -------------- -------------- -------------- -------------- -------------- (434) -- 23,914 423 -- 184 -- 2,339 2,375 -- 2 -- 23 1 -- 583 -- 1,762 (1) -- -- -- (2,586) (722) -- -- (2,038) -- -- 47,079 -- 57 -- -- -- -- -- -- -- 1,037 -------------- -------------- -------------- -------------- -------------- 335 (1,981) 25,452 2,076 48,116 -------------- -------------- -------------- -------------- -------------- (5,846) -- (66,932) (6,656) -- 73 -- 2,779 73 -- (227) -- (2,138) (67) -- -- -- 988 396 -- -- (24,946) -- -- (44,786) -------------- -------------- -------------- -------------- -------------- (6,000) (24,946) (65,303) (6,254) (44,786) -------------- -------------- -------------- -------------- -------------- (5,665) (26,927) (39,851) (4,178) 3,330 -------------- -------------- -------------- -------------- -------------- $ (571) $ (5,935) $ 28,494 $ 5,901 $ 78,225 ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 85 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
SHORT-TERM INCOME -------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 -------------------------------- (IN THOUSANDS) Net investment income....................................... $ 26,701 $ 23,506 Net realized gain/(loss) on investments..................... (6,274) 4,336 Net change in unrealized depreciation of investments........ (21,177) (1,216) -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ (750) 26,626 Distributions to shareholders from net investment income: Primary A Shares.......................................... (24,590) (20,742) Primary B Shares.......................................... -- -- Investor A Shares......................................... (1,950) (2,668) Investor B Shares......................................... (22) (24) Investor C Shares......................................... (339) (561) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... (1,918) (3,843) Primary B Shares.......................................... -- -- Investor A Shares......................................... (215) (643) Investor B Shares......................................... (3) (10) Investor C Shares......................................... (54) (250) Net increase/(decrease) in net assets from Fund share transactions.............................................. (241,433) 278,953 -------------- -------------- Net increase/(decrease) in net assets....................... (271,274) 276,838 NET ASSETS: Beginning of year........................................... 1,255,375 978,537 -------------- -------------- End of year................................................. $ 984,101 $ 1,255,375 ============== ============== Undistributed net investment income/(distributions in excess of net investment income) at end of year.................. $ 270 $ 1,344 ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 86 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SHORT-INTERMEDIATE GOVERNMENT GOVERNMENT SECURITIES --------------------------------- -------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 ---------------------------------------------------------------------- $ 10,159 $ 10,357 $ 5,094 $ 5,482 (1,885) 4,469 335 1,516 (12,235) (3,399) (6,000) (1,039) -------------- -------------- -------------- -------------- (3,961) 11,427 (571) 5,959 (8,635) (9,343) (2,932) (3,495) -- (1) -- -- (897) (997) (1,258) (1,477) (401) (495) (804) (1,013) (95) (150) (29) (45) (1,476) (7,311) -- -- -- (2) -- -- (166) (854) -- -- (111) (664) -- -- (29) (220) -- -- (45,210) (86,028) (34,115) (55,916) -------------- -------------- -------------- -------------- (60,981) (94,638) (39,709) (55,987) 416,822 511,460 200,855 256,842 -------------- -------------- -------------- -------------- $ 355,841 $ 416,822 $ 161,146 $ 200,855 ============== ============== ============== ============== $ 106 $ 80 $ (294) $ (335) ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 87 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERMEDIATE BOND -------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 -------------------------------- (IN THOUSANDS) Net investment income....................................... $ 20,992 $ 20,882 Net realized gain/(loss) on investments..................... -- -- Net realized gain/(loss) on investments allocated from Portfolio(a).............................................. (1,981) 15,588 Net change in unrealized appreciation/(depreciation) of investments............................................... -- -- Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio(a)................... (24,946) (5,461) -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ (5,935) 31,009 Distributions to shareholders from net investment income: Primary A Shares.......................................... (19,829) (20,528) Investor A Shares......................................... (685) (854) Investor B Shares......................................... (212) (268) Investor C Shares......................................... (76) (108) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... (6,030) (8,162) Investor A Shares......................................... (244) (374) Investor B Shares......................................... (102) (158) Investor C Shares......................................... (37) (66) Net increase/(decrease) in net assets from Fund share transactions.............................................. (64,447) (22,073) -------------- -------------- Net increase/(decrease) in net assets....................... (97,597) (21,582) NET ASSETS: Beginning of year........................................... 725,571 747,153 -------------- -------------- End of year................................................. $ 627,974 $ 725,571 ============== ============== Undistributed net investment income at end of year.......... $ 316 $ 68 ============== ==============
- --------------- (a)Allocated from Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio, respectively. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 88 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
BOND STRATEGIC INCOME HIGH YIELD BOND ------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 3/31/05 3/31/04 --------------------------------------------------------------------------------------------------- $ 68,345 $ 87,084 $ 10,079 $ 9,669 $ 74,895 $ 79,407 25,452 36,442 2,076 2,582 -- -- -- -- -- -- 48,116 42,845 (65,303) 20,000 (6,254) 8,193 -- -- -- -- -- -- (44,786) 101,158 -------------- -------------- -------------- -------------- -------------- -------------- 28,494 143,526 5,901 20,444 78,225 223,410 (73,997) (84,977) (7,691) (7,952) (52,058) (55,841) (1,148) (1,386) (1,272) (1,619) (11,011) (12,118) (299) (420) (1,084) (1,506) (8,473) (9,050) (44) (65) (108) (149) (3,393) (3,894) (30,768) (15,339) -- -- (39,038) (7,019) (491) (268) -- -- (7,996) (1,557) (171) (113) -- -- (7,454) (1,281) (25) (18) -- -- (3,010) (543) (332,491) (274,629) (11,610) 25,148 (93,904) 352,618 -------------- -------------- -------------- -------------- -------------- -------------- (410,940) (233,689) (15,864) 34,366 (148,112) 484,725 2,313,974 2,547,663 243,631 209,265 1,170,081 685,356 -------------- -------------- -------------- -------------- -------------- -------------- $ 1,903,034 $ 2,313,974 $ 227,767 $ 243,631 $ 1,021,969 $ 1,170,081 ============== ============== ============== ============== ============== ============== $ 3,094 $ 12,558 $ 368 $ 795 $ 2,394 $ 166 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 89 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
SHORT-TERM INCOME YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 29,658 $ 293,722 65,685 $ 659,056 Issued as reinvestment of distributions................... 675 6,674 401 4,014 Redeemed.................................................. (45,103) (446,301) (35,361) (354,471) ------- --------- ------- --------- Net increase (decrease)................................... (14,770) $(145,905) 30,725 $ 308,599 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 1,846 $ 18,337 6,738 $ 67,710 Issued as reinvestment of distributions................... 161 1,597 234 2,349 Redeemed.................................................. (10,255) (101,614) (7,719) (77,467) ------- --------- ------- --------- Net decrease.............................................. (8,248) $ (81,680) (747) $ (7,408) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... -- $ -- -- $ -- Issued as reinvestment of distributions................... 2 23 3 30 Redeemed.................................................. (28) (279) (42) (418) ------- --------- ------- --------- Net decrease.............................................. (26) $ (256) (39) $ (388) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 169 $ 1,675 749 $ 7,518 Issued as reinvestment of distributions................... 26 259 55 553 Redeemed.................................................. (1,568) (15,526) (2,984) (29,921) ------- --------- ------- --------- Net decrease.............................................. (1,373) $ (13,592) (2,180) $ (21,850) ======= ========= ======= ========= Total net increase/(decrease)............................. (24,417) $(241,433) 27,759 $ 278,953 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 90 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SHORT INTERMEDIATE GOVERNMENT SECURITIES YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------- -------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 12,508 $ 51,897 11,185 $ 47,894 Issued as reinvestment of distributions................... 88 366 376 1,628 Redeemed.................................................. (19,996) (83,436) (26,101) (111,957) ------- -------- ------- --------- Net decrease.............................................. (7,400) $(31,173) (14,540) $ (62,435) ======= ======== ======= ========= PRIMARY B SHARES: Issued as reinvestment of distributions................... -- $ -- 1 $ 3 Redeemed.................................................. -- -- (38) (161) ------- -------- ------- --------- Net decrease.............................................. -- $ -- (37) $ (158) ======= ======== ======= ========= INVESTOR A SHARES: Sold...................................................... 1,217 $ 5,084 3,139 $ 13,477 Shares issued upon conversion from Investor B Shares...... 38 158 61 261 Issued as reinvestment of distributions................... 192 801 334 1,437 Redeemed.................................................. (2,607) (10,872) (5,300) (22,624) ------- -------- ------- --------- Net decrease.............................................. (1,160) $ (4,829) (1,766) $ (7,449) ======= ======== ======= ========= INVESTOR B SHARES: Sold...................................................... 457 $ 1,907 1,207 $ 5,207 Issued as reinvestment of distributions................... 94 393 213 919 Shares redeemed upon conversion from Investor A Shares.... (38) (158) (61) (261) Redeemed.................................................. (2,187) (9,132) (3,718) (15,901) ------- -------- ------- --------- Net decrease.............................................. (1,674) $ (6,990) (2,359) $ (10,036) ======= ======== ======= ========= INVESTOR C SHARES: Sold...................................................... 92 $ 383 451 $ 1,947 Issued as reinvestment of distributions................... 19 81 64 273 Redeemed.................................................. (644) (2,682) (1,913) (8,170) ------- -------- ------- --------- Net decrease.............................................. (533) $ (2,218) (1,398) $ (5,950) ======= ======== ======= ========= Total net decrease........................................ (10,767) $(45,210) (20,100) $ (86,028) ======= ======== ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 91 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
GOVERNMENT SECURITIES YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 533 $ 5,617 777 $ 8,212 Issued as reinvestment of distributions................... 3 34 5 50 Redeemed.................................................. (2,129) (22,286) (3,174) (33,843) ------ -------- ------ -------- Net decrease.............................................. (1,593) $(16,635) (2,392) $(25,581) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 168 $ 1,759 1,107 $ 11,828 Shares issued upon conversion from Investor B Shares...... 14 149 49 532 Shares issued upon conversion from Investor C Shares...... 0(a) 2 32 338 Issued as reinvestment of distributions................... 90 941 102 1,090 Redeemed.................................................. (1,045) (10,926) (2,213) (23,499) ------ -------- ------ -------- Net decrease.............................................. (773) $ (8,075) (923) $ (9,711) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 150 $ 1,568 359 $ 3,850 Issued as reinvestment of distributions................... (14) (149) 76 814 Shares redeemed upon conversion into Investor A Shares.... 62 648 (49) (532) Redeemed.................................................. (1,068) (11,197) (2,144) (22,804) ------ -------- ------ -------- Net decrease.............................................. (870) $ (9,130) (1,758) $(18,672) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 19 $ 198 50 $ 535 Shares redeemed upon conversion into Investor A Shares.... (2) (2) (32) (338) Issued as reinvestment of distributions................... 2 16 3 29 Redeemed.................................................. (45) (487) (205) (2,178) ------ -------- ------ -------- Net decrease.............................................. (26) $ (275) (184) $ (1,952) ====== ======== ====== ======== Total net decrease........................................ (3,262) $(34,115) (5,257) $(55,916) ====== ======== ====== ========
- --------------- (a) Amount represents less than 500 shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 92 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
INTERMEDIATE BOND YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 10,308 $ 99,248 14,503 $ 143,638 Issued as reinvestment of distributions................... 254 2,409 342 3,356 Redeemed.................................................. (16,187) (155,878) (16,479) (163,401) ------- --------- ------- --------- Net decrease.............................................. (5,625) $ (54,221) (1,634) $ (16,407) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 623 $ 6,023 1,140 $ 11,368 Shares issued upon conversion from Investor B Shares...... 16 151 6 63 Issued as reinvestment of distributions................... 83 792 105 1,035 Redeemed.................................................. (1,331) (12,857) (1,605) (15,909) ------- --------- ------- --------- Net decrease.............................................. (609) $ (5,891) (354) $ (3,443) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 75 $ 723 211 $ 2,098 Issued as reinvestment of distributions................... 26 251 34 331 Shares redeemed upon conversion into Investor A Shares.... (16) (151) (6) (63) Redeemed.................................................. (377) (3,620) (427) (4,208) ------- --------- ------- --------- Net decrease.............................................. (292) $ (2,797) (188) $ (1,842) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 52 $ 555 193 $ 2,140 Issued as reinvestment of distributions................... 3 31 5 54 Redeemed.................................................. (198) (2,124) (234) (2,575) ------- --------- ------- --------- Net decrease.............................................. (143) $ (1,538) (36) $ (381) ======= ========= ======= ========= Total net decrease........................................ (6,669) $ (64,447) (2,212) $ (22,073) ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 93 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
BOND YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 21,748 $ 216,128 31,886 $ 319,377 Issued as reinvestment of distributions................... 1,748 17,206 1,520 15,288 Redeemed.................................................. (55,968) (555,773) (59,490) (596,534) ------- --------- ------- --------- Net decrease.............................................. (32,472) $(322,439) (26,084) $(261,869) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 1,312 $ 13,020 3,272 $ 32,682 Shares issued upon conversion from Investor B Shares...... 13 127 56 563 Shares issued upon conversion from Investor C Shares...... 7 7 -- -- Issued as reinvestment of distributions................... 112 1,103 96 963 Redeemed.................................................. (2,091) (20,658) (4,062) (40,483) ------- --------- ------- --------- Net decrease.............................................. (647) $ (6,401) (638) $ (6,275) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 55 $ 544 223 $ 2,240 Issued as reinvestment of distributions................... 39 380 43 428 Shares redeemed upon conversion into Investor A Shares.... (13) (127) (53) (529) Redeemed.................................................. (420) (4,158) (763) (7,593) ------- --------- ------- --------- Net decrease.............................................. (339) $ (3,361) (550) $ (5,454) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 24 $ 241 31 $ 313 Shares redeemed upon conversion into Investor A Shares.... (7) (7) (3) (34) Issued as reinvestment of distributions................... 4 38 5 49 Redeemed.................................................. (50) (562) (136) (1,359) ------- --------- ------- --------- Net decrease.............................................. (29) $ (290) (103) $ (1,031) ======= ========= ======= ========= Total net decrease........................................ (33,487) $(332,491) (27,375) $(274,629) ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 94 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
STRATEGIC INCOME YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 3,713 $ 37,602 7,114 $ 71,908 Issued as reinvestment of distributions................... 16 165 24 237 Redeemed.................................................. (3,958) (40,080) (4,177) (42,064) ------ -------- ------ -------- Net increase/(decrease)................................... (229) $ (2,313) 2,961 $ 30,081 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 374 $ 3,775 773 $ 7,769 Shares issued upon conversion from Investor B Shares...... 32 330 5 55 Issued as reinvestment of distributions................... 72 727 94 944 Redeemed.................................................. (830) (8,393) (989) (9,957) ------ -------- ------ -------- Net decrease.............................................. (352) $ (3,561) (117) $ (1,189) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 159 $ 1,620 444 $ 4,458 Issued as reinvestment of distributions................... 72 726 99 996 Shares redeemed upon conversion into Investor A Shares.... (32) (330) (5) (55) Redeemed.................................................. (682) (6,878) (907) (9,127) ------ -------- ------ -------- Net decrease.............................................. (483) $ (4,862) (369) $ (3,728) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 35 $ 353 163 $ 1,638 Issued as reinvestment of distributions................... 6 61 8 82 Redeemed.................................................. (128) (1,288) (172) (1,736) ------ -------- ------ -------- Net decrease.............................................. (87) $ (874) (1) $ (16) ====== ======== ====== ======== Total net increase/(decrease)............................. (1,151) $(11,610) 2,474 $ 25,148 ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 95 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
HIGH YIELD BOND YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 26,353 $ 252,451 64,383 $ 603,900 Issued as reinvestment of distributions................... 1,371 12,965 1,006 9,559 Redeemed.................................................. (33,184) (318,332) (38,114) (363,681) ------- --------- ------- --------- Net increase/(decrease)................................... (5,460) $ (52,916) 27,275 $ 249,778 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 12,625 $ 118,691 33,590 $ 309,598 Shares issued upon conversion from Investor B Shares...... 29 313 6 60 Issued as reinvestment of distributions................... 1,478 13,909 808 7,636 Redeemed.................................................. (16,371) (155,165) (29,066) (271,166) ------- --------- ------- --------- Net increase/(decrease)................................... (2,239) $ (22,252) 5,338 $ 46,128 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 1,314 $ 12,453 5,309 $ 48,924 Issued as reinvestment of distributions................... 1,050 9,835 631 5,950 Shares redeemed upon conversion into Investor A Shares.... (29) (279) (6) (60) Redeemed.................................................. (3,137) (29,676) (2,304) (21,948) ------- --------- ------- --------- Net increase/(decrease)................................... (802) $ (7,667) 3,630 $ 32,866 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 1,422 $ 13,404 4,655 $ 42,641 Issued as reinvestment of distributions................... 401 3,747 252 2,352 Redeemed.................................................. (2,990) (28,220) (2,265) (21,147) ------- --------- ------- --------- Net increase/(decrease)................................... (1,167) $ (11,069) 2,642 $ 23,846 ======= ========= ======= ========= Total net increase/(decrease)............................. (9,668) $ (93,904) 38,885 $ 352,618 ======= ========= ======= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 96 [This page intentionally left blank] 97 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- SHORT-TERM INCOME PRIMARY A SHARES Year ended 3/31/2005(c)................... $10.06 $0.24 $(0.25) $(0.01) $(0.23) Year ended 3/31/2004(c)................... 10.08 0.22 0.04 0.26 (0.23) Year ended 3/31/2003(c)................... 9.82 0.31 0.29 0.60 (0.31) Year ended 3/31/2002(c)................... 9.80 0.48 0.02 0.50 (0.48) Year ended 3/31/2001...................... 9.51 0.58 0.29 0.87 (0.58) INVESTOR A SHARES Year ended 3/31/2005(c)................... $10.07 $0.21 $(0.23) $(0.02) $(0.21) Year ended 3/31/2004(c)................... 10.10 0.20 0.02 0.22 (0.20) Year ended 3/31/2003(c)................... 9.83 0.28 0.30 0.58 (0.28) Year ended 3/31/2002(c)................... 9.81 0.45 0.02 0.47 (0.45) Year ended 3/31/2001...................... 9.51 0.56 0.30 0.86 (0.56) INVESTOR B SHARES Year ended 3/31/2005(c)................... $10.07 $0.14 $(0.24) $(0.10) $(0.14) Year ended 3/31/2004(c)................... 10.09 0.13 0.03 0.16 (0.13) Year ended 3/31/2003(c)................... 9.83 0.21 0.29 0.50 (0.21) Year ended 3/31/2002(c)................... 9.80 0.38 0.03 0.41 (0.38) Year ended 3/31/2001...................... 9.51 0.48 0.29 0.77 (0.48) INVESTOR C SHARES Year ended 3/31/2005(c)................... $10.07 $0.13 $(0.23) $(0.10) $(0.14) Year ended 3/31/2004(c)................... 10.09 0.13 0.03 0.16 (0.13) Year ended 3/31/2003(c)................... 9.83 0.21 0.29 0.50 (0.21) Year ended 3/31/2002(c)................... 9.80 0.38 0.03 0.41 (0.38) Year ended 3/31/2001...................... 9.51 0.48 0.29 0.77 (0.48)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The Reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (e)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.57% for Primary A Shares, 0.82% for Investor A Shares and 1.57% each for Investor B and Investor C Shares. (f) The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 14) is included in the ratio of operating expenses to average net assets without the waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.56% for Primary A Shares, 0.81% for Investor A Shares and 1.56% each for Investor B and C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 98 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(A) (000) ASSETS(B) ASSETS RATE NET ASSETS(B) - ------------------------------------------------------------------------------------------------------------------------------ $(0.02) $(0.25) $ 9.80 (0.04)% $ 926,514 0.48% 2.37% 128% 0.58%(f) (0.05) (0.28) 10.06 2.60 1,099,131 0.47(d) 2.24 164 0.60(e) (0.03) (0.34) 10.08 6.18 791,981 0.50 2.99 54 0.60 -- (0.48) 9.82 5.19 493,457 0.52 4.79 80 0.62 -- (0.58) 9.80 9.44 358,812 0.51 6.04 42 0.61 $(0.02) $(0.23) $ 9.82 (0.19)% $ 38,130 0.73% 2.10% 128% 0.83%(f) (0.05) (0.25) 10.07 2.23 122,202 0.72(d) 1.99 164 0.85(e) (0.03) (0.31) 10.10 6.01 130,036 0.75 2.74 54 0.85 -- (0.45) 9.83 4.91 99,453 0.77 4.54 80 0.87 -- (0.56) 9.81 9.28 7,658 0.76 5.79 42 0.86 $(0.02) $(0.16) $ 9.81 (1.03)% $ 1,477 1.48% 1.37% 128% 1.58%(f) (0.05) (0.18) 10.07 1.58 1,775 1.47(d) 1.24 164 1.60(e) (0.03) (0.24) 10.09 5.12 2,170 1.50 1.99 54 1.60 -- (0.38) 9.83 4.25 2,511 1.52 3.79 80 1.62 -- (0.48) 9.80 8.36 2,515 1.51 5.04 42 1.61 $(0.02) $(0.16) $ 9.81 (1.03)% $ 17,980 1.48% 1.36% 128% 1.58%(f) (0.05) (0.18) 10.07 1.58 32,267 1.47(d) 1.24 164 1.60(e) (0.03) (0.24) 10.09 5.12 54,350 1.50 1.99 54 1.60 -- (0.38) 9.83 4.23 39,515 1.52 3.79 80 1.62 -- (0.48) 9.80 8.37 833 1.51 5.04 42 1.61
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 99 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- SHORT-INTERMEDIATE GOVERNMENT PRIMARY A SHARES Year ended 3/31/2005(c)................... $4.29 $0.12 $(0.15) $(0.03) $(0.12) Year ended 3/31/2004(c)................... 4.36 0.10 0.02 0.12 (0.11) Year ended 3/31/2003(c)................... 4.16 0.12 0.32 0.44 (0.13) Year ended 3/31/2002(c)................... 4.15 0.18 0.01 0.19 (0.18) Year ended 3/31/2001...................... 3.94 0.23 0.21 0.44 (0.23) INVESTOR A SHARES Year ended 3/31/2005(c)................... $4.29 $0.11 $(0.15) $(0.04) $(0.11) Year ended 3/31/2004(c)................... 4.36 0.09 0.02 0.11 (0.10) Year ended 3/31/2003(c)................... 4.16 0.11 0.32 0.43 (0.12) Year ended 3/31/2002(c)................... 4.15 0.17 0.01 0.18 (0.17) Year ended 3/31/2001...................... 3.94 0.22 0.21 0.43 (0.22) INVESTOR B SHARES Year ended 3/31/2005(c)................... $4.29 $0.08 $(0.16) $(0.08) $(0.07) Year ended 3/31/2004(c)................... 4.36 0.06 0.02 0.08 (0.07) Year ended 3/31/2003(c)................... 4.16 0.07 0.32 0.39 (0.08) Year ended 3/31/2002(c)................... 4.15 0.13 0.01 0.14 (0.13) Year ended 3/31/2001...................... 3.94 0.19 0.21 0.40 (0.19) INVESTOR C SHARES Year ended 3/31/2005(c)................... $4.28 $0.08 $(0.16) $(0.08) $(0.07) Year ended 3/31/2004(c)................... 4.36 0.06 0.01 0.07 (0.07) Year ended 3/31/2003(c)................... 4.15 0.07 0.33 0.40 (0.08) Year ended 3/31/2002(c)................... 4.14 0.12 0.01 0.13 (0.12) Year ended 3/31/2001...................... 3.93 0.19 0.21 0.40 (0.19)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). Absent this reimbursement, the ratios of operating expenses to average net assets would have been 0.57% for Primary A Shares, 0.82% for Investor A Shares, 1.57% each for Investor B and Investor C Shares. (e)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.57% for Primary A Shares, 0.82% for Investor A Shares and 1.57% each for Investor B and Investor C Shares. (f) The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 14) is included in the ratio of operating expenses to average net assets without the waivers and/or expense reimbursements. Absent these non-recurring cost, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.60% for Primary A Shares, 0.85% for Investor A Shares and 1.60% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 100 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES TO INCOME PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(A) (000) ASSETS(B) NET ASSETS RATE NET ASSETS(B) - ------------------------------------------------------------------------------------------------------------------------------ $(0.02) $(0.14) $4.12 (0.78)% $299,649 0.60% 2.82% 129% 0.62%(f) (0.08) (0.19) 4.29 2.80 343,859 0.56(d) 2.38 206 0.60(e) (0.11) (0.24) 4.36 10.74 413,039 0.62 2.71 180 0.62 -- (0.18) 4.16 4.68 390,543 0.62 4.24 486 0.62 -- (0.23) 4.15 11.56 496,821 0.59 5.77 108 0.59 $(0.02) $(0.13) $4.12 (1.03)% $ 32,799 0.85% 2.59% 129% 0.87%(f) (0.08) (0.18) 4.29 2.55 39,133 0.81(d) 2.13 206 0.85(e) (0.11) (0.23) 4.36 10.46 47,480 0.87 2.46 180 0.87 -- (0.17) 4.16 4.42 41,926 0.87 3.99 486 0.87 -- (0.22) 4.15 11.31 44,244 0.82 5.54 108 0.84 $(0.02) $(0.09) $4.12 (1.77)% $ 19,086 1.60% 1.83% 129% 1.62%(f) (0.08) (0.15) 4.29 1.78 27,060 1.56(d) 1.38 206 1.60(e) (0.11) (0.19) 4.36 9.64 37,804 1.62 1.71 180 1.62 -- (0.13) 4.16 3.64 17,474 1.62 3.24 486 1.62 -- (0.19) 4.15 10.46 8,199 1.59 4.77 108 1.59 $(0.02) $(0.09) $4.11 (1.77)% $ 4,307 1.60% 1.83% 129% 1.62%(f) (0.08) (0.15) 4.28 1.56 6,770 1.56(d) 1.38 206 1.60(e) (0.11) (0.19) 4.36 9.91 12,975 1.62 1.71 180 1.62 -- (0.12) 4.15 3.63 6,820 1.62 3.24 486 1.62 -- (0.19) 4.14 10.49 1,079 1.59 4.77 108 1.59
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 101 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- GOVERNMENT SECURITIES PRIMARY A SHARES Year ended 3/31/2005(c)................... $10.76 $0.33 $(0.30) $ 0.03 $(0.33) Year ended 3/31/2004(c)................... 10.74 0.29 0.05 0.34 (0.32) Year ended 3/31/2003(c)................... 9.79 0.28 0.98 1.26 (0.31) Year ended 3/31/2002(c)................... 9.87 0.43 (0.07) 0.36 (0.44) Year ended 3/31/2001...................... 9.38 0.60 0.48 1.08 (0.59) INVESTOR A SHARES Year ended 3/31/2005(c)................... $10.75 $0.31 $(0.30) $ 0.01 $(0.31) Year ended 3/31/2004(c)................... 10.72 0.26 0.06 0.32 (0.29) Year ended 3/31/2003(c)................... 9.78 0.26 0.97 1.23 (0.29) Year ended 3/31/2002(c)................... 9.86 0.41 (0.07) 0.34 (0.42) Year ended 3/31/2001...................... 9.37 0.57 0.49 1.06 (0.57) INVESTOR B SHARES Year ended 3/31/2005(c)................... $10.76 $0.23 $(0.30) $(0.07) $(0.23) Year ended 3/31/2004(c)................... 10.74 0.19 0.04 0.23 (0.21) Year ended 3/31/2003(c)................... 9.79 0.19 0.97 1.16 (0.21) Year ended 3/31/2002(c)................... 9.87 0.33 (0.07) 0.26 (0.34) Year ended 3/31/2001...................... 9.38 0.50 0.49 0.99 (0.50) INVESTOR C SHARES Year ended 3/31/2005(c)................... $10.73 $0.23 $(0.30) $(0.07) $(0.23) Year ended 3/31/2004(c)................... 10.71 0.18 0.05 0.23 (0.21) Year ended 3/31/2003(c)................... 9.76 0.19 0.97 1.16 (0.21) Year ended 3/31/2002(c)................... 9.84 0.33 (0.07) 0.26 (0.34) Year ended 3/31/2001...................... 9.34 0.52 0.48 1.00 (0.50)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The reimbursement from Investment Advisor is included in the ratio of operating expenses to average net assets (with waivers). The effect of this reimbursement on the operating expense ratio (with waivers) was less than 0.01%. (e)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.80% for Primary A Shares, 1.05% for Investor A Shares and 1.80% each for Investor B and Investor C Shares. (f) The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 14) is included in the ratio of operating expenses to average net assets without the waivers and/or expense reimbursements. Absent these non-recurring cost, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.84% for Primary A Shares, 1.09% for Investor A Shares and 1.84% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 102 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ------------------ RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE END OF PERIOD RETURN(A) (000) ASSETS(B) ASSETS RATE NET ASSETS(B) - ----------------------------------------------------------------------------------------------------- $10.46 0.33% $ 86,914 0.73% 3.19% 309% 0.86%(f) 10.76 3.20 106,547 0.66(d) 2.68 244 0.83(e) 10.74 13.02 132,009 0.71 2.72 196 0.84 9.79 3.70 168,621 0.73 4.31 522 0.86 9.87 11.97 153,799 0.75 6.21 183 0.86 $10.45 0.08% $ 39,937 0.98% 2.95% 309% 1.11%(c)(f) 10.75 3.04 49,385 0.91(d) 2.43 244 1.08(e) 10.72 12.65 59,171 0.96 2.47 196 1.09 9.78 3.45 54,167 0.98 4.06 522 1.11 9.86 11.70 57,641 1.00 5.96 183 1.11 $10.46 (0.66)% $ 33,136 1.73% 2.19% 309% 1.86%(c)(f) 10.76 2.18 43,451 1.66(d) 1.68 244 1.83(e) 10.74 11.91 62,227 1.71 1.72 196 1.84 9.79 2.67 49,611 1.73 3.31 522 1.86 9.87 10.86 27,544 1.75 5.21 183 1.86 $10.43 (0.66)% $ 1,159 1.73% 2.19% 309% 1.86%(c)(f) 10.73 2.19 1,472 1.66(d) 1.68 244 1.83(e) 10.71 11.95 3,435 1.71 1.72 196 1.84 9.76 2.68 2,200 1.73 3.31 522 1.86 9.84 11.03 1,213 1.75 5.21 183 1.86
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 103 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- INTERMEDIATE BOND(B)(C) PRIMARY A SHARES Year ended 3/31/2005...................... $ 9.94 $0.31 $(0.39) $(0.08) $(0.30) Year ended 3/31/2004...................... 9.93 0.29 0.14 0.43 (0.30) Year ended 3/31/2003...................... 9.41 0.34 0.64 0.98 (0.34) Year ended 3/31/2002...................... 9.52 0.49 (0.11) 0.38 (0.49) Year ended 3/31/2001...................... 9.13 0.58 0.39 0.97 (0.58) INVESTOR A SHARES Year ended 3/31/2005...................... $ 9.97 $0.28 $(0.38) $(0.10) $(0.28) Year ended 3/31/2004...................... 9.96 0.26 0.15 0.41 (0.28) Year ended 3/31/2003...................... 9.43 0.32 0.65 0.97 (0.32) Year ended 3/31/2002...................... 9.55 0.47 (0.12) 0.35 (0.47) Year ended 3/31/2001...................... 9.15 0.56 0.40 0.96 (0.56) INVESTOR B SHARES Year ended 3/31/2005...................... $ 9.92 $0.21 $(0.38) $(0.17) $(0.21) Year ended 3/31/2004...................... 9.91 0.19 0.14 0.33 (0.20) Year ended 3/31/2003...................... 9.39 0.25 0.64 0.89 (0.25) Year ended 3/31/2002...................... 9.51 0.40 (0.12) 0.28 (0.40) Year ended 3/31/2001...................... 9.13 0.47 0.42 0.89 (0.51) INVESTOR C SHARES Year ended 3/31/2005...................... $11.07 $0.23 $(0.42) $(0.19) $(0.21) Year ended 3/31/2004...................... 11.02 0.20 0.17 0.37 (0.20) Year ended 3/31/2003...................... 10.39 0.23 0.75 0.98 (0.23) Year ended 3/31/2002...................... 10.47 0.39 (0.08) 0.31 (0.39) Year ended 3/31/2001...................... 9.32 0.47 1.09 1.56 (0.41)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Intermediate Bond Master Portfolio. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 104 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING DISTRIBUTIONS TOTAL DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO EXPENSES TO FROM NET AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET AVERAGE REALIZED GAINS DISTRIBUTIONS END OF PERIOD RETURN(A) (000) ASSETS ASSETS NET ASSETS - -------------------------------------------------------------------------------------------------------------------------- $(0.09) $(0.39) $ 9.47 (0.73)% $594,657 0.64% 3.17% 0.68% (0.12) (0.42) 9.94 4.44 680,063 0.68 2.94 0.69 (0.12) (0.46) 9.93 10.62 695,894 0.70 3.46 0.70 -- (0.49) 9.41 4.04 261,018 0.78 4.80 0.86 -- (0.58) 9.52 11.04 51,178 0.78 6.31 0.81 $(0.09) $(0.37) $ 9.50 (0.99)% $ 21,279 0.89% 2.92% 0.93% (0.12) (0.40) 9.97 4.17 28,403 0.93 2.69 0.94 (0.12) (0.44) 9.96 10.43 31,915 0.95 3.21 0.95 -- (0.47) 9.43 3.66 58,167 1.03 4.55 1.11 -- (0.56) 9.55 10.88 62,617 1.03 6.06 1.06 $(0.09) $(0.30) $ 9.45 (1.73)% $ 8,565 1.64% 2.17% 1.68% (0.12) (0.32) 9.92 3.41 11,883 1.68 1.94 1.69 (0.12) (0.37) 9.91 9.59 13,739 1.70 2.46 1.70 -- (0.40) 9.39 2.94 7,003 1.78 3.80 1.86 -- (0.51) 9.51 9.99 1,290 1.78 5.31 1.81 $(0.09) $(0.30) $10.58 (1.74)% $ 3,473 1.64% 2.17% 1.68% (0.12) (0.32) 11.07 3.42 5,222 1.68 1.94 1.69 (0.12) (0.35) 11.02 9.59 5,605 1.70 2.46 1.70 -- (0.39) 10.39 2.94 2,586 1.78 3.80 1.86 -- (0.41) 10.47 17.06 797 1.78 5.31 1.81
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 105 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- BOND PRIMARY A SHARES Year ended 3/31/2005(c)................... $10.17 $0.33 $(0.18) $0.15 $(0.36) Year ended 3/31/2004(c)................... 10.00 0.36 0.23 0.59 (0.36) Year ended 3/31/2003(c)................... 9.66 0.35 0.53 0.88 (0.37) Year ended 3/31/2002(c)................... 9.78 0.53 (0.11) 0.42 (0.54) Year ended 3/31/2001...................... 9.37 0.62 0.41 1.03 (0.62) INVESTOR A SHARES Year ended 3/31/2005(c)................... $10.17 $0.31 $(0.19) $0.12 $(0.34) Year ended 3/31/2004(c)................... 9.99 0.34 0.24 0.58 (0.34) Year ended 3/31/2003(c)................... 9.65 0.33 0.53 0.86 (0.35) Year ended 3/31/2002(c)................... 9.78 0.50 (0.12) 0.38 (0.51) Year ended 3/31/2001...................... 9.37 0.60 0.41 1.01 (0.60) INVESTOR B SHARES Year ended 3/31/2005(c)................... $10.17 $0.23 $(0.18) $0.05 $(0.26) Year ended 3/31/2004(c)................... 9.99 0.26 0.24 0.50 (0.26) Year ended 3/31/2003(c)................... 9.66 0.25 0.52 0.77 (0.27) Year ended 3/31/2002(c)................... 9.78 0.43 (0.11) 0.32 (0.44) Year ended 3/31/2001...................... 9.37 0.52 0.41 0.93 (0.52) INVESTOR C SHARES Year ended 3/31/2005(c)................... $10.17 $0.23 $(0.19) $0.04 $(0.26) Year ended 3/31/2004(c)................... 9.99 0.26 0.24 0.50 (0.26) Year ended 3/31/2003(c)................... 9.65 0.25 0.53 0.78 (0.27) Year ended 3/31/2002(c)................... 9.78 0.43 (0.12) 0.31 (0.44) Year ended 3/31/2001...................... 9.37 0.52 0.41 0.93 (0.52)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)The effect of interest expense on the operating expense ratio was less than 0.01%. (e)The effect of the non-recurring costs assumed by Bank of America Corporation is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.66% for Primary A Shares, 0.91% for Investor A Shares and 1.66% each for Investor B and Investor C Shares. (f) The effect of the non-recurring costs assumed by Bank of America Corporation (see Note 14) is included in the ratio of operating expenses to average net assets without waivers and/or expense reimbursements. Absent these non-recurring costs, the ratio of operating expenses to average net assets without waivers and/or expense reimbursements would have been 0.64% for Primary A Shares, 0.89% for Investor A Shares and 1.64% each for Investor B and Investor C Shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 106 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN(A) (000) ASSETS(B) ASSETS RATE NET ASSETS(B) - ------------------------------------------------------------------------------------------------------------------------------ $(0.15) $(0.51) $ 9.81 1.56% $1,861,448 0.58% 3.30% 402% 0.66%(f) (0.06) (0.42) 10.17 6.07 2,260,519 0.65 3.61 398 0.68(e) (0.17) (0.54) 10.00 9.32 2,482,229 0.67 3.50 488 0.67 -- (0.54) 9.66 4.33 2,256,647 0.68(d) 5.28 314 0.68 -- (0.62) 9.78 11.39 2,333,703 0.67 6.53 120 0.67 $(0.15) $(0.49) $ 9.80 1.21% $ 30,409 0.83% 3.08% 402% 0.91%(f) (0.06) (0.40) 10.17 5.92 38,114 0.90 3.36 398 0.93(e) (0.17) (0.52) 9.99 9.05 43,828 0.92 3.25 488 0.92 -- (0.51) 9.65 3.96 40,902 0.93(d) 5.03 314 0.93 -- (0.60) 9.78 11.11 27,220 0.92 6.28 120 0.92 $(0.15) $(0.41) $ 9.81 0.55% $ 9,707 1.58% 2.32% 402% 1.66%(f) (0.06) (0.32) 10.17 5.13 13,518 1.65 2.61 398 1.68(e) (0.17) (0.44) 9.99 8.13 18,783 1.67 2.50 488 1.67 -- (0.44) 9.66 3.29 16,877 1.68(d) 4.28 314 1.68 -- (0.52) 9.78 10.29 6,994 1.67 5.53 120 1.67 $(0.15) $(0.41) $ 9.80 0.45% $ 1,470 1.58% 2.32% 402% 1.66%(f) (0.06) (0.32) 10.17 5.13 1,823 1.65 2.61 398 1.68(e) (0.17) (0.44) 9.99 8.24 2,823 1.67 2.50 488 1.67 -- (0.44) 9.65 3.18 2,387 1.68(d) 4.28 314 1.68 -- (0.52) 9.78 10.28 1,321 1.67 5.53 120 1.67
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 107 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- STRATEGIC INCOME(C) PRIMARY A SHARES Year ended 3/31/2005...................... $10.26 $0.45 $(0.18) $0.27 $(0.45) Year ended 3/31/2004...................... 9.84 0.44 0.49 0.93 (0.51) Year ended 3/31/2003...................... 9.61 0.46 0.23 0.69 (0.46) Year ended 3/31/2002...................... 9.89 0.58 (0.26) 0.32 (0.60) Year ended 3/31/2001...................... 9.53 0.66 0.35 1.01 (0.65) INVESTOR A SHARES Year ended 3/31/2005...................... $10.25 $0.43 $(0.18) $0.25 $(0.43) Year ended 3/31/2004...................... 9.83 0.42 0.49 0.91 (0.49) Year ended 3/31/2003...................... 9.60 0.45 0.23 0.68 (0.45) Year ended 3/31/2002...................... 9.88 0.55 (0.26) 0.29 (0.57) Year ended 3/31/2001...................... 9.52 0.63 0.36 0.99 (0.63) INVESTOR B SHARES Year ended 3/31/2005...................... $10.26 $0.35 $(0.18) $0.17 $(0.35) Year ended 3/31/2004...................... 9.84 0.34 0.49 0.83 (0.41) Year ended 3/31/2003...................... 9.61 0.37 0.23 0.60 (0.37) Year ended 3/31/2002...................... 9.89 0.48 (0.26) 0.22 (0.50) Year ended 3/31/2001 9.52 0.56 0.37 0.93 (0.56) INVESTOR C SHARES Year ended 3/31/2005...................... $10.25 $0.35 $(0.18) $0.17 $(0.35) Year ended 3/31/2004...................... 9.83 0.34 0.49 0.83 (0.41) Year ended 3/31/2003...................... 9.60 0.37 0.23 0.60 (0.37) Year ended 3/31/2002...................... 9.88 0.48 (0.26) 0.22 (0.50) Year ended 3/31/2001...................... 9.52 0.56 0.36 0.92 (0.56)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The effect of the custodial expense offset (see Note 3) on the operating expenses ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 108 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS -------------- RATIO RATIO NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN(A) (000) ASSETS ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------- $(0.45) $10.08 2.74% $167,591 0.77%(b) 4.44% 417% 0.83%(b) (0.51) 10.26 9.68 172,932 0.71(b) 4.40 411 0.81(b) (0.46) 9.84 7.39 136,688 0.78(b) 4.78 255 0.88(b) (0.60) 9.61 3.30 143,283 0.81(b) 5.52 199 0.91(b) (0.65) 9.89 11.06 177,877 0.72 6.76 238 0.84 $(0.43) $10.07 2.48% $ 28,368 1.02%(b) 4.20% 417% 1.08%(b) (0.49) 10.25 9.42 32,481 0.96(b) 4.15 411 1.06(b) (0.45) 9.83 7.14 32,300 1.03(b) 4.53 255 1.13(b) (0.57) 9.60 3.05 26,543 1.06(b) 5.27 199 1.16(b) (0.63) 9.88 10.80 29,102 0.97 6.51 238 1.09 $(0.35) $10.08 1.72% $ 29,068 1.77%(b) 3.44% 417% 1.83%(b) (0.41) 10.26 8.60 34,537 1.71(b) 3.40 411 1.81(b) (0.37) 9.84 6.33 36,736 1.78(b) 3.78 255 1.88(b) (0.50) 9.61 2.28 45,960 1.81(b) 4.52 199 1.91(b) (0.56) 9.89 10.08 50,251 1.72 5.76 238 1.84 $(0.35) $10.07 1.72% $ 2,740 1.77%(b) 3.44%(d) 417% 1.83%(b) (0.41) 10.25 8.61 3,681 1.71(b) 3.40 411 1.81(b) (0.37) 9.83 6.33 3,541 1.78(b) 3.78 255 1.88(b) (0.50) 9.60 2.28 1,997 1.81(b) 4.52 199 1.91(b) (0.56) 9.88 9.98 1,527 1.72 5.76 238 1.84
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 109 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- HIGH YIELD BOND(B)(C) PRIMARY A SHARES Year ended 3/31/2005...................... $9.86 $0.67 $ 0.04 $0.71 $(0.68) Year ended 3/31/2004...................... 8.57 0.73 1.38 2.11 (0.73) Year ended 3/31/2003...................... 8.86 0.77 (0.29) 0.48 (0.77) Year ended 3/31/2002...................... 9.27 0.86 (0.34) 0.52 (0.88) Year ended 3/31/2001...................... 9.90 0.96 (0.54) 0.42 (1.05) INVESTOR A SHARES Year ended 3/31/2005...................... $9.79 $0.66 $ 0.03 $0.69 $(0.65) Year ended 3/31/2004...................... 8.52 0.70 1.36 2.06 (0.70) Year ended 3/31/2003...................... 8.80 0.75 (0.28) 0.47 (0.75) Year ended 3/31/2002...................... 9.22 0.80 (0.32) 0.48 (0.85) Year ended 3/31/2001...................... 9.88 0.96 (0.58) 0.38 (1.04) INVESTOR B SHARES Year ended 3/31/2005...................... $9.77 $0.58 $ 0.04 $0.62 $(0.58) Year ended 3/31/2004...................... 8.51 0.64 1.35 1.99 (0.64) Year ended 3/31/2003...................... 8.80 0.69 (0.29) 0.40 (0.69) Year ended 3/31/2002...................... 9.21 0.76 (0.33) 0.43 (0.79) Year ended 3/31/2001...................... 9.88 0.92 (0.62) 0.30 (0.97) INVESTOR C SHARES Year ended 3/31/2005...................... $9.74 $0.58 $ 0.03 $0.61 $(0.58) Year ended 3/31/2004...................... 8.47 0.64 1.36 2.00 (0.64) Year ended 3/31/2003...................... 8.77 0.69 (0.30) 0.39 (0.69) Year ended 3/31/2002...................... 9.19 0.76 (0.34) 0.42 (0.79) Year ended 3/31/2001...................... 9.87 0.90 (0.61) 0.29 (0.97)
- --------------- (a)Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (b)The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the High Yield Bond Master Portfolio. (c)Per share net investment income has been calculated using the monthly average shares method. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 110 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF DISTRIBUTIONS TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING FROM NET DIVIDENDS NET ASSET END OF EXPENSES INCOME EXPENSES TO REALIZED AND VALUE TOTAL PERIOD TO AVERAGE TO AVERAGE AVERAGE GAINS DISTRIBUTIONS END OF PERIOD RETURN(A) (000) NET ASSETS NET ASSETS NET ASSETS - ---------------------------------------------------------------------------------------------------------------------- $(0.52) $(1.20) $9.37 7.76% $707,834 0.84% 7.09% 0.84% (0.09) (0.82) 9.86 25.30 798,398 0.84 7.62 0.84 -- (0.77) 8.57 6.19 460,639 0.90 9.47 0.90 (0.05) (0.93) 8.86 6.05 194,867 0.93 9.75 1.00 -- (1.05) 9.27 4.51 61,181 0.93 10.97 1.45 $(0.52) $(1.17) $9.31 7.64% $134,980 1.09% 6.90% 1.09% (0.09) (0.79) 9.79 24.88 163,916 1.09 7.37 1.09 -- (0.75) 8.52 6.07 97,154 1.15 9.22 1.15 (0.05) (0.90) 8.80 5.69 31,551 1.18 9.50 1.25 -- (1.04) 9.22 3.99 8,344 1.18 10.72 1.70 $(0.52) $(1.10) $9.29 6.89% $130,088 1.84% 6.17% 1.84% (0.09) (0.73) 9.77 23.91 144,762 1.84 6.62 1.84 -- (0.69) 8.51 5.20 95,110 1.90 8.47 1.90 (0.05) (0.84) 8.80 5.06 64,091 1.93 8.75 2.00 -- (0.97) 9.21 3.29 22,106 1.93 9.97 2.45 $(0.52) $(1.10) $9.25 6.80% $ 49,066 1.84% 6.21% 1.84% (0.09) (0.73) 9.74 24.15 63,005 1.84 6.62 1.84 -- (0.69) 8.47 5.09 32,453 1.90 8.47 1.90 (0.05) (0.84) 8.77 4.96 15,213 1.93 8.75 2.00 -- (0.97) 9.19 3.20 1,891 1.93 9.97 2.45
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 111 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain only to the following U.S. government and corporate bond portfolios of Funds Trust (each a "Fund" and collectively, the "Funds"): Short-Term Income Fund Short-Intermediate Government Fund Government Securities Fund Intermediate Bond Fund Bond Fund Strategic Income Fund High Yield Bond Fund
Financial statements for the other portfolios of Funds Trust are presented under separate cover. The Funds currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. Intermediate Bond Fund and High Yield Bond Fund (the "Feeder Funds") seek to achieve their investment objectives by investing substantially all of their assets in Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio, respectively (the "Master Portfolios"), each a series of Nations Master Investment Trust (the "Master Trust"), another open-end management investment company in the Nations Funds family. The Master Portfolios each have the same investment objective as that of its corresponding Feeder Fund. The values of the Feeder Funds' investments in the respective Master Portfolios included in the Statements of assets and liabilities reflect the Feeder Funds' proportionate beneficial interests in the net assets of the respective Master Portfolios (96.7% for Intermediate Bond Master Portfolio and 94.0% for High Yield Bond Master Portfolio at March 31, 2005). The financial statements of the Master Portfolios, including their investment portfolios, are included elsewhere within this report and should be read in conjunction with the Feeder Funds' financial statements. Other funds not registered under the 1940 Act and managed by Banc of America Capital Management, LLC ("BACAP"), whose financial statements are not presented here, also invest in the Master Portfolios. Certain Funds invest in securities of foreign issuers. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments in a specific country, industry or region. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Certain debt security prices provided by the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities on comparable securities. Certain securities may be valued based upon quotes provided by one or more principal market makers. Securities, including options and futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on NASDAQ are generally valued at the NASDAQ official closing price. Securities which are primarily traded on foreign securities exchanges are generally valued at the last available sale price on their respective exchanges where primarily traded. Restricted securities, securities for which market quotations are not readily available, and certain other 112 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. The valuation of each Feeder Fund's investment in its corresponding Master Portfolio is based on the reported net asset value of that Master Portfolio. The Master Portfolios use valuation policies consistent with those described above. Futures contracts: The Short-Term Income, Short-Intermediate Government, Government Securities, Bond and Strategic Income Funds may invest in futures contracts for the purposes of hedging against changes in values of the Fund's securities or changes in the prevailing levels of interest rates or currency exchange rates or to enhance the portfolio's return. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect the changes in market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Funds may purchase and write call and put options on securities, futures and swap contracts ("swaptions"). A Fund may use such options on futures contracts in connection with its hedging strategies in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures, and to seek to enhance return. The Funds may write covered call options and put options on securities in which they are permitted to invest from time to time in seeking to attain each Fund's objective. Call options written by a Fund give the holder the right to buy the underlying securities from the Fund at a stated exercise price; put options give the holder the right to sell the underlying security to the Fund at a stated price. In the case of put options, a Fund is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Funds may also write combinations of covered puts and calls on the same underlying security. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Funds typically receive a premium from writing a put or call option, which would increase the Funds' return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received. A Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Fund. 113 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Foreign currency transactions: 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 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 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 securities are not separately identified 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 securities. Forward foreign currency transactions: Generally, each Fund may enter into forward currency exchange contracts only under two circumstances: (i) when a 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; or (ii) when the investment advisor or sub-advisor believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by a Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a 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. 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 a Fund's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency 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. Swaps: The Funds may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with their investment objective and policies to obtain a desired return at a lower cost than if the Funds had invested directly in the asset that yielded the desired return. Swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest or total return throughout the lives of the agreements. The interest to be paid or received on swaps is included in net realized gain/(loss) on investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statements of assets and liabilities. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Fund's basis in the swap and the proceeds from (or cost of) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. If there is a default by the counterparty to a swap contract, a Fund will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Fund will succeed in pursuing contractual remedies. A Fund thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The creditworthiness of the swap contract counterparties is closely monitored in order to minimize this risk. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. Repurchase agreements: Each Fund may engage in repurchase agreement transactions with institutions that the Funds' investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase 114 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. Loan Participations and Commitments: The Short-Term Income Fund may invest in Loan Participations. When the Fund purchases a Loan Participation, the Fund typically enters into a contractual relationship with the lender or third party selling such Participations ("Selling Participant"), but not the Borrower. As a result, the Fund assumes the credit risk of the Borrower, the Selling Participant and any other persons interpositioned between the Fund and the Borrower ("Intermediate Participants"). The Fund may not directly benefit from the collateral supporting the Senior Loan in which it has purchased the Loan Participation. Stripped securities: Stripped mortgage-backed securities are derivative multi-class mortgage securities structured so that one class receives most, if not all, of the principal from the underlying mortgage assets, while the other class receives most, if not all, of the interest and the remainder of the principal. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recoup its initial investment in an interest-only security. The market value of these securities consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligation. Dollar rolls: The Funds may enter into dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon, and maturity) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund's policy is to record the component of dollar rolls using "to be announced" mortgage-backed securities ("TBA Dollar Rolls") as purchase and sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the trade date of the sale transaction. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its dollar roll commitments. In addition, the Funds may receive compensation that is recorded as deferred income and amortized to income over the roll period. The counterparty receives all principal and interest payments, including prepayments, made in respect of a security subject to such a contract while it is the holder. Mortgage dollar rolls may be renewed with a new purchase and repurchase price and a cash settlement made on settlement date without physical delivery of the securities subject to the contract. The Funds engage in dollar rolls for the purpose of enhancing their yields, principally by earning a negotiated fee. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Each Fund's investment income and realized and unrealized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. The Feeder Funds record their share of the investment income and realized and unrealized gains and losses reported by the Master Portfolios on a daily basis. The investment income and realized and unrealized gains and losses are allocated daily to investors in the Master Portfolios based upon the relative value of their investments in the Master Portfolios. Dividends and distributions to shareholders: It is the policy of each Fund (except Intermediate Bond and High Yield Bond) to declare dividends from net investment income daily and to pay such dividends monthly. Intermediate Bond and 115 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) High Yield Bond Funds declare and pay dividends monthly. Each Fund will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on ex-dividend date. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from GAAP. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. The Feeder Funds record their share of the expenses reported by the Master Portfolios on a daily basis. The expenses are allocated daily to investors in the Master Portfolios based upon the relative value of the Feeder Funds' investments in the Master Portfolios. Indemnification: In the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Trust's organizational documents, the Trustees and Officers of the Trust are indemnified against certain liabilities that may arise out of their duties to the Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with BACAP, a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Funds. Effective December 1, 2004, BACAP 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:
FEES ON FEES ON FEES ON FEES ON FEES ON FEES ON AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS FIRST $500 MILLION $1 BILLION TO $1.5 BILLION $3 BILLION TO OVER $500 MILLION TO $1 BILLION $1.5 BILLION TO $3 BILLION $6 BILLION $6 BILLION ------------------------------------------------------------------------------------------- Short-Term Income Fund.............. 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% Short-Intermediate Government Fund.............................. 0.30% 0.25% 0.25% 0.25% 0.25% 0.25% Government Securities Fund.......... 0.39% 0.34% 0.31% 0.28% 0.27% 0.26% Bond Fund........................... 0.40% 0.35% 0.32% 0.29% 0.28% 0.27% Strategic Income Fund............... 0.46% 0.41% 0.38% 0.35% 0.35% 0.35%
The Feeder Funds indirectly pay for investment advisory services through their investments in their corresponding Master Portfolios (see Note 2 of Notes to financial statements of the Master Portfolios). Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Funds at the following annual rates:
FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE NET ASSETS NET ASSETS NET ASSETS FIRST $200 MILLION TO OVER $200 MILLION $250 MILLION $250 MILLION ----------------------------------------------------- Short-Term Income Fund............................... 0.30% 0.30% 0.30% Short-Intermediate Government Fund................... 0.30% 0.30% 0.30% Government Securities Fund........................... 0.50% 0.45% 0.40% Bond Fund............................................ 0.40% 0.40% 0.40% Strategic Income Fund................................ 0.50% 0.50% 0.50%
116 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) In addition, prior to December 31, 2004, BACAP waived its advisory fees for the Funds set forth below (as a percentage of the Funds' average daily net assets): Short-Term Income........................................... 0.10% Government Securities....................................... 0.10%* Strategic Income............................................ 0.10%
- --------------- *Contractual advisory fees are based on asset breakpoints causing this percentage to fluctuate, as the advisory waiver is subject to change in order to maintain a net advisory fee of 0.40% of Government Securities' average daily net assets. The advisory fee waiver presented reflects the maximum advisory fee waiver. For the year ended March 31, 2005, the effective investment advisory fee rates for the Funds were as follows:
EFFECTIVE FEE RATE ---------- Short-Term Income Fund...................................... 0.23% Short-Intermediate Government Fund.......................... 0.30% Government Securities Fund.................................. 0.41% Bond Fund................................................... 0.38% Strategic Income Fund....................................... 0.42%
BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Effective December 1, 2004, BACAP Distributors is entitled to receive a fee, computed daily and paid monthly, at the following annual rates:
ANNUAL FEE RATE -------- Short-Term Income Fund...................................... 0.14% Short-Intermediate Government Fund.......................... 0.15% Government Securities Fund.................................. 0.14% Intermediate Bond Fund...................................... 0.15% Bond Fund................................................... 0.15% Strategic Income Fund....................................... 0.14% High Yield Bond Fund........................................ 0.18%
In addition, effective December 31, 2004, BACAP Distributors has agreed to waived 0.02% of its administration fees for the Short Term Bond Fund. Prior to December 1, 2004, BACAP Distributors received a monthly administration fee based on the average daily net assets of each of the Funds at the following annual rates:
ANNUAL FEE RATE -------- Short-Term Income Fund...................................... 0.22% Short-Intermediate Government Fund.......................... 0.22% Government Securities Fund.................................. 0.22% Intermediate Bond Fund...................................... 0.17% Bond Fund................................................... 0.22% Strategic Income Fund....................................... 0.22% High Yield Bond Fund........................................ 0.18%
In addition, prior to December 1, 2004, BACAP Distributors waived 0.05% of its administration fees for Government Securities Fund. 117 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, the effective administration fee rates for the Funds were as follows:
EFFECTIVE FEE RATE --------- Short-Term Income Fund...................................... 0.19% Short-Intermediate Government Fund.......................... 0.20% Government Securities Fund.................................. 0.15% Intermediate Bond Fund...................................... 0.17% Bond Fund................................................... 0.20% Strategic Income Fund....................................... 0.19% High Yield Bond Fund........................................ 0.18%
The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of Funds Trust's assets. PFPC Inc. serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A Shares of the Funds. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Primary A shares of each Fund. For the year ended March 31, 2005, Bank of America earned the following sub-transfer agent fees from the Funds for providing such services and these amounts are included in "Transfer agent fees" in each Fund's Statements of operations.
