-----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, CYfcwxRFFJuf8Pp9GjztB9XMuxfr4qkDdkognUTsXmrW2OQZnl/37ebf/hyQ05Ap LL7UHxe83/OCmSR7twRS3g== 0000950168-01-000253.txt : 20010214 0000950168-01-000253.hdr.sgml : 20010214 ACCESSION NUMBER: 0000950168-01-000253 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS FUNDS TRUST CENTRAL INDEX KEY: 0001097519 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 333-89661 FILM NUMBER: 1537355 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 497 1 0001.txt NATIONS FUNDS TRUST NATIONS FUND TRUST NATIONS FUND, INC. NATIONS RESERVES One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 Telephone: 800-653-9427 January 29, 2001 DEAR SHAREHOLDER: We are pleased to invite you to special meetings of shareholders of Nations U.S. Government Bond Fund, Nations Government Securities Fund, Nations Balanced Assets Fund and Nations Asset Allocation Fund (each a "Fund" and collectively, the "Funds") to be jointly held at 10:00 a.m., Eastern time, on April 12, 2001, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina (the "Meetings"). At the Meetings, you will be asked to approve the proposed reorganization (the "Reorganization") of your Fund into an acquiring mutual fund (each an "Acquiring Fund" and together, the "Acquiring Funds") in Nations Funds Trust, another registered investment company within the Nations Funds family. If you own shares of Nations Government Securities Fund or Nations Asset Allocation Fund, the investment objective, principal investment strategies and investment risks of the Acquiring Fund are identical to those of your Fund. If you own shares of Nations Balanced Assets Fund or Nations U.S. Government Bond Fund, the investment objective, principal investment strategies and investment risks of the Acquiring Fund are substantially similar to those of your Fund. There will be no change to the investment adviser and sub-adviser who currently manage your Fund after the Reorganization. We note, however, that the Acquiring Fund for Nations Balanced Assets Fund utilizes a "multi-manager" approach, which means that a portion of its assets will be managed by a second sub-adviser as explained in the attached Combined Proxy Statement/Prospectus. In addition, the Reorganization will result in Acquiring Fund total operating expense ratios (before and after waivers and/or reimbursements) that are no higher than are currently applicable to your Fund (assuming each Fund's shareholders approve the Reorganization). The features and services that are available to you today as a shareholder will continue to be available to you as an Acquiring Fund shareholder after the Reorganization. THE BOARDS OF TRUSTEES OF NATIONS FUND TRUST AND NATIONS RESERVES AND THE BOARD OF DIRECTORS OF NATIONS FUND, INC. UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE THE PROPOSED REORGANIZATION. Management is proposing the Reorganization based on its belief that combining like funds, which will result in higher asset levels (assuming each Fund's shareholders approve the Reorganization), may lead to economies of scale by eliminating certain duplicative costs associated with maintaining those funds as separate series. The Reorganization offers several other benefits. First, the Reorganization is one part of a broader initiative to streamline the operations of the Nations Funds family, which currently consists of several registered investment companies. Over time, management expects to reduce the number of registered investment companies in the Nations Funds family without necessarily impacting investment alternatives. Streamlining the Nations Funds family may allow it and the Acquiring Funds to achieve cost savings by reducing accounting, legal and securities registration costs. Also, the Acquiring Funds will be part of a Delaware business trust, which generally is viewed as having more flexibility in its operations than Massachusetts business trusts like Nations Reserves and Nations Fund Trust, and a Maryland corporation like Nations Fund, Inc. Finally, the Acquiring Funds also will have more flexibility in their investment policies than your current Fund, including policies that permit them to adopt a "master-feeder" structure. A master-feeder structure, if adopted in the future, would allow an Acquiring Fund to access other distribution channels that might not otherwise be available, thereby potentially achieving economies of scale and other benefits that come from greater asset size. If shareholder approval is obtained and the other conditions to the Reorganization are satisfied, it is anticipated that each Fund would be reorganized into its corresponding Acquiring Fund on or about June 8, 2001, when Fund shares would be exchanged for shares of the same class of shares of the corresponding Acquiring Fund of equal dollar value. The exchange of shares in the Reorganization is expected to be tax-free under federal income tax law. None of the customary costs associated with this proxy solicitation will be borne by the Funds or their shareholders. The formal Notice of Special Meetings, Combined Proxy Statement/Prospectus and Proxy Ballot are enclosed. The proposed Reorganization and the reasons for the unanimous recommendation of the Boards are discussed in more detail in the enclosed materials, which you should read carefully. If you have any questions, please do not hesitate to contact us at the toll-free number set forth above. We look forward to your attendance at the Meetings or to receiving your Proxy Ballot(s) so that your shares may be voted at the Meetings. Sincerely, A. MAX WALKER President and Chairman of the Boards of Trustees of Nations Fund Trust and Nations Reserves and the Board of Directors of Nations Fund, Inc. YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. PLEASE VOTE BY SUBMITTING YOUR PROXY BALLOT(S) TODAY, EITHER IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR BY FAX AT (704) 388-2641. YOU MAY ALSO SUBMIT YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED BELOW. Two Quick And Easy Ways To Submit Your Proxy As a valued Fund shareholder, your proxy vote is important to us. That's why we've made it faster and easier to submit your proxy at your convenience, 24 hours a day. After reviewing the enclosed Combined Proxy Statement/Prospectus ("Proxy Statement") select one of the following quick and easy methods to submit your proxy -- accurately and quickly. Vote on-line Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have 1. Read the enclosed Proxy Statement and have your Proxy Ballot(s)* at hand. your Proxy Ballot(s)* at hand. 2. Go to Web site www.proxyvote.com 2. Call toll-free 1-800-690-6903. 3. Enter the 12-digit Control Number found on 3. Enter the 12-digit Control Number found on your Proxy Ballot(s). your Proxy Ballot(s). 4. Submit your proxy using the easy-to-follow 4. Submit your proxy using the easy-to-follow instructions. instructions.
* Do not mail the Proxy Ballot(s) if submitting your Proxy by Internet, fax or telephone. NATIONS FUND TRUST, NATIONS FUND, INC. AND NATIONS RESERVES One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 800-653-9427 --------------------------------------------- NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS To Be Held on April 12, 2001 --------------------------------------------- TO NATIONS BALANCED ASSETS FUND SHAREHOLDERS: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations Balanced Assets Fund of Nations Fund Trust (the "Trust") will be held at 10:00 a.m., Eastern time, on April 12, 2001, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: ITEM 1. A proposed agreement and plan of reorganization dated as of January 20, 2001 (the "Reorganization Agreement"), by and between the Trust, on behalf of Nations Balanced Assets Fund, and Nations Funds Trust, on behalf of a corresponding mutual fund (the "Acquiring Fund"). The Reorganization Agreement provides for the transfer of the assets and liabilities of Nations Balanced Assets Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of the Acquiring Fund. ITEM 2. Such other business as may properly come before the Meeting or any adjournment(s). Item 1 is described in the attached Combined Proxy Statement/Prospectus. TO NATIONS U.S. GOVERNMENT BOND FUND AND NATIONS GOVERNMENT SECURITIES FUND SHAREHOLDERS: PLEASE TAKE NOTE THAT special meetings of shareholders of Nations U.S. Government Bond Fund and Nations Government Securities Fund of Nations Fund, Inc. (the "Company") will be held jointly at 10:00 a.m., Eastern time, on April 12, 2001, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: ITEM 1. A proposed agreement and plan of reorganization dated as of January 20, 2001 (the "Reorganization Agreement"), by and between the Company, on behalf of Nations U.S. Government Bond Fund and Nations Government Securities Fund, and Nations Funds Trust, on behalf of a corresponding mutual fund (the "Acquiring Fund"). The Reorganization Agreement provides for the transfer of the assets and liabilities of Nations U.S. Government Bond Fund and Nations Government Securities Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of such Acquiring Fund. ITEM 2. Such other business as may properly come before the Meetings or any adjournment(s). Item 1 is described in the attached Combined Proxy Statement/Prospectus. TO NATIONS ASSET ALLOCATION FUND SHAREHOLDERS: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations Asset Allocation Fund of Nations Reserves ("Reserves") will be held at 10:00 a.m., Eastern time, on April 12, 2001, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: ITEM 1. A proposed agreement and plan of reorganization dated as of January 20, 2001 (the "Reorganization Agreement"), by and between Reserves, on behalf of Nations Asset Allocation Fund, and Nations Funds Trust, on behalf of a corresponding mutual fund (the "Acquiring Fund"). The Reorganization Agreement provides for the transfer of the assets and liabilities of Nations Asset Allocation Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of the Acquiring Fund. ITEM 2. Such other business as may properly come before the Meeting or any adjournment(s). Item 1 is described in the attached Combined Proxy Statement/Prospectus. YOUR TRUSTEES/DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSALS. Shareholders of record as of the close of business on January 15, 2001 are entitled to notice of, and to vote at, the Meetings or any adjournment(s) thereof. SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY BALLOT(S), WHICH IS BEING SOLICITED BY THE BOARDS OF TRUSTEES OF NATIONS FUND TRUST AND NATIONS RESERVES AND THE BOARD OF DIRECTORS OF NATIONS FUND, INC. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETINGS. SHAREHOLDERS ALSO MAY SUBMIT THEIR PROXIES: 1) BY FAX AT (704) 388-2641; 2) BY TELEPHONE AT (800) 690-6903; OR 3) ON-LINE AT WEBSITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO NATIONS FUND TRUST, NATIONS FUND, INC. AND/OR NATIONS RESERVES A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETINGS AND VOTING IN PERSON. By Order of the Board of Trustees/Directors, RICHARD H. BLANK, JR. Secretary of Nations Fund Trust, Nations Fund, Inc. and Nations Reserves January 29, 2001 COMBINED PROXY STATEMENT/PROSPECTUS Dated January 29, 2001 NATIONS FUNDS TRUST NATIONS FUND TRUST NATIONS FUND, INC. NATIONS RESERVES One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 1-800-653-9427 This Combined Proxy Statement/Prospectus ("Proxy/Prospectus") is furnished in connection with the solicitation of proxies by the Board of Trustees of Nations Fund Trust (the "Trust"), the Board of Directors of Nations Fund, Inc. (the "Company") and the Board of Trustees of Nations Reserves ("Reserves") at special meetings of shareholders of the following open-end management invesment companies: Nations U.S. Government Bond Fund ("U.S. Government Bond Fund"), Nations Government Securities Fund ("Government Securities Fund"), Nations Balanced Assets Fund ("Balanced Assets Fund"), and Nations Asset Allocation Fund ("Asset Allocation Fund") (each an "Acquired Fund" and collectively, the "Acquired Funds"). The Board of Trustees of the Trust, the Board of Directors of the Company and the Board of Trustees of Reserves are sometimes each referred to as a "Board," or together as the "Boards." The special meetings and any adjournment(s) are referred to as the "Meetings." This Proxy/Prospectus sets forth concisely the information about the proposed reorganization (the "Reorganization") of the Acquired Funds into corresponding Acquiring Funds in Nations Funds Trust, another registered investment company within the Nations Funds family, and the information about the Acquiring Funds that a shareholder should know before deciding how to vote. It is both a proxy statement for the Meetings and a prospectus offering shares in Nations Government Securities Fund (new) ("Government Securities Fund (new)") and Nations Asset Allocation Fund (new) ("Asset Allocation Fund (new)"). It is not a prospectus for shareholders of the Government Securities Fund or Asset Allocation Fund because these Funds are proposed to be reorganized into "shell" funds that have identical investment objectives, principal investment strategies and risks as the Government Securities Fund (new) and Asset Allocation Fund (new), respectively. This Proxy/Prospectus should be retained for future reference. Additional information about the Acquiring Funds is available in their: o Prospectuses; o Statements of Additional Information, or SAIs; and o Annual and Semi-Annual Reports to shareholders. All of this information is in documents filed with the Securities and Exchange Commission (the "SEC") and is available upon oral or written request and without charge. The information contained in the prospectuses for the Acquiring Funds is legally deemed to be part of this Proxy/Prospectus and is incorporated by reference. Copies of the applicable Acquiring Fund prospectus(es) also accompany this Proxy/Prospectus. 1 The annual reports to shareholders for the fiscal year ended March 31, 2000, semi-annual reports to shareholders for the fiscal period ended September 30, 2000 and the prospectuses for the Acquired Funds previously have been mailed to shareholders. The Statement of Additional Information relating to this Proxy/ Prospectus is incorporated by reference into this Proxy/Prospectus and is dated January 29, 2001. Additional copies of any of these documents are available without charge by writing the address given above or by calling 1-800-321-7854. These documents also are available on the SEC website at www.sec.gov. It is expected that this Proxy/Prospectus will be mailed to shareholders on or about January 29, 2001. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROXY/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. At the Meetings the Boards will propose that each Acquired Fund be reorganized into a corresponding mutual fund (each, an "Acquiring Fund" and together, the "Acquiring Funds") as set forth below.
Will Be Reorganized into these These Acquired Funds Acquiring Funds of Nations Funds Trust - ----------------------------- ----------------------------------------- U.S. Government Bond Fund Primary A Shares (down arrow) Investor A Shares Nations Government Securities Fund (new) Investor B Shares Primary A Shares Investor C Shares Investor A Shares Investor B Shares Investor C Shares Government Securities Fund (up arrow) Primary A Shares Investor A Shares Investor B Shares Investor C Shares Balanced Assets Fund Primary A Shares (down arrow) Investor A Shares Nations Asset Allocation Fund (new) Investor B Shares Primary A Shares Investor C Shares Investor A Shares Investor B Shares Investor C Shares Asset Allocation Fund (up arrow) Primary A Shares Investor A Shares Investor B Shares Investor C Shares
2 The Meetings have been called to consider the following proposals: FOR BALANCED ASSETS FUND SHAREHOLDERS: ITEM 1. A proposed agreement and plan of reorganization dated as of January 20, 2001, by and between the Trust, on behalf of Balanced Assets Fund, and Nations Funds Trust, on behalf of a corresponding Acquiring Fund. The reorganization agreement provides for the transfer of the assets and liabilities of Balanced Assets Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of such Acquiring Fund. ITEM 2. Such other business as may properly come before the Meeting or any adjournment(s). FOR U.S. GOVERNMENT BOND FUND AND GOVERNMENT SECURITIES FUND SHAREHOLDERS: ITEM 1. A proposed agreement and plan of reorganization dated as of January 20, 2001, by and between the Company, on behalf of U.S. Government Bond Fund and Government Securities Fund, and Nations Funds Trust, on behalf of a corresponding Acquiring Fund. The reorganization agreement provides for the transfer of the assets and liabilities of U.S. Government Bond Fund and Government Securities Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of such Acquiring Fund. ITEM 2. Such other business as may properly come before the Meetings or any adjournment(s). FOR ASSET ALLOCATION FUND SHAREHOLDERS: ITEM 1. A proposed agreement and plan of reorganization dated as of January 20, 2001, by and between Reserves, on behalf of Asset Allocation Fund, and Nations Funds Trust, on behalf of a corresponding Acquiring Fund. The reorganization agreement provides for the transfer of the assets and liabilities of Asset Allocation Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of such Acquiring Fund. ITEM 2. Such other business as may properly come before the Meeting or any adjournment(s). 3 TABLE OF CONTENTS SUMMARY ........................................................................................ 5 The Reorganization ............................................................................ 5 Fee Tables .................................................................................. 5 Overview of the Reorganization Agreements ................................................... 6 Overview of Investment Objective and Principal Investment Strategies ........................ 6 Overview of Service Providers ............................................................... 8 Overview of Purchase, Redemption, Distribution, Exchange and Other Procedures ............... 8 Federal Income Tax Consequences ............................................................. 8 Principal Risk Factors ...................................................................... 8 THE REORGANIZATION ............................................................................. 10 Description of the Reorganization Agreements .................................................. 10 Reasons for the Reorganization ................................................................ 11 Board Consideration ........................................................................... 13 Comparison of Investment Management, Investment Objective and Principal Investment Strategies.. 14 Comparison of Investment Policies and Restrictions ............................................ 19 Comparison of Forms of Business Organization .................................................. 19 Comparison of Acquired Fund and Acquiring Fund Performance .................................... 21 Comparison of Advisory and Other Service Arrangements and Fees ................................ 21 Investment Advisory and Sub-Advisory Services and Fees ...................................... 21 Administration Services ..................................................................... 23 Distribution and Shareholder Servicing Arrangements ......................................... 23 Comparison of Purchase, Redemption, Distribution and Exchange Policies and Other Shareholder Transactions and Services ................................................................... 24 Material Federal Income Tax Consequences ...................................................... 24 Capitalization ................................................................................ 26 VOTING MATTERS ................................................................................. 28 General Information ........................................................................... 28 Quorum ........................................................................................ 29 Shareholder Approval .......................................................................... 29 Principal Shareholders ........................................................................ 30 Annual Meetings and Shareholder Meetings ...................................................... 34 ADDITIONAL INFORMATION ABOUT THE TRUST, THE COMPANY, RESERVES AND NATIONS FUNDS TRUST ....................................................................... 35 FINANCIAL STATEMENTS ........................................................................... 35 OTHER BUSINESS ................................................................................. 35 SHAREHOLDER INQUIRIES .......................................................................... 36
APPENDICES I. EXPENSE SUMMARIES OF THE ACQUIRED FUNDS AND ACQUIRING FUNDS II. MANAGEMENT'S DISCUSSION OF ACQUIRED FUND PERFORMANCE III. COMPARISON OF FUNDAMENTAL POLICIES AND LIMITATIONS OF THE ACQUIRED FUNDS AND THE ACQUIRING FUNDS 4 SUMMARY The following is an overview of certain information relating to the proposed Reorganization. More complete information is contained throughout the Proxy/Prospectus and its Appendices. The Reorganization Fee Tables The table shows, as of December 1, 2000: (i) the annualized total operating expense ratios of the Acquired Funds; and (ii) the pro forma annualized total operating expense ratios of the Acquiring Funds based upon the fee arrangements that will be in place upon consummation of the Reorganization. The table shows that the total operating expense ratios (before and after waivers and/or reimbursements) of the Acquiring Funds after the Reorganization will be no higher than they were for the Acquired Funds as of December 1, 2000 (assuming each Acquired Fund's shareholders approve the Reorganization). It is possible that one or both of the Acquired Funds will not approve their respective Reorganization. The pro forma presentation is not shown here for either of these scenarios, because each such scenario would result in a shell transaction only and the total operating expense ratios would remain as they were before the Reorganization. Detailed pro forma expense information, including these additional scenarios, is included in Appendix I. Total Operating Expense Information
Total Pro Forma Operating Total Operating Expense Ratios Expense Ratios Before/After Before/After Acquired Waivers and/or Waivers and/or Fund/Share Class Reimbursements Combined Fund/Class Post-Reorganization Reimbursements - ----------------------------- ----------------- ----------------------------------------- ------------------ U.S. Government Bond Fund Primary A shares 1.04%/0.78% Investor A shares 1.29%/1.03% (down arrow) Investor B shares 2.04%/1.78% Government Securities Fund (new) Investor C shares 2.04%/1.78% Primary A shares 0.88%/0.78% Government Securities Fund Investor A shares 1.13%/1.03% Primary A shares 0.88%/0.78% Investor B shares 1.88%/1.78% Investor A shares 1.13%/1.03% Investor C shares 1.88%/1.78% Investor B shares 1.88%/1.78% (up arrow) Investor C shares 1.88%/1.78% Balanced Assets Fund Primary A shares 1.19%/1.00% Investor A shares 1.44%/1.25% (down arrow) Investor B shares 2.19%/2.00% Asset Allocation Fund (new) Investor C shares 2.19%/2.00% Primary A shares 1.00%/1.00% Asset Allocation Fund Investor A shares 1.25%/1.25% Primary A shares 1.00%/1.00% Investor B shares 2.00%/2.00% Investor A shares 1.25%/1.25% Investor C shares 2.00%/2.00% Investor B shares 2.00%/2.00% (up arrow) Investor C shares 2.00%/2.00%
5 Overview of the Reorganization Agreements The documents that govern the Reorganization are the agreements and plans of reorganization (i) between the Trust, on behalf of the Balanced Assets Fund, and Nations Funds Trust, on behalf of the Asset Allocation Fund (new); (ii) between the Company, on behalf of the U.S. Government Bond Fund and the Government Securities Fund and Nations Funds Trust, on behalf of the corresponding Acquiring Fund; and (iii) between Reserves, on behalf of the Asset Allocation Fund and Nations Funds Trust, on behalf of Asset Allocation Fund (new) (each a "Reorganization Agreement" and collectively, the "Reorganization Agreements"). The Reorganization Agreements are all substantially identical and each provides for: (1) the transfer of all of the assets and liabilities of each Acquired Fund to its corresponding Acquiring Fund in exchange for shares of equal value of the same classes of the Acquiring Fund; and (2) the distribution of the Acquiring Fund shares to the shareholders of the corresponding Acquired Fund in liquidation of such Acquired Fund. The Reorganization is subject to a number of conditions, including approval by Acquired Fund shareholders. As a result of the proposed Reorganization, an Acquired Fund shareholder will become a shareholder of a corresponding Acquiring Fund and will hold, immediately after the Reorganization, Acquiring Fund shares having a total dollar value equal to the total dollar value of the shares of the Acquired Fund that the shareholder held immediately before the Reorganization. The Reorganization is expected to occur on June 8, 2001. The exchange of Acquired Fund shares for corresponding Acquiring Fund shares by Acquired Fund shareholders in the Reorganization is expected be tax-free under federal income tax law and shareholders will not pay any sales charge or sales load on the exchange. For more information about the Reorganization and the Reorganization Agreements, see "The Reorganization -- Description of the Reorganization Agreements." Overview of Investment Objective and Principal Investment Strategies Acquired Fund Investment Objective and Principal Investment Corresponding Acquiring Fund Investment Objective and Strategy Principal Investment Strategy - ------------------------------------------------------------- ---------------------------------------------------------- U.S. Government Bond Fund: seeks total return and Government Securities Fund (new): seeks high current preservation of capital by investing in U.S. government income consistent with moderate fluctuation of principal; securities and repurchase agreements collateralized by normally invests at least 65% of its assets in U.S. such securities; normally invests at least 65% of its government obligations and repurchase agreements secured assets in U.S. government obligations and repurchase by these securities. agreements secured by these securities. Government Securities Fund: seeks high current income Government Securities Fund (new): seeks high current consistent with moderate fluctuation of principal; income consistent with moderate fluctuation of principal; normally invests at least 65% of its assets in U.S. normally invests at least 65% of its assets in U.S. government obligations and repurchase agreements government obligations and repurchase agreements secured secured by these securities. by these securities.
6 Acquired Fund Investment Objective and Principal Investment Corresponding Acquiring Fund Investment Objective and Strategy Principal Investment Strategy - ------------------------------------------------------------- ---------------------------------------------------------- Balanced Assets Fund: seeks total return by investing in Asset Allocation Fund (new): seeks to obtain long-term equity and fixed income securities; invests in a mix of growth from capital appreciation, and dividend and interest equity and fixed income securities, as well as money income; invests in a mix of equity and fixed income market instruments. securities, as well as cash equivalents, including U.S. government obligations, commercial paper and other short-term, interest-bearing instruments. Asset Allocation Fund: seeks to obtain long-term growth Asset Allocation Fund (new): seeks to obtain long-term from capital appreciation, and dividend and interest growth from capital appreciation, and dividend and interest income; invests in a mix of equity and fixed income income; invests in a mix of equity and fixed income securities, as well as cash equivalents, including U.S. securities, as well as cash equivalents, including U.S. government obligations, commercial paper and other government obligations, commercial paper and other short-term, interest-bearing instruments. short-term, interest-bearing instruments.
The investment objective, principal investment strategies and investment risks of the Government Securities Fund and its corresponding Acquiring Fund, Government Securities Fund (new), are identical. Although there are differences between the investment objective of U.S. Government Bond Fund and its corresponding Acquiring Fund, Government Securities Fund (new), they have identical principal investment strategies and each of these Funds substantially invests in similar types of securities -- U.S. government obligations and repurchase agreements secured by U.S. government obligations. The investment objective, principal investment strategies and investment risks of the Asset Allocation Fund and its corresponding Acquiring Fund, Asset Allocation Fund (new), are identical. Although there are differences between the investment objective and principal investment strategies of Balanced Assets Fund and its corresponding Acquiring Fund, Asset Allocation Fund (new), each of these Funds substantially invests in similar types of securities -- a mix of equities (or stocks), fixed-income securities and cash equivalents (such as U.S. government obligations, money market instruments or other short-term, interest-bearing instruments). One additional difference exists between the Balanced Assets Fund and the Asset Allocation Fund (new). For the Balanced Assets Fund, which is sub-advised by a single investment sub-adviser (Banc of America Capital Management, Inc. ("BACAP")), its corresponding Acquiring Fund utilizes a "multi-manager" approach, which means that it is managed by more than one sub-adviser. BACAP and Chicago Equity Partners LLC ("Chicago Equity") will each manage a portion of the assets of the Asset Allocation Fund (new). Chicago Equity will manage its equity portion and BACAP will manage its non-equity portion. One effect of this is that, if the Reorganization is approved by the Balanced Assets Fund shareholders, BACAP may sell a portion of the Balanced Assets Fund's equity securities prior to the Reorganization. This is because the equity portion of the Asset Allocation Fund (new) consists primarily of common stocks of blue chip companies, whereas the equity portion of the Balanced Assets Fund consists primarily of common stocks believed to be undervalued. Accordingly, although the Asset Allocation Fund (new) is expected to have a portfolio of securities of similar type as those held by the Balanced Assets Fund, it in some instances will not hold exactly the same securities. If BACAP sells these securities in anticipation of the Reorganization, the Balanced Assets Fund will incur brokerage commissions and such sales may result in taxable capital gain or other distributions to the 7 Balanced Assets Fund's shareholders. The plan for the Balanced Assets Fund to sell securities prior to the Reorganization could result in selling securities at a disadvantageous time and could result in the Balanced Asset Fund realizing losses that would not otherwise have been realized. The proceeds of any such sale are expected to be held in temporary investments until the Reorganization. For additional information about these and other similarities and differences between the investment objectives and principal investment strategies of the Acquired Funds and Acquiring Funds, see "The Reorganization -- Comparison of Investment Management, Investment Objective and Principal Investment Strategies." Overview of Service Providers With the exception of one of the investment sub-advisers to the Balanced Assets Fund (discussed above), the Acquired Funds and their corresponding Acquiring Funds have the same service providers, including Banc of America Advisors, Inc. ("BAAI"), their investment adviser. Please see discussion under "The Reorganization -- Comparison of Advisory and Other Service Arrangements and Fees." Overview of Purchase, Redemption, Distribution, Exchange and Other Procedures The purchase, redemption, distribution, exchange and other policies and procedures of each share class of each Acquired Fund are identical to those of the corresponding share class of the corresponding Acquiring Fund. For more information concerning these policies and procedures, see "The Reorganization -- Comparison of Purchase, Redemption, Distribution and Exchange Policies and other Shareholder Transactions and Services." Federal Income Tax Consequences The Reorganization is not expected to result in the recognition of gain or loss, for federal income tax purposes, by the Acquired Funds, the Acquiring Funds or their respective shareholders. However, the sale of securities by any Acquired Fund prior to the Reorganization, whether in the ordinary course of business or in anticipation of the Reorganization, could result in taxable distributions to such Acquired Fund's shareholders. See "The Reorganization -- Material Federal Income Tax Consequences" for additional information. Since their inception, each of the Acquired Funds and Acquiring Funds believes it has qualified as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, each Acquired Fund and Acquiring Fund believes it has been, and expects to continue to be, relieved of any federal income tax liability on its taxable income distributed to shareholders. Principal Risk Factors Investments in the Acquiring Funds will involve substantially similar risks as those of the corresponding Acquired Funds. 8 The U.S. Government Bond Fund, Government Securities Fund and Government Securities Fund (new) each have the following risks: o Investment strategy risk -- There is a risk that the value of the investments that each Fund's management team chooses will not rise a high as the team expects, or will fall. o Interest rate risk -- The prices of fixed income securities will tend to fall when interest rates rise. In general, fixed income securities with longer terms tend to fall more in value when interest rates rise than fixed income securities with shorter terms. o Credit risk -- A Fund could lose money if the issuer of a fixed income security is unable to pay interest or repay principal when it's due. Credit risk usually applies to most fixed income securities, but is generally not a factor for U.S. government obligations. o Changing distribution levels -- The level of monthly income distributions paid by a Fund depends on the amount of income paid by the securities a Fund holds. It is not guaranteed and will change. Changes in the value of the securities, however, generally should not affect the amount of income they pay. o Mortgage-related risk -- The value of a Fund's mortgage-backed securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall, or later than expected, which could happen when interest rates rise. If the underlying mortgages are paid off sooner than expected, the Fund may have to reinvest this money in mortgage-backed or other securities that have lower yields. o Asset-backed securities risk -- Payment of interest and repayment of principal may be impacted by the cash flows generated by the assets backing these securities. The value of a Fund's asset-backed securities may also be affected by changes in interest rates, the availability of information concerning the interests in and structure of the pools of purchase contracts, financing leases or sales agreements that are represented by these securities, the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities that provide any supporting letters of credit, surety bonds, or other credit enhancements. The Balanced Assets Fund, Asset Allocation Fund and Asset Allocation Fund (new) each have the following risks: o Investment strategy risk -- Each Fund's management team uses an asset allocation strategy to try to achieve the highest total return. There is a risk that the mix of investments will not produce the returns the team expects, or will fall in value. o Stock market risk -- The value of the stocks a Fund holds can be affected by changes in U.S. or foreign economies and financial markets, and the companies that issue the stocks, among other things. Stock prices can rise or fall over short as well as long periods. In general, stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. As of the date of this Proxy/ 9 Prospectus, the stock markets, as measured by the S&P 500 and other commonly used indices, were trading at historically high levels. There can be no guarantee that these levels will continue. o Interest rate risk -- The prices of fixed income securities will tend to fall when interest rates rise. In general, fixed income securities with longer terms tend to fall more in value when interest rates rise than fixed income securities with shorter terms. o Credit risk -- A Fund could lose money if the issuer of a fixed income security is unable to pay interest or repay principal when it's due. Credit risk usually applies to most fixed income securities, but is generally not a factor for U.S. government obligations. o Mortgage-related risk -- The value of a Fund's mortgage-backed securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall, or later than expected, which could happen when interest rates rise. If the underlying mortgages are paid off sooner than expected, the Fund may have to reinvest this money in mortgage-backed or other securities that have lower yields. o Asset-backed securities risk -- Payment of interest and repayment of principal may be impacted by the cash flows generated by the assets backing these securities. The value of a Fund's asset-backed securities may also be affected by changes in interest rates, the availability of information concerning the interests in and structure of the pools of purchase contracts, financing leases or sales agreements that are represented by these securities, the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities that provide any supporting letters of credit, surety bonds, or other credit enhancements. THE REORGANIZATION Description of the Reorganization Agreements The Reorganization Agreements are the governing documents of the Reorganization. Among other things, each provides for (i) the transfer of all of the assets and liabilities of each Acquired Fund to its corresponding Acquiring Fund in exchange for shares of equal value of the same classes of the Acquiring Fund; and (ii) the distribution of Acquiring Fund shares to shareholders of the respective Acquired Funds in liquidation of that Acquired Fund. The completion of the Reorganization is conditioned upon the Trust, the Company, Reserves and Nations Funds Trust receiving an opinion from Morrison & Foerster LLP that the exchange of shares contemplated under the Reorganization will be tax-free under federal income tax law. Each Reorganization Agreement sets forth representations and warranties of the parties and describes the mechanics of the transaction and includes a number of other conditions to the completion of the Reorganization, such as the requirement that good standing certificates be obtained by each party and that no stop-orders or similar regulatory barriers have been issued by the SEC. The Reorganization Agreements also provide that the Reorganization may be abandoned at any time before the closing of the Reorganization (the "Closing") by either party if any condition precedent is not 10 satisfied or otherwise by mutual consent of the parties. At any time before or (to the extent permitted by law) after approval of the Reorganization Agreement by Acquired Fund shareholders: (i) the parties may, by written agreement authorized by the respective Board of the Trust, the Company and/or Reserves and the Board of Trustees of Nations Funds Trust and with or without the approval of their shareholders, amend any of the provisions of the respective Reorganization Agreement and (ii) either party may waive any default by the other party or the failure to satisfy any of the conditions to its obligations (the waiver to be in writing and authorized by the respective Board of the Trust, the Company and/or Reserves or the Board of Trustees of Nations Funds Trust with or without the approval of shareholders). Additionally, the Reorganization Agreements provide that the Reorganization of one Fund is not conditioned upon the Reorganization of any other Fund. Upon completion of the Reorganization, all outstanding shares of each Acquired Fund will be canceled. Exchange or redemption requests received thereafter will be deemed to be exchange or redemption requests for shares of the corresponding Acquiring Fund. At Closing, the assets of each Acquired Fund will be transferred to the corresponding Acquiring Fund as described above. The Reorganization Agreement provides that BAAI and/or its affiliates will bear all customary expenses associated with the Reorganization. Neither the Acquired Funds nor their shareholders will bear any of these costs. A copy of each Reorganization Agreement is available at no charge by calling or writing Nations Funds Trust, the Trust, the Company and/or Reserves at the toll-free number or address listed on the first page of the Proxy/Prospectus. Copies of the Reorganization Agreements are also available at the SEC's website (www.sec.gov). Reasons for the Reorganization The Reorganization offers several benefits to Acquired Fund shareholders: o With respect to all of the Acquired Funds, the Reorganization is part of a broader initiative to streamline the operations of the Nations Funds family, which currently consists of several registered investment companies. Over time, management expects to reduce the number of companies in the Nations Funds family without necessarily impacting investment alternatives. Management believes that if it were permitted to operate the same number of mutual funds but housed in fewer companies, certain efficiencies and benefits to shareholders in the Nations Funds family should accrue over the long term. These benefits may include, among other things, cost savings relating to the potential reduction of accounting, legal and securities registration costs. o With respect to the U.S. Government Bond Fund and the Balanced Assets Fund only, the primary reason for the Reorganization is management's belief that the interests of the shareholders of the Acquired Funds would likely be better served if they participated in the Reorganization, thereby enabling shareholders to own shares of the corresponding Acquiring Funds with their significantly larger asset size (assuming each Acquired Fund's shareholders approve the Reorganization), while at 11 the same time allowing the Acquired Fund shareholders to remain invested in a similar mutual fund in the Nations Funds family. Because the corresponding Acquiring Funds would have a significantly larger asset size than each Acquired Fund standing alone, they would have total operating expense ratios that would be no higher than that of the corresponding Acquired Funds, and may be lower over time (before and after waivers and/or reimbursements and assuming each Acquired Fund's shareholders approve the Reorganization). Accordingly, management, including the Boards of the Trust and the Company, believes that the proposed Reorganization should benefit the U.S. Government Bond Fund and the Balanced Assets Fund shareholders by, among other things: (i) offering actual or potential reductions in total operating expense ratios for Acquired Fund shareholders; and (ii) offering shareholders the opportunity to remain invested in either the same or a generally similar mutual fund in the Nations Funds family. o With respect to all of the Acquired Funds, the Acquiring Funds will be part of a Delaware business trust, which generally is viewed as having more flexibility in its operations than Massachusetts business trusts like the Trust and Reserves and a Maryland corporation like the Company. Specifically, the Acquiring Funds would have greater flexibility in their investment policies, including policies that permit them to adopt a "master-feeder" structure. A master-feeder structure will only be adopted if the Board approves such a change as being in the interests of a Fund and its shareholders. In evaluating this change, the Board would consider both the potential benefits and disadvantages of this type of structure. One potential advantage is that feeder funds investing in the same master portfolio can reduce their expenses through sharing of costs of managing and administering a larger combined pool of assets. Another potential advantage is that the master portfolio may have opportunities to pursue other distribution channels -- such as private investment companies or offshore fund investors -- that would not otherwise be available to stand-alone mutual funds. One potential disadvantage is that if there are other feeders in the master portfolio, a Fund's voting impact on the master portfolio could be diminished. Additionally, if the Fund were to withdraw its investment from the master portfolio, such withdrawal could result in a distribution in kind of portfolio securities (as opposed to cash) by the master portfolio to the Fund. That distribution could result in a less diversified portfolio of investments and could adversely affect the liquidity of the Fund's investment portfolio. In addition, if securities were distributed, the Acquiring Fund generally would incur brokerage commissions, capital gains or losses, and/or other charges in converting the securities to cash. This could result in a lower net asset value of a shareholder's shares and/or certain adverse tax consequences for a shareholder. Also, as part of Nations Funds Trust, the Acquiring Funds would be governed under a more flexible charter document which could be amended by Nations Funds Trust's Board without the necessity of soliciting shareholders, thereby otherwise saving costs relating to proxy solicitations on certain routine matters. o With respect to all of the Acquired Funds, shareholders are not expected to bear any customary costs associated with the Reorganization, including solicitation costs. 12 Board Consideration The Boards of the Trust, the Company and Reserves each unanimously voted to approve the respective Reorganization Agreement at meetings held on August 23, 2000. During deliberations, each Board (with the advice and assistance of independent counsel), as applicable, reviewed and considered, among other things: (1) the various aspects of the Reorganization and the Reorganization Agreement; (2) the U.S. Government Bond Fund's and the Balanced Assets Fund's current asset levels; (3) the investment advisory and other fees paid by the Acquired Funds, and the historical and projected expense ratios for the Acquired Funds, as compared with those of their corresponding Acquiring Funds; (4) the expected cost savings for all of the Acquired Funds' shareholders; (5) the investment objectives, principal investment strategies and risks of the Acquired Funds and their relative compatibility with those of their corresponding Acquiring Funds; (6) the historical investment performance records of the Acquired Funds and the Acquiring Funds; (7) the fact that Acquired Fund shareholders would experience no change in shareholder services with respect to their class of shares; (8) the Reorganization as part of a broader initiative to streamline the operations of the Nations Funds family; (9) the fact that the Acquiring Funds as part of Nations Funds Trust would have greater flexibility in their investment policies and would be governed under a more flexible charter document which could be amended by the Board without the necessity of soliciting shareholders, thereby otherwise saving costs relating to proxy solicitations on certain routine matters; (10) the anticipated tax-free nature of the exchange of shares in the Reorganization; (11) the fact that the customary costs associated with the Reorganization would not be borne by Acquired Fund or Acquiring Fund shareholders; (12) potential benefits of the Reorganization, if any, to other persons, including BAAI and its affiliates (e.g., the benefit of consolidating resources within BAAI and its affiliates); and (13) the fact that moving from a single adviser to a multi-manager approach in the case of the Balanced Assets Fund may cause a repositioning in that Acquired Fund's portfolio prior to the Reorganization, thereby possibly causing such Acquired Fund to incur increased brokerage commissions and to make taxable capital gain or other distributions to its shareholders. Based upon their evaluation of the information presented to them, and in light of their fiduciary duties under federal and state law, the Boards of the Trust, the Company and Reserves, including all of the non-interested Trustees/Directors of each such Board, determined that participation in the Reorganization, as contemplated by the respective Reorganization Agreement, was in the best interests of each Acquired Fund, and that the shares of each Acquired Fund would not be diluted as a result of the Reorganization. Similarly, the Board of Trustees of Nations Funds Trust, including all of the non-interested Trustees, also evaluated the Reorganization and based upon its evaluation of the information presented to it, and in light of its fiduciary duties under federal and state law, determined that participation in the Reorganization, as contemplated by each Reorganization Agreement, was in the best interests of the Acquiring Funds and that the shares of the Acquiring Funds would not be diluted as a result of the Reorganization. THE BOARDS OF THE TRUST, THE COMPANY AND RESERVES UNANIMOUSLY RECOMMEND THAT ACQUIRED FUND SHAREHOLDERS VOTE TO APPROVE THE REORGANIZATION AGREEMENTS. 13 Comparison of Investment Management, Investment Objective and Principal Investment Strategies The investment objective, principal investment strategies and investment risks of the Government Securities Fund and its corresponding Acquiring Fund, Government Securities Fund (new), are identical. Although there are differences between the investment objective of U.S. Government Bond Fund and its corresponding Acquiring Fund, Government Securities Fund (new), they have identical principal investment strategies and each of these Funds substantially invests in similar types of securities -- U.S. government obligations and repurchase agreements secured by U.S. government obligations. The investment objective, principal investment strategies and investment risks of the Asset Allocation Fund and its corresponding Acquiring Fund, Asset Allocation Fund (new), are identical. Although there are differences between the investment objective and principal investment strategies of Balanced Assets Fund and its corresponding Acquiring Fund, Asset Allocation Fund (new), each of these Funds substantially invests in similar types of securities -- a mix of equities (or stocks), fixed-income securities and cash equivalents (such as U.S. government obligations, money market instruments or other short-term, interest-bearing instruments). In addition, the Balanced Assets Fund and Asset Allocation Fund (new) currently have the same target allocation mix. In each case, the investment adviser and/or sub-adviser seeks to achieve, under normal conditions, a mix of 60% equity securities and 40% fixed-income securities. The chart below compares these investment objectives and principal investment strategies in greater detail. Additional information on the Acquired Funds' and Acquiring Funds' investment objectives and principal investment strategies is contained in their Prospectuses and Statements of Additional Information. Although the Balanced Assets Fund employs similar investment strategies as its Acquiring Fund, Asset Allocation Fund (new), there is one primary difference between the Balanced Assets Fund and Asset Allocation Fund (new): o The Investment Sub-Adviser -- As described in the chart below, unlike the Balanced Assets Fund, which is sub-advised solely by BACAP, Asset Allocation Fund (new) will utilize a "multi-manager" approach, whereby BACAP and Chicago Equity each manage a portion of the assets of the Fund. In addition, in order to qualify as a tax-free reorganization under the Code, each Acquiring Fund may be required to hold a certain percentage of the assets of its corresponding Acquired Fund for a period of time in accordance with the Code and Treasury Regulations. This provision may require the investment sub-adviser of an Acquiring Fund to retain a security longer than it otherwise would absent such requirement.
