N-30D 1 g68300n-30d.txt STOCK FUNDS 1 [GRAPHIC: PHOTO COLLAGE - COMPUTER Nations Convertible CHIP/OYSTER SHELL] Securities Fund Nations Balanced Assets Fund Nations Asset Allocation Fund Nations Equity Income Fund Nations Value Fund Nations Marsico Growth & Income Fund Nations Blue Chip Fund Nations Strategic Growth Fund Nations Capital Growth Fund Nations Aggressive Growth Fund Nations Marsico Focused Equities Fund Nations MidCap Growth Fund Nations Marsico 21st Century Fund Nations Small Company Fund STOCK FUNDS ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2001 [NATIONS FUNDS LOGO] 2 This Report is submitted for the general information of shareholders of Nations Funds. This material must be preceded or accompanied by a current Nations Funds prospectus. Nations Funds distributor: Stephens Inc., which is not affiliated with Bank of America N.A., is not a bank, and securities offered by it are not guaranteed by any bank or insured by the FDIC. Stephens Inc., member NYSE, SIPC. Nations Funds Investment adviser: Banc of America Advisors, Inc. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE 3 PRESIDENTS' MESSAGE Dear Shareholder: The 12-month period ending March 31, 2001 marked one of the most difficult periods for investors in recent memory. As an investor, you've probably asked yourself many times over "When will it end?" The U.S. stock market has taken investors on a very wild ride during the past year and, more so, during the first quarter of 2001. After reaching all-time highs in early 2000, each of the three major stock market indexes -- the Dow Jones Industrial Average, Standard & Poor's 500 Composite Stock Price Index (S&P 500) and Nasdaq Composite Index (Nasdaq)(1) -- all ended the year 2000 in negative territory. To make matters worse, after some modest gains in January 2001, each of these indexes declined to levels not seen since 1998. It was the first time in a long time that both the S&P 500 and Nasdaq entered bear market territory -- defined by a loss of more than 20% from an index's 52-week high. International stock markets also felt the impact of the U.S. economic slowdown. The year 2000 marked the first time since 1992 that international stocks -- represented by the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index(2) -- finished the year in the minus column, down 14%. Bond investors were the only group to have anything to cheer about, as bonds -- represented by the Lehman Aggregate Bond Index(3) -- ended 2000 ahead of the S&P 500 by more than 20%. Not only that, it was the first time in a decade that bonds outperformed stocks. Now more than ever we need to be reminded of the fact that investing generally is a long-term proposition -- one that requires patience and perseverance during volatile times. With that long-term view in mind, here are some points to note. DOWNTURNS CAN ALSO EQUAL OPPORTUNITY While many stocks were flying high in 1999 and 2000, especially in the technology sector, several Wall Street experts were warning that many of these stocks were overvalued. This warning has now come to fruition, as many of these high-flying growth stocks of yesterday now appear to be today's value opportunities. We've always been told to "buy low" and now may be a good opportunity to buy some of the most widely regarded companies in corporate America at a discount. DIVERSIFICATION IS KEY A carefully selected portfolio of stocks, bonds and money market instruments is a sensible way to reduce some of the risk associated with investing. Since different investments respond differently to the same economic conditions, we believe it makes even more sense to maintain a diversified portfolio through uncertain times. It's times like these that can prove the effectiveness of asset allocation. (1)The Dow Jones Industrial Average is a price-weighted index of 30 of the largest, most widely held stocks traded on the New York Stock Exchange. The Standard & Poor's 500 Composite Stock Price Index is an index consisting of 500 widely held common stocks. The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. All indexes are unmanaged and unavailable for investment. (2)The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index is an unmanaged, capitalization-weighted index consisting of securities listed on exchanges in European, Australasian and Far Eastern markets. It is unavailable for investment. (3)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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 4 PRESIDENTS' MESSAGE CONTINUED... BRIGHTER DAYS MAY BE AHEAD The U.S. economy has been slowing down and we think it will continue to do so for the near future. In addition, the markets will continue to be rocked by reports of lower corporate earnings. However, the Federal Reserve Board has