SUB-TRANSFER AGENT FEE FUND (000) - -------------------------------------------------------------------------- Short-Term Income........................................... 26 Short-Intermediate Government............................... 10 Government Securities....................................... 3 Intermediate Bond........................................... 21 Bond........................................................ 61 Strategic Income............................................ 6 High Yield Bond............................................. 21
BACAP Distributors serves as distributor of the Funds' shares. For the year ended March 31, 2005, the Funds were informed that the distributor received the following:
FRONT END CONTINGENT DEFERRED SALES CHARGE SALES CHARGE (000) (000) ------------ -------------------------------------- FUND INVESTOR A INVESTOR A INVESTOR B INVESTOR C - -------------------------------------------------------------------------------------------------------------------- Short-Term Income........................................... $ 5 $ 2 $ -- $ 3 Short-Intermediate Government............................... 12 1 59 --* Government Securities....................................... 23 -- 64 --* Intermediate Bond........................................... 8 -- 23 --* Bond........................................................ 8 -- 26 --* Strategic Income............................................ 28 * 29 --* High Yield Bond............................................. 296 52 278 22
- --------------- *Amount represents less than $500. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, pays its pro-rata share of the expenses 118 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) associated with the Office of the Chief Compliance Officer. Each Fund's fee will not exceed $15,000 per year. As of March 31, 2005 the fees paid for the office of the Chief Compliance Officer were as follows:
CCO FEES FUND (000) - ---------------------------------------------------------------------- Short-Term Income........................................... $8 Short-Intermediate Government............................... 6 Government Securities....................................... 4 Intermediate Bond........................................... 8 Bond........................................................ 8 Strategic Income............................................ 5 High Yield Bond............................................. 8
These amounts are included in "Other expenses" on the Statements of Operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, another portfolio of Funds Trust. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. Certain Funds have made daily investments of cash balances in the Nations Cash Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Fund from such investments is included in its Statement of operations as "Dividend income from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Funds. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADMINISTRATION FEES ADVISORY FEES (EARNED BY (EARNED BY BACAP) BACAP DISTRIBUTORS) FUND (000) (000) - ------------------------------------------------------------------------------------------------------ Short-Term Income........................................... $ 59 $ 31 Short-Intermediate Government............................... 6 3 Government Securities....................................... 5 3 Bond........................................................ 380 196 Strategic Income............................................ 42 21
Certain Funds have invested in portfolios contained within the various Nations Trusts, pursuant to an exemptive order received from the Securities and Exchange Commission. Bond Fund has invested in Convertible Securities Fund, a portfolio of Funds Trust. Strategic Income Fund and Bond Fund have invested in High Yield Portfolio, a portfolio of Master Trust. The income earned from such investments is included in their Statements of operations as "Dividend income from affiliated funds". BACAP has agreed to waive advisory fees on Bond Fund's investment in Convertible Securities Fund and this waiver is included in Bond Fund's Statement of operations as "Fees waived by investment advisor, administrator and/or distributor". A significant portion of each Fund's Primary A Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. Prior to March 24, 2005, Strategic Income invested a portion of its assets in High Yield Portfolio (the "Portfolio"), a series of Nations Master Investment Trust. As of the close of business on March 24, 2005, the Portfolio distributed all of its net assets to Strategic Income in exchange for Strategic Income's interest in the Portfolio in complete liquidation of the Portfolio. The Portfolio allocated income, expenses, realized and unrealized gains (losses) to its investors on a daily basis, based on methods approved by the Internal Revenue Service. 119 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. TOTAL OPERATING EXPENSE LIMITATIONS During the year ended March 31, 2005, and until July 31, 2005, BACAP and/or BACAP Distributors has agreed to reimburse expenses and/or waive their fees to the extent that the total expenses (excluding interest expense and shareholder servicing and distribution fees), as a percentage of the respective Fund's average daily net assets, exceed the following annual rates:
FUND ANNUAL RATE - ------------------------------------------------------------------------- Intermediate Bond Fund...................................... 0.81% Bond........................................................ 0.60% High Yield Bond Fund........................................ 0.93%
BACAP and/or BACAP Distributors is entitled to recover from Intermediate Bond Fund and Bond Fund any fees waived or expenses reimbursed by BACAP and/or BACAP Distributors during the three year period following the date of such waiver or reimbursement, to the extent that such recovery would not cause the affected fund to exceed the expense limitations in effect at the time of recovery. There is no guarantee that these expense limitations will continue. At March 31, 2005, amounts potentially recoverable by BACAP and/or BACAP Distributors pursuant to this arrangement are as follows:
POTENTIAL POTENTIAL AMOUNT AMOUNT TO AMOUNT TO RECOVERED RECOVER WITHIN RECOVER WITHIN DURING 3 YEARS AS OF 2 YEARS AS OF YEAR ENDED FUND 3/31/05 3/31/05 3/31/05 - ----------------------------------------------------------------------------------------------------------- Bond Fund.................................................. 1,044 100 0
Each Fund has an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. 4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Fund and a combined distribution and shareholder servicing plan for the Investor A Shares of each Fund. 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 1940 Act, permit the Funds to compensate or reimburse the distributor and/or selling agents for activities or expenses primarily intended to result in the sale of the applicable classes' shares. Payments are made at an annual rate and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of each Fund directly to the applicable share class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP Distributors.
CURRENT RATE (AFTER FEE PLAN WAIVERS) LIMIT -------------------------- Investor A Combined Distribution and Shareholder Servicing Plan...................................................... 0.25%* 0.25% Investor B and Investor C Shareholder Servicing Plans....... 0.25% 0.25% Investor B and Investor C Distribution Plans................ 0.75% 0.75%
- --------------- *Short-Term Income Fund pays its shareholder servicing fees, at the rates shown above, under a separate servicing plan. 5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. 120 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for foreign currency transactions, swap payments, dividend reclassifications, redemptions treated as dividends, remedial allocations due to tax rules, defaulted securities and investments in partnerships were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED/ (OVERDISTRIBUTED) ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME (LOSS) GAIN (LOSS) CAPITAL FUND (000) (000) (000) - ---------------------------------------------------------------------------------------------------------- Short-Term Income........................................... $ (874) $ 874 $ -- Short-Intermediate Government............................... (105) 105 -- Government Securities....................................... (30) 30 -- Intermediate Bond........................................... 58 (58) -- Bond........................................................ (2,321) (829) 3,150 Strategic Income............................................ (351) 1,361 (1,010) High Yield Bond............................................. 2,268 (6,447) 4,179
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 ------------------------- ------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME* CAPITAL GAINS INCOME* CAPITAL GAINS FUND (000) (000) (000) (000) - -------------------------------------------------------------------------------------------------------------------- Short-Term Income........................................... 28,352 738 $ 26,600 $2,141 Short-Intermediate Government............................... 10,510 1,300 16,222 3,815 Government Securities....................................... 5,023 -- 6,030 -- Intermediate Bond........................................... 22,862 4,353 25,534 4,984 Bond........................................................ 100,927 6,016 102,586 -- Strategic Income............................................ 10,156 -- 11,226 -- High Yield Bond............................................. 96,063 36,370 91,303 --
- --------------- *For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED/ (ACCUMULATED) UNDISTRIBUTED LONG-TERM NET UNREALIZED ORDINARY CAPITAL GAINS/ APPRECIATION INCOME (LOSS)** (DEPRECIATION)* FUND (000) (000) (000) - ---------------------------------------------------------------------------------------------------------------------- Short-Term Income........................................... 271 (5,600) (12,711) Short-Intermediate Government............................... 105 (2,315) (3,896) Government Securities....................................... -- (595) (566) Intermediate Bond........................................... 316 (2,659) (4,234) Bond........................................................ 4,845 3,712 (1,756) Strategic Income............................................ 379 (10,275) (618) High Yield Bond............................................. 5,681 10,368 47,581
- --------------- *The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to deferral of losses from wash sales, income on defaulted securities and the realization for tax-purposes of unrealized gains/(losses) on certain forward foreign currency and futures contracts. **Amounts may include post-October loss deferrals and/or straddle loss deferrals. 121 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION) FUND (000) (000) (000)** - ------------------------------------------------------------------------------------------------------------ Short-Term Income........................................... $ 348 $(13,059) $(12,711) Short-Intermediate Government............................... 597 (4,492) (3,895) Government Securities....................................... 1,007 (1,576) (569) Intermediate Bond........................................... N/A* N/A* (4,258) Bond........................................................ 19,845 (21,597) (1,752) Strategic Income............................................ 2,851 (3,462) (611) High Yield Bond............................................. N/A* N/A* 47,606
- --------------- *See corresponding Master Portfolio for tax basis information. **Differences between book basis and tax basis net unrealized appreciation (depreciation) is due primarily to deferred wash sale losses and income on defaulted securities. The following capital loss carryforwards, determined as of March 31, 2005, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING IN 2008 IN 2009 IN 2010 IN 2011 IN 2013 FUND (000) (000) (000) (000) (000) - ---------------------------------------------------------------------------------------------------------------------- Short-Term Income........................................... $ -- $ -- $ -- $ -- $ 955 Short-Intermediate Government............................... -- -- -- -- 721 Intermediate Bond........................................... -- -- -- -- 1,494 Government Securities....................................... 571 -- -- -- 24 Strategic Income............................................ 1,590 3,544 1,929 3,212 --
During the year ended March 31, 2005, the following Funds utilized capital losses as follows:
CAPITAL LOSSES UTILIZED FUND (000) - ---------------------------------------------------------------------------- Strategic Income............................................ $4,101
Under current tax rules, certain currency and capital 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, 2005, the following funds elected to defer losses occurring between November 1, 2004 and March 31, 2005 under these rules as follows:
CURRENCY CAPITAL ------------------- Short-Term Income........................................... --* 4,645 -- Short-Intermediate Government............................... -- 1,591 -- Intermediate Bond........................................... -- 1,164
- --------------- *Amount represents less than $500. 6. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005, were as follows:
PURCHASES SALES (000) (000) -------------------------- Short-Term Income........................................... $ 1,279,828 $ 1,463,688 Short-Intermediate Government............................... 243,259 246,543 Government Securities....................................... 493,224 466,939 Bond........................................................ 7,725,272 8,328,919 Strategic Income............................................ 624,945 682,477
122 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2005, were as follows:
PURCHASES SALES (000) (000) --------------------- Short-Term Income........................................... $152,721 $229,542 Short-Intermediate Government............................... 278,985 365,994 Government Securities....................................... 54,737 123,392 Bond........................................................ 355,116 479,355 Strategic Income............................................ 37,596 45,309
7. FUTURES CONTRACTS At March 31, 2005, the following Funds had futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- SHORT-INTERMEDIATE GOVERNMENT FUND: U.S. 5 year Treasury Note Futures (long position) expiring June 2005(a).............................................. 10 $ 1,076 $ 1,070 $ (6) U.S. 10 year Treasury Note Futures (long position) expiring June 2005(a).............................................. 183 20,166 19,996 (170) U.S. 5 year Treasury Bond Futures (short position) expiring June 2005(a).............................................. (83) (9,396) (9,244) 152 ----- Total net unrealized appreciation......................... (24) ===== GOVERNMENT SECURITIES FUND: U.S. 20 year Treasury Bond Futures (long position) expiring June 2005(a).............................................. 49 $ 5,492 $ 5,457 $ (35) U.S. 10 year Treasury Note Futures (long position) expiring June 2005(a).............................................. 30 3,306 3,279 (27) U.S. 5 year Treasury Note Futures (short position) expiring June 2005(a).............................................. (10) (1,078) (1,070) 8 U.S. 2 year Treasury Note Futures (short position) expiring June 2005(a).............................................. (15) (3,112) (3,103) 9 ----- Total net unrealized appreciation......................... $ (45) ===== BOND FUND: U.S. 5 year Treasury Note Futures (long position) expiring June 2005(a).............................................. 80 $ 8,612 $ 8,568 $ (44) U.S. 2 year Treasury Note Futures (long position) expiring June 2005(a).............................................. 95 19,718 19,654 (64) U.S. 20 year Treasury Bond Futures (long position) expiring June 2005(a).............................................. 375 42,136 41,765 (371) U.S. 10 year Treasury Note Futures (short position) expiring June 2005(a).............................................. (161) (17,733) (17,591) 142 ----- Total net unrealized appreciation......................... $(337) =====
- --------------- (a)Securities have been segregated as collateral for the Funds' open futures contracts. 123 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. WRITTEN OPTIONS Written options for the year ended March 31, 2005, aggregated the following:
PREMIUM NUMBER OF RECEIVED SUMMARY OF WRITTEN OPTIONS (FUND) CONTRACTS* (000) - ------------------------------------------------------------------------------------ SHORT-INTERMEDIATE GOVERNMENT: Outstanding at March 31, 2004............................... -- $ -- Contracts opened............................................ 200 4 Contracts closed............................................ -- -- Contracts expired........................................... (200) (4) ---- ---- Outstanding at March 31, 2005............................... -- $ -- ==== ==== GOVERNMENT SECURITIES: Outstanding at March 31, 2004............................... -- $ -- Contracts opened............................................ 200 2 Contracts closed............................................ -- -- Contracts expired........................................... (200) (2) ---- ---- Outstanding at March 31, 2005............................... -- $ -- ==== ==== BOND: Outstanding at March 31, 2004............................... -- $ -- Contracts opened............................................ 4 23 Contracts closed............................................ -- -- Contracts expired........................................... (4) (23) ---- ---- Outstanding at March 31, 2005............................... -- $ -- ==== ==== STRATEGIC INCOME: Outstanding at March 31, 2004............................... -- $ -- Contracts opened............................................ 2 1 Contracts closed............................................ -- -- Contracts expired........................................... (2) (1) ---- ---- Outstanding at March 31, 2005............................... -- $ -- ==== ====
- --------------- *1 contract = $1,000,000 notional amount. 9. FORWARD FOREIGN CURRENCY CONTRACTS At March 31, 2005, the following Funds had forward foreign currency contracts outstanding:
UNREALIZED VALUE OF CONTRACT VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ WHEN OPENED WHEN OPENED CONTRACT (DEPRECIATION) LOCAL (LOCAL CURRENCY) (US DOLLARS) (US DOLLARS) (US DOLLARS) DESCRIPTION CURRENCY (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- BOND: CONTRACTS TO SELL Expiring April 19, 2005................. Euro (330) $(433) $(430) $ 3 Expiring April 19, 2005................. Euro (540) (714) (701) 13 Expiring June 1, 2005................... Euro (114) (147) (148) (1) --- Total net unrealized depreciation....... $15 --- STRATEGIC INCOME FUND: CONTRACTS TO SELL: Expiring April 28, 2005................. Euro (680) $(897) $(884) $13 Expiring June 1, 2005................... Euro (95) (122) (123) (1) --- Total net unrealized depreciation....... $12 ===
124 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. SHARES OF BENEFICIAL INTEREST As of March 31, 2005, an unlimited number of shares of beneficial interest without par value were authorized for Funds Trust. Funds Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any authorized but unissued shares into one or more additional classes or series of shares. Investor B Shares generally convert to Investor A Shares based on the following conditions: SHORT-INTERMEDIATE GOVERNMENT/INTERMEDIATE BOND/BOND
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1998 and November 15, 1998 $0 - $249,999 Six years $250,000 - $499,999 Six years $500,000 - $999,999 Five years
GOVERNMENT SECURITIES/STRATEGIC INCOME/HIGH YIELD BOND
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1997 and November 15, 1998 $0 - $249,999 Nine years $250,000 - $499,999 Six years $500,000 - $999,999 Five years - -- before August 1, 1997 Eight Years
See Schedules of capital stock activity. 11. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Funds had no borrowings outstanding at March 31, 2005. 12. SECURITIES LENDING Under an agreement with BNY, the Funds may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of borrower default, the Fund has the right to use the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. The Fund bears the risk of loss with respect to the investment of collateral. The income earned by each Fund from securities lending is included in its Statement of operations. 125 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) At March 31, 2005, the following Funds had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) - ------------------------------------------------------------------------------------------------ Short-Term Income........................................... $ 22,733 $ 23,348 Short-Intermediate Government............................... 156,224 160,496 Government Securities....................................... 25,954 26,501 Bond........................................................ 126,690 132,182 Strategic Income............................................ 11,170 11,620
13. RESTRICTED SECURITIES A restricted security is a security which has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933. The Funds do not have the right to demand that such securities be registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. The following securities are considered restricted as to resale at March 31, 2005 for the Government Securities Fund.
MARKET ACQUISITION VALUE PERCENTAGE ACQUISITION COST 3/31/05 OF NET SECURITY DATE (000) (000) ASSETS - ----------------------------------------------------------------------------------------------------------------------- Vendee Mortgage Trust, Series 1998-1, Class 2, Interest Only 0.448% 09/15/27............................. 05/18/98 $236 $122 0.08% Vendee Mortgage Trust, Series 1998-3, Class 1, Interest Only 0.305% 03/15/29............................. 09/16/98 161 98 0.06
14. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund 126 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. For the fiscal year ended March 31, 2005, Bank of America Corporation has assumed $6.7 million of legal, shareholder communications, audit related, transfer agent, consulting and Trustee costs and fees incurred by the Funds impacted in connection with the regulatory and civil litigation matters discussed above. These non-recurring costs were allocated to the Funds based on their respective average nets assets for the year ended March 31, 2005. These non-recurring costs on a per Fund basis are shown in that Fund's respective Statement of operations. Because these costs were borne by Bank of America Corporation and not any Fund, an offsetting waiver of these costs is also presented in each respective Fund's Statement of operations as, "Costs assumed by Bank of America Corporation". The impact to the expense ratio of each impacted Fund is reflected in the Fund's Financial highlights. 15. PROPOSED REORGANIZATION The Board of Trustees of the Funds approved a proposal to reorganize the following funds: the Nations Short Intermediate Government Fund into the Nations Short Term Income Fund, the Nations Government Securities Fund into the Columbia Federal Securities Fund; and the Nations Strategic Income Fund into the Columbia Strategic Income Fund. The fund mergers are subject to approval by shareholders of the Funds and the satisfaction of certain other conditions. The mergers are expected to be completed in the third quarter of 2005. 127 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Short-Term Income Fund, Nations Short-Intermediate Government Fund, Nations Government Securities Fund, Nations Intermediate Bond Fund, Nations Bond Fund, Nations Strategic Income Fund and Nations High Yield Bond Fund (constituting part of Nations Funds Trust, hereafter referred to as the "Funds") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 128 NATIONS FUNDS TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2005, the amount of long-term capital gains designated by Funds Trust were as follows:
TOTAL LONG- TERM CAPITAL FUND GAINS - --------------------------------------------------------------------------- Short-Term Income........................................... $ 737,732 Short-Intermediate Government............................... 1,299,938 Intermediate Bond........................................... 4,353,135 Bond........................................................ 7,358,184 High Yield Bond............................................. 39,797,625
129 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio and Nations High Yield Bond Master Portfolio Annual Report MARCH 31, 2005 The following pages should be read in conjunction with Nations Intermediate Bond and Nations High Yield Bond Funds' Annual Report. 130 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 49.6% BASIC MATERIALS -- 2.3% CHEMICALS -- 1.2% $ 1,298 E.I. Dupont De Nemours & Co. 3.375% 11/15/07............................................. $ 1,269 1,622 Dow Chemical Co. 6.125% 02/01/11............................................. 1,736 409 Eastman Chemical Co. 3.250% 06/15/08............................................. 392 435 Potash Corp. of Saskatchewan 4.875% 03/01/13............................................. 427 Praxair, Inc. 705 4.750% 07/15/07............................................. 710 1,192 6.500% 03/01/08............................................. 1,252 1,394 6.625% 10/15/07............................................. 1,459 489 6.900% 11/01/06............................................. 511 --------- 7,756 --------- FOREST PRODUCTS AND PAPER -- 0.6% International Paper Co. 577 4.250% 01/15/09............................................. 569 1,973 5.850% 10/30/12............................................. 2,056 1,501 MeadWestvaco Corp. 6.850% 04/01/12............................................. 1,674 --------- 4,299 --------- METALS AND MINING -- 0.5% 29 Alcan, Inc. 6.450% 03/15/11............................................. 32 1,570 Alcoa, Inc. 7.375% 08/01/10............................................. 1,765 641 BHP Billiton Finance USA 4.800% 04/15/13............................................. 634 701 CODELCO, Inc. 5.500% 10/15/13(a).......................................... 708 --------- 3,139 --------- 15,194 --------- COMMUNICATIONS -- 7.6% MEDIA -- 3.1% 1,607 Clear Channel Communications 6.000% 11/01/06............................................. 1,638 Comcast Cable Communications, Inc. 1,104 6.375% 01/30/06............................................. 1,123 1,620 7.125% 06/15/13............................................. 1,802 3,094 Gannett Co., Inc. 5.500% 04/01/07............................................. 3,170 2,269 Liberty Media Corp. 3.500% 09/25/06............................................. 2,236 News America Holdings, Inc. 1,247 6.625% 01/09/08(b).......................................... 1,310 967 9.250% 02/01/13............................................. 1,207 1,159 Thomson Corp. 5.250% 08/15/13............................................. 1,175 Time Warner, Inc. 1,785 7.250% 09/01/08............................................. 1,920 10 8.110% 08/15/06............................................. 10 1,727 9.125% 01/15/13............................................. 2,134
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PAR VALUE (000) (000) MEDIA -- (CONTINUED) Viacom, Inc. $ 584 5.625% 05/01/07............................................. $ 598 12 7.700% 07/30/10............................................. 13 Walt Disney Co. 336 5.500% 12/29/06............................................. 343 1,073 6.750% 03/30/06............................................. 1,102 --------- 19,781 --------- TELECOMMUNICATIONS -- 4.5% 2,016 Alltel Corp. 7.500% 03/01/06............................................. 2,083 1,398 BellSouth Corp. 5.000% 10/15/06............................................. 1,417 943 British Telecommunications PLC 8.375% 12/15/10............................................. 1,095 636 Cingular Wireless SV 8.125% 05/01/12............................................. 743 3,980 Deutsche Telekom International Finance BV 5.250% 07/22/13............................................. 3,991 4,091 France Telecom SA 8.000% 03/01/11(b).......................................... 4,681 1,727 SBC Communications, Inc. 5.750% 05/02/06............................................. 1,759 Sprint Capital Corp. 697 6.125% 11/15/08............................................. 729 3,121 8.375% 03/15/12............................................. 3,647 11 Telefonos de Mexico SA 4.500% 11/19/08............................................. 11 3,625 Telus Corp. 7.500% 06/01/07............................................. 3,858 2,577 Verizon New England, Inc. 6.500% 09/15/11............................................. 2,759 2,533 Verizon Pennsylvania, Inc. 5.650% 11/15/11............................................. 2,601 --------- 29,374 --------- 49,155 --------- CONSUMER CYCLICAL -- 2.2% APPAREL -- 0.5% 3,500 Jones Apparel Group, Inc. 5.125% 11/15/14(a)(b)....................................... 3,317 --------- AUTO MANUFACTURERS -- 0.6% 3,842 DaimlerChrysler NA Holding Corp. 4.050% 06/04/08............................................. 3,731 --------- HOME BUILDERS -- 0.6% 4,000 Centex Corp. 4.550% 11/01/10............................................. 3,866 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 131 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- RETAIL -- 0.5% $ 4 Costco Wholesale Corp. 5.500% 03/15/07............................................. $ 4 Target Corp. 10 3.375% 03/01/08............................................. 10 802 5.375% 06/15/09............................................. 827 957 5.400% 10/01/08............................................. 987 802 5.875% 03/01/12............................................. 847 Wal-Mart Stores Inc. 40 4.375% 07/12/07............................................. 40 850 4.550% 05/01/13(b).......................................... 836 --------- 3,551 --------- 14,465 --------- CONSUMER NON-CYCLICAL -- 3.3% AGRICULTURE -- 0.1% 328 Monsanto Co. 4.000% 05/15/08............................................. 323 --------- BEVERAGES -- 0.2% 1,142 Anheuser-Busch Cos., Inc. 6.000% 04/15/11............................................. 1,217 3 Coca-Cola Co. 5.750% 03/15/11............................................. 3 --------- 1,220 --------- COMMERCIAL SERVICES -- 0.0% 147 RR Donnelley & Sons 4.950% 04/01/14............................................. 144 --------- COSMETICS/PERSONAL CARE -- 0.3% 1,847 Procter & Gamble Co. 4.750% 06/15/07............................................. 1,872 --------- FOOD -- 1.6% 2,016 Cadbury-Schweppes US Finance LLC 5.125% 10/01/13(a).......................................... 2,003 2,357 Campbell Soup Co. 5.500% 03/15/07............................................. 2,402 2,444 Fred Myer, Inc. 7.450% 03/01/08............................................. 2,619 1,919 General Mills, Inc. 2.625% 10/24/06............................................. 1,875 633 Kroger Co. 6.750% 04/15/12............................................. 690 745 Unilever Capital Corp. 6.875% 11/01/05............................................. 764 --------- 10,353 --------- HEALTHCARE SERVICES -- 0.5% WellPoint Health Networks, Inc. 1,728 6.375% 06/15/06............................................. 1,772 1,258 6.375% 01/15/12............................................. 1,357 --------- 3,129 ---------
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PAR VALUE (000) (000) HOUSEHOLD PRODUCTS/WARES -- 0.1% $ 3 Avery Dennison Corp. 4.875% 01/15/13............................................. $ 3 621 Fortune Brands, Inc. 2.875% 12/01/06............................................. 610 --------- 613 --------- PHARMACEUTICALS -- 0.5% 12 Abbott Laboratories 5.625% 07/01/06............................................. 12 1,445 Bristol-Myers Squibb Co. 4.750% 10/01/06............................................. 1,464 2,112 GlaxoSmithKline Capital PLC 2.375% 04/16/07............................................. 2,044 --------- 3,520 --------- 21,174 --------- ENERGY -- 2.9% OIL AND GAS -- 1.9% 1,293 BP Capital Markets PLC 2.750% 12/29/06............................................. 1,267 2,421 Burlington Resources Finance Co. 5.600% 12/01/06............................................. 2,469 Conoco Funding Co. 1,062 5.450% 10/15/06............................................. 1,085 1,427 6.350% 10/15/11............................................. 1,555 530 Devon Financing Corp. 6.875% 09/30/11............................................. 584 1,939 Pemex Project Funding Master Trust 7.875% 02/01/09............................................. 2,096 2,237 USX Corp. 6.650% 02/01/06............................................. 2,285 827 Valero Energy Corp. 6.875% 04/15/12............................................. 918 --------- 12,259 --------- PIPELINES -- 1.0% 1,219 CenterPoint Energy Resources Corp. 7.875% 04/01/13............................................. 1,413 1,065 Consolidated Natural Gas Co. 5.375% 11/01/06............................................. 1,085 1,415 Duke Capital LLC 4.370% 03/01/09............................................. 1,391 1,125 Kinder Morgan Inc. 5.150% 03/01/15(b).......................................... 1,096 1,311 Teppco Partners LP 7.625% 02/15/12............................................. 1,484 --------- 6,469 --------- 18,728 --------- FINANCIALS -- 25.0% BANKS -- 6.3% 660 Bank of New York Co., Inc. 3.900% 09/01/07............................................. 654 4,000 Bank One Corp. 6.000% 08/01/08............................................. 4,185 2 Barclays Bank PLC 7.400% 12/15/09............................................. 2 597 City National Corp. 5.125% 02/15/13............................................. 593 6 Deutsche Bank Financial Inc. 6.700% 12/13/06............................................. 6
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 132 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- BANKS -- (CONTINUED) $ 3,000 HSBCBank USA NA 3.020% 12/14/06............................................. $ 3,001 923 Huntington National Bank 2.750% 10/16/06............................................. 906 964 Key Bank National Association 7.000% 02/01/11............................................. 1,070 Korea Development Bank 1,225 7.250% 05/15/06............................................. 1,267 5 5.250% 11/16/06............................................. 5 Mellon Funding Corp. 1,028 4.875% 06/15/07............................................. 1,042 900 6.700% 03/01/08............................................. 957 8 6.400% 05/14/11(b).......................................... 9 1,968 National City Bank 4.625% 05/01/13............................................. 1,914 1,892 PNC Funding Corp. 5.750% 08/01/06............................................. 1,934 3,286 Popular North America, Inc. 6.125% 10/15/06............................................. 3,375 1,223 Regions Financial Corp. 6.375% 05/15/12............................................. 1,319 1,700 Scotland International Finance 4.250% 05/23/13(a).......................................... 1,621 738 SouthTrust Bank, Inc. 4.750% 03/01/13(b).......................................... 721 2,366 Union Planters Corp. 4.375% 12/01/10............................................. 2,301 US Bank NA 502 2.850% 11/15/06............................................. 493 3,308 6.375% 08/01/11............................................. 3,583 Wachovia Corp. 2,116 4.850% 07/30/07............................................. 2,152 3,609 3.500% 08/15/08............................................. 3,503 4,200 Wells Fargo & Co. 2.810% 03/10/08............................................. 4,198 --------- 40,811 --------- DIVERSIFIED FINANCIAL SERVICES -- 16.4% 645 AIG SunAmerica Global Financing VII 5.850% 08/01/08(a).......................................... 672 American Express Co. 1,120 3.750% 11/20/07............................................. 1,103 1,286 5.500% 09/12/06............................................. 1,312 907 4.750% 06/17/09............................................. 913 American General Finance Corp. 3,000 2.790% 01/18/08............................................. 2,999 1,022 2.750% 06/15/08............................................. 967 Bear Stearns Companies, Inc. 1,829 4.500% 10/28/10............................................. 1,798 910 5.700% 01/15/07............................................. 933 1,031 Capital One Bank 5.000% 06/15/09............................................. 1,036 Caterpillar Financial Services Corp. 1,898 5.950% 05/01/06............................................. 1,938 582 4.500% 06/15/09............................................. 578 806 2.625% 01/30/07............................................. 785 1,001 2.350% 09/15/06............................................. 978 1,845 CIT Group, Inc. 7.375% 04/02/07............................................. 1,951
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PAR VALUE (000) (000) DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) Citigroup, Inc. $ 1,900 4.125% 02/22/10............................................. $ 1,848 3,073 6.000% 02/21/12............................................. 3,271 4,320 5.000% 09/15/14............................................. 4,241 4,692 Countrywide Home Loans, Inc. 5.500% 08/01/06............................................. 4,771 Credit Suisse First Boston USA, Inc. 1,597 6.125% 11/15/11............................................. 1,694 1,210 5.875% 08/01/06............................................. 1,239 2,439 Diageo Finance BV 3.000% 12/15/06............................................. 2,392 Ford Motor Credit Co. 6,242 7.375% 10/28/09............................................. 6,269 1,010 5.700% 01/15/10............................................. 951 General Electric Capital Corp. 1,000 3.750% 12/15/09............................................. 962 7,250 3.190% 06/22/09(b).......................................... 7,270 3,343 5.875% 02/15/12............................................. 3,529 General Motors Acceptance Corp. 988 6.150% 04/05/07............................................. 969 2,966 6.875% 09/15/11............................................. 2,684 Goldman Sachs Group, Inc. 2,503 6.600% 01/15/12............................................. 2,709 347 5.700% 09/01/12............................................. 357 315 4.125% 01/15/08............................................. 312 2,176 Household Finance Corp. 5.750% 01/30/07............................................. 2,234 HSBC Finance Corp. 3,072 6.375% 11/27/12............................................. 3,322 1,118 7.200% 07/15/06............................................. 1,161 847 International Lease Finance Corp. 4.500% 05/01/08............................................. 842 John Deere Capital Corp. 2,074 3.625% 05/25/07............................................. 2,046 1,403 3.125% 12/15/05............................................. 1,397 JPMorgan Chase & Co. 3,382 5.250% 05/30/07............................................. 3,449 3,836 7.250% 06/01/07............................................. 4,061 Lehman Brothers Holdings, Inc. 4,513 7.000% 02/01/08............................................. 4,815 336 7.875% 08/15/10............................................. 383 742 4.000% 01/22/08............................................. 732 1,020 MassMutual Global Funding II 2.550% 07/15/08(a).......................................... 962 Merrill Lynch & Co., Inc. 1,591 2.070% 06/12/06............................................. 1,559 2,596 6.000% 02/17/09............................................. 2,715 1,360 3.700% 04/21/08............................................. 1,333 Morgan Stanley 1,050 6.600% 04/01/12............................................. 1,146 295 5.300% 03/01/13............................................. 297 National Rural Utilities Cooperative Finance Corp. 1,824 5.750% 08/28/09............................................. 1,900 1,023 3.250% 10/01/07............................................. 994 1,853 Principal Life Global 6.250% 02/15/12(a).......................................... 1,990 2,860 Prudential Funding LLC 6.600% 05/15/08(a).......................................... 3,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 133 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 769 Rio Tinto Finance USA Ltd. 2.625% 09/30/08............................................. $ 724 2,674 Toyota Motor Credit Corp. 2.700% 01/30/07............................................. 2,609 --------- 107,134 --------- INSURANCE -- 0.7% Hartford Financial Services Group, Inc. 590 2.375% 06/01/06............................................. 577 1,120 4.625% 07/15/13............................................. 1,075 510 Marsh & McLennan Cos., Inc. 3.625% 02/15/08............................................. 495 1,524 Metlife, Inc. 5.375% 12/15/12............................................. 1,557 256 Nationwide Financial Services 5.900% 07/01/12............................................. 269 16 The Allstate Corp. 6.125% 02/15/12............................................. 17 398 Unitrin, Inc. 4.875% 11/01/10............................................. 387 --------- 4,377 --------- REAL ESTATE -- 0.1% 356 ERP Operating LP 5.200% 04/01/13............................................. 355 --------- REAL ESTATE INVESTMENT TRUST (REITS) -- 0.6% 1,744 Camden Property Trust 5.375% 12/15/13............................................. 1,749 612 Health Care Property Investors, Inc. 6.450% 06/25/12............................................. 657 1,750 Simon Property Group LP 4.875% 08/15/10............................................. 1,731 --------- 4,137 --------- SAVINGS AND LOANS -- 0.9% 1,712 Amsouth Bank NA 4.850% 04/01/13............................................. 1,675 Golden West Financial Corp. 1,283 4.750% 10/01/12............................................. 1,271 406 4.125% 08/15/07............................................. 405 Washington Mutual, Inc. 2,008 4.625% 04/01/14............................................. 1,897 335 5.625% 01/15/07............................................. 343 --------- 5,591 --------- 162,405 --------- INDUSTRIALS -- 1.3% AEROSPACE AND DEFENSE -- 0.4% 252 General Dynamics Corp. 4.500% 08/15/10(b).......................................... 250 483 Goodrich Corp. 7.625% 12/15/12............................................. 560 1,106 Northrop Grumman Corp. 7.125% 02/15/11............................................. 1,234 700 Raytheon Co. 5.375% 04/01/13(b).......................................... 710 --------- 2,754 ---------
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PAR VALUE (000) (000) BUILDING MATERIALS -- 0.2% $ 1,151 Hanson Overseas BV 6.750% 09/15/05............................................. $ 1,167 --------- ENVIRONMENTAL CONTROL -- 0.2% 1,195 Waste Management, Inc. 7.375% 08/01/10............................................. 1,332 --------- MACHINERY -- CONSTRUCTION AND MINING -- 0.0% 7 Caterpillar, Inc. 6.550% 05/01/11............................................. 7 --------- MISCELLANEOUS MANUFACTURING -- 0.0% 7 General Electric Co. 5.000% 02/01/13............................................. 7 --------- TRANSPORTATION -- 0.5% Burlington Northern Santa Fe Corp. 1,250 4.875% 01/15/15............................................. 1,215 1,139 6.750% 07/15/11............................................. 1,250 397 Canadian National Railroad Co. 6.375% 10/15/11............................................. 430 --------- 2,895 --------- 8,162 --------- TECHNOLOGY -- 0.5% COMPUTERS -- 0.5% 1,942 Hewlett-Packard Co. 5.750% 12/15/06............................................. 1,991 1,500 International Business Machines Corp. 3.800% 02/01/08............................................. 1,482 --------- 3,473 --------- UTILITIES -- 4.5% ELECTRIC -- 4.1% 1,800 American Electric Power Company, Inc. 5.375% 03/15/10............................................. 1,837 780 Appalachian Power Co. 3.600% 05/15/08............................................. 757 1,034 Con Edison Co. 6.625% 12/15/05............................................. 1,056 571 Dominion Resources, Inc. 5.000% 03/15/13............................................. 563 525 Duquesne Light Co. 6.700% 04/15/12............................................. 577 3,782 FirstEnergy Corp. 6.450% 11/15/11............................................. 3,990 4 Florida Power & Light Co. 4.850% 02/01/13............................................. 4 1,000 FPL Energy National Wind 5.608% 03/10/24(a).......................................... 989 1,483 Midamerican Energy Holdings Co. 5.000% 02/15/14............................................. 1,447 491 NiSource Finance Corp. 5.400% 07/15/14............................................. 495 348 Ohio Edison Co. 4.000% 05/01/08............................................. 341
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 134 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- ELECTRIC -- (CONTINUED) $ 908 Pacific Gas & Electric Co. 4.200% 03/01/11............................................. $ 875 571 Pepco Holdings, Inc. 5.500% 08/15/07............................................. 584 3,330 Progress Energy, Inc. 6.050% 04/15/07............................................. 3,435 629 Public Service Electric & Gas Co. 4.000% 11/01/08............................................. 617 3,000 Scottish Power PLC 4.910% 03/15/10(b).......................................... 3,000 616 Southern California Edison Co. 8.000% 02/15/07............................................. 656 1,078 Southern Co. Capital Funding, Inc. 5.300% 02/01/07............................................. 1,109 589 TransAlta Corp. 5.750% 12/15/13............................................. 599 2,373 TXU Energy Co. LLC 7.000% 03/15/13............................................. 2,597 1,032 Virginia Electric & Power Co. 5.375% 02/01/07............................................. 1,052 --------- 26,580 --------- GAS -- 0.4% 3,000 Atmos Energy Corp. 4.000% 10/15/09............................................. 2,889 --------- 29,469 --------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost $321,629)............................................. 322,225 --------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 31.9% FOREIGN GOVERNMENT BONDS -- 2.3% 3,188 Quebec Province 6.125% 01/22/11............................................. 3,413 872 Republic of Chile 5.500% 01/15/13............................................. 891 2,023 Republic of Greece 6.950% 03/04/08............................................. 2,168 1,163 Republic of Italy 2.750% 12/15/06............................................. 1,141 969 Republic of South Africa 6.500% 06/02/14............................................. 1,018 5,925 United Mexican States 6.625% 03/03/15(b).......................................... 6,174 --------- 14,805 --------- U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 29.6% 3,624 Federal Farm Credit Bank 2.500% 03/15/06............................................. 3,583 Federal Home Loan Bank 5,500 3.250% 08/15/05............................................. 5,504 1,800 3.625% 11/14/08............................................. 1,760 3,500 3.875% 06/14/13............................................. 3,311 Federal Home Loan Mortgage Corp. 1,437 2.375% 04/15/06............................................. 1,417 3,949 2.875% 10/15/05............................................. 3,938
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PAR VALUE (000) (000) U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- (CONTINUED) $ 700 4.500% 01/15/13(b).......................................... $ 688 1,750 5.750% 03/15/09............................................. 1,837 2,136 6.625% 09/15/09............................................. 2,322 Federal National Mortgage Association 1,500 4.125% 04/15/14(b).......................................... 1,424 2,095 4.375% 09/15/12(b).......................................... 2,046 20,775 5.250% 06/15/06-01/15/09(h)................................. 21,337 U.S. Treasury Bonds 7,850 3.125% 04/15/09(b).......................................... 7,570 6,500 7.250% 05/15/16............................................. 7,971 U.S. Treasury Notes 15,000 1.875% 11/30/05(b).......................................... 14,866 3,500 2.000% 05/15/06............................................. 3,442 2,500 2.375% 08/15/06(b).......................................... 2,458 2,000 2.750% 06/30/06............................................. 1,980 5,500 3.000% 02/15/09(b).......................................... 5,289 4,210 3.125% 05/15/07(b).......................................... 4,151 5,100 3.250% 01/15/09(b).......................................... 4,956 6,200 3.375% 10/15/09(b).......................................... 6,003 6,000 3.625% 01/15/10............................................. 5,856 5,200 3.875% 05/15/09(b).......................................... 5,156 1,000 4.000% 03/15/10(b).......................................... 992 26,979 4.250% 08/15/13-11/15/14(b)................................. 26,469 7,000 4.625% 05/15/06............................................. 7,084 900 5.000% 08/15/11(b).......................................... 935 17,000 6.500% 02/15/10(b).......................................... 18,719 U.S. Treasury STRIPS 14,000 05/15/06-11/15/08(c)........................................ 12,494 7,000 0.010% 05/15/05(b).......................................... 6,979 --------- 192,537 --------- TOTAL GOVERNMENT AGENCIES & OBLIGATIONS (Cost $210,023)............................................. 207,342 --------- SHARES (000) - -------- INVESTMENT MANAGEMENT COMPANY -- 0.8% 4,816 Nations Cash Reserves, Capital Class Shares(d)..................................... 4,816 --------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $4,816)............................................... 4,816 --------- PAR (000) - -------- ASSET-BACKED SECURITIES -- 8.8% $ 3,500 AmeriCredit Automobile Receivables Trust 3.930% 10/06/11............................................. 3,445 5,811 BMW Vehicle Owner Trust 3.320% 02/25/09............................................. 5,713 5 Bombardier Capital Mortgage Securitization Corp. 6.230% 04/15/28............................................. 5
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 135 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- (CONTINUED) $ 124 Capital Auto Receivables Asset Trust 4.180% 10/15/07............................................. $ 124 3,552 Chase Credit Card Master Trust 3.710% 07/16/07............................................. 3,553 2,346 CIT Equipment Collateral 4.670% 12/21/09............................................. 2,351 Citibank Credit Card Issuance Trust 6,401 2.500% 04/07/08............................................. 6,315 4,500 5.650% 06/16/08............................................. 4,590 1,500 Credit-Based Asset Servicing and Securitization 5.497% 05/25/35............................................. 1,531 5,000 Discover Card Master Trust 5.750% 12/15/08............................................. 5,108 72 First Plus Home Loan Trust 7.720% 05/10/24............................................. 72 Ford Credit Auto Owner Trust 3,500 4.080% 01/15/10............................................. 3,453 1,015 5.180% 10/16/06............................................. 1,021 1,022 Green Tree Financial Corp. 8.250% 07/15/27............................................. 1,106 1,400 GSAA Home Equity Trust 4.220% 08/25/34............................................. 1,386 2,000 GSAA Trust 4.316% 11/25/34............................................. 1,972 3,000 MBNA Master Credit Card Trust USA 3.110% 02/15/08............................................. 3,002 1,100 Residential Asset Mortgage Products Inc. 3.981% 04/25/29............................................. 1,079 3,500 Residential Funding Mortgage Securities II 4.160% 11/25/17............................................. 3,447 4,012 Volkswagen Auto Loan Enhanced Trust 2.270% 10/22/07............................................. 3,972 3,500 WFS Financial Owner Trust 4.620% 11/17/12............................................. 3,487 --------- TOTAL ASSET-BACKED SECURITIES (Cost $57,566).............................................. 56,732 --------- MORTGAGE-BACKED SECURITIES -- 2.9% AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5% Federal Home Loan Mortgage Corp., Interest Only 2,847 5.500% 01/15/23............................................. 223 3,112 5.500% 05/15/27............................................. 304 2,624 Federal National Mortgage Association 6.000% 04/25/17............................................. 2,732 --------- 3,259 --------- MORTGAGE-BACKED OBLIGATIONS -- 2.4% Federal National Mortgage Association 2,082 2.625% 11/15/06............................................. 2,040 236 4.185% 08/01/36............................................. 240 2,818 5.500% 08/25/17............................................. 2,862 TBA 6,500 4.500% 05/15/20(f).......................................... 6,320
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- MORTGAGE-BACKED OBLIGATIONS -- (CONTINUED) $ 3,500 5.500% 04/15/20(f).......................................... $ 3,566 Government National Mortgage Association 170 7.000% 05/15/12............................................. 179 16 9.500% 09/15/16-12/15/20.................................... 18 39 10.000% 05/15/16-08/15/18................................... 43 71 11.500% 06/15/13-06/15/13................................... 79 --------- 15,347 --------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $18,988).............................................. 18,606 --------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.7% COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.6% 3,284 Chaseflex Trust 5.500% 02/25/35(g).......................................... 3,278 3,765 Citigroup Commercial Mortgage Trust 4.733% 10/15/41............................................. 3,665 2,822 First Horizon Alternative Mortgage Securities 6.000% 01/25/35............................................. 2,853 4,000 Nomura Asset Acceptance Corp. 4.386% 01/25/35............................................. 3,939 Vendee Mortgage Trust, Interest Only 12,886 0.448% 09/15/27(e).......................................... 141 15,672 0.305% 03/15/29(e).......................................... 122 2,500 Washington Mutual Inc. 4.684% 04/25/35............................................. 2,500 --------- 16,498 --------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.1% 3,730 Bear Stearns Commercial Mortgage Securities 4.680% 08/13/39(b).......................................... 3,646 2,000 JPMorgan Chase Commercial Mortgage Securities Corp. 4.878% 01/15/42............................................. 1,962 12,072 Merrill Lynch Mortgage Investors, Inc., Interest only 1.017% 12/15/30............................................. 364 7,949 Morgan Stanley Capital I 4.970% 12/15/41............................................. 7,916 --------- 13,888 --------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $31,269).............................................. 30,386 ---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 136 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- ffi-SHORT-TERM OBLIGATIONS -- 3.2% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 3.2% $ 6,500 Federal Home Loan Bank Discount Notes 04/01/05(c)................................................. $ 6,500 3,500 Federal Home Loan Mortgage Corp. 04/18/05(c)................................................. 3,496 6,500 Federal National Mortgage Association 05/17/05(c)................................................. 6,477 4,544 U.S. Treasury Notes 2.750% 08/15/07(b).......................................... 4,431 --------- 20,904 --------- TOTAL SHORT-TERM OBLIGATIONS (Cost $21,008).............................................. 20,904 --------- REPURCHASE AGREEMENTS(I) -- 18.7% 32,339 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $32,647 (repurchase proceeds $32,342)....................... 32,342 38,807 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $39,317 (repurchase proceeds $38,810).................................................... 38,810 50,520 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/01/35, market value $51,317 (repurchase proceeds $50,524).................................................... 50,524 --------- TOTAL REPURCHASE AGREEMENTS (Cost of $121,676).......................................... 121,676 --------- TOTAL INVESTMENTS (Cost 786,975)(j)................................. 120.6% 782,687 --------- OTHER ASSETS AND LIABILITIES (NET).................. (20.6)% (133,508) --------- NET ASSETS.......................................... 100.0% $ 649,179 =========
- --------------- Notes to Investment Portfolio: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $15,294, which represents 2.4% of net assets. (b) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $111,965 and $109,999, respectively. (c) Zero coupon bond. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) Restricted and illiquid security. (f) Security, or a portion thereof, purchased on a delayed delivery basis. (g) Fair valued security. (h) Security pledged as collateral for open futures contracts and TBA's. (i) This amount represents cash collateral received from securities lending activity (see Note 10). (j) Cost for federal income tax purposes is $787,044. See Note 4 for additional information. ACRONYMS: STRIPS -- Separate Trading of Registered Interest and Principal of Securities TBA -- To Be Announced