U.S. Government Bond Fund Government Securities Fund (new) ---------------------------------------- ---------------------------------------- Investment BAAI is the Acquired Fund's investment BAAI is the Acquiring Fund's investment Management adviser. BACAP is the Acquired Fund's adviser. BACAP is the Acquiring Fund's investment sub-adviser. BACAP's Fixed investment sub-adviser. BACAP's Fixed Income Management Team makes the Income Management Team makes the day-to-day investment decisions for the day-to-day investment decisions for the Acquired Fund. Acquiring Fund.
14
U.S. Government Bond Fund Government Securities Fund (new) ------------------------------------------------- ------------------------------------------------- Investment The Acquired Fund seeks total return and The Acquiring Fund seeks high current Objective preservation of capital by investing in U.S. income consistent with moderate fluctuation government securities and repurchase of principal. agreements collateralized by such securities. Principal The Acquired Fund normally invests at least The Acquiring Fund normally invests at least Investment 65% of its assets in U.S. government 65% of its assets in U.S. government Strategies obligations and repurchase agreements obligations and repurchase agreements secured by these securities. secured by these securities. The Acquired Fund may also invest in the The Acquiring Fund may also invest in the following securities rated investment grade at following securities rated investment grade at the time of investment: the time of investment: o mortgage-related securities issued by o mortgage-related securities issued by governments, their agencies or instrumen- governments, their agencies or instrumen- talities, or corporations. talities, or corporations. o asset-backed securities or municipal o asset-backed securities or municipal securities. securities. o corporate debt securities, including bonds, o corporate debt securities, including bonds, notes and debentures. notes and debentures. The Acquired Fund may also invest in The Acquiring Fund may also invest in securities that aren't part of its principal securities that aren't part of its principal investment strategies, but it won't hold more investment strategies, but it won't hold more than 10% of its assets in any one type of than 10% of its assets in any one type of these securities. These securities are described these securities. These securities are described in its SAI. in its SAI. Normally the Acquired Fund's average Normally the Acquiring Fund's average dollar-weighted maturity will be between five dollar-weighted maturity will be between five and 30 years. and 30 years. When selecting individual investments, the When selecting individual investments, the team: team: o looks at a fixed income security's potential o looks at a fixed income security's potential to generate both income and price to generate both income and price appreciation appreciation o allocates assets primarily among U.S. o allocates assets primarily among U.S. government obligations, including securities government obligations, including securities issued by government agencies, issued by government agencies, mortgage-backed securities and U.S. mortgage-backed securities and U.S. Treasury securities, based on how they Treasury securities, based on how they have performed in the past, and on how have performed in the past, and on how they are expected to perform under current they are expected to perform under current market conditions. The team may change market conditions. The team may change the allocations when market conditions the allocations when market conditions change change o selects securities using structure analysis, o selects securities using structure analysis, which evaluates the characteristics of a which evaluates the characteristics of a security, including its call features, coupons security, including its call features, coupons and expected timing of cash flows. and expected timing of cash flows.
15
U.S. Government Bond Fund Government Securities Fund (new) ------------------------------------------------- ------------------------------------------------- The team may sell a security when it believes The team may sell a security when it believes the security is overvalued, there is a the security is overvalued, there is a deterioration in the security's credit rating or deterioration in the security's credit rating or in the issuer's financial situation, when other in the issuer's financial situation, when other investments are more attractive, or for other investments are more attractive, or for other reasons. reasons.
Government Securities Fund Government Securities Fund (new) ------------------------------------------- ------------------------------------------- Investment This Fund has the same investment adviser This Fund has the same investment adviser Management and sub-adviser as its corresponding and sub-adviser as its corresponding Acquiring Fund. Acquired Fund. Investment This Fund has the same investment This Fund has the same investment Objective objective as its corresponding Acquiring objective as its corresponding Acquired Fund. Fund. Principal This Fund has the same principal This Fund has the same principal Investment investment strategies as its corresponding investment strategies as its corresponding Strategies Acquiring Fund. Acquired Fund.
Balanced Assets Fund Asset Allocation Fund (new) -------------------------------------------- -------------------------------------------- Investment BAAI is the Acquired Fund's investment BAAI is the Acquiring Fund's investment Management adviser. BACAP is the Acquired Fund's adviser. The Acquiring Fund is managed by investment sub-adviser. BACAP's Value two sub-advisers: BACAP and Chicago Strategies Team makes the day-to-day Equity. Chicago Equity's Equity investment decisions for the equity portion Management Team makes the day-to-day of the Acquired Fund. BACAP's Fixed investment decisions for the equity portion Income Management Team makes the of the Acquiring Fund. BACAP's Fixed day-to-day investment decisions for the Income Management Team makes the fixed income and money market portions day-to-day investment decisions for the of the Acquired Fund. fixed income and money market portions of the Acquiring Fund. Investment The Acquired Fund seeks total return by The Acquiring Fund seeks to obtain Objective investing in equity and fixed income long-term growth from capital appreciation, securities. and dividend and interest income. Principal The Acquired Fund invests in a mix of The Acquiring Fund invests in a mix of Investment equity and fixed income securities, as well equity and fixed income securities, as well Strategies as money market instruments. as cash equivalents, including U.S. Government obligations, commercial paper and other short-term, interest-bearing instruments.
16
Balanced Assets Fund Asset Allocation Fund (new) ----------------------------------------------- ----------------------------------------------- Equity securities the Acquired Fund invests The equity securities the Acquiring Fund in are primarily common stock of invests in are primarily common stock of established companies believed to be blue chip companies. These companies are financially strong. well established, nationally known companies that have a long record of profitability and a reputation for quality management, products and services. Fixed income securities normally make up The fixed income securities the Acquiring at least 25% of the Acquired Fund's assets. Fund invests in are primarily investment Fixed income securities the Acquired Fund grade bonds and notes. The Acquiring invests in are primarily bonds, notes and Fund normally invests at least 25% of its mortgage-backed and asset-backed assets in senior securities. The Acquiring securities issued by U.S. companies and Fund may also invest up to 35% of its government entities. Money market assets in mortgaged-backed and instruments the Acquired Fund invests in asset-backed securities. are primarily cash equivalents, including U.S. government obligations, commercial paper and other short-term interest-bearing instruments. The Acquired Fund may also invest in The Acquiring Fund may also invest in securities that aren't part of its principal securities that aren't part of its principal investment strategies, but it won't hold investment strategies, but it won't hold more than 10% of its assets in any one more than 10% of its assets in any one type of these securities. These securities are type of these securities. These securities are described in its SAI. described in its SAI. The team uses asset allocation as its The teams use asset allocation as their primary investment approach. The team primary investment approach. The teams allocates assets among the three asset allocate assets among the three asset classes based on its assessment of the classes based on their assessment of the expected risks and returns of each class. expected risks and returns of each class. The team evaluates: o current economic and financial market conditions, including trends in interest rates, in the United States and abroad o earning and dividend prospects for common stocks o the overall stability of financial markets The team may change the Acquired Fund's asset allocation to try to increase returns and reduce risk.
17
Balanced Assets Fund Asset Allocation Fund (new) ----------------------------------------------- --------------------------------------------- The team identifies individual investments For the equity portion of the Acquiring using the following process: Fund, the Equity Management Team uses quantitative analysis to analyze o For the equity portion of the Acquired fundamental information about securities Fund, the team evaluates the overall and identify value. Starting with a universe economy, industry conditions, and the of approximately 2000 common stocks, the financial condition and management of team uses a multi-factor computer model to each company, using a process called rank securities, based on the following fundamental analysis. criteria, among others: o For the fixed income portion of the Acquired Fund, the team looks for o changes in actual and expected earnings securities rated investment grade at the time of investment. The team may o unexpected changes in earnings choose unrated securities if it believes they are of comparable quality to o price-to-earnings ratio investment grade securities at the time of investment. o dividend discount model o For the money market portion of the o price-to-cash flow Acquired Fund, the team chooses high-quality securities primarily to provide liquidity. The team may use various tax strategies, The Equity Management Team tries to consistent with the Acquired Fund's manage risk by matching the market investment objective, to try to reduce the capitalization, style and industry weighting amount of capital gains distributed to characteristics of the S&P SuperComposite shareholders. For example, the team: 1500, which is an index created by Standard & Poor's combining the o may limit the number of buy and sell companies represented in three other transactions it makes indices -- the S&P 500, the MidCap 400 and SmallCap 600. The index represents o will try to sell shares that have the 87% of the total capitalization of U.S. lowest tax burden on shareholders equity markets. The Equity ManagementS. Team focuses on selecting individual stocks o may offset capital gains by selling to try to provide higher returns than the securities to realize a capital loss S&P SuperComposite 1500 while maintaining a level of risk similar to the index. While the Acquired Fund tries to manage its capital gain distributions, it will not be able to completely avoid making taxable distributions. These strategies also may be affected by changes in tax laws and regulations, or by court decisions.
18
Balanced Assets Fund Asset Allocation Fund (new) -------------------------------------------- -------------------------------------------- The team may sell a security when the The teams may sell a security when the Acquired Fund's asset allocation changes, Acquired Fund's asset allocation changes, there is a deterioration in the issuer's there is a deterioration in the issuer's financial situation, when the team believes financial situation, when the teams believe other investments are more attractive, or other investments are more attractive, or for other reasons. for other reasons.
Asset Allocation Fund Asset Allocation Fund (new) ------------------------------------------- ------------------------------------------- Investment This Fund has the same investment adviser This Fund has the same investment adviser Management and sub-adviser as its corresponding and sub-adviser as its corresponding Acquiring Fund. Acquired Fund. Investment This Fund has the same investment This Fund has the same investment Objective objective as its corresponding Acquiring objective as its corresponding Acquired Fund. Fund. Principal This Fund has the same principal This Fund has the same principal Investment investment strategies as its corresponding investment strategies as its corresponding Strategies Acquiring Fund. Acquired Fund.
Comparison of Investment Policies and Restrictions The Acquiring Funds will have a more streamlined set of fundamental and non-fundamental investment policies and restrictions. Some of each Acquired Fund's current investment policies and restrictions may limit its portfolio management team from investing in a security that is both consistent with the investment objective of such Acquired Fund and also is believed to be a good investment. One reason for changing some of these investment policies is to remove restrictions that unnecessarily hamper the portfolio management team's investment discretion. Some of these restrictions were put in place by the Acquired Funds as a result of the directives of various state securities commissions. Changes to federal securities laws have superseded these directives. Another reason is management's desire to migrate towards uniform investment policies for all funds in the Nations Funds family. One of the differences between the Acquiring Funds' fundamental policies and those of the Acquired Funds is that the Acquiring Funds will have the ability under their fundamental policies to invest all of their assets in a master portfolio rather than in individual securities. For a detailed comparison of the fundamental investment policies and limitations of the Acquired Funds and the Acquiring Funds, see Appendix III to this Proxy/Prospectus. Comparison of Forms of Business Organization Federal securities laws largely govern the way that mutual funds operate, but they do not cover every aspect of a fund's existence and operation. State law and a fund's governing documents fill in most of the gaps and typically create additional operational rules and restrictions that funds must follow. The Balanced Assets Fund is a series of the Trust. The U.S. Government Bond and Government Securities Fund are series of the Company. The Asset Allocation Fund is a series of Reserves and the Government Securities Fund (new) and Asset Allocation Fund (new) are series of Nations Funds Trust. As noted, the Trust and Reserves are Massachusetts business trusts and the Company is a Maryland corporation. The proposed Reorganization 19 would reorganize each Acquired Fund into series of Nations Funds Trust, which is a Delaware business trust. While there are few differences between these forms of organization, one advantage to a Delaware business trust is its potentially greater flexibility. Generally, under Delaware business trust law, a mutual fund's governing instrument, called a declaration of trust, may establish the way it will operate with few state law requirements or prohibitions. Thus, mutual funds organized in Delaware generally have more flexibility in their operations and certainty about any operational restrictions. The following discussion outlines some of the differences between the state law and documents currently governing the Acquired Funds of the Trust, the Company and Reserves and those which apply to the Acquiring Funds as series of Nations Funds Trust. o The Board of Trustees. Maryland corporations such as the Company, are governed by a Board of Directors. Massachusetts business trusts, such as the Trust and Reserves, are governed by a Board of Trustees. The Acquiring Funds, as series of Nations Funds Trust will be governed by a Board of Trustees. There are no practical differences between a "trustee" and "director." The Board of Nations Funds Trust will have eleven Trustees, ten of whom currently serve as Trustees of the Trust and Reserves and as Directors of the Company, with the eleventh currently serving in an advisory capacity to the Boards of the Trust, the Company and Reserves. o Governing Documents. Maryland corporations are typically governed by organizational documents called articles of incorporation and by-laws. Massachusetts and Delaware business trusts are governed by similar sets of documents, typically called a declaration of trust and by-laws. These governing documents are generally similar, although there are some differences. For example, in order for the Company to dissolve under Maryland law, a majority of all outstanding shares of the Company generally must approve such a dissolution. In contrast, the Declaration of Trust of Nations Funds Trust provides that Nations Funds Trust, or any series of Nations Funds Trust, may be dissolved at any time by the Board of Nations Funds Trust upon written notice to shareholders. In addition, Nations Funds Trust's Declaration of Trust, as permitted by Delaware law, provides that shareholders of series of Nations Funds Trust would be entitled to vote on mergers, acquisitions and consolidations involving such series, only to the extent required by federal securities law. By limiting mandatory shareholder votes to those matters expressly required under the federal securities laws, the Acquiring Funds could save costs by not having to schedule special shareholder meetings and solicit shareholder proxies. Although as shareholders of an Acquiring Fund of Nations Funds Trust shareholders may no longer have certain rights, it is anticipated that the Acquiring Funds would benefit from a reduction in expenses associated with potential proxy solicitations on these matters. In general, the attributes of a share of common stock in the case of a Maryland corporation such as the Company and a share of beneficial interest in the case of a Massachusetts business trust, are comparable to those of a share of beneficial interest of a Delaware business trust such as Nations Funds Trust, i.e., shares of all are entitled to one vote per share held and fractional votes for fractional shares held. o Shareholder Liability. Under Maryland law, shareholders are not personally liable for the debts of a fund. Under Massachusetts law, shareholders may, under certain circumstances, be held personally liable for the debts and obligations of a Massachusetts business trust. In contrast, under Delaware law, 20 shareholders of a Delaware business trust like Nations Funds Trust are not liable for the debts and obligations of such trust. Comparison of Acquired Fund and Acquiring Fund Performance No comparison of the performance of the Government Securities Fund and its Acquiring Fund, or of the Asset Allocation Fund and its Acquiring Fund, is provided because each Acquiring Fund was created to continue the business of its corresponding Acquired Fund, and each Acquiring Fund has no performance record of its own and will succeed to the Acquired Fund performance record upon the Reorganization. Similarly, no comparison of the performance of the U.S. Government Bond Fund and its Acquiring Fund, or of the Balanced Assets Fund and its Acquiring Fund is provided because these Acquiring Funds do not yet have any performance record with which to make a comparison. Please see Appendix II, however, for the performance records of Nations Asset Allocation Fund and Nations Government Securities Fund. The past performance of these Funds is no guarantee of how the Asset Allocation Fund (new) and Government Securities Fund (new) will perform. Comparison of Advisory and Other Service Arrangements and Fees The Acquired Funds and the Acquiring Funds have the same service providers. Immediately after the Reorganization, these service providers are expected to continue to serve the Acquiring Funds in the capacities indicated below, with the exceptions shown below. Service Providers for the Acquired Funds and the Acquiring Funds Investment Adviser BAAI Investment Sub-Adviser BACAP, except for the Asset Allocation Fund and the Asset Allocation Fund (new), which are managed by both BACAP and Chicago Equity Distributor Stephens Inc. ("Stephens") Co-Administrator BAAI Co-Administrator Stephens Sub-Administrator The Bank of New York Custodian The Bank of New York Transfer Agent PFPC Inc. Sub-Transfer Agent Bank of America, N.A. ("Bank of America") (for Primary A shares only) Independent Accountants PricewaterhouseCoopers LLP
Investment Advisory and Sub-Advisory Services and Fees BAAI serves as the investment adviser for each Acquired Fund and each Acquiring Fund. Each Acquired Fund and each Acquiring Fund pay an advisory fee, computed daily and paid monthly, to BAAI based on 21 each such Fund's average daily net assets. Currently the maximum advisory fee rate for each of the Balanced Assets Fund and the Asset Allocation Fund is 0.65%.(1) The maximum advisory fee rate for each of the U.S. Government Bond Fund and the Government Securities Fund is 0.50%.(2) The maximum advisory fee rate for each of the Acquiring Funds is the same as its corresponding Acquired Fund. BACAP is the sub-adviser for each Acquired Fund except for the Asset Allocation Fund, which is sub-advised by BACAP and Chicago Equity, as noted. BAAI pays BACAP, and in the case of the Asset Allocation Fund, BACAP and Chicago Equity, sub-advisory fees, computed daily and paid monthly, at the maximum annual rate of 0.25% for each of the Balanced Assets Fund and the Asset Allocation Fund, and 0.15% for each of the U.S. Government Bond Fund and the Government Securities Fund of the Acquired Funds' and the corresponding Acquiring Funds' average daily net assets managed by such sub-adviser. BAAI, BACAP and Chicago Equity are registered investment advisers, and BAAI and BACAP are wholly-owned subsidiaries of Bank of America. Currently, BAAI advises over 70 mutual funds in the Nations Funds family and BACAP has over 200 institutional clients and sub-advises more than 50 mutual funds in the Nations Funds family. - -------- (1) Currently, BAAI is under a contractual commitment to cap Fund level expenses for the Balanced Assets Fund until July 31, 2001. The waivers and/or reimbursements necessary to maintain those expense levels may come from BAAI's advisory fees, administration fees and/or other fees and expenses (excluding Rule 12b-1/shareholder servicing fees), at BAAI's discretion. After July 31, 2001, it is possible that all waivers and/or reimbursements could be discontinued. (2) Currently, BAAI is under a contractual commitment to cap Fund level expenses for the U.S. Government Bond Fund until July 31, 2001. The waivers and/or reimbursements necessary to maintain those expense levels may come from BAAI's advisory fees, administration fees and/or other fees and expenses (excluding Rule 12b-1/shareholder servicing fees), at BAAI's discretion. After July 31, 2001, it is possible that all waivers and/or reimbursements could be discontinued. In addition, BAAI is under a contractual commitment to cap the advisory fee rate for the Government Securities Fund and U.S. Government Bond Fund at 0.40% until July 31, 2001. After July 31, 2001, it is possible that such commitment could be discontinued. The following table shows the investment advisory fees, both before and after waivers, for the Acquired Funds and their corresponding Acquiring Funds (as of December 1, 2000 and assuming each Acquired Fund's shareholders approve the Reorganization). It is possible that one or both of the Acquired Funds will not approve their respective Reorganization. The pro forma presentation is not shown here for either of these scenarios because each such scenario would result in a shell transaction only and the total operating expense ratios would remain as they were before the Reorganization. Detailed pro forma advisory fee information, including these addition scenarios, is included in Appendix I. Investment Advisory Fee Information
Pro Forma Advisory Fees Advisory Fees Before/After Before/After Acquired Fund Waivers Acquiring Fund Waivers - ------------------------------ ---------------- ---------------------------------- ---------------- U.S. Government Bond Fund 0.50%/0.24% Government Securities Fund (new) 0.50%/0.40% Government Securities Fund 0.50%/0.40% Government Securities Fund (new) 0.50%/0.40% Balanced Assets Fund 0.65%/0.46% Asset Allocation Fund (new) 0.65%/0.65% Asset Allocation Fund 0.65%/0.65% Asset Allocation Fund (new) 0.65%/0.65%
BAAI, the Acquired Funds and Acquiring Funds are currently seeking an exemptive order from the SEC that would permit BAAI to engage a different or additional sub-adviser for a fund, to continue the 22 engagement of a sub-adviser who has experienced a change in its ownership or corporate structure or under an agreement that has materially changed, with the approval of the respective Board, but without submitting the sub-advisory change to a vote of the fund's shareholders, under certain circumstances. If this exemptive order is granted and the proposed Reorganization is approved, BAAI, the Acquired Funds or Acquiring Funds will inform shareholders of any such sub-advisory change, which may include: (i) engaging new or additional sub-advisers, (ii) terminating or replacing one or more sub-advisers, or (iii) materially amending an existing sub-advisory agreement. Unless and until this exemptive order is granted and the proposed Reorganization is approved, consistent with applicable law, the Acquired Funds will continue to submit any such sub-advisory changes to the Acquired Funds' shareholders for approval. Administration Services Stephens and BAAI are the co-administrators for the Acquired Funds and Acquiring Funds. Stephens and BAAI provide the Acquired Funds and Acquiring Funds with administrative services, including, among other things, general supervision of their non-investment operations, preparation of proxy statements and shareholder reports and general supervision of data completion in connection with preparing periodic reports to the respective Boards of the Trust, the Company, Reserves and Nations Funds Trust. For these services and the assumption of expenses, Stephens and BAAI are entitled to a monthly fee, in the aggregate, at the annual rate of 0.22% of the Acquired Funds' and corresponding Acquiring Funds' average daily net assets in the case of the U.S. Government Bond Fund and the Government Securities Fund, and 0.23% of the Acquired Funds' and corresponding Acquiring Funds' average daily net assets in the case of the Balanced Assets Fund and the Asset Allocation Fund. Distribution and Shareholder Servicing Arrangements Shares of the Acquired Funds and Acquiring Funds are distributed by Stephens, a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "1934 Act"). Primary A Shares Primary A shares are not subject to any distribution or shareholder servicing fees and, accordingly, the Acquired Funds and the Acquiring Funds have not adopted any related plans. Investor A Shares Pursuant to combined distribution and shareholder servicing plans adopted pursuant to Rule 12b-1 under the 1940 Act by the Acquired Funds and Acquiring Funds for their Investor A shares, the Acquired Funds and Acquiring Funds may compensate Stephens for any activities or expenses primarily intended to result in the sale of Investor A shares, including sales related services provided by banks, broker/dealers or other financial institutions ("Selling Agents") that have entered into a sales support agreement with Stephens. In addition, the Acquired Funds and Acquiring Funds may compensate or reimburse broker/dealers, banks and other financial institutions ("Servicing Agents") which provide shareholder support services to their customers who own Investor A shares. This shareholder servicing and distribution plan provides that the Acquired Funds and 23 Acquiring Funds may pay Stephens, Selling Agents that have entered into a sales support agreement with Stephens, or Servicing Agents that have entered into a Shareholder Servicing Agreement with the Acquired Funds and Acquiring Funds up to 0.25% (on an annualized basis) of the average daily net asset value of the Investor A shares of the Acquired Funds and Acquiring Funds. Investor B Shares and Investor C Shares The Acquired Funds and Acquiring Funds have adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Investor B Shares and Investor C Shares of the Acquired Funds and Acquiring Funds. Pursuant to these distribution plans, the Acquired Funds and Acquiring Funds may pay Stephens for expenses incurred in connection with the marketing or distribution of the Acquired Funds' and Acquiring Funds' shares, including sales related services provided by selling agents that have entered into a sales support agreement with Stephens. Payments under these distribution plans will be calculated daily and paid monthly and may not exceed 0.75% on an annualized basis of the average daily net asset value of the Investor B Shares and Investor C Shares of the Acquired Funds and Acquiring Funds. The Acquired Funds and Acquiring Funds have also adopted shareholder servicing plans with respect to the Investor B Shares and Investor C Shares of the Acquired Funds and Acquiring Funds. Pursuant to these shareholder servicing plans, the Acquired Funds and Acquiring Funds may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of the Acquired Funds or Acquiring Funds. Payments under these shareholder servicing plans will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Investor B Shares and Investor C Shares. Comparison of Purchase, Redemption, Distribution and Exchange Policies and Other Shareholder Transactions and Services As a result of the Reorganization, Acquired Fund shareholders will hold shares of the same class of Acquiring Fund that they held in each Acquired Fund. For example, an Acquired Fund shareholder who owns Investor A shares will, immediately after the Reorganization, hold Investor A shares in the corresponding Acquiring Fund. Accordingly, all of the purchase, redemption, distribution, exchange policies and other shareholder transactions and services applicable to a shareholder's share class will remain unaffected and unchanged by the Reorganization. As noted, no sales charges or sales loads will be imposed in connection with the exchange of shares in the Reorganization. Material Federal Income Tax Consequences As noted, the exchange of shares in the Reorganization is expected to be tax free under federal income tax law. The following discussion summarizes the material federal income tax consequences of the Reorganization that are applicable to Acquired Fund shareholders. It is based on the Code, applicable Treasury Regulations, judicial authority, and administrative rulings and practice, all as of the date of this Proxy/Prospectus and all of 24 which are subject to change, including changes with retroactive effect. The discussion below does not address any state, local or foreign tax consequences of the Reorganization. An Acquired Fund shareholder's tax treatment may vary depending upon his or her particular situation. An Acquired Fund shareholder also may be subject to special rules not discussed below if they are a certain kind of shareholder, including: an insurance company; a tax-exempt organization; a financial institution or broker-dealer; a person who is neither a citizen nor resident of the United States or entity that is not organized under the laws of the United States or political subdivision thereof; a holder of Acquired Fund shares as part of a hedge, straddle or conversion transaction; or a person that does not hold Acquired Fund shares as a capital asset at the time of the Reorganization. Neither the Trust, the Company, Reserves nor Nations Funds Trust has requested or will request an advance ruling from the Internal Revenue Service as to the federal income tax consequences of the Reorganization or any related transaction. The Internal Revenue Service may adopt positions contrary to that discussed below and such positions could be sustained. An Acquired Fund shareholder is urged to consult with his or her own tax advisors and financial planners as to the particular tax consequences of the Reorganization to the Acquired Fund shareholder, including the applicability and effect of any state, local or foreign laws, and the effect of possible changes in applicable tax laws. The Reorganization, with respect to each Acquired Fund and its corresponding Acquiring Fund, is intended to qualify as a "reorganization" for federal income tax purposes. In this regard, the obligation of the Acquired Funds and the Acquiring Funds to consummate the Reorganization is conditioned upon the receipt by the Trust, the Company, Reserves and Nations Funds Trust of an opinion of Morrison & Foerster LLP reasonably acceptable to the Trust, the Company, Reserves and Nations Funds Trust substantially to the effect that the Reorganization, with respect to each Acquired Fund and its corresponding Acquiring Fund, will be treated for federal income tax purposes as a tax-free reorganization under Section 368(a) of the Code and, in such connection, that the Acquired Fund and its corresponding Acquiring Fund will each be a party to a reorganization within the meaning of Section 368(b) of the Code. Provided that the Reorganization so qualifies: o Neither the Acquired Funds, the Acquiring Funds nor their respective shareholders will recognize any gain or loss pursuant to the Reorganization. o An Acquired Fund shareholder's aggregate tax basis for the Acquiring Fund shares received pursuant to the Reorganization will equal such shareholder's aggregate tax basis in Acquired Fund shares held immediately before the Reorganization. o An Acquired Fund shareholder's holding period for the Acquiring Fund shares received pursuant to the Reorganization will include the period during which the Acquired Fund shares are held. The tax opinion of Morrison & Foerster LLP described above is based upon facts, representations and assumptions to be set forth or referred to in the opinion and the continued accuracy and completeness of representations made by the Trust, the Company and Reserves, on behalf of their respective Acquired Funds, and Nations Funds Trust, on behalf of the Acquiring Funds, which if incorrect in any material respect would jeopardize the conclusions reached by Morrison & Foerster LLP in the opinion. In addition, in the event that 25 the Trust, the Company, Reserves and/or Nations Funds Trust are unable to obtain the tax opinion, they are permitted under the Reorganization Agreements to waive the receipt of such tax opinion as a condition to their obligation to consummate the Reorganization. Regardless of whether the acquisition of the assets and liabilities of each Acquired Fund by the corresponding Acquiring Fund qualifies as a tax-free reorganization as described above, the sale of securities by the Acquired Fund prior to the Reorganization, whether in the ordinary course of business or in anticipation of the Reorganization, could result in a taxable distribution to Acquired Fund shareholders. Since its formation, each Acquired Fund and Acquiring Fund believes it has qualified as a separate "regulated investment company" under the Code. Accordingly, each Acquired Fund and Acquiring Fund believes it has been, and expects to continue to be, relieved of federal income tax liability on its taxable income distributions to its shareholders. Capitalization The following tables show the total net assets, number of shares outstanding and net asset value per share of each Acquired Fund and Acquiring Fund. This information is generally referred to as the "capitalization." The term "pro forma capitalization" means the expected capitalization of each Acquiring Fund after it has combined with its corresponding Acquired Fund, i.e., as if the Reorganization had already occurred. These capitalization tables are based on figures as of September 30, 2000. The ongoing investment performance and daily share purchase and redemption activity of the Acquired Funds and Acquiring Funds affects capitalization. Therefore, the capitalization on the Closing date may vary from the capitalization shown in the following tables. The table below shows the capitalization relating to the reorganization of the U.S. Government Bond Fund and Government Securities Fund into the Government Securities Fund (new).