done its part in aiding the economy by reducing interest rates aggressively this year. The markets react to this sort of news almost instantly, but it's important to note that rate cuts take time to have a lasting effect on the economy -- some times up to four quarters before any real impact can be measured. Please read through your report to see what your Managers of Distinction have to say about the markets, the economy and how your investment in Nation Funds has fared over the past 12 months. We encourage you to then have a conversation with your investment professional to discuss how you can take advantage of the current market environment as it relates to your long-term investment goals. We remain committed to providing you with world-class investment management and competitive products to help you reach your long-term goals. Should you have any questions or comments on your annual report, please contact your investment professional or call us at 1.800.321.7854. You can also visit us online at www.nations-funds.com. Thank you for being a part of the Nations Funds family. Sincerely, /s/ A. Max Walker A. MAX WALKER PRESIDENT AND CHAIRMAN OF THE BOARD NATIONS FUNDS /S/ ROBERT H. GORDON ROBERT H. GORDON PRESIDENT BANC OF AMERICA ADVISORS, INC. March 31, 2001 5 TABLE OF CONTENTS ECONOMIC OVERVIEWS 3 PORTFOLIO COMMENTARY Nations Convertible Securities Fund 7 Nations Balanced Assets Fund 11 Nations Asset Allocation Fund 17 Nations Equity Income Fund 23 Nations Value Fund 28 Nations Marsico Growth & Income Fund 33 Nations Blue Chip Fund 40 Nations Strategic Growth Fund 44 Nations Capital Growth Fund 49 Nations Aggressive Growth Fund 54 Nations Marsico Focused Equities Fund 59 Nations MidCap Growth Fund 66 Nations Marsico 21st Century Fund 71 Nations Small Company Fund 77 FINANCIAL STATEMENTS Statements of net assets 82 Statements of operations 126 Statements of changes in net assets 130 Schedules of capital stock activity 136 Financial highlights 150 Notes to financial statements 178 Statement of net assets -- Nations Master Investment Trust 190 Nations Marsico Growth & Income Master Portfolio 190 Nations Blue Chip Master Portfolio 192 Nations Marsico Focused Equities Master Portfolio 196 Statement of operations 198 Statement of changes in net assets 199 Supplementary data 199 Notes to financial statements 200
------------------------------------------------------------------------------ NATIONS FUNDS RECOGNIZED FOR [DALBAR LOGO] OUTSTANDING INTERMEDIARY AND DALBAR, Inc. is a well-respected SHAREHOLDER SERVICE research firm that measures customer service levels and IN RECOGNITION OF ITS COMMITMENT TO establishes benchmarks in the PROVIDE INVESTMENT PROFESSIONALS financial services industry. AND SHAREHOLDERS WITH THE HIGHEST LEVEL OF SERVICE IN THE MUTUAL FUND INDUSTRY, NATIONS FUNDS RECEIVED BOTH THE DALBAR INTERMEDIARY SERVICE AWARD AND MUTUAL FUND SERVICE AWARD IN 2000. ------------------------------------------------------------------------------
6 [This page intentionally left blank.] 7 ECONOMIC OVERVIEW BANC OF AMERICA CAPITAL MANAGEMENT* THE YEAR IN REVIEW The U.S. economy slowed dramatically in the year ended March 31, 2001, which weighed heavily on corporate profit performance and stock prices. The pendulum in the equity market swung from euphoria to pessimism, with hard-hit technology stocks responsible for much of the pull. Conversely, the fixed-income market recorded impressive gains, as weary investors scrambled for the security and liquidity of bonds. The stock market's performance during the past year was hardly uniform. The Standard & Poor's 500 Composite Stock Price Index** suffered a 22% loss in total return over the 12-month period, while the tech-heavy Nasdaq Composite Index*** plummeted 60%. Value strategies generally trumped growth approaches, reversing the trend of the past four years and highlighting the importance of diversification. While the broad market suffered a setback over the past year, investors achieved double-digit rates of return in several sectors, including utilities, transportation, consumer staples, health care and financial services. The energy sector also yielded a positive return. Joining the technology sector in the red were basic materials, capital goods, consumer cyclicals and communications. Fixed-income products provided a safe haven for investors, as slowing economic activity, interest-rate cuts by the Federal Reserve Board, and a strong U.S. dollar drove bond prices higher. Both U.S. Treasury securities and corporate bonds delivered double-digit returns to their holders in the 12 months ending March 31, 2001. The performance of the U.S. economy provided the backdrop for this rapid change in market sentiment. U.S. real GDP (gross domestic product) growth skidded