At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ---------------------------------------------------------- Government Agencies & Obligations........ 35.1 Financials............................... 25.0 Repurchase Agreements.................... 18.7 Asset-Backed Securities.................. 8.8 Communications........................... 7.6 Collateralized Mortgage Obligations...... 4.7 Utilities................................ 4.5 Consumer Non-Cyclical.................... 3.3 Energy................................... 2.9 Mortgage-Backed Securities............... 2.9 Basic Materials.......................... 2.3 Consumer Cyclical........................ 2.2 Industrials.............................. 1.3 Investment Management Company............ 0.8 Technology............................... 0.5 Other Assets & Liabilities, Net.......... (20.6) ----- 100.0 =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 137 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 79.6% BASIC MATERIALS -- 8.1% CHEMICALS -- 3.0% $ 2,620 Acetex Corp. 10.875% 08/01/09............................................ $ 2,790 Equistar Chemicals LP 2,925 7.550% 02/15/26............................................. 2,815 4,530 10.625% 05/01/11............................................ 5,085 Lyondell Chemical Co. 4,115 9.500% 12/15/08............................................. 4,403 1,830 10.500% 06/01/13(a)......................................... 2,105 Millennium America, Inc. 1,980 7.000% 11/15/06............................................. 2,010 3,525 7.625% 11/15/26............................................. 3,419 8,140 Terra Capital, Inc. 12.875% 10/15/08............................................ 9,646 ---------- 32,273 ---------- FOREST PRODUCTS AND PAPER -- 3.4% 585 Bowater, Inc. 9.000% 08/01/09............................................. 629 Georgia-Pacific Corp. 2,925 8.000% 01/15/24............................................. 3,261 3,245 8.875% 02/01/10............................................. 3,622 8,760 8.875% 05/15/31............................................. 10,556 1,190 9.375% 02/01/13............................................. 1,330 6,670 Norske Skog Canada 8.625% 06/15/11............................................. 6,903 Pope and Talbot, Inc. 1,395 8.375% 06/01/13............................................. 1,465 1,170 8.375% 06/01/13............................................. 1,229 Tembec Industries, Inc. 1,620 7.750% 03/15/12............................................. 1,474 1,145 8.500% 02/01/11............................................. 1,085 6,390 8.625% 06/30/09(a).......................................... 6,166 ---------- 37,720 ---------- IRON/STEEL -- 1.7% 4,666 Algoma Steel, Inc. 11.000% 12/31/09............................................ 5,086 3,850 Allegheny Ludlum Corp. 6.950% 12/15/25............................................. 3,754 5,490 Allegheny Technologies, Inc. 8.375% 12/15/11............................................. 5,874 3,200 United States Steel LLC 10.750% 08/01/08............................................ 3,680 ---------- 18,394 ---------- 88,387 ---------- COMMUNICATIONS -- 18.2% ADVERTISING -- 0.2% 1,745 Bear Creek Corp. 9.000% 03/01/13(b).......................................... 1,728 ---------- INTERNET -- 0.0% 429 Globix Corp. 11.000% 05/01/08(b)(c)(d)................................... 414 ----------
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- MEDIA -- 8.7% Adelphia Communications Corp. $ 205 9.250% 10/01/02(e).......................................... $ 173 3,595 9.375% 11/15/09(e).......................................... 3,200 1,755 10.250% 11/01/06(e)......................................... 1,527 7,420 10.250% 06/15/11(e)......................................... 6,845 CanWest Media, Inc. 8,260 7.625% 04/15/13............................................. 8,714 5,417 8.000% 09/15/12(b).......................................... 5,701 516 Dex Media East LLC/Dex Media East Finance Co. 2.125% 11/15/12(a).......................................... 611 Frontiervision LP Holdings 4,900 11.000% 10/15/06(e)......................................... 6,468 2,100 11.875% 09/15/07(e)......................................... 2,825 Hollinger, Inc. 930 11.875% 03/01/11(b)......................................... 930 3,945 12.875% 03/01/11(b)......................................... 4,349 4,490 Houghton Mifflin Co. 7.200% 03/15/11............................................. 4,625 1,780 Medianews Group, Inc. 6.875% 10/01/13............................................. 1,744 5,605 Morris Publishing Group LLC 7.000% 08/01/13............................................. 5,549 EUR 7,285 ONO Finance PLC 10.500% 05/15/14(b)......................................... 10,415 $ 8,905 Paxson Communications Corp. 01/15/09(f) (12.250% 01/15/06).......................................... 8,282 4,370 Quebecor Media, Inc. 11.125% 07/15/11............................................ 4,502 2,595 Rogers Cablesystems Ltd. 11.000% 12/01/15............................................ 2,829 CAD 6,060 Shaw Communications, Inc. 7.500% 11/20/13............................................. 5,418 $ 2,410 Spanish Broadcasting System, Inc. 9.625% 11/01/09............................................. 2,524 3,800 Sun Media Corp. 7.625% 02/15/13............................................. 3,952 Young Broadcasting, Inc. 555 8.500% 12/15/08............................................. 581 800 10.000% 03/01/11(a)......................................... 818 1,651 Ziff Davis Media, Inc., Series B 13.000% 08/12/09(c)......................................... 1,768 ---------- 94,350 ---------- TELECOMMUNICATIONS -- 9.3% 1,060 American Tower Escrow Corp. 08/01/08(g)................................................. 795 1,145 Colo.Com, Inc. 13.875% 03/15/10(m)......................................... -- Dobson Cellular Systems, Inc. 980 7.493% 11/01/11(b)(h)....................................... 1,005 980 8.375% 11/01/11(b).......................................... 1,000 1,725 9.875% 11/01/12(a)(b)....................................... 1,760 5,755 Inmarsat Finance PLC 11/15/12(f) (10.375% 11/15/08).......................................... 4,057 Intelsat Bermuda Ltd. 4,660 7.794% 01/15/12(b)(h)....................................... 4,730 3,130 8.250% 01/15/13(b).......................................... 3,161
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 138 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- (CONTINUED) $ 1,164 Loral Cyberstar, Inc. 10.000% 07/15/06(e)......................................... $ 838 Lucent Technologies, Inc. 4,350 5.500% 11/15/08(a).......................................... 4,252 4,190 6.450% 03/15/29............................................. 3,614 805 6.500% 01/15/28............................................. 690 3,500 Metro PCS Wireless 7.500% 03/07/06(l).......................................... 3,500 5,950 Millicom International Cellular SA 10.000% 12/01/13(b)......................................... 6,069 3,250 Mobifon Holdings BV 12.500% 07/31/10............................................ 3,969 3,510 PanAmSat Corp. 9.000% 08/15/14............................................. 3,703 Qwest Capital Funding, Inc. 665 7.750% 08/15/06............................................. 672 6,500 Series B 6.950% 06/30/10(l)................................. 6,584 Qwest Communications International, Inc. 4,435 7.500% 11/01/08............................................. 4,190 2,830 7.500% 02/15/11(a)(b)....................................... 2,765 Qwest Corp. 165 5.625% 11/15/08(a).......................................... 164 2,950 7.125% 11/15/43(a).......................................... 2,493 1,410 7.250% 09/15/25............................................. 1,318 1,130 9.125% 03/15/12(b).......................................... 1,229 Qwest Services Corp. 3,379 13.500% 12/15/07(b)......................................... 3,759 6,787 14.000% 12/15/10(b)......................................... 7,856 6,279 14.500% 12/15/14(b)......................................... 7,582 1,735 Rogers Cantel, Inc. 9.750% 06/01/16............................................. 2,047 4,715 Telcordia Technologies 10.000% 03/15/13(b)......................................... 4,680 5,530 Triton PCS, Inc. 8.500% 06/01/13............................................. 5,088 745 TSI Telecommunications 12.750% 02/01/09............................................ 831 865 US Unwired, Inc. 10.000% 06/15/12............................................ 958 6,055 US West Communications 8.875% 06/01/31............................................. 6,085 ---------- 101,444 ---------- 197,936 ---------- CONSUMER CYCLICAL -- 9.2% AIRLINES -- 1.8% 810 American Airlines, Inc. 7.377% 05/23/19............................................. 535 Delta Air Lines, Inc. 13,869 8.300% 12/15/29(a).......................................... 4,369 715 9.250% 03/15/22(a).......................................... 236 2,335 9.750% 05/15/21(a).......................................... 771 2,200 10.000% 08/15/08(a)......................................... 968 4,295 10.375% 02/01/11............................................ 1,697 2,735 10.375% 12/15/22(a)......................................... 916 Northwest Airlines, Inc. 3,535 8.875% 06/01/06(a).......................................... 2,987 254 8.970% 01/02/15............................................. 161
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- AIRLINES -- (CONTINUED) $ 2,800 9.875% 03/15/07(a).......................................... $ 2,086 7,010 10.000% 02/01/09(a)......................................... 4,381 ---------- 19,107 ---------- AUTO MANUFACTURERS -- 0.5% 6,035 General Motors Corp. 8.375% 07/15/33(a).......................................... 5,164 ---------- AUTO PARTS AND EQUIPMENT -- 3.2% 4,310 ArvinMeritor, Inc. 8.750% 03/01/12............................................. 4,483 Collins & Aikman Products Co. 1,200 10.750% 12/31/11(a)......................................... 987 7,525 12.875% 08/15/12(a)(b)...................................... 3,386 2,080 Cooper-Standard Automotive, Inc. 7.000% 12/15/12(a)(b)....................................... 1,934 3,720 Dana Corp. 7.000% 03/01/29............................................. 3,267 Goodyear Tire & Rubber Co. 982 6.375% 03/15/08(a).......................................... 972 1,905 6.625% 12/01/06(a).......................................... 1,943 4,300 9.000% 03/31/06(l).......................................... 4,332 10,570 11.000% 03/01/11(a)(b)...................................... 11,759 1,970 Tenneco Automotive, Inc. 10.250% 07/15/13............................................ 2,197 ---------- 35,260 ---------- ENTERTAINMENT -- 1.2% 845 Isle of Capri Casinos, Inc. 9.000% 03/15/12............................................. 918 2,627 Jacobs Entertainment Co. 11.875% 02/01/09............................................ 2,863 2,080 LCE Acquisition Corp. 9.000% 08/01/14(b).......................................... 2,070 Six Flags, Inc. 4,070 9.625% 06/01/14............................................. 3,755 1,805 9.750% 04/15/13(a).......................................... 1,683 404 United Artists Theatre, Inc. 9.300% 07/01/15(d).......................................... 412 1,485 Warner Music Group 7.375% 04/15/14............................................. 1,530 ---------- 13,231 ---------- HOME FURNISHINGS -- 0.2% 2,400 Fedders North America, Inc. 9.875% 03/01/14............................................. 1,800 ---------- LODGING -- 1.1% 1,460 Gaylord Entertainment Co. 8.000% 11/15/13............................................. 1,511 ITT Corp. 3,230 7.375% 11/15/15............................................. 3,472 1,015 7.750% 11/15/25............................................. 1,045 720 Mandalay Resort Group 9.500% 08/01/08............................................. 787 310 Park Place Entertainment Corp. 9.375% 02/15/07............................................. 330
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 139 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- LODGING -- (CONTINUED) $ 5,260 Trump Atlantic City Associates 11.250% 05/01/06(e)......................................... $ 5,155 ---------- 12,300 ---------- RETAIL -- 0.9% 1,085 Blockbuster, Inc. 9.000% 09/01/12(b).......................................... 1,052 2,952 Jafra Cosmetics International Inc./Distribuidora Comerical Jaffra SA de CV 10.750% 05/15/11............................................ 3,395 3,900 Star Gas Partners LP/Star Gas Finance Co. 10.250% 02/15/13(a)......................................... 3,608 1,930 Toys R Us, Inc. 7.625% 08/01/11(a).......................................... 1,814 ---------- 9,869 ---------- TEXTILES -- 0.3% 3,340 INVISTA 9.250% 05/01/12(b).......................................... 3,674 ---------- 100,405 ---------- CONSUMER NON-CYCLICAL -- 8.3% AGRICULTURE -- 1.1% Commonwealth Brands, Inc. 6,135 9.750% 04/15/08(b).......................................... 6,565 3,685 10.625% 09/01/08(b)......................................... 3,943 1,290 Seminis Vegetable Seeds, Inc. 10.250% 10/01/13............................................ 1,522 ---------- 12,030 ---------- COMMERCIAL SERVICES -- 4.4% 2,570 American Color Graphics, Inc. 10.000% 06/15/10............................................ 1,671 3,565 Chemed Corp. 8.750% 02/24/11............................................. 3,877 2,140 Dollar Financial Group, Inc. 9.750% 11/15/11............................................. 2,279 2,295 Great Lakes Dredge & Dock Corp. 7.750% 12/15/13(a).......................................... 1,905 1,940 Jostens Corp. Series C 5.190% 10/04/11(l)................................. 1,970 4,745 Language Line, Inc. 11.125% 06/15/12............................................ 4,947 4,299 Phoenix Color Corp. 10.375% 02/01/09............................................ 3,955 Protection One Alarm Monitoring 7,010 7.375% 08/15/05............................................. 7,036 3,760 8.125% 01/15/09............................................. 3,610 8,560 Quintiles Transnational Corp. 10.000% 10/01/13............................................ 9,630 4,120 Vertis, Inc. 9.750% 04/01/09............................................. 4,305 2,380 Vertrue, Inc. 9.250% 04/01/14............................................. 2,451 ---------- 47,636 ---------- FOOD -- 1.1% EUR 7,895 Parmalat Finance Corp. BV 6.250% 02/07/05(e).......................................... 2,295
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- FOOD -- (CONTINUED) $ 4,355 Pinnacle Foods Holding Corp. 8.250% 12/01/13(a).......................................... $ 3,724 Swift & Co. 1,225 10.125% 10/01/09............................................ 1,344 4,305 12.500% 01/01/10............................................ 4,854 ---------- 12,217 ---------- HEALTHCARE SERVICES -- 1.3% 5,780 Ameripath, Inc. 10.500% 04/01/13............................................ 5,751 2,285 Columbia HCA 7.500% 11/15/95............................................. 2,192 HCA, Inc. 90 7.750% 07/15/36............................................. 93 4,075 8.360% 04/15/24............................................. 4,464 1,905 National Nephrology Associates, Inc. 9.000% 11/01/11(b).......................................... 2,112 ---------- 14,612 ---------- PHARMACEUTICALS -- 0.4% Warner Chilcott Corp. 2,075 8.750% 02/01/15(b).......................................... 2,086 1,365 Series B 5.584% 01/18/12(l)................................. 1,378 550 Series C 5.584% 01/18/12(l)................................. 555 254 Series D 5.584% 01/18/12(l)................................. 256 ---------- 4,275 ---------- 90,770 ---------- DIVERSIFIED -- 0.6% HOLDING COMPANIES DIVERSIFIED -- 0.6% 413 ESI Tractebel Acquisition Corp. 7.990% 12/30/11............................................. 438 7,340 Pharma Services Intermediate Holding Corp. 04/01/14(b)(f) (11.500% 04/01/09)........................................ 5,174 1,225 Stena AB 9.625% 12/01/12............................................. 1,357 ---------- 6,969 ---------- ENERGY -- 8.2% ENERGY -- ALTERNATE SOURCES -- 0.0% Salton SEA Funding 93 7.370% 05/30/05(d).......................................... 94 3 8.300% 05/30/11(d).......................................... 3 ---------- 97 ---------- OIL AND GAS -- 3.7% 11,830 El Paso Production Holding Co. 7.750% 06/01/13............................................. 11,979 2,730 Evergreen Resources, Inc. 5.875% 03/15/12............................................. 2,776 3,350 Forest Oil Corp. 8.000% 12/15/11............................................. 3,685 400 Hilcorp Energy LP/Hilcorp Finance Co. 10.500% 09/01/10(b)......................................... 444
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 140 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- OIL AND GAS -- (CONTINUED) Newfield Exploration Co. $ 390 7.625% 03/01/11............................................. $ 419 390 8.375% 08/15/12............................................. 421 Parker Drilling Co. 5,155 9.625% 10/01/13(a).......................................... 5,696 297 10.125% 11/15/09............................................ 312 1,960 Plains E&P Co. 8.750% 07/01/12............................................. 2,136 2,485 Pride International, Inc. 7.375% 07/15/14............................................. 2,634 495 Seitel, Inc. 11.750% 07/15/11............................................ 557 2,310 Venoco, Inc. 8.750% 12/15/11(b).......................................... 2,379 Vintage Petroleum, Inc. 1,695 7.875% 05/15/11............................................. 1,797 4,435 8.250% 05/01/12............................................. 4,801 ---------- 40,036 ---------- OIL AND GAS SERVICES -- 1.2% 1,640 Grant Prideco, Inc. > 9.625% 12/01/07............................................. 1,787 Petroleum Geo-Services ASA 3,546 8.000% 11/05/06(a).......................................... 3,621 6,240 10.000% 11/05/10............................................ 7,004 ---------- 12,412 ---------- PIPELINES -- 3.3% ANR Pipeline Co. 765 7.000% 06/01/25............................................. 760 5,140 9.625% 11/01/21............................................. 6,383 Dynegy Holdings, Inc. 2,155 9.160% 07/15/08(b)(h)....................................... 2,311 5,450 9.875% 07/15/10(b).......................................... 5,838 El Paso Corp. 1,280 6.950% 12/15/07............................................. 1,296 2,025 7.000% 05/15/11............................................. 1,944 1,600 7.800% 08/01/31............................................. 1,504 El Paso Natural Gas Co. 310 7.500% 11/15/26............................................. 320 5,240 7.625% 08/01/10............................................. 5,495 1,860 8.375% 06/15/32............................................. 2,044 1,385 Pacific Energy Partners LP/Pacific Energy Finance Corp. 7.125% 06/15/14............................................. 1,433 5,375 PG&E Gas Transmission 7.100% 06/01/05............................................. 5,407 1,315 Southern Natural Gas Co. 7.350% 02/15/31............................................. 1,343 ---------- 36,078 ---------- 88,623 ---------- FINANCIALS -- 8.6% BANKS -- 0.4% 3,965 Fremont General Corp. 7.875% 03/17/09............................................. 4,025 ----------
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 4.3% Alamosa Delaware, Inc. $ 3,334 11.000% 07/31/10............................................ $ 3,792 2,150 07/31/09(f) (12.000% 07/31/05)........................................ 2,338 6,185 AMR Real Estate 8.125% 06/01/12............................................. 6,401 Cedar Brakes LLC 2,265 8.500% 02/15/14(b).......................................... 2,632 5,388 9.875% 09/01/13(b).......................................... 6,445 General Motors Acceptance Corp. 2,000 8.000% 11/01/31............................................. 1,742 1,005 5.625% 05/15/09............................................. 917 5,345 6.750% 12/01/14(a).......................................... 4,617 LaBranche and Co., Inc. 3,910 11.000% 05/15/12............................................ 4,145 2,290 9.500% 05/15/09(a).......................................... 2,301 2,910 Rainbow National Services LLC 10.375% 09/01/14(b)......................................... 3,252 4,005 UCAR Finance, Inc. 10.250% 02/15/12............................................ 4,285 2,155 UGS Corp. 10.000% 06/01/12(b)......................................... 2,381 Vanguard Health Holding Co. LLC 455 9.000% 10/01/14............................................. 479 2,020 10/01/15 (11.250% 10/01/09)(f)....................................... 1,349 ---------- 47,076 ---------- INSURANCE -- 1.0% 5,775 Crum and Forster Holdings Corp. 10.375% 06/15/13............................................ 6,468 Fairfax Financial Holdings Ltd. 185 8.300% 04/15/26............................................. 168 3,590 7.750% 07/15/37............................................. 3,052 185 7.375% 04/15/18(a).......................................... 165 65 7.750% 04/26/12............................................. 63 Lumbermens Mutual Casualty 9,865 9.150% 07/01/26(b)(e)....................................... 299 180 8.300% 12/01/37(b)(e)....................................... 5 4,600 8.450% 12/01/97(b)(e)....................................... 139 510 Unum-Provident Corp. 6.750% 12/15/28............................................. 494 ---------- 10,853 ---------- REAL ESTATE -- 1.5% 2,730 Blum CB Corp. 11.250% 06/15/11............................................ 3,058 2,633 CB Richard Ellis Services, Inc. Escrow 9.750% 05/15/10............................................. 2,975 Riley Mezzanine Corp. 2,000 8.060% 02/03/08(l).......................................... 2,030 2,000 7.310% 02/03/08(l).......................................... 2,015
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 141 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- $ 6,575 LNR Property Corp. Series B 5.810% 02/03/08(d)(l)....................................... $ 6,649 ---------- 16,727 ---------- REAL ESTATE INVESTMENT TRUST (REITS) -- 1.4% 4,470 Crescent Real Estate Equites LP 9.250% 04/15/09............................................. 4,850 4,475 Omega Healthcare Investors, Inc. 7.000% 04/01/14............................................. 4,475 5,950 Trustreet Properties, Inc. 7.500% 04/01/15(b).......................................... 5,920 ---------- 15,245 ---------- 93,926 ---------- INDUSTRIALS -- 10.5% AEROSPACE AND DEFENSE -- 1.4% BE Aerospace, Inc. 7,360 8.875% 05/01/11(a).......................................... 7,452 980 8.000% 03/01/08(a).......................................... 973 520 8.500% 10/01/10............................................. 567 Sequa Corp. 2,635 9.000% 08/01/09............................................. 2,819 3,115 8.875% 04/01/08............................................. 3,271 ---------- 15,082 ---------- BUILDING MATERIALS -- 0.9% 4,465 Dayton Superior Corp. 10.750% 09/15/08............................................ 4,375 940 Goodman Global Holdings Co., Inc. 5.760% 06/15/12(b)(h)....................................... 931 2,421 Interline Brands, Inc. 11.500% 05/15/11............................................ 2,760 1,960 MMI Products, Inc. 11.250% 04/15/07............................................ 1,950 ---------- 10,016 ---------- ELECTRICAL COMPONENTS AND EQUIPMENT -- 0.4% 3,645 Rayovac Corp. 8.500% 10/01/13............................................. 3,754 ---------- ELECTRONICS -- 0.4% 2,275 Fisher Scientific International, Inc. 8.125% 05/01/12............................................. 2,468 2,175 Knowles Electronics Holdings, Inc. 13.125% 10/15/09............................................ 2,241 ---------- 4,709 ---------- ENGINEERING AND CONSTRUCTION -- 1.1% 3,280 J. Ray McDermott SA 11.000% 12/15/13(b)......................................... 3,673 4,960 Shaw Group, Inc. 10.750% 03/15/10(a)......................................... 5,382 2,398 URS Corp. 11.500% 09/15/09............................................ 2,734 ---------- 11,789 ----------
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- ENVIRONMENTAL CONTROL -- 0.5% $ 3,675 Geo Sub Corp. 11.000% 05/15/12............................................ $ 3,767 65 Marsulex, Inc. 9.625% 07/01/08............................................. 66 GBP 590 WRG Acquisitions PLC 8.489% 12/15/11(b)(h)....................................... 1,129 ---------- 4,962 ---------- HAND/MACHINE TOOLS -- 0.3% $ 2,725 Thermadyne Holdings Corp. 9.250% 02/01/14............................................. 2,616 ---------- MACHINERY -- CONSTRUCTION AND MINING -- 0.4% 4,365 JLG Industries, Inc. 8.250% 05/01/08............................................. 4,627 ---------- METAL FABRICATE/HARDWARE -- 0.3% 3,305 Mueller Group, Inc. 10.000% 05/01/12(a)......................................... 3,569 ---------- MISCELLANEOUS MANUFACTURING -- 0.6% 7,165 Mark IV Industries, Inc. 7.500% 09/01/07............................................. 6,914 ---------- PACKAGING AND CONTAINERS -- 3.6% Crown Europe Holdings SA 6,750 9.500% 03/01/11............................................. 7,408 5,285 10.875% 03/01/13............................................ 6,131 Graham Packaging, Series C 1,000 7.313% 04/07/12(l).......................................... 1,030 Owens-Brockway Glass Container, Inc. 5,440 8.750% 11/15/12............................................. 5,943 2,080 7.750% 05/15/11............................................. 2,179 3,675 8.875% 02/15/09............................................. 3,923 Owens-Illinois, Inc. 6,480 8.100% 05/15/07(a).......................................... 6,707 2,605 7.800% 05/15/18............................................. 2,651 3,365 Tekni-Plex, Inc. 8.750% 11/15/13(a)(b)....................................... 3,188 ---------- 39,160 ---------- TRANSPORTATION -- 0.4% TFM SA de CV 2,770 12.500% 06/15/12............................................ 3,158 1,315 11.750% 06/15/09(f)......................................... 1,315 ---------- 4,473 ---------- TRUCKING AND LEASING -- 0.2% 2,450 Interpool, Inc. 6.000% 09/01/14............................................. 2,285 ---------- 113,956 ---------- TECHNOLOGY -- 1.6% COMPUTERS -- 0.3% 1,780 Activant Solutions, Inc. 9.090% 04/01/10(a)(b)(h).................................... 1,815
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 142 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- COMPUTERS -- (CONTINUED) $ 670 Electronic Data Systems Corp. 7.125% 10/15/09(a).......................................... $ 720 1,350 Stratus Technologies, Inc. 10.375% 12/01/08............................................ 1,337 ---------- 3,872 ---------- SEMICONDUCTORS -- 0.6% Amkor Technology, Inc. 390 7.125% 03/15/11(a).......................................... 329 485 7.750% 05/15/13(a).......................................... 407 MagnaChip Semiconductor SA/ MagnaChip Semiconductor Finance Co. 2,275 6.260% 12/15/11(b)(h)....................................... 2,332 3,190 8.000% 12/15/14(a)(b)....................................... 3,262 ---------- 6,330 ---------- SOFTWARE -- 0.7% 6,995 IPC Acquisition Corp. 11.500% 12/15/09............................................ 7,694 ---------- 17,896 ---------- UTILITIES -- 6.3% ELECTRIC -- 6.3% AES Corp. 6,930 9.000% 05/15/15(b).......................................... 7,623 4,975 7.750% 03/01/14............................................. 5,137 AES Eastern Energy LP 4,711 9.000% 01/02/17............................................. 5,418 1,175 9.670% 01/02/29............................................. 1,481 14,565 Calpine Canada 8.500% 05/01/08(a).......................................... 10,341 Calpine Corp. 13,717 8.500% 07/15/10(a)(b)....................................... 10,768 1,890 8.750% 07/15/07(a).......................................... 1,474 760 7.625% 04/15/06(a).......................................... 737 1,370 7.750% 04/15/09(a).......................................... 945 Mirant Americas Generation LLC 2,526 07/17/05(e)(l)(g)........................................... 2,028 1,400 4.816% 01/15/04(e)(l)....................................... 1,019 2,185 8.300% 05/01/11(e).......................................... 2,436 2,390 9.125% 05/01/31(e).......................................... 2,599 1,670 8.500% 10/01/21(e).......................................... 1,766 6,131 NRG Energy, Inc. 8.000% 12/15/13(b).......................................... 6,484 1,645 Reliant Energy, Inc. 9.250% 07/15/10............................................. 1,760 1,632 Southern California Edison Co. 8.000% 02/15/07............................................. 1,738 3,228 Tiverton Power Associates/Rumford Power Associates 9.000% 07/15/18(b).......................................... 2,421 Western Resources 375 7.125% 08/01/09............................................. 405 1,770 7.875% 05/01/07............................................. 1,891 ---------- 68,471 ---------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost $821,887)............................................. 867,339 ---------- SHARES VALUE (000) (000) - ----------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 7.3% 78,955 Nations Cash Reserves, Capital Class Shares(i)................ $ 78,955 ---------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost $78,955).............................................. 78,955 ---------- PAR (000) - ---------- CONVERTIBLE BONDS -- 4.8% COMMUNICATIONS -- 1.8% MEDIA -- 0.0% $ 1,125 Adelphia Communications Corp. 6.000% 02/15/06(e).......................................... 79 ---------- INTERNET -- 0.3% 3,897 At Home Corp. 4.750% 12/15/06(e).......................................... 545 2,565 RiverStone Networks, Inc. 3.750% 12/01/06(b)(e)....................................... 2,360 ---------- 2,905 ---------- TELECOMMUNICATIONS -- 1.5% 8,335 Ciena Corp. 3.750% 02/01/08(a).......................................... 7,116 9,840 Nortel Networks Corp. 4.250% 09/01/08............................................. 9,102 ---------- 16,218 ---------- 19,202 ---------- CONSUMER CYCLICAL -- 0.1% AIRLINES -- 0.1% 2,885 Delta Air Lines, Inc. 8.000% 06/03/23............................................. 1,168 ---------- CONSUMER NON-CYCLICAL -- 1.8% HEALTHCARE SERVICES -- 1.5% 14,960 Laboratory Corp. of America Holdings 09/11/21(g)................................................. 11,220 Lincare Holdings, Inc. 1,420 3.000% 06/15/33............................................. 1,489 3,500 3.000% 06/15/33............................................. 3,671 ---------- 16,380 ---------- BIOTECHNOLOGY -- 0.3% 5,255 Amgen, Inc. 03/01/32(g)................................................. 3,823 ---------- 20,203 ---------- FINANCIALS -- 0.4% INSURANCE -- 0.1% 900 Loews Corp. 3.125% 09/15/07............................................. 907 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 143 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ----------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% $ 3,510 Providian Financial Corp. 3.250% 08/15/05............................................. $ 3,505 ---------- 4,412 ---------- TECHNOLOGY -- 0.6% SEMICONDUCTORS -- 0.5% 5,000 Amkor Technology, Inc. 5.750% 06/01/06(a).......................................... 4,738 790 LSI Logic Corp. 4.000% 11/01/06(a).......................................... 779 ---------- 5,517 ---------- COMPUTERS -- 0.1% 685 Electronic Data Systems Corp. 3.875% 07/15/23............................................. 676 ---------- 6,193 ---------- UTILITIES -- 0.1% ELECTRIC -- 0.1% 1,497 Caithness Coso Funding Corp. 9.050% 12/15/09............................................. 1,602 ---------- TOTAL CONVERTIBLE BONDS (Cost $52,647).............................................. 52,780 ---------- SHARES (000) - ---------- PREFERRED STOCKS -- 2.1% COMMUNICATIONS -- 0.8% MEDIA -- 0.5% --(j) Paxson Communications Corp.(c)................................ 707 217 Quadramed Corp.(b)(d)......................................... 3,905 --(j) Ziff Davis Holdings, Inc.(d).................................. 227 ---------- 4,839 ---------- TELECOMMUNICATIONS -- 0.3% 30 Neon Communications(d)(m)..................................... 337 61 Haights Cross Communications, Inc.(d)(m)...................... 3,386 ---------- 3,723 ---------- 8,562 ---------- FINANCIALS -- 1.3% INSURANCE -- 0.1% 69 Conseco, Inc. ................................................ 1,826 ---------- REAL ESTATE INVESTMENT TRUST (REITS) -- 1.2% 84 Sovereign Real Estate Investment Corp.(b)..................... 12,882 ---------- 14,708 ---------- TOTAL PREFERRED STOCKS (Cost $22,481).............................................. 23,270 ---------- COMMON STOCKS -- 1.6% BASIC MATERIALS -- 0.0% FOREST PRODUCTS AND PAPER -- 0.0% 115 Abitibi-Consolidated, Inc. ................................... 534 ----------
SHARES VALUE (000) (000) - ----------------------------------------------------------------------------------------- COMMUNICATIONS -- 0.7% INTERNET -- 0.1% 139 Globix Corp.(d)............................................... $ 515 ---------- MEDIA -- 0.5% 631 UnitedGlobalCom, Inc., Class A................................ 5,972 ---------- TELECOMMUNICATIONS -- 0.1% 7 ICO Global Communications Holding Ltd.(d)..................... 22 426 Neon Communications(a)(d)(m).................................. 532 8 Remote Dynamics, Inc. ........................................ 8 40 US Unwired, Inc. ............................................. 168 ---------- 730 ---------- 7,217 ---------- CONSUMER CYCLICAL -- 0.5% AUTO COMPONENTS -- 0.5% 357 Goodyear Tire & Rubber Co.(a)................................. 4,771 ---------- HEALTH CARE -- 0.0% HEALTH CARE PROVIDERS AND SERVICES -- 0.0% --(j) Fountain View, Inc.(d)(m)..................................... 2 ---------- INDUSTRIALS -- 0.3% HAND/MACHINE TOOLS -- 0.2% 158 Thermadyne Holdings Corp.(d)(l)............................... 1,929 ---------- METAL FABRICATE/HARDWARE -- 0.1% 711 ACP Holding Co.(d)............................................ 1,441 ---------- 3,370 ---------- TECHNOLOGY -- 0.1% SOFTWARE -- 0.1% 474 Quadramed Corp.(d)............................................ 740 ---------- TOTAL COMMON STOCKS (Cost $12,171).............................................. 16,634 ---------- PAR (000) - ---------- ASSET-BACKED SECURITIES -- 0.6% $ 6,756 Gilroy Receivable Asset Trust 10.000% 09/30/14(d)(l)...................................... 6,757 GT Telecom Racers Trust 583 Series A(g) 06/30/08(m)..................................... 0 417 Series B(g) 06/30/08(m)..................................... 0 ---------- TOTAL ASSET-BACKED SECURITIES (Cost $7,241)............................................... 6,757 ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 144 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
UNITS VALUE (000) (000) - ----------------------------------------------------------------------------------------- WARRANTS -- 0.1% BASIC MATERIALS -- 0.1% FOREST PRODUCTS AND PAPER -- 0.1% 730 Neenah Expires 09/30/13(d)(k)...................................... $ 1,479 ---------- COMMUNICATIONS -- 0.0% MEDIA -- 0.0% 1 ONO Finance PLC Expires 03/16/11(b)(d)(k)(m)................................ 0 78 Ziff Davis Media, Inc. Series E Expires 08/12/12(b)(k)...................................... 8 ---------- 8 ---------- TELECOMMUNICATIONS -- 0.0% 1 Colo.Com, Inc. Expires 03/15/10(b)(k)(m)................................... 0 2 ICO Global Communications Expires 05/16/06(k)......................................... 0 276 Neon Communications Expires 12/02/12(a)(d)(k)(m)................................ 3 180 Neon Communications Expires 12/02/12(d)(k)(m)................................... 2 --(j) UbiquiTel, Inc. Expires 04/15/10(d)(k)...................................... 0 45 Haights Cross Communications, Inc. Expires 12/10/11(d)(k)(m)................................... 0 --(j) Haights Cross Communications, Inc. Series A Expires 12/10/11(d)(k)(m)................................... 0 ---------- 5 ---------- 13 ---------- INDUSTRIALS -- 0.0% HAND/MACHINE TOOLS -- 0.0% --(j) Thermadyne Holdings Corp. Expires 05/23/06(d)(k)(m)................................... 0 ---------- TOTAL WARRANTS (Cost $460)................................................. 1,492 ---------- REPURCHASE AGREEMENTS(n) -- 12.3% 36,649 Repurchase agreement with ABN AMRO, Inc. dated 03/31/05, due 04/01/05 at 2.830%, collateralized by U.S. Government Agency securities with various maturities to 05/15/29, market value $36,998 (repurchase proceeds $36,652)....................... 36,652
UNITS VALUE (000) (000) - ----------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS(N) -- (CONTINUED) 43,979 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.840%, collateralized by U.S. Government Agency securities with various maturities to 05/20/33, market value $44,557 (repurchase proceeds $43,983).................................................... $ 43,983 53,914 Repurchase agreement with Wachovia Capital Markets dated 03/31/05, due 04/01/05 at 2.920%, collateralized by U.S. Government Agency securities with various maturities to 03/01/35, market value $54,764 (repurchase proceeds $53,918).................................................... 53,918 ---------- TOTAL REPURCHASE AGREEMENTS (Cost of $134,553).......................................... 134,553 ---------- TOTAL INVESTMENTS (Cost $1,130,395)(o).............................. 108.4% 1,181,780 ---------- OTHER ASSETS AND LIABILITIES (NET)................................. (8.4)% (91,765) ------- ---------- NET ASSETS.......................................... 100.0% 1,090,015 ==========
- --------------- Notes to Investment Portfolio: (a) All or a portion of this security was on loan at March 31, 2005. The aggregate cost and market value of securities on loan at March 31, 2005 is $130,562 and $127,153, respectively. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $207,714, which represents 19.1% of net assets. (c) Pay-in-kind securities. (d) Restricted and illiquid security. (e) The issuer is in default of certain debt covenants. Income is not being accrued. As of March 31, 2005, the value of these securities represents 3.9% of net assets. (f) Step bond. (g) Zero coupon bond. (h) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (i) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (j) Amount represents less than 500 shares. (k) Non-income producing security. (l) Loan participation agreement. (m) Fair valued security. (n) This amount represents cash collateral received from securities lending activity (see Note 10). (o) Cost for federal income tax purposes is $1,132,926. See Note 4 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 145 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 ACRONYMS: EUR -- Euro Currency CAD -- Canadian Dollar GBP -- Great Britain Pound
At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------------------------------------------------------ Communications............................. 21.5 Repurchase Agreements...................... 12.3 Industrials................................ 10.8 Financials................................. 10.3 Consumer Non-Cyclical...................... 10.1 Consumer Cyclical.......................... 9.7 Basic Materials............................ 8.3 Energy..................................... 8.2 Investment Management Company.............. 7.3 Utilities.................................. 6.4 Technology................................. 2.3 Asset-Back Securities...................... 0.6 Diversified................................ 0.6 Health Care................................ --(a) Other Assets & Liabilities, Net............ (8.4) ----- 100.0 =====
(a)Less than 0.1%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 146 [This page intentionally left blank] 147 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
INTERMEDIATE HIGH YIELD BOND BOND MASTER MASTER PORTFOLIO PORTFOLIO --------------------------------- (IN THOUSANDS) ASSETS: Non-affiliated investments, at cost......................... $ 660,483 $ 916,887 Repurchase agreements....................................... 121,676 134,553 Affiliated investments, at cost............................. 4,816 78,955 -------------- -------------- Non-affiliated investments, at value........................ 656,195 968,272 Repurchase agreements....................................... 121,676 134,553 Affiliated investments, at value............................ 4,816 78,955 Cash........................................................ -- 793 Foreign cash................................................ -- --(a) Receivable for investment securities sold................... 27,744 25,029 Interest receivable......................................... 7,154 20,680 Net unrealized appreciation on foreign forward currency contracts................................................. -- 183 Receivable for variation margin............................. 14 -- -------------- -------------- Total assets............................................ 817,599 1,228,465 -------------- -------------- LIABILITIES: Collateral on securities loaned............................. (121,676) (134,553) Investment advisory fee payable............................. (228) (552) Administration fee payable.................................. -- (49) Due to custodian............................................ (9,095) -- Net unrealized depreciation on foreign forward currency contracts................................................. -- (117) Payable for investment securities purchased................. (37,352) (3,100) Accrued Trustees' fees and expenses......................... (43) (45) Accrued expenses and other liabilities...................... (26) (34) -------------- -------------- Total liabilities....................................... (168,420) (138,450) -------------- -------------- NET ASSETS.................................................. $ 649,179 $ 1,090,015 ============== ==============
(a) Amount represents less than $500. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 148 [This page intentionally left blank] 149 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF OPERATIONS For the year ended March 31, 2005
INTERMEDIATE HIGH YIELD BOND BOND MASTER MASTER PORTFOLIO PORTFOLIO --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 25,962 $ 88,244 Dividends (Net of foreign withholding taxes of $0 and $1, respectively)............................................. -- 767 Dividend income from affiliated funds....................... 235 2,096 Securities lending.......................................... 71 478 -------------- -------------- Total investment income................................. 26,268 91,585 -------------- -------------- EXPENSES: Investment advisory fee..................................... 2,745 6,294 Administration fee.......................................... 281 576 Custodian fees.............................................. 50 88 Legal and audit fees........................................ 33 33 Trustees' fees and expenses................................. 21 21 Other....................................................... 27 35 -------------- -------------- Total expenses.......................................... 3,157 7,047 Fees reduced by credits allowed by the custodian (see Note 3)........................................................ (5) (7) Fees waived by administrator (see Note 3)................... (281) -- -------------- -------------- Net expenses............................................ 2,871 7,040 -------------- -------------- NET INVESTMENT INCOME....................................... 23,397 84,545 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... (1,396) 50,827 Swap contracts............................................ 69 -- Futures................................................... (624) -- Written options........................................... 7 -- Foreign currency and other net assets..................... -- 234 -------------- -------------- Net realized gain/(loss) on investments..................... (1,944) 51,061 -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities................................................ (25,159) (47,685) Swap contracts............................................ (67) -- Futures................................................... (624) -- Foreign currency and other net assets..................... -- 53 -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... (25,850) (47,632) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (27,794) 3,429 -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (4,397) $ 87,974 ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 150 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE BOND MASTER HIGH YIELD BOND MASTER PORTFOLIO PORTFOLIO --------------------------------- -------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/05 3/31/04 3/31/05 3/31/04 ---------------------------------------------------------------------- (IN THOUSANDS) Net investment income............................... $ 23,397 $ 23,684 $ 84,545 $ 89,077 Net realized gain/(loss) on investments............. (1,944) 16,276 51,061 45,456 Net change in unrealized appreciation/(depreciation) of investments.................................... (25,850) (5,781) (47,632) 106,780 -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations........................................ (4,397) 34,179 87,974 241,313 Contributions....................................... 111,455 162,098 405,297 1,083,816 Withdrawals......................................... (207,111) (232,258) (651,619) (772,416) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets............... (100,053) (35,981) (158,348) 552,713 NET ASSETS: Beginning of year................................... 749,232 785,213 1,248,363 695,650 -------------- -------------- -------------- -------------- End of year......................................... $ 649,179 $ 749,232 $ 1,090,015 $ 1,248,363 ============== ============== ============== ==============
FINANCIAL HIGHLIGHTS
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF OPERATING NET INVESTMENT OPERATING EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO TOTAL AVERAGE NET AVERAGE NET TURNOVER AVERAGE RETURN ASSETS ASSETS RATE NET ASSETS ------------------------------------------------------------------------- INTERMEDIATE BOND MASTER PORTFOLIO: Year ended 3/31/2005............................ (0.51)% 0.42%(a) 3.39% 49% 0.46%(a) Year ended 3/31/2004............................ 4.66 0.46(a)(b) 3.10 200 0.47(a) Year ended 3/31/2003............................ 10.85 0.47(a)(b) 3.70 122 0.47(a) Year ended 3/31/2002............................ 4.33 0.49(a)(b) 5.24 228 0.49(a) Year ended 3/31/2001............................ --(c) 0.45(a) 6.61 118 0.46(a) HIGH YIELD BOND MASTER PORTFOLIO: Year ended 3/31/2005............................ 7.99% 0.61%(a) 7.33% 33% 0.61%(a) Year ended 3/31/2004............................ 25.53 0.61(a) 7.85 51 0.61(a) Year ended 3/31/2003............................ 6.47 0.62(a) 9.76 50 0.62(a) Year ended 3/31/2002............................ 6.33 0.65(a)(b) 9.93 64 0.65(a) Year ended 3/31/2001............................ --(c) 0.71 11.14 63 0.72
- --------------- (a)The effect of the custodial expense offset (See Note 3) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b)The effect of interest expense on the operating expense ratio was less than 0.01%. (c)Total return not required for periods indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 151 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS Nations Master Investment Trust (the "Master Trust") is registered under the Investment Company Act of 1940, as amended (the March 31, 2005, the Master Trust offered twelve separate portfolios. These financial statements pertain only to the following portfolios (each a "Master Portfolio" and collectively, the "Master Portfolios"): Intermediate Bond Master Portfolio High Yield Bond Master Portfolio Financial statements for the other portfolios of the Master Trust are presented under separate cover. The following investors were invested in the Master Portfolios at March 31, 2005: INTERMEDIATE BOND MASTER PORTFOLIO: Nations Intermediate Bond Fund.............................. 96.7% Nations Intermediate Bond Fund (Offshore)................... 3.3% HIGH YIELD BOND MASTER PORTFOLIO: Nations High Yield Bond Fund................................ 94.0% Nations High Yield Bond Fund (Offshore)..................... 6.0%
Certain Master Portfolios invest in securities of foreign issuers. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Master Portfolios to meet their obligations may be affected by economic and political developments in a specific country, industry or region. The High Yield Bond Master Portfolio principally invests in high yield securities (sometimes called "junk bonds"), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay a premium -- a high interest rate or yield -- because of the increased risk of loss. These securities can also be subject to greater price volatility. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolios in the preparation of their financial statements. Securities valuation: Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Certain debt security prices provided by the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities on comparable securities. Certain securities may be valued based upon quotes provided by one or more principal market makers. Securities, including options and futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on Nasdaq are generally valued at the Nasdaq official closing price. Securities which are primarily traded on foreign securities exchanges are generally valued at the last available sale price on their respective exchanges where primarily traded. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. Futures contracts: The Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio may invest in futures contracts for the purposes of hedging against changes in values of the Portfolio's securities or changes in the prevailing levels of interest rates or currency exchange rates or to enhance the portfolio's return. Upon entering into a futures contract, a Master Portfolio is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation 152 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) margin") are made or received by a Master Portfolio each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Intermediate Bond Master Portfolio may purchase and write call and put options on securities, futures and swap contracts ("swaptions"). A Master Portfolio may use such options on futures contracts in connection with its hedging strategies and for the purpose of yield enhancement in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures. The Master Portfolio may write covered call options and put options on securities in which it is permitted to invest from time to time in seeking to attain the Master Portfolio's objective. Call options written by a Master Portfolio give the holder the right to buy the underlying securities from the Master Portfolio at a stated exercise price; put options give the holder the right to sell the underlying security to the Master Portfolio at a stated price. In the case of put options, a Master Portfolio is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Master Portfolio may also write combinations of covered puts and calls on the same underlying security. When the Portfolio purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Portfolio writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Master Portfolio typically receives a premium from writing a put or call option, which would increase the Master Portfolio's return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Master Portfolio limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Master Portfolio assumes the risk that it may be required to purchase the underlying security. The Master Portfolio may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Master Portfolio will realize a profit or loss from such transaction in which it purchases an option having the same terms as the option written. The Master Portfolio will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Master Portfolio. Foreign currency transactions: The books and records of the Master Portfolios are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. London time by a pricing service. Purchases and sales of investment securities and 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 securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of a Master Portfolio and the amounts actually received. The effects of changes in foreign currency exchange rates on securities are not separately identified 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 securities. 153 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) Forward foreign currency transactions: Generally, a Master Portfolio may enter into forward currency exchange contracts only under two circumstances: (i) when a Master Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency to "lock in" the U.S. exchange rate of the transaction, with such period being a short-dated contract covering the period between transaction date and settlement date; or (ii) when the investment advisor or sub-advisor believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by a Master Portfolio as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or offset. Forward foreign currency contracts will be used primarily to protect the Master Portfolios from adverse currency movements and will generally not be entered into for terms greater than one year. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of a Master Portfolio's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency 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 Master Portfolios could be exposed to risks if counterparties to the contracts are unable to meet the terms of their contracts. The counterparty risk exposure is, therefore, closely monitored and contracts are only executed with high credit quality financial institutions. Swaps: The Master Portfolios may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with their investment objective and policies to obtain a desired return at a lower cost than if the Master Portfolios had invested directly in the asset that yielded the desired return. Swaps involve the exchange by the Master Portfolios with another party of their respective commitments to pay or receive interest, effective return, or total return throughout the lives of the agreements. The interest to be paid or received on swaps is included in net realized gain/(loss) on investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statements of assets and liabilities. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Master Portfolio's basis in the swap and the proceeds from (or cost of) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. If there is a default by the counterparty to a swap contract, a Master Portfolio will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Master Portfolio will succeed in pursuing contractual remedies. A Master Portfolio thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The creditworthiness of the swap contract counterparties is closely monitored in order to minimize this risk. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. Repurchase agreements: Each Master Portfolio may engage in repurchase transactions with institutions that the Fund's investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period which the Funds seek to assert their rights. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Master Portfolio enters into such transactions, it is required to have segregated assets with a current value at least equal to the 154 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. Loan Participations and Commitments: The High Yield Bond Master Portfolio may invest in loan participations, loan commitments and bridge loans. Loan commitments, loan participations and bridge loans are agreements to make money available to a broker in a specific amount at a specific time. As a result, the Master Portfolio assumes the credit risk of the Borrower, the Selling Participant and any other persons interpositioned between the Master Portfolio and the Borrower ("Intermediate Participants"). Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Each investor in the portfolio is treated as an owner of its proportionate share of the net assets, income, expenses, realized and unrealized gains and losses of the portfolio. Federal income taxes: The Master Portfolios are treated as partnerships for federal income tax purposes and therefore are not subject to federal income tax. Each investor in the Master Portfolios will be subject to taxation on its allocated share of the Master Portfolio's ordinary income and capital gains. Expenses: General expenses of the Master Trust are allocated to the Master Portfolios based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Master Portfolio are charged to such Master Portfolio. Indemnification: In the normal course of business, each Master Portfolio enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Master Portfolio's maximum exposure under these arrangements is unknown, as this would involve future claims against the Fund that have not yet occurred. Also, under the Trust's organizational documents, the Trustees and Officers of the Trust are indemnified against certain liabilities that may arise out of their duties to the Trust. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be minimal. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS The Master Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Master Portfolios. Effective December 1, 2004, BACAP 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 Master Portfolio:
FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE NET ASSETS NET ASSETS NET ASSETS NET ASSETS NET ASSETS FIRST $500 MILLION TO $1 BILLION TO $1.5 BILLION TO $3 BILLION TO $500 MILLION $1 BILLION $1.5 BILLION $3 BILLION $6 BILLION ------------------------------------------------------------------------------------------------ Intermediate Bond Master 0.40% 0.35% 0.32% 0.29% 0.28% Portfolio.............. High Yield Bond Master 0.55% 0.52% 0.49% 0.46% 0.46% Portfolio.............. FEES ON AVERAGE NET ASSETS OVER $6 BILLION --------------- Intermediate Bond Master 0.27% Portfolio.............. High Yield Bond Master 0.46% Portfolio..............