Total Net Assets Shares Outstanding Net Asset Value Per Share ---------------------- --------------------- -------------------------- U.S. Government Bond Fund $55,630,974.00 5,746,515 $9.68 (Fund A) (Primary A shares) (Primary A shares) (Primary A shares) $2,607,193.00 268,667 $9.70 (Investor A shares) (Investor A shares) (Investor A shares) $8,645,303.00 893,173 $9.68 (Investor B shares) (Investor B shares) (Investor B shares) $721,153.00 74,478 $9.68 (Investor C shares) (Investor C shares) (Investor C shares) Government Securities Fund $151,990,440.00 16,035,375 $9.48 (Fund B) (Primary A shares) (Primary A shares) (Primary A shares) $53,237,827.00 5,623,627 $9.47 (Investor A shares) (Investor A shares) (Investor A shares) $24,939,807.00 2,631,264 $9.48 (Investor B shares) (Investor B shares) (Investor B shares) $267,593.00 28,342 $9.44 (Investor C shares) (Investor C shares) (Investor C shares)
26
Total Net Assets Shares Outstanding Net Asset Value Per Share ---------------------- --------------------- -------------------------- Government Securities Fund (new) $0.00 0 $0.00 (Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $0.00 0 $0.00 (Investor A shares) (Investor A shares) (Investor A shares) $0.00 0 $0.00 (Investor B shares) (Investor B shares) (Investor B shares) $0.00 0 $0.00 (Investor C shares) (Investor C shares) (Investor C shares) Pro Forma Combined Fund $55,630,974.00 5,746,515 $9.68 (Fund A + Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $2,607,193.00 268,667 $9.70 (Investor A shares) (Investor A shares) (Investor A shares) $8,645,303.00 893,173 $9.68 (Investor B shares) (Investor B shares) (Investor B shares) $721,153.00 74,478 $9.68 (Investor C shares) (Investor C shares) (Investor C shares) Pro Forma Combined Fund $151,990,440.00 16,035,375 $9.48 (Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $53,237,827.00 5,623,627 $9.47 (Investor A shares) (Investor A shares) (Investor A shares) $24,939,807.00 2,631,264 $9.48 (Investor B shares) (Investor B shares) (Investor B shares) $267,593.00 28,342 $9.44 (Investor C shares) (Investor C shares) (Investor C shares) Pro Forma Combined Fund $207,621,414.00 21,900,993 $9.48 (Fund A + Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $55,845,020.00 5,897,045 $9.47 (Investor A shares) (Investor A shares) (Investor A shares) $33,585,110.00 3,542,733 $9.48 (Investor B shares) (Investor B shares) (Investor B shares) $988,746.00 104,740 $9.44 (Investor C shares) (Investor C shares) (Investor C shares)
The table below shows the capitalization relating to the reorganization of the Balanced Assets Fund and Asset Allocation Fund into the Asset Allocation Fund (new).
Total Net Assets Shares Outstanding Net Asset Value Per Share ---------------------- ----------------------- -------------------------- Balanced Assets Fund $34,074,802.00 3,334,901 $10.22 (Fund A) (Primary A shares) (Primary A shares) (Primary A shares) $10,069,608.00 986,444 $10.21 (Investor A shares) (Investor A shares) (Investor A shares) $45,489,386.00 4,464,564 $10.19 (Investor B shares) (Investor B shares) (Investor B shares) $876,088.00 86,290 $10.15 (Investor C shares) (Investor C shares) (Investor C shares) $17,934,129.00 754,634.00 $23.77 Asset Allocation Fund (Primary A shares) (Primary A shares) (Primary A shares) (Fund B) $277,103,861.00 11,663,078 $23.76 (Investor A shares) (Investor A shares) (Investor A shares) $123,134,728.00 5,207,504 $23.65 (Investor B shares) (Investor B shares) (Investor B shares) $2,723,922.00 115,060 $23.67 (Investor C shares) (Investor C shares) (Investor C shares)
27
Total Net Assets Shares Outstanding Net Asset Value Per Share ---------------------- --------------------- -------------------------- Asset Allocation Fund (new) $0.00 0 $0.00 (Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $0.00 0 $0.00 (Investor A shares) (Investor A shares) (Investor A shares) $0.00 0 $0.00 (Investor B shares) (Investor B shares) (Investor B shares) $0.00 0 $0.00 (Investor C shares) (Investor C shares) (Investor C shares) Pro Forma Combined Fund $34,074,802.00 3,334,901 $10.22 (Fund A + Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $10,069,608.00 986,444 $10.21 (Investor A shares) (Investor A shares) (Investor A shares) $45,489,368.00 4,464,564 $10.19 (Investor B shares) (Investor B shares) (Investor B shares) $876,088.00 86,290 $10.15 (Investor C shares) (Investor C shares) (Investor C shares) Pro Forma Combined Fund $17,934,129.00 754,634 $23.77 (Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $277,103,861.00 11,663,078 $23.76 (Investor A shares) (Investor A shares) (Investor A shares) $123,134,728.00 5,207,504 $23.65 (Investor B shares) (Investor B shares) (Investor B shares) $2,723,922.00 115,060 $23.67 (Investor C shares) (Investor C shares) (Investor C shares) Pro Forma Combined Fund $52,008,931.00 2,188,007 $23.77 (Fund A + Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares) $287,173,469.00 12,086,425 $23.76 (Investor A shares) (Investor A shares) (Investor A shares) $168,624,096.00 7,129,983 $23.65 (Investor B shares) (Investor B shares) (Investor B shares) $3,600,010.00 152,092 $23.67 (Investor C shares) (Investor C shares) (Investor C shares)
VOTING MATTERS General Information This Proxy/Prospectus is being furnished in connection with the solicitation of proxies for the Meetings by, and on behalf of, the Boards. It is expected that the solicitation of proxies will be primarily by mail. Officers and service contractors of the Trust, the Company and Reserves also may solicit proxies by telephone or otherwise. In this connection, the Trust, the Company and Reserves have retained ADP Proxy Services to assist in the solicitation of proxies. Shareholders may submit their proxy: (1) by mail, by marking, signing, dating and returning the enclosed proxy ballot(s) in the enclosed postage-paid envelope; (2) by fax, by marking, signing, dating and faxing the enclosed proxy ballot(s) to ADP Proxy Services at (704) 388-2641; (3) by phone at (800) 690-6903; or 4) by on-line voting at www.proxyvote.com. Any shareholder submitting a proxy may revoke it at any time before it is exercised at the Meetings by submitting to the Trust, the Company and/or Reserves a written notice of revocation addressed to the Trust, the Company and/or Reserves at the address shown on the cover page of this Proxy/Prospectus, or a subsequently executed proxy or by attending the Meetings and voting in person. 28 Any expenses incurred as a result of hiring ADP Proxy Services or any other proxy solicitation agent will be borne by BAAI and/or its affiliates. Only shareholders of record at the close of business on January 15, 2001 will be entitled to vote at the Meetings. On that date, 6,817,918 shares of the U.S. Government Bond Fund, 23,849,877 shares of the Government Securities Fund, 8,626,992 shares of the Balanced Assets Fund and 17,724,159 shares of the Asset Allocation Fund were outstanding and entitled to be voted. Each whole and fractional share of an Acquired Fund is entitled to a whole or fractional vote. If the accompanying proxy ballot(s) is executed and returned in time for the Meetings, the shares covered thereby will be voted in accordance with the proxy on all matters that may properly come before the Meetings. Quorum A quorum is constituted with respect to the Acquired Funds by the presence in person or by proxy of the holders of more than one-half of the outstanding shares of each Acquired Fund entitled to vote at the Meetings. For purposes of determining the presence of a quorum for transacting business at the Meetings, abstentions will be treated as shares that are present at the Meetings but which have not been voted. Accordingly, abstentions will have the effect of a "no" vote for purposes of obtaining the requisite approvals of each Reorganization Agreement. Broker "non-votes" (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owners or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be treated the same as abstentions. In the event that a quorum is not present at the Meetings, or in the event that a quorum is present at the Meetings but sufficient votes to approve any Reorganization Agreement are not received by an Acquired Fund, one or more adjournment(s) may be proposed to permit further solicitation of proxies under Massachusetts law and the Trust's and Reserves's charter documents, a meeting may be adjourned for a reasonable period in order to obtain a requisite vote. Under Maryland state law, any adjourned session or sessions may be held after the date set for the original Meetings of the U.S. Government Bond Fund and the Government Securities Fund without notice except announcement at the Meetings, provided that the Meetings are not adjourned beyond the 120th day from January 15, 2001 (which is the record date). Any such adjournment(s) will require the affirmative vote of a majority of those shares affected by the adjournment(s) that are represented at the Meetings in person or by proxy. If a quorum is present, the persons named as proxies will vote those proxies which they are entitled to vote FOR the particular proposal for which a quorum exists in favor of such adjournment(s), and will vote those proxies required to be voted AGAINST such proposal against any adjournment(s). Shareholder Approval Each Reorganization Agreement is being submitted for approval at the Meetings by each respective Acquired Fund's shareholders pursuant to the charter documents of the Trust, the Company and Reserves, and were unanimously approved by their respective Boards at meetings held on August 23, 2000. Each Reorganization Agreement must be approved by a majority of the shares of each respective Acquired Fund 29 present at the Meetings in person or by proxy. The Reorganization of any Acquired Fund is not conditioned upon the Reorganization of any other Acquired Fund. Accordingly, it is possible that one or more Acquired Fund(s)' shareholders will not approve the Reorganization and such Acquired Fund(s) will not be reorganized. In this event, the Board(s) will consider what further action is appropriate. A vote of the shareholders of the Acquiring Funds is not being solicited, since their approval or consent is not necessary for the Reorganization. Principal Shareholders The table below shows the name, address and share ownership of each person known to the Trust, the Company and Reserves to have ownership with respect to 5% or more of a class of an Acquired Fund as of January 15, 2001. Each shareholder is known to own as of record the shares indicated below. Any shareholder known to the Trust, the Company and/or Reserves to own such shares beneficially is designated by an asterisk.
Percentage of Class; Amount of Percentage Percentage Fund Post Fund Name and Address Shares Owned of Class of Fund Closing - ----------------------- ----------------------------------- ----------------- ----------- ----------- -------------- Balanced Assets Fund Harold A Dawson, Sr. & Investor C 5.09% 0.05% 0.01% Harold A Dawson, Jr. TTEES 4,402.116 Harold A Dawson Co. Inc. Profit Sharing Plan 600 Peachtree St. NE Ste. 3700 Atlanta, GA 30308 Stuart K. Colonna TTEE Investor C 22.97% 0.23% 0.04% Bayshore Concrete Products Corp 19,864.297 Retirement Savings Plan 1 Bayshore Rd P.O. Box 230 Cape Charles, VA 23310 C A Porterfield & Rosalee Moxley & Investor C 17.43% 0.17% 0.03% Frank Minton TTEES 15,068.024 Starmount Company Capital Accumulation Plan P.O. Box 10349 Greensboro, NC 27404-0349 C A Porterfield & Rosalee Moxley & Investor C 13.90% 0.14% 0.03% Frank Minton TTEES FBO 12,021.584 Starmount Company Employees Tax Deferred Savings Plan P.O. Box 10349 Greensboro, NC 27404-0349 Anthony M. Sfreddo TTEE Investor C 6.07% 0.06% 0.01% Triple S Termite & Pest Control 5,245.026 401(K) Plan 9160 Prince William St Manassas, VA 20110
30
Percentage of Class; Amount of Percentage Percentage Fund Post Fund Name and Address Shares Owned of Class of Fund Closing - ----------------- ------------------------------------ ----------------- ----------- ----------- -------------- Merrill Lynch, Pierce, Fenner & Investor C 5.06% 0.05% 0.01% Smith Inc. for the Sole Benefit 4,377.362 of its Customers Attention Service Team 4800 Deer Lake Drive East 3rd Floor Jacksonville, FL 32246 Maurine E. Jehusou TTEE Investor C 5.57% 0.06% 0.01% Travis A Weidner Trust 4,812.977 UA DTD 4/1/96 101 Lariat San Antonio, TX 78232-1004 Henry Sternlieb and Investor A 6.19% 0.69% 0.13% Rose Sternlieb JTWROS 59,098.185 6608 Maynada Street Coral Gables, FL 33146-0000 Gable & Gotwals Inc. Profit Sharing Investor A 6.15% 0.68% 0.13% Plan Segregated FBO ADWAN 58,687.481 Bank of Oklahoma, NA TTEE P.O. Box 2180 Tulsa, OK 74101 Stephens Inc. Primary B 100% 0% 0% Attn: Cindy Cole 1.359 111 Center Street Little Rock, AR 72201 Bank of America, NA Primary A 97.81% 38.05% 7.16% Attn Tony Farrer 3,282,954.678 1401 Elm Street 11th Floor Dallas, TX 75202-2911 U.S. Government Wilbur M. Finger and Investor C 7.01% 0.09% 0.02% Bond Fund Marga E. Finger JT WROS 6,383.135 5200 S Broadway Apt 408 M Saint Louis, MO 63111-2019 NFSC FEBO #W53-678562 Investor C 20.74% 0.28% 0.06% Ruth Lee Paar 18,875.364 750 Webster P.O. Box 102 Warsaw, IL 62379 NFSC FEBO #W53-710237 Investor C 11.21% 0.15% 0.03% NFSC/FMTC IRA 10,201.415 FBO Mildred DeLuca 5512 Columbia Ave. St. Louis, MO 63139
31
Percentage of Class; Amount of Percentage Percentage Fund Post Fund Name and Address Shares Owned of Class of Fund Closing - ------ ------------------------------------ ----------------- ----------- ----------- -------------- NFSC FEBO #W52-004448 Investor C 9.64% 0.13% 0.03% Rodger N Lindgren TTEE 8,776.230 Rodger N Lindgren Rev Tr U/A 10/8/98 1203 Geneva Kearney, MO 64060 First Clearing Corporation Investor C 25.40% 0.34% 0.08% A/C 2049-3139 23,123.387 Ernest A Chandler 15 Glenkirk Charleston, SC 29407 Virginia United Methodist Homes Inc Investor A 6.91% 0.26% 0.06% 7113 Three Chopt Rd Ste 300 17,408.434 Richmond, VA 23226 Gable & Gotwals Inc. Profit Sharing Investor A 6.18% 0.23% 0.05% Plan Segregated FBO Noulles 15,563.468 Bank of Oklahoma, NA TTEE P.O. Box 2180 Tulsa, OK 74101 Gable & Gotwals Inc. Profit Sharing Investor A 9.03% 0.33% 0.08% Plan Segregated FBO ADWAN 22,740.917 Bank of Oklahoma NA TTEE P.O. Box 2180 Tulsa, OK 74101 ISTCO Investor A 17.01% 0.63% 0.14% A Partnership 42,861.414 P.O. Box 523 Belleville, IL 62222 Bear Stearns Securities Corp. Investor A 16.18% 0.60% 0.14% FBO 220-59289-28 40,777.611 1 Metrotech Center North Brooklyn, NY 11201-3859 Bear Stearns Securities Corp. Investor A 6.63% 0.24% 0.06% FBO 039-52210-13 16,699.801 1 Metrotech Center North Brooklyn, NY 11201-3859 Squashapenny Limited Partnership Investor A 15.78% 0.58% 0.13% c/o James River Capital Corp 39,761.431 58 Broad Street Rd. 103 Sabot Park Manakin-Sabot, VA 23103
32
Percentage of Class; Amount of Percentage Percentage Fund Post Fund Name and Address Shares Owned of Class of Fund Closing - ----------------------- ------------------------------------ ----------------- ----------- ----------- -------------- Stephens Inc. Primary B 100% 0% 0% Attn: Cindy Cole 1.116 111 Center Street Little Rock, AR 72201 Bank of America, NA Primary A 100% 80.99% 18.31% Attn Tony Farrer 5,522,091.207 1401 Elm Street 11th Floor Dallas, TX 75202-2911 Government Securities Union Bank Trust Nominee Investor A 5.66% 1.32% 1.02% Fund FBO Angelus Sanitary 315,877.002 Can Machine Co. Emp Welfare BP 610001305-00 PO Box 85484 San Diego, CA 92186-5484 Bank of America, NA Primary A 99.45% 65.11% 50.42% Attn Tony Farrer 15,529,801.181 1401 Elm Street 11th Floor Dallas, TX 75202-2911 Stephens Inc. Primary B 100% 0% 0% Attn: Cindy Cole 1.061 111 Center Street Little Rock, AR 72201 Merrill Lynch, Pierce, Fenner & Investor C 13.11% 0.02% 0.01% Smith Inc. for the Sole Benefit 4,539.474 of its Customers Attention Service Team 4800 Deer Lake Drive East 3rd Floor Jacksonville, FL 32246 NFSC FEBO #W79-735922 Investor C 30.21% 0.04% 0.03% Paul E Adams 10,460.251 2261 Medina Ave. Simi Valley, CA 93063 NFSC FEBO #W75-019801 Investor C 6.57% 0.01% 0.01% Meiling a Wong-Bond Cust 2,273.122 Kathleen Lew UTMA CA 454 Chesapeake Ave. Foster City, CA 94404 NFSC FEBO #W78-027251 Investor C 12.72% 0.02% 0.01% David Hahn 4,404.394 2060 W 171st St. Torrance, CA 90504
33
Percentage of Class; Amount of Percentage Percentage Fund Post Fund Name and Address Shares Owned of Class of Fund Closing - ------------------------ --------------------------- ----------------- ----------- ----------- -------------- NFSC FEBO #W77-299057 Investor C 7.72% 0.01% 0.01% Verlin R Baldwin 2,673.797 Tod Betty B Dial 4134 NE Flanders St. Portland, OR 97232 Asset Allocation Fund Stephens Inc. Primary B 100% 0% 0% Attn: Cindy Cole 1.072 111 Center Street Little Rock, AR 72201 Seafirst Bank Investor A 71.17% 46.93% 38.18% FBO Retirement Svcs 8,318,108.651 P.O. Box 84248 Seattle, WA 98124-5548 Bank of America, NA Primary A 100% 3.58% 2.91% Attn Tony Farrer 633,832.190 1401 Elm Street 11th Floor Dallas, TX 75202-2911
For purposes of the 1940 Act, any person who owns directly or through one or more controlled companies more than 25% of the voting securities of a company is presumed to "control" such company. Accordingly, to the extent that a shareholder identified in the foregoing table is identified as the beneficial holder of more than 25% of a class, or is identified as the holder of record of more than 25% of a class and has voting and/or investment power, it may be presumed to control such class. As of January 15, 2001, Bank of America had voting control of 77.04% of the U.S. Government Bond Fund's outstanding shares, 64.34% of the Government Securities Fund's outstanding shares and 38.09% of the Balanced Assets Fund's outstanding shares. Accordingly, Bank of America may be considered to "control" such Acquired Funds. The address of Bank of America is: 1401 Elm Street, 11th Floor, Dallas, TX 75202-2911. Bank of America's control is likely to increase the chance that the Acquired Funds' shareholders will approve the proposed items. As of January 15, 2001, the officers and Trustees/Directors of each of the Trust, the Company and Reserves, as a group, owned less than 1% of any class of an Acquired Fund. Annual Meetings and Shareholder Meetings Neither the Trust, the Company nor Reserves presently holds annual meetings of shareholders for the election of Trustees/Directors and other business unless otherwise required by the 1940 Act. 34 ADDITIONAL INFORMATION ABOUT THE TRUST, THE COMPANY, RESERVES AND NATIONS FUNDS TRUST Additional information about the Acquired Funds and Acquiring Funds is included in their Prospectuses and Statements of Additional Information dated August 1, 2000, as supplemented, for the Acquired Funds and dated December 27, 2000 for the Acquiring Funds, copies of which, to the extent not included herewith, may be obtained without charge by writing or calling the Trust, the Company, Reserves and/or Nations Funds Trust at the address and telephone number set forth on the first page of this Proxy/Prospectus. The proxy materials, reports and other information filed by the Trust, the Company and Reserves can be inspected and copied at the public reference facilities maintained by the SEC located at 450 5th Street N.W., Washington, D.C. 20549, and 7 World TradeCenter, Suite 1300, New York, NY 10048. Copies of such material also can be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a web site (www.sec.gov) that contains reports, other information and proxy statements filed by the Trust, the Company and Reserves. Officers of the Trust, the Company and Reserves are elected by, and serve at the pleasure of, the Boards of the Trust, the Company and Reserves, respectively. Officers of the Trust, the Company and Reserves receive no remuneration from the Trust, the Company and Reserves, respectively, for their services in such capacities. FINANCIAL STATEMENTS The audited financial statements and financial highlights for shares of the Acquired Funds for the annual period ended March 31, 2000, and unaudited financial statements for shares of the Acquired Funds for the semi-annual period ended September 30, 2000, are incorporated by reference in their prospectuses or statements of additional information, or in the statement of additional information related to this Proxy/ Prospectus. The annual financial statements and financial highlights of the Acquired Funds for the year ended March 31, 2000 have been audited by PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in their reports thereon and have been incorporated by reference in the Statement of Additional Information to this Proxy/Prospectus, in reliance upon such reports given upon the authority of such firm as an expert in accounting and auditing. OTHER BUSINESS The Boards know of no other business to be brought before the Meetings. However, if any other matters properly come before the Meetings, it is the intention that proxies which do not contain specific restrictions to the contrary will be voted on such matters in accordance with the judgment of the persons named in the enclosed form of proxy. 35 SHAREHOLDER INQUIRIES Shareholder inquiries may be addressed to the Trust, the Company and/or Reserves in writing at the address, or by phone at the phone number, on the cover page of this Proxy/Prospectus. * * * SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETINGS ARE REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY BALLOT(S) AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS ALSO MAY SUBMIT PROXIES BY FAX, TELEPHONE OR ON-LINE. THE TRUST, THE COMPANY AND/OR RESERVES WILL FURNISH, WITHOUT CHARGE, COPIES OF THE MARCH 31, 2000 ANNUAL REPORT AND THE SEPTEMBER 30, 2000 SEMI-ANNUAL REPORT TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: NATIONS FUND TRUST, NATIONS FUND, INC. OR NATIONS RESERVES, ONE BANK OF AMERICA PLAZA, 101 SOUTH TRYON STREET, CHARLOTTE, N.C. 28255 OR BY TELEPHONE AT 1-800-321-7854. 36 APPENDIX I Expense Summaries of Acquired Funds and Acquiring Funds The following tables describe the fees and expenses associated with holding Acquired Fund and Acquiring Fund shares. In particular, the tables (a) compare the fees and expenses as of December 1, 2000, for each class of each Acquired Fund and the corresponding class of the Acquiring Fund, and (b) show the estimated fees and expenses for each combined Acquiring Fund on a pro forma basis after giving effect to the Reorganization. The fund operating expense levels shown in this Proxy/Prospectus assume net asset levels as of December 1, 2000; pro forma expense levels shown should not be considered an actual representation of future expenses or performance. Such pro forma expense levels project anticipated levels but may be greater or less than those shown. I-1 IF ONLY U.S. GOVERNMENT BOND FUND IS REORGANIZED: Primary A Shares
Government Securities Fund (new) Pro Forma U.S. Government (After Bond Fund Reorganization) ---------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases ......... none none Maximum deferred sales charge (load) ..................... none none Annual Fund Operating Expenses(1) (Expenses that are deducted from the Fund's assets) Management fees .......................................... 0.50% 0.50% Other expenses ........................................... 0.54% 0.54% ------ ------ Total annual Fund operating expenses ..................... 1.04% 1.04% Fee waivers and/or reimbursements ........................ (0.26)% (0.26)% ------ ------ Total net expenses(2),(3) ................................ 0.78% 0.78% ====== ======
- -------- (1) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (2) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (3) For Nations Government Securities Fund (new), administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 0.73% Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Primary A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ............................................. $80 $305 $549 $1,247 Government Securities Fund (new) Pro Forma (after reorganization) ..... $80 $305 $549 $1,247
I-2 IF ONLY GOVERNMENT SECURITIES FUND IS REORGANIZED: Primary A Shares
Government Securities Fund (new) Pro Forma Government (After Securities Fund Reorganization) ----------------- ----------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases .............. none none Maximum deferred sales charge (load) .......................... none none Annual Fund Operating Expenses(1) (Expenses that are deducted from the Fund's assets) ......... Management fees ............................................... 0.50% 0.50% Other expenses ................................................ 0.38% 0.38% ----- ------ Total annual Fund operating expenses .......................... 0.88% 0.88% Fee waivers and/or reimbursements ............................. (0.10)% (0.10)% ----- ------ Total net expenses(2),(3) ..................................... 0.78% 0.78% ===== ======
- -------- (1) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (2) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (3) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 0.73%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Primary A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Government Securities Fund ............................................ $80 $271 $478 $1,075 Government Securities Fund (new) Pro Forma (after reorganization) ..... $80 $271 $478 $1,075
I-3 IF BOTH U.S. GOVERNMENT BOND FUND AND GOVERNMENT SECURITIES FUND ARE REORGANIZED: Primary A Shares
Government Securities Fund (new) Pro Forma U.S. Government Government (After Bond Fund Securities Fund Reorganization) ---------------- ----------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases ......... none none none Maximum deferred sales charge (load) ..................... none none none Annual Fund Operating Expenses(1) (Expenses that are deducted from the Fund's assets) Management fees .......................................... 0.50% 0.50% 0.50% Other expenses ........................................... 0.54% 0.38% 0.38% ----- ------ ----- Total annual Fund operating expenses ..................... 1.04% 0.88% 0.88% Fee waivers and/or reimbursements ........................ (0.26)% (0.10)% (0.10)% ------ -------- -------- Total net expenses ....................................... 0.78%(3) 0.78%(2),(4) 0.78%(2),(4) ======== ============ ============
- -------- (1) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (2) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 0.73%. (3) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Primary A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ............................................. $80 $305 $549 $1,247 Government Securities Fund ............................................ $80 $271 $478 $1,075 Government Securities Fund (new) Pro Forma (after reorganization) ..... $80 $271 $478 $1,075
I-4 IF ONLY U.S. GOVERNMENT BOND FUND IS REORGANIZED: Investor A Shares
Government Securities Fund (new) Pro Forma U.S. Government (After Bond Fund Reorganization) ---------------- --------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ............................................................. 4.75% 4.75% Maximum deferred sales charge as a % of net asset value(1) ......... none none Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................... 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees ................ 0.25% 0.25% Other expenses ..................................................... 0.54% 0.54% ------ ----- Total annual Fund operating expenses ............................... 1.29% 1.29% Fee waivers and/or reimbursements .................................. (0.26)% (0.26)% ------ ------ Total net expenses(3) .............................................. 1.03% 1.03%(4) ====== ========
- -------- (1) A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them. Different charges may apply to purchases made prior to August 1, 1999. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 0.98%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $575 $841 $1,126 $1,939 Government Securities Fund (new) Pro Forma (after reorganization) ........ $575 $841 $1,126 $1,939
I-5 IF ONLY GOVERNMENT SECURITIES FUND IS REORGANIZED: Investor A Shares
Government Securities Fund (new) Government Pro Forma Securities (After Fund Reorganization) ---------------- ------------------------ Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ................................................................... 4.75% 4.75% Maximum deferred sales charge as a % of net asset value(1) ................ none none Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees ........................................................... 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees ....................... 0.25% 0.25% Other expenses ............................................................ 0.38% 0.38% ------ ------ Total annual Fund operating expenses ...................................... 1.13% 1.13% Fee waivers and/or reimbursements ......................................... (0.10)% (0.10)% ------ ------ Total net expenses(3),(4) ................................................. 1.03% 1.03% ====== ======
- -------- (1) A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them. Different charges may apply to purchases made prior to August 1, 1999. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 0.98%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Government Securities Fund ............................................... $575 $808 $1,060 $1,778 Government Securities Fund (new) Pro Forma (after reorganization) ........ $575 $808 $1,060 $1,778
I-6 IF BOTH U.S. GOVERNMENT BOND FUND AND GOVERNMENT SECURITIES FUND ARE REORGANIZED: Investor A Shares
Government Securities Fund (new) Government Pro Forma U.S. Government Securities (After Bond Fund Fund Reorganization) ---------------- -------------- --------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ................................................. 4.75% 4.75% 4.75% Maximum deferred sales charge as a % of net asset value(1) ....... none none none Annual Fund Operating Expenses2 (Expenses that are deducted from the Fund's assets) Management fees .................................................. 0.50% 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees .............. 0.25% 0.25% 0.25% Other expenses ................................................... 0.54% 0.38% 0.38% ----- ------ ----- Total annual Fund operating expenses ............................. 1.29% 1.13% 1.13% Fee waivers and/or reimbursements ................................ (0.26)% (0.10)% (0.10)% ------ -------- -------- Total net expenses ............................................... 1.03%(4) 1.03%(3),(5) 1.03%(3),(5) ======== ============ ============
- -------- (1) A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them. Different charges may apply to purchases made prior to August 1, 1999. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 0.98%. (4) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (5) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $575 $841 $1,126 $1,939 Government Securities Fund ............................................... $575 $808 $1,060 $1,778 Government Securities Fund (new) Pro Forma (after reorganization) ........ $575 $808 $1,060 $1,778
I-7 IF ONLY U.S. GOVERNMENT BOND FUND IS REORGANIZED: Investor B Shares
Government Securities Fund (new) Pro Forma U.S. Government (After Bond Fund Reorganization) ---------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ............................................................. none none Maximum deferred sales charge as a % of net asset value(1) ......... 5.00% 5.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................... 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees ................ 1.00% 1.00% Other expenses ..................................................... 0.54% 0.54% ------ ----- Total annual Fund operating expenses ............................... 2.04% 2.04% Fee waivers and/or reimbursements .................................. (0.26)% (0.26)% ------ ------ Total net expenses(3) .............................................. 1.78% 1.78%(4) ====== ========
- -------- (1) This charge decreases over time. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. Different charges apply to Investor B Shares bought before January 1, 1996 and after July 31, 1997. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 1.73%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor B Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor B Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $681 $915 $1,274 $2,155 Government Securities Fund (new) Pro Forma (after reorganization) ........ $681 $915 $1,274 $2,155
If you bought Investor B shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $181 $615 $1,074 $2,155 Government Securities Fund (new) Pro Forma (after reorganization) ........ $181 $615 $1,074 $2,155
I-8 IF ONLY GOVERNMENT SECURITIES FUND IS REORGANIZED: Investor B Shares
Government Securities Fund (new) Pro Forma Government (After Securities Fund Reorganization) ----------------- ----------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price none none Maximum deferred sales charge as a % of net asset value(1) ................ 5.00% 5.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) ..................... Management fees ........................................................... 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees ....................... 1.00% 1.00% Other expenses ............................................................ 0.38% 0.38% ----- ------ Total annual Fund operating expenses ...................................... 1.88% 1.88% Fee waivers and/or reimbursements ......................................... (0.10)% (0.10)% ----- ------ Total net expenses(3),(4) ................................................. 1.78% 1.78% ===== ======
- -------- (1) This charge decreases over time. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. Different charges apply to Investor B Shares bought before January 1, 1996 and after July 31, 1997. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 1.73%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor B Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor B Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Government Securities Fund ............................................... $681 $881 $1,207 $1,997 Government Securities Fund (new) Pro Forma (after reorganization) ........ $681 $881 $1,207 $1,997
If you bought Investor B shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Government Securities Fund ............................................... $181 $581 $1,007 $1,997 Government Securities Fund (new) Pro Forma (after reorganization) ........ $181 $581 $1,007 $1,997
I-9 IF BOTH U.S. GOVERNMENT BOND FUND AND GOVERNMENT SECURITIES FUND ARE REORGANIZED: Investor B Shares
Government Securities Fund (new) Pro Forma U.S. Government Government (After Bond Fund Securities Fund Reorganization) ---------------- ----------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) ...................... Maximum sales charge (load) imposed on purchases, as a % of offering price ................................................. none none none Maximum deferred sales charge as a % of net asset value(1) ....... 5.00% 5.00% 5.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................. 0.50% 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees .............. 1.00% 1.00% 1.00% Other expenses ................................................... 0.54% 0.38% 0.38% ----- ------ ----- Total annual Fund operating expenses ............................. 2.04% 1.88% 1.88% Fee waivers and/or reimbursements ................................ (0.26)% (0.10)% (0.10)% ------ -------- -------- Total net expenses ............................................... 1.78%(4) 1.78%(3),(5) 1.78%(3),(5) ======== ============ ============
- -------- (1) This charge decreases over time. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. Different charges apply to Investor B Shares bought before January 1, 1996 and after July 31, 1997. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 1.73%. (4) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (5) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor B Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor B Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $681 $915 $1,274 $2,155 Government Securities Fund ............................................... $681 $881 $1,207 $1,997 Government Securities Fund (new) Pro Forma (after reorganization) ........ $681 $881 $1,207 $1,997
If you bought Investor B shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $181 $615 $1,074 $2,155 Government Securities Fund ............................................... $181 $581 $1,007 $1,997 Government Securities Fund (new) Pro Forma (after reorganization) ........ $181 $581 $1,007 $1,997
I-10 IF ONLY U.S. GOVERNMENT BOND FUND IS REORGANIZED: Investor C Shares