from an explosive 8% at the end of 1999 to a mere 1% at the close of 2000. Three primary forces caused the slowdown: the Fed's aggressive tightening of interest rates to contain inflationary pressures; a sharp run-up in energy prices; and a rapid response by companies to control inventories amidst slowing consumer demand. As 2001 began, companies started to pare back earnings expectations, leaving investors questioning when a turning point might appear. The abrupt slowdown in the economy caught everyone, even the Federal Reserve, by surprise. To arrest a possible slide into recession, U.S. monetary policymakers slashed interest rates by a full 150 basis points -- or one and one-half percent -- in the first quarter of 2001.+ Other interest rates had already started to fall in anticipation of these reductions and in response to weaker growth. The yield on 10- *Banc of America Capital Management is the investment management group of Bank of America, N.A. and includes Banc of America Capital Management, Inc., investment sub-adviser to many Nations Funds, and other non-bank affiliates of Bank of America. **The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. ***The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. +Since March 31, 2001, the Federal Reserve Board reduced the Federal Funds rate by 1.00%. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 8 ECONOMIC OVERVIEW CONTINUED... year Treasury notes plummeted to less than 5.00% in March 2001 from around 6.25% a year earlier. The tight linkages among various countries and the dominance of U.S. multinational companies have caused the effects of the U.S. economic slowdown to be felt worldwide. The capital markets in Asia, Europe and Latin America have all reflected the weakening demand from U.S. consumers and businesses. The world has managed to escape a global economic crisis during the past year, however, despite a major devaluation by Turkey, a recession in Argentina and growing weakness in Japan. Meanwhile, the ongoing strength of the U.S. dollar has reflected global investors' confidence in the long-term prospects of the U.S. economy. THE YEAR AHEAD As the second quarter of 2001 began, questions persisted as to whether the U.S. economy was headed for recession. While the manufacturing sector experienced a severe decline, with weakness spreading to other areas, housing remained strong and auto sales have performed better than expected. Some of the key forces causing the economic weakness have also, at least partially, reversed course. Monetary policy has shifted to an active easing, crude oil and natural gas prices have receded from their highs, and the inventory correction is well underway. While it appears that a recession may still be avoided, significant risks persist. Concerns about the job market could cause consumers to be more frugal; companies could make aggressive cuts in capital spending or global weakness could intensify. Nevertheless, in our view, the U.S. economy should be able to recover by the end of 2001. Look for inflation to remain relatively subdued, which will be welcome news for investors. Although the current slowdown may temper near-term productivity performance, we believe longer-term trends will remain favorable. U.S. economic policy should work to help restore better growth rates. The Federal Reserve Board can be expected to reduce interest rates until the economy shows clear signs of stabilizing. Proposed tax cuts should provide some relief to consumers and businesses. We anticipate corporate profit numbers to be extremely weak in the first half of 2001, but look forward to better numbers late in the year and into 2002. The stock market may begin to reflect better expectations well before they actually materialize. On balance, the transition of a $10 trillion U.S. economy from a track of extremely rapid to more sustainable growth has been treacherous. However, we look for better news to unfold over the next 12 months. Investors who are diversified and retain a long-term investment horizon may find a number of rewarding opportunities in the coming year. LYNN REASER, PH.D. CHIEF ECONOMIST AND SENIOR MARKET STRATEGIST BANC OF AMERICA CAPITAL MANAGEMENT March 31, 2001 4 9 ECONOMIC OVERVIEW MARSICO CAPITAL MANAGEMENT, LLC THE YEAR IN REVIEW. While the investment experience of the past year has been undeniably difficult, we would underscore the fact that we continue to have an overall positive long-term investment outlook. As you may know, an important aspect of our investment process relates to the formulation of a macroeconomic outlook; we believe this view helps create a strategic backdrop for actual portfolio construction. In our opinion, there are a number of positive underlying factors in the U.S. economy. These factors