Prior to December 1, 2004, BACAP received a monthly investment advisory fee based on the average daily net assets of each of the Portfolios at the following annual rates:
ANNUAL RATE ----------- Intermediate Bond Master Portfolio.......................... 0.40% High Yield Bond Master Portfolio............................ 0.55%
155 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the year ended March 31, 2005, the effective investment advisory fee rates for the Intermediate Bond and High Yield Bond Master Portfolios were 0.40% and 0.55%, respectively. The Master Trust has, on behalf of the High Yield Bond Master Portfolio, entered into a sub-advisory agreement with BACAP and MacKay Shields LLC ("MacKay Shields"). Pursuant to the sub-advisory agreement, MacKay Shields is entitled to receive a sub-advisory fee from BACAP based on the Master Portfolio's average daily net assets at the following annual rates:
AVERAGE DAILY NET ASSETS ANNUAL RATE - ------------------------------------------------------------------------- First $100 million.......................................... 0.400% Next $100 million........................................... 0.375% Over $200 million........................................... 0.350%
BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of the Master Trust. Effective December 1, 2004, BACAP Distributors is entitled to receive a fee, computed daily and paid monthly, at the annual rate of 0.05% of the High Yield Bond Master Portfolio's average daily net assets. BACAP Distributors does not receive a fee from the Intermediate Bond Portfolio for its administrative services. Prior to December 1, 2004, BACAP Distributors was entitled to receive an administration fee at the annual rate of 0.05% of the Intermediate Bond and High Yield Bond Master Portfolios' average daily net assets. BACAP Distributors waived all of it administration fees for the Intermediate Bond Master Portfolio. For the year ended March 31, 2005, the effective administration fee rates for the Intermediate Bond and High Yield Bond Master Portfolios were 0.04% and 0.05%, respectively. The Bank of New York ("BNY") serves as sub-administrator of the Master Trust pursuant to an agreement with BACAP Distributors. BNY serves as the custodian of the Master Trust's assets. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from the Master Trust for serving as a Trustee or Officer of the Master Trust. The Master Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Master Portfolios' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, a portfolio of Nations Funds Trust, another registered investment company advised by BACAP. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities. The Master Portfolios have made daily investments of cash balances in the Nations Cash Reserves, a portfolio of Nations Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Master Portfolio from such investments is included in its Statement of operations as "Dividend income from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in the Nations Cash Reserves in addition to the advisory and administration fees earned by BACAP and BACAP Distributors from the Master Portfolios. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADVISORY FEES ADMINISTRATION FEES (EARNED BY (EARNED BY BACAP) BACAP DISTRIBUTORS) (000) (000) --------------------------------------- Intermediate Bond Master Portfolio.......................... $ 19 $10 High Yield Bond Master Portfolio............................ 133 68
156 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. TOTAL OPERATING EXPENSE LIMITATIONS Each Master Portfolio has an agreement with BNY under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Master Portfolios could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if they had not entered into such an agreement. 4. FEDERAL TAX INFORMATION Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET REALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION)* (000) (000) (000) ----------------------------------------------- Intermediate Bond Master Portfolio.......................... $ -- $(4,357) $(4,357) High Yield Bond Master Portfolio............................ 48,854 -- 48,854
- --------------- *The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to deferral of losses from wash sales, income on defaulted securities and the realization for tax-purposes of unrealized gains/losses on certain forward foreign currency and futures contracts. 5. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005 were as follows:
PURCHASES SALES (000) (000) ---------------------- Intermediate Bond Master Portfolio.......................... $ 148,190 $ 175,824 High Yield Bond Master Portfolio............................ 345,658 618,022
The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2005 were as follows:
PURCHASES SALES (000) (000) --------------------- Intermediate Bond Master Portfolio.......................... $ 183,894 $222,445 High Yield Master Portfolio................................. -- --
6. FUTURES CONTRACTS At March 31, 2005, the Intermediate Bond Master Portfolio had the following futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- U.S. 10 year Treasury Note Futures (short position) expiring June 2005(a).............................................. 27 $2,975 $2,950 (25) ---- Total net unrealized appreciation......................... $(25) ====
- --------------- (a)Securities have been segregated as collateral for the Master Portfolio's open futures contracts. 157 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. WRITTEN OPTIONS Written options for the Intermediate Bond Master Portfolio for the year ended March 31, 2005 aggregated the following:
PREMIUM NUMBER OF RECEIVED SUMMARY OF WRITTEN OPTIONS CONTRACTS* (000) - ------------------------------------------------------------------------------------ Outstanding at March 31, 2004............................... -- $-- Contracts opened............................................ 2 7 Contracts closed............................................ -- -- Contracts expired........................................... (2) (7) -- --- Outstanding at March 31, 2005............................... -- -- == ===
- --------------- *1 contract = $1,000,000 notional amount. 8. FORWARD FOREIGN CURRENCY CONTRACTS At March 31, 2005, the following Funds had forward foreign currency contracts outstanding:
VALUE OF VALUE OF CONTRACT WHEN CONTRACT WHEN MARKET VALUE UNREALIZED OPENED OPENED OF CONTRACT APPRECIATION/ (LOCAL CURRENCY) (US DOLLARS) (US DOLLARS) (DEPRECIATION) DESCRIPTION LOCAL CURRENCY (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- HIGH YIELD BOND MASTER CONTRACTS TO BUY Expiring April 7, 2005...... Euro 1,087 1,428 1,413 (15) --- Net unrealized depreciation.............. (15) --- CONTRACTS TO SELL Expiring April 7, 2005...... Canadian Dollar (4,959) (4,010) (4,098) (88) Expiring April 7, 2005...... Euro (10,229) (13,478) (13,295) 183 Expiring April 7, 2005...... British Pound Sterling (601) (1,121) (1,135) (14) --- Net unrealized appreciation.............. 81 --- Total net unrealized appreciation.............. 66 ===
9. LINE OF CREDIT The Master Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Master Portfolio maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Master Portfolios had no borrowings outstanding at March 31, 2005. During the year ended March 31, 2005, borrowings by the Master Portfolios under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST FUND (000) RATE - -------------------------------------------------------------------------------------- High Yield Bond Master Portfolio............................ $71 1.49%
- --------------- *The average amount outstanding was based on daily balances in the period over 365 days. 158 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. SECURITIES LENDING Under an agreement with BNY, the Funds may lend their securities to certain approved brokers, dealers and other financial institutions. Each loan is collateralized by cash, in an amount at least equal to the market value of the securities loaned plus accrued income from the investment of the collateral. The cash collateral received is invested in repurchase agreements. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to the borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of borrower default, the Fund has the right to use the collateral to offset any losses incurred. In the event the Fund is delayed or prevented from exercising its right to dispose of the collateral, there may be a potential loss to the Fund. The Fund bears the risk of loss with respect to the investment of collateral. The income earned by each Fund from securities lending is included in its Statement of operations. At March 31, 2005, the following Master Portfolios had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL (000) (000) ---------------------------------- Intermediate Bond Master Portfolio.......................... $109,999 $121,676 High Yield Bond Master Portfolio............................ 127,153 134,553
11. RESTRICTED SECURITIES A restricted security is a security which has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933. The Master Portfolios do not have the right to demand that such securities be registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. The following securities are considered restricted as to resale at March 31, 2005 for the Intermediate Bond and High Yield Bond Master Portfolios. Intermediate Bond Master Portfolio
ACQUISITION MARKET VALUE PERCENTAGE COST 3/31/05 OF NET SECURITY ACQUISITION DATE (000) (000) ASSETS - ------------------------------------------------------------------------------------------------------------------------- Vendee Mortgage Trust, Series 1998-1, Class 2, Interest Only 0.448% 09/15/27........................................... 05/18/98 281 $ 141 0.02% Vendee Mortgage Trust, Series 1998-3, Class 1, Interest Only 0.305% 03/15/29........................................... 09/16/98 186 122 0.02
High Yield Bond Master Portfolio
ACQUISITION MARKET VALUE PERCENTAGE ACQUISITION COST 3/31/05 OF NET SECURITY DATE (000) (000) ASSETS - ------------------------------------------------------------------------------------------------------------------------- ACP Holding Co., Common Stock............................... 10/17/03-11/6/03 185 1,441 0.13 Fountain View, Inc., Common Stock........................... 09/03/03 --* 2 --** Gilroy Receivable Asset Trust............................... 10/20/03 6,745 6,756 0.62 Globix Corp. ............................................... 10/14/02-05/1/04 348 414 0.04 Globix Corp., Common Stock.................................. 10/14/02-03/8/05 268 515 0.05 Haights Cross Communications, Inc., Warrants................ 01/15/04 --* --* --** Haights Cross Communications, Inc., Preferred Stock......... 01/15/04 2,838 3,386 0.31 Haights Cross Communications, Inc., Preferred Warrants...... 01/15/04 -- -- --** ICO Global Communications Holdings, Inc., Common Stock...... 03/16/00 61 22 --** LNR Property Corp. ......................................... 12/22/04 6,575 6,649 0.61 Neenah, Warrants............................................ 10/17/03 730 1,479 0.14 Neon Communications, Inc., Warrants......................... 09/11/03 244 3 --** Neon Communications, Inc., Preferred Stock.................. 12/04/02 338 337 0.03 Neon Communications, Inc., Common Stock..................... 09/11/03-03/28/05 246 532 0.05 Neon Communications, Inc., Preferred Warrants............... 01/03/03 180 2 --** ONO Finance, Warrant........................................ 07/18/01 181 --* --** Quadramed Corp., Common Stock............................... 04/26/04 541 740 0.07
159 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ACQUISITION MARKET VALUE PERCENTAGE ACQUISITION COST 3/31/05 OF NET SECURITY DATE (000) (000) ASSETS - ------------------------------------------------------------------------------------------------------------------------- Quadramed Corp., Preferred.................................. 06/16/04 5,423 3,905 0.36 Salton SEA Funding.......................................... 01/22/01 87 94 0.01 Salton SEA Funding.......................................... 02/7/05 3 3 --** Thermadyne Holdings Corp., Common Stock..................... 09/25/03 1,822 1,929 0.18 Thermadyne Holdings Corp., Warrants......................... 03/01/01-09/25/03 --* --* --** UbiquiTel, Inc., Warrants................................... 07/10/00 10 --* --** United Artists Theatre Circuit, Inc. ....................... 11/27/00-04/20/01 321 412 0.04 Ziff Davis Holdings, Inc. .................................. 12/06/02 --* 227 0.02
- --------------- *Amount represents less than $500. **Amount represents less than 0.1%. 12. COMMITMENTS AND CONTINGENCIES As of March 31, 2005, the High Yield Bond Master Portfolio had unfunded loan commitments pursuant to the following loan agreements:
UNFUNDED COMMITMENT BORROWER (000) - ------------------------------------------------------------------------ Foster Wheeler LLC.......................................... $ 7,350 Mirant Revolving Credit Corp. .............................. 876 Movie Gallery, Inc. ........................................ 2,190 Satbirds Capital Participations, S.C.A. .................... 6,411 Telecordia Technologies, Inc. .............................. 3,000 Warner Chilcott Company, Inc. .............................. 331 ------- Total....................................................... $20,158 =======
13. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by 160 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. The Master Portfolios are not currently named as defendants in the MDL. The Master Portfolios can not predict if they will be added as parties to the MDL, and if they are added, whether the litigation will have any impact on them. 161 NATIONS MASTER INVESTMENT TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS MASTER INVESTMENT TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Intermediate Bond Master Portfolio and Nations High Yield Bond Master Portfolio (constituting part of Nations Master Investment Trust, hereafter referred to as the "Portfolios") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 162 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director -- Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
163 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
164 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 165 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS: (UNAUDITED) Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Boards of Trustees (the "Boards") of Nations Funds Trust and Nations Master Investment Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory and sub-advisory agreements and are not "interested persons" of the Trusts, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory and sub-advisory agreements and approve any newly proposed terms therein. In this regard, the Boards reviewed and re-approved, during the most recent six months covered by this report: (i) investment advisory agreements with Banc of America Capital Management, LLC ("BACAP") for Nations Short-Term Income Fund, Nations Short-Intermediate Government Fund, Nations Government Securities Fund, Nations Intermediate Bond Master Portfolio, Nations Bond Fund, Nations Strategic Income Fund and Nations High Yield Bond Master Portfolio; and (ii) an investment sub-advisory agreement with MacKay Shields LLC ("MacKay Shields" or the "Sub-Adviser") for Nations High Yield Bond Master Portfolio. The investment advisory agreements with BACAP and the investment sub-advisory agreement with MacKay Shields are each referred to as an "Advisory Agreement" and collectively referred to as the "Advisory Agreements." The funds and master portfolios identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at meetings held on November 17-18, 2004, the Boards, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the Sub-Adviser and the re-approval of the Advisory Agreements. Nature, Extent and Quality of Services The Boards received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP and the Sub-Adviser under the Advisory Agreements. The most recent investment adviser registration forms ("Forms ADV") for BACAP and the Sub-Adviser were provided to the Boards, as were responses of BACAP and the Sub-Adviser to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Boards reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by, investment personnel of BACAP and the Sub-Adviser. In this regard, the Boards specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Boards received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds, BACAP and the Sub-Adviser. The Boards considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Boards also considered the Funds' Chief Compliance Officer's report and recommendations. The Boards evaluated the ability of BACAP and the Sub-Adviser, including their respective resources, reputations and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Boards considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Boards considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Boards concluded that they were generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP and the Sub-Adviser. Fund Performance and Expenses The Boards considered the one-year, three-year, five-year and ten-year performance results for each of the Funds, as relevant. They also considered these results in comparison to the performance results of the group of funds that was 166 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED) (CONTINUED) determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain Funds, Lipper determined that the composition of the Universe for performance would differ from that of expenses to provide a more accurate basis of comparison. The Boards were provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. The Boards also considered information in the Lipper data that ranked each Fund based on: (i) each Fund's one-year performance compared to actual management fees; (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Boards of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Boards (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Boards considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Boards also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Boards noted that the performance of the Funds, except Nations Strategic Income Fund, was better than, or not substantially below, each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Nations Funds Trust Board noted that Nations Strategic Income Fund required additional review as a result of its 5th quintile performance against its Universe in the three-year period. In addition, the Board noted that the Fund underwent a management change on October 13, 2004 and that under its previous manager, the Fund was underweighted in the high yield and non-U.S. sectors, as well as in foreign currency exposure relative to its multi-sector peers. The Board also noted that the new management had begun repositioning the Fund within prospectus guidelines to more closely resemble its multi-sector peers. In addition, the Board considered that total expenses for the Fund were in the 1st quintile of its Peer Group. The Boards received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. They also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. The Boards noted that the overall expense ratios of the Funds were lower than, or not appreciably above, each Fund's Peer Group's median total expense ratio and did not require significant additional consideration by the Boards. Management also discussed the Lipper data and rankings, and other relevant information, for each Fund. Based on the above-referenced considerations and other factors, the Boards concluded that the overall performance and expense results supported the re-approval of the Advisory Agreements for each Fund. Investment Advisory and Sub-Advisory Fee Rates The Boards reviewed and considered the proposed contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). The Boards also reviewed and considered the proposed contractual investment sub-advisory fee rate (the "Sub-Advisory Agreement Rate") payable by BACAP to the Sub-Adviser for investment sub-advisory services. In addition, the Boards reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net 167 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED) (CONTINUED) Advisory Rates"). The Boards noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain of its affiliates relating to trading in mutual fund shares. At the November meetings, the Boards also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Boards also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. Additionally, the Boards received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Boards concluded that the respective Net Advisory Rates for the Funds, except Nations High Yield Bond Master Portfolio, were lower than, or not appreciably higher than, the median rates of each Fund's Peer Group and did not warrant significant additional consideration. The Nations Master Investment Trust Board noted that the Advisory Agreement Rate and Net Advisory Rate for Nations High Yield Bond Master Portfolio required additional review as they were appreciably above the median rates of the Fund's Peer Group with a 5th quintile rating in contractual and actual management fees. However, the Board considered that the total expense ratio for the Fund was consistent with that of the other funds in its Peer Group and within a reasonable range of the median overall expense ratio for its Peer Group. In addition, the Board considered that the Fund held the top performance ranking in its Peer Group for the one- and three-year periods. The Board concluded that these and other factors supported the Advisory Agreement Rates and the Net Advisory Rates, and approved the Advisory Agreements for all of the Funds. With regard to the Nations High Yield Bond Master Portfolio, the Nations Master Investment Trust Board also reviewed the Sub-Advisory Agreement Rate charged by MacKay Shields, which serves as Sub-Adviser to the Nations High Yield Bond Master Portfolio. The Board concluded that the Sub-Advisory Agreement Rate was fair and equitable, based on its consideration of the factors described above. Profitability The Boards received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates. The Boards concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. The Nations Master Investment Trust Board received and considered consolidated financial statements regarding the profitability of MacKay Shields based on the Sub-Advisory Fee Rate, as well as on other relationships between the Fund and MacKay Shields and its affiliates. The Board observed the costs of providing portfolio management and other services to the Fund. The Board also noted that the sub-advisory fees are paid to MacKay Shields by BACAP and not directly by the Fund, and that the Board separately determined that the Advisory Agreement Rate for the Fund was fair and equitable. Based on these factors, the Board concluded that the profits and other ancillary benefits that MacKay Shields and its affiliates received with regard to providing these services to the Funds were not unreasonable. Economies of Scale The Boards received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Boards concluded that any actual or potential economies of scale are, or will be, shared fairly with Fund shareholders, most particularly through the newly-approved Advisory Agreement Rate breakpoints effective December 1, 2004. 168 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED) (CONTINUED) The Nations Funds Trust Board did not approve such breakpoints for Nations Short-Term Income Fund. However, the Board considered the Advisory Agreement Rate of the Fund and concluded that the fees were fair and equitable based on relevant factors, including the Fund's performance results. The Nations Master Investment Trust Board did not receive information regarding any economies of scale of unaffiliated sub-advisers given that the sub-advisory fees are paid to the Sub-Adviser by BACAP and not directly by the Funds, and that the Board separately determined that the Advisory Agreement Rate for the sub-advised Fund was fair and equitable. It also noted that shareholders would receive benefits from any economies of scale through breakpoints in the Advisory Agreement Rates (except for Nations Short-Term Income Fund, whose Advisory Agreement Rate did not offer breakpoints). The Boards acknowledged the inherent limitations of any analysis of an investment adviser's economies of scale and of any attempt to correlate breakpoints with such economies, stemming largely from the Boards' understanding that economies of scale are realized, if at all, by an investment adviser across a variety of products and services, not just with respect to a single fund. Information About Services to Other Clients The Boards also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP and the Sub-Adviser to their other clients, including other registered investment companies and institutional investors. The Boards concluded that the Advisory Agreement Rates, the Sub-Advisory Agreement Rate and the Net Advisory Rates were within a reasonable range of the fee rates offered to other BACAP and Sub-Adviser clients. Where rates offered to other clients of BACAP were appreciably lower, the Boards concluded, based on information provided by BACAP, that the costs associated with managing and operating a registered open-end fund, compared with an institutional investor account, provided a justification for the higher fee rates charged to the Funds. Other Benefits to BACAP and the Sub-Adviser The Boards received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates and the Sub-Adviser as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP and the Sub-Adviser with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP and the Sub-Adviser as a result of their relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates or the Sub-Adviser and its affiliates). The Boards also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, including whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Boards also reviewed the respective policies of BACAP and the Sub-Adviser regarding the allocation of portfolio investment opportunities among the Funds and other clients. Other Factors and Broader Review The Boards also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Boards noted that the Funds in the Nations Funds complex are generally utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. As discussed above, the Boards review detailed materials received from BACAP and the Sub-Adviser annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Boards also regularly review and assess the quality of the services that the Funds receive throughout the year. In this regard, the Boards review reports of BACAP and the Sub-Adviser at least in each of their quarterly meetings, which include, among other things, a detailed portfolio review 169 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED) (CONTINUED) and detailed fund performance reports. In addition, the Boards interview the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and their evaluation of the information provided to them, the Boards concluded that re-approval of the Advisory Agreements for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Boards unanimously re-approved the Advisory Agreements. 170 NATIONS FUNDS SHAREHOLDER MEETING RESULTS (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - ------------------------------------------------------------------------------------------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
SHAREHOLDER MEETING RESULTS (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Master Investment Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 996,970,350 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - ------------------------------------------------------------------------------------------- Edward J. Boudreau, Jr. .................................... 911,066,248 4,746,035 William P. Carmichael....................................... 911,023,809 4,788,474 William A. Hawkins.......................................... 911,084,335 4,727,928 R. Glenn Hilliard........................................... 911,060,388 4,751,895 Minor M. Shaw............................................... 911,038,474 4,773,809
171 THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF BANC OF AMERICA CAPITAL MANAGEMENT INTERNATIONAL/ GLOBAL WITHIN EACH CATEGORY, FUNDS THE FUNDS ARE LISTED FROM AGGRESSIVE TO CONSERVATIVE. EQUITY Nations Marsico FUNDS International FIXED Opportunities Fund INCOME FUNDS GROWTH FUNDS Nations International MONEY Equity Fund MARKET Nations Small FUNDS TAXABLE Company Fund Nations International INCOME FUNDS Value Fund Nations Marsico Nations Cash Nations High Yield 21st Century Fund Nations Global Reserves Bond Fund Value Fund Nations MidCap Nations Money Nations Strategic Growth Fund Market Reserves Income Fund Nations Marsico LOWER RISK/REWARD POTENTIAL Nations Government Nations Bond Fund Focused Equities Reserves Fund Nations Intermediate Nations Treasury Bond Fund Nations Marsico Reserves Growth Fund Nations Government Nations Tax-Exempt Securities Fund Reserves BLEND FUNDS SPECIALTY FUNDS Nations Short- Nations Municipal Intermediate Nations Asset Reserves Government Fund Allocation Fund INDEX FUNDS Nations California Nations Short-Term Nations Strategic Nations SmallCap Index Fund Tax-Exempt Reserves Income Fund Growth Fund Nations MidCap Index Fund Nations New York Tax-Exempt Reserves TAX-EXEMPT VALUE FUNDS Nations LargeCap Index Fund INCOME FUNDS Nations SmallCap Nations LargeCap Enhanced Nations Municipal Value Fund Core Fund Income Fund Nations MidCap Nations State-Specific Value Fund ASSET ALLOCATION Long-Term Municipal PORTFOLIOS Bond Funds (CA, FL) Nations Value Fund Nations LifeGoal Nations Intermediate Growth Portfolio Municipal Bond Fund Nations LifeGoal Balanced Nations State-Specific Growth Portfolio Intermediate Municipal Bond Funds (CA, FL, Nations LifeGoal Income and GA, KS, MD, NC, SC, Growth Portfolio TN, TX, VA) Nations LifeGoal Nations Short-Term Income Portfolio Municipal Income Fund OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/053V-0405 (05/05) 05/5866
Nations LifeGoal(R) Growth Portfolio Nations LifeGoal(R) Balanced Growth Portfolio Nations LifeGoal(R) Income Nations LifeGoal(R) Portfolios and Growth Portfolio Annual report for the year ended Nations LifeGoal(R) March 31, 2005 Income Portfolio [NATIONS FUNDS LOGO] A description of the policies and procedures that each portfolio uses to determine how to vote proxies and a copy of the portfolio's voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how the portfolio voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the portfolio voted proxies relating to portfolio securities is also available from the portfolio's website. Each portfolio files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The portfolio's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment advisor to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENT'S LETTER [CHRISTOPHER WILSON PHOTO] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to help maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have also reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the better has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS DISCLOSURE OF FUND EXPENSES AND PORTFOLIO HOLDINGS Nations LifeGoal Growth Portfolio 3 Nations LifeGoal Balanced Growth Portfolio 10 Nations LifeGoal Income and Growth Portfolio 18 Nations LifeGoal Income Portfolio 26 FINANCIAL STATEMENTS Investment Portfolios 33 Statements of assets and liabilities 37 Statements of operations 38 Statements of changes in net assets 40 Schedules of capital stock activity 42 Financial highlights 46 Notes to financial statements 54 Report of independent registered public accounting firm 61 Tax information 62 Fund governance 63 Board consideration and approval of investment advisory agreements 66 Shareholder meeting results 70
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. NATIONS LIFEGOAL GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE MEMBERS OF THE PORTFOLIO MANAGEMENT TEAM SHARE THEIR VIEWS ON NATIONS LIFEGOAL GROWTH PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks capital appreciation through exposure to a variety of equity market segments. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations LifeGoal Growth Portfolio Investor A Shares provided shareholders with a total return of 8.76%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. The portfolio's primary objective is long-term capital appreciation. It invests in a diversified selection of other Nations Funds equity mutual funds in seeking to provide exposure to various domestic and international equity market segments. The portfolio's management team seeks total return advantages through the strong performance of individual Nations Funds portfolios relative to their benchmarks. The team seeks additional performance enhancement through active allocation, emphasizing the funds and asset classes it believes can offer the most attractive attributes given the current investment environment. HOW DID THE PORTFOLIO PERFORM DURING THE LAST 12 MONTHS? For the 12-month period ended March 31, 2005, Nations LifeGoal Growth Portfolio (Investor A Shares) returned 8.76%. The portfolio outpaced the performance of its benchmark, the S&P 500 Index, which returned 6.69% during the period.*** *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total return would have been lower. ***The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. INVESTMENTS IN SMALL- AND MID-CAP STOCKS MAY PRESENT SPECIAL RISKS. THEY TEND TO BE MORE VOLATILE AND MAY BE LESS LIQUID THAN THE STOCKS OF LARGER COMPANIES. SMALL-CAP STOCKS OFTEN HAVE NARROWER MARKETS, LIMITED FINANCIAL RESOURCES AND TEND TO BE MORE THINLY TRADED THAN STOCKS OF LARGER COMPANIES. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. SOME OF THE COUNTRIES THE UNDERLYING FUNDS INVEST IN ARE CONSIDERED EMERGING ECONOMIES, WHICH MEANS THERE MAY BE GREATER RISKS ASSOCIATED WITH INVESTING THERE THAN IN MORE DEVELOPED COUNTRIES. IN ADDITION, CONCENTRATION OF INVESTMENTS IN A SINGLE REGION MAY RESULT IN GREATER VOLATILITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 NATIONS LIFEGOAL GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) International stocks, as measured by the MSCI EAFE Index, posted a return of 15.06%.+ An overweight position in international stock funds helped the portfolio's relative performance. The portfolio's allocation in small- and mid-capitalization stock funds also contributed positively to performance. In the US, small- and mid-cap stocks led market performance. Both asset classes outpaced the returns of large-cap stocks. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE REPORTING PERIOD? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the US, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. The MSCI World Index, an unmanaged index measuring the performance of both US and foreign stock markets in developed countries, returned 10.56%++. Japan's economy grew by an estimated 4.0%. Eurozone countries -- those countries whose common currency is now the euro -- continued to struggle with growth below 2.0%. Emerging market countries reported significantly higher economic growth than developed economies. China's economic growth remained robust despite efforts to slow it down. Official estimates place China's economic growth at 9.5% for 2004. South Korea's economy has apparently benefited from China's growth, as China has become its biggest trading partner. South Korea's estimated growth was 4.6% for 2004. DESCRIBE THE ASSET ALLOCATION PROCESS. The portfolio's allocation to large-capitalization domestic stock funds is targeted to fall between 30% and 70% of its assets. Allocations to small- and mid- capitalization domestic stock funds range from 5% to 20% and 10% to 30%, respectively. For added growth potential, the portfolio may invest between 10% and 30% of its assets in international stock funds. The portfolio may also invest up to 20% in convertible securities funds. The long-term allocation of Nations LifeGoal Growth Portfolio seeks to maximize the potential return for the amount of expected risk or volatility. When the portfolio management team believes certain asset classes, or segments within an asset class, become substantially mispriced relative to historical patterns, we reallocate the portfolio to try to avoid some of the increased risk or to take advantage of the increased opportunity. +The MSCI EAFE Index (Europe, Australasia, Far East) measures developed market equity performance, excluding the US and Canada. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. ++The MSCI World Index comprises securities listed on exchanges in major European and Asian countries, Australia and the US. It includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and is not available for investment. Source for all statistical data -- Banc of America Capital Management, LLC. 4 NATIONS LIFEGOAL GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) HOW WAS THE PORTFOLIO ALLOCATED AT THE BEGINNING OF THE REPORTING PERIOD AND WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET ALLOCATION DURING THE PERIOD?+++ At the beginning of this period, the portfolio was positioned to benefit from expanding global growth. We significantly increased the portfolio's weight in funds focused on international equities. We also believed that domestic large-cap companies would benefit from this global expansion because these companies have greater exposure to foreign markets. As a result, we also increased considerably the weight in funds focused on domestic large-cap equities. Our strategy was rewarded. Near the end of the period, we rebalanced the portfolio. Although we reduced the portfolio's exposure to both international equities and domestic large-caps, they still remain overweighted positions within the portfolio. WHICH ASSET ALLOCATION DECISIONS HELPED OR HURT PORTFOLIO PERFORMANCE? The portfolio's performance was helped by increasing its exposure to international stock funds. We are pleased to report that all of the portfolio's underlying funds posted positive returns this period. HOW HAVE YOU POSITIONED THE PORTFOLIO TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? We believe that the global economy will continue to grow, although we think there may be a slowing in the growth of corporate profits. We believe that large-cap and international stocks will continue to be good performers within this economic environment. We plan to maintain the portfolio's overweighted positions in large-cap domestic stock funds and international stock funds. --------------------------------------------- Vikram Kuriyan has co-managed Nations LifeGoal Growth Portfolio since August 2004. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. Michael Welhoelter has co-managed Nations LifeGoal Growth Portfolio since August 2004. Mr. Welhoelter is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. +++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 5 NATIONS LIFEGOAL GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,101.47 1,023.68 1.31 1.26 0.25 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,100.32 1,022.44 2.62 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,095.59 1,018.70 6.53 6.29 1.25 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,096.14 1,018.70 6.53 6.29 1.25
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. 6 NATIONS LIFEGOAL GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 7 NATIONS LIFEGOAL GROWTH PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF TOTAL INVESTMENTS AS OF 3/31/05) [PIE CHART] 13.9% International equity funds 86.1% Domestic equity funds
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 8 NATIONS LIFEGOAL GROWTH PORTFOLIO PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS LIFEGOAL GROWTH LIPPER LARGE-CAP CORE PORTFOLIO S&P 500 INDEX FUNDS AVERAGE ---------------- ------------- --------------------- Oct. 15 1996 9425.00 10000.00 10000.00 1997 9609.00 10875.00 10394.00 12473.00 16095.00 13330.00 1999 12831.00 19066.00 16709.00 17023.00 22487.00 20159.00 2001 14214.00 17612.00 16147.00 14646.00 17654.00 15887.00 2003 10738.00 13283.00 11836.00 15518.00 17948.00 15583.00 Mar. 31 2005 16885.00 19149.00 16211.00
[INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS LIFEGOAL GROWTH LIPPER LARGE-CAP CORE PORTFOLIO S&P 500 INDEX FUNDS AVERAGE ---------------- ------------- --------------------- Oct. 15 1996 10000.00 10000.00 10000.00 1997 10195.00 10875.00 10394.00 13234.00 16095.00 13330.00 1999 13614.00 19066.00 16709.00 18062.00 22487.00 20159.00 2001 15081.00 17612.00 16147.00 15540.00 17654.00 15887.00 2003 11393.00 13283.00 11836.00 16465.00 17948.00 15583.00 Mar. 31 2005 17909.00 19149.00 16211.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/15/96 through 3/31/05) 7.13% 6.39%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LifeGoal Growth Portfolio from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. Funds in the Lipper Large-Cap Core Funds Average invest at least 75% of their equity assets in large capitalization companies that typically have average price-to-earnings and price-to-book ratios compared to the S&P 500 Index. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Nations LifeGoal Growth Portfolio's Primary A, Investor A and Investor C Shares commenced investment operations on October 2, 1996. Shares were offered to the public on October 15, 1996. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/15/96 10/15/96 8/12/97 10/15/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 9.07% 8.76% 2.49% 7.95% 2.95% 8.00% 7.00% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.10% 4.84% 2.80% 4.04% 3.11% 4.07% 4.07% 5 YEARS 0.02% -0.17% -1.34% -0.94% -1.26% -0.95% -0.95% SINCE INCEPTION 7.32% 7.13% 6.39% 4.43% 4.43% 6.36% 6.36%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 9 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE MEMBERS OF THE PORTFOLIO MANAGEMENT TEAM SHARE THEIR VIEWS ON NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks total return through a balanced portfolio of equity and fixed-income securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations LifeGoal Balanced Growth Portfolio Investor A Shares provided shareholders with a total return of 5.75%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. The portfolio's primary objective is total return performance. It invests in a diversified selection of other Nations Funds equity and fixed-income mutual funds in seeking to provide exposure to various domestic and international market segments. The portfolio's management team seeks total return advantages through the strong performance of the individual Nations Funds portfolios relative to their benchmarks. The team seeks additional performance enhancement through active allocation, emphasizing the funds and asset classes it believes can offer the most attractive attributes given the current investment environment. HOW DID THE PORTFOLIO PERFORM DURING THE LAST 12 MONTHS? During the 12-month period ended March 31, 2005, Nations LifeGoal Balanced Growth Portfolio (Investor A Shares) returned 5.75%. That compares with a 6.69% return for the S&P 500 Index*** and a 1.15% return for the Lehman Brothers U.S. *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. INVESTMENTS IN SMALL- AND MID-CAP STOCKS MAY PRESENT SPECIAL RISKS. THEY TEND TO BE MORE VOLATILE AND MAY BE LESS LIQUID THAN THE STOCKS OF LARGER COMPANIES. SMALL-CAP STOCKS OFTEN HAVE NARROWER MARKETS, LIMITED FINANCIAL RESOURCES AND TEND TO BE MORE THINLY TRADED THAN STOCKS OF LARGER COMPANIES. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 10 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) Aggregate Bond Index.+ The MSCI EAFE Index returned 15.06% for the same period.++ In the US, equities outpaced fixed-income securities during the period. International stocks, as measured by the MSCI EAFE Index, outperformed both US equity and fixed income markets. An overweight position in equity funds relative to fixed income, as well as an overweight position in international stock funds, benefited relative performance of the portfolio. Relative performance was also helped by the portfolio's underlying small- and mid-cap stock funds and the performance of its high-yield bond fund. High-yield bonds led market performance within the fixed-income universe. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE REPORTING PERIOD? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the US, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. The MSCI World Index, an unmanaged index measuring the performance of both US and foreign stock markets in developed countries, returned 10.56%.+++ Japan's economy grew by an estimated 4.0%. Eurozone countries -- those countries whose common currency is now the euro -- continued to struggle with growth below 2.0%. Emerging market countries reported significantly higher economic growth than developed economies. China's economic growth remained robust despite efforts to slow it down. Official estimates place China's economic growth at 9.5% for 2004. South Korea's economy has apparently benefited from China's growth, as China has become its biggest trading partner. South Korea's estimated growth was 4.6% for 2004. The US bond market managed to deliver a positive return, despite rising interest rates. In June 2004, the Federal Reserve (the Fed) made the first of seven increases to the federal funds rate -- a key short term interest rate. By March 31, 2005, the federal funds rate had been raised 1.75 percentage points to 2.75%.++++ High-yield bonds led the fixed-income markets, as a stronger economy resulted in improved credit ratings, stronger balance sheets and higher profits for many companies. +The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index of US government agency and US Treasury securities, investment grade corporate bonds, and asset- and mortgage-backed securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ++The MSCI EAFE Index (Europe, Australasia, Far East) measures developed market equity performance, excluding the US and Canada. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. +++The MSCI World Index comprises securities listed on exchanges in major European and Asian countries, Australia and the US. It includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and is not available for investment. ++++On May 3, 2005, the federal funds rate was increased to 3.00%. 11 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) DESCRIBE THE ASSET ALLOCATION PROCESS. Generally, the portfolio's overall asset allocation to domestic stock funds is targeted to fall between 40% and 70% and is globally diversified across style and market capitalization. Bond allocations are generally intended to fall between 35% and 60% with a bias to high quality securities. The long-term allocation of Nations LifeGoal Balanced Growth Portfolio seeks to maximize the potential return for the amount of expected risk or volatility. When the portfolio management team believes certain asset classes, or segments within an asset class, become substantially mispriced relative to historical patterns, we reallocate the portfolio to try to avoid some of the increased risk or to take advantage of the increased opportunity. HOW WAS THE PORTFOLIO ALLOCATED AT THE BEGINNING OF THE REPORTING PERIOD AND WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET ALLOCATION DURING THE PERIOD?+++++ Our strategy for the equity portion of the portfolio was two-pronged. We increased the portfolio's overall exposure to equity funds while reducing the position of fixed income funds. We believed that in the US equities would outperform fixed-income securities because of strong economic growth and rising interest rates. Since we also believed that the outlook for global economic growth funds was favorable, we decided to increase the portfolio's exposure to international stock funds. We also increased our investments in large-cap domestic stock funds because we believed that large-cap companies were in a position to benefit from a strengthening global economy. During the period, our strategy was rewarded. Since we expected the Fed to begin raising short-term interest rates (which it did in June 2004), we kept a focus on short-term bond funds. We believed that short-term bonds would be affected less by rising interest rates than longer-term bond funds. Long-term bonds tend to be more sensitive to changes in interest rates, and we reduced our position in funds that invest in long-term bonds. However, yields rose, prices fell on short- to intermediate-maturity bonds and, contrary to historical precedent, long-term bond yields fell and their prices rose. As a result, our emphasis on short-term bonds detracted from the portfolio's performance. WHICH ASSET ALLOCATION DECISIONS HELPED OR HURT PORTFOLIO PERFORMANCE? The portfolio's performance was helped by increasing its exposure to equity stock funds. An overweight position in international stock funds also benefited relative performance. We were disappointed by the weak performance of our short-term bond investments. These funds posted a low return for the period, which hindered the portfolio's overall performance. HOW HAVE YOU POSITIONED THE PORTFOLIO TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? We believe that the global economy will continue to grow, although we think there may be a slowing in the growth of corporate profits. We also believe that equities are likely to continue to outperform fixed income securities. Within this economic +++++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 12 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) environment, we plan to maintain the portfolio's overall overweight position in equity stock funds compared to its underlying fixed-income funds and an overweight position in international stock funds. --------------------------------------------- Vikram Kuriyan has co-managed Nations LifeGoal Balanced Growth Portfolio since August 2004. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. Michael Welhoelter has co-managed Nations LifeGoal Balanced Growth Portfolio since August 2004. Mr. Welhoelter is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 13 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,062.63 1,023.68 1.29 1.26 0.25 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,061.13 1,022.44 2.57 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,057.69 1,018.70 6.41 6.29 1.25 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,058.04 1,018.70 6.41 6.29 1.25
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. 14 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 15 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF TOTAL INVESTMENTS AS OF 3/31/05) [PIE CHART] 9.9% International equity funds 35.1% Fixed income funds 55.0% Domestic equity funds
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 16 NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS LIFEGOAL BALANCED GROWTH LEHMAN BROTHERS U.S. LIPPER BALANCED FUNDS PORTFOLIO AGGREGATE BOND INDEX S&P 500 INDEX AVERAGE ---------------- -------------------- ------------- --------------------- Oct. 15 1996 9425 10000 10000 10000 1997 9506 10145 10875 10346 11575 10361 16095 12351 1999 12088 12099 19066 14012 14268 12325 22487 15217 2001 13896 13869 17612 14304 14524 14611 17654 14551 2003 12524 16319 13283 12638 16231 17201 17948 15668 Mar. 31 2005 17170 17397 19149 16343
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS LIFEGOAL BALANCED GROWTH LEHMAN BROTHERS U.S. LIPPER BALANCED FUNDS PORTFOLIO AGGREGATE BOND INDEX S&P 500 INDEX AVERAGE ---------------- -------------------- ------------- --------------------- Oct. 15 1996 10000 10000 10000 10000 1997 10086 10145 10875 10346 12281 11361 16095 12351 1999 12826 12099 19066 14012 15139 12325 22487 15217 2001 14743 13869 17612 14304 15410 14611 17654 14551 2003 13288 16319 13283 12638 17221 17201 17948 15668 Mar. 31 2005 18212 17397 19149 16343
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/15/96 through 3/31/05) 7.35% 6.60%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LifeGoal Balanced Growth Portfolio from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. The Lehman Brothers U.S. Aggregate Bond Index, is an unmanaged index of US government agency and US Treasury securities, corporate bonds and mortgage-backed securities. Funds in the Lipper Balanced Funds Average have a primary objective of conserving principal by maintaining, at all times, a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Nations LifeGoal Balanced Growth Portfolio's Primary A, Investor A and Investor C Shares commenced investment operations on October 2, 1996. Shares were offered to the public on October 15, 1996. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/15/96 10/15/96 8/13/97 10/15/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 6.02% 5.75% -0.30% 4.94% -0.06% 4.99% 3.99% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 6.02% 5.73% 3.65% 4.96% 4.05% 4.96% 4.96% 5 YEARS 4.01% 3.77% 2.55% 2.98% 2.63% 2.97% 2.97% SINCE INCEPTION 7.57% 7.35% 6.60% 5.87% 5.87% 6.70% 6.70%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 17 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE MEMBERS OF THE PORTFOLIO MANAGEMENT TEAM SHARE THEIR VIEWS ON NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks current income and modest growth to protect against inflation and to preserve purchasing power. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations LifeGoal Income and Growth Portfolio Investor A Shares provided shareholders with a total return of 3.05%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. The portfolio's primary objective is to seek current income and modest growth to protect against inflation and to preserve purchasing power. It invests in a diversified selection of other Nations Funds fixed-income and equity mutual funds in seeking to provide exposure to various domestic and international market segments. The portfolio's management team seeks current income and modest growth through the superior performance of the individual Nations Funds portfolios relative to their benchmarks. The team seeks additional performance enhancement through active allocation, emphasizing the funds and asset classes they believe can offer the most attractive attributes given the current investment environment. HOW DID THE PORTFOLIO PERFORM DURING THE LAST 12 MONTHS? For the 12-month period that ended March 31, Nations LifeGoal Income and Growth Portfolio (Investor A Shares) returned 3.05%. The broad-based S&P 500 *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. Had all sales charges been considered, the total return would have been lower. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. INVESTMENTS IN SMALL- AND MID-CAP STOCKS MAY PRESENT SPECIAL RISKS. THEY TEND TO BE MORE VOLATILE AND MAY BE LESS LIQUID THAN THE STOCKS OF LARGER COMPANIES. SMALL-CAP STOCKS OFTEN HAVE NARROWER MARKETS, LIMITED FINANCIAL RESOURCES AND TEND TO BE MORE THINLY TRADED THAN STOCKS OF LARGER COMPANIES. INTERNATIONAL INVESTING MAY INVOLVE CERTAIN RISKS, INCLUDING FOREIGN TAXATION, CURRENCY FLUCTUATIONS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 18 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) Index returned 6.69%.*** The MSCI EAFE Index+ and the Lehman Brothers U.S. Aggregate Bond Index++ returned 15.06% and 1.15%, respectively. In the equity portion of the portfolio, relative performance was helped by a 6% allocation in international equity funds. During the period, international stocks outperformed all classes of domestic equities. At the beginning of the period, the portfolio had a 4% allocation in small-cap stock funds. These holdings also performed well. In the United States, small-cap stocks led market performance during the period. By the end of the period, we reduced the small-cap allocation to 3%. In the fixed-income portion, a 7% allocation in high-yield bond funds benefited portfolio performance. High-yield securities led performance in the fixed-income market. At the beginning of the period, we allocated 4% to convertible securities funds. These holdings performed well. A convertible security has characteristics of both a bond and a stock. Although it is traded like a bond, it can be converted into common stock. Since we did not believe that potential reward outweighed risk, by the end of the period we reduced this allocation to 1%. The portfolio's 42% position in short-term bond funds hurt performance, given the relatively weak performance of short-term bonds. We reduced this allocation to 34% by the end of the period. Also, during the period, we increased the portfolio's allocation to long-term bond funds from 15% to 22%. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE REPORTING PERIOD? Domestic and foreign economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the US, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. The MSCI World Index, an unmanaged index measuring the performance of both US and foreign stock markets in developed countries, returned 10.56%.+++ Japan's economy grew by an estimated 4.0%. Eurozone countries -- those countries whose common currency is now the euro -- continued to struggle with growth below 2.0%. Emerging market countries reported significantly higher economic growth than developed economies. China's economic growth remained robust despite ***The S&P 500 Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +The MSCI EAFE Index (Europe, Australasia, Far East) measures developed market equity performance, excluding the US and Canada. The index includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and unavailable for investment. ++The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index of US government agency and US Treasury securities, investment grade corporate bonds, and asset- and mortgage-backed securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +++The MSCI World Index comprises securities listed on exchanges in major European and Asian countries, Australia and the US. It includes dividends and distributions, but does not reflect fees, brokerage commissions or other expenses of investing. It is unmanaged and is not available for investment. 19 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) efforts to slow it down. Official estimates place China's economic growth at 9.5% for 2004. South Korea's economy has apparently benefited from China's growth, as China has become its biggest trading partner. South Korea's estimated growth was 4.6% for 2004. The US bond market managed to deliver a positive return, despite rising interest rates. In June 2004, the Federal Reserve (the Fed) made the first of seven increases to the federal funds rate -- a key short term interest rate. By March 31, 2005, the federal funds rate had been raised 1.75 percentage points to 2.75%.++++ High-yield bonds led the fixed-income markets, as a stronger economy resulted in improved credit ratings, stronger balance sheets and higher profits for many companies. DESCRIBE THE ASSET ALLOCATION PROCESS. Generally, the portfolio's overall asset allocation to bond funds is intended to fall between 65% and 85% with a bias toward high quality securities. Up to 15% of the portfolio may be invested in high-yield bond funds to enhance return potential. Stock investments are generally targeted to fall between 10% and 30% and are globally diversified across style and market capitalization. The long-term asset allocation of Nations LifeGoal Income and Growth Portfolio seeks to maximize the potential return while managing the amount of expected risk or volatility with a bias toward fixed-income investments. When the portfolio management team believes certain asset classes, or segments within an asset class, become substantially mispriced relative to historical patterns, we reallocate the portfolio to try to avoid some of the increased risk or to take advantage of the increased opportunity. HOW WAS THE PORTFOLIO ALLOCATED AT THE BEGINNING OF THE REPORTING PERIOD AND WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET ALLOCATION DURING THE PERIOD?+++++ We increased the portfolio's overall exposure to equity funds while reducing the position of fixed-income funds. We believed that in the US, equities would outperform fixed-income securities because of strong economic growth and rising interest rates. Since we also believed that the outlook for global economic growth was favorable, we decided to increase the portfolio's exposure to international stocks. We started the period with a sizeable investment -- as compared to our benchmark -- in small-cap domestic stock funds. These strategies helped the portfolio's relative performance. Since we expected the Fed to begin raising short-term interest rates (which it did in June 2004), we kept a focus on short-term bond funds. We believed that short-term bonds would be affected less by rising interest rates than longer-term bond funds. Long-term bonds tend to be more sensitive to changes in interest rates, and we reduced our position in funds that invest in long-term bonds. However, yields rose, and bond prices fell on short- to intermediate-maturity bonds. Contrary to historical precedent, long-term bond yields fell and their prices rose. As a result, our emphasis on short-term bonds detracted from the portfolio's performance. ++++On May 3, 2005, the federal funds rate was increased to 3.00%. +++++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 20 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) WHICH ASSET ALLOCATION DECISIONS HELPED OR HURT PORTFOLIO PERFORMANCE? The portfolio's performance was helped by increasing its exposure to equity stock funds. An overweight position in international stock funds also benefited relative performance. We were disappointed by the weak performance of our short-term bond investments. These funds posted a low return for the period, which hindered the portfolio's overall performance. HOW HAVE YOU POSITIONED THE PORTFOLIO TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? We believe that the global economy will continue to grow, although we think that corporate profit growth is likely to slow. We also believe that equities are likely to continue to outperform fixed income securities. Within this economic environment, we plan to maintain the portfolio's overall overweight position in equity stock funds compared to its underlying fixed-income funds. --------------------------------------------- Vikram Kuriyan has managed Nations LifeGoal Income and Growth Portfolio since August 2004. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. Michael Welhoelter has managed Nations LifeGoal Income and Growth Portfolio since August 2004. Mr. Welhoelter is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 21 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,033.26 1,023.68 1.27 1.26 0.25 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,032.81 1,022.44 2.53 2.52 0.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,028.17 1,018.70 6.32 6.29 1.25 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,029.27 1,018.70 6.32 6.29 1.25
Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. 22 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 23 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) 24 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF TOTAL INVESTMENTS AS OF 3/31/05) [PIE CHART] 2.0% Money Market fund 6.0% International equity funds 28.9% Domestic equity funds 63.1% Fixed income funds