Government Securities Fund (new) Pro Forma U.S. Government (After Bond Fund Reorganization) ---------------- ----------------------- Shareholder Fees (Fees paid directly from your investment) ............................... Maximum sales charge (load) imposed on purchases, as a % of offering price none none Maximum deferred sales charge as a % of net asset value(1) ................ 1.00% 1.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) ..................... Management fees ........................................................... 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees ....................... 1.00% 1.00% Other expenses ............................................................ 0.54% 0.54% ------ ----- Total annual Fund operating expenses ...................................... 2.04% 2.04% Fee waivers and/or reimbursements ......................................... (0.26)% (0.26)% ------ ------ Total net expenses(3) ..................................................... 1.78% 1.78%(4) ====== ========
- -------- (1) This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 1.73%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor C Shares
1 year 3 years 5 years 10 years -------- --------- ----------- --------- U.S. Government Bond Fund ................................................ $281 $615 $ 1,074 $2,348 Government Securities Fund (new) Pro Forma (after reorganization) ........ $281 $615 $ 1.074 $2,348
If you bought Investor C shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- ----------- --------- U.S. Government Bond Fund ................................................ $181 $615 $ 1,074 $2,348 Government Securities Fund (new) Pro Forma (after reorganization) ........ $181 $615 $ 1.074 $2,348
I-11 IF ONLY GOVERNMENT SECURITIES FUND IS REORGANIZED: Investor C Shares
Government Securities Fund (new) Pro Forma Government (After Securities Fund Reorganization) ----------------- ----------------------- Shareholder Fees (Fees paid directly from your investment) ............................... Maximum sales charge (load) imposed on purchases, as a % of offering price none none Maximum deferred sales charge as a % of net asset value(1) ................ 1.00% 1.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) ..................... Management fees ........................................................... 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees ....................... 1.00% 1.00% Other expenses ............................................................ 0.38% 0.38% ----- ------ Total annual Fund operating expenses ...................................... 1.88% 1.88% Fee waivers and/or reimbursements ......................................... (0.10)% (0.10)% ----- ------ Total net expenses(3),(4) ................................................. 1.78% 1.78% ===== ======
- -------- (1) This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (4) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 1.73%. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor C Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Government Securities Fund .............................................. $281 $581 $1,007 $2,193 Government Securities Fund (new) Pro Forma (after reorganization) ....... $281 $581 $1,007 $2,193
If you bought Investor C shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Government Securities Fund .............................................. $181 $581 $1,007 $2,193 Government Securities Fund (new) Pro Forma (after reorganization) ....... $181 $581 $1,007 $2,193
I-12 IF BOTH U.S. GOVERNMENT BOND FUND AND GOVERNMENT SECURITIES FUND ARE REORGANIZED: Investor C Shares
Government Securities Fund (new) Government Pro Forma U.S. Government Securities (After Bond Fund Fund Reorganization) ---------------- ------------ ----------------------- Shareholder Fees (Fees paid directly from your investment) ....................... Maximum sales charge (load) imposed on purchases, as a % of offering price .................................................. none none none Maximum deferred sales charge as a % of net asset value(1) ....... 1.00% 1.00% 1.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) ............. Management fees .................................................. 0.50% 0.50% 0.50% Distribution (12b-1) and shareholder servicing fees .............. 1.00% 1.00% 1.00% Other expenses ................................................... 0.54% 0.38% 0.38% ----- ------ ----- Total annual Fund operating expenses ............................. 2.04% 1.88% 1.88% Fee waivers and/or reimbursements ................................ (0.26)% (0.10)% (0.10)% ------ -------- -------- Total net expenses ............................................... 1.78%(4) 1.78%(3),(5) 1.78%(3),(5) ======== ============ ============
- -------- (1) This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) Administration fees of 0.05% are voluntarily waived by the co-administrator; however, there is no guarantee that this waiver will continue for any specified period of time. This waiver is not reflected in the table above. The total net expense ratio including this waiver is 1.73%. (4) Nations U.S. Government Bond Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001, so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Government Securities Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. (5) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor C Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $281 $615 $1,074 $2,348 Government Securities Fund ............................................... $281 $581 $1,007 $2,193 Government Securities Fund (new) Pro Forma (after reorganization) ........ $281 $581 $1,007 $2,193
If you bought Investor C shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- U.S. Government Bond Fund ................................................ $181 $615 $1,074 $2,348 Government Securities Fund ............................................... $181 $581 $1,007 $2,193 Government Securities Fund (new) Pro Forma (after reorganization) ........ $181 $581 $1,007 $2,193
I-13 IF ONLY BALANCED ASSETS FUND IS REORGANIZED: Primary A Shares
Asset Allocation Fund (new) Pro Forma Balanced (After Assets Fund Reorganization) ------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) ................... Maximum sales charge (load) imposed on purchases .............. none none Maximum deferred sales charge (load) .......................... none none Annual Fund Operating Expenses(1) (Expenses that are deducted from the Fund's assets) ......... Management fees ............................................... 0.65% 0.65% Other expenses ................................................ 0.54% 0.54% ----- ----- Total annual Fund operating expenses .......................... 1.19% 1.19% Fee waivers and/or reimbursements ............................. (0.19)% (0.19)% ----- ----- Total net expenses(2) ......................................... 1.00% 1.00% ===== =====
- -------- (1) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service fees. (2) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that those waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Primary A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $102 $359 $636 $1,426 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $102 $359 $636 $1,426
I-14 IF ONLY ASSET ALLOCATION FUND IS REORGANIZED: Primary A Shares
Asset Allocation Asset Fund (new) Pro Forma Allocation (After Fund Reorganization) ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases ......... none none Maximum deferred sales charge (load) ..................... none none Annual Fund Operating Expenses(1) (Expenses that are deducted from the Fund's assets) Management fees .......................................... 0.65% 0.65% Other expenses ........................................... 0.35% 0.35% ----- ----- Total annual Fund operating expenses ..................... 1.00% 1.00% ===== =====
- -------- (1) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Primary A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Asset Allocation Fund ................................................ $102 $318 $552 $1,225 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $102 $318 $552 $1,225
I-15 IF BOTH BALANCED ASSETS FUND AND ASSET ALLOCATION FUND ARE REORGANIZED: Primary A Shares
Asset Allocation Asset Fund (new) Pro Forma Balanced Allocation (After Assets Fund Fund Reorganization) ------------- ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases ......... none none none Maximum deferred sales charge (load) ..................... none none none Annual Fund Operating Expenses(1) (Expenses that are deducted from the Fund's assets) Management fees .......................................... 0.65% 0.65% 0.65% Other expenses ........................................... 0.54% 0.35% 0.35% ----- ----- ----- Total annual Fund operating expenses ..................... 1.19% 1.00% 1.00% ===== ===== Fee waivers and/or reimbursements ........................ (0.19)% N/A N/A ------ Total net expenses ....................................... 1.00%(2) N/A N/A ========
- -------- (1) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (2) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Primary A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $102 $359 $636 $1,426 Asset Allocation Fund ................................................ $102 $318 $552 $1,225 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $102 $318 $552 $1,225
I-16 IF ONLY BALANCED ASSETS FUND IS REORGANIZED: Investor A Shares
Asset Allocation Fund (new) Pro Forma Balanced (After Assets Fund Reorganization) ------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price 5.75% 5.75% Maximum deferred sales charge as a % of net asset value(1) ................ none none Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees ........................................................... 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees ....................... 0.25% 0.25% Other expenses ............................................................ 0.54% 0.54% ----- ------ Total annual Fund operating expenses ...................................... 1.44% 1.44% Fee waivers and/or reimbursements ......................................... (0.19)% (0.19)% ----- ------ Total net expenses(3) ..................................................... 1.25% 1.25% ===== ======
- -------- (1) A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them. Different charges may apply to purchases made prior to August 1, 1999. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $695 $988 $1,301 $2,188 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $695 $988 $1,301 $2,188
I-17 IF ONLY ASSET ALLOCATION FUND IS REORGANIZED: Investor A Shares
Asset Allocation Asset Fund (new) Pro Forma Allocation (After Fund Reorganization) ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ............................................................ 5.75% 5.75% Maximum deferred sales charge as a % of net asset value(1) ......... none none Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................... 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees ................ 0.25% 0.25% Other expenses ..................................................... 0.35% 0.35% ----- ----- Total annual Fund operating expenses ............................... 1.25% 1.25% ===== =====
- -------- (1) A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them. Different charges may apply to purchases made prior to August 1, 1999. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Asset Allocation Fund ................................................ $695 $949 $1,223 $2,002 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $695 $949 $1,223 $2,002
I-18 IF BOTH BALANCED ASSETS FUND AND ASSET ALLOCATION FUND ARE REORGANIZED: Investor A Shares
Asset Allocation Asset Fund (new) Pro Forma Balanced Allocation (After Assets Fund Fund Reorganization) ------------- ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price .................................................. 5.75% 5.75% 5.75% Maximum deferred sales charge as a % of net asset value(1) ....... none none none Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................. 0.65% 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees .............. 0.25% 0.25% 0.25% Other expenses ................................................... 0.54% 0.35% 0.35% ----- ----- ----- Total annual Fund operating expenses ............................. 1.44% 1.25% 1.25% ===== ===== Fee waivers and/or reimbursements ................................ (0.19)% N/A N/A ------ Total net expenses ............................................... 1.25%(3) N/A N/A ========
- -------- (1) A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them. Different charges may apply to purchases made prior to August 1, 1999. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor A Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $695 $988 $1,301 $2,188 Asset Allocation Fund ................................................ $695 $949 $1,223 $2,002 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $695 $949 $1,223 $2,002
I-19 IF ONLY BALANCED ASSETS FUND IS REORGANIZED: Investor B Shares
Asset Allocation Fund (new) Pro Forma Balanced (After Assets Fund Reorganization) ------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price none none Maximum deferred sales charge as a % of net asset value(1) ................ 5.00% 5.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees ........................................................... 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees ....................... 1.00% 1.00% Other expenses ............................................................ 0.54% 0.54% ----- ----- Total annual Fund operating expenses ...................................... 2.19% 2.19% Fee waivers and/or reimbursements ......................................... (0.19)% (0.19)% ----- ----- Total net expenses(3) ...................................................... 2.00% 2.00% ===== =====
- -------- (1) This charge decreases over time. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. Different charges apply to Investor B Shares bought before January 1, 1996 and after July 31, 1997. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor B Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor B Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $703 $967 $1,357 $2,319 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $703 $967 $1,357 $2,319
If you bought Investor B shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $203 $667 $1,157 $2,319 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $203 $667 $1,157 $2,319
I-20 IF ONLY ASSET ALLOCATION FUND IS REORGANIZED: Investor B Shares
Asset Allocation Asset Fund (new) Pro Forma Allocation (After Fund Reorganization) ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ............................................................ none none Maximum deferred sales charge as a % of net asset value(1) ......... 5.00% 5.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................... 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees ................ 1.00% 1.00% Other expenses ..................................................... 0.35% 0.35% ----- ----- Total annual Fund operating expenses ............................... 2.00% 2.00% ===== =====
- -------- (1) This charge decreases over time. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. Different charges apply to Investor B Shares bought before January 1, 1996 and after July 31, 1997. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor B Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor B Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Asset Allocation Fund ................................................ $703 $927 $1,278 $2,134 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $703 $927 $1,278 $2,134
If you bought Investor B shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Asset Allocation Fund ................................................ $203 $627 $1,078 $2,134 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $203 $627 $1,078 $2,134
I-21 IF BOTH BALANCED ASSETS FUND AND ASSET ALLOCATION FUND ARE REORGANIZED: Investor B Shares
Asset Allocation Asset Fund (new) Pro Forma Balanced Allocation (After Assets Fund Fund Reorganization) ------------- ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price .................................................. none none none Maximum deferred sales charge as a % of net asset value(1) ....... 5.00% 5.00% 5.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) Management fees .................................................. 0.65% 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees .............. 1.00% 1.00% 1.00% Other expenses ................................................... 0.54% 0.35% 0.35% ----- ----- ----- Total annual Fund operating expenses ............................. 2.19% 2.00% 2.00% ===== ===== Fee waivers and/or reimbursements ................................ (0.19)% N/A N/A ------ Total net expenses ............................................... 2.00%(3) N/A N/A ========
- -------- (1) This charge decreases over time. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. Different charges apply to Investor B Shares bought before January 1, 1996 and after July 31, 1997. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor B Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor B Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $703 $967 $1,357 $2,319 Asset Allocation Fund ................................................ $703 $927 $1,278 $2,134 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $703 $927 $1,278 $2,134
If you bought Investor B shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $203 $667 $1,157 $2,319 Asset Allocation Fund ................................................ $203 $627 $1,078 $2,134 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $203 $627 $1,078 $2,134
I-22 IF ONLY BALANCED ASSETS FUND IS REORGANIZED: Investor C Shares
Asset Allocation Fund (new) Pro Forma Balanced (After Assets Fund Reorganization) ------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ............................................................ none none Maximum deferred sales charge as a % of net asset value(1) ......... 1.00% 1.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) .............. Management fees .................................................... 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees ................ 1.00% 1.00% Other expenses ..................................................... 0.54% 0.54% ----- ----- Total annual Fund operating expenses ............................... 2.19% 2.19% ===== Fee waivers and/or reimbursements .................................. (0.19)% (0.19)% ----- ----- Total net expenses(3) .............................................. 2.00% 2.00% ===== =====
- -------- (1) This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2000 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor C Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $303 $667 $1,157 $2,509 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $303 $667 $1,157 $2,509
If you bought Investor C shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $203 $667 $1,157 $2,509 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $203 $667 $1,157 $2,509
I-23 IF ONLY ASSET ALLOCATION FUND IS REORGANIZED: Investor C Shares
Asset Allocation Fund (new) Pro Forma Asset (After Allocation Fund Reorganization) ----------------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ................................................. none none Maximum deferred sales charge as a % of net asset value(1) ....... 1.00% 1.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) ............ Management fees .................................................. 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees .............. 1.00% 1.00% Other expenses ................................................... 0.35% 0.35% ----- ----- Total annual Fund operating expenses ............................. 2.00% 2.00% ===== =====
- -------- (1) This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor C Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Asset Allocation Fund ................................................ $303 $627 $1,078 $2,327 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $303 $627 $1,078 $2,327
If you bought Investor C Shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Asset Allocation Fund ................................................ $203 $627 $1,078 $2,327 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $203 $627 $1,078 $2,327
I-24 IF BOTH BALANCED ASSETS FUND AND ASSET ALLOCATION FUND ARE REORGANIZED: Investor C Shares
Asset Allocation Asset Fund (new) Pro Forma Balanced Allocation (After Assets Fund Fund Reorganization) ------------- ----------- ---------------------- Shareholder Fees (Fees paid directly from your investment) Maximum sales charge (load) imposed on purchases, as a % of offering price ................................................. none none none Maximum deferred sales charge as a % of net asset value(1) ....... 1.00 % 1.00% 1.00% Annual Fund Operating Expenses(2) (Expenses that are deducted from the Fund's assets) ............ Management fees .................................................. 0.65 % 0.65% 0.65% Distribution (12b-1) and shareholder servicing fees .............. 1.00 % 1.00% 1.00% Other expenses ................................................... 0.54 % 0.35% 0.35% ----- ----- ----- Total annual Fund operating expenses ............................. 2.19 % 2.00% 2.00% ===== ===== Fee waivers and/or reimbursements ................................ (0.19) % N/A N/A ------ Total net expenses ............................................... 2.00%(3) N/A N/A ========
- -------- (1) This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see the Acquired Fund's or Acquiring Fund's prospectus for more details. (2) The figures contained in the above table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary to reflect current service provider fees. (3) The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2001 so that the Fund's total net expenses, by class, are no higher than those of the corresponding class of Nations Asset Allocation Fund. The figure shown here is after waivers and/or reimbursements. There is no guarantee that these waivers and/or reimbursements will continue after this date. Example This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: o you invest $10,000 in Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods o you reinvest all dividends and distributions in the Fund o your investment has a 5% return each year o the Fund's operating expenses remain the same as shown in the table above o the waivers and/or reimbursements shown above expire July 31, 2001 and are not reflected in the 3, 5 and 10 year examples Although your actual cost may be higher or lower, based on these assumptions, your costs would be: Investor C Shares
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $303 $667 $1,157 $2,509 Asset Allocation Fund ................................................ $303 $627 $1,078 $2,327 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $303 $627 $1,078 $2,327
If you bought Investor C shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years -------- --------- --------- --------- Balanced Assets Fund ................................................. $203 $667 $1,157 $2,509 Asset Allocation Fund ................................................ $203 $627 $1,078 $2,327 Asset Allocation Fund (new) Pro Forma (after reorganization) ......... $203 $627 $1,078 $2,327
I-25 APPENDIX II Management's Discussion of Acquired Fund Performance Nations Balanced Assets Fund Investment Strategies Team commentary* Portfolio Management The Fund is managed by the Investment Strategies Team of Banc of America Capital Management, Inc., investment sub-adviser to the Fund. Investment Objective The Fund seeks total return by investing in equity and fixed income securities. Performance Review For the 12-month period ended March 31, 2000, Nations Balanced Assets Fund Investor A Shares provided shareholders with a total return of 0.47%.** In the following interview, the team shares its views on Nations Balanced Assets Fund's performance for the 12-month period ended March 31, 2000 and its outlook for the future. Please describe the Fund's Investment philosophy and style. The Fund seeks to provide shareholders with the potential for solid returns with reduced overall portfolio risk. It allocates its assets among a diversified portfolio of stocks, fixed-income securities and money market instruments -- all of which have different return/risk characteristics. The Fund invests primarily in stocks of high-quality companies with long-term fundamentals believed favorable and trading at we think are attractive valuations. Its fixed income holdings consist of investment-grade securities. Management of the equity portion of the Fund is based on the premise that companies' stock prices are more volatile than their underlying business fundamentals and that active security selection improves performance over time. We also believe that proprietary research is a critical component of investment success and, that opportunities are best uncovered by a constant search for new information. In addition, we believe that the reward for assuming risk varies over time. As a result, in our view, dynamic risk management should increase performance consistency. Within this framework, the Fund's equity style is a value approach where the management team seeks superior returns by investing in sound, proven businesses that are thought to be inexpensive relative to their intrinsic value. This approach also reflects a long-term view of value investing with its potential long-term rewards. The management of the fixed income portion is based on our belief that returns and consistency of returns are enhanced through a disciplined risk management process that seeks to control interest rate risk and emphasizes a quantitative approach to sector allocation, sector rotation and relative value security selection. Please comment on Fund performance for the period. Nations Balanced Assets Fund offers investors the opportunity to invest in the stocks of high-quality companies with long-term fundamentals believed favorable, selling at what we think are attractive valuation levels. The fixed income portion consists of high-quality securities. Over the reporting period, the stock market did little to reward investors with a valuation focus, while the bond market suffered through one of its worst declines in the last 10 years. The Fund's return reflects these occurrences. However, we believe that investors with a long-term horizon should benefit with solid returns from the strategies represented by both the equity and fixed income portions of the portfolio while incurring reduced overall portfolio risk. *The outlook for this Fund may differ from that presented for other Nations Funds mutual funds. **The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. For standardized performance, please refer to the Performance table. The performance shown includes the effect of fee waivers by the investment adviser and the co-administrator, which have the effect of increasing total return. Source for all statistical data -- Banc of America Capital Management, Inc. Past performance is no guarantee of future results. II-1 Nations Balanced Assets Fund Investment Strategies Team commentary continued What was the investment environment for the Fund during the fiscal year? The stock market was, once again, dominated by growth stocks, particularly technology and communications services companies. In fact, the market propelled a very narrow group of large capitalization, high price-to-earnings stocks forward, leaving more undervalued companies we consider to have more attractive valuation measures in their wake. Momentum investing carried the day, as investors continued to flock to very highly valued technology and communication stocks. Many of these companies did not fit the valuation criteria used in the equity portion of Nations Balanced Assets Fund, which maintains a focus on value measures. The bond market experienced one of its most volatile periods in history because of a confluence of factors. These factors included: the combination of a strong U.S. economy, fears of a Y2K disaster, the announcement of a U.S. Treasury debt reduction program, the dramatic increase in oil prices, and the recent proposal to eliminate the implied government guarantee on some government agency securities. In general, interest rates rose and bond prices declined. What factors affected the performance in the stock portion of the portfolio?*** As might be expected, the technology stocks in the portfolio performed the best, rising 93.4% compared to 78.4% for the technology sector of the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index).(dagger) However, we believed it was prudent to continue to take profits in these companies as they reached the price objectives we had set. Consequently, we reduced the weighting in the sector throughout the year. At year-end March 31, 2000, the Fund's technology weighting was 16.7%, compared to a 34.0% weight for the technology sector of the S&P 500 Index. This decision hurt performance, but was in keeping with the Fund's investment strategy. The Fund's holdings during the year included Apple Computer Inc., which gained 278%, and Sun Microsystems which gained nearly 200%. Currently, our holdings include International Business Machines Corporation, Xerox Corporation and Pitney Bowes, Inc. -- more traditional, undervalued companies selling substantially below their fair value, in our opinion, with catalysts for improvement over the next 12 to 18 months. The financial sector's weighting was 16.2% at the end of the period and represented the second largest portion of the Fund's equity assets. This sector within the S&P 500 Index declined about 1% for the period, as interest rates continued to move upward. We believe valuations are compelling, particularly in the large, money center banks, Citigroup Inc. and Chase Manhattan Corporation; Mellon Financial Corporation, the well diversified, regional bank holding company; and Paine Webber Group, Inc., a brokerage firm we think undervalued. ***Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. (dagger) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is unavailable for investment. II-2 Nations Balanced Assets Fund Investment Strategies Team commentary continued What factors affected the performance of the bond portion of the portfolio? Despite the volatility, we remained faithful to our strategy of seeking to maximize the yield of the portfolio while minimizing its risk relative to the benchmark. While this may cause some interim performance volatility, we believe the strategy will produce superior returns over time. Our strategic overweighting of the corporate bond and mortgage-backed securities sectors helped performance in a difficult environment. What investment opportunities do you anticipate in the equity market during the next year, and how have you positioned the portfolio to take advantage of these opportunities? First, we believe the tremendous increase in the value of technology stocks will dissipate over the coming year as stocks in this sector are now selling, on average, at incredibly high levels relative to what we think are their sustainable growth rates. Therefore, we have underweighted the technology sector relative to the market (S&P 500 Index), and have major representation in just those stocks that we believe should continue to perform well with strong dominance in their respective markets -- IBM, Xerox and Pitney Bowes. Second, we have overweighted the financial sector. When viewed from a demographic as well as from a bottom-up, valuation approach, we think these companies represent substantial opportunity for the long-term investor. Third, we anticipate improvement in the economies of our global trading partners, Europe, Asia (ex-Japan) and Latin America in 2000 and beyond. We have invested in commodity-like companies, such as Alcoa Inc., Nucor Corporation and Weyerhaeuser Company and multi-national conglomerates such as United Technologies Corporation, Honeywell International Inc., Rockwell International Corporation and Emerson Electric Company. These stocks appear to be selling substantially below their potential earnings power and dividend-paying capabilities. What investment opportunities do you anticipate in the fixed income market, and how are you positioning the portfolio? On the fixed income side, our expectations are for the Federal Reserve Board to raise the Federal Funds rate to slow the U.S. economy at least one more time -- to 6.25%. While there is a risk of additional rate increases, the recent volatility in the stock market should help to dampen consumer confidence and U.S. GDP (gross domestic product) growth. The yield advantages -- or "spreads" -- of corporate, mortgage-backed and asset-backed securities over the yields of U.S. Treasuries are higher than at any point since the recession of 1991. We expect to continue to add incremental exposure to corporate bonds, mortgage-backed and asset-backed securities as these yield advantages grow larger. We believe that once the markets stabilize, these sectors will enhance the return potential of the portfolio. II-3 Nations Balanced Assets Fund - -------------------------------------------------------------------------------- Portfolio breakdown (as a % of net assets as of 3/31/00) - -------------------------------------------------------------------------------- [PIE CHART APPEARS HERE] Top 10 holdings 2.2% Telecommunications _________________________________________ 1 Exxon Mobil Corporation 1.6% 2.5% Oil - International _________________________________________ 2 Chase Manhattan Corporation 1.6% 2.6% Computer related _________________________________________ 3 Citigroup Inc. 1.4% 3.3% Federal Home Loan Mortgage _________________________________________ Corporation (FHLMC) 4 United Technologies Corporation 1.3% certificates _________________________________________ 5 Honeywell International Inc. 1.2% 3.8% Banking and finance _________________________________________ 6 Bristol-Myers Squibb Company 1.2% 4.5% Banking _________________________________________ 7 Lincoln National Corporation Ltd. 1.2% 5.4% Utilities - Telephone _________________________________________ 8 Mellon Financial Corporation 1.2% 6.5% Financial services _________________________________________ 9 Ford Motor Company 1.2% 8.7% Commercial mortgage-backed _________________________________________ securities 10 Target Corporation 1.1% 9.5% Federal National Mortgage Association (FNMA) certificates The top 10 holdings are presented to illustrate examples of the industries 51.0% Other and securities in which the Fund may invest. Portofolio holdings were current as of March 31, 2000, are subject to change and may not be representative of current holdings. II-4 Nations Balanced Assets Fund Performance - -------------------------------------------------------------------------------- Growth of a $10,000 Investment - -------------------------------------------------------------------------------- [BAR CHARTS APPEAR HERE] Investor A Shares at MOP* (as of 3/31/00) Assumes the reinvestment of all distributions
Nations Balanced Lipper Balanced Standard & Poor's Lehman Aggregate Asset Fund Funds Universe 500 Index Bond Index $15,846 Oct. 2 1992 9425 10000 10000 10000 1992 9776 10396 10504 10027 10179 10830 10963 10441 10431 11003 11017 10718 10659 11387 11301 10998 1993 10726 11548 11563 11004 10381 11178 11125 10688 10050 11058 11172 10578 10441 11387 11718 10643 1994 10369 11269 11716 10683 10955 11984 12857 11222 11862 12862 14085 11905 12491 13575 15204 12138 1995 13070 14146 16120 12655 13504 14523 16985 12431 13864 14875 17748 12502 14178 15279 18296 12734 1996 14946 16114 19820 13116 15148 16118 20351 13042 16679 17786 23907 13521 17997 18992 25695 13970 1997 18137 19233 26432 14380 19713 20706 30120 14605 19408 20932 31114 14947 17657 19590 28018 15579 1998 19637 21817 33986 15632 19444 22044 35682 15554 20348 23005 38197 15417 19182 22021 35810 15522 1999 19614 23699 41138 15503 Mar. 31 2000 19533 24310 42080 15846 Investor A Shares at NAV** (as of 3/31/00) Assumes the reinvestment of all distributions Nations Balanced Lipper Balanced Standard & Poor's Lehman Aggregate Asset Fund Funds Universe 500 Index Bond Index $15,846 Oct. 2 1992 10000 10000 10000 10000 1992 10372 10396 10504 10027 10800 10830 10963 10441 11067 11003 11017 10718 11310 11387 11301 10998 1993 11361 11548 11563 11004 11014 11178 11125 10688 10668 11058 11172 10578 11078 11387 11718 10643 1994 11001 11269 11716 10683 11623 11984 12857 11222 12585 12862 14085 11905 13254 13575 15204 12138 1995 13867 14146 16120 12655 14328 14523 16985 12431 14710 14875 17748 12502 15043 15279 18296 12734 1996 15858 16114 19820 13116 15072 16118 20351 13042 17697 17786 23907 13521 19095 18992 25695 13970 1997 19244 19233 26432 14380 20916 20706 30120 14605 20592 20932 31114 14947 15734 19590 28018 15579 1998 20835 21817 33986 15632 20630 22044 35682 15554 21589 23005 38197 15417 20352 22021 35810 15522 1999 20810 23699 41138 15503 Mar. 31 2000 20725 24310 42080 15846