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 25 NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
NATIONS LIFEGOAL INCOME AND GROWTH LEHMAN BROTHERS U.S. LIPPER INCOME FUNDS PORTFOLIO AGGREGATE BOND INDEX S&P 500 INDEX AVERAGE ----------------- -------------------- ------------- ------------------- Oct. 15 1996 9425 10000 10000 10000 1997 9664 10145 10875 10305 10957 11361 16095 11986 1999 11709 12099 19066 12906 12286 12325 22487 13530 2001 12818 13869 17612 13650 13275 14611 17654 14027 2003 12679 16319 13283 13211 14952 17201 17948 15836 Mar. 31 2005 15411 17397 19149 16528
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
NATIONS LIFEGOAL INCOME AND GROWTH LEHMAN BROTHERS U.S. LIPPER INCOME FUNDS PORTFOLIO AGGREGATE BOND INDEX S&P 500 INDEX AVERAGE ----------------- -------------------- ------------- ------------------- Oct. 15 1996 10000 10000 10000 10000 1997 10254 10145 10875 10305 11626 11361 16095 11986 1999 12424 12099 19066 12906 13036 12325 22487 13530 2001 13600 13869 17612 13650 14085 14611 17654 14027 2003 13452 16319 13283 13211 15864 17201 17948 15836 Mar. 31 2005 16349 17397 19149 16528
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/15/96 through 3/31/05) 5.98% 5.25%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LifeGoal Income and Growth Portfolio from the inception of the share class. The S&P 500 Index is an unmanaged index of 500 widely held common stocks. The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index of US government agency and US Treasury securities, corporate bonds and mortgage-backed securities. Funds in the Lipper Income Funds Average seek high level current income through investing in income-producing stocks, bonds and money market instruments. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Nations LifeGoal Income and Growth Portfolio's Primary A, Investor A and Investor C Shares commenced investment operations on October 2, 1996. Shares were offered to the public on October 15, 1996. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/15/96 10/15/96 8/7/97 10/15/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 3.32% 3.05% -2.89% 2.30% -2.66% 2.32% 1.32% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.33% 5.09% 3.02% 4.29% 3.36% 4.28% 4.28% 5 YEARS 4.88% 4.63% 3.41% 3.84% 3.49% 3.82% 3.82% SINCE INCEPTION 6.17% 5.98% 5.25% 4.56% 4.56% 5.24% 5.24%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 5.00% in the first year after purchase that declines to 1.00% in the sixth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 25 NATIONS LIFEGOAL INCOME PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE MEMBERS OF THE PORTFOLIO MANAGEMENT TEAM SHARE THEIR VIEWS ON NATIONS LIFEGOAL INCOME PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks current income through investments primarily in fixed-income and income-oriented equity securities consistent with moderate fluctuation of principal. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Nations LifeGoal Income Portfolio Investor A Shares provided shareholders with a total return of 2.12%.** - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. The portfolio's primary objective is income generation with moderate fluctuations in principal. It invests primarily in a diversified selection of other Nations Funds fixed-income and income-oriented equity mutual funds, as well as individual securities. The portfolio's management team seeks additional performance enhancement and risk management through active allocation, emphasizing the funds and asset classes it believes can offer the most attractive attributes given the current investment environment. When the team believes certain asset classes, or segments within an asset class, become substantially mispriced relative to historical patterns, the portfolio is reallocated to try to avoid some of the increased risk or to take advantage of the increased opportunity. HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? During the 12-month period ended March 31, 2005, Nations LifeGoal Income Portfolio (Investor A Shares) returned 2.12%. The portfolio outpaced its benchmark, the Lehman Brothers U.S. Aggregate 1-3 Years Index, which returned negative 0.03%.***The portfolio's return was also better than the 1.32% blended return for the Lehman Brothers U.S. Aggregate 1-3 Years Index and the Lehman Brothers U.S. High Yield Index.+ *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **For standardized performance, please refer to the Performance table. The performance shown does not reflect the maximum front-end sales charge of 3.25%, which may apply to purchases of Investor A Shares. The performance shown includes the effect of fee waivers and/or reimbursements by the investment advisor and/or other service provider, which have the effect of increasing total return. Had all sales charges, fees and expenses been considered, the total returns would have been lower. ***Lehman Brothers U.S. Aggregate 1-3 Years Index is an unmanaged index of publicly issued investment grade corporate, US Treasury and government agency securities with remaining maturities of one to three years. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +This blend is 80% Lehman Brothers U.S. Aggregate 1-3 Years Index and 20% Lehman Brothers U.S. High Yield Index. Lehman Brothers High Yield Index is an unmanaged index of fixed-rate, non- investment-grade bonds with at least one year remaining to maturity. This index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. EQUITY INVESTMENTS ARE AFFECTED BY STOCK MARKET FLUCTUATIONS THAT OCCUR IN RESPONSE TO ECONOMIC AND BUSINESS DEVELOPMENTS. INVESTING IN HIGH-YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 26 NATIONS LIFEGOAL INCOME PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) The overall bond market, as measured by the Lehman Brothers U.S. Aggregate Bond Index, returned 1.15%.++ A majority of the asset classes within the fixed- income universe posted positive returns during the period. High-yield bonds led performance during this 12-month period. Although the return this period for convertible securities was just barely positive, the performance of short-term bonds dipped slightly into negative territory. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE REPORTING PERIOD? Domestic economic news for the 12-month period from April 1, 2004, to March 31, 2005, was generally positive. In the US, gross domestic product grew at an annualized rate of 3.5% for 2004. Job growth dominated the economic news and drove consumer confidence readings, which moved up and down depending on the number of new jobs reported. Unemployment fell from 5.7% to 5.2% during this reporting period. Consumer spending grew during the period as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace, although business spending was not as robust as expected. The US bond market managed to deliver a positive return, despite rising interest rates. In June 2004, the Federal Reserve (the Fed) made the first of seven increases to the federal funds rate -- a key short term interest rate. By March 31, 2005, the federal funds rate had been raised 1.75 percentage points to 2.75%.+++ High-yield bonds led the fixed-income markets, as a stronger economy resulted in improved credit ratings, stronger balance sheets and higher profits for many companies. DESCRIBE THE ASSET ALLOCATION PROCESS. The portfolio's overall asset allocation to investment grade bonds will be a minimum of 50% with the potential to allocate up to 30% in a combination of income-oriented securities and REITs. Up to 35% of the portfolio may be invested in higher-yielding non-investment grade bonds to help enhance income potential. The primary objective of Nations LifeGoal Income Portfolio is to seek current income with moderate fluctuation of principal. When the portfolio management teams believe certain asset classes, or segments within an asset class, become substantially mispriced relative to historical patterns, the portfolio is reallocated to try to avoid some of the increased risk or to take advantage of the increased opportunity. HOW WAS THE PORTFOLIO ALLOCATED AT THE BEGINNING OF THE REPORTING PERIOD AND WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET ALLOCATION DURING THE PERIOD?++++ We maintained the portfolio's overall exposure to convertible securities funds during the period. We believed that in the US equities would outperform fixed-income securities because of strong economic growth and rising interest rates. We felt that convertible securities would give us some exposure to equity markets because of their hybrid equity and fixed-income characteristics. We also expected the Fed to begin raising short-term interest rates (which it did in June 2004). With those anticipated increases in mind, we kept a focus on short-term bond funds. We ++The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index of US government agency and US Treasury securities, investment grade corporate bonds, and asset- and mortgage-backed securities. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +++On May 3, 2005, the federal funds rate was increased to 3.00%. ++++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 27 NATIONS LIFEGOAL INCOME PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) believed that short-term bonds would be affected less by rising interest rates than longer-term bond funds. Long-term bonds tend to be more sensitive to changes in interest rates, and we reduced our position in funds that invest in long-term bonds. However, yields rose and bond prices fell on short-term bonds and also on some intermediate-term bonds. Contrary to historical precedent, long-term bond yields fell and their prices rose. As a result, our emphasis on short-term bonds detracted from the portfolio's performance. Late in the period, we reduced the portfolio's exposure to high-yield bonds. Although high-yield bonds had performed well, with rising interest rates, we did not believe that they would continue to do so. We invested the proceeds into two bond funds: Nations Short-Term Income Fund and Nations Bond Fund. WHICH ASSET ALLOCATION DECISIONS HELPED OR HURT PORTFOLIO PERFORMANCE? The portfolio's performance was helped by its exposure to convertible securities funds and high-yield bond funds. We were disappointed by the weak performance of our short-term bond investments. These funds posted a low return for the period, which hindered the portfolio's overall performance. HOW HAVE YOU POSITIONED THE PORTFOLIO TO REFLECT YOUR OUTLOOK FOR THE COMING YEAR? We believe that the global economy will continue to grow, although we expect corporate profit growth to slow. We also believe that equities are likely to continue to outperform fixed-income securities. Within this economic environment, we plan to maintain the portfolio's overall exposure to convertible security funds. We expect interest rates to continue to rise. We believe that the portfolio's position in Nations Cash Reserves will benefit from an anticipated increase in yields. We will continue to seek a balance among short-term, intermediate-term and high-yield securities, which we believe should provide the level of income and moderate price volatility that we seek to achieve in the fund. --------------------------------------------- Vikram Kuriyan has managed Nations LifeGoal Income Portfolio since August 2004. Mr. Kuriyan is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. Michael Welhoelter has managed Nations LifeGoal Income Portfolio since August 2004. Mr. Welhoelter is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC, is part of Columbia Management, the primary investment management division of Bank of America Corporation. 28 NATIONS LIFEGOAL INCOME PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the fund's most recent fiscal half-year. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - For shareholders who receive their account statements from BACAP Distributors, LLC, your account balance is available by calling Shareholder Services at 800.626.2275 (institutional investors) and 800.321.7854 (individual investors). - - For shareholders who receive their account statements from their brokerage firm, contact your brokerage firm to obtain your account balance. 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount for your share class. You will find this number is in the column labeled "actual". Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period.
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) 10/01/04-03/31/05 ---------------------------- ------------------------ ---------------------- ----------------- - --------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Primary A 1,000.00 1,000.00 1,014.36 1,022.84 2.11 2.12 0.42 - ----------------------------------------------------------------------------------------------------------------------------------- Investor A 1,000.00 1,000.00 1,012.12 1,021.59 3.36 3.38 0.67 - ----------------------------------------------------------------------------------------------------------------------------------- Investor B 1,000.00 1,000.00 1,008.38 1,017.85 7.11 7.14 1.42 - ----------------------------------------------------------------------------------------------------------------------------------- Investor C 1,000.00 1,000.00 1,009.37 1,017.85 7.11 7.14 1.42
Expenses paid during the period are equal to the annualized expense ratio for the share class multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the investment advisor and/or administrator not waived or reimbursed a portion of expenses, total return would have been reduced. 29 NATIONS LIFEGOAL INCOME PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE (CONTINUED) It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 30 NATIONS LIFEGOAL INCOME PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF TOTAL INVESTMENTS AS OF 3/31/05) [PIE CHART] 2.6% Money market fund 5.0% Domestic equity fund 92.4% Fixed income funds
PORTFOLIO HOLDINGS ARE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 31 NATIONS LIFEGOAL INCOME PORTFOLIO PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/05) RETURN CHART]
BLENDED 80% LEHMAN BROTHERS U.S. AGGREGATE 1-3 YEARS INDEX/20% LEHMAN LEHMAN BROTHERS U.S. NATIONS LIFEGOAL BROTHERS U.S. HIGH AGGREGATE 1-3 YEARS LIPPER INCOME FUNDS INCOME PORTFOLIO YIELD INDEX INDEX AVERAGE ---------------- ------------------- -------------------- ------------------- Sep. 4 2003 9675 10000 10000 10000 10034 10284 10138 10658 10175 10431 10260 10882 10070 10322 10150 10783 10267 10518 10269 10925 2004 10495 10625 10283 11472 Mar. 31 2005 10387 10569 10256 11346
[INVESTOR A SHARES AT NAV** (AS OF 3/31/05) RETURN CHART]
BLENDED 80% LEHMAN BROTHERS U.S. AGGREGATE 1-3 YEARS INDEX/20% LEHMAN LEHMAN BROTHERS U.S. NATIONS LIFEGOAL BROTHERS U.S. HIGH AGGREGATE 1-3 YEARS LIPPER INCOME FUNDS INCOME PORTFOLIO YIELD INDEX INDEX AVERAGE ---------------- ------------------- -------------------- ------------------- Sep. 4 2003 10000 10000 10000 10000 10371 10284 10138 10658 10517 10431 10260 10882 10408 10322 10150 10783 10612 10518 10269 10925 2004 10847 10625 10283 11472 Mar. 31 2005 10741 10569 10256 11346
CUMULATIVE TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (9/04/03 through 3/31/05) 4.64% 2.44%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LifeGoal Income Portfolio from the inception of the share class. The Lehman Brothers U.S. Aggregate 1-3 Years Index is an unmanaged index of publicly issued investment grade corporate, US Treasury and government agency securities with remaining maturities of one to three years. The Lehman Brothers U.S. High Yield Index is an unmanaged index of fixed-rate, non-investment grade bonds with at least one year remaining to maturity. Funds in the Lipper Income Funds Average seek a high level of current income through investing in income-producing stocks, bonds and money market instruments. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. Index performance is from August 31, 2003. The charts and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/04/03 9/04/03 9/04/03 9/05/03 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 2.47% 2.12% -1.23% 1.35% -1.58% 1.46% 0.48% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS SINCE INCEPTION 4.95% 4.64% 2.44% 3.84% 1.97% 3.78% 3.78%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. PERFORMANCE DATA FOR THE MOST RECENT MONTH END MAY BE OBTAINED AT WWW.NATIONSFUNDS.COM. THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS BY THE INVESTMENT ADVISOR AND/OR OTHER SERVICE PROVIDERS, WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN. HAD ALL FEES AND EXPENSES BEEN CONSIDERED, THE TOTAL RETURNS WOULD HAVE BEEN LOWER. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 3.25%. **Figures at net asset value (NAV) do not reflect any sales charges. Had sales charges, if any, been reflected, returns would have been lower. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. Returns for Investor B Shares reflect a CDSC fee of 3.00% in the first year after purchase that declines to 1.00% in the fourth year and is eliminated thereafter. Returns for Investor C Shares reflect a CDSC fee of 1.00% in the first year after purchase. 32 NATIONS FUNDS Nations LifeGoal Growth Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- AFFILIATED INVESTMENT MANAGEMENT COMPANIES(a) -- 99.9% 1,231,906 Nations International Value Fund, Primary A Class............. $ 27,619 4,246,584 Nations Marsico Focused Equities Fund, Primary A Class........ 76,099 2,217,931 Nations Marsico International Opportunities Fund, Primary A Class....................................................... 25,573 2,968,532 Nations Marsico MidCap Growth Fund, Primary A Class........... 36,602 2,773,837 Nations MidCap Value Fund, Primary A Class.................... 38,945 1,520,323 Nations SmallCap Value Fund, Primary A Class.................. 19,156 1,207,751 Nations Small Company Fund, Primary A Class................... 18,599 2,224,942 Nations Strategic Growth Fund, Primary A Class................ 26,766 8,543,207 Nations Value Fund, Primary A Class........................... 112,087 -------- TOTAL AFFILIATED INVESTMENT MANAGEMENT COMPANIES (Cost of $335,882).......................................... 381,446 -------- TOTAL INVESTMENTS (Cost of $335,882)(b)............................. 99.9% 381,446 -------- OTHER ASSETS AND LIABILITIES (NET)................................. 0.1% 375 -------- NET ASSETS.......................................... 100.0% $381,821 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Mutual Funds registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (b) Cost for federal income tax purposes is $346,725. See Note 5 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 33 NATIONS FUNDS Nations LifeGoal Balanced Growth Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - --------------------------------------------------------------------------------------- AFFILIATED INVESTMENT MANAGEMENT COMPANIES(a) -- 99.7% 15,202,586 Nations Bond Fund, Primary A Class............................ $149,137 406,657 Nations Convertible Securities Fund, Primary A Class.......... 7,056 3,002,919 Nations High Yield Bond Fund, Primary A Class................. 28,137 1,768,348 Nations International Value Fund, Primary A Class............. 39,646 4,337,876 Nations Marsico Focused Equities Fund, Primary A Class........ 77,735 2,678,223 Nations Marsico International Opportunities Fund, Primary A Class....................................................... 30,880 3,308,066 Nations Marsico MidCap Growth Fund, Primary A Class........... 40,788 3,090,937 Nations MidCap Value Fund, Primary A Class.................... 43,397 7,318,558 Nations Short-Term Income Fund, Primary A Class............... 71,722 1,694,147 Nations SmallCap Value Fund, Primary A Class.................. 21,346 1,345,899 Nations Small Company Fund, Primary A Class................... 20,727 2,951,660 Nations Strategic Growth Fund, Primary A Class................ 35,509 10,942,705 Nations Value Fund, Primary A Class........................... 143,568 -------- TOTAL AFFILIATED INVESTMENT MANAGEMENT COMPANIES (Cost of $644,831).......................................... 709,648 -------- TOTAL INVESTMENTS (Cost of $644,831)(b)............................. 99.7% 709,648 -------- OTHER ASSETS AND LIABILITIES (NET)................................. 0.3% 1,892 -------- NET ASSETS.......................................... 100.0% $711,540 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Mutual Funds registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (b) Cost for federal income tax purposes is $661,982. See Note 5 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 34 NATIONS FUNDS Nations LifeGoal Income and Growth Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - -------------------------------------------------------------------------------------- AFFILIATED INVESTMENT MANAGEMENT COMPANIES(a) -- 100.1% 4,553,628 Nations Bond Fund, Primary A Class............................ $ 44,671 4,120,170 Nations Cash Reserves, Capital Class Shares................... 4,120 116,248 Nations Convertible Securities Fund, Primary A Class.......... 2,017 1,502,381 Nations High Yield Bond Fund, Primary A Class................. 14,077 183,296 Nations International Value Fund, Primary A Class............. 4,110 676,498 Nations Marsico Focused Equities Fund, Primary A Class........ 12,123 695,905 Nations Marsico International Opportunities Fund, Primary A Class....................................................... 8,024 472,546 Nations Marsico MidCap Growth Fund, Primary A Class........... 5,826 441,957 Nations MidCap Value Fund, Primary A Class.................... 6,205 7,109,432 Nations Short-Term Income Fund, Primary A Class............... 69,672 241,020 Nations SmallCap Value Fund, Primary A Class.................. 3,037 193,209 Nations Small Company Fund, Primary A Class................... 2,975 506,307 Nations Strategic Growth Fund, Primary A Class................ 6,091 1,564,369 Nations Value Fund, Primary A Class........................... 20,525 -------- TOTAL AFFILIATED INVESTMENT MANAGEMENT COMPANIES (Cost of $198,504).......................................... 203,473 -------- TOTAL INVESTMENTS (Cost of $198,504)(b)............................. 100.1% 203,473 -------- OTHER ASSETS AND LIABILITIES (NET)................................. (0.1)% (290) -------- NET ASSETS.......................................... 100.0% $203,183 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Mutual Funds registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (b) Cost for federal income tax purposes is $199,241. See Note 5 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 35 NATIONS FUNDS Nations LifeGoal Income Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
VALUE SHARES (000) - ------------------------------------------------------------------------------------- AFFILIATED INVESTMENT MANAGEMENT COMPANIES(a) -- 100.4% 244,982 Nations Bond Fund, Primary A Class............................ $ 2,403 1,288,007 Nations Cash Reserves, Capital Class Shares................... 1,288 139,490 Nations Convertible Securities Fund, Primary A Class.......... 2,420 1,022,319 Nations High Yield Bond Fund, Primary A Class................. 9,579 722,660 Nations Mortgage- and Asset-Backed Portfolio.................. 7,234 2,627,860 Nations Short-Term Income Fund, Primary A Class............... 25,753 ------- TOTAL AFFILIATED INVESTMENT MANAGEMENT COMPANIES (Cost of $48,995)........................................... 48,677 ------- TOTAL INVESTMENTS (Cost of $48,995)(b).............................. 100.4% 48,677 ------- OTHER ASSETS AND LIABILITIES (NET)................................. (0.4)% (178) ------- NET ASSETS.......................................... 100.0% $48,499 =======
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Mutual Funds registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (b) Cost for federal income tax purposes is $49,389. See Note 5 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 36 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES March 31, 2005
LIFEGOAL LIFEGOAL LIFEGOAL BALANCED INCOME AND LIFEGOAL GROWTH GROWTH GROWTH INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------------------------------------------------------------- (IN THOUSANDS) ASSETS: Affiliated investments, at cost................... $ 335,882 $ 644,831 $ 198,504 $ 48,995 -------------- -------------- -------------- -------------- Affiliated investments, at value.................. 381,446 709,648 203,473 48,677 Receivable for Fund shares sold................... 968 3,154 281 39 Dividends receivable.............................. -- 639 314 72 Receivable from investment advisor................ -- -- -- 54 -------------- -------------- -------------- -------------- Total assets.................................. 382,414 713,441 204,068 48,842 -------------- -------------- -------------- -------------- LIABILITIES: Investment advisory fee payable................... (81) (150) (43) (3) Administration fee payable........................ -- -- -- (6) Payable for investment securities purchased....... -- (639) (314) (72) Payable for Fund shares redeemed.................. (359) (759) (376) (158) Accrued Trustees' fees and expenses............... -- -- -- (21) Accrued expenses and other liabilities............ -- -- -- (57) Shareholder servicing and distribution fees payable......................................... (153) (317) (99) (26) Distributions payable............................. -- (36) (53) -- -------------- -------------- -------------- -------------- Total liabilities............................. (593) (1,901) (885) (343) -------------- -------------- -------------- -------------- NET ASSETS........................................ $ 381,821 $ 711,540 $ 203,183 $ 48,499 ============== ============== ============== ============== NET ASSETS CONSIST OF: Undistributed net investment income............... $ -- $ 585 $ 251 $ -- Accumulated net realized gain/(loss) on investments..................................... (10,500) (8,695) 6,793 (289) Unrealized appreciation/(depreciation) on investments..................................... 45,564 64,817 4,969 (318) Paid-in capital................................... 346,757 654,833 191,170 49,106 -------------- -------------- -------------- -------------- NET ASSETS........................................ $ 381,821 $ 711,540 $ 203,183 $ 48,499 ============== ============== ============== ============== PRIMARY A SHARES: Net assets........................................ $ 132,747,849 $ 220,295,613 $ 56,897,234 $ 667,455 Number of shares outstanding...................... 10,846,935 19,184,366 5,184,691 66,227 Net asset value and redemption price per share.... $ 12.24 $ 11.48 $ 10.97 $ 10.08 INVESTOR A SHARES: Net assets........................................ $ 93,069,930 $ 156,938,364 $ 42,815,530 $ 25,210,599 Number of shares outstanding...................... 7,635,416 13,643,834 3,879,184 2,502,805 Net asset value and redemption price per share.... $ 12.19 $ 11.50 $ 11.04 $ 10.07 Maximum sales charge.............................. 5.75% 5.75% 5.75% 3.25% Maximum offering price per share.................. $ 12.93 $ 12.20 $ 11.71 $ 10.41 INVESTOR B SHARES: Net assets........................................ $ 119,994,943 $ 271,690,900 $ 85,762,025 $ 12,740,095 Number of shares outstanding...................... 10,235,871 23,721,605 7,786,370 1,266,111 Net asset value and redemption price per share(a)........................................ $ 11.72 $ 11.45 $ 11.01 $ 10.06 INVESTOR C SHARES: Net assets........................................ $ 36,007,953 $ 62,614,831 $ 17,707,954 $ 9,880,881 Number of shares outstanding...................... 3,088,709 5,417,335 1,615,595 983,221 Net asset value and redemption price per share(a)........................................ $ 11.66 $ 11.56 $ 10.96 $ 10.05
- --------------- (a)The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 NATIONS FUNDS STATEMENTS OF OPERATIONS For the Year Ended March 31, 2005
LIFEGOAL LIFEGOAL LIFEGOAL BALANCED INCOME AND LIFEGOAL GROWTH GROWTH GROWTH INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------------------------------------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Dividend income from affiliated funds.............. $ 2,823 $ 12,203 $ 4,933 $ 2,076 -------------- -------------- -------------- -------------- Total investment income........................ 2,823 12,203 4,933 2,076 -------------- -------------- -------------- -------------- EXPENSES: Investment advisory fee............................ 807 1,567 487 50 Administration fee................................. -- -- -- 128 Transfer agent fees................................ -- -- -- 25 Legal and audit fees............................... -- -- -- 114 Registration and filing fees....................... -- -- -- 48 Trustees' fees and expenses........................ -- -- -- 27 Printing expense................................... -- -- -- 48 Other.............................................. -- -- -- 42 -------------- -------------- -------------- -------------- Subtotal....................................... 807 1,567 487 482 Shareholder servicing and distribution fees: Investor A Shares................................ 194 321 93 81 Investor B Shares................................ 1,029 2,359 835 123 Investor C Shares................................ 269 501 180 101 -------------- -------------- -------------- -------------- Total expenses................................. 2,299 4,748 1,595 787 Fees waived by advisor, administrator, and/or distributor (see Note 3)......................... -- -- -- (249) -------------- -------------- -------------- -------------- Net expenses................................... 2,299 4,748 1,595 538 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME/(LOSS)....................... 524 7,455 3,338 1,538 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments from affiliated funds................................. 4,751 3,859 8,351 (631) Capital gains distributions received............... 4,328 9,176 2,018 1,115 Net change in unrealized appreciation/(depreciation) of investments....... 18,296 14,016 (8,479) (948) -------------- -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments...................................... 27,375 27,051 1,890 (464) -------------- -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................. $ 27,899 $ 34,506 $ 5,228 $ 1,074 ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 38 [This page intentionally left blank] 39 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
LIFEGOAL GROWTH PORTFOLIO --------------------------------- YEAR ENDED YEAR ENDED 3/31/05 3/31/04 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 524 $ 115 Net realized gain/(loss) on investments..................... 4,751 570 Capital gain distributions received......................... 4,328 245 Net change in unrealized appreciation/(depreciation) of investments............................................... 18,296 65,237 -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 27,899 66,167 Distributions to shareholders from net investment income: Primary A Shares.......................................... (890) (240) Primary B Shares.......................................... -- -- Investor A Shares......................................... (567) (94) Investor B Shares......................................... (567) (15) Investor C Shares......................................... (163) (6) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... -- -- Investor A Shares......................................... -- -- Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Net increase/(decrease) in net assets from Portfolio share transactions.............................................. 73,133 93,992 -------------- -------------- Net increase/(decrease) in net assets....................... 98,845 159,804 NET ASSETS: Beginning of year........................................... 282,976 123,172 -------------- -------------- End of year................................................. $ 381,821 $ 282,976 ============== ============== Undistributed net investment income at end of year.......... $ -- $ -- ============== ==============
- --------------- (a)LifeGoal Income Portfolio commenced operations on September 4, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 40 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
LIFEGOAL BALANCED LIFEGOAL INCOME AND LIFEGOAL INCOME GROWTH PORTFOLIO GROWTH PORTFOLIO PORTFOLIO - ----------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED 3/31/05 3/31/04 3/31/05 3/31/04 3/31/05 3/31/2004(a) - ------------------------------------------------------------------------------------------------------- $ 7,455 $ 5,393 $ 3,338 $ 2,396 $ 1,538 $ 563 3,859 (19) 8,351 671 (631) (3) 9,176 1,069 2,018 513 1,115 67 14,016 96,989 (8,479) 17,851 (948) 630 -------------- -------------- -------------- -------------- -------------- -------------- 34,506 103,432 5,228 21,431 1,074 1,257 (4,708) (3,610) (1,568) (1,006) (45) (45) -- (1) -- -- -- -- (2,630) (1,308) (981) (526) (1,283) (438) (3,154) (1,624) (1,556) (953) (420) (94) (691) (256) (335) (177) (340) (66) (2,137) (264) (611) (223) (3) -- (1,187) (108) (382) (110) (126) -- (2,247) (218) (892) (335) (53) -- (452) (32) (195) (51) (42) -- 118,342 187,937 14,340 78,771 (5,896) 55,019 -------------- -------------- -------------- -------------- -------------- -------------- 135,642 283,948 13,048 96,821 (7,134) 55,633 575,898 291,950 190,135 93,314 55,633 -- -------------- -------------- -------------- -------------- -------------- -------------- $ 711,540 $ 575,898 $ 203,183 $ 190,135 $ 48,499 $ 55,633 ============== ============== ============== ============== ============== ============== $ 585 $ 396 $ 251 $ 349 $ -- $ 1 ============== ============== ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 41 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
LIFEGOAL GROWTH PORTFOLIO YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ (IN THOUSANDS) SHARES DOLLARS SHARES DOLLARS ------------------------------------------ PRIMARY A SHARES: Sold...................................................... 2,707 $ 31,700 2,917 $ 29,355 Issued as reinvestment of distributions................... 68 842 21 228 Redeemed.................................................. (1,699) (19,401) (1,095) (10,965) ------ -------- ------ -------- Net increase/(decrease)................................... 1,076 $ 13,141 1,843 $ 18,618 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 3,166 $ 36,351 3,899 $ 39,216 Shares issued upon conversion from Investor B shares...... 9 99 8 82 Shares issued upon conversion from Investor C shares...... --(a) 2 1 5 Issued as reinvestment of distributions................... 44 541 8 90 Redeemed.................................................. (1,283) (14,671) (975) (9,731) ------ -------- ------ -------- Net increase/(decrease)................................... 1,936 $ 22,322 2,941 $ 29,662 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 3,070 $ 34,050 4,280 $ 41,308 Issued as reinvestment of distributions................... 45 536 1 14 Shares redeemed upon conversion into Investor A shares.... (9) (99) (8) (82) Redeemed.................................................. (1,025) (11,370) (728) (7,139) ------ -------- ------ -------- Net increase/(decrease)................................... 2,081 $ 23,117 3,545 $ 34,101 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 1,680 $ 18,682 1,353 $ 13,292 Issued as reinvestment of distributions................... 11 128 -- 5 Shares redeemed upon conversion into Investor A shares.... --(a) (2) (1) (5) Redeemed.................................................. (385) (4,255) (172) (1,681) ------ -------- ------ -------- Net increase/(decrease)................................... 1,306 $ 14,553 1,180 $ 11,611 ====== ======== ====== ======== Total net increase/(decrease)............................... 6,399 $ 73,133 9,509 $ 93,992 ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 42 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
LIFEGOAL BALANCED GROWTH PORTFOLIO YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ (IN THOUSANDS) SHARES DOLLARS SHARES DOLLARS ------------------------------------------ PRIMARY A SHARES: Sold...................................................... 2,208 $ 25,032 2,764 $ 28,591 Issued as reinvestment of distributions................... 743 8,265 327 3,446 Redeemed.................................................. (3,177) (35,366) (1,730) (18,106) ------ -------- ------ -------- Net increase/(decrease)................................... (226) $ (2,069) 1,361 $ 13,931 ====== ======== ====== ======== PRIMARY B SHARES: Sold...................................................... -- $ -- -- $ -- Issued as reinvestment of distributions................... -- -- --(a) 1 Redeemed.................................................. -- -- (33) (355) ------ -------- ------ -------- Net increase/(decrease)................................... -- $ -- (33) $ (354) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 5,461 $ 61,516 7,950 $ 82,884 Shares issued upon conversion from Investor B shares...... 41 456 55 607 Shares issued upon conversion from Investor C shares...... --(a) --(a) 1 16 Issued as reinvestment of distributions................... 389 4,347 121 1,209 Redeemed.................................................. (2,187) (24,346) (2,480) (26,314) ------ -------- ------ -------- Net increase/(decrease)................................... 3,704 $ 41,973 5,647 $ 58,402 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 7,181 $ 80,342 10,300 $105,507 Issued as reinvestment of distributions................... 596 6,607 164 1,766 Shares redeemed upon conversion into Investor A shares.... (43) (456) (55) (607) Redeemed.................................................. (2,690) (29,932) (1,756) (18,323) ------ -------- ------ -------- Net increase/(decrease)................................... 5,044 $ 56,561 8,653 $ 88,343 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 2,724 $ 30,756 2,917 $ 30,767 Issued as reinvestment of distributions................... 96 1,071 21 230 Shares redeemed upon conversion into Investor A shares.... --(a) --(a) (1) (16) Redeemed.................................................. (885) (9,950) (316) (3,366) ------ -------- ------ -------- Net increase/(decrease)................................... 1,935 $ 21,877 2,621 $ 27,615 ====== ======== ====== ======== Total net increase/(decrease)............................. 10,457 $118,342 18,249 $187,937 ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares or $500 as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 43 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
LIFEGOAL INCOME AND GROWTH PORTFOLIO YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ (IN THOUSANDS) SHARES DOLLARS SHARES DOLLARS ------------------------------------------ PRIMARY A SHARES: Sold...................................................... 1,418 $ 15,554 2,495 $ 26,625 Issued as reinvestment of distributions................... 223 2,424 111 1,171 Redeemed.................................................. (1,803) (19,654) (724) (7,698) ------ -------- ------ -------- Net increase/(decrease)................................... (162) $ (1,676) 1,882 $ 20,098 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 1,723 $ 19,003 2,314 $ 24,278 Shares issued upon conversion from Investor B shares...... 46 499 18 196 Shares issued upon conversion from Investor C shares...... --(a) 2 1 6 Issued as reinvestment of distributions................... 122 1,339 52 560 Redeemed.................................................. (996) (10,981) (541) (5,752) ------ -------- ------ -------- Net increase/(decrease)................................... 895 $ 9,862 1,844 $ 19,288 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 1,850 $ 20,313 3,747 $ 39,241 Issued as reinvestment of distributions................... 241 2,636 128 1,363 Shares redeemed upon conversion into Investor A shares.... (46) (499) (18) (196) Redeemed.................................................. (1,520) (16,646) (1,140) (12,129) ------ -------- ------ -------- Net increase/(decrease)................................... 525 $ 5,804 2,717 $ 28,279 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 586 $ 6,384 1,289 $ 13,579 Issued as reinvestment of distributions................... 45 489 17 188 Shares redeemed upon conversion into Investor A shares.... --(a) (2) (1) (6) Redeemed.................................................. (599) (6,521) (248) (2,655) ------ -------- ------ -------- Net increase/(decrease)................................... 32 $ 350 1,057 $ 11,106 ====== ======== ====== ======== Total net increase/(decrease)............................. 1,290 $ 14,340 7,500 $ 78,771 ====== ======== ====== ========
- --------------- (a)Amount represents less than 500 shares. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 44 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
LIFEGOAL INCOME PORTFOLIO YEAR ENDED PERIOD ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ----------------- (IN THOUSANDS) SHARES DOLLARS SHARES DOLLARS ----------------------------------------- PRIMARY A SHARES:(a) Sold...................................................... 28 $ 286 242 $ 2,434 Issued as reinvestment of distributions................... -- 2 -- -- Redeemed.................................................. (162) (1,646) (42) (435) ------ -------- ----- ------- Net increase/(decrease)................................... (134) $ (1,358) 200 $ 1,999 ====== ======== ===== ======= INVESTOR A SHARES:(a) Sold...................................................... 1,462 $ 14,940 3,857 $39,340 Shares issued upon conversion from Investor B shares...... 9 88 --(c) 3 Issued as reinvestment of distributions................... 129 1,298 36 371 Redeemed.................................................. (2,586) (26,357) (404) (4,147) ------ -------- ----- ------- Net increase/(decrease)................................... (986) $(10,031) 3,489 $35,567 ====== ======== ===== ======= INVESTOR B SHARES:(a) Sold...................................................... 609 $ 6,202 925 $ 9,421 Issued as reinvestment of distributions................... 39 400 7 74 Shares redeemed upon conversion into Investor A shares.... (8) (88) --(c) (3) Redeemed.................................................. (274) (2,785) (32) (325) ------ -------- ----- ------- Net increase/(decrease)................................... 366 $ 3,729 900 $ 9,167 ====== ======== ===== ======= INVESTOR C SHARES:(b) Sold...................................................... 496 $ 5,056 821 $ 8,391 Issued as reinvestment of distributions................... 33 335 5 52 Redeemed.................................................. (357) (3,627) (15) (157) ------ -------- ----- ------- Net increase/(decrease)................................... 172 $ 1,764 811 $ 8,286 ====== ======== ===== ======= Total net increase/(decrease)............................. (582) $ (5,896) 5,400 $55,019 ====== ======== ===== =======
- --------------- (a)LifeGoal Income Portfolio Primary A, Investor A and Investor B Shares commenced operations on September 4, 2003. (b)LifeGoal Income Portfolio Investor C Shares commenced operations on September 5, 2003. (c)Amount represents less than 500 shares or $500 as applicable. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 45 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
NET INCREASE/ (DECREASE) NET ASSET NET REALIZED IN NET ASSETS DISTRIBUTIONS VALUE NET AND UNREALIZED RESULTING FROM FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME ------------------------------------------------------------------------------- LIFEGOAL GROWTH PORTFOLIO PRIMARY A SHARES Year ended 3/31/2005(c)..................... $11.30 $ 0.07 $ 0.96 $ 1.03 $(0.09) Year ended 3/31/2004(c)..................... 7.82 0.05 3.46 3.51 (0.03) Year ended 3/31/2003(c)..................... 10.68 0.04 (2.87) (2.83) (0.03) Year ended 3/31/2002(c)..................... 10.38 0.03 0.31 0.34 (0.04) Year ended 3/31/2001........................ 15.50 0.09 (2.29) (2.20) (0.07) INVESTOR A SHARES Year ended 3/31/2005(c)..................... $11.28 $ 0.04 $ 0.95 $ 0.99 $(0.08) Year ended 3/31/2004(c)..................... 7.82 0.02 3.46 3.48 (0.02) Year ended 3/31/2003(c)..................... 10.68 0.02 (2.87) (2.85) (0.01) Year ended 3/31/2002(c)..................... 10.39 --(d) 0.32 0.32 (0.03) Year ended 3/31/2001........................ 15.48 0.07 (2.26) (2.19) (0.05) INVESTOR B SHARES Year ended 3/31/2005(c)..................... $10.91 $(0.04) $ 0.91 $ 0.87 $(0.06) Year ended 3/31/2004(c)..................... 7.61 (0.05) 3.35 3.30 --(d) Year ended 3/31/2003(c)..................... 10.46 (0.04) (2.81) (2.85) -- Year ended 3/31/2002(c)..................... 10.23 (0.07) 0.30 0.23 --(d) Year ended 3/31/2001........................ 15.35 0.02 (2.28) (2.26) (0.01) INVESTOR C SHARES Year ended 3/31/2005(c)..................... $10.85 $(0.04) $ 0.91 $ 0.87 $(0.06) Year ended 3/31/2004(c)..................... 7.57 (0.04) 3.32 3.28 --(d) Year ended 3/31/2003(c)..................... 10.40 (0.04) (2.79) (2.83) -- Year ended 3/31/2002(c)..................... 10.18 (0.07) 0.29 0.22 --(d) Year ended 3/31/2001........................ 15.30 0.03 (2.29) (2.26) (0.01)
- --------------- (a)Total return represents aggregate total return for the period indicated and does not reflect the deduction of any applicable sales charges. (b)The Portfolio's expenses do not include the expenses of the underlying funds. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. (d)Amount represents less than $0.01 per share. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 46 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS NET ASSET NET ASSETS OPERATING NET INVESTMENT FROM NET VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO REALIZED TOTAL END OF TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER GAINS DISTRIBUTIONS PERIOD RETURN(a) (000) NET ASSETS(b) NET ASSETS RATE --------------------------------------------------------------------------------------------------------------- $ -- $(0.09) $12.24 9.07% $132,748 0.25% 0.62% 13% -- (0.03) 11.30 44.84 110,400 0.25 0.45 6 -- (0.03) 7.82 (26.53) 61,985 0.25 0.45 13 -- (0.04) 10.68 3.30 75,284 0.25 0.25 33 (2.85) (2.92) 10.38 (16.52) 66,504 0.25 0.81 58 $ -- $(0.08) $12.19 8.76% $ 93,070 0.50% 0.37% 13% -- (0.02) 11.28 44.51 64,267 0.50 0.20 6 -- (0.01) 7.82 (26.68) 21,559 0.50 0.20 13 -- (0.03) 10.68 3.04 16,967 0.50 0.00 33 (2.85) (2.90) 10.39 (16.50) 9,728 0.50 0.56 58 $ -- $(0.06) $11.72 7.95% $119,995 1.25% (0.38)% 13 -- --(d) 10.91 43.39 88,969 1.25 (0.55) 6 -- -- 7.61 (27.25) 35,069 1.25 (0.55) 13 -- --(d) 10.46 2.25 29,079 1.25 (0.75) 33 (2.85) (2.86) 10.23 (17.18) 14,753 1.25 (0.19) 58 $ -- $(0.06) $11.66 8.00% $ 36,008 1.25% (0.38)% 13% -- --(d) 10.85 43.38 19,340 1.25 (0.55) 6 -- -- 7.57 (27.21) 4,559 1.25 (0.55) 13 -- --(d) 10.40 2.16 3,436 1.25 (0.75) 33 (2.85) (2.86) 10.18 (17.18) 2,198 1.25 (0.19) 58 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS(b) --------------- 0.25% 0.25 0.25 0.25 0.25 0.50% 0.50 0.50 0.50 0.50 1.25% 1.25 1.25 1.25 1.25 1.25% 1.25 1.25 1.25 1.25
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 47 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET INCREASE/ (DECREASE) NET ASSET NET REALIZED IN NET ASSETS DISTRIBUTIONS VALUE NET AND UNREALIZED RESULTING FROM FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME ------------------------------------------------------------------------------- LIFEGOAL BALANCED GROWTH PORTFOLIO PRIMARY A SHARES Year ended 3/31/2005(c)..................... $11.18 $0.19 $ 0.47 $ 0.66 $(0.25) Year ended 3/31/2004(c)..................... 8.77 0.17 2.44 2.61 (0.19) Year ended 3/31/2003(c)..................... 10.38 0.18 (1.58) (1.40) (0.21) Year ended 3/31/2002(c)..................... 10.33 0.31 0.16 0.47 (0.31) Year ended 3/31/2001........................ 11.97 0.44 (0.71) (0.27) (0.42) INVESTOR A SHARES Year ended 3/31/2005(c)..................... $11.20 $0.16 $ 0.47 $ 0.63 $(0.22) Year ended 3/31/2004(c)..................... 8.79 0.15 2.44 2.59 (0.17) Year ended 3/31/2003(c)..................... 10.41 0.16 (1.59) (1.43) (0.19) Year ended 3/31/2002(c)..................... 10.35 0.27 0.19 0.46 (0.29) Year ended 3/31/2001........................ 11.99 0.40 (0.69) (0.29) (0.40) INVESTOR B SHARES Year ended 3/31/2005(c)..................... $11.16 $0.08 $ 0.46 $ 0.54 $(0.14) Year ended 3/31/2004(c)..................... 8.77 0.07 2.43 2.50 (0.10) Year ended 3/31/2003(c)..................... 10.39 0.09 (1.57) (1.48) (0.14) Year ended 3/31/2002(c)..................... 10.35 0.20 0.17 0.37 (0.22) Year ended 3/31/2001........................ 12.00 0.32 (0.70) (0.38) (0.32) INVESTOR C SHARES Year ended 3/31/2005(c)..................... $11.26 $0.08 $ 0.47 $ 0.55 $(0.14) Year ended 3/31/2004(c)..................... 8.85 0.08 2.45 2.53 (0.11) Year ended 3/31/2003(c)..................... 10.49 0.09 (1.60) (1.51) (0.13) Year ended 3/31/2002(c)..................... 10.44 0.20 0.18 0.38 (0.22) Year ended 3/31/2001........................ 12.09 0.34 (0.73) (0.39) (0.31)
- --------------- (a)Total return represents aggregate total return for the period indicated and does not reflect the deduction of any applicable sales charges. (b)The Portfolio's expenses do not include the expenses of the underlying funds. (c)Per share net investment income/(loss) has been calculated using the monthly average shares method. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 48 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS NET ASSET NET ASSETS OPERATING NET INVESTMENT FROM NET VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO REALIZED TOTAL END OF TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER GAINS DISTRIBUTIONS PERIOD RETURN(a) (000) NET ASSETS(b) NET ASSETS RATE --------------------------------------------------------------------------------------------------------------- $(0.11) $(0.36) $11.48 6.02% $220,296 0.25% 1.70% 17% (0.01) (0.20) 11.18 29.95 216,997 0.25 1.63 24 -- (0.21) 8.77 (13.51) 158,377 0.25 1.97 26 (0.11) (0.42) 10.38 4.65 195,436 0.25 3.02 117 (0.95) (1.37) 10.33 (2.39) 194,842 0.25 3.69 106 $(0.11) $(0.33) $11.50 5.75% $156,938 0.50% 1.45% 17% (0.01) (0.18) 11.20 29.60 111,325 0.50 1.38 24 -- (0.19) 8.79 (13.77) 37,750 0.50 1.72 26 (0.11) (0.40) 10.41 4.52 11,343 0.50 2.77 117 (0.95) (1.35) 10.35 (2.61) 4,308 0.50 3.44 106 $(0.11) $(0.25) $11.45 4.94% $271,691 1.25% 0.70% 17% (0.01) (0.11) 11.16 28.63 208,372 1.25 0.63 24 -- (0.14) 8.77 (14.33) 87,911 1.25 0.97 26 (0.11) (0.33) 10.39 3.62 33,519 1.25 2.02 117 (0.95) (1.27) 10.35 (3.37) 13,676 1.25 2.69 106 $(0.11) $(0.25) $11.56 4.99% $ 62,615 1.25% 0.70% 17% (0.01) (0.12) 11.26 28.67 39,204 1.25 0.63 24 -- (0.13) 8.85 (14.41) 7,620 1.25 0.97 26 (0.11) (0.33) 10.49 3.66 3,655 1.25 2.02 117 (0.95) (1.26) 10.44 (3.43) 1,613 1.25 2.69 106 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS(b) --------------- 0.25% 0.25 0.25 0.25 0.25 0.50% 0.50 0.50 0.50 0.50 1.25% 1.25 1.25 1.25 1.25 1.25% 1.25 1.25 1.25 1.25
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 49 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET INCREASE/ (DECREASE) NET ASSET NET REALIZED IN NET ASSETS DISTRIBUTIONS VALUE NET AND UNREALIZED RESULTING FROM FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS OPERATIONS INCOME ---------------------------------------------------------------------------------- LIFEGOAL INCOME AND GROWTH PORTFOLIO PRIMARY A SHARES Year ended 3/31/2005...................... $11.04 $0.25 $ 0.11 $ 0.36 $(0.31) Year ended 3/31/2004...................... 9.62 0.23 1.49 1.72 (0.24) Year ended 3/31/2003...................... 10.35 0.27 (0.71) (0.44) (0.26) Year ended 3/31/2002...................... 10.37 0.40 (0.01) 0.39 (0.36) Year ended 3/31/2001...................... 10.63 0.52 (0.04) 0.48 (0.50) INVESTOR A SHARES Year ended 3/31/2005...................... $11.11 $0.23 $ 0.10 $ 0.33 $(0.28) Year ended 3/31/2004...................... 9.67 0.22 1.50 1.72 (0.22) Year ended 3/31/2003...................... 10.41 0.24 (0.71) (0.47) (0.24) Year ended 3/31/2002...................... 10.43 0.36 0.01 0.37 (0.34) Year ended 3/31/2001...................... 10.69 0.51 (0.06) 0.45 (0.47) INVESTOR B SHARES Year ended 3/31/2005...................... $11.08 $0.14 $ 0.11 $ 0.25 $(0.20) Year ended 3/31/2004...................... 9.66 0.13 1.50 1.63 (0.15) Year ended 3/31/2003...................... 10.41 0.17 (0.71) (0.54) (0.18) Year ended 3/31/2002...................... 10.44 0.29 -- 0.29 (0.27) Year ended 3/31/2001...................... 10.70 0.43 (0.06) 0.37 (0.39) INVESTOR C SHARES Year ended 3/31/2005...................... $11.03 $0.14 $ 0.11 $ 0.25 $(0.20) Year ended 3/31/2004...................... 9.62 0.13 1.49 1.62 (0.15) Year ended 3/31/2003...................... 10.37 0.17 (0.71) (0.54) (0.18) Year ended 3/31/2002...................... 10.40 0.29 -- 0.29 (0.27) Year ended 3/31/2001...................... 10.67 0.43 (0.07) 0.36 (0.39)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated and does not reflect the deduction of any applicable sales charges. (c)The Portfolio's expenses do not include the expenses of the underlying funds. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 50 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS NET ASSET NET ASSETS OPERATING NET INVESTMENT FROM NET VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO REALIZED TOTAL END OF TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS(c) NET ASSETS RATE --------------------------------------------------------------------------------------------------------------- $(0.12) $(0.43) $10.97 3.32% $56,897 0.25% 2.28% 34% (0.06) (0.30) 11.04 18.08 59,040 0.25 2.20 14 (0.03) (0.29) 9.62 (4.22) 33,316 0.25 2.72 34 (0.05) (0.41) 10.35 3.83 25,906 0.25 3.81 37 (0.24) (0.74) 10.37 4.60 15,297 0.25 5.05 35 $(0.12) $(0.40) $11.04 3.05% $42,816 0.50% 2.03% 34% (0.06) (0.28) 11.11 17.93 33,141 0.50 1.95 14 (0.03) (0.27) 9.67 (4.49) 11,027 0.50 2.47 34 (0.05) (0.39) 10.41 3.56 4,241 0.50 3.56 37 (0.24) (0.71) 10.43 4.33 1,487 0.50 4.80 35 $(0.12) $(0.32) $11.01 2.30% $85,762 1.25% 1.28% 34% (0.06) (0.21) 11.08 16.94 80,486 1.25 1.20 14 (0.03) (0.21) 9.66 (5.20) 43,905 1.25 1.72 34 (0.05) (0.32) 10.41 2.77 13,926 1.25 2.81 37 (0.24) (0.63) 10.44 3.55 5,391 1.25 4.05 35 $(0.12) $(0.32) $10.96 2.32% $17,708 1.25% 1.28% 34% (0.06) (0.21) 11.03 16.95 17,469 1.25 1.20 14 (0.03) (0.21) 9.62 (5.23) 5,066 1.25 1.72 34 (0.05) (0.32) 10.37 2.77 1,829 1.25 2.81 37 (0.24) (0.63) 10.40 3.50 1,051 1.25 4.05 35 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS(c) --------------- 0.25% 0.25 0.25 0.25 0.25 0.50% 0.50 0.50 0.50 0.50 1.25% 1.25 1.25 1.25 1.25 1.25% 1.25 1.25 1.25 1.25
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 51 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET INCREASE/ (DECREASE) NET ASSET NET REALIZED IN NET ASSETS DISTRIBUTIONS VALUE NET AND UNREALIZED RESULTING FROM FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT OF PERIOD INCOME/(LOSS)(a) INVESTMENTS OPERATIONS INCOME ---------------------------------------------------------------------------------- LIFEGOAL INCOME PORTFOLIO PRIMARY A SHARES(d) Year ended 3/31/2005...................... $10.31 $0.32 $(0.07) $0.25 $(0.44) Period ended 3/31/2004.................... 10.00 0.23 0.30 0.53 (0.22) INVESTOR A SHARES(d) Year ended 3/31/2005...................... $10.31 $0.31 $(0.09) $0.22 $(0.42) Period ended 3/31/2004.................... 10.00 0.21 0.30 0.51 (0.20) INVESTOR B SHARES(d) Year ended 3/31/2005...................... $10.30 $0.24 $(0.10) $0.14 $(0.34) Period ended 3/31/2004.................... 10.00 0.16 0.31 0.47 (0.17) INVESTOR C SHARES(f) Year ended 3/31/2005...................... $10.28 $0.24 $(0.09) $0.15 $(0.34) Period ended 3/31/2004.................... 10.00 0.16 0.29 0.45 (0.17)
- --------------- (a)Per share net investment income/(loss) has been calculated using the monthly average shares method. (b)Total return represents aggregate total return for the period indicated and does not reflect the deduction of any applicable sales charges. (c)The Portfolio's expenses do not include the expenses of the underlying funds. (d)LifeGoal Income Portfolio Primary A, Investor A and Investor B Shares commenced operations on September 4, 2003. (e)Annualized. (f)LifeGoal Income Portfolio Investor C Shares commenced operations on September 5, 2003. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 52 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS NET ASSET NET ASSETS OPERATING NET INVESTMENT FROM NET VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO REALIZED TOTAL END OF TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER GAINS DISTRIBUTIONS PERIOD RETURN(b) (000) NET ASSETS(c) NET ASSETS RATE --------------------------------------------------------------------------------------------------------------- $(0.04) $(0.48) $10.08 2.47% $ 667 0.42% 3.26% 48% -- (0.22) 10.31 5.31 2,060 0.42(e) 3.39(e) 5 $(0.04) $(0.46) $10.07 2.12% $25,211 0.67% 3.01% 48% -- (0.20) 10.31 5.18 35,964 0.67(e) 3.14(e) 5 $(0.04) $(0.38) $10.06 1.35% $12,740 1.42% 2.36% 48% -- (0.17) 10.30 4.70 9,269 1.42(e) 2.39(e) 5 $(0.04) $(0.38) $10.05 1.46% $ 9,881 1.42% 2.36% 48% -- (0.17) 10.28 4.49 8,340 1.42(e) 2.39(e) 5 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS(c) --------------- 0.87% 0.92(e) 1.12% 1.17(e) 1.87% 1.92(e) 1.87% 1.92(e)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 53 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate Portfolios. These financial statements pertain only to the LifeGoal Portfolios of Funds Trust (each a "Portfolio" and collectively, the "Portfolios"): LifeGoal Growth Portfolio LifeGoal Balanced Growth Portfolio LifeGoal Income and Growth Portfolio LifeGoal Income Portfolio
The Portfolios invest in Nations Mortgage- and Asset-Backed Portfolio and Primary A or Capital Class Shares of other Nations Funds (the "Underlying Funds") distributed by BACAP Distributors, LLC ("BACAP Distributors") and advised by Banc of America Capital Management, LLC ("BACAP"). The Portfolios are authorized to issue an unlimited number of shares without par value and currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. Shareholders of a Portfolio have equal voting rights on matters affecting all shareholders of the Portfolio. In addition, each class of shares of a Portfolio has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolios in the preparation of their financial statements. Securities valuation: Investments in the Underlying Funds are valued at the net asset value of each class of the respective Underlying Fund determined as of the close of the New York Stock Exchange on the valuation date. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Distributions from the Underlying Funds are recorded on the ex-dividend date. Each Portfolio's investment income and realized and unrealized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. Distributions to shareholders: Distributions from net investment income are declared and paid each calendar quarter. The Portfolios may, however, declare and pay distributions from net investment income more frequently. Each Portfolio will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Distributions are recorded on ex-dividend date. Income distributions and capital gain distributions on a Portfolio level are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Federal income tax: Each Portfolio intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of Funds Trust are allocated to the Portfolios based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses are allocated to separate classes of shares based upon their relative net asset value on the date the expenses are incurred. Expenses directly attributable to a Portfolio or class of shares are charged to such Portfolio or class. In addition, the Portfolios indirectly bear their pro rata share of expenses of the Underlying Funds. Indemnifications: In the normal course of business, each Portfolio enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Portfolio's maximum exposure under these arrangements is unknown, as this would involve future claims against the Portfolio that have not yet occurred. Also, under the Funds Trust's organizational documents, the Trustees and Officers of the Funds Trust are indemnified against certain liabilities that may arise out of their duties to the Funds Trust. However, based on experience, the Portfolios expect the risk of loss due to these warranties and indemnities to be minimal. 54 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT ADVISORY FEE, CO-ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with BACAP, a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Portfolios. Under the terms of the Investment Advisory Agreement, BACAP is entitled to receive an advisory fee, calculated daily and paid monthly, at the maximum annual rate of 0.25% of each Portfolio's average daily net assets (excluding LifeGoal Income Portfolio) and has agreed to bear any and all fees and expenses of the Portfolios (excluding LifeGoal Income Portfolio) (other than the investment advisory fee payable under the Investment Advisory Agreement, taxes, brokerage fees and commissions, cost, including interest expenses of borrowing money, extraordinary expenses, and any applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder administration fees). Under the terms of the Investment Advisory Agreement for LifeGoal Income Portfolio, BACAP is entitled to receive an advisory fee, calculated daily and paid monthly based on LifeGoal Income Portfolio's average daily net assets that are invested in direct securities or the Corporate Bond Portfolio, Mortgage- and Asset-Backed Portfolio and/or High Income Portfolio (collectively referred to as the "Fixed Income Sector Portfolios") at the maximum annual rate of 0.50%. LifeGoal Income Portfolio is not charged an advisory fee on its assets that are invested in the Nations Funds (Nations Funds do not include the Fixed Income Sector Portfolios.) BACAP Distributors, a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. BACAP Distributors received no compensation for its services as administrator from the Portfolios (excluding LifeGoal Income Portfolio). Under the administration agreement, BACAP Distributors is entitled to receive an administration fee, calculated daily and paid monthly, at a maximum annual rate of 0.23% of the average daily net assets for the LifeGoal Income Portfolio. For the year ended March 31, 2005, BACAP Distributors earned 0.23% on LifeGoal Income Portfolio's assets that were invested in the Fixed Income Sector Portfolios and 0.13% on LifeGoal Income Portfolio's assets invested in the Nations Funds. The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. Bank of America serves as custodian of Funds Trust (excluding LifeGoal Income Portfolio) on behalf of the Portfolios' assets. The Bank of New York serves as custodian of Funds Trust on behalf of LifeGoal Income Portfolio's assets. PFPC Inc. serves as the transfer agent for the Portfolios' shares. Bank of America serves as sub-transfer agent for the Portfolios' Primary A Shares. Bank of America is entitled to receive from the transfer agent a fee equal to the costs incurred by Bank of America in providing services pursuant to its obligations as sub-transfer agent at the annual rate of up to 0.01% of the net assets attributable to the Primary A shares of each Portfolio. For the year ended March 31, 2005, Bank of America earned the following sub-transfer agent fees from the Portfolios for providing such services.
SUB-TRANSFER AGENT FEE PORTFOLIO (000) - -------------------------------------------------------------------------------------- Growth...................................................... $ --* Balanced Growth............................................. --* Income and Growth........................................... --* Income...................................................... 2
- --------------- *Amount represents less than $500. 55 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) BACAP Distributors serves as distributor of the Funds' shares. For the year ended March 31, 2005, the Funds were informed that the distributor received the following:
FRONT END SALES CONTINGENT DEFERRED CHARGE SALES CHARGE (000) (000) --------------- -------------------------------------- PORTFOLIO INVESTOR A INVESTOR A INVESTOR B INVESTOR C - ----------------------------------------------------------------------------------------------------------------------- Growth...................................................... $ 916 $--* $208 $10 Balanced Growth............................................. 1,549 --* 496 22 Income and Growth........................................... 322 -- 195 12 Income...................................................... 93 22 28 9
- --------------- *Amount represents less than $500. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as a Director or Officer of Funds Trust. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Portfolios in accordance with federal securities regulations. Each Portfolio, along with other affiliated funds, pays its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. Each Portfolio's fee will not exceed $15,000 per year. As of March 31, 2005, the fees paid for the Office of the Chief Compliance Officer were as follows:
(000) ----- Income...................................................... $3
This amount is included in "Other Expenses" on the Statements of Operations. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Portfolios' assets (excluding LifeGoal Growth, LifeGoal Balanced Growth, and LifeGoal Income and Growth). Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of the Nations Treasury Reserves. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statement of operations for LifeGoal Income Portfolio. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statements of assets and liabilities for LifeGoal Income Portfolio. A significant portion of each Portfolio's Primary A Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. 3. TOTAL OPERATING EXPENSE LIMITATIONS For the year ended March 31, 2005, BACAP Distributors agreed to waive 0.10% of its administration fees for LifeGoal Income Portfolio as a percentage of the LifeGoal Income Portfolio's average daily net assets that are invested in the Nations Funds. BACAP and/or its affiliates may, from time to time, reduce its fee payable by each Portfolio. For the year ended March 31, 2005, BACAP agreed to waive 0.10% of its advisory fees for LifeGoal Income Portfolio as a percentage of the Portfolio's average daily net assets that were invested in direct securities or the Fixed Income Sector Portfolios. For the year ended March 31, 2005, BACAP voluntarily agreed to limit total annual operating expenses to 0.42% of LifeGoal Income Portfolio's average daily net assets. There is no guarantee that this limitation will continue. 4. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS Funds Trust has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Portfolio, and a combined distribution and shareholder servicing plan for the Investor A Shares of each Portfolio. The shareholder servicing plans permit the Portfolios to compensate or reimburse servicing agents for shareholder 56 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) services provided by the servicing agents. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940 Act, permit the Portfolios to compensate or reimburse the distributor and/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 and paid monthly, as a percentage of average daily net assets, set from time to time by the Board of Trustees, and are charged as expenses of each Portfolio directly to the applicable class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BACAP. For the year ended March 31, 2005, the annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT RATE PLAN (AFTER FEE WAIVER) LIMIT --------------------------- Investor A Combined Shareholder Servicing and Distribution Plan....................................................... 0.25% 0.25% Investor B and Investor C Shareholder Servicing Plans...... 0.25% 0.25% Investor B and Investor C Distribution Plans............... 0.75% 0.75%
5. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from distribution reclassifications and dividends received from underlying mutual funds were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED/ (OVERDISTRIBUTED) ACCUMULATED NET INVESTMENT INCOME/(LOSS) NET REALIZED GAIN/(LOSS) PAID-IN CAPITAL PORTFOLIO (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- Growth.............................................. $1,663 $(1,663) $ -- Balanced Growth..................................... 3,917 (3,917) -- Income and Growth................................... 1,004 (1,004) -- Income.............................................. 549 (549) --
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 ------------------------- ------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME CAPITAL GAINS INCOME CAPITAL GAINS PORTFOLIO (000) (000) (000) (000) - -------------------------------------------------------------------------------------------------------------------- Growth...................................................... $ 2,169 $ 18 $ 355 $ -- Balanced Growth............................................. 13,075 4,131 6,799 622 Income and Growth........................................... 4,973 1,547 2,812 569 Income...................................................... 2,206 106 643 --
- --------------- *For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 57 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
NET UNDISTRIBUTED UNDISTRIBUTED UNREALIZED ORDINARY LONG-TERM APPRECIATION INCOME CAPITAL GAINS (DEPRECIATION)* PORTFOLIO (000) (000) (000) - --------------------------------------------------------------------------------------------------------------- Growth...................................................... $ -- $ 343 $34,721 Balanced Growth............................................. 586 8,454 47,666 Income and Growth........................................... 250 7,529 4,232 Income...................................................... -- 105 (712)
- --------------- *The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to deferral of losses from wash sales. Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION) PORTFOLIO (000) (000) (000) - ------------------------------------------------------------------------------------------------------------ Growth...................................................... $35,630 $ (909) $34,721 Balanced Growth............................................. 51,723 (4,057) 47,666 Income and Growth........................................... 7,146 (2,914) 4,232 Income...................................................... 146 (858) (712)
During the year ended March 31, 2005, the following Portfolio utilized capital losses as follows:
CAPITAL LOSSES UTILIZED FUND (000) - ------------------------------------------------------------------------------------- Growth...................................................... $7,306
6. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of the Underlying Funds for the year ended March 31, 2005, were as follows:
PURCHASES SALES PORTFOLIO (000) (000) - --------------------------------------------------------------------------------- Growth..................................................... $116,852 41,035 Balanced Growth............................................ 221,709 104,769 Income and Growth.......................................... 76,906 67,006 Income..................................................... 26,037 30,803
7. SHARES OF BENEFICIAL INTEREST As of March 31, 2005, an unlimited number of shares of beneficial interest without par value were authorized for Funds Trust. Funds Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any authorized, but unissued shares into one or more additional classes or series of shares. Investor B Shares generally convert to Investor A Shares based on the following conditions:
INVESTOR B SHARES PURCHASED: WILL CONVERT TO INVESTOR A SHARES AFTER: - ---------------------------------------------------------------------------------------------- - -- after November 15, 1998 Eight years - -- between August 1, 1997 and November 15, 1998 $0 - $249,999 Nine years $250,000 - $499,999 Six years $500,000 - $999,999 Five years - -- before August 1, 1997 Nine years
See Schedules of capital stock activity. 58 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Portfolios had no borrowings during the fiscal year or outstanding as of March 31, 2005. 9. RISK FACTORS OF THE PORTFOLIOS AND THE UNDERLYING FUNDS Investing in the Underlying Funds through the Portfolios involves certain additional expenses and possible risks that would not be present in a direct investment in the Underlying Funds. Under certain circumstances, an Underlying Fund may pay a redemption request by a Portfolio wholly or partly by a distribution in kind of securities from its portfolio, instead of cash, in accordance with the rules of the Securities and Exchange Commission. In such cases, the Portfolios may hold securities distributed by an Underlying Fund and incur custody and other costs until BACAP determines that it is appropriate to dispose of such securities. The Officers and Trustees of Funds Trust also serve as Officers and Trustees of the Underlying Funds. In addition, BACAP Distributors and BACAP are wholly-owned subsidiaries of Bank of America. Conflicts may arise as these companies seek to fulfill their fiduciary responsibilities to both the Portfolios and the Underlying Funds. From time to time, one or more of the Underlying Funds a Portfolio invests in may experience relatively large investments or redemptions due to reallocations or rebalancings by the Portfolios as recommended by BACAP. In such event, the Underlying Funds that experience redemptions as a result of the reallocations or rebalancings may have to sell portfolio securities, and the Underlying Funds that receive additional cash will have to invest such cash. While it is impossible to predict the overall impact of these transactions over time, there could be adverse effects on portfolio management to the extent that the Underlying Funds may be required to sell securities or invest cash at times when they would not otherwise have to do so. These transactions could also have tax consequences if sales of securities resulted in gains and could also increase transaction costs. BACAP, representing the interests of the Underlying Funds, is committed to minimizing the impact of Portfolio transactions on the Underlying Funds to the extent it is consistent with pursuing the investment objectives of the Portfolios. BACAP may, nevertheless, face conflicts of interest in fulfilling its responsibilities to both the Portfolios and the Underlying Funds. Investing in the Underlying Funds also presents certain risks. Each of the Underlying Funds may invest in certain specified derivative securities, including but not limited to: interest rate and equity swaps, caps and floors for hedging purposes; exchange-traded options; over-the-counter options executed with primary dealers, including long calls and puts and covered calls and financial futures and options. Certain of the Underlying Funds may invest in restricted securities; instruments issued by trusts, partnerships or other issuers, including pass-through certificates representing participations in, or debt instruments backed by, the securities owned by such issuers. These Underlying Funds also may engage in securities lending, reverse repurchase agreements and dollar roll transactions. In addition, certain of the Underlying Funds may invest in below-investment grade debt, debt obligations of foreign issuers and stocks of foreign corporations, securities in foreign investment funds or trusts and various other investment vehicles, each with inherent risks. 10. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. 59 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. 60 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations LifeGoal Growth Portfolio, Nations LifeGoal Balanced Growth Portfolio, Nations LifeGoal Income and Growth Portfolio and Nations LifeGoal Income Portfolio (constituting part of Nations Funds Trust, hereafter collectively referred to as the "Portfolios") at March 31, 2005, the results of each of their operations, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 61 NATIONS FUNDS FEDERAL INCOME TAX INFORMATION (UNAUDITED) NATIONS LIFEGOAL GROWTH PORTFOLIO For the fiscal year ended March 31, 2005, the Portfolio designates long-term capital gains of $18,366. 100.00% of the ordinary income (including short-term capital gains) distributed by the Portfolio, or the maximum allowable for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 100.00% of the ordinary income (including short-term capital gains) distributed by the Portfolio or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Portfolio for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO For the fiscal year ended March 31, 2005, the Portfolio designates long-term capital gains of $4,131,182. 20.59% of the ordinary income (including short-term capital gains) distributed by the Portfolio, or the maximum allowable for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 25.49% of the ordinary income (including short-term capital gains) distributed by the Portfolio or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Portfolio for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO For the fiscal year ended March 31, 2005, the Portfolio designates long-term capital gains of $1,547,984. 13.51% of the ordinary income (including short-term capital gains) distributed by the Portfolio, or the maximum allowable for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 14.77% of the ordinary income (including short-term capital gains) distributed by the Portfolio or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Portfolio for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. NATIONS LIFEGOAL INCOME PORTFOLIO For the fiscal year ended March 31, 2005, the Portfolio designates long-term capital gains of $106,194. 0.54% of the ordinary income (including short-term capital gains) distributed by the Portfolio, or the maximum allowable for the year ended March 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 0.55% of the ordinary income (including short-term capital gains) distributed by the Portfolio or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Portfolio for the period April 1, 2004 to March 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. 62 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director -- Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
63 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
64 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 65 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Board of Trustees (the "Board") of Nations Funds Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not "interested persons" of the Trust, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory agreement and approve any newly proposed terms therein. In this regard, the Board reviewed and re-approved, during the most recent six months covered by this report, an investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for Nations LifeGoal Growth Portfolio, Nations LifeGoal Balanced Growth Portfolio, Nations LifeGoal Income and Growth Portfolio and Nations LifeGoal Income Portfolio (the "Advisory Agreement"). The portfolios identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at a meeting held on November 17-18, 2004, the Board, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the re-approval of the Advisory Agreement. Nature, Extent and Quality of Services The Board received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP under the Advisory Agreement. The most recent investment adviser registration form ("Form ADV") for BACAP was provided to the Board, as were responses of BACAP to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Board reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds by, investment personnel of BACAP. In this regard, the Board specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Board received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds and BACAP. The Board considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Board also considered the Funds' Chief Compliance Officer's report and recommendations. The Board evaluated the ability of BACAP, based on its resources, reputation and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Board considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Board considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Board concluded that it was generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP. Fund Performance and Expenses The Board considered the one-year, three-year and five-year performance results for each of the Funds except the Nations LifeGoal Income Portfolio, which had performance results of less than one year because of its recent inception date. For these Funds, the Board also considered these results in comparison to the performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain Funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that of expenses to provide a more accurate basis of comparison. The Board was provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. 66 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) (CONTINUED) The Board also considered information in the Lipper data that ranked each Fund based on: (i) each Fund's one-year performance compared to actual management fees; (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Board of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Board (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Board considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Board also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Board noted that the performance of each Fund was better than, or not substantially below, each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Board received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. It also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe. Such comparative data was provided by Lipper. The Board noted that the overall expense ratios of Nations LifeGoal Growth Portfolio, Nations LifeGoal Income and Growth Portfolio and Nations LifeGoal Income Portfolio were lower than, or not appreciably above, each Fund's Peer Group's median total expense ratio and did not require significant additional consideration by the Board. Management also discussed the Lipper data and rankings, and other relevant information, for each Fund. Based on the above-referenced considerations and other factors, the Board concluded that the overall performance and expense results supported the re-approval of the Advisory Agreement for each Fund. Investment Advisory Fee Rates The Board reviewed and considered the proposed contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). In addition, the Board reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). The Board noted that, on a complex-wide basis, BACAP and Columbia Management Advisors, Inc. ("Columbia") were proposing to reduce annual investment advisory and administration fees by $32 million per year pursuant to an agreement in principle entered into with the New York Attorney General ("NYAG") on March 15, 2004 to settle a civil complaint filed by the NYAG against BACAP and certain of its affiliates relating to trading in mutual fund shares. At the November meetings, the Board also considered and approved BACAP's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type on a complex-wide basis. The Board also considered the reduction in the advisory agreement rates for certain individual Funds that would result from the fee reductions and adoption of a standardized breakpoint schedule. Additionally, the Board received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. The Board noted that BACAP had waived its entire management fee under the Advisory Agreement Rate and that, accordingly, no fees had been charged under the Net Advisory Rate for Nations LifeGoal Income Portfolio. The Board concluded that the Advisory Agreement Rate and Net Advisory Rate for Nations LifeGoal Growth Portfolio and Nations LifeGoal Income Portfolio were lower than the median of their respective Peer Groups. 67 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) (CONTINUED) The Board noted that Nations LifeGoal Balanced Growth Portfolio required additional review as a result of its 4th and 5th quintile Peer Group ratings for its Advisory Agreement Rate and Net Advisory Rate, respectively, but the Board considered that the Fund ranked in the 2nd and 1st quintiles for its one-and three-year performance periods against its Universe, respectively. In addition, the Board considered that the total expense ratio for the Fund were lower than the average expense ratio of its Peer Group. The Board also noted that Nations LifeGoal Income and Growth Portfolio required additional review as a result of its 4th quintile rating for its Advisory Agreement Rate and 5th quintile rating for its Net Advisory Rate. The Board considered, however, that the Fund performed in the 3rd and 2nd quintiles against its Universe for the one- and three-year performance periods, respectively, and that the Fund's total expense ratio was appreciably lower than the median overall expense ratio of its Peer Group. The Board concluded that these and other factors supported the Advisory Agreement Rates and the Net Advisory Rates, and approved the Advisory Agreement for all of the Funds. Profitability The Board received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates. The Board concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. Economies of Scale The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board observed that the Advisory Agreement for the Funds did not offer breakpoints. However, the Board considered the Advisory Agreement Rates of the Funds and concluded that the fees were fair and equitable based on relevant factors, including the Funds' performance results. The Board acknowledged the inherent limitations of any analysis of an investment adviser's economies of scale and of any attempt to correlate breakpoints with such economies, stemming largely from the Board's understanding that economies of scale are realized, if at all, by an investment adviser across a variety of products and services, not just with respect to a single fund. Information About Services to Other Clients The Board also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP to its other clients, including institutional separate account investors. The Board concluded that the Advisory Agreement Rates and the Net Advisory Rates were appreciably lower than the fee rates offered to other BACAP clients. Other Benefits to BACAP The Board received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP as a result of its relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates). The Board also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, including whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Board also reviewed the respective policies of BACAP regarding the allocation of portfolio investment opportunities among the Funds and other clients. 68 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) (CONTINUED) Other Factors and Broader Review The Board also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Board noted that the Funds in the Nations Funds complex are generally utilized primarily by fiduciary accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. As discussed above, the Board reviews detailed materials received from BACAP annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Funds receive throughout the year. In this regard, the Board reviews reports of BACAP at least in each of its quarterly meetings, which include, among other things, a detailed portfolio review and detailed fund performance reports. In addition, the Board interviews the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and its evaluation of the information provided to it, the Board concluded that re-approval of the Advisory Agreement for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Board unanimously re-approved the Advisory Agreement. 69 NATIONS FUNDS SHAREHOLDER MEETING RESULTS (UNAUDITED) RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: PROPOSAL 1.
ELECTION OF TRUSTEES: FOR WITHHELD - ------------------------------------------------------------------------------------------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
70 THE NATIONS FUNDS HIGHER RISK/REWARD POTENTIAL FAMILY OF FUNDS THE MUTUAL FUND FAMILY OF BANC OF AMERICA CAPITAL MANAGEMENT INTERNATIONAL/ GLOBAL WITHIN EACH CATEGORY, FUNDS THE FUNDS ARE LISTED FROM AGGRESSIVE TO CONSERVATIVE. EQUITY Nations Marsico FUNDS International FIXED Opportunities Fund INCOME FUNDS GROWTH FUNDS Nations International MONEY Equity Fund MARKET Nations Small FUNDS TAXABLE Company Fund Nations International INCOME FUNDS Value Fund Nations Marsico Nations Cash Nations High Yield 21st Century Fund Nations Global Reserves Bond Fund Value Fund Nations MidCap Nations Money Nations Strategic Growth Fund Market Reserves Income Fund Nations Marsico LOWER RISK/REWARD POTENTIAL Nations Government Nations Bond Fund Focused Equities Reserves Fund Nations Intermediate Nations Treasury Bond Fund Nations Marsico Reserves Growth Fund Nations Government Nations Tax-Exempt Securities Fund Reserves BLEND FUNDS SPECIALTY FUNDS Nations Short- Nations Municipal Intermediate Nations Asset Reserves Government Fund Allocation Fund INDEX FUNDS Nations California Nations Short-Term Nations Strategic Nations SmallCap Index Fund Tax-Exempt Reserves Income Fund Growth Fund Nations MidCap Index Fund Nations New York Tax-Exempt Reserves TAX-EXEMPT VALUE FUNDS Nations LargeCap Index Fund INCOME FUNDS Nations SmallCap Nations LargeCap Enhanced Nations Municipal Value Fund Core Fund Income Fund Nations MidCap Nations State-Specific Value Fund ASSET ALLOCATION Long-Term Municipal PORTFOLIOS Bond Funds (CA, FL) Nations Value Fund Nations LifeGoal Nations Intermediate Growth Portfolio Municipal Bond Fund Nations LifeGoal Balanced Nations State-Specific Growth Portfolio Intermediate Municipal Bond Funds (CA, FL, Nations LifeGoal Income and GA, KS, MD, NC, SC, Growth Portfolio TN, TX, VA) Nations LifeGoal Nations Short-Term Income Portfolio Municipal Income Fund OTHER SPECIALTY FUNDS Nations Convertible Securities Fund NF-02/059V-0405 (05/05) 05/5728
Fixed Income Sector Portfolios ---------------------------------------------------------------- Annual report for the year ended March 31, 2005 CORPORATE BOND PORTFOLIO HIGH INCOME PORTFOLIO MORTGAGE- AND ASSET-BACKED PORTFOLIO [NATIONS FUNDS LOGO] A description of the policies and procedures that each portfolio uses to determine how to vote proxies and a copy of the portfolio's voting record are available (i) at www.nationsfunds.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-626-2275 (institutional investors) and 800-321-7854 (individual investors). Information regarding how each portfolio voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the portfolio voted proxies relating to portfolio securities is also available from the portfolio's website. Each portfolio files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The portfolio's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 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. BACAP DISTRIBUTORS, LLC and Banc of America Capital Management, LLC are the distributor and investment advisor to Nations Funds, respectively. They and other affiliates of Bank of America provide services to Nations Funds and receive fees for such services. BACAP DISTRIBUTORS, LLC, MEMBER NASD, SIPC.
- ---------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - ----------------------------------------------------------------------
PRESIDENT'S LETTER [PHOTO WILSON] DEAR SHAREHOLDER: Columbia Management, the asset management division of Bank of America, is in the process of combining various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. Our objective is to provide our shareholders with the best products and services possible. A number of changes are in the works that we believe may offer significant benefits for our shareholders. Some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes later this year. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have reduced management fees for many funds as part of our settlement agreement with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Nations Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ CHRISTOPHER WILSON Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. TABLE OF CONTENTS PORTFOLIO COMMENTARY Corporate Bond Portfolio 3 High Income Portfolio 8 Mortgage- and Asset-Backed Portfolio 13 FINANCIAL STATEMENTS Investment Portfolios 18 Statements of assets and liabilities 30 Statements of operations 31 Statements of changes in net assets 32 Schedules of capital stock activity 34 Financial highlights 35 Notes to financial statements 38 Report of independent registered public accounting firm 46 Tax information 47 Fund governance 48 Board consideration and re-approval of investment advisory agreement 51 Shareholder meeting results 54
The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Nations Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Nations Fund. References to specific company securities should not be construed as a recommendation or investment advice. CORPORATE BOND PORTFOLIO PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, THE PORTFOLIO'S MANAGER SHARES HIS VIEWS ON CORPORATE BOND PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, AND HIS OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks to maximize total return consistent with investing at least 80% of its assets in a diversified portfolio of corporate bonds. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Corporate Bond Portfolio provided shareholders with a total return of 1.25%. - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. The portfolio's investment style and philosophy are based upon our belief that the level of fixed-income total returns and consistency of returns we strive for may be achieved through a disciplined risk management process. We focus on managing interest rate risk and emphasize a quantitative approach to sector allocation, sector rotation and relative value security selection. The Corporate Bond Portfolio seeks to outperform the Lehman Brothers U.S. Credit Index,** a broad-based measure of the bond market as a whole. The index currently has an average duration of approximately 5.88 years and includes publicly issued investment-grade corporate debt with maturities longer than one year. Duration is a measure of a portfolio's interest rate sensitivity. HOW DID THE PORTFOLIO PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Corporate Bond Portfolio returned 1.25% compared with 0.84% for its benchmark, the Lehman Brothers U.S. Credit Index. The portfolio's emphasis on utility and financial company bonds aided performance relative to the benchmark as did an overweight in lower-rated bonds. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? Relatively strong, stable economic growth prompted the Federal Reserve (the Fed) to begin raising a key lending rate, the federal funds rate, in June 2004. As a result, short- to intermediate-term interest rates rose, as typically happens when the Fed shifts its policy in favor of higher rates. However, longer-term interest rates either rose much less or declined, which was uncharacteristic given the Fed's actions. In fact, the longer the bond maturity, the more the interest rate declined. This environment was also conducive to corporate bonds, which historically have performed better than other fixed income sectors when economic growth is steady and inflation is relatively low. WHAT INVESTMENT DECISIONS HELPED THE PORTFOLIO'S PERFORMANCE?*** We anticipated that an expanding economy would continue to provide a beneficial backdrop for corporate bonds. We focused on both utility bonds and high quality financial companies that would benefit from stable economic growth. In addition, the portfolio had more exposure to BBB-rated corporate bonds than its benchmark. These bonds generally outperformed higher quality securities. *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **Lehman Brothers U.S. Credit Index is an unmanaged index of publicly issued investment grade corporate, securities and dollar-denominated SEC registered global debentures. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 CORPORATE BOND PORTFOLIO PORTFOLIO MANAGER COMMENTARY (continued) WHAT INVESTMENT DECISIONS DETRACTED FROM PORTFOLIO PERFORMANCE? Although the portfolio's corporate bonds outperformed the index, the portfolio would have benefited from additional holdings in more economically sensitive, lower quality industrial corporate bonds. HOW HAVE YOU POSITIONED THE PORTFOLIO TO REFLECT YOUR OUTLOOK GOING FORWARD? Corporate bonds have performed quite well over the last several years and now largely reflect the growth prospects of the US economy. However we believe that this fiscal year is likely to be more challenging. As a result, we plan to upgrade quality where we think it appropriate, while still maintaining exposure to the expanding economy. --------------------------------------------------- Brian Drainville has managed the portfolio since March 2005. Mr. Drainville is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. The portfolio was formally managed by the Fixed Income Management Team. 4 CORPORATE BOND PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE The information on this page is intended to help you understand your ongoing costs of investing in the portfolio. The table below reflects the fact that no fees or expenses are charged to the portfolio. Participants in the wrap fee programs eligible to invest in the portfolio pay an asset-based fee for investment services, brokerage services and investment consultation, which fee is negotiable. Please read the wrap program documents for information regarding fees charged. The information in the table is based on an initial investment of $1,000, which is invested at the beginning of the six-month reporting period and held for the entire period. The amount listed as "actual" is calculated using the portfolio's actual total return for the period. The amount listed as hypothetical is calculated using a hypothetical annual return of 5%. You should not use the hypothetical account value to estimate your actual account balance.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID OCTOBER 1, 2004 MARCH 31, 2005 DURING PERIOD* --------------- -------------- -------------- Actual...................................................... $1,000.00 $1,006.68 $-- Hypothetical................................................ $1,000.00 $1,024.93 $--
* No fees or expenses are charged to the portfolio. Participants in wrap fee programs pay asset based fees that are not included in this table. 5 CORPORATE BOND PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 92.1% Corporate fixed-income bonds and notes 3.9% Government agencies and obligations 4.0% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 General Electric Capital, 6.750% 03/15/32 2.3% ------------------------------------------------- 2 Bank One, 6.000% 08/01/08 2.0% ------------------------------------------------- 3 Deutsche Telekom International Finance BV, 8.500% 06/15/10 1.8% ------------------------------------------------- 4 DaimlerChrysler N.A. Holdings, 4.050% 06/04/08 1.5% ------------------------------------------------- 5 Goldman Sachs Group, 6.600% 01/15/12 1.5% ------------------------------------------------- 6 Ford Motor Credit, 7.375% 02/01/11 1.4% ------------------------------------------------- 7 International Lease Finance, 3.500% 04/01/09 1.4% ------------------------------------------------- 8 Countrywide Home Loans, 5.500% 08/01/06 1.3% ------------------------------------------------- 9 Verizon Pennsylvania, 5.650% 11/15/11 1.3% ------------------------------------------------- 10 Sprint Capital, 8.375% 03/15/12 1.2% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE PORTFOLIO MAY INVEST.
6 CORPORATE BOND PORTFOLIO PERFORMANCE GROWTH OF $10,000 INVESTMENT [LINE GRAPH]
INVESTOR A SHARES (AS OF 3/31/05) CORPORATE BOND PORTFOLIO LEHMAN BROTHERS U.S. CREDIT INDEX Assumes the reinvestment of all distributions ------------------------ --------------------------------- Aug. 30 2002 10000.00 10000.00 10699.00 10778.00 11143.00 11295.00 11154.00 11280.00 2003 11195.00 11336.00 11537.00 11707.00 11155.00 11305.00 11603.00 11781.00 2004 11790.00 11929.00 Mar. 31 2005 11681.00 11804.00
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION (8/30/02 through 3/31/05) 6.19%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Corporate Bond Portfolio from the inception of the Portfolio. The Lehman Brothers U.S. Credit Index includes publicly issued investment grade corporate securities and dollar-denominated SEC registered global debentures. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05) Inception date 8/30/02 - ------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.25% - ------------------------------------------------------------------------- AVERAGE ANNUAL RETURN SINCE INCEPTION 6.19%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 7 HIGH INCOME PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE PORTFOLIO'S MANAGERS SHARE THEIR VIEWS ON HIGH INCOME PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks to maximize total return consistent with investing at least 80% of its assets in a diversified portfolio of high-yield debt securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, High Income Portfolio provided shareholders with a total return of 4.54%. - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. The portfolio's investment style and philosophy are based upon our belief that the level and consistency of fixed-income total returns for which we strive may be achieved through a disciplined risk-management process. We focus on managing risk through diversification, and we emphasize sector allocation and relative value in our security selection. The High Income Portfolio seeks to outperform the Citigroup BB/B High Yield Index,** a credit-quality specific measure of the below investment-grade bond market. The index has an average duration of approximately 4.69 years and comprises all publicly-issued BB and B rated corporate bonds. HOW DID THE PORTFOLIO PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, High Income Portfolio returned 4.54% compared with 6.43% for its benchmark, the Citigroup BB/B High Yield Index. The portfolio underperformed the index because it had a heavier weighting in high quality bonds than its benchmark. In addition, the portfolio emphasized bonds with relatively short duration as well as callable bonds, which were trading near their call price, and as such, had limited potential for price appreciation during the period. WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? A relatively strong economy and stable interest rates created a favorable environment for investors who were willing to take on higher risk. Bank lenders were liberal in extending credit to companies and default rates continued to decline. These factors favored lower-quality, higher yielding bonds within the high-yield universe. These bonds delivered better returns than the higher quality, lower yielding bonds that constituted a large portion of the portfolio's holdings. *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **The Citigroup BB/B High Yield Index measures the performance of below investment-grade debt securities rated BB or B by Standard & Poor's Corporation that are issued by corporations domiciled in the United States or Canada. All bonds in the index are publicly placed, have a fixed coupon and are non-convertible. The index is unavailable for investment and does not reflect fees, brokerage commissions and other expenses of investing. INVESTING IN HIGH YIELD SECURITIES (COMMONLY KNOWN AS "JUNK BONDS") OFFERS THE POTENTIAL FOR HIGH CURRENT INCOME AND ATTRACTIVE TOTAL RETURN, BUT INVOLVES CERTAIN RISKS. CHANGES IN ECONOMIC CONDITIONS OR OTHER CIRCUMSTANCES MAY ADVERSELY AFFECT A JUNK BOND ISSUER'S ABILITY TO MAKE PRINCIPAL AND INTEREST PAYMENTS. RISING INTEREST RATES TEND TO LOWER THE VALUE OF ALL BONDS. SOURCE FOR ALL STATISTICAL DATA -- BANC OF AMERICA CAPITAL MANAGEMENT, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 8 HIGH INCOME PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) WHAT INVESTMENT DECISIONS HELPED THE PORTFOLIO'S PERFORMANCE?+ The portfolio's investments in utilities, including El Paso and AES, bolstered performance. During the period we sold El Paso. AES experienced improved results and put excess free cash to work to reduce its debt and improve its balance sheet. Bonds of wireless telephone provider Nextel Communications also had strong returns, which culminated in a December announcement of the firm's merger with Sprint, an investment-grade company. WHAT INVESTMENT DECISIONS DETRACTED FROM PORTFOLIO PERFORMANCE? The portfolio's positions in high quality, low duration bonds that were trading at or near their call price detracted from performance. In addition, the portfolio carried a large cash position for much of the year, which was an additional drag on performance. DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE PORTFOLIO? Yes, since taking over management responsibility for the portfolio in October, we have added lower quality bonds to the portfolio. We focused on companies that we believe can reduce their debt levels over time and have valuable assets. We are comfortable with these new positions because we believe a relatively strong economic environment should continue to benefit corporate borrowers. We also reduced the portfolio's cash balance, which had accumulated before we took over management of the portfolio. HOW HAVE YOU POSITIONED THE PORTFOLIO TO REFLECT YOUR OUTLOOK FOR THE HIGH-YIELD MARKET? Although we do not believe that high-yield bonds offer the same compelling value as they did a year ago, we continue to believe that the sector has the potential to provide returns that are competitive with other fixed income assets. The economy has continued to grow, interest rates have risen gradually, and default rates have declined -- all positive factors for the sector. In this environment, we will continue to seek to identify those bonds with improving credit profiles that represent attractive relative and absolute value. --------------------------------------------------- Kevin L. Cronk has co-managed Nations High Income Portfolio since October 2004. Mr. Cronk is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Thomas A. LaPointe has co-managed the fund since October 2004. Mr. LaPointe is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Prior to October 2004, the portfolio was managed by the High Yield Team. +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 9 HIGH INCOME PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE The information on this page is intended to help you understand your ongoing costs of investing in the portfolio. The table below reflects the fact that no fees or expenses are charged to the portfolio. Participants in the wrap fee programs eligible to invest in the portfolio pay an asset-based fee for investment services, brokerage services and investment consultation, which fee is negotiable. Please read the wrap program documents for information regarding fees charged. The information in the table is based on an initial investment of $1,000, which is invested at the beginning of the six-month reporting period and held for the entire period. The amount listed as "actual" is calculated using the portfolio's actual total return for the period. The amount listed as hypothetical is calculated using a hypothetical annual return of 5%. You should not use the hypothetical account value to estimate your actual account balance.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID OCTOBER 1, 2004 MARCH 31, 2005 DURING PERIOD* --------------- -------------- -------------- Actual...................................................... $1,000.00 $1,002.29 $-- Hypothetical................................................ $1,000.00 $1,024.93 $--
* No fees or expenses are charged to the portfolio. Participants in wrap fee programs pay asset based fees that are not included in this table. 10 HIGH INCOME PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 88.1% Corporate fixed-income bonds and notes 11.9% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Dow Jones CDX HY 3, 8.000% 12/29/09 16.4% ------------------------------------------------- 2 Building Materials Corp. of America, 7.750% 07/15/05 3.3% ------------------------------------------------- 3 Park Place Entertainment, 7.875% 12/15/05 3.0% ------------------------------------------------- 4 Methanex, 7.750% 08/15/05 3.0% ------------------------------------------------- 5 Ryerson Tull, 9.125% 07/15/06 2.9% ------------------------------------------------- 6 Beazer Homes USA, 6.500% 11/15/13 2.9% ------------------------------------------------- 7 KB Home, 5.750% 02/01/14 2.8% ------------------------------------------------- 8 United Agri Products, 8.250% 12/15/11 2.4% ------------------------------------------------- 9 Crown European Holdings SA, 10.875% 03/01/13 1.7% ------------------------------------------------- 10 US Unwired, 10.000% 06/15/12 1.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE PORTFOLIO MAY INVEST.