Average annual total return Investor A Shares Since Inception NAV** MOP* (10/2/92 through 3/31/00) 10.22% 9.35% The charts to the left show the growth in value of a hypothetical $10,000 Investment in investor A Shares of Nations Balanced Assets Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), on unmanaged index of 500 widely held common stocks, include reinvestment of dividends. Figures for the Lehman Aggregate Bond Index, which is an unmanaged index comprised of the Government Corporate Bond Index, the Asset-Backed Securities index and the Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed issues include reinvestment of dividends. Funds Included in the Lipper Balanced Funds Universe has a primary objective of conserving principal by maintainingat all times a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. It is not possible to Invest in the Indexes or Lipper Universe. 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. [LEGEND FOR LINE GRAPH APPEARS HERE] II-5 Nations Balanced Assets Fund continued - -------------------------------------------------------------------------------- Total return (as of 3/31/00) - --------------------------------------------------------------------------------
Primary A Investor A Investor B Investor C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/30/92 10/2/92 6/7/93 10/2/92 - ----------------------------------------------------------------------------------------------------------------------------- 1 year performance 0.73% 0.47% -5.28% -0.30% -5.20% -0.27% -1.25% - ----------------------------------------------------------------------------------------------------------------------------- Average annual returns 3 years 9.07% 8.85% 6.72% 8.07% 7.28% 8.09% 8.09% 5 years 12.49% 12.27% 10.94% 11.55% 11.31% 11.59% 11.59% Since inception 10.46% 10.22% 9.35% 9.44% 9.44% 9.49% 9.49%
The performance shown represents past performance and is not predictive of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be worth more or less than their original cost. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. The performance shown includes the effect of fee waivers by the investment adviser and the co-administrator, which have the effect of increasing total return. II-6 Nations Asset Allocation Fund Equity Management Team and Fixed Income Management Team commentary* Portfolio Management The Fund is managed by the Equity Management Team of Chicago Equity Partners Corporation and the Fixed Income Management Team of Banc of America Capital Management, Inc., investment sub-advisers to the Fund. Investment Objective The Fund seeks to obtain long-term growth from capital appreciation, and dividend and interest income. Performance Review For the 12-month period ended March 31, 2000, Nations Asset Allocation Fund Investor A Shares provided shareholders with a total return of 10.65%.** In the following interview, the teams share their views on Nations Asset Allocation Fund's performance for the 12-month period ended march 31, 2000 and their outlook for the future. Please describe the Fund's investment philosophy and style. Within the stock component of the Fund, our intent is to stay neutral to the market in terms of sector weightings and market capitalization. The Fund primarily invests in large-capitalization common stocks represented in the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) as well as common stocks represented in the Standard & Poor's MidCap 400 Index and the Standard & Poor's SmallCap 600 Index.*** We believe investment across the large-, mid- and small-cap market segments allows for greater diversification and potentially lower volatility and higher returns. We focus on individual stock selections. Our risk-controlled strategy is intended to ensure that the Fund is able to fully benefit from the market's advances, despite the major disparities in performance between sectors and the recent narrowness of the market. Within the framework of our disciplined process, we select securities that display what we think are attractive valuations, while exhibiting positive momentum and solid earnings quality. The fixed income portion of the Fund is composed of investment grade securities. The management of the fixed income portion is based on the belief that returns and consistency of returns are enhanced through a disciplined risk management process that seeks to control interest rate risk and emphasizes a quantitative approach to sector allocation, sector rotation and relative value security selection. *The outlook for this Fund may differ from that presented for other Nations Funds mutual funds. **The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. For standardized performance, please refer to the Performance table. ***The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is unavailable for investment. The Standard & Poor's MidCap 400 Index is a market-value weighted index that measures the market value of 400 domestic stocks chosen for market size, liquidity and industry representation. It is unmanaged and unavailable for investment. The Standard & Poor's SmallCap 600 Index is a market-capitalization-weighted index consisting of 600 common stocks that capture the economic and industry characteristics of small-company stock performance. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. and Chicago Equity Partners Corporation. Past performance is no guarantee of future results. II-7 Nations Asset Allocation Fund Equity Management Team and Fixed Income Management Team commentary continued Please comment on the Fund's performance For the 12 months ended March 31, 2000, the Fund (Investor A Shares) had a total return of 10.65%. The Fund measures its performance against two benchmarks, the S&P 500 Index and the Lehman Aggregate Bond Index (dagger), which returned 17.94% and 1.88%, respectively. The Fund's asset allocation as of March 31, 2000, was 59% to equity, 23% to fixed income and 18% to cash and cash equivalents.(double daggers) What particular equity sectors or stocks proved favorable for the Fund, and what sectors proved unfavorable? The Fund benefited primarily from its holdings in the technology sector. In the large-cap segment, QUALCOMM Inc., Oracle Corporation and Cisco Systems, Inc. produced triple-digit returns as investors flocked towards the "new economy" companies. The same story was true for mid- and small-company stocks, with companies such as PMC-Sierra, Inc., Three-five Systems, Inc. and Qlogic Corporation each returning above 700%. Sectors that lagged were health care and transportation. Price-cutting hurt the profits of major drug companies while higher energy costs adversely affected transportation companies. What factors affected the performance of the bond portion of the portfolio? Despite the bond market's volatility, we remained faithful to our strategy of maximizing the yield of the portfolio while minimizing its risk relative to the benchmark. While this may cause some interim performance volatility, we believe the strategy will produce superior returns over time. The portfolio's strategic overweighting of the corporate bond and mortgage-backed securities sectors helped performance in a difficult environment. What economic factors most influenced the Fund's performance? Rising interest rates most influenced performance. The U.S. economy remained healthy throughout the year, but fears of rising inflation helped increase interest rates as the year wore on. Investors remained cautious on the outlook for continued economic growth, specifically for the "old economy" stocks, as they appeared more affected by the volatility of interest rates than their "new economy" brethren. What is your outlook for the year ahead in the equity market? As we enter the tenth year of economic prosperity, the U.S. economy remains remarkably healthy in spite of higher interest rates and tight labor conditions. We anticipate that the U.S. economy will continue to grow, though we believe the growth to be more moderate than in recent months. (dagger)The Lehman Aggregate Bond Index is an unmanaged index composed of the Government Corporate Bond Index, the Asset-Backed Securities Index and the Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed issues. It includes reinvestment of dividends and is unavailable for investment. (double daggers)Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. II-8 Nations Asset Allocation Fund Equity Management Team and Fixed Income Management Team commentary continued In the stock market, the S&P 500 Index has recorded a record 20%annual return for the last five years and most prognosticators believe that pace will not continue. The continued discrepancies in valuations between the largest 50 stocks and the rest of the stock market defy historical averages. We believe these discrepancies favoring the largest stocks are unlikely to be sustained. Of course, neither we nor anyone else can predict exact changes in the markets. We plan to continue our diversification strategy of investing in large-, mid- and small-cap stocks. Our goal is to add value through security selection, while attempting to neutralize risk factors such as market timing and sector rotation, for which there is not adequate compensation by the market. What investment opportunities do you anticipate in the fixed income market, and how are you positioning the portfolio? On the fixed income side, our expectations are for the Federal Reserve Board to continue to raise interest rates to slow the U.S. economy at least one more time - -- to 6.25%. While there is a risk of additional rate increases, the recent volatility in the stock market should help to dampen consumer confidence and U.S. GDP (gross domestic product) growth. The yield advantages -- or "spreads" -- of corporate, mortgage-backed and asset-backed securities over the yields of U.S. Treasuries are higher than at any point since the recession of 1991. We expect to continue to add incremental exposure to corporate bonds, mortgage-backed and asset-backed securities as these yield advantages grow larger. We believe that once the markets stabilize, these sectors could enhance the returns of the portfolio. II-9 Nations Asset Allocation Fund - -------------------------------------------------------------------------------- Portfolio breakdown (as a % of net assets as of 3/31/00) - -------------------------------------------------------------------------------- [PIE CHART APPEARS HERE] 3.2% U.S. Treasury strips 3.7% Drugs 4.0% Banking and finance 4.3% Banking 4.3% Computer related 4.5% Utilities - Telephone 4.7% Semiconductors 5.3% Computer software 7.5% Commercial mortgage-backed securities 8.1% Federal National Mortgage Association (FNMA) certificates 50.4% Other Portfolio holdings were current as of March 31, 2000, are subject to change and may not be representative of current holdings. Top 10 holdings - --------------------------------------- 1 Cisco Systems, Inc. 2.6% - --------------------------------------- 2 Microsoft Corporation 2.3% - --------------------------------------- 3 General Electric Company 1.9% 8.000% 11/01/29 1.8% - --------------------------------------- 4 Intel Corporation 1.4% - --------------------------------------- 5 Citigroup Inc. 1.4% - --------------------------------------- 6 Wal-Mart Stores, Inc. 1.3% 6.500% 04/01/29 1.2% - --------------------------------------- 7 MCI Worldcom, Inc. 1.2% - --------------------------------------- 8 Oracle Corporation 1.1% - --------------------------------------- 9 Texas Instruments Inc. 1.1% - --------------------------------------- 10 Chase Manhattan Corporation 1.1% The top 10 holdings are presented to illustrate examples of the industries and securities in which the Fund may invest. II-10 Nations Asset Allocation Fund Performance - -------------------------------------------------------------------------------- Growth of a $10,000 investment - -------------------------------------------------------------------------------- Investor A Shares at MOP* (as of 3/31/00) Assumes the reinvestment of all distributions
Nations Asset Lipper Balanced Standard & Poor's Lehman Aggregate Allocation Funds Universe 500 Index Bond Index Jan. 8 1994 9425 10000 10000 10000 9095 9679 9621 9713 8978 9575 9661 9613 9284 9860 10134 9672 9295 9758 10132 9708 9999 10377 11119 10198 10795 11138 12180 10819 11297 11755 13149 11031 1995 11796 12249 13940 11501 12099 12575 14689 11297 12377 12881 15349 11361 12747 13230 15823 11572 13644 13954 17141 11919 13772 13956 17600 11852 15371 15401 20675 12287 16158 16445 22221 12695 1997 16558 16654 22859 13068 17976 17930 26048 13272 18587 18125 26908 13583 17780 16963 24230 14157 20051 18892 29391 14205 20602 19088 30858 14134 21214 19921 33034 14010 20385 19068 30969 14105 1999 22278 20521 35577 14088 Mar. 31 2000 22795 21051 36392 14400 Investor A Shares at NAV** (as of 3/31/00) Assumes the reinvestment of all distributions Nations Asset Lipper Balanced Standard & Poor's Lehman Aggregate Allocation Funds Universe 500 Index Bond Index Jan. 8 1994 10000 10000 10000 10000 9650 9679 9621 9713 9526 9575 9661 9613 9850 9860 10134 9672 9862 9758 10132 9708 10609 10377 11119 10198 11453 11138 12180 10819 11986 11755 13149 11031 1995 12516 12249 13940 11501 12837 12575 14689 11297 13132 12881 15349 11361 13525 13230 15823 11572 14476 13954 17141 11919 14612 13956 17600 11852 16308 15401 20675 12287 17143 16445 22221 12695 1997 17569 16654 22859 13068 19072 17930 26048 13272 19721 18125 26908 13583 18865 16963 24230 14157 21274 18892 29391 14205 21859 19088 30858 14134 22508 19921 33034 14010 21628 19068 30969 14105 1999 23638 20521 35577 14088 Mar. 31 2000 24186 21051 36392 14400
Average annual total return Investor A Shares Since Inception NAV** MOP* (1/8/94 through 3/31/00) 15.32% 14.22% 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 from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), on unmanged index of 500 widely held common stocks, include reinvestment of dividends. Figures for the Lehman Aggregate Bond Index, which is an unmanged index comprised of the Government/Corporate Bond Index, the Asset-Backed Securities Index and the Mortgage-Backed Securities Index and included U.S. Treasury issues, agency issues, corporate bond issues, and mortgage-backed issues, include reinvestment of dividends. Funds included ni the Lipper Balanced Funds Universe 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%. It is not possible to invest in the indexes or Lipper Universe. The performance of Primary A Investor B, Investor C and Seafirst Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. II-11 Nations Asset Allocation Fund continued - -------------------------------------------------------------------------------- Total return (as of 3/31/00) - --------------------------------------------------------------------------------
Primary A+ Seafirst Investor A Investor B++ Investor C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 3/7/88 1/8/94 7/15/98 11/11/96 - ----------------------------------------------------------------------------------------------------------------------- 1 year performance 12.18% 10.92% 10.65% 4.27% 9.77% 4.77% 9.75% 8.75% - ----------------------------------------------------------------------------------------------------------------------- Average annual returns 3 years 18.84% 18.44% 18.30% 15.99% 17.82% 17.10% 17.48% 17.48% 5 years 18.24% 18.03% 17.92% 16.53% 17.64% 17.43% 10 years 13.44% Since Inception 15.57% 13.37% 15.32% 14.22% 15.09% 15.09% 16.05% 16.05%
The performance shown represents past performance and is not predictive of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be worth more or less than their original cost. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 5.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. +Primary A Shares commenced operations on May 21, 1999 and have no performance prior to that date. Performance prior to May 21, 1999 is that of Investor A Shares at NAV, which reflects shareholder servicing and/or 12b-1 fees of 0.25%. These fees are not applicable to Primary A Shares. ++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 reflects shareholder servicing and/or 12b-1 fees of 0.25%. If Investor B Shares had been reflected, total returns would have been lower. The performance shown includes the effect of fee waivers by the investment adviser and the co-administrator, which have the effect of increasing total return. II-12 Nations Government Securities Fund Fixed Income Management Team commentary* Portfolio Management The Fund is managed by the Fixed Income Management Team of Banc of America Capital Management, Inc., investment sub-adviser to the Fund. Investment Objective The Fund seeks high current income consistent with moderate fluctuation of principal. Performance Review For the 12-month period ended March 31, 2000, Nations Government Securities Fund Investor A Shares provided shareholders with a total return of 0.80%.** In the following interview, the team shares its views on Nations Government Securities Fund's performance for the 12-month period ended March 31, 2000 and their outlook for the future. Please describe the Fund's investment style and philosophy. We believe returns and consistency of returns are enhanced through a disciplined risk management process that seeks to control interest rate risk and emphasizes a quantitative approach to sector allocation, sector rotation and relative value security selection. Simply put, we believe that if we maximize the yield of the portfolio and match its duration -- or interest-rate sensitivity -- to an appropriate benchmark, the higher yield should enhance the return of the portfolio. At the same time, we believe the neutral duration of the portfolio compared to the benchmark will lessen unnecessary portfolio performance volatility. The goal of Nations Government Securities Fund is to outperform the Lehman Government Bond Index.*** The Index is comprised of all U.S. Treasury and agency issues with maturities longer than one year and it has an average duration of 5.35 years. Our strategy is focused on adding yield to the portfolio by maintaining a large exposure to agency mortgage-backed securities and under-weighting U.S. Treasury and agency securities. The security selection process is relative value oriented and is based upon both quantitative and fundamental analyses of the mortgage market. What were economic and market conditions like during the reporting period? A combination of factors created one of the most volatile periods in fixed income history. These included a strong U.S. economy, fears of a Y2K disaster, the announcement of the U.S. Treasury debt reduction program, the dramatic increase in oil prices, and the recent proposal to eliminate the implied government guarantees on some mortgage-related securities. The Federal Reserve Board (the Fed), citing tight labor markets and continued strength in the U.S. economy, raised short-term rates a total of five times over the past year, from 4.75% to 6.00%. This pushed the yields on most longer-maturity securities higher, although long-term Treasury yields did decline late in the period on news of the government's debt reduction program. *The outlook for this Fund may differ from that presented for other Nations Funds mutual funds. **The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. For standardized performance, please refer to the Performance table. The performance shown includes the effects of fee waivers by the investment adviser, which has the effect of increasing total return. ***The Lehman Government Bond Index is unmanaged and represents the return of government bonds with an average maturity of approximately nine years. It is unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. Past performance is no guarantee of future results. II-13 Nations Government Securities Fund Fixed Income Management Team commentary continued With uncertainty comes volatility among securities with credit risk. The corporate bond sector had poor total returns relative to comparable duration U.S. Treasury securities. The other sectors of the fixed income markets also suffered, but their yield advantages were enough to offset the decline in their prices relative to U.S. Treasury securities. How did you manage the Fund in this environment? Despite the volatility, we remained faithful to our strategy of maximizing the yield of the portfolio while minimizing its risk relative to the benchmark. While this may cause some interim performance volatility, we believe the strategy will produce top-quartile returns over a three-to-five year period. What investment decisions contributed to the Fund's performance and did any decisions hold back performance? (dagger) The Fund's strategic overweighting of the spread sectors -- or sectors with higher yields than U.S. Treasury securities -- managed to overcome the marginal spread widening that occurred over the period. However, the consistent overweighting of spread product and lack of U.S. Treasury exposure made it difficult to take advantage of short-term trading opportunities in the agency and commercial mortgage markets. What economic developments do you anticipate during the rest of 2000? We forecast that the Fed will raise interest rates to slow the U.S. economy at least one more time. While there is a risk of additional rate increases, the recent volatility in the stock market should help to dampen consumer confidence and U.S. GDP (gross domestic product) growth. The biggest issues facing fixed income investors over the next year are the combination of a shrinking U.S. Treasury market and the potential that U.S. government-sponsored agencies may lose their implied government guarantees. How is the Fund positioned in this environment? Because our process involves taking a consistent level of market exposure while remaining duration neutral to the Fund's benchmark, we do not have to rely on historically inaccurate economic forecasting techniques to position the portfolio. Spreads between the yields on U.S. Treasuries and the yields on corporate, mortgage-backed and asset-backed securities have widened to levels that we have not seen since the recession of 1991. While we anticipate that spreads will be under pressure for the remainder of the year, we will continue to add incremental exposure to these markets as spreads widen. Once the markets stabilize, spreads should revert to more reasonable levels and we are optimistic the Fund's exposure to mortgage-backed securities should enhance the returns of the portfolio. (dagger)Portfolio characteristics are subject to change and may not be representative of current characteristics. II-14 Nations Government Securities Fund - -------------------------------------------------------------------------------- Portfolio breakdown (as a % of net assets as of 3/31/00) - -------------------------------------------------------------------------------- [PIE CHART APPEARS HERE] 0.7% Asset-backed securities 20.1% U.S. Treasury obligations 77.3% Mortgage-backed securities 1.9% Other Portfolio holdings were current as of March 31, 2000, are subject to change and may not be representative of current holdings. Top 10 holdings - ---------------------------------------------------------- 1 Government National Mortgage Association (GNMA) Certificates, 6.500% 05/15/29 8.4% - ---------------------------------------------------------- 2 Government National Mortgage Association (GNMA) Certificates, 8.000% 11/15/29 5.2% - ---------------------------------------------------------- 3 Federal Home Loan Mortgage Corporation (FHLMC) Certificates, 6.500% 09/15/25 5.1% - ---------------------------------------------------------- 4 Federal National Mortgage Association (FNMA) Certificates, 8.000% 10/01/29 3.4% - ---------------------------------------------------------- 5 Federal National Mortgage Association (FNMA) Certificates, 6.565% 07/01/16 3.3% - ---------------------------------------------------------- 6 Federal National Mortgage Association (FNMA) Certificates, 6.000% 06/01/29 3.2% - ---------------------------------------------------------- 7 Federal National Mortgage Association (FNMA) Certificates, 5.625% 05/14/04 2.7% - ---------------------------------------------------------- 8 Federal National Mortgage Association (FNMA) Certificates, 6.500% 03/01/29 2.4% - ---------------------------------------------------------- 9 Government National Mortgage Association (GNMA) Certificates, 6.500% 01/15/29 2.3% - ---------------------------------------------------------- 10 Government National Mortgage Association (GNMA) Certificates, 6.000% 07/15/29 2.3% - ---------------------------------------------------------- The top 10 holdings are presented to illustrate examples of the Industries and securities in which the Fund may invest. II-15 Nations Government Securities Fund Performance - -------------------------------------------------------------------------------- Growth of a $10,000 investment - -------------------------------------------------------------------------------- [BAR CHARTS APPEAR HERE] Investor A Shares at MOP* (as of 3/31/00) Assumes the reinvestment of all distributions
Salomon Brothers Lehman Intermediate Nations Government Lehman Government Mortgage Index Treasury Index Securities Fund Bond Index Apr. 17 1991 10000 10000 9525 10000 10202 10167 9624 10135 10767 10651 10121 10713 1991 11243 11170 10619 11287 11184 11047 10429 11484 11634 11477 10837 11939 11977 11988 11186 12529 1992 12071 11944 11159 12534 12425 12394 11491 13101 12688 12640 11728 13479 12803 12908 12002 13917 1993 12919 12927 12009 13870 12647 12685 11644 13452 12579 12616 11440 13299 12680 12711 11375 13355 1994 12735 12697 11372 13402 13408 13222 11930 14033 14102 13842 12475 14903 14387 14052 12682 15167 1995 14872 14527 13077 15860 14817 14424 12807 15501 14918 14518 12786 15576 15233 14768 12992 15837 1996 15673 15107 13373 16300 15692 15097 13167 16168 16263 15515 13628 16729 16731 15914 13975 17289 1997 17124 16268 14482 17863 17404 16514 14666 18133 17701 16818 15044 18612 18165 17634 15694 19641 1998 18319 17671 15664 19625 18504 17605 15421 19345 18428 17574 15196 19180 18604 17762 15292 19307 1999 18656 17742 15149 19187 Mar. 31 2000 18932 18058 15545 19830 Investor A Shares at NAV** (as of 3/31/00) Assumes the reinvestment of all distributions Nations Government Lehman Intermediate Salomon Brothers Lehman Government Securities Fund Treasury Index Mortgage Index Bond Index Apr. 17 1991 10000 10000 10000 10000 10104 10167 10202 10135 10625 10651 10767 10713 1991 11148 11170 11243 11287 10949 11047 11184 11484 11378 11477 11634 11939 11744 11988 11977 12529 1992 11716 11944 12071 12534 12064 12394 12425 13101 12312 12640 12688 13479 12601 12908 12803 13917 1993 12608 12927 12919 13870 12225 12685 12647 13452 12011 12616 12579 13299 11942 12711 12680 13355 1994 11939 12697 12735 13402 12525 13222 13408 14033 13097 13842 14102 14903 13315 14052 14387 15167 1995 13729 14527 14872 15860 13448 14424 14817 15501 13423 14518 14918 15576 13639 14768 15233 15837 1996 14040 15107 15673 16300 13824 15097 15692 16168 14308 15515 16263 16729 14671 15914 16731 17289 1997 15204 16268 17124 17863 15397 16514 17404 18133 15794 16818 17701 18612 16477 17634 18165 19641 1998 16445 17671 18319 19625 16190 17605 18504 19345 15954 17574 18428 19180 16054 17762 18604 19307 1999 15905 17742 18656 19187 Mar. 31 2000 16320 18058 18932 19830
Average annual total return Investor A Shares Since Inception NAV** MOP* (4/17/91 through 3/31/00) 5.62% 5.05% The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Government securities Fund from the Inception of the share class. Figures for the Lehman Intermediate Treasury Index truck the market value of U.S. Treasury securities with maturities of 3 to 10 years. The Saloman Brothers Mortgage Index is comprised of 30-year and 15-year GNMA, FNMA, and FHLMC securities and FNMA and FHLMC balloon mortgages. Figures for the Lehman Government Bond index represent the return of government bonds with an average maturity of approximately nine years and include reinvestment of dividends. All of the indices are unmanaged and unavailable for investment. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class [LEGEND FOR LINE CHART APPEARS HERE] II-16 Nations Government Securities Fund continued - -------------------------------------------------------------------------------- Total return (as of 3/31/00) - --------------------------------------------------------------------------------
Primary A Investor A Investor B Investor C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/11/91 4/17/91 6/7/93 7/6/92 - ----------------------------------------------------------------------------------------------------------------------- 1 year performance 1.12% 0.80% -3.97% 0.22% -3.59% -0.22% -1.17% - ----------------------------------------------------------------------------------------------------------------------- Average annual returns 3 years 5.97% 5.69% 3.98% 5.09% 4.17% 4.95% 4.95% 5 years 5.71% 5.44% 4.41% 4.91% 4.75% 4.85% 4.85% Since inception 5.87% 5.62% 5.05% 3.83% 3.83% 4.07% 4.07%
The performance shown represents past performance and is not predictive of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be worth more or less than their original cost. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. The performance shown includes the effect of fee waivers by the investment adviser, which have the effect of increasing total return. The annual reports for the fiscal year ended March 31, 1999 and prior years compare the Fund's performance to the Lehman Intermediate Treasury Index and the Salomon Brothers Mortgage Index. Fund management believes the Lehman Government Bond Index is a more appropriate benchmark because the composition of the Index more closely resembles the composition of the Fund. II-17 Nations U.S. Government Bond Fund Fixed Income Management Team commentary* Portfolio Management The Fund is managed by the Fixed Income Management Team of Banc of America Capital Management, Inc., investment sub-adviser to the Fund. Investment Objective The Fund seeks total return and preservation of capital by investing in U.S. government securities and repurchase agreements collateralized by such securities or instrumentalities. Performance Review For the 12-month period ended March 31, 2000, Nations U.S. Government Bond Fund Investor A Shares provided shareholders with a total return of -0.80%.** In the following interview, the team shares its views on Nations U.S. Government Bond Fund's performance for the 12-month period ended March 31, 2000 and its outlook for the future. Please describe the Fund's investment style and philosophy. We believe returns and consistency of returns are enhanced through a disciplined risk management process that seeks to control interest rate risk and emphasizes a quantitative approach to sector allocation, sector rotation and relative value security selection. Simply put, we believe that if we maximize the yield of the portfolio and match its duration -- or interest-rate sensitivity -- to an appropriate benchmark, its higher yield should enhance the return of the portfolio, while the neutral duration of the portfolio compared to the benchmark will lessen unnecessary portfolio performance volatility. The investment goal of Nations U.S. Government Fund is to outperform the Lehman Government Bond Index. The Index is comprised of all U.S. Treasury and agency issues with maturities longer than one year and it has an average duration of 5.35 years. We think this index is well matched to the Lipper General U.S. Government Funds Universe.*** Our strategy is focused on adding yield to the portfolio by maintaining a large exposure to agency mortgage-backed securities and under-weighting U.S. Treasury and agency securities. The security selection process searches for relative value and is based upon both quantitative and fundamental analyses of the mortgage market. What were economic and market conditions like during the reporting period? A combination of factors created one of the most volatile periods in fixed income history. These included a strong U.S. economy, fears of a Y2K disaster, the announcement of the U.S. Treasury debt reduction program, the dramatic increase in oil prices, and the recent proposal to eliminate the implied government guarantees on some mortgage-related securities. The Federal Reserve Board (the Fed), citing tight labor markets and continued strength in the U.S. economy, raised short-term rates a total of five times over the past year, from 4.75% to 6.00%. This pushed the yields on most longer-maturity securities higher, although long-term U.S. Treasury yields did decline late in the period on news of the government's debt reduction program. *The outlook for this Fund may differ from that presented for other Nations Funds mutual funds. **The performance shown does not reflect the maximum front-end sales charge of 4.75%, which may apply to purchases of Investor A Shares. For standardized performance, please refer to the Performance table. The performance shown includes the effects of fee waivers by the investment adviser, which has the effect of increasing total return. ***Lipper, Inc. is an independent mutual fund performance monitor. Funds in the Lipper General U.S. Government Funds Universe invest at least 65% of their assets in U.S. government and agency issues. Source for all statistical data -- Banc of America Capital Management, Inc. Past performance is no guarantee of future results. II-18 Nations U.S. Government Bond Fund Fixed Income Management Team commentary continued With uncertainty comes volatility among securities with credit risk. The corporate bond sector had poor total returns relative to comparable duration U.S. Treasury securities. The other sectors of the fixed income markets also suffered, but their yield advantages were enough to offset the decline in their prices relative to U.S. Treasury securities. How did you manage the Fund in this environment? The investment strategy for the Fund changed in mid-February of this year from one of active duration management to a strategy that seeks relative value, with neutral interest rate sensitivity relative to the Fund's benchmark. The Fund's investment strategy is now identical to that of Nations Government Securities Fund. What investment decisions contributed to the Fund's performance, and what decisions hindered performance?(dagger) With the exception of the fourth quarter of 1999, Treasury securities outperformed spread sectors -- those sectors that offered yield advantages or "spreads" above the yield of Treasuries. During the period, the portfolio was systematically overweighted in U.S. Treasury securities, which helped performance. Prior to the change in strategy the duration of the portfolio was consistently long relative to both the Lipper General U.S. Government Funds Universe and the Lehman Government Bond Index. This caused substantial volatility in the Fund and detracted from performance. What economic developments do you anticipate during the rest of 2000? We forecast that the Fed will raise interest rates in an effort to slow the U.S. economy at least one more time. While there is a risk of additional rate increases, the recent volatility in the stock market should help to dampen consumer confidence and U.S. GDP (gross domestic product) growth. The biggest issues facing fixed income investors over the next year are the combination of a shrinking U.S. Treasury market and the potential that U.S. government-sponsored agencies may lose their implied government guarantees. How is the Fund positioned in this environment? Because our process involves taking a consistent level of market exposure while remaining duration neutral to the Fund's benchmark, we do not have to rely on historically inaccurate economic forecasting techniques to position the portfolio. Spreads between the yields on Treasuries and the yields on corporate, mortgage-backed, and asset-backed securities have widened to levels that we have not seen since the recession of 1991. While we anticipate that spreads will be under pressure for the remainder of the year, we will continue to add incremental exposure to these markets as spreads widen. Once the markets stabilize, spreads should revert to more reasonable levels and we are optimistic that our exposure to mortgage-backed securities should enhance the returns of the portfolio. (dagger)Portfolio characteristics are subject to change and may not be representative of current characteristics. II-19 Nations U.S. Government Bond Fund - -------------------------------------------------------------------------------- Portfolio breakdown (as a % of net assets as of 3/31/00) - -------------------------------------------------------------------------------- [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] U.S. government and agency obligations 12.2% Mortgage-backed securities 37.9% U.S. Treasury obligations 48.3% Other 1.6% Portfolio holdings were current as of March 31, 2000, are subject to change and may not be representative of current holdings. Top 10 holdings - ------------------------------------------------------- 1 Federal Home Loan Mortgage Corporation (FMLMC) Certificates, 5.75% 04/15/08 11.2% - ------------------------------------------------------- 2 Federal Home Loan Mortgage Corporation (FMLMC) Certificates, 5.75% 07/15/03 8.4% - ------------------------------------------------------- 3 Federal National Mortgage Corporation (FNMA) Certificates, 6.00% 03/01/13 7.8% - ------------------------------------------------------- 4 Federal Home Loan Mortgage Corporation (FHLMC) Certificates, 6.00% 09/01/13 6.4% - ------------------------------------------------------- 5 Federal National Mortgage Association (FNMA) Certificates, 6.00% 03/01/13 5.4% - ------------------------------------------------------- 6 Federal National Mortgage Association (FNMA) Certificates, 6.00% 11/01/28 4.4% - ------------------------------------------------------- 7 Government National Mortgage Association (GNMA) Certificates, 7.50% 04/15/29 3.0% - ------------------------------------------------------- 8 Government National Mortgage Association (GNMA) Certificates, 7.50% 04/15/29 2.3% - ------------------------------------------------------- 9 Federal Home Loan Bank (FHLB) Certificates, 5.13% 09/15/03 1.2% - ------------------------------------------------------- 10 Federal National Mortgage Association (FNMA) Certificates, 6.00% 05/01/13 0.6% - ------------------------------------------------------- The top 10 holdings are presented to illustrate examples of the industries and securities in which the Fund may invest. II-20 Nations U.S. Government Bond Fund Performance - -------------------------------------------------------------------------------- Growth of a $10,000 investment - -------------------------------------------------------------------------------- [BAR CHARTS APPEAR HERE] Investor A Shares at MOP* (as of 3/31/00) Assumes the reinvestment of all distributions. Nations U.S. Lehman Government Government Bond Index Feb. 7 1995 9525 10000 9750 10279 10453 10916 10639 11110 1995 11149 11617 10832 11355 10901 11409 11041 11601 1996 11346 11940 11274 11843 11616 12254 11925 12664 1997 12259 13085 12345 13282 12696 13633 13272 14387 1998 13255 14375 13034 14170 12819 14049 12866 14142 1999 12653 14054 Mar. 31 2000 12930 14525 Investor A Shares at NAV** (as of 3/31/00) Assumes the reinvestment of all distributions. Nations U.S. Lehman Government Government Bond Index Feb. 7 1995 10000 10000 10236 10279 10974 10916 11169 11110 1995 11705 11617 11372 11355 11445 11409 11591 11601 1996 11912 11940 11836 11843 12196 12254 12520 12664 1997 12871 13085 12961 13282 13329 13633 13934 14387 1998 13916 14375 13684 14170 13458 14049 13508 14142 1999 13284 14054 Mar. 31 2000 13575 14525 Average annual total return Investor A Shares Since Inception NAV** MOP* - --------------- ----- ----- (2/7/95 through 3/31/00) 6.12% 5.13% The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations U.S. Government Bond Fund from the inception of the share class. Figures for the Lehman Government Bond Index, an unmanaged index, represent the return of government bonds with an average maturity of approximately nine years and include reinvestment of dividends. It is unavailable for investment. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [LEGEND FOR LINE GRAPHS APPEARS HERE] - -------------------------------------------------------------------------------- Total return (as of 3/31/00)