11 HIGH INCOME PORTFOLIO PERFORMANCE GROWTH OF $10,000 INVESTMENT [LINE GRAPH]
INVESTOR A SHARES (AS OF 3/31/05) HIGH INCOME PORTFOLIO CITIGROUP BB/B HIGH YIELD INDEX Assumes the reinvestment of all distributions --------------------- ------------------------------- Aug. 30 2002 10000.00 10000.00 10602.00 11319.00 11248.00 12297.00 11371.00 12528.00 2003 11868.00 13274.00 12163.00 13544.00 12225.00 13425.00 12684.00 14066.00 2004 12941.00 14596.00 Mar. 31 2005 12715.00 14414.00
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION (8/30/02 through 3/31/05) 9.73%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in High Income Portfolio from the inception of the Portfolio. Figures for the Citigroup BB/B High Yield Index dollar-denominated market index comprised of various fixed income securities rated either BB or B by the Standard & Poor's Corporation. All bonds included in the index must be nonconvertible, have at least one year remaining to maturity, and have an outstanding par value of at least $100 million, include reinvestment of dividends. The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. Index performance is from 8/31/02. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05) Inception date 8/30/02 - ------------------------------------------------------------------------- 1 YEAR PERFORMANCE 4.54% - ------------------------------------------------------------------------- AVERAGE ANNUAL RETURN SINCE INCEPTION 9.73%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 12 MORTGAGE- AND ASSET-BACKED PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY* IN THE FOLLOWING INTERVIEW, THE PORTFOLIO'S MANAGERS SHARE THEIR VIEWS ON MORTGAGE- AND ASSET-BACKED PORTFOLIO'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 AND THEIR OUTLOOK FOR THE FUTURE. - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The portfolio seeks to maximize total return consistent with investing at least 80% of its assets in a diversified portfolio of mortgage and other asset-backed securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2005, Mortgage- and Asset-Backed Portfolio provided shareholders with a total return of 2.57%. - -------------------------------------------------------------------------------- PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY. We emphasize yield as the most predictable component of total return, and we manage the portfolio in such a way as to minimize the volatility of the portfolio's cash flows. We believe that the rigorous use of quantitative tools to test various interest-rate and prepayment scenarios is critical to making well-timed buy-and-sell decisions. The strategic and tactical implementation of asset classes such as collateralized mortgage obligations, asset-backed securities and commercial mortgage-backed securities is used to enhance performance on a risk-adjusted basis. HOW DID THE PORTFOLIO PERFORM DURING THE LAST 12 MONTHS? For the 12 months ended March 31, 2005, Mortgage- and Asset-Backed Portfolio returned 2.57%, compared with 2.61% for its benchmark, the Lehman Brothers U.S. MBS Fixed Rate Index.** WHAT ECONOMIC AND MARKET FACTORS MOST INFLUENCED PERFORMANCE? The shift in interest rates was the most important development during the period. As the difference in yield between 30-year and 15-year mortgages narrowed considerably, 30-year mortgages outperformed their 15-year counterparts. This trend was consistent with what occurred in the US Treasury market, in which bonds with longer maturities were the best performers. WHAT INVESTMENT DECISIONS HELPED THE PORTFOLIO'S PERFORMANCE?*** Our decision to "roll" mortgages helped performance. Rolling mortgages is a strategy that involves selling them, then committing to buying them back within a relatively short period of time. Because we were able to invest the cash proceeds of these sales at sufficiently high short-term rates, these transactions added value to the portfolio. WHAT INVESTMENT DECISIONS DETRACTED FROM PORTFOLIO PERFORMANCE? Our decision to increase our weight in 15-year mortgages detracted from relative performance because these securities did not perform as well as longer-term mortgages. *The outlook for this portfolio may differ from that presented for other Nations Funds mutual funds and portfolios. **Lehman Brothers U.S. MBS Fixed Rate Index is an unmanaged index of mortgage passthrough securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC). It is unmanaged and unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 13 MORTGAGE- AND ASSET-BACKED PORTFOLIO PORTFOLIO MANAGERS' COMMENTARY (continued) WHAT IS YOUR OUTLOOK FOR THE NEAR TERM AND HOW WILL YOU POSITION THE PORTFOLIO? We remain confident that the portfolio's concentration in 15-year mortgages is a sound strategy in the current interest-rate environment, and we will maintain that positioning going forward. In addition, we will continue to take advantage of mortgage-roll opportunities as they present themselves. --------------------------------------------------- Richard Cutts has co-managed the portfolio since October 2004. Mr. Cutts is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Leonard Aplet has co-managed the portfolio since October 2004. Mr. Aplet is affiliated with Banc of America Capital Management, LLC, investment advisor to the fund. Banc of America Capital Management, LLC is part of Columbia Management, the primary investment management division of Bank of America Corporation. Prior to October 2004, the portfolio was managed by the Fixed Income Management Team. 14 MORTGAGE- AND ASSET-BACKED PORTFOLIO SHAREHOLDER EXPENSE EXAMPLE The information on this page is intended to help you understand your ongoing costs of investing in the portfolio. The table below reflects the fact that no fees or expenses are charged to the portfolio. Participants in the wrap fee programs eligible to invest in the portfolio pay an asset-based fee for investment services, brokerage services and investment consultation, which fee is negotiable. Please read the wrap program documents for information regarding fees charged. The information in the table is based on an initial investment of $1,000, which is invested at the beginning of the six-month reporting period and held for the entire period. The amount listed as "actual" is calculated using the portfolio's actual total return for the period. The amount listed as hypothetical is calculated using a hypothetical annual return of 5%. You should not use the hypothetical account value to estimate your actual account balance.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID OCTOBER 1, 2004 MARCH 31, 2005 DURING PERIOD* --------------- -------------- -------------- Actual...................................................... $1,000.00 $1,010.97 $-- Hypothetical................................................ $1,000.00 $1,024.93 $--
* No fees or expenses are charged to the portfolio. Participants in wrap fee programs pay asset based fees that are not included in this table. 15 MORTGAGE- AND ASSET-BACKED PORTFOLIO PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/05) [PIE CHART] 97.8% Mortgage-backed securities 31.6% Asset-backed securities 24.6% Government agencies and obligations 7.5% Collateralized mortgage obligations 1.2% Municipal bonds (62.7)% Other*
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2005, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. * DUE TO THE TIMING AND NATURE OF THE PORTFOLIO'S LIABILITIES, TOTAL INVESTMENTS MAY EXCEED THE PORTFOLIO'S TOTAL NET ASSETS AT PERIOD END. TOP 10 HOLDINGS ------------------------------------------------- 1 Federal National Mortgage Association, TBA 5.000% 03/20/20 30.9% ------------------------------------------------- 2 Federal National Mortgage Association, 6.500% 05/01/32-04/15/35 26.4% ------------------------------------------------- 3 Federal National Mortgage Association, 5.500% 08/25/17-03/15/35 14.0% ------------------------------------------------- 4 Federal National Mortgage Association, 5.000% 04/15/35 13.7% ------------------------------------------------- 5 Government National Mortgage Association, 5.500% 06/15/33-03/15/35 8.2% ------------------------------------------------- 6 Federal Home Loan Bank Discount Note, 04/01/05 6.4% ------------------------------------------------- 7 Federal National Mortgage Association, 4.375% 07/17/13 4.1% ------------------------------------------------- 8 Federal Home Loan Mortgage, Discount Note, 04/12/05 3.8% ------------------------------------------------- 9 Federal Home Loan Bank, 04/06/05 3.3% ------------------------------------------------- 10 Federal National Mortgage Association, 04/20/05 3.2% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE PORTFOLIO MAY INVEST.
16 MORTGAGE- AND ASSET-BACKED PORTFOLIO PERFORMANCE GROWTH OF $10,000 INVESTMENT [LINE GRAPH]
INVESTOR A SHARES (AS OF 3/31/05) MORTGAGE AND ASSET-BACKED LEHMAN BROTHERS U.S. MBS FIXED Assumes the reinvestment of all distributions PORTFOLIO RATE INDEX ------------------------- ------------------------------ Aug. 30 2002 10000.00 10000.00 10308.00 10300.00 10382.00 10368.00 10415.00 10421.00 10487.00 10518.00 2003 10672.00 10720.00 10560.00 10599.00 10828.00 10875.00 2004 10964.00 11012.00 Mar. 31 2005 10947.00 11000.00
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION (8/30/02 through 3/31/05) 3.56%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Mortgage- and Asset-Backed Portfolio from the inception of the Portfolio. Lehman Brothers U.S. MBS Fixed Rate Index is an unmanaged index of mortgage passthrough securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC). The index is unavailable for investment and does not reflect fees, brokerage commissions or other expenses of investing. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/05) Inception date 8/30/02 - ------------------------------------------------------------------------- 1 YEAR PERFORMANCE 2.57% - ------------------------------------------------------------------------- AVERAGE ANNUAL RETURN SINCE INCEPTION 3.56%
PERFORMANCE PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED HERE. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. 17 NATIONS FUNDS Corporate Bond Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 92.1% BASIC MATERIALS -- 5.1% CHEMICALS -- 1.8% Dow Chemical Co. $ 248 6.125% 02/01/11............................................. $ 265 208 7.375% 11/01/29............................................. 254 Eastman Chemical Co. 68 3.250% 06/15/08............................................. 65 240 6.300% 11/15/18............................................. 256 111 Praxair, Inc. 4.750% 07/15/07............................................. 112 ------- 952 ------- FOREST PRODUCTS AND PAPER -- 2.2% 116 Champion International Corp. 7.350% 11/01/25............................................. 133 402 International Paper Co. 5.850% 10/30/12............................................. 419 368 MeadWestvaco Corp. 6.850% 04/01/12............................................. 411 145 Westvaco Corp. 8.200% 01/15/30............................................. 183 ------- 1,146 ------- METALS AND MINING -- 1.1% 288 Alcan, Inc. 6.450% 03/15/11............................................. 314 223 Alcoa, Inc. 7.375% 08/01/10............................................. 251 ------- 565 ------- 2,663 ------- COMMUNICATIONS -- 16.4% MEDIA -- 4.3% 172 Comcast Cable Communications, Inc. 7.125% 06/15/13............................................. 191 135 Knight-Ridder, Inc. 7.125% 06/01/11............................................. 151 535 Liberty Media Corp. 3.500% 09/25/06............................................. 527 News America Holdings, Inc. 22 6.550% 03/15/33............................................. 23 209 8.150% 10/17/36............................................. 258 125 9.250% 02/01/13............................................. 156 11 Rogers Cable, Inc. 6.250% 06/15/13............................................. 11 192 TCI Communications, Inc., 9.875% 06/15/22............................................. 270 Time Warner, Inc. 100 7.625% 04/15/31............................................. 118 440 9.125% 01/15/13............................................. 544 ------- 2,249 ------- TELECOMMUNICATION SERVICES -- 12.1% 83 BellSouth Corp. 6.000% 10/15/11............................................. 88 140 BellSouth Telecommunications, Inc. 6.375% 06/01/28............................................. 147 British Telecommunications PLC 265 7.875% 12/15/05............................................. 273 112 8.375% 12/15/10............................................. 130
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- (CONTINUED) $ 43 8.875% 12/15/30............................................. $ 57 Deutsche Telekom International Finance BV 490 5.250% 07/22/13............................................. 492 840 8.500% 06/15/10(c).......................................... 966 France Telecom SA 370 8.000% 03/01/11............................................. 423 263 8.750% 03/01/31............................................. 346 SBC Communications, Inc. 400 4.125% 09/15/09............................................. 389 490 5.750% 05/02/06............................................. 499 Sprint Capital Corp. 43 6.125% 11/15/08............................................. 45 562 8.375% 03/15/12(c).......................................... 657 310 8.750% 03/15/32............................................. 402 80 Telefonos de Mexico SA 4.500% 11/19/08............................................. 79 452 Telus Corp. 7.500% 06/01/07............................................. 481 221 Verizon Global Funding Corp. 7.750% 12/01/30............................................. 267 644 Verizon Pennsylvania, Inc. 5.650% 11/15/11(c).......................................... 661 ------- 6,402 ------- 8,651 ------- CONSUMER CYCLICAL -- 5.0% AIRLINES -- 0.5% 283 Continental Airlines, Inc. 7.461% 04/01/15............................................. 266 ------- AUTO MANUFACTURERS -- 2.0% 839 DaimlerChrysler N.A. Holding Corp. 4.050% 06/04/08(c).......................................... 815 231 Ford Motor Co. 7.450% 07/16/31............................................. 209 ------- 1,024 ------- RETAIL -- 2.5% 159 CVS Corp. 5.298% 01/11/27(a).......................................... 159 170 Kohl's Corp. 6.700% 02/01/06............................................. 174 Target Corp. 169 5.400% 10/01/08............................................. 174 314 5.875% 03/01/12............................................. 331 491 Wal-Mart Stores, Inc. 5.450% 08/01/06............................................. 501 ------- 1,339 ------- 2,629 ------- CONSUMER NON-CYCLICAL -- 5.0% AGRICULTURE -- 0.0% 12 Monsanto Co. 4.000% 05/15/08............................................. 12 ------- BEVERAGES -- 0.5% 245 Anheuser-Busch Companies, Inc. 5.950% 01/15/33............................................. 262 -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 18 NATIONS FUNDS Corporate Bond Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- COMMERCIAL SERVICES -- 1.0% $ 500 ERAC USA Finance Co. 6.750% 05/15/07(a).......................................... $ 523 ------- COSMETICS/PERSONAL CARE -- 0.3% 136 Procter & Gamble Co. 4.750% 06/15/07............................................. 138 ------- FOOD -- 2.1% 449 Cadbury-Schweppes US Finance LLC 5.125% 10/01/13(a).......................................... 446 Kroger Co. 12 6.750% 04/15/12............................................. 13 202 6.800% 04/01/11............................................. 219 384 7.450% 03/01/08............................................. 411 36 Unilever Capital Corp. 6.875% 11/01/05............................................. 37 ------- 1,126 ------- HEALTHCARE SERVICES -- 1.1% WellPoint Health Networks, Inc. 377 6.375% 06/15/06............................................. 386 185 6.375% 01/15/12............................................. 200 ------- 586 ------- 2,647 ------- DIVERSIFIED -- 1.0% HOLDING COMPANIES DIVERSIFIED -- 1.0% 500 Hutchison Whampoa International Ltd. 6.250% 01/24/14(a).......................................... 520 ------- ENERGY -- 7.2% OIL AND GAS -- 5.3% 325 Amerada Hess Corp. 7.300% 08/15/31............................................. 366 271 Conoco Funding Co. 6.350% 10/15/11............................................. 295 275 Gazprom International SA 7.201% 02/01/20(a).......................................... 281 90 Nexen, Inc. 7.875% 03/15/32............................................. 110 Pemex Project Funding Master Trust 25 7.875% 02/01/09............................................. 27 392 8.625% 02/01/22............................................. 445 351 USX Corp. 6.650% 02/01/06............................................. 359 Valero Energy Corp. 243 6.875% 04/15/12............................................. 270 13 7.500% 04/15/32............................................. 16 545 XTO Energy, Inc. 7.500% 04/15/12............................................. 624 ------- 2,793 -------
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- PIPELINES -- 1.9% $ 188 CenterPoint Energy Resources Corp. 7.875% 04/01/13............................................. $ 218 418 Duke Capital LLC 4.370% 03/01/09............................................. 411 346 Teppco Partners LP 7.625% 02/15/12............................................. 392 ------- 1,021 ------- 3,814 ------- FINANCIALS -- 40.9% BANKS -- 8.6% 987 Bank One Corp. 6.000% 08/01/08(c).......................................... 1,032 6 Barclays Bank PLC 7.400% 12/15/09............................................. 7 105 Chinatrust Commercial Bank 5.625% 03/29/49(a)(b)....................................... 103 482 First Union National Bank 5.800% 12/01/08............................................. 503 123 HSBC Holdings PLC 7.350% 11/27/32(a).......................................... 149 186 Mellon Funding Corp. 4.875% 06/15/07............................................. 189 445 National City Bank 4.625% 05/01/13............................................. 433 315 PNC Funding Corp. 5.750% 08/01/06............................................. 322 Popular North America, Inc. 20 4.250% 04/01/08............................................. 20 312 6.125% 10/15/06............................................. 320 500 Rabobank Capital Funding II 5.260% 12/31/49(a)(b)....................................... 502 87 Regions Financial Corp. 7.750% 09/15/24............................................. 108 322 Scotland International Finance 4.250% 05/23/13(a).......................................... 307 75 SouthTrust Bank, Inc. 4.750% 03/01/13............................................. 73 433 US Bank N.A. 6.375% 08/01/11............................................. 469 ------- 4,537 ------- DIVERSIFIED FINANCIAL SERVICES -- 25.4% 146 American Express Co. 3.750% 11/20/07............................................. 144 143 American General Finance Corp. 2.750% 06/15/08............................................. 135 652 Bear Stearns Companies, Inc. 4.500% 10/28/10(c).......................................... 641 119 Capital One Bank 5.000% 06/15/09............................................. 120 193 CIT Group, Inc. 7.375% 04/02/07............................................. 204 500 Citicorp Lease Pass-Through Trust 8.040% 12/15/19(a).......................................... 594 210 Citigroup Global Markets Holdings, Inc. 6.500% 02/15/08............................................. 222 237 Citigroup, Inc. 6.000% 02/21/12............................................. 252
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 NATIONS FUNDS Corporate Bond Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- (CONTINUED) $ 660 Countrywide Home Loans, Inc. 5.500% 08/01/06(c).......................................... $ 671 Credit Suisse First Boston USA, Inc. 30 4.625% 01/15/08............................................. 30 229 6.125% 11/15/11............................................. 243 Ford Motor Credit Co. 254 5.800% 01/12/09............................................. 243 758 7.375% 02/01/11(c).......................................... 753 275 Fund American Companies, Inc. 5.875% 05/15/13............................................. 279 1,032 General Electric Capital Corp. 6.750% 03/15/32(c).......................................... 1,191 General Motors Acceptance Corp. 178 6.150% 04/05/07............................................. 175 399 6.875% 09/15/11............................................. 361 190 8.000% 11/01/31............................................. 166 Goldman Sachs Group, Inc. 254 4.750% 07/15/13............................................. 244 711 6.600% 01/15/12(c).......................................... 769 HSBC Finance Corp. 202 5.875% 02/01/09............................................. 210 402 6.375% 11/27/12............................................. 435 International Lease Finance Corp. 765 3.500% 04/01/09(c).......................................... 732 110 4.500% 05/01/08............................................. 109 165 John Deere Capital Corp. 7.000% 03/15/12............................................. 185 Lehman Brothers Holdings, Inc. 333 4.000% 01/22/08............................................. 329 352 7.000% 02/01/08............................................. 376 262 7.875% 08/15/10............................................. 298 152 Mass Mutual Global Funding II 2.550% 07/15/08(a).......................................... 143 Merrill Lynch & Co., Inc. 125 2.070% 06/12/06............................................. 123 76 3.700% 04/21/08............................................. 75 539 6.000% 02/17/09............................................. 564 Morgan Stanley 518 5.300% 03/01/13............................................. 521 294 6.600% 04/01/12............................................. 321 National Rural Utilities Cooperative Finance Corp. 355 3.250% 10/01/07............................................. 345 221 5.750% 08/28/09............................................. 230 163 8.000% 03/01/32............................................. 212 50 Principal Life Global Funding 6.125% 03/01/06(a).......................................... 51 399 Prudential Funding LLC 6.600% 05/15/08(a).......................................... 423 250 UFJ Finance Aruba AEC 6.750% 07/15/13............................................. 269 ------- 13,388 ------- INSURANCE -- 1.1% Hartford Financial Services Group, Inc. 78 2.375% 06/01/06............................................. 76 72 4.625% 07/15/13............................................. 69
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- INSURANCE -- (CONTINUED) $ 32 Hartford Life, Inc. 7.375% 03/01/31............................................. $ 39 MetLife, Inc. 110 5.375% 12/15/12............................................. 112 235 6.500% 12/15/32............................................. 257 52 Prudential Financial, Inc. 4.500% 07/15/13............................................. 50 ------- 603 ------- REAL ESTATE -- 1.2% EOP Operating LP 443 4.750% 03/15/14............................................. 415 208 7.000% 07/15/11............................................. 229 11 ERP Operating LP 5.200% 04/01/13............................................. 11 ------- 655 ------- REAL ESTATE INVESTMENT TRUSTS -- 2.2% 509 Camden Property Trust 5.375% 12/15/13............................................. 511 149 Health Care Property Investors, Inc. 6.450% 06/25/12............................................. 160 487 Simon Property Group LP 3.750% 01/30/09............................................. 467 ------- 1,138 ------- SAVINGS AND LOANS -- 2.4% 271 Golden West Financial Corp. 4.750% 10/01/12............................................. 268 Washington Mutual, Inc. 587 4.625% 04/01/14............................................. 555 421 5.625% 01/15/07............................................. 430 ------- 1,253 ------- 21,574 ------- INDUSTRIALS -- 3.3% AEROSPACE AND DEFENSE -- 1.4% 233 Boeing Co. 5.125% 02/15/13............................................. 234 8 General Dynamics Corp. 4.500% 08/15/10............................................. 8 322 Northrop Grumman Corp. 7.125% 02/15/11............................................. 359 120 Raytheon Co. 5.375% 04/01/13............................................. 122 ------- 723 ------- BUILDING MATERIALS -- 0.3% 184 Hanson Overseas BV 6.750% 09/15/05............................................. 186 ------- ENVIRONMENTAL CONTROL -- 0.5% 244 Waste Management, Inc. 7.375% 08/01/10............................................. 272 ------- MISCELLANEOUS MANUFACTURING -- 0.2% 83 General Electric Co. 5.000% 02/01/13............................................. 83 -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 20 NATIONS FUNDS Corporate Bond Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- TRANSPORTATION -- 0.9% $ 222 Burlington Northern Santa Fe Corp. 6.750% 07/15/11............................................. $ 244 188 Canadian National Railway Co. 6.900% 07/15/28............................................. 219 21 Union Pacific Corp. 4.698% 01/02/24............................................. 20 ------- 483 ------- 1,747 ------- TECHNOLOGY -- 0.4% COMPUTERS -- 0.4% 172 International Business Machines Corp. 6.500% 01/15/28............................................. 193 ------- UTILITIES -- 7.8% ELECTRIC -- 7.8% 93 American Electric Power Co., Inc. 5.250% 06/01/15............................................. 92 97 Appalachian Power Co. 3.600% 05/15/08............................................. 94 111 Columbus Southern Power Co. 6.600% 03/01/33............................................. 124 31 Dominion Resources, Inc. 5.000% 03/15/13............................................. 31 60 Duquesne Light Co. 6.700% 04/15/12............................................. 66 35 Energy East Corp. 6.750% 06/15/12............................................. 38 FirstEnergy Corp. 88 6.450% 11/15/11............................................. 93 201 7.375% 11/15/31............................................. 228 210 Kiowa Power Partners LLC 5.737% 03/30/21(a).......................................... 205 507 MidAmerican Energy Holdings Co. 5.000% 02/15/14............................................. 495 310 NiSource Finance Corp. 5.400% 07/15/14............................................. 312 16 Ohio Edison Co. 4.000% 05/01/08............................................. 16 130 Pacific Gas & Electric Co. 6.050% 03/01/34............................................. 133 Pepco Holdings, Inc. 122 3.750% 02/15/06............................................. 122 45 5.500% 08/15/07............................................. 46 433 Progress Energy, Inc. 6.050% 04/15/07............................................. 447 26 PSEG Power LLC 5.500% 12/01/15............................................. 26 94 Public Service Electric & Gas Co. 4.000% 11/01/08............................................. 92 104 Southern California Edison Co. 6.000% 01/15/34............................................. 108 255 Southern Co. Capital Funding Inc. 5.300% 02/01/07............................................. 262 126 Southern Power Co. 6.250% 07/15/12............................................. 135
PAR VALUE (000) (000) - ------------------------------------------------------------------------------------- ELECTRIC -- (CONTINUED) TXU Corp. $ 300 5.550% 11/15/14(a).......................................... $ 285 500 6.550% 11/15/34(a).......................................... 474 180 Virginia Electric & Power Co. 5.375% 02/01/07............................................. 184 ------- 4,108 ------- TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost of $48,690)........................................... 48,546 ------- GOVERNMENT AGENCIES & OBLIGATIONS -- 3.9% FOREIGN GOVERNMENT BONDS -- 3.9% 225 Export-Import Bank of Korea 4.625% 03/16/10............................................. 222 157 Region of Lombardy 5.804% 10/25/32............................................. 167 101 Republic of Chile 5.500% 01/15/13............................................. 103 233 Republic of South Africa 6.500% 06/02/14............................................. 245 United Mexican States 188 6.375% 01/16/13............................................. 195 524 7.500% 04/08/33............................................. 555 523 8.375% 01/14/11............................................. 595 ------- 2,082 ------- TOTAL GOVERNMENT AGENCIES & OBLIGATIONS (Cost of $2,034)............................................ 2,082 ------- SHARES (000) - --------- INVESTMENT MANAGEMENT COMPANY -- 1.0% 515 Nations Cash Reserves, Capital Class Shares(c)(d)............. 515 TOTAL INVESTMENT COMPANY (Cost of $515).............................................. 515 ------- TOTAL INVESTMENTS (Cost of $51,239)(e).............................. 97.0% 51,143 ------- OTHER ASSETS & LIABILITIES, NET..................... 3.0% 1,555 ------- NET ASSETS.......................................... 100.0% $52,698 =======
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $5,165, which represents 9.8% of net assets. (b) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (c) All or a portion of security pledged as collateral for open futures contracts. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) Cost for federal income tax purposes is $51,240. See Note 3 for additional information. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 NATIONS FUNDS Corporate Bond Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005 At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------- --------------- Financials..................................... 40.9% Communications................................. 16.4 Utilities...................................... 7.8 Energy......................................... 7.2 Basic Materials................................ 5.1 Consumer Non-Cyclical.......................... 5.0 Consumer Cyclical.............................. 5.0 Industrials.................................... 3.3 Diversified.................................... 1.0 Technology..................................... 0.4 Government Agencies & Obligations.............. 3.9 Investment Management Company.................. 1.0 Other Assets & Liabilities, Net................ 3.0 ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 NATIONS FUNDS High Income Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS AND NOTES -- 88.1% BASIC MATERIALS -- 7.3% CHEMICALS -- 4.9% $ 15 Huntsman International LLC 7.375% 01/01/15(a).......................................... $ 15 87 Lyondell Chemical Co. 9.875% 05/01/07............................................. 89 200 Methanex Corp. 7.750% 08/15/05............................................. 203 30 Rhodia SA 8.875% 06/01/11............................................. 29 ------ 336 ------ FOREST PRODUCTS AND PAPER -- 2.1% 15 Abitibi-Consolidated, Inc. 8.375% 04/01/15............................................. 15 15 Fraser Papers, Inc. 8.750% 03/15/15............................................. 14 EUR 50 JSG Holding PLC 11.500% 10/01/15(a)......................................... 60 $ 25 Newark Group, Inc. 9.750% 03/15/14............................................. 25 15 Norske Skog Canada 8.625% 06/15/11............................................. 16 10 Tembec Industries, Inc. 8.500% 02/01/11............................................. 9 ------ 139 ------ IRON/STEEL -- 0.3% 20 Wise Metals Group LLC 10.250% 05/15/12............................................ 20 ------ 495 ------ COMMUNICATIONS -- 10.9% ADVERTISING -- 0.8% 30 Advanstar Communications, Inc. 12.000% 02/15/11............................................ 32 25 Vertis, Inc. 13.500% 12/07/09(a)......................................... 21 ------ 53 ------ MEDIA -- 3.7% 15 CBD Media Holdings LLC/CBD Holdings Finance, Inc. 9.250% 07/15/12............................................. 15 105 Charter Communications LLC 9.920% 04/01/11............................................. 81 60 Dex Media West LLC 9.875% 08/15/13............................................. 67 15 DirecTV Holdings LLC/DirecTV Financing Co. 8.375% 03/15/13............................................. 16 20 Fisher Communications, Inc. 8.625% 09/15/14............................................. 21 15 Paxson Communications Corp. (b) 01/15/09 (12.250% 01/15/06).......................................... 14 35 10.750% 07/15/08............................................ 35 ------ 249 ------
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES -- 6.4% $ 15 American Towers, Inc. 7.250% 12/01/11............................................. $ 15 30 Cincinnati Bell, Inc. 8.375% 01/15/14............................................. 30 25 Inmarsat Finance PLC (b) 11/15/12 (10.375% 11/15/08).......................................... 18 40 Intelsat Bermuda Ltd. 8.250% 01/15/13(a).......................................... 40 50 Nextel Communications, Inc. 7.375% 08/01/15............................................. 53 45 Qwest Capital Funding, Inc. 7.250% 02/15/11............................................. 42 60 Qwest Services Corp. 13.500% 12/15/10(a)......................................... 69 5 Telcordia Technologies, Inc. 10.000% 03/15/13(a)......................................... 5 Time Warner Telecom, Inc. 12 9.750% 07/15/08............................................. 12 20 10.125% 02/01/11............................................ 19 15 US LEC Corp. 10.670% 10/01/09(c)......................................... 16 100 US Unwired, Inc. 10.000% 06/15/12............................................ 111 15 Zeus Special Subsidiary Ltd. (b) 02/01/15(a) (9.250% 02/01/10)........................................... 9 ------ 439 ------ 741 ------ CONSUMER CYCLICAL -- 19.9% AIRLINES -- 0.4% 40 Northwest Airlines, Inc. 9.875% 03/15/07............................................. 30 ------ APPAREL -- 1.0% 45 Levi Strauss & Co. 9.750% 01/15/15(a).......................................... 44 20 Phillips-Van Heusen Corp. 8.125% 05/01/13............................................. 21 ------ 65 ------ AUTO MANUFACTURERS -- 0.2% 15 Navistar International Corp. 7.500% 06/15/11............................................. 15 ------ AUTO PARTS AND EQUIPMENT -- 1.1% 30 Cooper-Standard Automotive, Inc. 8.375% 12/15/14(a).......................................... 24 20 Delco Remy International, Inc. 9.375% 04/15/12............................................. 17 10 Dura Operating Corp. 8.625% 04/15/12............................................. 10 25 Goodyear Tire & Rubber Co. 7.857% 08/15/11............................................. 24 ------ 75 ------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 NATIONS FUNDS High Income Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- DISTRIBUTION/WHOLESALE -- 0.2% $ 10 Buhrmann US, Inc. 7.875% 03/01/15(a).......................................... $ 10 ------ ENTERTAINMENT -- 3.1% 40 AMC Entertainment, Inc. 9.875% 02/01/12............................................. 42 25 LCE Acquisition Corp. 9.000% 08/01/14(a).......................................... 25 10 Mohegan Tribal Gaming Authority 6.125% 02/15/13(a).......................................... 10 20 Penn National Gaming, Inc. 6.750% 03/01/15(a).......................................... 20 20 River Rock Entertainment Authority 9.750% 11/01/11............................................. 22 15 Seneca Gaming Corp. 7.250% 05/01/12............................................. 15 45 Six Flags, Inc. 9.625% 06/01/14............................................. 41 20 Warner Music Group 7.375% 04/15/14............................................. 21 15 WMG Holdings Corp. 9.760% 12/15/14(a).......................................... 15 ------ 211 ------ HOME BUILDERS -- 5.7% 200 Beazer Homes USA, Inc. 6.500% 11/15/13............................................. 195 200 KB Home 5.750% 02/01/14............................................. 192 ------ 387 ------ HOME FURNISHINGS -- 0.3% 20 ALH Finance LLC/ALH Finance Corp. 8.500% 01/15/13............................................. 20 ------ LEISURE TIME -- 1.1% 20 AMF Bowling Worldwide, Inc. 10.000% 03/01/10............................................ 20 20 Equinox Holdings, Inc. 9.000% 12/15/09............................................. 21 15 K2, Inc. 7.375% 07/01/14............................................. 16 30 Town Sports International, Inc. (b) 02/01/14 (11.000% 02/01/09).......................................... 18 ------ 75 ------ LODGING -- 5.5% 20 Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12............................................ 21 71 HMH Properties, Inc. 7.875% 08/01/08............................................. 72 25 Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10............................................ 29 25 MGM Mirage 6.750% 09/01/12............................................. 26
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- LODGING -- (continued) $ 200 Park Place Entertainment Corp. 7.875% 12/15/05............................................. $ 204 25 Wynn Las Vegas LLC 6.625% 12/01/14(a).......................................... 24 ------ 376 ------ RETAIL -- 1.3% 15 Finlay Fine Jewelry Corp. 8.375% 06/01/12............................................. 14 20 Landry's Restaurants, Inc. 7.500% 12/15/14(a).......................................... 19 Rite Aid Corp. 5 7.500% 01/15/15(a).......................................... 5 20 9.250% 06/01/13............................................. 20 20 Saks, Inc. 7.000% 12/01/13............................................. 18 10 Suburban Propane Partners LP 6.875% 12/15/13(a).......................................... 10 ------ 86 ------ 1,350 ------ CONSUMER NON-CYCLICAL -- 8.2% AGRICULTURE -- 0.2% 20 North Atlantic Trading Co., Inc. 9.250% 03/01/12............................................. 15 ------ BEVERAGES -- 0.3% 20 Constellation Brands, Inc. 8.125% 01/15/12............................................. 21 ------ COMMERCIAL SERVICES -- 1.3% 20 Corrections Corp. of America 6.250% 03/15/13(a).......................................... 19 20 GEO Group, Inc. 8.250% 07/15/13............................................. 20 25 Language Line, Inc. 11.125% 06/15/12............................................ 26 20 Service Corp. International 7.700% 04/15/09............................................. 21 ------ 86 ------ COSMETICS/PERSONAL CARE -- 0.9% 20 DEL Laboratories, Inc. 8.000% 02/01/12(a).......................................... 19 15 Elizabeth Arden, Inc. 7.750% 01/15/14............................................. 15 15 Revlon Consumer Products Corp. 8.625% 02/01/08............................................. 14 15 9.500% 04/01/11(a).......................................... 15 ------ 63 ------ FOOD -- 3.5% 10 Dole Food Co., Inc. 8.625% 05/01/09............................................. 10 35 Pinnacle Foods Holding Corp. 8.250% 12/01/13............................................. 30
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 NATIONS FUNDS High Income Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- FOOD -- (continued) $ 35 Stater Brothers Holdings, Inc. 8.125% 06/15/12............................................. $ 34 156 United Agri Products 8.250% 12/15/11............................................. 162 ------ 236 ------ HEALTHCARE SERVICES -- 0.5% 15 DaVita, Inc. 7.250% 03/15/15(a).......................................... 15 10 Select Medical Corp. 7.625% 02/01/15(a).......................................... 10 10 US Oncology Holdings, Inc. 8.620% 03/15/15(a)(c)....................................... 9 ------ 34 ------ HOUSEHOLD PRODUCTS/WARES -- 1.0% 30 Amscan Holdings, Inc. 8.750% 05/01/14............................................. 29 35 Playtex Products, Inc. 9.375% 06/01/11............................................. 37 ------ 66 ------ PHARMACEUTICALS -- 0.5% 35 Elan Finance PLC 7.750% 11/15/11(a).......................................... 26 10 Warner Chilcott Corp. 8.750% 02/01/15(a).......................................... 11 ------ 37 ------ 558 ------ ENERGY -- 4.7% OIL AND GAS -- 2.4% 15 Chesapeake Energy Corp. 7.500% 06/15/14............................................. 16 15 Delta Petroleum Corp. 7.000% 04/01/15(a).......................................... 14 93 Evergreen Resources, Inc. 5.875% 03/15/12............................................. 95 20 Premcor Refining Group, Inc. 7.500% 06/15/15............................................. 20 15 Pride International, Inc. 7.375% 07/15/14............................................. 16 ------ 161 ------ PIPELINES -- 2.3% 100 Sonat, Inc. 7.625% 07/15/11............................................. 99 55 Williams Companies, Inc. 8.125% 03/15/12............................................. 60 ------ 159 ------ 320 ------ FINANCIALS -- 19.9% DIVERSIFIED FINANCIAL SERVICES -- 19.5% 10 Altra Industrial Motion, Inc. 9.000% 12/01/11(a).......................................... 10 1,150 Dow Jones CDX HY 3 8.000% 12/29/09............................................. 1,117 15 E*Trade Financial Corp. 8.000% 06/15/11............................................. 15
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- (continued) $ 20 Global Cash Access LLC 8.750% 03/15/12............................................. $ 21 10 Innophos Investments Holdings, Inc. 10.771% 02/15/15(a)(c)...................................... 10 50 LaBranche & Co., Inc. 11.000% 05/15/12............................................ 53 59 Midland Funding II 11.750% 07/23/05............................................ 60 43 Scotia Pacific Co. LLC 7.110% 01/20/14............................................. 37 ------ 1,323 ------ SAVINGS AND LOANS -- 0.4% 25 Western Financial Bank 9.625% 05/15/12............................................. 28 ------ 1,351 ------ INDUSTRIALS -- 15.2% AEROSPACE AND DEFENSE -- 0.5% 10 Argo-Tech Corp. 9.250% 06/01/11............................................. 11 5 Sequa Corp. 9.000% 08/01/09............................................. 5 15 TransDigm, Inc. 8.375% 07/15/11............................................. 15 ------ 31 ------ BUILDING MATERIALS -- 4.2% 20 ACIH, Inc. (b) 12/15/12(a) (11.500% 12/15/07).......................................... 14 15 Associated Materials, Inc. (b) 03/01/14 (11.250% 03/01/09).......................................... 10 225 Building Materials Corp. of America 7.750% 07/15/05............................................. 226 10 Nortek, Inc. 8.500% 09/01/14............................................. 10 10 RMCC Acquisition Co. 9.500% 11/01/12(a).......................................... 10 15 US Concrete, Inc. 8.375% 04/01/14............................................. 15 ------ 285 ------ ELECTRICAL COMPONENTS AND EQUIPMENT -- 0.3% 20 Coleman Cable, Inc. 9.875% 10/01/12(a).......................................... 20 ------ ELECTRONICS -- 0.5% 25 Flextronics International Ltd. 6.250% 11/15/14............................................. 24 10 Sanmina-SCI Corp. 6.750% 03/01/13(a).......................................... 9 ------ 33 ------ ENGINEERING AND CONSTRUCTION -- 0.3% 20 J. Ray McDermott SA 11.000% 12/15/13(a)......................................... 22 ------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 NATIONS FUNDS High Income Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - ---------------------------------------------------------------------------------- ENVIRONMENTAL CONTROL -- 0.2% $ 15 Allied Waste North America, Inc. 7.250% 03/15/15(a).......................................... $ 14 ------ MACHINERY DIVERSIFIED -- 2.0% 103 AGCO Corp. 9.500% 05/01/08............................................. 108 25 Douglas Dynamics LLC 7.750% 01/15/12(a).......................................... 24 ------ 132 ------ METAL FABRICATED/HARDWARE -- 2.9% 194 Ryerson Tull, Inc. 9.125% 07/15/06............................................. 200 ------ MISCELLANEOUS MANUFACTURING -- 0.9% 25 Bombardier, Inc. 6.300% 05/01/14(a).......................................... 21 20 JB Poindexter & Co., Inc. 8.750% 03/15/14(a).......................................... 20 10 Reddy Ice Holdings, Inc. (b) 11/01/12(a) (10.500% 11/01/08).......................................... 7 15 Samsonite Corp. 8.875% 06/01/11............................................. 16 ------ 64 ------ PACKAGING AND CONTAINERS -- 2.3% 100 Crown European Holdings SA 10.875% 03/01/13............................................ 116 20 Jefferson Smurfit Corp. 8.250% 10/01/12............................................. 21 20 Owens-Brockway 6.750% 12/01/14(a).......................................... 21 ------ 158 ------ TRANSPORTATION -- 1.1% 10 CHC Helicopter Corp. 7.375% 05/01/14(a).......................................... 10 25 Quality Distribution/QD Capital Corp. 9.000% 11/15/10............................................. 24 25 Ship Finance International Ltd. 8.500% 12/15/13............................................. 25 15 TFM SA de C.V. 10.250% 06/15/07............................................ 16 ------ 75 ------ 1,034 ------ UTILITIES -- 2.0% ELECTRIC -- 2.0% 73 AES Corp. 8.500% 11/01/07............................................. 74 40 Calpine Generating Co. LLC 11.169% 04/01/11(c)......................................... 38 20 Texas Genco LLC 6.875% 12/15/14(a).......................................... 20 ------ 132 ------ TOTAL CORPORATE FIXED-INCOME BONDS AND NOTES (Cost of $6,120)............................................ 5,981 ------
SHARES VALUE (000) (000) - ---------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 5.4% 367 Nations Cash Reserves, Capital Class Shares(d)................ $ 367 ------ TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $367).............................................. 367 ------ TOTAL INVESTMENTS (Cost of $6,487)(e)............................... 93.5% 6,348 ------ OTHER ASSETS AND LIABILITIES, NET................... 6.5% 443 ------ NET ASSETS.......................................... 100.0% $6,791 ======
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $795, which represents 11.7% of net assets. (b) Step bond. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. (c) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (d) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (e) Cost for federal income tax purposes is $6,499. See Note 3 for additional information. ABBREVIATIONS: EUR -- Euro Currency
At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------- --------------- Financials..................................... 19.9% Consumer Cyclical.............................. 19.9 Communications................................. 10.9 Industrials.................................... 15.2 Consumer Non-Cyclical.......................... 8.2 Basic Materials................................ 7.3 Energy......................................... 4.7 Utilities...................................... 2.0 Investment Management Company.................. 5.4 Other Assets & Liabilities, Net................ 6.5 ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 NATIONS FUNDS Mortgage- and Asset-Backed Portfolio INVESTMENT PORTFOLIO MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES -- 97.8% FEDERAL HOME LOAN MORTGAGE CORP. $ 1,500 4.500% 03/15/20(a)............................................ $ 1,468 2,098 5.500% 01/15/23-03/15/35(a)(f)................................ 1,557 64 6.500% 11/01/32............................................... 67 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION 11,000 5.000% 04/15/35(a)............................................ 10,753 10,929 5.500% 08/25/17-03/15/35(e)(a)................................ 10,958 291 6.000% 04/25/17............................................... 303 19,877 6.500% 05/01/32-04/15/35(a)................................... 20,624 91 7.000% 02/01/32-06/01/32...................................... 96 TBA 24,203 5.000% 03/20/20(a)............................................ 24,180 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 6,375 5.500% 06/15/33-03/15/35(e)................................... 6,441 16 7.000% 03/15/31............................................... 17 -------- TOTAL MORTGAGE-BACKED SECURITIES (cost of $76,920)........................................... 76,464 -------- ASSET-BACKED SECURITIES -- 31.6% 922 Aames Mortgage Investment Trust 3.190% 01/25/35(b)(e)....................................... 925 -------- 1,175 AmeriCredit Automobile Receivables Trust 2.750% 10/09/07(e).......................................... 1,171 -------- Bank One Issuance Trust 1,000 2.930% 06/15/10(b)(e)......................................... 1,003 1,525 4.160% 01/15/08(b)(e)......................................... 1,527 -------- 913 Bear Stearns Asset Backed Security, Inc. 3.200% 03/25/35(b)(e)....................................... 913 -------- 475 Chase Credit Card Master Trust 2.920% 02/15/11(b)(e)....................................... 476 -------- Countrywide Asset-Backed Certificates 1,500 2.940% 08/25/35(b)(e)......................................... 1,500 1,000 2.950% 07/25/35(b)(e)......................................... 1,000 -------- 1,333 Keycorp Student Loan Trust 3.010% 07/25/29(e).......................................... 1,343 -------- Morgan Stanley ABS Capital 1,000 2.930% 02/25/35(e)............................................ 1,000 932 3.030% 05/25/34(e)............................................ 932 -------- Onyx Acceptance Auto Trust 1,019 2.400% 12/15/07(e)............................................ 1,015 1,250 3.380% 01/15/08(e)............................................ 1,246 -------- 1,000 Renaissance Home Equity Loan Trust 2.980% 05/25/35(b)(e)....................................... 1,000 --------
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- SLM STUDENT LOAN TRUST $ 500 2.730% 10/25/12(b)(e)......................................... $ 500 1,500 2.730% 04/25/14(b)(e)......................................... 1,501 1,865 2.740% 01/25/13(b)(e)......................................... 1,864 1,442 2.810% 04/25/17(b)(e)......................................... 1,445 1,509 2.860% 01/25/12(b)(e)......................................... 1,515 -------- 1,000 Structured Asset Investment Loan Trust 2.970% 03/25/35(b)(e)....................................... 986 -------- 1,063 Terwin Mortgage Trust 3.300% 07/25/34(b)(e)....................................... 1,071 -------- 748 World Omni Auto Receivables Trust 4.490% 08/20/08(e).......................................... 751 -------- TOTAL ASSET-BACKED SECURITIES (Cost of $24,706)........................................... 24,684 -------- GOVERNMENT AGENCIES AND OBLIGATIONS -- 14.4% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 14.4% 2,600 Federal Home Loan Bank (d)04/06/05(e).............................................. 2,599 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION 2,400 (d)04/06/05(e)................................................ 2,399 2,500 (d)04/20/05(e)................................................ 2,496 3,332 4.375% 07/17/13(e)............................................ 3,192 -------- 125 U.S. Treasury Bond 6.250% 08/15/23............................................. 146 -------- 405 U.S. Treasury Note 4.000% 06/15/09............................................. 403 -------- TOTAL U.S. GOVERNMENT AGENCIES AND OBLIGATIONS.................................... 11,235 -------- TOTAL GOVERNMENT AGENCIES AND OBLIGATIONS (Cost of $11,211)........................................... 11,235 -------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 7.5% 972 Bear Stearns Alt-A Trust 3.130% 01/25/35(b).......................................... 972 -------- 992 Homebanc Mortgage Trust 3.100% 03/25/35(b).......................................... 992 -------- 990 IMPAC CMB Trust 3.110% 04/25/35(b).......................................... 991 -------- 1,000 IMPAC Secured Assets Common Owner Trust 3.120% 12/25/31(b).......................................... 1,000 --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 NATIONS FUNDS Mortgage- and Asset-Backed Portfolio INVESTMENT PORTFOLIO (CONTINUED) MARCH 31, 2005
PAR VALUE (000) (000) - -------------------------------------------------------------------------------------- $ 994 MLCC Mortgage Investors, Inc. 3.080% 03/25/30(b).......................................... $ 994 -------- 962 Mortgage Trust 3.220% 12/25/34(b).......................................... 962 -------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost of $5,910)............................................ 5,911 -------- MUNICIPAL BOND -- 1.2% ARIZONA -- 1.2% 933 Arizona Education Loan Marketing Corp. 3.010% 12/01/13(b).......................................... 933 -------- TOTAL MUNICIPAL BOND (Cost of $933).............................................. 933 -------- SHORT-TERM OBLIGATIONS -- 10.2% U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 10.2% 5,000 Federal Home Loan Bank Discount Note (d) 04/01/05................................................ 5,000 -------- 3,000 Federal Home Loan Mortgage Corp. Discount Note (d) 04/12/05................................................ 2,998 -------- TOTAL U.S. GOVERNMENT AGENCIES AND OBLIGATIONS................ 7,998 -------- TOTAL SHORT-TERM OBLIGATIONS (Cost of $7,998).................................. 7,998 -------- SHARES VALUE (000) (000) - -------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANY -- 17.0% 13,314 Nations Cash Reserves, Capital Class Shares(c)(e)............. $ 13,314 -------- TOTAL INVESTMENT MANAGEMENT COMPANY (Cost of $13,314)........................................... 13,314 -------- TOTAL INVESTMENTS --................................ 179.7% (Cost of $140,992)(g)............................. 140,539 -------- OTHER ASSETS & LIABILITIES, NET..................... (79.7)% (62,323) -------- NET ASSETS.......................................... 100.0% $ 78,216 ========
- --------------- NOTES TO INVESTMENT PORTFOLIO: (a) Securities purchased on a delayed delivery basis. (b) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (c) Money market mutual fund registered under the Investment Company Act of 1940, as amended, and advised by Banc of America Capital Management, LLC. (d) Zero coupon bond. (e) A portion of the security pledged as collateral for open futures contracts and TBA. (f) Accrued interest accumulates in the value of this security and is payable at redemption. (g) Cost for federal income tax purposes is $141,019. See Note 3 for additional information. ABBREVIATIONS: TBA -- To Be Announced
At March 31, 2005, the Fund held investments in the following security types:
SECURITY TYPE % OF NET ASSETS - ------------- --------------- Mortgaged-Backed Securities.................... 97.8% Asset-Backed Securities........................ 31.6 Investment Management Company.................. 17.0 Government Agencies & Obligations.............. 14.4 Collateralized Mortgage Obligations............ 7.5 Municipal Bond................................. 1.2 Short-Term Obligations......................... 10.2 Other Assets & Liabilities, Net................ (79.7) ----- 100.0% =====
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 [This page intentionally left blank] 29 NATIONS FUNDS STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2005
CORPORATE HIGH MORTGAGE- AND BOND INCOME ASSET-BACKED PORTFOLIO PORTFOLIO PORTFOLIO ---------------------------------------------------- (IN THOUSANDS) ASSETS: Unaffiliated investments, at value (cost $50,724, $6,120, and $127,678, respectively)............................... $ 50,628 $ 5,981 $ 127,225 Affiliated investments, at value (cost $515, $367 and $13,314, respectively).................................... 515 367 13,314 Cash........................................................ -- 36 48 Unrealized appreciation on forward foreign exchange contracts................................................. -- 1 -- Receivable for investment securities sold................... -- 5 -- Receivable for Fund units sold.............................. 822 312 893 Dividends receivable........................................ 1 1 -- Interest receivable......................................... 744 129 331 -------------- -------------- -------------- Total assets............................................ 52,710 6,832 141,811 ============== ============== ============== LIABILITIES: Payable for investment securities purchased................. (4) (41) -- Payable for investment securities purchased on a delayed delivery basis............................................ -- -- (63,422) Payable for Fund units purchased............................ -- -- (17) Payable for variation margin................................ (8) -- (23) Accrued other liabilities................................... -- -- (133) -------------- -------------- -------------- Total liabilities....................................... (12) (41) (63,595) ============== ============== ============== NET ASSETS.................................................. $ 52,698 $ 6,791 $ 78,216 ============== ============== ============== NET ASSETS CONSIST OF: Undistributed (overdistributed) net investment income....... $ 41 $ 7 $ 52 Accumulated net realized gain/(loss) on investments sold, swaps and futures contracts............................... 41 10 176 Unrealized appreciation/(depreciation) on: Investments............................................... (96) (139) (453) Futures................................................... (6) -- 25 Foreign currency translations............................. -- 1 -- Paid-in capital............................................. 52,718 6,912 78,416 -------------- -------------- -------------- NET ASSETS.................................................. $ 52,698 $ 6,791 $ 78,216 ============== ============== ============== NET ASSETS.................................................. $ 52,698,265 $ 6,791,445 $ 78,216,300 ============== ============== ============== Units of beneficial interest outstanding.................... 5,169,581 707,682 7,811,956 Net asset value and redemption price per share.............. $ 10.19 $ 9.60 $ 10.01 ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 30 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2005
CORPORATE HIGH MORTGAGE- AND BOND INCOME ASSET-BACKED PORTFOLIO PORTFOLIO PORTFOLIO ---------------------------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 2,645 $ 409 $ 1,787 Dividends................................................... -- 1 -- Dividend from affiliated funds.............................. 18 11 381 -------------- -------------- -------------- Total investment income................................. 2,663 421 2,168 -------------- -------------- -------------- NET INVESTMENT INCOME....................................... 2,663 421 2,168 -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... 173 120 701 Futures contracts......................................... (103) (11) (30) Written options........................................... -- -- (9) Swap contracts............................................ -- 84 8 -------------- -------------- -------------- Net realized gain/(loss) on investments..................... 70 193 670 -------------- -------------- -------------- Change in unrealized appreciation/(depreciation) on: Investments............................................... (1,972) (340) (696) Futures contracts......................................... 71 -- 55 Foreign currency translation.............................. -- 1 -- Swap contracts............................................ -- -- 2 -------------- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... (1,901) (339) (639) -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (1,831) (146) 31 -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 832 $ 275 $ 2,199 ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 31 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
CORPORATE BOND PORTFOLIO ------------------------------- YEAR ENDED YEAR ENDED 3/31/2005 3/31/2004 ------------------------------- (IN THOUSANDS) Net investment income....................................... $ 2,663 $ 1,630 Net realized gain/(loss) on investments..................... 70 334 Net change in unrealized appreciation/(depreciation) of investments............................................... (1,901) 1,506 -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 832 3,470 Distributions to shareholders from net investment income.... (2,631) (1,657) Distributions to shareholders from net realized gain on investments............................................... (196) (150) Net increase/(decrease) in net assets from Portfolio share transactions.............................................. (6,500) 44,758 -------------- -------------- Net increase/(decrease) in net assets....................... (8,495) 46,421 NET ASSETS: Beginning of year........................................... 61,193 14,772 -------------- -------------- End of year................................................. $ 52,698 $ 61,193 ============== ============== Undistributed net investment income at end of year.......... $ 41 $ 9 ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 32 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MORTGAGE- AND HIGH INCOME PORTFOLIO ASSET-BACKED PORTFOLIO --------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/2005 3/31/2004 3/31/2005 3/31/2004 - --------------------------------------------------------------------------- $ 421 $ 723 $ 2,168 $ 1,079 193 705 670 1,102 (339) 32 (639) 219 -------------- -------------- -------------- -------------- 275 1,460 2,199 2,400 (498) (854) (2,124) (1,091) (328) (404) (1,449) (94) (341) (5,162) (6,821) 75,991 -------------- -------------- -------------- -------------- (892) (4,960) (8,195) 77,206 7,683 12,643 86,411 9,205 -------------- -------------- -------------- -------------- $ 6,791 $ 7,683 $ 78,216 $ 86,411 ============== ============== ============== ============== $ 7 $ -- $ 52 $ -- ============== ============== ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 33 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
CORPORATE BOND PORTFOLIO YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) Sold........................................................ 2,100 $ 21,492 6,309 $ 65,226 Issued as reinvestment of distributions..................... 25 256 19 196 Redeemed.................................................... (2,739) (28,248) (1,975) (20,664) ------ -------- ------ -------- Net increase/(decrease)..................................... (614) $ (6,500) 4,353 $ 44,758 ====== ======== ====== ========
HIGH INCOME PORTFOLIO YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) Sold........................................................ 281 $ 2,797 1,298 $ 13,540 Issued as reinvestment of distributions..................... 28 273 72 747 Redeemed.................................................... (339) (3,411) (1,867) (19,449) ------ -------- ------ -------- Net increase/(decrease)..................................... (30) $ (341) (497) $ (5,162) ====== ======== ====== ========
MORTGAGE- AND ASSET-BACKED PORTFOLIO YEAR ENDED YEAR ENDED MARCH 31, 2005 MARCH 31, 2004 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) Sold........................................................ 3,568 $ 35,736 10,498 $105,472 Issued as reinvestment of distributions..................... 41 402 6 60 Redeemed.................................................... (4,280) (42,959) (2,927) (29,541) ------ -------- ------ -------- Net increase/(decrease)..................................... (671) $ (6,821) 7,577 $ 75,991 ====== ======== ====== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 34 NATIONS FUNDS Corporate Bond Portfolio FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