Primary A Investor A Investor B Investor C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 11/7/94 2/7/95 11/10/94 9/19/97 - ----------------------------------------------------------------------------------------------------------------------- 1 year performance -0.55% -0.80% -5.49% -1.48% -5.26% -1.67% -2.62% - ----------------------------------------------------------------------------------------------------------------------- Average annual returns 3 years 4.97% 4.67% 3.00% 4.07% 3.19% 5 years 6.05% 5.80% 4.78% 5.09% 4.94% Since inception 7.34% 6.12% 5.13% 6.34% 6.34% 2.67% 2.67%
The performance shown represents past performance and is not predictive of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be worth more or less than their original cost. Average annual returns are historical in nature and measure net investment income and capital gain or loss from portfolio investments assuming reinvestment of distributions. *Figures at maximum offering price (MOP) reflect the maximum front-end sales charge of 4.75%. **Figures at net asset value (NAV) do not reflect any sales charges. Investor A Shares are available with a reduced or waived sales charge only under certain circumstances as described in the prospectus. ***Figures at CDSC reflect the maximum applicable contingent deferred sales charge. The performance shown includes the effect of fee waivers by the investment adviser, which have the effect of increasing total return. II-21 APPENDIX III Comparison of Fundamental Policies and Limitations of the Acquired Funds and the Acquiring Funds Fundamental Investment Policies and Limitations The Acquired Funds may not: The Acquiring Funds may not: 1. Except for the Asset Allocation 1. Underwrite any issue of securities Fund, underwrite securities within the meaning of the 1933 Act issued by any other person, except when it might technically be except to the extent that the deemed to be an underwriter either purchase of securities and the (a) in connection with the later disposition of such disposition of a portfolio security, securities in accordance with or (b) in connection with the the Fund's investment program purchase of securities directly from may be deemed an underwriting. the issuer thereof in accordance This restriction shall not with its investment objective. This limit a Fund's ability to restriction shall not limit the invest in securities issued by Fund's ability to invest in other registered investment securities issued by other companies. registered investment companies. The Asset Allocation Fund may not underwrite any issue of securities within the meaning of the 1933 Act except when it might technically be deemed to be an underwriter either (a) in connection with the disposition of a portfolio security, or (b) in connection with the purchase of securities directly from the issuer thereof in accordance with its investment objective. 2. Except for the Asset Allocation 2. Purchase or sell real estate, except Fund, invest in real estate or a Fund may purchase securities of real estate limited partnership issuers which deal or invest in real interests. (A Fund may, estate and may purchase securities however, purchase and sell which are secured by real estate or securities secured by real interests in real estate. estate or interests therein or issued by issuers which invest in real estate or interests therein.) This restriction does not apply to real estate limited partnerships listed on a national stock exchange (e.g., the New York Stock Exchange). The Asset Allocation Fund may not purchase or sell real estate, except a Fund may purchase securities of issuers which deal or invest in real estate and may purchase securities which are secured by real estate or interests in real estate. III-1 3. Except for the Asset Allocation 3. Purchase or sell commodities, except Fund, purchase or sell that a Fund may to the extent commodity contracts except that consistent with its investment each Fund may, to the extent objective, invest in securities of appropriate under its companies that purchase or sell investment policies, purchase commodities or which invest in such publicly traded securities of programs, and purchase and sell companies engaging in whole or options, forward contracts, futures in part in such activities, may contracts, and options on futures enter into futures contracts contracts. This limitation does not and related options, may engage apply to foreign currency in transactions on a transactions including without when-issued or forward limitation forward currency commitment basis, and may enter contracts. into forward currency contracts in accordance with its investment policies. The Asset Allocation Fund may not purchase or sell commodities, except that a Fund may to the extent consistent with its investment objective, invest in securities of companies that purchase or sell commodities or which invest in such programs, and purchase and sell options, forward contracts, futures contracts, and options on futures contracts. This limitation does not apply to foreign currency transactions including without limitation forward currency contracts. 4. Except for the Asset Allocation 4. Make loans, except to the extent Fund, make loans, except that a permitted by the 1940 Act, the rules Fund may purchase and hold debt and regulations thereunder and any instruments (whether such exemptive relief obtained by the instruments are part of a Funds. public offering or privately placed), may enter into repurchase agreements and may lend portfolio securities in accordance with its investment policies. The Asset Allocation Fund may not make loans, except to the extent permitted by the 1940 Act. 5. The Government Securities Fund 5. Borrow money or issue senior and Balanced Assets Fund may securities except to the extent not borrow money or issue permitted by the 1940 Act, the rules senior securities as defined in and regulations thereunder and any the 1940 Act except that (a) a exemptive relief obtained by the Fund may borrow money from Funds. banks for temporary or emergency purposes in amounts up to one-third of the value of such Fund's total assets at the time of borrowing, provided that borrowings in excess of 5% of the value of such Fund's total assets will be repaid III-2 prior to the purchase of additional portfolio securities by such Fund, (b) a Fund may enter into commitments to purchase securities in accordance with the Fund's investment program, including delayed delivery and when-issued securities, which commitments may be considered the issuance of senior securities, and (c) a Fund may issue multiple classes of shares in accordance with SEC regulations or exemptions under the 1940 Act. The purchase or sale of futures contracts and related options shall not be considered to involve the borrowing of money or issuance of senior securities. Each Fund may enter into reverse repurchase agreements or dollar roll transactions. The purchase or sale of futures contracts and related options shall not be considered to involve the borrowing of money or issuance of senior securities. The U.S. Government Bond Fund may not borrow money except as a temporary measure for extraordinary or emergency purposes or except in connection with reverse repurchase agreements and mortgage rolls; provided that the respective Fund will maintain asset coverage of 300% for all borrowings. The Asset Allocation Fund may not borrow money, issue senior securities or mortgage, pledge or hypothecate its assets except to the extent permitted under the 1940 Act. III-3 6. The Government Securities Fund 6. Purchase securities (except and the Balanced Assets Fund securities issued or guaranteed by may not purchase securities of the U.S. Government, its agencies or any one issuer (other than instrumentalities) of any one issuer securities issued or guaranteed if, as a result, more than 5% of its by the U.S. Government, its total assets will be invested in the agencies or instrumentalities securities of such issuer or it or securities of other would own more than 10% of the investment companies) if, voting securities of such issuer, immediately after such except that (a) up to 25% of its purchase, more than 5% of the total assets may be invested without value of such Fund's total regard to these limitations and (b) assets would be invested in the a Fund's assets may be invested in securities of such issuer, the securities of one or more except that up to 25% of the management investment companies to value of the Fund's total the extent permitted by the 1940 assets may be invested without Act, the rules and regulations regard to these limitations and thereunder and any exemptive relief with respect to 75% of such obtained by the Funds. Fund's assets, such Fund will not hold more than 10% of the voting securities of any issuer. The U.S. Government Bond Fund may not purchase securities of any one issuer (other than securities issued or guaranteed by the U.S. Government, its agencies or instrumentalists or certificates of deposit for any such securities) if, immediately after such purchase, more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the issuer's outstanding voting securities would be owned by the Fund or the Company; except that up to 25% of the value of a Fund's total assets may be invested without regard to the foregoing limitations. For purposes of this limitation, (a) a security is considered to be issued by the entity (or entities) whose assets and revenues back the security and (b) a guarantee of a security shall not be deemed to be a security issued by the guarantor when the value of securities issued and guaranteed by the guarantor, and owned by the Fund, does not exceed 10% of the value of the Fund's total assets. The Fund will maintain asset coverage of 300% or maintain a segregated account with its custodian bank in which it will maintain cash, U.S. Government Securities or other liquid high grade debt obligations equal in value to its borrowing. III-4 The Asset Allocation Fund may not purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that (a) up to 25% of its total assets may be invested without regard to these limitations and (b) the Fund's assets may be invested in the securities of one or more diversified management investment companies to the extent permitted by the 1940 Act. 7. The Government Securities Fund 7. Purchase any securities which would and the Balanced Assets Fund cause 25% or more of the value of may not purchase any securities its total assets at the time of which would cause 25% or more purchase to be invested in the of the value of the Fund's securities of one or more issuers total assets at the time of conducting their principal business such purchase to be invested in activities in the same industry, the securities of one or more provided that: (a) there is no issuers conducting their limitation with respect to principal activities in the obligations issued or guaranteed by same industry, provided that the U.S. Government, any state or this limitation does not apply territory of the United States, or to investments in U.S. any of their agencies, Government Obligations. In instrumentalities or political addition, this limitation does subdivisions, and (b) not apply to investments by notwithstanding this limitation or "money market funds" as that any other fundamental investment term is used under the 1940 limitation, assets may be invested Act, in obligations of domestic in the securities of one or more banks. management investment companies to the extent permitted by the 1940 The U.S. Government Bond Fund Act, the rules and regulations may not purchase any securities thereunder and any exemptive relief which would cause 25% or more obtained by the Funds. of the value of the Fund's total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (a) there is no limitation with respect to (i) instruments issued or guaranteed by the United States, any state, territory or possession of the United States, the District of Columbia or any of their authorities, agencies, instrumentalities or political subdivisions and III-5 (ii) repurchase agreements secured by the instruments described in clause (i); (b) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of the parents; and (c) utilities will be divided according to their services, for example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry. The Asset Allocation Fund may not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States, or any of their agencies, instrumentalities or political subdivisions, and (b) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more diversified management investment companies to the extent permitted by the 1940 Act and the rules and regulations thereunder. 8. Except for the Asset Allocation Fund, purchase any securities on margin (except for such short-term credits as are necessary for the clearance of purchases and sales of portfolio securities) or sell any securities short (except against the box.) For purposes of this restriction, the deposit or payment by the Fund of initial or maintenance margin connection with futures contracts and related options and options on securities is not considered to be the purchase of a security on margin. III-6 Statement of Additional Information Dated January 29, 2001 NATIONS FUND TRUST NATIONS FUND, INC. NATIONS RESERVES NATIONS FUNDS TRUST One Bank of America Plaza 101 South Tryon Street, 33rd Floor Charlotte, North Carolina 28255 1-800-321-7854 (April 12, 2001 Special Meeting of Shareholders of Nations Fund Trust, Nations Fund, Inc. and Nations Reserves) This Statement of Additional Information is not a prospectus but should be read in conjunction with the Proxy/Prospectus dated the date hereof, for the Special Meetings of Shareholders of the Acquired Funds to be held on April 12, 2001. Copies of the Proxy/Prospectus may be obtained at no charge by writing or calling Nations Fund Trust, Nations Fund, Inc. and Nations Reserves at the address or telephone number set forth above. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Proxy/Prospectus. Incorporation of Documents by Reference in Statement of Additional Information Further information about the Primary A Shares, Investor A Shares, Investor B Shares, and Investor C Shares of Nations U.S. Government Bond Fund, Nations Government Securities Fund, Nations Balanced Assets Fund and Nations Asset Allocation Fund is contained in and incorporated herein by reference to the Statement of Additional Information for the Acquired Funds dated August 1, 2000, as supplemented. The audited financial statements and related Report of Independent Accountants for the year ended March 31, 2000 for the Nations U.S. Government Bond Fund, Nations Government Securities Fund, Nations Balanced Assets Fund and Nations Asset Allocation Fund are incorporated herein by reference. No other parts of the annual and semi-annual reports are incorporated herein by reference. 1 Table of Contents General Information....................................................... 3 Introductory Note to Pro Forma Financial Information...................... 4 2 General Information The Reorganization contemplates the transfer of the assets and liabilities of the Acquired Funds to the Acquiring Funds in exchange for shares of designated classes of the corresponding Acquiring Funds of equal value. The shares issued by an Acquiring Fund will have an aggregate dollar value equal to the aggregate dollar value of the shares of each corresponding Acquired Fund that are outstanding immediately before the closing of the Reorganization. Immediately after the Closing, the Acquired Funds will distribute the shares of their corresponding Acquiring Fund received in the Reorganization to its shareholders in liquidation of such Acquired Fund. Each shareholder owning shares of an Acquired Fund at the Closing will receive shares of the designated class of the corresponding Acquiring Fund, and will receive any unpaid dividends or distributions that were declared before the Closing on the Acquired Funds' shares. Nations Funds Trust will establish an account for each former shareholder of the Acquired Funds reflecting the number of Acquiring Fund shares distributed to that shareholder. If the Reorganization Agreements are approved and consummated, the Acquired Funds will transfer all of their assets and liabilities, as of the Closing, and all outstanding shares of the Acquired Funds will be redeemed and canceled in exchange for shares of the corresponding Acquiring Fund. For further information about the transaction, see the Proxy/Prospectus. 3 Introductory Note to Pro Forma Financial Information The following unaudited pro forma information gives effect to the proposed transfer of the assets and liabilities of the Acquired Funds to the Acquiring Funds accounted for as if the transfer had occurred as of September 30, 2000. In addition, the pro forma combined statement of operations has been prepared as if the transfer had occurred at the beginning of the fiscal year ended September 30, 2000 and based upon the proposed fee and expense structure of the Acquiring Funds. The pro forma financial information should be read in conjunction with the historical financial statements and notes thereto of the Acquired Funds and the Acquiring Funds included or incorporated herein by reference in this Statement of Additional Information. The combination of the above Acquired Funds and the Acquiring Funds will be accounted for as a tax-free reorganization. 4 Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) September 30, 2000
Nations Asset Nations Nations Allocation Balanced Asset Nations Nations Fund Assets Allocation Combined Pro Balanced Asset (new) Fund Fund Forma Assets Allocation Combined Pro Principal Principal Principal Fund Fund Forma amount amount amount Value Value Value (000) (000) (000) Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Asset-backed securities - 0.7% Asset-backed - Auto loans - 0.1% $ - $ 167 $ 167 AESOP Funding II LLC, Series 1997-1A, Class A1, $ - $ 167 $ 167 6.220% 10/20/01 250 250 Premier Auto Trust, Series 1998-1, Class B, 5.920% 10/06/04 247 247 ---------------------------------------- 247 167 414 ---------------------------------------- Asset-backed - Home equity loans - 0.6% 500 500 ContiMortgage Home Equity Loan Trust, Series 1998-1, Class A4, 6.280% 01/15/13 494 494 423 423 CS First Boston Mortgage Securities Corporation, Series 1996-2, Class A4, 6.620% 02/25/18 420 420 650 650 EQCC Home Equity Loan Trust, Series 1997-2, Class A6, 6.720% 02/15/12 650 650 787 787 First Plus Home Loan Trust, Series 1996-3, Class A6, 7.600% 09/20/14 786 786 650 650 First Plus Home Loan Trust, Series 1997-1, Class A6, 6.950% 12/10/15 648 648 100 100 IMC Home Equity Loan Trust, Series 1997-5, Class A7, 6.900% 01/20/22 99 99 241 241 IMC Home Equity Loan Trust, Series 1997-7, Class A3, 6.540% 11/20/12 240 240 ---------------------------------------- 660 2,677 3,337 ---------------------------------------- Total asset-backed securities 907 2,844 3,751 (Cost $912 and $2,870, respectively) ---------------------------------------- Shares Shares Shares - ------------------------------------------- Common stocks - 61.6% Aerospace and defense - 0.8% 2,400 2,400 Alliant Techsystems Inc. 197 197 28,100 28,100 Boeing Company 1,771 1,771 25,612 25,612 Honeywell International Inc. 912 912 14,100 14,100 Northrop Grumman Corporation 1,281 1,281 ---------------------------------------- 912 3,249 4,161 ---------------------------------------- Airlines - 0.1% 12,300 12,300 Delta Air Lines, Inc. 546 546 1,500 1,500 Forward Air Corporation 53 53 1,800 1,800 Northwest Airlines Corporation 44 44 ---------------------------------------- 643 643 ---------------------------------------- Apparel and textiles - 0.1% 800 800 Columbia Sportswear Company 37 37 3,200 3,200 Jones Apparel Group, Inc. 85 85 1,050 1,050 Kenneth Cole Productions, Inc. 37 37 9,500 9,500 Liz Claiborne Inc. 365 365 2,800 2,800 Reebok International, Ltd. 53 53 1,700 1,700 Timberland Company, Class A 70 70 ---------------------------------------- 647 647 ---------------------------------------- Automotive - 0.7% 5,475 5,475 ArvinMeritor, Inc. 80 80 2,600 2,600 Copart, Inc. 36 36 67,042 67,042 Ford Motor Company 1,696 1,696 12,825 12,825 General Motors Corporation 834 834 1,100 1,100 Gentex Corporation 28 28 13,350 13,350 Johnson Controls Inc. 710 710 4,050 4,050 Lear Corporation 83 83 2,100 2,100 Mascotech, Inc. 35 35 2,200 2,200 Oshkosh Truck Corporation 85 85 1,800 1,800 Superior Industries International 54 54 2,300 2,300 Tower Automotive Inc. 22 22 ---------------------------------------- 710 2,953 3,663 ----------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Beverages - 1.0% 800 800 Adolph Coors Company, Class B $ - $ 51 $ 51 50,600 50,600 Anheuser-Busch Companies, Inc. 2,140 2,140 14,500 14,500 Coca-Cola Company 799 799 2,500 2,500 Constellation Brands, Inc. 136 136 46,300 46,300 PepsiCo, Inc. 2,130 2,130 ---------------------------------------- 5,256 5,256 ---------------------------------------- Broadcasting and cable - 1.3% 2,200 2,200 Hispanic Broadcasting Corporation 61 61 25,000 25,000 Time Warner Inc. 1,956 1,956 5,200 5,200 Univision Communications, Inc. 194 194 40,067 40,067 Viacom Inc., Class B 2,345 2,345 51,300 51,300 Walt Disney Company 1,962 1,962 2,650 2,650 Westwood One, Inc. 57 57 ---------------------------------------- 6,575 6,575 ---------------------------------------- Chemicals - Basic - 0.5% 11,500 11,500 Air Products & Chemicals Inc. 414 414 9,393 9,393 E.I. duPont de Nemours and Company 389 389 9,600 9,600 Eastman Chemical Company 355 355 16,700 16,700 Praxair Inc. 624 624 15,400 15,400 Union Carbide Corporation 581 581 ---------------------------------------- 2,363 2,363 ---------------------------------------- Chemicals - Specialty - 0.1% 6,000 6,000 Albemarle Corporation 121 121 3,300 3,300 Arch Chemicals Inc. 60 60 3,600 3,600 Cabot Corporation 114 114 6,200 6,200 Cytec Industries Inc. 208 208 1,500 1,500 OM Group, Inc. 65 65 2,200 2,200 Scotts Company, Class A 74 74 ---------------------------------------- 642 642 ---------------------------------------- Commercial banking - 4.3% 4,220 4,220 Associated Banc-Corp 111 111 2,800 2,800 Astoria Financial Corporation 108 108 27,187 22,762 49,949 Chase Manhattan Corporation 1,256 1,051 2,307 30,886 134,566 165,452 Citigroup Inc. 1,669 7,274 8,943 4,100 4,100 City National Corporation 158 158 4,500 4,500 Cullen Frost Bankers Inc. 146 146 10,900 10,900 Dime Bancorp, Inc. 235 235 2,600 2,600 Downey Financial Corporation 103 103 2,100 2,100 First Midwest Bancorp, Inc. 56 56 2,300 2,300 First Virginia Banks Inc. 98 98 5,900 5,900 FirstFed Financial Corporation 136 136 63,943 63,943 FleetBoston Financial Corporation 2,494 2,494 5,100 5,100 Hibernia Corporation 62 62 2,600 2,600 Hudson United Bancorp 72 72 6,225 5,300 11,525 J.P. Morgan & Company Inc. 1,017 866 1,883 1,700 1,700 MAF Bancorp Inc. 42 42 33,900 33,900 Mellon Financial Corporation 1,572 1,572 3,000 3,000 Mercantile Bankshares Corporation 109 109 2,800 2,800 National Commerce Bancorp 56 56 9,600 9,600 North Fork Bancorporation, Inc. 208 208 19,200 19,200 PNC Bank Corporation 1,248 1,248 1,800 1,800 Silicon Valley Bancshares 105 105 2,300 2,300 Southwest Bancorp of Texas 75 75 5,100 5,100 TCF Financial Corporation 192 192 27,125 27,125 Wells Fargo Company 1,246 1,246 2,000 2,000 Whitney Holding Corporation 73 73 ---------------------------------------- 5,188 16,650 21,838 ---------------------------------------- Commercial services - 0.5% 1,200 1,200 Administaff, Inc. 91 91 2,800 2,800 ADVO Inc. 92 92 1,800 1,800 Apollo Group Inc., Class A 72 72 2,900 2,900 Catalina Marketing Corporation 109 109 1,500 1,500 ChoicePoint Inc. 69 69 ----------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks-(continued) Commercial services - (continued) 1,900 1,900 Cintas Corporation $ - $ 83 $ 83 4,300 4,300 Comdisco, Inc. 82 82 3,900 3,900 eLoyalty Corporation 50 50 1,000 1,000 F.Y.I. Incorporated 37 37 3,900 3,900 Fiserv, Inc. 233 233 1,200 1,200 Heidrick & Struggles International, Inc. 62 62 600 600 Learning Tree International, Inc. 29 29 3,100 3,100 Manpower Inc. 99 99 8,500 8,500 Omnicom Group Inc. 619 619 1,700 1,700 Quanta Services, Inc. 47 47 2,100 2,100 Rent-A-Center, Inc. 73 73 5,200 5,200 Robert Half International Inc. 180 180 1,000 1,000 SCP Pool Corporation 30 30 1,800 1,800 SEI Investment Company 127 127 800 800 Startek, Inc. 23 23 1,100 1,100 Teletech Holdings Inc. 27 27 2,400 2,400 Tetra Tech Inc. 69 69 4,300 4,300 True North Communications 154 154 2,700 2,700 Viad Corporation 72 72 ---------------------------------------- 2,529 2,529 ---------------------------------------- Computer services - 0.9% 37,100 37,100 America Online Inc. 1,995 1,995 19,100 19,100 Automatic Data Processing Inc. 1,277 1,277 2,000 2,000 CSG Systems International, Inc. 58 58 600 600 Fair, Issac and Company Inc. 26 26 3,600 3,600 MarchFirst, Inc. 56 56 14,100 14,100 Paychex, Inc. 740 740 3,600 3,600 Sapient Corporation 146 146 3,100 3,100 Sungard Data Systems, Inc. 133 133 ---------------------------------------- 4,431 4,431 ---------------------------------------- Computers and office equipment - 4.2% 22,300 22,300 Apple Computer Inc. 574 574 3,150 3,150 Avocent Corporation 174 174 45,700 45,700 Dell Computer Corporation 1,408 1,408 49,000 49,000 EMC Corporation 4,856 4,856 7,000 20,600 27,600 Hewlett-Packard Company 679 1,998 2,677 10,950 11,000 21,950 International Business Machines Corporation 1,232 1,238 2,470 23,000 23,000 Jabil Circuit, Inc. 1,305 1,305 8,600 8,600 NCR Corporation 325 325 9,200 9,200 Network Appliance, Inc. 1,172 1,172 7,000 7,000 Palm, Inc. 371 371 3,400 3,400 PerkinElmer, Inc. 355 355 1,000 1,000 Radisys Corporation 51 51 4,500 4,500 Sanmina Corporation 421 421 9,000 9,000 Solectron Corporation 415 415 37,850 37,850 Sun Microsystems, Inc. 4,418 4,418 2,587 2,587 Symbol Technologies, Inc. 93 93 2,100 2,100 Tech Data Corporation 90 90 400 400 Tektronix, Inc. 31 31 1,700 1,700 Zebra Technologies Corporation 82 82 ---------------------------------------- 1,911 19,377 21,288 ---------------------------------------- Conglomerates - 1.0% 14,200 14,200 Dover Corporation 667 667 1,800 1,800 Dycom Industries, Inc. 75 75 900 900 Insituform Technologies Inc., Class A 30 30 500 500 SPX Corporation 71 71 10,200 10,200 Textron Inc. 470 470 1,000 1,000 The Shaw Group Inc. 71 71 40,200 40,200 Tyco International Ltd. 2,085 2,085 25,525 25,525 United Technologies Corporation 1,768 1,768 ---------------------------------------- 5,237 5,237 ----------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Consumer credit and mortgages - 1.3% 20,850 18,000 38,850 American Express Company $ 1,267 $ 1,094 $ 2,361 29,200 29,200 Fannie Mae 2,088 2,088 2,500 2,500 Greenpoint Financial Corporation 74 74 26,525 23,200 49,725 MBNA Corporation 1,021 893 1,914 2,000 2,000 Metris Companies Inc. 79 79 2,600 2,600 Providian Financial Corporation 330 330 ---------------------------------------- 2,288 4,558 6,846 ---------------------------------------- Department and discount stores - 1.1% 10,100 10,100 Kohls Corporation 583 583 22,600 22,600 Sears, Roebuck and Company 733 733 91,200 91,200 Wal-Mart Stores, Inc. 4,388 4,388 ---------------------------------------- 5,704 5,704 ---------------------------------------- Diversified electronics - 0.1% 2,200 2,200 Aeroflex, Inc. 107 107 2,300 2,300 Anixter International Inc. 67 67 2,000 2,000 Harman International Industries 78 78 1,200 1,200 Helix Technology Corporation 36 36 1,900 1,900 Kent Electronics Corporation 45 45 2,700 2,700 Waters Corporation 241 241 ---------------------------------------- 574 574 ---------------------------------------- Diversified manufacturing - 2.2% 2,800 2,800 Belden Inc. 66 66 14,125 14,125 Eastman Kodak Company 577 577 164,000 164,000 General Electric Company 9,461 9,461 3,000 3,000 Harsco Corporation 66 66 2,000 2,000 Nordson Corporation 57 57 3,600 3,600 Plexus Corporation 254 254 9,400 9,400 Procter & Gamble Company 630 630 ---------------------------------------- 1,207 9,904 11,111 ---------------------------------------- Electric power - Non nuclear - 2.5% 4,500 4,500 Allegheny Energy, Inc. 172 172 4,100 4,100 Allete 91 91 18,200 18,200 Ameren Corporation 762 762 3,800 3,800 Calpine Corporation 397 397 6,800 6,800 Conectiv, Inc. 122 122 25,150 25,150 Consolidated Edison, Inc. 858 858 14,400 14,400 Dominion Resources, Inc. 836 836 15,100 15,100 Duke Energy Corporation 1,295 1,295 7,200 7,200 Dynegy Inc. 410 410 6,600 6,600 Energy East Corporation 149 149 14,000 18,500 32,500 FPL Group Inc. 921 1,216 2,137 2,200 2,200 Idacorp, Inc. 102 102 2,610 2,610 NSTAR 105 105 26,300 26,300 PECO Energy Company 1,592 1,592 2,100 2,100 Pinnacle West Capital Corporation 107 107 5,400 5,400 Public Service Company of New Mexico 140 140 49,975 5,200 55,175 TECO Energy, Inc. 1,437 150 1,587 1,800 1,800 The Montana Power Company 60 60 1,700 1,700 UIL Holdings Corporation 87 87 25,400 25,400 Unicom Corporation 1,427 1,427 3,400 3,400 UniSource Energy Corporation 56 56 5,300 5,300 UtiliCorp United Inc. 137 137 ---------------------------------------- 4,814 7,815 12,629 ---------------------------------------- Electrical equipment - 0.2% 1,900 1,900 AMETEK, Inc. 40 40 2,500 2,500 C&D Technologies, Inc. 142 142 13,500 13,500 Emerson Electric Company 905 905 2,000 2,000 Littelfuse, Inc. 59 59 700 700 Park Electrochemical Corporation 39 39 ---------------------------------------- 905 280 1,185 ---------------------------------------- Exploration and production - 0.0% 1,700 1,700 Stone Energy Corporation 94 94 ----------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Finance - Miscellaneous - 0.3% 6,800 6,800 AmeriCredit Corporation $ - $ 196 $ 196 6,500 6,500 Concord EFS, Inc. 231 231 22,250 22,250 Freddie Mac 1,203 1,203 ----------------------------------------- 1,203 427 1,630 ----------------------------------------- Food and drug stores - 0.2% 3,000 3,000 Casey's General Stores, Inc. 39 39 20,600 20,600 Safeway, Inc. 961 961 1,800 1,800 Whole Foods Market Inc. 97 97 ----------------------------------------- 1,097 1,097 ----------------------------------------- Food products - 1.3% 5,000 5,000 Bestfoods 364 364 42,850 40,000 82,850 ConAgra Inc. 860 803 1,663 1,391 1,391 Hain Celestial Group, Inc. 49 49 23,550 23,550 H.J. Heinz Company 873 873 29,450 29,450 Kellogg Company 712 712 3,500 3,500 McCormick and Company, Inc. 104 104 2,400 2,400 Michael Foods Inc. 56 56 6,500 6,500 Nabisco Group Holdings Corporation 185 185 2,600 2,600 Performance Food Group Company 98 98 11,400 11,400 Quaker Oats Company 901 901 7,500 7,500 Smithfield Foods Inc. 197 197 2,800 2,800 Suiza Foods Corporation 142 142 18,200 18,200 SYSCO Corporation 843 843 9,600 9,600 Unilever NV, ADR 463 463 ----------------------------------------- 2,445 4,205 6,650 ----------------------------------------- Health services - 0.4% 2,400 2,400 Cerner Corporation 111 111 3,000 3,000 Coventry Health Care Inc. 45 45 1,100 1,100 Express Scripts Inc., Class A 79 79 1,300 1,300 Invacare Corporation 42 42 3,600 3,600 Lincare Holdings Inc. 103 103 2,900 2,900 Orthodontic Centers of America 97 97 500 500 Quest Diagnostics Inc. 57 57 5,300 5,300 Trigon Healthcare, Inc. 279 279 8,900 8,900 UnitedHealth Group Inc. 880 880 1,400 1,400 Universal Health Services Inc., Class B 120 120 750 750 Wellpoint Health Networks Inc. 72 72 ----------------------------------------- 1,885 1,885 ----------------------------------------- Heavy machinery - 0.5% 2,700 2,700 Briggs & Stratton Corporation 102 102 20,500 20,500 Caterpillar Inc. 692 692 13,500 13,500 Deere & Company 449 449 6,400 6,400 JLG Industries Inc. 78 78 20,575 16,500 37,075 Parker Hannifin Corporation 694 557 1,251 1,500 1,500 Toro Company 47 47 ----------------------------------------- 1,386 1,233 2,619 ----------------------------------------- Household products - 0.7% 18,700 18,700 Avon Products, Inc. 764 764 1,500 1,500 Blyth Industries, Inc. 35 35 4,400 4,400 Church & Dwight Company, Inc. 81 81 8,700 8,700 Colgate-Palmolive Company 411 411 28,100 28,100 Kimberly-Clark Corporation 1,569 1,569 13,100 13,100 The Clorox Company 518 518 ----------------------------------------- 3,378 3,378 ----------------------------------------- Housing and furnishing - 0.3% 3,500 3,500 American Standard Companies Inc. 156 156 4,796 4,796 D.R. Horton Inc. 82 82 1,500 1,500 Lennar Corporation 45 45 4,100 4,100 M.D.C. Holdings, Inc. 107 107 5,200 5,200 Mohawk Industries Inc. 113 113
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Housing and furnishing - (continued) 3,800 3,800 Pulte Corporation $ - $ 125 $ 125 1,400 1,400 Salton, Inc. 45 45 23,300 23,300 Stanley Works 537 537 3,700 3,700 The Ryland Group, Inc. 115 115 1,800 1,800 Toll Brothers, Inc. 62 62 ---------------------------------------------- 537 850 1,387 ---------------------------------------------- Insurance - 2.7% 19,500 19,500 American General Corporation 1,521 1,521 22,000 15,150 37,150 American International Group, Inc. 2,105 1,450 3,555 1,300 1,300 Arthur J. Gallagher & Company 77 77 18,400 18,400 AXA Financial, Inc. 937 937 8,925 8,000 16,925 CIGNA Corporation 932 835 1,767 1,696 1,696 Delphi Financial Group Inc., Class A 69 69 3,600 3,600 Everest Re Group Ltd. 178 178 2,900 2,900 Fidelity National Financial, Inc. 72 72 30,700 30,700 Hartford Financial Services Group, Inc. 2,240 2,240 12,500 28,500 41,000 MGIC Investment Corporation 764 1,742 2,506 7,500 7,500 Old Republic International Corporation 180 180 2,700 2,700 PMI Group, Inc. 183 183 2,400 2,400 Radian Group Inc. 162 162 1,600 1,600 RenaissanceRe Holdings Ltd. 102 102 ---------------------------------------------- 3,801 9,748 13,549 ---------------------------------------------- Integrated oil - 3.8% 2,200 2,200 AGL Resources Inc. 44 44 12,200 12,200 Anadarko Petroleum Corporation 811 811 16,600 16,600 Apache Corporation 981 981 11,500 11,500 BP Amoco plc, ADR 610 610 12,675 29,000 41,675 Chevron Corporation 1,081 2,472 3,553 29,188 29,188 Conoco, Inc. 786 786 2,100 2,100 EOG Resources, Inc. 82 82 23,041 78,407 101,448 Exxon Mobil Corporation 2,053 6,988 9,041 1,600 1,600 Murphy Oil Corporation 104 104 2,500 2,500 Newfield Exploration Company 117 117 30,700 30,700 Occidental Petroleum Corporation 670 670 3,200 3,200 Pogo Producing Company 81 81 14,850 14,850 Royal Dutch Petroleum Company 890 890 3,200 3,200 Ultramar Diamond Shamrock Corporation 81 81 18,025 18,025 Unocal Corporation 639 639 23,475 23,475 USX-Marathon Group Inc. 666 666 5,500 5,500 Vintage Petroleum, Inc. 125 125 ---------------------------------------------- 6,870 12,411 19,281 ---------------------------------------------- Investment services - 2.2% 2,800 2,800 A.G. Edwards, Inc. 146 146 400 400 Dain Rauscher Corporation 37 37 2,000 2,000 Eaton Vance Corporation 102 102 1,100 1,100 Jefferies Group, Inc. 30 30 1,900 1,900 Legg Mason Inc. 110 110 14,300 14,300 Lehman Brothers Holdings Inc. 2,113 2,113 15,050 23,000 38,050 Merrill Lynch & Company Inc. 993 1,518 2,511 15,250 27,500 42,750 Morgan Stanley Dean Witter & Company 1,395 2,515 3,910 1,600 1,600 Raymond James Financial, Inc. 53 53 15,300 15,300 State Street Corporation 1,989 1,989 2,900 2,900 Waddell & Reed Financial, Inc. 90 90 ---------------------------------------------- 2,388 8,703 11,091 ---------------------------------------------- Lodging and recreation - 0.4% 3,500 3,500 Aztar Corporation 54 54 4,050 4,050 Brunswick Corporation 74 74 4,000 4,000 Darden Restaurants Inc. 83 83 18,100 18,100 Harley-Davidson Inc. 867 867 12,400 12,400 Marriott International Inc., Class A 452 452 1,500 1,500 MeriStar Hospitality Corporation 30 30
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks-(continued) Lodging and recreation-(continued) 9,900 9,900 Park Place Entertainment Corporation $ - $ 150 $ 150 2,200 2,200 Polaris Industries Inc. 78 78 700 700 Sabre Holdings Corporation 20 20 2,900 2,900 Winnebago Industries 36 36 ---------------------------------------------- 1,844 1,844 ---------------------------------------------- Medical devices and supplies - 2.1% 28,375 28,375 Abbott Laboratories 1,350 1,350 2,000 2,000 ADAC Laboratories Designs 42 42 14,800 14,800 Baxter International Inc. 1,181 1,181 1,900 1,900 Beckman Coulter, Inc. 147 147 26,850 26,850 Biomet, Inc. 940 940 1,400 1,400 C.R. Bard, Inc. 59 59 11,250 17,000 28,250 Cardinal Health, Inc. 992 1,499 2,491 1,100 1,100 Coherent Inc. 75 75 2,500 2,500 Cooper Companies Inc. 88 88 2,500 2,500 Datascope Corporation 84 84 800 800 Diagnostic Products Corporation 43 43 30,300 30,300 Johnson & Johnson 2,846 2,846 2,600 2,600 Minimed Inc. 232 232 7,100 7,100 PE Corp-PE Biosystems Group 827 827 1,337 1,337 Priority Healthcare Corporation= 102 102 1,900 1,900 Respironics, Inc. 32 32 1,900 1,900 Stryker Corporation 82 82 1,000 1,000 Techne Corporation 112 112 1,800 1,800 Varian Medical Systems, Inc. 81 81 ---------------------------------------------- 2,342 8,472 10,814 ---------------------------------------------- Metals and mining - 0.4% 6,200 6,200 AK Steel Holding Corporation 58 58 15,200 15,200 Barrick Gold Corporation 232 232 2,100 2,100 Carpenter Technology Corporation 61 61 10,850 10,850 Minnesota Mining & Manufacturing Company 989 989 700 700 Mueller Industries Inc. 16 16 2,800 2,800 Precision Castparts Corporation 107 107 1,400 1,400 Quanex Corporation 27 27 3,700 3,700 Reliance Steel & Aluminum Company 78 78 2,200 2,200 Texas Industries Inc. 70 70 28,000 28,000 USX - U.S. Steel Group Inc. 425 425 ---------------------------------------------- 989 1,074 2,063 ---------------------------------------------- Natural gas distribution - 0.7% 23,300 23,300 Coastal Corporation 1,727 1,727 13,600 13,600 El Paso Energy Corporation 838 838 5,100 5,100 Energen Corporation 152 152 8,200 8,200 Enron Corporation 719 719 2,200 2,200 Equitable Resources Inc. 139 139 3,650 3,650 KeySpan Corporation 146 146 3,100 3,100 Northwest Natural Gas Company 71 71 ---------------------------------------------- 838 2,954 3,792 ---------------------------------------------- Networking and telecommunications equipment - 3.7% 1,300 1,300 Adaptive Broadband Corporation 25 25 200 200 ADC Telecommunications, Inc. 5 5 2,400 2,400 ADTRAN, Inc. 102 102 800 800 Advanced Fibre Communications, Inc. 30 30 2,000 2,000 Brocade Communications Systems, Inc. 472 472 700 700 Brooktrout Inc. 23 23 1,800 1,800 C-COR Electronics 28 28 2,850 2,850 Cable Design Technologies Corporation 69 69 4,400 4,400 CIENA Corporation 540 540 145,100 145,100 Cisco Systems, Inc. 8,017 8,017 6,300 6,300 Comverse Technology, Inc. 680 680 8,500 8,500 Corning Inc. 2,525 2,525 2,600 2,600 DMC Stratex Networks, Inc. 42 42 1,500 1,500 Foundry Networks, Inc. 100 100 9,200 9,200 JDS Uniphase Corporation 871 871 1,800 1,800 Juniper Networks, Inc. 394 394
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Networking and telecommunications equipment - (continued) 57,700 57,700 Nortel Networks Corporation $ - $ 3,437 $ 3,437 3,000 3,000 Plantronics Inc. 114 114 2,600 2,600 Polycom, Inc. 174 174 2,800 2,800 Powerwave Technologies, Inc. 106 106 1,000 1,000 Proxim, Inc. 45 45 700 700 Rainbow Technologies, Inc. 25 25 12,200 12,200 Scientific-Atlanta, Inc. 776 776 900 900 Terayon Communication Systems, Inc. 31 31 800 800 ViaSat Inc. 18 18 1,300 1,300 Westell Technologies, Inc. 17 17 ---------------------------------------------- 18,666 18,666 ---------------------------------------------- Oilfield services - 0.6% 24,050 24,050 ENSCO International Inc. 921 921 3,500 3,500 Helmerich & Payne, Inc. 126 126 4,000 4,000 Hughes Supply Inc. 78 78 4,800 4,800 Noble Drilling Corporation 241 241 5,300 5,300 Offshore Logistics Inc. 95 95 10,100 10,100 Schlumberger Ltd. 831 831 2,600 2,600 Smith International, Inc. 212 212 900 900 Swift Energy Company 37 37 1,800 1,800 UTI Energy Corporation 80 80 2,200 2,200 Varco International, Inc. 46 46 4,200 4,200 Weatherford International, Inc. 181 181 ---------------------------------------------- 2,848 2,848 ---------------------------------------------- Packaging and containers - 0.0% 1,300 1,300 AptarGroup Inc. 31 31 ---------------------------------------------- Paper and forest products - 0.2% 12,600 12,600 Bowater Incorporated 585 585 3,100 3,100 Buckeye Technologies Inc. 64 64 1,600 1,600 Georgia - Pacific Corporation (Timber Group) 43 43 5,304 5,304 International Paper Company 152 152 3,600 3,600 United Stationers Inc. 97 97 7,400 7,400 Weyerhaeuser Company 299 299 ---------------------------------------------- 1,240 1,240 ---------------------------------------------- Pharmaceuticals - 4.3% 13,000 13,000 Allergan, Inc. 1,098 1,098 1,900 1,900 Alpharma Inc., Class A 116 116 18,300 18,300 Amgen Inc. 1,278 1,278 1,500 1,500 Barr Laboratories, Inc. 99 99 3,666 3,666 Bindley Western Industries 117 117 7,200 7,200 Biogen, Inc. 439 439 24,150 41,500 65,650 Bristol-Myers Squibb Company 1,380 2,370 3,750 1,200 1,200 Cephalon, Inc. 58 58 5,500 5,500 Chiron Corporation 248 248 2,300 2,300 COR Therapeutics, Inc. 143 143 2,100 2,100 Dura Pharmaceuticals Inc. 74 74 7,100 7,100 Eli Lilly and Company 576 576 200 200 Enzo Biochem, Inc. 10 10 2,700 2,700 Forest Laboratories, Inc. 310 310 2,800 2,800 Genzyme Corporation 191 191 1,200 1,200 Gilead Sciences, Inc. 132 132 1,900 1,900 ICN Pharmaceuticals Incorporated 63 63 900 900 IDEC Pharmaceuticals Corporation 158 158 2,000 2,000 Incyte Pharmaceuticals, Inc. 82 82 2,350 2,350 IVAX Corporation 108 108 1 1 King Pharmaceuticals, Inc. - 2,000 2,000 Medicis Pharmaceutical Corporation, Class A 123 123 58,400 58,400 Merck & Company, Inc. 4,346 4,346 1,300 1,300 Millennium Pharmaceuticals, Inc. 190 190 3,100 3,100 NBTY, Inc. 20 20 600 600 Noven Pharmaceuticals, Inc. 26 26 119,800 119,800 Pfizer Inc. 5,383 5,383 700 700 Protein Design Labs, Inc. 84 84
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Pharmaceuticals - (continued) 1,000 1,000 Regeneron Pharmaceuticals, Inc. $ - $ 33 $ 33 49,700 49,700 Schering-Plough Corporation 2,311 2,311 200 200 Sepracor Inc. 25 25 1,400 1,400 Syncor International Corporation 52 52 2,200 2,200 Vertex Pharmaceuticals, Inc. 186 186 --------------------------------------- 1,380 20,449 21,829 --------------------------------------- Publishing and advertising - 0.5% 12,900 12,900 Dow Jones & Company, Inc. 780 780 1,000 1,000 Harcourt General Inc. 59 59 1,600 1,600 Harte-Hanks, Inc. 44 44 1,700 1,700 John H. Harland Company 26 26 12,700 12,700 McGraw-Hill Companies, Inc. 807 807 12,300 12,300 New York Times Company, Class A 484 484 1,200 1,200 Penton Media Inc. 33 33 4,250 4,250 Readers Digest Association, Inc. 150 150 2,100 2,100 Scholastic Corporation 167 167 38 38 The Washington Post Company 20 20 --------------------------------------- 780 1,790 2,570 --------------------------------------- Railroads, trucking and shipping - 0.4% 3,500 3,500 American Freightways Corporation 56 56 4,500 4,500 Arkansas Best Corporation 69 69 1,500 1,500 C.H. Robinson Worldwide, Inc. 85 85 1,600 1,600 CNF Transportation Inc. 36 36 2,400 2,400 Expeditors International of Washington, Inc. 108 108 21,725 21,725 FedEx Corporation 963 963 2,300 2,300 GATX Corporation 96 96 1,800 1,800 Heartland Express Inc. 31 31 2,600 2,600 Kirby Corporation 51 51 3,600 3,600 Roadway Express, Inc. 65 65 15,600 15,600 Union Pacific Corporation 606 606 --------------------------------------- 963 1,203 2,166 --------------------------------------- Restaurants - 0.3% 3,800 3,800 Brinker International, Inc. 114 114 3,800 3,800 CEC Entertainment Inc. 122 122 4,500 4,500 Jack in the Box Inc. 96 96 8,500 8,500 McDonald's Corporation 257 257 5,500 5,500 Ruby Tuesday Inc. 62 62 16,000 16,000 Starbucks Corporation 641 641 --------------------------------------- 257 1,035 1,292 --------------------------------------- Semiconductors - 3.3% 1,900 1,900 Actel Corporation 68 68 3,000 3,000 Alliance Semiconductor Corporation 60 60 2,500 2,500 Alpha Industries, Inc. 85 85 14,500 14,500 Altera Corporation 692 692 13,100 13,100 Analog Devices, Inc. 1,082 1,082 22,900 22,900 Applied Materials, Inc. 1,357 1,357 1,700 1,700 Applied Micro Circuits Corporation 352 352 2,900 2,900 Arrow Electronics, Inc. 99 99 4,800 4,800 Atmel Corporation 73 73 2,200 2,200 Avnet, Inc. 62 62 5,500 5,500 Broadcom Corporation, Class A 1,341 1,341 2,000 2,000 Cognex Corporation 79 79 1,300 1,300 Credence Systems Corporation 39 39 3,600 3,600 Cypress Semiconductor Corporation 150 150 2,900 2,900 Dallas Semiconductor Corporation 95 95 1,600 1,600 Electro Scientific Industries, Inc. 56 56 2,100 2,100 General Semiconductor, Inc. 26 26 78,650 78,650 Intel Corporation 3,268 3,268 9,450 3,300 12,750 Intergrated Device Technology, Inc. 855 299 1,154 2,400 2,400 International Rectifier Corporation 121 121 4,400 4,400 KEMET Corporation 122 122 6,900 6,900 KLA-Tencor Corporation 284 284 700 700 Lattice Semiconductor Corporation 38 38 7,600 7,600 Linear Technology Corporation 492 492
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Semiconductors - (continued) 1,300 1,300 Micrel Inc. $ - $ 87 $ 87 4,725 4,725 Microchip Technology Inc. 156 156 14,000 14,000 Micron Technology, Inc. 644 644 7,500 7,500 National Semiconductor Corporation 302 302 2,200 2,200 Nvidia Corporation 180 180 2,300 2,300 PMC - Sierra, Inc. 495 495 1,700 1,700 QLogic Corporation 150 150 1,300 1,300 Sawtek, Inc. 50 50 2,075 2,075 SDL, Inc. 642 642 1,600 1,600 Semtech Corporation 69 69 2,800 2,800 Silicon Valley Group, Inc. 74 74 1,100 1,100 Technitrol Inc. 111 111 5,900 5,900 Teradyne, Inc. 207 207 29,300 29,300 Texas Instruments Inc. 1,382 1,382 2,600 2,600 TranSwitch Corporation 166 166 2,600 2,600 TriQuint Semiconductor, Inc. 95 95 4,350 4,350 Vishay Intertechnology, Inc. 134 134 10,100 10,100 Xilinx, Inc. 865 865 --------------------------------------- 855 16,149 17,004 --------------------------------------- Software - 3.5% 3,600 3,600 Adobe Systems Inc. 559 559 1,000 1,000 Affiliated Computer Services, Inc. 50 50 1,800 1,800 Aspen Technology, Inc. 81 81 2,300 2,300 Avid Technology, Inc. 32 32 2,750 2,750 BroadVision, Inc. 71 71 7,200 7,200 Cadence Design Systems, Inc. 185 185 2,550 2,550 Dendrite International, Inc. 68 68 2,800 2,800 DST Systems, Inc. 329 329 1,600 1,600 Electronic Arts Inc. 79 79 19,775 19,775 Electronic Data Systems Corporation 820 820 1,800 1,800 FileNET Corporation 33 33 19,425 16,775 36,200 First Data Corporation 759 655 1,414 900 900 HNC Software Inc. 74 74 1,600 1,600 Hyperion Solutions Corporation 41 41 11,300 11,300 Intuit Inc. 644 644 800 800 J.D.Edwards and Company 21 21 2,000 2,000 Jack Henry & Associates 87 87 1,200 1,200 Macromedia Inc. 97 97 300 300 Mercury Interactive Corporation 47 47 83,400 83,400 Microsoft Corporation 5,029 5,029 1,400 1,400 National Instruments Corporation 62 62 58,400 58,400 Oracle Corporation 4,598 4,598 1,000 1,000 Project Software & Development, Inc. 16 16 4,200 4,200 Rational Software Corporation 291 291 2,000 2,000 RSA Security Inc. 86 86 6,200 6,200 Siebel Systems, Inc. 690 690 5,500 5,500 Sybase, Inc. 127 127 2,250 2,250 Symantec Corporation 99 99 1,300 1,300 The BISYS Group, Inc. 101 101 2,100 2,100 Veritas DGC Inc. 61 61 6,900 6,900 VERITAS Software Corporation 980 980 1,700 1,700 Verity, Inc. 61 61 11,300 11,300 Yahoo! Inc. 1,028 1,028 --------------------------------------- 1,579 16,382 17,961 --------------------------------------- Specialty stores - 1.2% 3,700 3,700 Abercrombie & Fitch Company 71 71 23,600 23,600 Bed Bath & Beyond, Inc. 576 576 13,100 13,100 Best Buy Company, Inc. 833 833 3,700 3,700 BJ's Wholesale Club, Inc. 126 126 3,000 3,000 CDW Computer Centers, Inc. 207 207 2,100 2,100 Cost Plus, Inc. 63 63 1,700 1,700 Dollar Tree Stores, Inc. 69 69 1,600 1,600 Dress Barn Inc. 34 34 1,400 1,400 Footstar Inc. 45 45 37,750 37,750 Home Depot Inc. 2,002 2,002 1,500 1,500 Insight Enterprises Inc. 41 41
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Common stocks - (continued) Specialty stores - (continued) 41,200 41,200 Limited Inc. $ - $ 909 $ 909 2,500 2,500 Linens 'N Things Inc. 64 64 1,600 1,600 Michaels Stores Inc. 64 64 4,600 4,600 Pier 1 Imports Inc. 62 62 1,600 1,600 Talbots, Inc. 106 106 6,200 6,200 The Men's Wearhouse Inc. 176 176 20,900 20,900 Tiffany & Company 806 806 2,700 2,700 Zale Corporation 88 88 ------------------------------------------- 6,342 6,342 ------------------------------------------- Telecommunications services - 3.3% 67,350 67,350 BellSouth Corporation 2,711 2,711 2,500 2,500 Broadwing Inc. 64 64 14,800 14,800 Nextel Communications, Inc. 692 692 49,300 49,300 Qwest Communications International, Inc. 2,369 2,369 22,325 79,966 102,291 SBC Communications Inc. 1,116 3,999 5,115 3,500 3,500 TALK.com, Inc. 15 15 1,600 1,600 Telephone and Data Systems, Inc. 177 177 18,165 49,239 67,404 Verizon Communications 880 2,385 3,265 85,286 85,286 WorldCom, Inc. 2,591 2,591 ------------------------------------------- 1,996 15,003 16,999 ------------------------------------------- Tobacco - 0.7% 39,200 49,600 88,800 Philip Morris Companies Inc. 1,154 1,460 2,614 1 2,200 2,201 R.J. Reynolds Tobacco Holdings, Inc. 0 71 71 40,850 40,850 UST Inc. 934 934 ------------------------------------------- 2,088 1,531 3,619 ------------------------------------------- Utilities - Miscellaneous - 0.7% 30,175 30,175 American Water Works Company, Inc. 832 832 44,775 44,775 AT&T Corporation 1,315 1,315 19,650 19,650 NICOR Inc. 711 711 1,800 1,800 Philadelphia Suburban Corporation 42 42 31,500 31,500 Sprint Corporation (FON Group) 923 923 ------------------------------------------- 3,781 42 3,823 ------------------------------------------- Total common stocks (Cost $48,551 and $194,715, respectively) 54,413 260,473 314,886 ------------------------------------------- Convertible preferred stocks - 0.0% (Cost $245) Packaging and containers - 0.0% 4,845 4,845 Sealed Air Corporation 218 218 ------------------------------------------- Principal Principal Principal amount amount amount (000) (000) (000) - ------------------------------------------------------ Corporate bonds and notes - 14.7% Aerospace and defense - 0.4% Raytheon Company: $ - $ 1,770 $ 1,770 7.900% 03/01/03 1,800 1,800 250 250 6.750% 08/15/07 237 237 ------------------------------------------- 237 1,800 2,037 ------------------------------------------- Automotive - 0.2% 1,200 1,200 Delphi Automotive Systems Corporation, 6.125% 05/01/04 1,145 1,145 ------------------------------------------- Beverages - 0.2% 1,035 1,035 Pepsi Bottling Holdings, Inc., 5.375% 02/17/04 987 987 -------------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Nations Nations Allocation Balanced Asset Nations Nations Fund Assets Allocation Combined Pro Balanced Asset (new) Fund Fund Forma Assets Allocation Combined Pro Principal Principal Principal Fund Fund Forma amount amount amount Value Value Value (000) (000) (000) Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Corporate bonds and notes - (continued) Broadcasting and cable - 1.2% $ - $ 1,150 $ 1,150 British Sky Broadcasting Group plc, 6.875% 02/23/09 $ - $ 998 $ 998 500 1,750 2,250 Clear Channel Communications, Inc., 7.875% 06/15/05 510 1,785 2,295 1,200 1,200 Cox Radio, Inc., 6.250% 05/15/03 1,172 1,172 520 520 Time Warner Inc., 8.110% 08/15/06 542 542 1,500 1,500 USA Networks, Inc., 6.750% 11/15/05 1,459 1,459 ---------------------------------------------- 1,052 5,414 6,466 ---------------------------------------------- Chemicals - Specialty - 0.3% 325 325 Equistar Chemicals, L.P., 8.500% 02/15/04 323 323 1,500 1,500 Praxair, Inc., 6.750% 03/01/03 1,487 1,487 ---------------------------------------------- 323 1,487 1,810 ---------------------------------------------- Commercial banking - 0.8% 1,425 1,425 Chase Manhattan Corporation, 5.750% 04/15/04 1,369 1,369 500 500 FCB/NC Capital Trust I, Gtd. Notes, 8.050% 03/01/28 416 416 1,600 1,600 First Union Corporation, 7.550% 08/18/05 1,620 1,620 750 750 Popular, Inc., MTN, 6.375% 09/15/03 736 736 250 250 Union Planters Capital Trust, 8.200% 12/15/26 214 214 ---------------------------------------------- 1,366 2,989 4,355 ---------------------------------------------- Commercial services - 0.6% 450 1,650 2,100 Comdisco, Inc., 9.500% 08/15/03 453 1,662 2,115 650 650 Service Corporation International, 6.000% 12/15/05 369 369 500 260 760 Xerox Capital Trust I, Gtd. Notes, 8.000% 02/01/27 357 186 543 ---------------------------------------------- 1,179 1,848 3,027 ---------------------------------------------- Computer services - 0.1% 350 350 Computer Sciences Corporation, 7.500% 08/08/05 354 354 ---------------------------------------------- Computers and office equipment - 0.3% 350 1,200 1,550 Compaq Computer Corporation, 7.450% 08/01/02 351 1,205 1,556 ---------------------------------------------- Conglomerates - 0.2% 250 1,000 1,250 USA Waste Services Inc., 7.000% 07/15/28 205 819 1,024 250 250 Waste Management, Inc., 6.125% 07/15/01 244 244 ---------------------------------------------- 449 819 1,268 ---------------------------------------------- Consumer credit and mortgages - 0.3% 1,725 1,725 Capital One Bank, 8.250% 06/15/05 1,751 1,751 ---------------------------------------------- Diversified manufacturing - 0.3% Tyco International Group SA: 500 500 6.375% 06/15/05 486 486 1,200 1,200 7.000% 06/15/28 1,059 1,059 ---------------------------------------------- 486 1,059 1,545 ----------------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Nations Nations Allocation Balanced Asset Nations Nations Fund Assets Allocation Combined Pro Balanced Asset (new) Fund Fund Forma Assets Allocation Combined Pro Principal Principal Principal Fund Fund Forma amount amount amount Value Value Value (000) (000) (000) Description (000) (000) (000) - --------------------------------------------------------------------------------- ---------------------------------------------- Corporate bonds and notes - (continued) Electric power - Non nuclear - 0.3% $ - $ 1,300 $ 1,300 Consumers Energy Company, 6.200% 05/01/03 $ - $ 1,237 $ 1,237 135 135 SCANA Corporation, 6.050% 01/13/03 132 132 ---------------------------------------------- 1,369 1,369 ---------------------------------------------- Energy - Miscellaneous - 0.6% 180 800 980 PDV America Inc., Gtd. Sr. Notes, 7.875% 08/01/03 173 768 941 500 1,650 2,150 USX Corporation, 6.650% 02/01/06 484 1,599 2,083 ---------------------------------------------- 657 2,367 3,024 ---------------------------------------------- Finance - Miscellaneous - 3.4% 500 1,400 1,900 Case Credit Corporation, 6.125% 02/15/03 463 1,295 1,758 1,800 1,800 Caterpillar Financial Services Corporation, 6.875% 08/01/04 1,780 1,780 200 200 CIT Group, Inc., 7.375% 03/15/03 200 200 1,050 1,050 Crown Cork & Seal Financial plc, 6.750% 12/15/03 940 940 500 500 ERAC USA Finance Company, 6.625% 02/15/05 478 478 500 1,695 2,195 Finova Capital Corporation, 7.250% 11/08/04 377 1,277 1,654 1,500 1,500 Ford Motor Credit Company, 7.600% 08/01/05 1,617 1,617 500 1,060 1,560 General Motors Acceptance Corporation, 6.150% 04/05/07 467 991 1,458 1,680 1,680 Heller Financial, Inc., 6.000% 03/19/04 1,617 1,617 1,725 1,725 Household Finance Corporation, 8.000% 05/09/05 1,782 1,782 1,200 1,200 Newcourt Credit Group Inc., 6.875% 02/16/05 1,185 1,185 1,250 1,250 Paine Webber Group, Inc., 6.375% 05/15/04 1,220 1,220 1,600 1,600 Washington Mutual, Inc., 7.500% 08/15/06 1,603 1,603 ---------------------------------------------- 1,985 15,307 17,292 ---------------------------------------------- Food and drug stores - 0.7% 1,500 1,500 Nabisco Inc., 6.125% 02/01/33 1,438 1,438 500 1,700 2,200 Safeway Inc., Sr. Notes, 7.250% 09/15/04 499 1,697 2,196 ---------------------------------------------- 499 3,135 3,634 ---------------------------------------------- Health services - 0.1% 60 215 275 HCA-The Healthcare Corporation, 8.750% 09/01/10 61 220 281 ---------------------------------------------- Heavy machinery - 0.3% 1,500 1,500 Thermo Electron Corporation, 7.625% 10/30/08 1,428 1,428 ---------------------------------------------- Housing and furnishing - 0.3% 1,350 1,350 Hanson Overseas B.V., 7.375% 01/15/03 1,349 1,349 ---------------------------------------------- Insurance - 0.3% 1,675 1,675 American General Finance Corporation, 7.450% 01/15/05 1,692 1,692 ----------------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Nations Nations Allocation Balanced Asset Nations Nations Fund Assets Allocation Combined Pro Balanced Asset (new) Fund Fund Forma Assets Allocation Combined Pro Principal Principal Principal Fund Fund Forma amount amount amount Value Value Value (000) (000) (000) Description (000) (000) (000) - ------------------------------------------------------------------------------- ------------------------------------------- Corporate bonds and notes - (continued) Integrated oil - 0.3% $ - $ 1,500 $ 1,500 Occidental Petroleum Corporation, Sr. Notes, 7.650% 02/15/06 $ - $ 1,520 $ 1,520 ---------------------------------------------- Investment services - 1.6% 500 500 Aristar, Inc., 8.250% 06/15/05 518 518 500 1,650 2,150 Bear Stearns Companies, Inc., 7.800% 08/15/07 506 1,670 2,176 480 480 Donaldson Lufkin and Jenrette, 5.875% 04/01/02 472 472 500 500 Goldman Sachs Group, LP, 6.625% 12/01/04 492 492 1,300 1,300 Lehman Brothers Holdings Inc., 6.625% 04/01/04 1,274 1,274 1,500 1,500 MCN Investment Corporation, 6.890% 01/16/02 1,492 1,492 500 500 Morgan Stanley Dean Witter and Company, 7.750% 06/15/05 515 515 1,300 1,300 Salomon Smith Barney Holdings, Inc., 6.250% 05/15/03 1,280 1,280 ---------------------------------------------- 2,503 5,716 8,219 ---------------------------------------------- Metals and mining - 0.1% 385 385 Alcoa, Inc., 7.375% 08/01/10 388 388 ---------------------------------------------- Natural gas pipelines - 0.8% 500 1,815 2,315 KN Energy, Inc., 6.450% 03/01/03 491 1,782 2,273 1,700 1,700 Williams Companies, Inc., 6.500% 08/01/06 1,631 1,631 ---------------------------------------------- 491 3,413 3,904 ---------------------------------------------- Pharmaceuticals - 0.3% 1,500 1,500 Pharmacia Corporation, 6.600% 12/01/28 1,335 1,335 ---------------------------------------------- Telecommunications services - 0.7% 1,650 1,650 AirTouch Communications, Inc., 6.350% 06/01/05 1,598 1,598 1,400 1,400 MCI Worldcom, Inc., 6.400% 08/15/05 1,363 1,363 500 75 575 Sprint Capital Corporation, 6.875% 11/15/28 432 65 497 ---------------------------------------------- 432 3,026 3,458 ---------------------------------------------- Total corporate bonds and notes (Cost $13,343 and $63,290, respectively) 12,813 62,381 75,194 ---------------------------------------------- Foreign bonds and notes - 1.0% 2,275 2,275 AT&T Canada Inc., 8.680% 06/15/08 1,855 1,855 395 395 AT &T Canada Inc., Sr. Notes, 7.650% 09/15/06 399 399 1,000 1,000 Banco Latinoamericano, 7.200% 05/28/02 983 983 500 500 Corp Andina De Fomento, 8.875% 06/01/05 522 522 1,463 1,463 Pemex Finance Ltd., 5.720% 11/15/03 1,429 1,429 70 70 Tyco International Group SA, 6.875% 01/15/29 61 61 ---------------------------------------------- Total foreign bonds and notes (Cost $892 and $4,403, respectively) 921 4,328 5,249 ----------------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Nations Balanced Asset Assets Allocation Combined Pro Fund Fund Forma Principal Principal Principal amount amount amount (000) (000) (000) Description - ------------------------------------------------------------------------------------------------------------------------------- Mortgage-backed securities - 20.2% Commercial mortgage-backed securities - 8.0% $ - $ 750 $ 750 Commercial Mortgage Acceptance Corporation, Series 1999-C1, Class A2, 7.030% 05/15/09 1,239 1,239 Criimi Mae CMBS Corporation, Series 1998-1, Class A1, 5.697% 10/20/01 1,880 1,880 CS First Boston Mortgage Securities Corporation, Series 1998-C1, Class A1B, 6.480% 05/17/08 2,735 2,735 DLJ Commercial Mortgage Corporation, Series 1998-CG1, Class A1B, 6.410% 05/10/08 750 2,600 3,350 DLJ Commercial Mortgage Corporation, Series 1999-CG1, Class A1B, 6.460% 01/10/09 750 750 DLJ Commercial Mortgage Corporation, Series 1999-CG2, Class A1B, 7.300% 06/10/09 750 750 DLJ Commercial Mortgage Corporation, Series 1999-CG3, Class A1B, 7.340% 09/10/09 1,000 1,000 DLJ Commercial Mortgage Corporation, Series 2000-CF1, Class A1B, 7.620% 05/10/10 750 2,300 3,050 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 7.390% 11/15/09 440 440 First Union-Chase Commercial Mortgage, Series 1999-C2, Class A2, 6.645% 04/15/09 750 2,650 3,400 GMAC Commercial Mortgage Securities Inc., Series 1999-C1, Class A2, 6.175% 05/15/33 2,600 2,600 GMAC Commercial Mortgage Securities Inc., Series 1999-C2, Class A2, 6.945% 09/15/33 800 800 Heller Financial Commercial Mortgage Asset Corporation, Series 2000-PH1, Class A2, 7.750% 11/15/09 6,596 6,596 JP Morgan Commercial Mortgage Finance Corporation, Series 1997-C4, Class X, Interest only, 1.290% 12/26/28 2,750 2,750 Mortgage Capital Funding, Inc., Series 1998-MC2, Class A2, 6.423% 05/18/08 2,050 2,050 Nomura Asset Securities Corporation, Series 1998-D6, Class A1B, 6.590% 03/17/28 2,000 2,000 PNC Mortgage Acceptance Corporation, Series 1999-CM1, Class A1B, 7.330% 10/10/09 800 1,750 2,550 Prudential Securities Secured Financing Corporation, Series 1999-C2, Class A2, 7.193% 04/15/09 2,715 2,715 Prudential Securities Secured Financing Corporation, Series 1999-NRF1, Class A2, 6.480% 01/15/09 760 1,715 2,475 Salomon Brothers Mortgage Securities, Series 2000-C1, Class A2, 7.520% 12/18/09 1,600 1,600 Salomon Brothers Mortgage Securities, Series 2000-C2, Class A2, 7.455% 04/18/10 702 168 870 Salomon Brothers Mortgage Securities, Series 2000-NL1, Class A1, 6.601% 04/15/08 42,911 42,911 Vendee Mortgage Trust, Series 1998-1, Class 2, IO, .453% 09/15/27 46,495 46,495 Vendee Mortgage Trust, Series 1998-3, Class 1, IO, .314% 03/15/29 Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 1.8% 64 64 8.000% 01/01/04 400 400 6.500% 04/01/09 1,554 1,554 6.500% 07/01/10 70 70 8.000% 07/01/10 2,909 2,909 6.500% 06/01/14 7 7 10.500% 04/01/19 827 827 8.000% 09/01/25 3,070 3,070 7.000% 10/01/29 438 438 8.000% 06/01/30 Nations Asset Allocation Nations Nations Fund Balanced Asset (new) Assets Allocation Combined Pro Fund Fund Forma Value Value Value Description (000) (000) (000) - ----------------------------------------------------------------------------------------------------------------------------------- Mortgage-backed securities - 20.2% Commercial mortgage-backed securities - 8.0% Commercial Mortgage Acceptance Corporation, Series 1999-C1, Class A2, $ - $ 743 $ 743 7.030% 05/15/09 Criimi Mae CMBS Corporation, Series 1998-1, Class A1, 1,217 1,217 5.697% 10/20/01 CS First Boston Mortgage Securities Corporation, Series 1998-C1, Class A1B, 1,806 1,806 6.480% 05/17/08 DLJ Commercial Mortgage Corporation, Series 1998-CG1, Class A1B, 2,623 2,623 6.410% 05/10/08 DLJ Commercial Mortgage Corporation, Series 1999-CG1, Class A1B, 719 2,493 3,212 6.460% 01/10/09 DLJ Commercial Mortgage Corporation, Series 1999-CG2, Class A1B, 756 756 7.300% 06/10/09 DLJ Commercial Mortgage Corporation, Series 1999-CG3, Class A1B, 752 752 7.340% 09/10/09 DLJ Commercial Mortgage Corporation, Series 2000-CF1, Class A1B, 1,027 1,027 7.620% 05/10/10 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 761 2,333 3,094 7.390% 11/15/09 First Union-Chase Commercial Mortgage, Series 1999-C2, Class A2, 428 428 6.645% 04/15/09 GMAC Commercial Mortgage Securities Inc., Series 1999-C1, Class A2, 704 2,485 3,189 6.175% 05/15/33 GMAC Commercial Mortgage Securities Inc., Series 1999-C2, Class A2, 2,561 2,561 6.945% 09/15/33 Heller Financial Commercial Mortgage Asset Corporation, Series 2000-PH1, 828 828 Class A2, 7.750% 11/15/09 JP Morgan Commercial Mortgage Finance Corporation, Series 1997-C4, 364 364 Class X, Interest only, 1.290% 12/26/28 Mortgage Capital Funding, Inc., Series 1998-MC2, Class A2, 2,629 2,629 6.423% 05/18/08 Nomura Asset Securities Corporation, Series 1998-D6, Class A1B, 1,990 1,990 6.590% 03/17/28 PNC Mortgage Acceptance Corporation, Series 1999-CM1, Class A1B, 2,018 2,018 7.330% 10/10/09 Prudential Securities Secured Financing Corporation, Series 1999-C2, Class A2, 802 1,753 2,555 7.193% 04/15/09 Prudential Securities Secured Financing Corporation, Series 1999-NRF1, 2,601 2,601 Class A2, 6.480% 01/15/09 Salomon Brothers Mortgage Securities, Series 2000-C1, Class A2, 775 1,748 2,523 7.520% 12/18/09 Salomon Brothers Mortgage Securities, Series 2000-C2, Class A2, 1,623 1,623 7.455% 04/18/10 Salomon Brothers Mortgage Securities, Series 2000-NL1, Class A1, 687 165 852 6.601% 04/15/08 Vendee Mortgage Trust, Series 1998-1, Class 2, IO, 748 748 .453% 09/15/27 Vendee Mortgage Trust, Series 1998-3, Class 1, IO, 608 608 .314% 03/15/29 --------------------------------------- 7,212 33,535 40,747 --------------------------------------- Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 1.8% 8.000% 01/01/04 65 65 6.500% 04/01/09 397 397 6.500% 07/01/10 1,533 1,533 8.000% 07/01/10 71 71 6.500% 06/01/14 2,853 2,853 10.500% 04/01/19 8 8 8.000% 09/01/25 841 841 7.000% 10/01/29 3,006 3,006 8.000% 06/01/30 444 444 --------------------------------------- 1,356 7,862 9,218 ---------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Nations Balanced Asset Assets Allocation Combined Pro Fund Fund Forma Principal Principal Principal amount amount amount (000) (000) (000) Description - ------------------------------------------------------------------------------- Mortgage-backed securities - (continued) Federal Housing Authority (FHA) Certificates - 0.4% $ - $ 275 $ 275 7.000% 01/15/27 593 593 6.750% 01/01/40 419 419 7.000% 01/01/40 287 287 6.850% 02/01/40 640 640 6.530% 10/01/40 Federal National Mortgage Association (FNMA) Certificates - 8.1% 191 191 6.500% 01/01/06 1,130 1,130 6.500% 08/01/10 174 174 6.500% 10/01/10 536 536 8.500% 08/01/11 440 440 7.500% 10/01/11 1,974 1,974 6.500% 02/01/13 828 828 6.500% 03/01/15 430 430 10.000% 09/01/18 286 286 7.000% 01/25/21 5,081 5,081 6.500% 12/01/27 2,574 2,574 7.000% 05/01/28 2,459 2,459 7.000% 08/01/28 180 180 6.000% 02/01/29 691 691 6.500% 02/01/29 3,512 3,512 6.500% 07/01/29 2,627 2,627 7.000% 07/01/29 3,174 3,174 7.000% 10/01/29 6,493 6,493 8.000% 11/01/29 1,427 7,794 9,221 6.500% 05/01/30 529 529 7.354% 08/01/36 Government National Mortgage Association (GNMA) Certificates - 1.6% 802 802 6.750% 09/15/01 410 410 6.600% 11/15/01 15 15 10.000% 02/15/16 124 124 9.000% 10/15/19 97 97 9.000% 11/15/19 468 468 9.000% 12/15/19 151 151 9.000% 01/15/20 464 464 7.500% 12/15/23 1,934 1,934 8.000% 07/15/27 336 336 8.000% 09/15/27 192 192 7.000% 11/15/27 90 90 8.000% 04/15/28 2,592 2,592 8.000% 06/15/28 305 305 6.550% 03/15/40 Government National Mortgage Association II (GNMA) Certificates - 0.3% 494 494 6.650% 01/15/34 1,193 1,193 7.375% 10/15/34 Total mortgage-backed securities (Cost $18,922 and $85,189, respectively) U.S. Treasury obligations - 1.4% U.S. Treasury strips - 1.4% 1,250 1,250 Interest only 05/15/20 3,720 14,885 18,605 Principal only 11/15/21 490 490 Principal only 08/15/26 610 6,000 6,610 Principal only 02/15/27 Total U.S. Treasury obligations (Cost $1,188 and $5,483, respectively) Nations Asset Allocation Nations Nations Fund Balanced Asset (new) Assets Allocation Combined Pro Fund Fund Forma Value Value Value Description (000) (000) (000) - ------------------------------------------ ---------------------------------------------- Mortgage-backed securities - (continued) Federal Housing Authority (FHA) Certificates - 0.4% 7.000% 01/15/27 $ - $ 271 $ 271 6.750% 01/01/40 558 558 7.000% 01/01/40 400 400 6.850% 02/01/40 271 271 6.530% 10/01/40 592 592 ---------------------------------------------- 2,092 2,092 ---------------------------------------------- Federal National Mortgage Association (FNMA) Certificates - 8.1% 6.500% 01/01/06 188 188 6.500% 08/01/10 1,117 1,117 6.500% 10/01/10 172 172 8.500% 08/01/11 552 552 7.500% 10/01/11 444 444 6.500% 02/01/13 1,941 1,941 6.500% 03/01/15 812 812 10.000% 09/01/18 460 460 7.000% 01/25/21 282 282 6.500% 12/01/27 4,883 4,883 7.000% 05/01/28 2,524 2,524 7.000% 08/01/28 2,415 2,415 6.000% 02/01/29 168 168 6.500% 02/01/29 663 663 6.500% 07/01/29 3,379 3,379 7.000% 07/01/29 2,575 2,575 7.000% 10/01/29 3,110 3,110 8.000% 11/01/29 6,583 6,583 6.500% 05/01/30 1,371 7,487 8,858 7.354% 08/01/36 544 544 ---------------------------------------------- 10,088 31,582 41,670 ---------------------------------------------- Government National Mortgage Association (GNMA) Certificates - 1.6% 6.750% 09/15/01 759 759 6.600% 11/15/01 383 383 10.000% 02/15/16 16 16 9.000% 10/15/19 129 129 9.000% 11/15/19 101 101 9.000% 12/15/19 489 489 9.000% 01/15/20 157 157 7.500% 12/15/23 467 467 8.000% 07/15/27 1,969 1,969 8.000% 09/15/27 343 343 7.000% 11/15/27 189 189 8.000% 04/15/28 91 91 8.000% 06/15/28 2,639 2,639 6.550% 03/15/40 285 285 ---------------------------------------------- 467 7,550 8,017 ---------------------------------------------- Government National Mortgage Association II (GNMA) Certificates - 0.3% 6.650% 01/15/34 469 469 7.375% 10/15/34 1,187 1,187 ---------------------------------------------- 1,656 1,656 ---------------------------------------------- Total mortgage-backed securities (Cost $18,922 and $85,189, respectively) 19,123 84,277 103,400 ---------------------------------------------- U.S. Treasury obligations - 1.4% U.S. Treasury strips - 1.4% Interest only 05/15/20 381 381 Principal only 11/15/21 1,038 4,154 5,192 Principal only 08/15/26 106 106 Principal only 02/15/27 128 1,259 1,387 ---------------------------------------------- Total U.S. Treasury obligations (Cost $1,188 and $5,483, respectively) 1,272 5,794 7,066 ----------------------------------------------
Nations Balanced Assets Fund/Nations Asset Allocation Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000
Nations Asset Allocation Nations Nations Fund Nations Nations Balanced Asset (new) Balanced Asset Assets Allocation Combined Pro Assets Allocation Combined Pro Fund Fund Forma Fund Fund Forma Value Value Value Shares Shares Shares Description (000) (000) (000) - ----------------------------------------------------------------------------------- ---------------------------------------------- Investment companies - 0.4% (Cost $1,913 and $11, respectively) 1,913,000 11,000 1,924,000 Nations Cash Reserves# $ 1,913 $ 11 $ 1,924 ----------------------------------------------- Total investments - 100.0% (Cost $85,721 and $356,206, respectively) $ 91,362 $ 420,326 $ 511,688 ----------------------------------------------- # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc.