YEAR ENDED YEAR ENDED PERIOD ENDED 3/31/2005 3/31/2004 3/31/2003(A) ------------------------------------------ Net asset value, beginning of period........................ $ 10.58 $ 10.33 $ 10.00 ------- ------- ------- Investment income from operations: Net investment income(b).................................... 0.48 0.46 0.41 Net realized and unrealized gain (loss) on investments...... (0.36) 0.33 0.27 ------- ------- ------- Net increase in net assets resulting from investment operations................................................ 0.12 0.79 0.68 ------- ------- ------- Distributions to shareholders: Dividends from net investment income........................ (0.48) (0.47) (0.26) Distributions from net realized gains....................... (0.03) (0.07) (0.09) ------- ------- ------- Total dividends and distributions........................... (0.51) (0.54) (0.35) ------- ------- ------- Net asset value, end of period.............................. $ 10.19 $ 10.58 $ 10.33 ======= ======= ======= Total return(c)............................................. 1.25% 7.83% 6.99% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (000)............................. $52,698 $61,193 $14,772 Ratio of net investment income to average net assets........ 4.69% 4.40% 4.33%(d) Portfolio turnover rate..................................... 39% 126% 183%
- --------------- (a) Portfolio commenced operations on August 30, 2002. (b) Per share net investment income has been calculated using the monthly average shares method. (c) Total return represents aggregate total return for the period indicated and assumes reinvestment of all distributions. (d) Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 35 NATIONS FUNDS High Income Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
YEAR ENDED YEAR ENDED PERIOD ENDED 3/31/2005 3/31/2004 3/31/2003(A) ---------------------------------------- Net asset value, beginning of period........................ $10.41 $10.24 $ 10.00 ------ ------ ------- Investment income from operations: Net investment income(b).................................... 0.63 0.71 0.32 Net realized and unrealized gain (loss) on investments...... (0.20) 0.73 0.27 ------ ------ ------- Net increase in net assets resulting from investment operations................................................ 0.43 1.44 0.59 ------ ------ ------- Distributions to shareholders: Dividends from net investment income........................ (0.75) (0.86) (0.34) Distributions from net realized gains....................... (0.49) (0.41) (0.01) ------ ------ ------- Total dividends and distributions........................... (1.24) (1.27) (0.35) ------ ------ ------- Net asset value, end of period.............................. $ 9.60 $10.41 $ 10.24 ====== ====== ======= Total return(c)............................................. 4.54% 14.72% 6.02% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (000)............................. $6,791 $7,683 $12,643 Ratio of net investment income to average net assets........ 6.40% 6.86% 5.64%(d) Portfolio turnover rate..................................... 165% 211% 84%
- --------------- (a) Portfolio commenced operations on August 30, 2002. (b) Per share net investment income has been calculated using the monthly average shares method. (c) Total return represents aggregate total return for the period indicated and assumes reinvestment of all distributions. (d) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 36 NATIONS FUNDS Mortgage- and Asset-Backed Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
YEAR ENDED YEAR ENDED PERIOD ENDED 3/31/2005 3/31/2004 3/31/2003(A) ---------------------------------------- Net asset value, beginning of period........................ $ 10.19 $ 10.15 $10.00 ------- ------- ------ Investment income from operations: Net investment income(b).................................... 0.26 0.22 0.17 Net realized and unrealized gain (loss) on investments...... (0.01) 0.13 0.14 ------- ------- ------ Net increase in net assets resulting from investment operations................................................ 0.25 0.35 0.31 ------- ------- ------ Distributions to shareholders: Dividends from net investment income........................ (0.26) (0.22) (0.10) Distributions from net realized gains....................... (0.17) (0.09) (0.06) ------- ------- ------ Total dividends and distributions........................... (0.43) (0.31) (0.16) ------- ------- ------ Net asset value, end of period.............................. $ 10.01 $ 10.19 $10.15 ======= ======= ====== Total return(c)............................................. 2.57% 3.53% 3.08% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (000)............................. $78,216 $86,411 $9,205 Ratio of net investment income to average net assets........ 2.61% 2.26% 1.82%(d) Portfolio turnover rate..................................... 765% 941% 688%
- --------------- (a)Portfolio commenced operations on August 30, 2002. (b)Per share net investment income has been calculated using the monthly average shares method. (c)Total return represents aggregate total return for the period indicated and assumes reinvestment of all distributions. (d)Annualized. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At March 31, 2005, Funds Trust offered fifty-six separate portfolios. These financial statements pertain to the following portfolios of Funds Trust (each a "Portfolio" and collectively, the "Portfolios"): Corporate Bond Portfolio Mortgage- and Asset-Backed Portfolio High Income Portfolio The Portfolios are authorized to issue an unlimited number of shares of beneficial interest without par value. The Portfolios are only available through certain wrap fee programs and certain other managed accounts, including those sponsored or managed by Bank of America and its affiliates. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign government laws and restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Portfolios to meet their obligations may be affected by economic and political developments in a specific country, industry or region. The High Income Portfolio principally invests in high yield securities (sometimes called "junk bonds"), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay a premium -- a high interest rate or yield -- because of the increased risk of loss. These securities can also be subject to greater price volatility. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolios in the preparation of their financial statements. Securities valuation: Securities, including options and futures contracts, traded on a recognized exchange are generally valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded on NASDAQ are generally valued at the NASDAQ official closing price. Securities which are primarily traded on foreign securities exchanges are generally valued at the last available sale price on their respective exchanges where primarily traded. Debt securities will generally be valued using prices provided by a pricing service which may employ various indications of value including but not limited to broker-dealer quotations. Certain debt security prices provided by the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities on comparable securities. Certain securities may be valued based upon quotes provided by one or more principal market makers. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be fair valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Investments in other Nations Funds are valued at their net asset value as determined by the applicable Nations Funds' prospectus. Futures contracts: The Portfolios may invest in futures contracts for the purposes of hedging against changes in values of the Portfolios' securities or changes in the prevailing levels of interest rates or currency exchange rates or to enhance the Portfolios' return. Upon entering into a futures contract, a Portfolio is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Portfolio each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect the changes in market value of the contract. When the 38 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) contract is closed, a Portfolio records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Portfolios may purchase and write call and put options on securities, futures and swap contracts ("swaptions"). A Portfolio may use such options on futures contracts in connection with its hedging strategies in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures, and to seek to enhance return. The Portfolios may write covered call options and put options on securities in which they are permitted to invest from time to time in seeking to attain each Portfolio's objective. Call options written by a Portfolio give the holder the right to buy the underlying securities from the Portfolio at a stated exercise price; put options give the holder the right to sell the underlying security to the Portfolio at a stated price. In the case of put options, a Portfolio is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Portfolios may also write combinations of covered puts and calls on the same underlying security. When a Portfolio purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When a Portfolio writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Portfolios typically receive a premium from writing a put or call option, which would increase the Portfolios' return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Portfolio limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Portfolio assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received, unless the security subsequently appreciates in value. A Portfolio may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Portfolio will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Portfolio. Swaps: The Portfolios may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with their investment objective and policies to obtain a desired return at a lower cost than if the Portfolio had invested directly in the asset that yielded the desired return. Swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest or total return throughout the lives of the agreements. The interest to be paid or received on swaps is included in net realized gain/(loss) on investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statements of assets & liabilities. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Portfolio's basis in the swap and the proceeds from (or cost of) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. If there is a default by the counterparty to a swap contract, a Portfolio will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Portfolio will succeed in pursuing 39 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) contractual remedies. A Portfolio thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The creditworthiness of the swap contract counterparties is closely monitored in order to minimize this risk. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of assets and liabilities. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Portfolio enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. Stripped securities: Stripped mortgage-backed securities are derivative multi-class mortgage securities structured so that one class receives most, if not all, of the principal from the underlying mortgage assets, while the other class receives most, if not all, of the interest and the remainder of the principal. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Portfolio may fail to fully recoup its initial investment in an interest-only security. The market value of these securities consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. Credit risk reflects the risk that a Portfolio may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligation. Dollar Rolls: The Portfolios may enter into dollar rolls in which the Portfolio sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon, and maturity) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio's policy is to record the component of dollar rolls using "to be announced" mortgage-backed securities ("TBA Dollar Rolls") as purchase and sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the trade date of the sale transaction. Mortgage-and Asset-Backed Portfolio had dollar rolls outstanding as of March 31, 2005, which are included in Payable for investment securities purchased on a delayed delivery basis on its Statements of assets and liabilities. At the time a Portfolio enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its dollar roll purchase commitments. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income (including dividend income from affiliated funds) is recorded on ex-dividend date. Dividends and distributions to shareholders: It is the policy of each Portfolio to declare and pay dividends from net investment income monthly. Each Portfolio will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Federal income tax: Each Portfolio intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986 Sub-chapter M, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Indemnification: In the normal course of business, each Portfolio enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Portfolio's maximum exposure under these arrangements is unknown, as this would involve future claims against the Portfolio that have not yet occurred. Also, under the Funds Trust's organizational documents, the Trustees and Officers of the Funds Trust are indemnified against certain liabilities that may arise out of their duties to the Funds Trust. However, based on experience, the Portfolios expect the risk of loss due to these warranties and indemnities to be minimal. 40 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BACAP provides investment advisory services to the Portfolios. BACAP does not receive any fee for its investment advisory services and has agreed to bear all fees and expenses of the Portfolios, except taxes, brokerage fees and commission costs, including interest expense of borrowing money, extraordinary expenses, and any applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder administration fees. BACAP Distributors, LLC ("BACAP Distributors"), a wholly-owned subsidiary of Bank of America, serves as sole administrator of Funds Trust. Under the administration agreement, BACAP Distributors does not receive any fee for its services. The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BACAP Distributors. The Portfolios do not incur any fees or expenses except taxes, brokerage fees and commission costs, including interest expense of borrowing money, extraordinary expenses, and any applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder administration fees. Participants in the wrap fee programs eligible to invest in the Portfolios are required to pay fees to the program sponsor pursuant to separate agreements and should review the wrap program disclosure document for fees and expenses charged. BNY serves as the custodian of Funds Trust's assets. PFPC Inc. serves as the transfer agent for the Portfolios' shares. BACAP Distributors serves as distributor of the Portfolios' shares. BACAP Distributors does not receive a fee for its services as distributor. With the exception of one officer, no officer, director or employee of Bank of America, BACAP Distributors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Effective August 31, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Portfolios in accordance with federal securities regulations. A significant portion of the Portfolios represent investments by fiduciary accounts over which Bank of America has either sole or joint discretion. The Portfolios have made daily investments of cash balances in the Nations Cash Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Portfolio from such investments is included in its Statement of operations as "Dividends from affiliated funds". BACAP and BACAP Distributors earn advisory and administration fees on the investments made in Nations Cash Reserves. For the year ended March 31, 2005, BACAP and BACAP Distributors earned the following fees related to investments in affiliated funds:
ADVISORY FEES ADMINISTRATION FEES (EARNED BY BACAP) (EARNED BY BACAP DISTRIBUTORS) FUND (000) (000) - -------------------------------------------------------------------------------------------------------------- Corporate Bond........................................... $ 2 $ 1 High Income.............................................. 1 --* Mortgage- and Asset-Backed............................... 31 16
- --------------- *Amount represents less than $500. 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax 41 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended March 31, 2005, permanent book and tax basis differences resulting primarily from differing treatments for dividend reclassifications, foreign currency transactions, swap payments and redemption based payments treated as dividends paid deduction were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED (OVERDISTRIBUTED) ACCUMULATED NET INVESTMENT NET REALIZED FUND INCOME GAIN/LOSS PAID-IN CAPITAL - --------------------------------------------------------------------------------------------------------------- Corporate Bond........................................... $--* $ (20) $ 20 High Income.............................................. 84 (99) 15 Mortgage- and Asset-Backed............................... 8 (119) 111
- --------------- *Amount represents less than $500. Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended March 31, 2005 and March 31, 2004 was as follows:
3/31/05 3/31/04 -------------------------------- -------------------------------- LONG-TERM LONG-TERM ORDINARY INCOME CAPITAL GAINS ORDINARY INCOME CAPITAL GAINS FUND (000) (000) (000) (000) - ----------------------------------------------------------------------------------------------------------------- Corporate Bond............................. $2,826 $ -- $1,807 $-- High Income................................ 676 150 1,247 11 Mortgage- and Asset-Backed................. 3,573 -- 1,185 --
- --------------- *For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of March 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED NET UNREALIZED ORDINARY LONG-TERM APPRECIATION/ INCOME CAPITAL GAINS (DEPRECIATION)* FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------- Corporate Bond.......................................... 42 36 (97) High Income............................................. 17 13 (152) Mortgage- and Asset-Backed.............................. 280 -- (480)
- --------------- *The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to marked to market futures contracts and deferred wash sale losses. Unrealized appreciation and depreciation at March 31, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION) FUND (000) (000) (000) - ------------------------------------------------------------------------------------------------------------ Corporate Bond.............................................. 587 (684) (97) High Income................................................. 23 (174) (151) Mortgage- and Asset-Backed.................................. 42 (522) (480)
4. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2005, were as follows: 42 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PURCHASES SALES (000) (000) - ---------------------------------------------------------------------------------- Corporate Bond.............................................. $11,236 $17,287 High Income................................................. 9,098 9,341 Mortgage-and Asset-Backed................................... 38,190 40,047
The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2005, were as follows:
PURCHASES SALES (000) (000) - ----------------------------------------------------------------------------------- Corporate Bond.............................................. $ 10,107 $ 10,769 High Income................................................. -- 247 Mortgage-and Asset-Backed................................... 761,398 771,169
5. FUTURES CONTRACTS At March 31, 2005, the following Portfolios had futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- CORPORATE BOND PORTFOLIO: U.S. Treasury Bond Futures (long position) expiring June 2005(a)..................... 13 $ 1,444 $ 1,449 $ 5 U.S. 2 year Treasury Note Futures (long position) expiring June 2005(a)..................... 15 3,107 3,104 (3) U.S. 5 year Treasury Note Futures (short position) expiring June 2005(a).................... (6) (643) (643) -- U.S. 10 year Treasury Note Futures (short position) expiring June 2005(a).................... (37) (4,035) (4,043) (8) ---- Total net unrealized depreciation......................... $ (6) ==== MORTGAGE- AND ASSET-BACKED PORTFOLIO: U.S. 5 year Treasury Note Futures (short position) expiring June 2005(a).................... (25) (2,688) (2,677) 11 U.S. 10 year Treasury Note Futures (short position) expiring June 2005(a).................... (25) (2,745) (2,731) 14 ---- Total net unrealized appreciation......................... $ 25 ====
- --------------- (a)Securities have been segregated as collateral for the Portfolios' open futures contracts. 6. WRITTEN OPTIONS Written options for the Mortgage- and Asset-Backed Portfolio for the year ended March 31, 2005 aggregated the following:
PREMIUM NUMBER OF RECEIVED SUMMARY OF WRITTEN OPTIONS CONTRACTS* (000) - ------------------------------------------------------------------------------------ Outstanding at March 31, 2004............................... -- $-- Contracts opened............................................ 0.14 1 Contracts closed............................................ -- -- Contracts expired........................................... (0.14) (1) ----- --- Outstanding at March 31, 2005............................... -- -- ===== ===
- --------------- * 1 contract = $1,000,000 notional amount. 43 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. FORWARD FOREIGN CURRENCY CONTRACTS At March 31, 2005, the following Portfolios had forward foreign currency contracts outstanding:
UNREALIZED VALUE OF CONTRACT VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ WHEN OPENED WHEN OPENED CONTRACT (DEPRECIATION) LOCAL (LOCAL CURRENCY) (US DOLLARS) (US DOLLARS) (US DOLLARS) DESCRIPTION CURRENCY (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- HIGH INCOME PORTFOLIO: CONTRACTS TO BUY Expiring April 19, 2005................ US Dollar 20 $ 20 $ 20 $-- Expiring April 19, 2005................ US Dollar 46 46 46 -- --- Net unrealized appreciation.......... -- --- CONTRACTS TO SELL: Expiring April 19, 2005................ Euro (15) (20) (20) -- Expiring April 19, 2005................ Euro (35) (46) (45) 1 --- Net unrealized appreciation.......... 1 --- Total net unrealized appreciation.... $1 ===
8. LINE OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). The Agreement is renewable on an annual basis. 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 a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Portfolio maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. The Portfolios had no borrowings outstanding at March 31, 2005. During the year ended March 31, 2005, borrowings by the Portfolios under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING* INTEREST FUND (000) RATE - -------------------------------------------------------------------------------------- Corporate Bond Portfolio.................................... $3 1.52% High Income Portfolio....................................... 2 1.49
- --------------- * The average amount outstanding was based on daily balances in the period 9. CONTINGENCIES AND OTHER EVENTS On February 9, 2005, BACAP and BACAP Distributors entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the U.S. Securities and Exchange Commission (the "SEC") (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the SEC Order, BACAP and its affiliate, Banc of America Securities, LLC ("BAS") have agreed, among other things, (1) to pay $250 million in disgorgement and $125 million in civil money penalties; (2) to cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; (3) to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices; and (4) to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures. The NYAG Settlement also requires, among other things, BACAP along with Columbia Management Advisors, Inc. and Columbia Funds Distributors, Inc. -- the investment advisor to and distributor 44 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) of the Columbia Funds, respectively, -- to reduce Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. BACAP and BACAP Distributors are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. Pursuant to the procedures set forth in the SEC Order, $375 million will be distributed in accordance with a distribution plan to be developed by the independent distribution consultant. The distribution plan must be based on a methodology developed in consultation with the BACAP, BACAP Distributors and the independent trustees of the Nations Funds and not unacceptable to the staff of the SEC. Although the distribution plan has not yet been formulated, it is anticipated that a significant portion of the settlement fund will be paid to shareholders or mutual funds of other mutual fund complexes that may have been harmed by the trading of the third parties referenced in the Settlements through systems provided by BAS. At this time, the distribution plan is still under development. As such, any gain to the Nations Funds or their shareholders can not currently be determined. More specific information on the distribution plan will be communicated on a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Nations Funds, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Nations Funds. Civil Litigation In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Bank of America Corporation and certain of its affiliates, including BACAP and BACAP Distributors (collectively "BAC"), Nations Funds Trust and its Board of Trustees. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Nations Funds Trust, the Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of Nations Funds Trust against BAC and others that asserts claims under the federal securities laws and state common law. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. Separately, a putative class action (Reinke v. Bank of America N.A., et al.) was filed against Nations Funds Trust and others on December 16, 2004 in the United States District Court for the Eastern District of Missouri relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. Nations Funds Trust has filed a motion to dismiss that is pending, and no discovery has been taken. At the present time, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. 45 NATIONS FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUNDS TRUST In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, 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 Corporate Bond Portfolio, High Income Portfolio and Mortgage- and Asset-Backed Portfolio (constituting part of Nations Funds Trust, hereafter referred to as the "Portfolios") at March 31, 2005, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 26, 2005 46 NATIONS FUND TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2005, the amount of total long-term capital gains designated by the Corporate Bond Portfolio and the High Income Portfolio was $20,358 and $163,958 respectively. 47 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Board of Trustees (the "Board") of Nations Funds Trust (the "Trust") oversees the Trust's series ("Funds") to ensure that they are managed and operated in the interests of shareholders. A majority of the trustees ("Trustees") are "independent", meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the Funds, apart from the personal investments that most Trustees have made in certain of the portfolios as private individuals. The Trustees bring distinguished backgrounds in government, business, academia and public service to their task of working with Trust officers ("Officers") to establish the policies and oversee the activities of the Funds. Although all Trustees are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Trust, the independent Trustees have particular responsibilities for assuring that the Trust's Funds are managed in the best interests of shareholders. The following table provides basic information about the Trustees and certain Officers of the Trust. The mailing address of each Trustee is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255.
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Indefinite term; Managing Director -- E.J. Boudreau & 75 Age: 60 Trustee since 2005 Associates (consulting), through Trustee current; Chairman and Chief Executive Officer -- John Hancock Funds (mutual funds), 1989 through 2000. William P. Carmichael Indefinite term; Retired; Senior Managing 75 Age: 60 Trustee since 1999 Director -- The Succession Fund (a Trustee and Chairman of company formed to advise and buy the Board family owned companies) from 1998 through April 2001. William A. Hawkins Indefinite term; President, Retail Banking -- IndyMac 75 Age: 63 Trustee since 2005 Bancorp, Inc., September 1999 Trustee through August 2003. R. Glenn Hilliard Indefinite term; Chairman and Chief Executive 75 Age: 65 Trustee since 2005 Officer -- Hilliard Group LLC Trustee (investing and consulting), April 2003 through current; Chairman and Chief Executive Officer -- ING America (financial services), 1999 -- April 2003; and Executive Chairman -- Conseco, Inc. (insurance), Sept 2004 through current. Minor M. Shaw Indefinite term; President -- Micco Corporation and 75 Age: 56 Trustee since 2003 Mickel Investment Group. Trustee NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ INDEPENDENT TRUSTEES Edward J. Boudreau, Jr. Director -- The Museum of Science, Age: 60 Boston; Advisory Board Member -- Trustee Perennial Capital Advisors. William P. Carmichael Director -- Cobra Electronics Age: 60 Corporation (electronic equipment Trustee and Chairman of manufacturer), Rayovac Corp. the Board (batteries) and The Finish Line (apparel). William A. Hawkins Vice Chairman -- San Gabriel Red Age: 63 Cross; Director -- Leadership Trustee Pasadena; Director - Operation Hope; Trustee -- The Chandler School. R. Glenn Hilliard Director -- Conseco, Inc. Age: 65 (insurance); Non-Executive Trustee Director -- Alea Group Holding (Bermuda), Ltd. (insurance). Minor M. Shaw Chairman -- Wofford College Board of Age: 56 Trustees; Chairman and Trustee Trustee -- The Daniel-Mickel Foundation of South Carolina; Vice-Chairman and Trustee -- Greenville-Spartanburg Airport Commission and Duke Endowment; Trustee -- The Hollingsworth Funds, The Belle Baruch Foundation and the South Carolina Foundation for Independent Colleges; Chair-Elect -- Urban League of the Upstate; Board Member -- United Way of Greenville County; Vice-Chair -- Greenville Chamber of Commerce; Board Member -- United Way of South Carolina.
48 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- PRINCIPAL OFFICERS Christopher L. Wilson Indefinite term: Head of Mutual Funds since August, n/a Age: 47 President (since 2004 and Senior Vice President of 2004) the Advisor since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Funds since October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton Indefinite term: Treasurer of the Columbia Funds n/a (Age 40) Treasurer (since since October, 2003 and of the Treasurer 2000) Liberty Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene Indefinite term: Senior Vice President and Chief n/a (Age 54) Senior Vice Compliance Officer of the Columbia President and Funds, Liberty Funds, Stein Roe Chief Compliance Funds and All-Star Funds since Officer (since August, 2004 (formerly Partner, 2004) Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ PRINCIPAL OFFICERS Christopher L. Wilson n/a Age: 47 J. Kevin Connaughton n/a (Age 40) Treasurer Mary Joan Hoene n/a (Age 54)
49 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NUMBER OF FUNDS IN TERM OF OFFICE AND FUND NAME, AGE AND POSITION LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING COMPLEX HELD WITH THE TRUST SERVED THE PAST FIVE YEARS OVERSEEN - ---------------------- ------------------ ------------------------------------ --------- Michael G. Clarke Indefinite term: Chief Accounting Officer of the n/a (Age 35) Chief Accounting Columbia Funds, Liberty Funds, Stein Officer (since Roe Funds and All-Star Funds since 2004) October, 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Toche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman Indefinite term: Controller of the Columbia Funds, n/a (Age 35) Controller (since Liberty Funds, Stein Roe Funds and 2004) All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson Indefinite term: Secretary of the Columbia Funds, n/a (Age 45) Secretary (since Liberty Funds and Stein Roe Funds 2004) since December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Executive Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001). NAME, AGE AND POSITION HELD WITH THE TRUST OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------------------------------ Michael G. Clarke n/a (Age 35) Jeffrey R. Coleman n/a (Age 35) R. Scott Henderson n/a (Age 45)
- --------------- The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 50 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") contemplates that the Board of Trustees (the "Board") of Nations Funds Trust, including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not "interested persons" of the Trust, as defined in the 1940 Act (the "Independent Trustees"), will annually review and re-approve the existing investment advisory agreement and approve any newly proposed terms therein. In this regard, the Board reviewed and re-approved, during the most recent six months covered by this report the investment advisory agreement with Banc of America Capital Management, LLC ("BACAP") for the Corporate Bond Portfolio, High Income Portfolio, and Mortgage- and Asset-Backed Portfolio (the "Advisory Agreement"). The portfolios identified above are each referred to as a "Fund" and collectively referred to as the "Funds." More specifically, at a meeting held on November 17-18, 2004, the Board, including the Independent Trustees advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of BACAP and the re-approval of the Advisory Agreement. Nature, Extent and Quality of Services The Board received and considered various data and information regarding the nature, extent and quality of services provided to the Funds by BACAP under the Advisory Agreement. The most recent investment adviser registration form ("Form ADV") for BACAP was provided to the Board, as were responses of BACAP to a detailed series of requests submitted by the Independent Trustees' independent legal counsel on behalf of such Trustees. The Board reviewed and analyzed these materials, which included, among other things, information about the background and experience of the senior management and the expertise of, and amount of attention devoted to the Funds, by investment personnel of BACAP. In this regard, the Board specifically reviewed the qualifications, backgrounds and responsibilities of the portfolio managers primarily responsible for day-to-day portfolio management services for the Funds. In addition, the Board received and reviewed information on Securities and Exchange Commission ("SEC") and other regulatory inquiries and examinations relating to the Funds and BACAP. The Board considered the investment and legal compliance programs of each of these entities, including their implementation of enhanced compliance policies and procedures in response to SEC rule changes and other regulatory initiatives. The Board also considered the Funds' Chief Compliance Officer's report and recommendations. The Board evaluated the ability of BACAP, based on its resources, reputations and other attributes, to attract and retain highly qualified investment professionals, including research, advisory, and supervisory personnel. In this connection, the Board considered information regarding BACAP's compensation program for its personnel involved in the management of the Funds, including incentive and retirement plans. In addition, the Board considered the effects of recent and anticipated hirings and departures of personnel in light of the merger of Bank of America Corporation and FleetBoston Financial Corporation. Based on the above factors, together with those referenced below, the Board concluded that it was generally satisfied with the nature, extent and quality of the investment advisory services provided to each of the Funds by BACAP. Fund Performance and Expenses The Board considered the one-year performance results for each of the Funds. They also considered these results in comparison to the performance results of the group of funds that was determined by Lipper Inc. ("Lipper") to be the most similar to a given Fund (the "Peer Group") and to the performance of a broader universe of relevant funds as determined by Lipper (the "Universe"), as well as to each Fund's benchmark index. Lipper is an independent provider of investment company data. For certain funds, Lipper determined that the composition of the Peer Group/Universe for performance would differ from that that of expenses to provide a more accurate basis of comparison. The Board was provided with a description of the methodology used by Lipper to select the mutual funds in each Fund's Peer Group and Universe. The Board also considered information in the Lipper data that ranked each Fund based on (i) each Fund's one-year performance compared to actual management fees; (ii) each Fund's one-year performance compared to total expenses; (iii) each Fund's three-year performance compared to actual management fees; and (iv) each Fund's three-year 51 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) performance compared to total expenses. Based on these comparisons and expense and performance rankings of each Fund in the Lipper data, BACAP apprised the Board of individual characteristics (such as: poor rankings in terms of overall expense or management fees, maintaining poor performance or demonstrating a combination of below average to poor performance while maintaining below average or poor expense rankings) of any Fund that they believed may warrant further investigation by the Board (denoted by an overall "negative" ranking for the Fund in question) and accordingly determined an overall score for each Fund. The Board considered the projected impact on expenses of the Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Board also considered projected savings to the Funds that would result from certain modifications in soft dollar arrangements. The Board noted that the performance results for each Fund was better than, or not substantially below, each Fund's Peer Group median overall performance and did not necessitate any significant additional review. The Board received and considered statistical information regarding each Fund's total expense ratio and its various components, including contractual advisory fees, actual advisory fees, actual non-management fees, Rule 12b-1 and non-Rule 12b-1 service fees, fee waivers/caps and/or expense reimbursements. It also considered comparisons of these fees to the expense information for each Fund's Peer Group and Universe, which comparative data was provided by Lipper. The Board noted, however, that the Funds do not charge any fees or expenses. Only those participants in the wrap fee program that are eligible to invest in each of the Funds are required to pay fees to the program sponsor. Accordingly, as no fees or expenses are charged, the Board noted that the total expense ratios of the Funds were significantly lower than each Fund's Peer Group's median total expense ratio and did not require significant additional consideration by the Board. Investment Advisory Fee Rates The Board reviewed and considered the contractual investment advisory fee rates, combined with the administration fee rates, payable by the Funds to BACAP for investment advisory services (the "Advisory Agreement Rates"). The Board also reviewed and considered the proposed fee waiver/cap arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the waivers/caps into account (the "Net Advisory Rates"). Additionally, the Board received and afforded specific attention to information comparing the Net Advisory Rates with those of the other funds in their respective Peer Groups. As the Funds do not charge any fees or expenses, the Board concluded that the respective Net Advisory Rates for the Funds were lower than the median rates of each Fund's Peer Group and did not warrant significant additional consideration. Profitability The Board received and considered a detailed profitability analysis of BACAP based on the Advisory Agreement Rates and the Net Advisory Rates, as well as on other relationships between the Funds and BACAP and its affiliates. The Board concluded that, in light of the cost of providing investment management and other services, any profits and other ancillary benefits that BACAP and its affiliates received with regard to providing these services to the Funds were not unreasonable. Economies of Scale The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Funds, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board concluded that, as BACAP does not charge any fees or expenses, no economies of scale could have been realized by the Advisor in conjunction with the management of the Funds. 52 NATIONS FUNDS BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED) (UNAUDITED) Information About Services to Other Clients The Board also received and considered information about the nature, extent and quality of services and fee rates offered by BACAP to its other clients, including institutional investors. As no fees or expenses are charged to the Funds, the Board concluded that the Advisory Agreement Rates and the Net Advisory Rates were lower than the fee rates offered to other BACAP clients. Other Benefits to BACAP and the Sub-Advisers The Board received and considered information regarding potential "fall-out" or ancillary benefits received by BACAP and its affiliates as a result of their relationship with the Funds. Such benefits could include, among others, benefits directly attributable to the relationship of BACAP with the Funds (such as soft-dollar credits) and benefits potentially derived from an increase in the business of BACAP as a result of their relationship with the Funds (such as the ability to market to shareholders other financial products offered by BACAP and its affiliates). The Board also considered the effectiveness of policies of the Funds in achieving the best execution of portfolio transactions, including whether and to what extent soft dollar credits are sought and how any such credits are utilized, any benefits that may be realized by using an affiliated broker, the extent to which efforts are made to recapture transaction costs, and the controls applicable to brokerage allocation procedures. The Board also reviewed the respective policies of BACAP regarding the allocation of portfolio investment opportunities among the Funds and other clients. Other Factors and Broader Review The Board also considered the markets for the Funds, including the principal channels through which the Funds' shares are offered and sold. The Board noted that the Funds in the Nations Funds complex are generally utilized primarily by wrap fee programs and certain other managed accounts, over many of which Bank of America, N.A. and its affiliates exercise discretionary authority. As discussed above, the Board reviews detailed materials received from BACAP annually as part of the re-approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Funds receive throughout the year. In this regard, the Board reviews reports of BACAP at least in each of their quarterly meetings, which include, among other things, a detailed portfolio review, and detailed fund performance reports. In addition, the Board interviewed the portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and their evaluation of the information provided to them, the Board concluded that re-approval of the Advisory Agreement for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Board unanimously re-approved the Advisory Agreement. 53 SHAREHOLDER MEETING RESULTS RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) On March 17, 2005, a Special Meeting of Shareholders of the Nations Funds Trust (the "Trust") was held to conduct a vote for or against the approval of the following Item on the Trust's Proxy Statement for said Meeting. On December 17, 2004, the record date of the Meeting, the Trust had 89,015,864,903 shares outstanding. The votes cast were as follows: Proposal 1.
ELECTION OF TRUSTEES: FOR WITHHELD --------------------- ------------- ---------- Edward J. Boudreau, Jr. .................................... 60,106,221,350 182,307,606 William P. Carmichael....................................... 60,097,356,926 191,172,030 William A. Hawkins.......................................... 60,107,769,386 180,759,570 R. Glenn Hilliard........................................... 60,106,552,355 181,976,601 Minor M. Shaw............................................... 60,099,464,530 189,064,426
54 NF-02/064V-0405(05/05) 05/5783 ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that William P. Carmichael qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR and is considered independent. Mr. Carmichael is an "independent" trustee (i.e., he is not an interested person of the registrant as defined in the Investment Company Act of 1940, nor has he accepted directly or indirectly any consulting, advisory or other compensatory fee from the registrant, other than in his capacity as a Trustee). ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows:
2005 2004 $1,470,000 $1,340,000
Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows:
2005 2004 $221,000 $15,750
Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. Audit-Related Fees in fiscal year 2005 include certain agreed-upon procedures performed for semi-annual shareholder reports. Audit-Related Fees in fiscal year 2004 consists of certain agreed-upon procedures performed for fund mergers. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows:
2005 2004 $414,700 $389,700
Tax Fees in both fiscal years 2005 and 2004 consist primarily of the review of annual tax returns and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows:
2005 2004 $0 $5,000
In 2004 the independent accountant presented continuing education classes at a cost of $5,000. All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. None of the amounts described in paragraphs (a) through (d) above were approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES The Audit Committee of the registrant has adopted a formal policy which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve services rendered by the principal accountant. The Audit Committee is required to pre-approve all audit and non-audit services rendered by the principal accountant to the Funds, and those non-audit services relating directly to the Funds' operations and financial reporting that are rendered by the principal accountant to the Funds' adviser or a control affiliate of the adviser (i.e., affiliates that provide ongoing services to the Funds). Annual Pre-approval of audit and non-audit services The Audit Committee pre-approves the following on an annual basis usually during the November board meeting: - - amounts for the annual audit services. - - amounts related to the annual tax services. - - separate amounts for "agreed upon procedures" and consultative type of work. More specifically, this would include agreed upon procedures relating to the Funds' accounting records and/or tax compliance in connections with mergers, in-kind contributions or redemptions and other Fund reorganizations, up to a maximum $50,000 per annum. - - Separate amounts for tax consultations, research and discussions relating to proposed new registered funds and existing funds. This includes advice regarding the tax consequences of proposed or actual fund transactions, tax reporting issues and assistance in responding to inquiries from tax authorities. This pre-approval is limited to engagements that are less than $10,000 individually and $50,000 in the aggregate. - - Consultations, research and discussion regarding accounting and auditing issues relating to new or existing Funds. This pre-approved is limited to engagements that are less than $10,000 individually and $25,000 in the aggregate. - - Continuing education seminars for Banc of America Capital Management (BACAP) personnel. Management reviews these requested pre-approvals with the Audit Committee. At this meeting, the scope and fees related to the audit and tax services and also the requests for pre-approval for "agreed upon procedures" and other consultative work are reviewed. Approval of additional non-audit services To the extent that management requests that the principal accountant do additional work beyond the pre-approved amounts, the following will apply: To the extent that management seeks approval of such services at a regularly scheduled board meeting, the following will apply: - The matter will be covered under an agenda item in the Audit Committee agenda. Management will review with the Audit Committee the dollar amount and the business reasons for the needed work. The appropriate representatives from the principal accountant will be present as needed by the Audit Committee. To the extent that management is requesting approval between Board meetings, the following will apply: - If the request is for less than $50,000, then Management will call the Chairman of the Audit Committee and inform the Chairman as to the details regarding the request. This information would include: - The requested dollar amount. - A detailed description of the work to be done. - The business reasons for the needed work. - The Chairman will have the authority to approve or disapprove these non-audit fees. If the Chairman is unavailable to serve in this capacity, the Audit Committee has authorized an alternative member of the Audit Committee to approve or disapprove said fees. The Chairman also has the discretion to call a telephonic Audit Committee meeting if it is believed that the service raises issues where it is believed that the entire committee should discuss prior to approval. - To the extent that the Chairman approves such request, management and the Audit Committee Chairman / management will present to the full Board at the next regularly scheduled Board meeting. - If the request is for more than $50,000, then Management will call the Chairman of the Audit Committee and inform the Chairman as to the details regarding the request. This information would include the requested dollar amount as well as a detailed description of the work to be done and the business reasons for the needed work. Management will then arrange for a telephonic Audit Committee meeting to discuss the request in more detail and to request the approval of the fees by the Audit Committee. ***** (e)(2) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended March 31, 2005 and March 31, 2004 was zero. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended March 31, 2005 and March 31, 2004 are disclosed in (b) through (d) of this Item. During the fiscal years ended March 31, 2005 and March 31, 2004, there were no Audit-Related Fees, Tax Fees or Other Fees that were approved for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during both fiscal years ended March 31, 2005 and March 31, 2004 was zero. (h) The registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal half year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Nations Funds Trust By (Signature and Title) /S/ Christopher L. Wilson --------------------------------------- Christopher L. Wilson, President Date June 9, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /S/ Christopher L. Wilson -------------------------------------- Christopher L. Wilson, President Date June 9, 2005 By (Signature and Title) /S/ J. Kevin Conaughton ------------------------------------- J. Kevin Connaughton, Treasurer Date June 9, 2005 EX-99.CODEETH 2 b55414nfexv99wcodeeth.txt CODE OF ETHICS NATIONS FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This code of ethics (the "Code") governs the investment companies within the Nations Funds complex (collectively, the "Funds" and each, a "Fund") as set forth in Exhibit A. It applies to each Fund's Principal Executive Officer, Chief Financial Officer, Principal Accounting Officer or Controller and any other persons conducting similar functions for the Funds (the "Covered Officers") as set forth in Exhibit B. This Code promotes: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to both actual and apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST. OVERVIEW. A "conflict of interest" occurs when a Covered Officer's personal interest interferes with the interest of, or his service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Funds. Certain provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisors Act") govern certain conflicts of interest that arise out of the relationships between Covered Officers and the Funds. If such conflicts are addressed in conformity with applicable provisions of the Investment Company Act and the Investment Advisers Act, they will be deemed to have been handled ethically. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Funds because they are "affiliated persons" of the Funds. The Funds' and their investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conduct that is consistent with such programs and procedures falls outside of the parameters of this Code. Although they do not typically present an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationships between the Funds and the investment adviser, distributor and/or administrator of which the Covered Officers are also officers or employees (each, a "Primary Service Provider"). As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Funds or for the Primary Service Providers, or for both), be involved in establishing policies and implementing decisions which will have different effects on the Primary Service Providers and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationships between the Funds and the Primary Service Providers and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. If such conflicts are addressed in conformity with applicable provisions of the Investment Company Act and the Investment Advisers Act, they will be deemed to have been handled ethically. In addition, it is recognized by the Boards of Trustees and Directors (such Trustees and Directors collectively, "Trustees") that the Covered Officers also may be officers or employees of one or more other investment companies covered by other similar codes of ethics and that the codes of ethics of those investment companies will apply to the Covered Officers acting in those distinct capacities for those other investment companies. This Code covers conflicts of interest that are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Certain examples of such conflicts of interest follow. Each Covered Officer must: - not knowingly use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; - not knowingly cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Funds; - not use material non-public knowledge of portfolio transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; and - report at least annually known affiliations or other relationships that may give rise to conflicts of interest with respect to the Funds. If a Covered Officer believes that he has a potential conflict of interest that is likely to materially compromise his objectivity or his ability to perform the duties of his role as Covered Officer, including a potential conflict of interest that arises out of his responsibilities as an officer or employee of one or more Primary Service Providers or other funds, he should consult with the Funds' Chief Legal Officer ("Legal Counsel"), the Funds' outside counsel, or counsel to the Trustees who are not "interested persons" of the Funds as defined in the Investment Company Act ("Independent Trustees"), as appropriate. Under appropriate circumstances, the Covered Officer should also consider whether to present the matter to the Board or an appropriate committee thereof. Examples of potential conflicts of interest that may materially compromise objectivity or ability to perform the duties of a Covered Officer include: - service as a director on the board of a public or private company or service as a public official; - the receipt of a non-nominal gift when the gift is in relation to doing business directly or indirectly with the Funds; - the receipt of entertainment from any company with which the Funds have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - an ownership interest in, or any consulting or employment relationship with, any of the Funds' service providers, other than the Primary Service Providers or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE & COMPLIANCE It is the responsibility of each Covered Officer: - to familiarize himself with the disclosure requirements generally applicable to the Funds, as well as the business and financial operations of the Funds; - to not knowingly misrepresent, and to not knowingly cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Trustees and the Funds' auditors, and to governmental regulators and self-regulatory organizations; - to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the Primary Service Providers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - within his or her area of responsibility, to adhere to and promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code or becoming a Covered Officer and annually thereafter, affirm in writing to the Funds' Boards of Trustees that he has received, read, and understands the Code on the attached form; - annually thereafter affirm to the Boards that he has reviewed and believes that he has complied with the requirements of the Code on the attached form; - not retaliate against any employee or Covered Officer for reports of potential violations that are made in good faith; and - notify Legal Counsel, the Funds' outside counsel, or counsel to the Independent Trustees promptly if he knows of any violation of this Code. Failure to do so is a violation of this Code. Legal Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by Covered Officers will be considered by the appropriate Audit Committee. Legal Counsel is authorized and encouraged to consult, as appropriate, with the chair of the Audit Committee, the Funds' outside counsel or counsel to the Independent Trustees. The Funds will follow these procedures in investigating and enforcing this Code: - Legal Counsel will endeavor to take all appropriate action to investigate any potential violations reported to him; - if, after such investigation, Legal Counsel believes that no violation has occurred, Legal Counsel is not required to take any further action; - any matter that Legal Counsel believes is a violation will be reported to the appropriate Audit Committee; - if the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Funds' Primary Service Providers or their boards; a recommendation to censure, suspend or dismiss the Covered Officer or referral to of the matter to the appropriate authorities for civil action or criminal prosecution; - the Audit Committee will be responsible for granting waivers, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' Primary Service Providers, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code and this Code does not address the overlap or conflict. The Funds' and their investment adviser's and investment sub-advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act and the adviser's more detailed policies and procedures set forth in its Compliance Manual are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Except as to Exhibit A, this Code may not be amended except in written form, which is specifically approved or ratified by a majority vote of the Funds' board, including a majority of the Independent Trustees. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code or upon advice of counsel, such matters shall not be disclosed to anyone other than the appropriate Board and their counsel, the Primary Service Providers or their affiliates and counsel and, if deemed appropriate, the Boards of the other Funds. VIII. RECORDKEEPING The Funds will maintain and preserve for a period of not less than six (6) years from the date such action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Board: (i) that provided the basis for any amendment or waiver to this Code, and (ii) relating to any violation of the Code and sanctions imposed for such violation, together with a written record of the approval or action taken by the Audit Committee and/or Board. IX. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Funds, as to any fact, circumstance, or legal conclusion. Date: December 23, 2003 EXHIBIT A FUNDS Nations Funds Trust Nations Master Investment Trust Nations Separate Account Trust EXHIBIT B COVERED OFFICERS Christopher L. Wilson J. Kevin Connaughton INITIAL ACKNOWLEDGEMENT I acknowledge that I have received and read a copy of the Nations Funds Code of Ethics for Principal Executive and Senior Financial Officers (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I have set forth below (and on attached sheets of paper, if necessary) all known affiliations or other relationships that may give rise to conflicts of interest for me with respect to the Funds. -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- I also acknowledge my responsibility to report any known violation of the Code to Legal Counsel, the Funds' outside counsel, or counsel to the Independent Trustees, all as defined in this Code. I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. Covered Officer Name and Title: ------------------------------------------------- (please print) - -------------------------------------------------------------------------------- Signature Date Please return this completed form to_______________________________ within one week from the date of your review of these documents. Thank you! ANNUAL ACKNOWLEDGEMENT I acknowledge that I have received and read a copy of the Nations Funds Code of Ethics for Principal Executive and Senior Financial Officers (the "Code") and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code. I also acknowledge that I believe that I have fully complied with the terms and provisions of the Code during the period of time since the most recent Initial or Annual Acknowledgement provided by me. I have set forth below (and on attached sheets of paper, if necessary) all known affiliations or other relationships that may give rise to conflicts of interest for me with respect to the Funds.(1) -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Funds have the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in their sole discretion, with or without notice. Covered Officer Name and Title: ------------------------------------------------ (please print) - -------------------------------------------------------------------------------- Signature Date Please return this completed form to_______________________________ within one week from the date of your receipt of a request to complete and return it. Thank you! - ---------------------- (1) It is acceptable to refer to affiliations and other relationships previously disclosed in prior Initial or Annual Acknowledgements without setting forth such affiliations and relationships again. EX-99.CERT 3 b55414nfexv99wcert.txt CERTIFICATIONS I, Christopher L. Wilson, certify that: 1. I have reviewed this report on Form N-CSR of Nations Funds Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 9, 2005 /S/ Christopher L. Wilson --------------------------------- Christopher L. Wilson, President I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Nations Funds Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 9, 2005 /S/ J. Kevin Conaughton -------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CERT 4 b55414nfexv99w906cert.txt SECTION 906 CERTIFICATIONS CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Nations Funds Trust (the "Trust") on Form N-CSR for the period ending March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: June 9, 2005 /S/ Christopher L. Wilson --------------------------------- Christopher L. Wilson, President Date: June 9, 2005 /S/ J. Kevin Conaughton --------------------------------- J. Kevin Connaughton, Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR with the Commission -----END PRIVACY-ENHANCED MESSAGE-----