Nations Balanced Assets Fund / Nations Asset AllocationFund Pro Forma Combining Statement of Net Assets (unaudited) September 30, 2000
Nations Asset Allocation Fund (new) Nations Balanced Nations Asset Adjustments to Pro Forma Assets Fund Allocation Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------------------------- --------------- Total Investments $ 91,362 $ 420,326 $ - $ 511,688 Other Assets and Liabilities: Receivable for investment securities sold 7,168 2,140 9,308 Receivable for Fund shares sold - 415 415 Dividends receivable 86 205 291 Interest receivable 346 1,585 1,931 Receivable for variation margin - 36 36 Variation margin/due to broker - (28) (28) Collateral for securities loaned (206) - (206) Payable for Fund shares redeemed (164) (709) (873) Investment advisory fee payable (29) (228) (257) Administration fee payable (17) (81) (98) Shareholder servicing and distribution fees payable (40) (162) (202) Due to custodian (31) (98) (129) Payable for investment securities purchased (7,890) (2,373) (10,263) Accrued Trustees' fees and expenses (33) (16) (49) Accrued expenses and other liabilities (42) (115) (157) --------------------------------------------------------------- --------------- Total Other Assets and Liabilities (852) 571 - (281) --------------------------------------------------------------- --------------- Net Assets $ 90,510 $ 420,897 $ - $ 511,407 =============================================================== =============== Net Assets by Class: Primary A $ 34,074,802 $ 17,934,129 $ - $52,008,931 Investor A 10,069,608 277,103,861 - 287,173,469 Investor B 45,489,368 123,134,728 - 168,624,096 Investor C 876,088 2,723,922 - 3,600,010 --------------------------------------------------------------- --------------- $ 90,509,866 $ 420,896,640 $ - $511,406,506 --------------------------------------------------------------- --------------- Shares Outstanding by Class: Primary A 3,334,901 754,634 (1,901,380) (a) 2,188,155 Investor A 986,444 11,663,078 (562,639) (a) 12,086,883 Investor B 4,464,564 5,207,504 (2,541,123) (a) 7,130,945 Investor C 86,290 115,060 (49,277) (a) 152,073 --------------------------------------------------------------- --------------- 8,872,199 17,740,276 (5,054,419) 21,558,056 --------------------------------------------------------------- --------------- Net Asset Value per Share by Class: Primary A $ 10.22 $ 23.77 $ - $ 23.77 Investor A $ 10.21 $ 23.76 $ - $ 23.76 Investor B $ 10.19 $ 23.65 $ - $ 23.65 Investor C $ 10.15 $ 23.67 $ - $ 23.67 (a) Reflects the issuance of Nations Asset Allocation Fund shares to holders of shares of Nations Balanced Assets Fund. See Notes to Pro Forma Financial Statements
Nations Balanced Assets Fund / Nations Asset Allocation Fund Pro Forma Combining Statement of Operations (unaudited) Twelve Month Period Ending September 30, 2000
Nations Asset Allocation Fund (new) Nations Balanced Nations Asset Adjustments to Pro Forma Assets Fund Allocation Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------------------------- --------------- Investment Income: Interest $3,446 $4,790 $ - $8,236 Dividends (net of foreign withholding taxes of $3 and $14, respectively) 1,112 9,371 - 10,483 Securities lending 7 - - 7 --------------------------------------------------------------- --------------- Total Investment Income 4,565 14,161 - 18,726 --------------------------------------------------------------- --------------- Expenses: Investment advisory fee 680 2,778 - 3,458 Administration fee 241 903 - 1,144 Transfer agent fee 40 130 - 170 Custodian fees 16 48 - 64 Legal and audit fees 81 95 (81)(a) 95 Registration and filing fees 38 126 (38)(a) 126 Trustees' fees and expenses 19 20 (19)(a) 20 Interest expense 1 1 - 2 Printing expense 50 81 - 131 Other 88 107 (88)(a) 107 --------------------------------------------------------------- --------------- Subtotal 1,254 4,289 (226) 5,317 --------------------------------------------------------------- --------------- Shareholder servicing and distribution fees: Investor A Shares 31 340 - 371 Investor B Shares 545 1,182 - 1,727 Investor C Shares 12 31 - 43 Seafirst Shares - 360 (360)(b) - --------------------------------------------------------------- --------------- Total expenses 1,842 6,202 (586) 7,458 --------------------------------------------------------------- --------------- Fees waived by investment advisor, administrator and/or distributor (272) (621) 893 (c) - Fees reduced by credits allowed by the custodian - (7) - (7) --------------------------------------------------------------- --------------- Net Expenses 1,570 5,574 307 7,451 --------------------------------------------------------------- --------------- Net Investment Income 2,995 8,587 (307) 11,275 --------------------------------------------------------------- --------------- Net Realized And Unrealized Gain/(Loss) on Investments: Net realized gain/(loss) from: Security transactions 2,504 24,409 26,913 Futures contracts - (20) (20) --------------------------------------------------------------- --------------- Net realized gain/(loss) on investments 2,504 24,389 26,893 --------------------------------------------------------------- --------------- Change in unrealized appreciation/ (depreciation) of: Securities (1,821) 8,617 6,796 Futures contracts - (185) (185) --------------------------------------------------------------- --------------- Net change in unrealized appreciation/ (depreciation) of investments (1,821) 8,432 6,611 --------------------------------------------------------------- --------------- Net realized and unrealized gain/(loss) on investments 683 32,821 33,504 --------------------------------------------------------------- --------------- Net Increase/(Decrease) in Net Assets Resulting From Operations $3,678 $41,408 ($307) $44,779 =============================================================== =============== Legend: (a) Adjustment reflects expected savings when the two funds become one. (b) Seafirst Shares converted into Investor A Shares on June 23, 2000. (c) Adjustment for inapplicability of expense cap. See Notes to Pro Forma Financial Statements
Nations Balanced Assets Fund Nations Asset Allocation Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Fund Trust (the "Trust"), Nations Reserves ("Reserves") and Nations Funds Trust ("Funds Trust") are each registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 2000, the Trust offered thirty-four separate portfolios, Reserves offered sixteen separate portfolios and Funds Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 2000 and the unaudited Pro Forma Combining Statement of Operations for the year ended September 30, 2000 assumes the exchange occurred as of October 1, 1999. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 2000 and for the twelve month period then ended. The pro forma statements give effect to the proposed agreement and plan of reorganization between the Trust, on behalf of Nations Balanced Assets Fund, Reserves, on behalf of Nations Asset Allocation Fund and Funds Trust, on behalf of a newly created shell fund (the "Acquiring Fund"). The Agreement provides for the transfer of the assets and stated liabilities of Nations Balanced Assets Fund and Nations Asset Allocation Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of the Acquiring Fund. Under generally accepted accounting principles, the market value of investment securities of Nations Balanced Assets Fund and Nations Asset Allocation Fund will be carried forward as the cost basis to the Acquiring Fund and the results of operations of Nations Balanced Assets Fund and Nations Asset Allocation Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization, which are not considered to be material. It is not expected that the investment adviser or sub-adviser will sell any securities of either acquired fund, in anticipation of or as a result of the reorganization, other than in the normal course of business. These financial statements present the reorganization of Nations Balanced Assets Fund and Nations Asset Allocation Fund into a newly created shell fund of Funds Trust. It is possible that one or both of Nations Balanced Assets Fund and Nations Asset Allocation Fund will not approve the reorganization. If this situation were to arise, the pro forma presentation of Nations Balanced Assets Fund into the newly created shell fund or Nations Asset Allocation Fund into the newly created shell fund will not be shown because it is a shell transaction only. The investment adviser and/or affiliates will bear the customary costs associated with the reorganization, including proxy solicitation. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. Nations Balanced Assets Fund Nations Asset Allocation Fund Notes to Pro Forma Combining Financial Statements (unaudited) 2. Pro Forma Operations Pro forma operating expenses include the actual expenses of each fund and the combined fund, with certain expenses adjusted to reflect the expected expenses of the combined entity. Nations U. S. Government Bond Fund/Nations Government Securities Fund Pro Forma Combining Schedule of Investments (unaudited) September 30, 2000 Nations Nations U.S. Government Government Bond Securities Combined Pro Fund Fund Forma Principal Principal Principal amount amount amount (000) (000) (000) Description - ------------------------------------------------------------------------------------------------------------------------------------ Asset-backed securities - 0.4% (Cost $1,308) $ - $ 1,308 $ 1,308 Export Funding Trust, Series 1995-A, Class A, 8.210% 12/29/06 Mortgage-backed securities - 86.0% Commercial mortgage-backed securities - 10.6% 1,265 1,265 Chase Manhattan Bank - First Union National, Series 1999-1, Class 2, 7.439% 07/15/09 1,225 1,225 Commercial Mortgage Acceptance Corporation, Series 1999-C1, Class A2, 7.030% 05/15/09 1,200 3,900 5,100 Commercial Mortgage Asset Trust, Series 1999-C1, Class A3, 6.640% 09/17/10 725 725 DLJ Commercial Mortgage Corporation, Series 1998-CG1, Class A1B, 6.410% 05/10/08 3,820 3,820 DLJ Commercial Mortgage Corporation, Series 1999-CG3, Class A1B, 7.340% 09/10/09 1,265 3,820 5,085 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 7.390% 11/15/09 650 650 Mortgage Capital Funding, Inc., Series 1998-MC2, Class A2, 6.423% 05/18/08 1,225 3,800 5,025 PNC Mortgage Acceptance Corporation, Series 1999-CM1, Class A1B, 7.330% 10/10/09 1,200 1,200 PNC Mortgage Acceptance Corporation, Series 2000-C1, Class A2, 7.610% 02/15/10 3,900 3,900 Prudential Securities Secured Financing Corporation, Series 1999-C2, Class A2, 7.193% 04/15/09 1,265 1,265 Prudential Securities Secured Financing Corporation, Series 1999-RF1, Class A2, 6.480% 01/15/09 1,265 1,265 Salomon Brothers Mortgage Securities, Series 2000-C2, Class A2, 7.455% 04/18/10 45,095 45,095 Vendee Mortgage Trust, Series 1998-1, Class 2, IO, .453% 09/15/27 41,572 41,572 Vendee Mortgage Trust, Series 1998-3, Class 1, IO, .314% 03/15/29 Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 36.7% 607 607 10.000% 07/01/01 - 09/01/18 1,810 1,810 8.500% 09/01/01 - 09/01/20 435 435 9.000% 02/01/02 - 12/01/16 925 42,000 42,925 6.250% 10/15/02 - 07/15/04 5,975 5,975 5.750% 07/15/03 308 308 8.000% 08/01/07 - 05/01/17 29 29 7.500% 08/01/08 29,011 29,011 6.500% 01/01/09 - 09/15/25 1,000 1,000 6.625% 09/15/09 4,992 5,347 10,339 6.000% 09/01/13 1,381 1,381 9.500% 04/01/18 - 01/01/29 358 358 7.000% 05/01/29 - 08/01/29 17,450 17,450 6.500% 08/01/30 Federal National Mortgage Association (FNMA) Certificates - 29.0% 255 255 8.500% 11/01/01 - 07/01/21 236 236 7.000% 07/01/03 5,600 5,600 5.625% 05/14/04 10,091 10,091 8.000% 04/01/06 - 11/01/29 1,849 1,849 10.000% 10/01/06 - 04/01/20 2,444 2,444 6.135% 08/01/08 8,290 8,290 7.500% 08/01/08 - 02/01/15 61 61 8.250% 04/01/09 474 19,946 20,420 6.000% 05/01/13 - 06/01/29 1,750 1,750 7.500% 02/01/15 6,733 6,733 6.565% 07/01/16 814 814 9.000% 12/01/16 - 09/01/24 6,386 6,386 9.500% 04/01/20 - 08/01/21
Nations Government Securities Nations Nations Fund U.S. Government Government (new) Bond Securities Combined Pro Fund Fund Forma Value Value Value Description (000) (000) (000) - ------------------------------------------------------------------------------------------------------------------------------------ Asset-backed securities - 0.4% (Cost $1,308) Export Funding Trust, Series 1995-A, Class A, 8.210% 12/29/06 $ - $ 1,363 $ 1,363 -------------------------------------------- Mortgage-backed securities - 86.0% Commercial mortgage-backed securities - 10.6% Chase Manhattan Bank - First Union National, Series 1999-1, Class 2, 7.439% 07/15/09 1,287 1,287 Commercial Mortgage Acceptance Corporation, Series 1999-C1, Class A2, 7.030% 05/15/09 1,213 1,213 Commercial Mortgage Asset Trust, Series 1999-C1, Class A3, 6.640% 09/17/10 1,157 3,759 4,916 DLJ Commercial Mortgage Corporation, Series 1998-CG1, Class A1B, 6.410% 05/10/08 695 695 DLJ Commercial Mortgage Corporation, Series 1999-CG3, Class A1B, 7.340% 09/10/09 3,833 3,833 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 7.390% 11/15/09 1,283 3,875 5,158 Mortgage Capital Funding, Inc., Series 1998-MC2, Class A2, 6.423% 05/18/08 621 621 PNC Mortgage Acceptance Corporation, Series 1999-CM1, Class A1B, 7.330% 10/10/09 1,236 3,835 5,071 PNC Mortgage Acceptance Corporation, Series 2000-C1, Class A2, 7.610% 02/15/10 1,231 1,231 Prudential Securities Secured Financing Corporation, Series 1999-C2, Class A2, 7.193% 04/15/09 3,908 3,908 Prudential Securities Secured Financing Corporation, Series 1999-RF1, Class A2, 6.480% 01/15/09 1,212 1,212 Salomon Brothers Mortgage Securities, Series 2000-C2, Class A2, 7.455% 04/18/10 1,283 1,283 Vendee Mortgage Trust, Series 1998-1, Class 2, IO, .453% 09/15/27 786 786 Vendee Mortgage Trust, Series 1998-3, Class 1, IO, .314% 03/15/29 543 543 -------------------------------------------- 9,902 21,855 31,757 -------------------------------------------- Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 36.7% 10.000% 07/01/01 - 09/01/18 634 634 8.500% 09/01/01 - 09/01/20 1,848 1,848 9.000% 02/01/02 - 12/01/16 445 445 6.250% 10/15/02 - 07/15/04 920 41,663 42,583 5.750% 07/15/03 5,857 5,857 8.000% 08/01/07 - 05/01/17 312 312 7.500% 08/01/08 29 29 6.500% 01/01/09 - 09/15/25 27,909 27,909 6.625% 09/15/09 988 988 6.000% 09/01/13 4,817 5,159 9,976 9.500% 04/01/18 - 01/01/29 1,432 1,432 7.000% 05/01/29 - 08/01/29 351 351 6.500% 08/01/30 16,748 16,748 -------------------------------------------- 28,342 80,770 109,112 -------------------------------------------- Federal National Mortgage Association (FNMA) Certificates - 29.0% 8.500% 11/01/01 - 07/01/21 261 261 7.000% 07/01/03 235 235 5.625% 05/14/04 5,430 5,430 8.000% 04/01/06 - 11/01/29 10,229 10,229 10.000% 10/01/06 - 04/01/20 1,906 1,906 6.135% 08/01/08 2,342 2,342 7.500% 08/01/08 - 02/01/15 8,354 8,354 8.250% 04/01/09 63 63 6.000% 05/01/13 - 06/01/29 457 18,720 19,177 7.500% 02/01/15 1,763 1,763 6.565% 07/01/16 6,495 6,495 9.000% 12/01/16 - 09/01/24 840 840 9.500% 04/01/20 - 08/01/21 6,626 6,626
Nations U. S. Government Bond Fund/Nations Government Securities Fund Pro Forma Combining Schedule of Investments (unaudited) (continued) September 30, 2000 Nations Nations U.S. Government Government Bond Securities Combined Pro Fund Fund Forma Principal Principal Principal amount amount amount (000) (000) (000) Description - ------------------------------------------------------------------------------------------------------------------ Mortgage-backed securities - (continued) Federal National Mortgage Association (FNMA) Certificates - (continued) $ - $ 1,748 $ 1,748 6.990% 06/01/23 1,496 1,496 6.750% 03/18/28 9,616 9,616 5.500% 02/01/29 - 03/01/29 4,855 4,855 6.500% 03/01/29 5,800 5,800 8.000% 05/01/30 305 305 8.426% 08/01/36 Government National Mortgage Association (GNMA) Certificates - 9.7% 260 260 10.500% 10/15/00 - 04/15/21 240 240 10.000% 12/15/00 - 03/15/21 1 1 11.750% 12/15/00 357 357 9.500% 02/20/01 - 04/20/06 546 546 9.000% 06/15/01 - 03/15/27 3,979 3,979 7.500% 09/15/07 - 04/15/29 259 259 7.000% 02/15/09 - 06/15/23 2,815 2,815 8.500% 10/15/09 - 02/20/29 9,812 9,812 6.000% 12/15/10 - 07/15/29 46 46 13.000% 1/15/11 - 04/15/11 3,348 3,348 8.000% 11/15/14 - 07/15/26 81 81 11.000% 11/15/15 - 10/20/20 5,191 5,191 7.500% 04/15/22 - 04/15/29 2,350 2,350 6.500% 04/15/29 127 127 8.000% 07/15/29 Total mortgage-backed securities (Cost $52,635 and $203,887, respectively) U.S. government and agency obligations - 1.2% (Cost $3,925) Federal Home Loan Mortgage Corporation (FHLMC) - 1.2% 4,005 4,005 5.750% 04/15/08 U.S. Treasury obligations - 9.8% U.S. Treasury notes - 1.6% 4,900 4,900 5.500% 08/31/01 U.S. Treasury strips - 8.2% 5,000 5,000 Interest only 02/15/10 16,625 16,625 Interest only 02/15/20 2,570 5,300 7,870 Interest only 05/15/20 1,750 1,750 Principal only 11/15/04 2,100 2,100 Principal only 05/15/20 1,500 1,500 Principal only 02/15/21 9,525 8,500 18,025 Principal only 11/15/21 4,525 22,075 26,600 Principal only 02/15/27 1,700 2,300 4,000 Principal only 11/15/27 Total U.S. Treasury obligations (Cost $4,585 and $23,147, respectively) Short term investments - 2.0% (Cost $5,877) Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 2.0% 5,890 5,890 Discount note 10/13/00 Investment companies - 2.4% (Cost $5,794 and $1,289, respectively) 5,794,000 1,289,000 7,083,000 Nations Cash Reserves# Total investments - 101.8% (Cost $72,816 and $229,631, respectively)
Nations Government Securities Nations Nations Fund U.S. Government Government (new) Bond Securities Combined Pro Fund Fund Forma Value Value Value Description (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------- Mortgage-backed securities - (continued) Federal National Mortgage Association (FNMA) Certificates - (continued) 6.990% 06/01/23 $ - $ 1,720 $ 1,720 6.750% 03/18/28 1,424 1,424 5.500% 02/01/29 - 03/01/29 8,724 8,724 6.500% 03/01/29 4,663 4,663 8.000% 05/01/30 5,876 5,876 8.426% 08/01/36 313 313 --------------------------------------- 8,096 78,345 86,441 --------------------------------------- Government National Mortgage Association (GNMA) Certificates - 9.7% 10.500% 10/15/00 - 04/15/21 282 282 10.000% 12/15/00 - 03/15/21 254 254 11.750% 12/15/00 1 1 9.500% 02/20/01 - 04/20/06 364 364 9.000% 06/15/01 - 03/15/27 565 565 7.500% 09/15/07 - 04/15/29 3,991 3,991 7.000% 02/15/09 - 06/15/23 256 256 8.500% 10/15/09 - 02/20/29 2,897 2,897 6.000% 12/15/10 - 07/15/29 9,217 9,217 13.000% 1/15/11 - 04/15/11 50 50 8.000% 11/15/14 - 07/15/26 3,418 3,418 11.000% 11/15/15 - 10/20/20 87 87 7.500% 04/15/22 - 04/15/29 5,216 5,216 6.500% 04/15/29 2,263 2,263 8.000% 07/15/29 130 130 --------------------------------------- 6,384 22,607 28,991 --------------------------------------- Total mortgage-backed securities (Cost $52,635 and $203,887, respectively) 52,724 203,577 256,301 --------------------------------------- U.S. government and agency obligations - 1.2% (Cost $3,925) Federal Home Loan Mortgage Corporation (FHLMC) - 1.2% 5.750% 04/15/08 3,768 3,768 --------------------------------------- U.S. Treasury obligations - 9.8% U.S. Treasury notes - 1.6% 5.500% 08/31/01 4,865 4,865 --------------------------------------- U.S. Treasury strips - 8.2% Interest only 02/15/10 2,859 2,859 Interest only 02/15/20 5,115 5,115 Interest only 05/15/20 782 1,613 2,395 Principal only 11/15/04 1,373 1,373 Principal only 05/15/20 640 640 Principal only 02/15/21 438 438 Principal only 11/15/21 2,659 2,372 5,031 Principal only 02/15/27 949 4,632 5,581 Principal only 11/15/27 343 463 806 --------------------------------------- 4,733 19,505 24,238 --------------------------------------- Total U.S. Treasury obligations (Cost $4,585 and $23,147, respectively) 4,733 24,370 29,103 --------------------------------------- Short term investments - 2.0% (Cost $5,877) Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 2.0% Discount note 10/13/00 5,877 5,877 --------------------------------------- Investment companies - 2.4% (Cost $5,794 and $1,289, respectively) Nations Cash Reserves# 5,794 1,289 7,083 --------------------------------------- Total investments - 101.8% (Cost $72,816 and $229,631, respectively) $ 72,896 $ 230,599 $ 303,495 ---------------------------------------
# Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. Nations U.S. Government Bond Fund / Nations Government Securities Fund Pro Forma Combining Statement of Net Assets (unaudited) September 30, 2000
Nations Government Securities Fund (new) Nations U.S. Government Bond Nations Government Adjustments to Pro Forma Fund Securities Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------------------- --------------- Total Investments $ 72,896 $ 230,599 $ - $ 303,495 Other Assets and Liabilities: Cash 1 - 1 Receivable for investment securities sold 865 2,386 3,251 Receivable for Fund shares sold 558 149 707 Interest receivable 473 2,106 2,579 Collateral for securities loaned - (644) (644) Payable for Fund shares redeemed (913) (2,742) (3,655) Investment advisory fee payable (23) (76) (99) Administration fee payable (12) (42) (54) Shareholder servicing and distribution fees payable (8) (32) (40) Distributions payable (318) (1,186) (1,504) Payable for investment securities purchased (5,842) - (5,842) Accrued Directors' fees and expenses (21) (26) (47) Accrued expenses and other liabilities (51) (56) (107) --------------------------------------------------------- --------------- Total Other Assets and Liabilities (5,291) (163) - (5,454) --------------------------------------------------------- --------------- Net Assets $ 67,605 $ 230,436 $ - $ 298,041 ========================================================= =============== Net Assets by Class: Primary A $ 55,630,974 $ 151,990,440 $ - $ 207,621,414 Investor A 2,607,193 53,237,827 - 55,845,020 Investor B 8,645,303 24,939,807 - 33,585,110 Investor C 721,153 267,593 - 988,746 --------------------------------------------------------- --------------- $ 67,604,623 $ 230,435,667 $ - $ 298,040,290 --------------------------------------------------------- --------------- Shares Outstanding by Class: Primary A 5,746,515 16,035,375 121,731 (a) 21,903,621 Investor A 268,667 5,623,627 6,644 (a) 5,898,938 Investor B 893,173 2,631,264 18,779 (a) 3,543,216 Investor C 74,478 28,342 1,915 (a) 104,735 --------------------------------------------------------- --------------- 6,982,833 24,318,608 149,069 31,450,510 --------------------------------------------------------- --------------- Net Asset Value per Share by Class: Primary A $ 9.68 $ 9.48 $ - $ 9.48 Investor A $ 9.70 $ 9.47 $ - $ 9.47 Investor B $ 9.68 $ 9.48 $ - $ 9.48 Investor C $ 9.68 $ 9.44 $ - $ 9.44
(a) Reflects the issuance of Nations Government Securities Fund shares to holders of shares of Nations U.S. Government Bond Fund. See Notes to Pro Forma Financial Statements Nations U.S. Government Bond Fund / Nations Government Securities Fund Pro Forma Combining Statement of Operations (unaudited) Twelve Month Period Ending September 30, 2000
Nations Government Securities Fund (new) Nations U.S. Government Bond Nations Government Adjustments to Pro Forma Fund Securities Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------------- --------------- Investment Income: Interest $ 5,065 $ 15,030 $ - $ 20,095 Securities lending 66 42 108 ----------------------------------------------------- --------------- Total Investment Income 5,131 15,072 - 20,203 ----------------------------------------------------- --------------- Expenses: Investment advisory fee 405 1,039 - 1,444 Administration fee 178 460 - 638 Transfer agent fee 32 84 - 116 Custodian fees 9 35 (9) (a) 35 Legal and audit fees 95 95 (95) (a) 95 Registration and filing fees 22 47 (6) (a) 63 Directors' fees and expenses 19 20 (19) (a) 20 Printing expense 17 23 - 40 Other 62 83 (62) (a) 83 ----------------------------------------------------- --------------- Subtotal 839 1,886 (191) 2,534 ----------------------------------------------------- --------------- Shareholder servicing and distribution fees: Investor A Shares 6 147 - 153 Investor B Shares 82 277 - 359 Investor C Shares 11 2 - 13 ----------------------------------------------------- --------------- Total expenses 938 2,312 (191) 3,059 ----------------------------------------------------- --------------- Fees waived by investment advisor, administrator and/or distributor (80) (222) (145)(b) (447) Fees reduced by credits allowed by the custodian (1) (3) - (4) ----------------------------------------------------- --------------- Net Expenses 857 2,087 (336) 2,608 ----------------------------------------------------- --------------- Net Investment Income 4,274 12,985 336 17,595 ----------------------------------------------------- --------------- Net Realized And Unrealized Gain/(Loss) on Investments: Net realized gain/(loss) on investments (3,713) (5,022) (8,735) Net change in unrealized appreciation/ (depreciation) of investments 2,976 4,511 7,487 ----------------------------------------------------- --------------- Net realized and unrealized gain/(loss) on investments (737) (511) (1,248) ----------------------------------------------------- --------------- Net Increase/(Decrease) in Net Assets Resulting From Operations $ 3,537 $12,474 $ 336 $ 16,347 ====================================================== =============== Legend: - ------- (a) Adjustment reflects expected savings when the two funds become one. (b) Adjustment reflects 0.05% co-administration waiver approved by the Board of Directors, effective December 1, 2000. See Notes to Pro Forma Financial Statements
Nations U.S. Government Bond Fund Nations Government Securities Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Fund, Inc. (the "Company") and Nations Funds Trust ("Funds Trust") are each registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 2000, the Company offered six separate portfolios and Funds Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 2000 and the unaudited Pro Forma Combining Statement of Operations for the year ended September 30, 2000 assumes the exchange occurred as of October 1, 1999. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 2000 and for the twelve month period then ended. The pro forma statements give effect to the proposed agreement and plan of reorganization between the Company, on behalf of Nations U.S. Government Bond Fund and Nations Government Securities Fund and Funds Trust, on behalf of a newly created shell fund (the "Acquiring Fund"). The Agreement provides for the transfer of the assets and stated liabilities of Nations U.S. Government Bond Fund and Nations Government Securities Fund to the Acquiring Fund, in exchange for shares of equal value of designated classes of the Acquiring Fund. Under generally accepted accounting principles, the market value of investment securities of Nations U.S. Government Bond Fund and Nations Government Securities Fund will be carried forward as the cost basis to the Acquiring Fund and the results of operations of Nations U.S. Government Bond Fund and Nations Government Securities Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization, which are not considered to be material. It is not expected that the investment adviser or sub-adviser will sell any securities of either acquired fund, in anticipation of or as a result of the reorganization, other than in the normal course of business. These financial statements present the reorganization of Nations U.S. Government Bond Fund and Nations Government Securities Fund into a newly created shell fund of Funds Trust. It is possible that one or both of Nations U.S. Government Bond Fund and Nations Government Securities Fund will not approve the reorganization. If this situation were to arise, the pro forma presentation of Nations U.S. Government Bond Fund into the newly created shell fund or Nations Government Securities Fund into the newly created shell fund will not be shown because it is a shell transaction only. The investment adviser and/or affiliates will bear the customary costs associated with the reorganization, including proxy solicitation. Nations U.S. Government Bond Fund Nations Government Securities Fund Notes to Pro Forma Combining Financial Statements (unaudited) (continued) The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 2. Pro Forma Operations Pro forma operating expenses include the actual expenses of each fund and the combined fund, with certain expenses adjusted to reflect the expected expenses of the combined entity. The proforma financial statements were prepared to reflect a co-administration waiver of 0.05% of Nations Government Securities Fund's average daily net assets which was effective on December 1, 2000. Prior to December 1, 2000, there was no co-administration waiver for Nations Government Securities Fund. 3. Subsequent Event Effective December 1, 2000, the net fund level expense ratio for U.S. Government Bond Fund will be maintained, on a daily basis, at the same net fund level expense ratio as that of Government Securities Fund. -----END PRIVACY-ENHANCED MESSAGE-----