include lower interest rates, constrained inflation, budget surpluses and productivity gains. While we acknowledge that the recent interest rate cuts by the Federal Reserve Board (the Fed) will take some time to be "felt" by the economy, we believe these reductions, which totaled 150 basis points* thus far for calendar year 2001, could provide a more favorable valuation profile for the overall stock market. It is our expectation, given continuing evidence that inflation remains restrained that the Fed will likely reduce interest rates even further. Inflation expectations, we have found, largely drive interest rates. When we review our proprietary research on the economy and individual companies, we come to the conclusion that overall inflation remains quite benign. From our meetings with company managements, we see many signs that labor markets are loosening. As a result, there continues to be very little pressure on unit labor costs and wage gains have been constrained overall. In addition from a pricing standpoint, few companies have demonstrated an ability to make price increases stick. We would also note that commodity prices, with the exception of energy, are generally stable or lower. In our opinion, the greatest concern investors appear to be facing, as we go to press with this letter, is whether or not the U.S. economy is entering a recession. While growth has slowed dramatically from the levels seen in the last several years, we believe the economy can avoid falling into recession. We would note that the economy still expanded 2 percent in the first quarter of calendar 2001. Also previous recessions in the 80s and 90s were led by a slow down in consumer spending. This time businesses have slowed spending while the consumer has continued to support the economy, as shown by strong auto sales so far this year. Much of the slow down in business spending is related to telecommunications equipment and technology. The deregulation of the local telephone industry in 1996 coupled with the rise of the Internet drove demand for larger "pipelines" to deliver voice, data and video traffic. However, as the promise of the Internet cooled and financing dried up, inventories began to build throughout the technology sector. As a result we have seen reversals of fortune among former growth stock favorites such as JDS Uniphase, Cisco Systems and Corning. We worry that the slowdown in the tech sector has had a ripple effect on the overall economy and has affected consumer confidence. However, excess inventories appear to have already begun to be worked down quite rapidly. The value of goods *The Federal Reserve Board cut interest rates an additional 50 basis points on April 18, 2001. Source for statistical information -- Marsico Capital Management, LLC 5 10 ECONOMIC OVERVIEW MARSICO CAPITAL MANAGEMENT, LLC and services in the first quarter of calendar 2001, for instance, fell $7.1 billion. This is the first decline since the end of the last recession in 1991. With the economy still sluggish, we expect the Federal Reserve Board to maintain its easing bias over the next several months. This gives us hope that as inventories come into equilibrium with demand and as corporate earnings begin to overlap with easier comparisons later this year and next, the tone of the equity markets will become more positive. While the past year has been difficult for growth stock managers, our research staff and I continue to work hard looking for well-managed growth companies selling at attractive prices. THOMAS F. MARSICO CHAIRMAN AND CHIEF EXECUTIVE OFFICER MARSICO CAPITAL MANAGEMENT, LLC March 31, 2001 6 11 NATIONS CONVERTIBLE SECURITIES FUND INCOME STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS CONVERTIBLE SECURITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Income Nations Convertible Securities Fund is designed to be a Strategies Team of Banc of America moderate way to invest in convertible securities. We try to Capital Management, Inc., maintain a portfolio of convertibles that have balanced investment sub-adviser to the risk/reward characteristics. This means as individual issues Fund. rise in price, we replace them with other issues selling INVESTMENT OBJECTIVE closer to par. We believe this tends to keep volatility The Fund seeks to provide dampened and the Fund's yield above the yields of the investors with a total investment popular indexes. return, comprised of current Our philosophy is to try to run a somewhat conservative income and capital appreciation, equity vehicle with a current income above the overall yield consistent with prudent investment of stocks in general, but with some appreciation potential. risk. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET PERFORMANCE REVIEW CONDITIONS OF THE LAST 12 MONTHS? For the 12-month period ended For the twelve months ended March 31, 2001, the Fund March 31, 2001, Nations (Investor A Shares) was down 7.88%. This compared quite Convertible Securities Fund favorably to the Credit Suisse First Boston (CSFB) Investor A Shares provided Convertible Securities Index***, which was down 18.82%, and shareholders with a total return the Lipper Convertible Securities Funds Average+, which was of -7.88%.** down 15.31%. This performance was due to our underweighting in technology, and overweight in finance and utilities, areas that benefited from the Federal Reserve Board's (the Fed) easing interest rates. WHAT ADJUSTMENTS WERE MADE TO THE FUND AS A RESULT OF THE STOCK MARKET VOLATILITY OF THE FIRST QUARTER OF 2001? We did not make any major changes to our strategy in the first quarter of 2001. As stock prices pull back, the fixed income characteristics of convertible securities come into play, providing a price floor which allows the price of convertibles to hold up better, in general, than the underlying stock. Also, if the Federal Reserve Board continues the trend of lowering rates, the fixed-income floor that provides
*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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. ***The Credit Suisse First Boston (CSFB) Convertible Securities Index is an unmanaged, market- weighted index of convertible securities that meet minimum quality and liquidity criteria. It is unavailable for investment. +Lipper Inc. is an independent mutual fund performance monitor. Funds in the Lipper Convertible Securities Funds Average invest their portfolios primarily in convertible bonds and convertible preferred shares. It is unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 7 12 NATIONS CONVERTIBLE SECURITIES FUND INCOME STRATEGIES TEAM COMMENTARY continued this support tends to rise in value, providing more support. For example, in the first quarter of the year, the Fund was off 8%, while the Standard & Poor's 500 Composite Stock Price Index (S&P 500)++ was off 11.85%. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?+++ We were overweighted in utilities, finance, health care and energy -- all of these areas did well versus the S&P 500. The problems in California highlighted strong demand for natural gas and electric power, and EOG Resources, a natural gas provider, saw its preferred stock go from $19.50 to $39.60 over the course of the year. The Fund also held Calpine Capital Trust III, a generating company with plants feeding California's power needs. Another issue of that company which the Fund owned appreciated 40% in the last eight months of the period. Financial issues also did well as rates fell. Two insurance preferreds, ACE Ltd. and Metlife Capital Trust I, both appreciated over 50%. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Last year was the mirror of the year before. Technology and telecoms were the worst performers, after being leaders in the year 2000. We believed there would be a technology let down after Y2K activity, so we actively sold these issues, as they became equity sensitive. This risk control measure really helped performance. Issues such as Corning Inc., Comverse Technology, Inc., and Cypress Semiconductor Corporation saw their stocks fall 40% to 70% in just the five months from November to March. But the convertibles acted as they were supposed to and fell only 17% to 25%. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR AND HOW ARE YOU POSITIONING THE FUND? We expect interest rates to fall further in the near term, which may raise the bond floor under convertibles. This support, coupled with the decline in prices seen over the last six months, may mean that convertibles as a class could be very defensive in the future if the market declines further. A vast portion of convertibles outstanding now sell with a large premium, due to the stock decline that has occurred over the last twelve months. This may mean that when the market advance starts, convertible performance will be subdued until the issues advance enough to potentially get that premium to decline. We continue to monitor quality and the outlook for earnings. We believe that when the market does turn up, the higher-quality issues should lead the way. We continue to be mindful of overall quality in the portfolio.
++The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 8 13 NATIONS CONVERTIBLE SECURITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Diversified manufacturing 3.8% Broadcasting and cable 3.9% Networking and telecommunications equipment 4.0% Health services 5.1% Commercial banking 5.4% Oilfield services 5.7% Pharmaceuticals 6.1% Telecommunications services 7.3% Insurance 8.1% Electric power - Non nuclear 9.1% Other 41.5%
TOP 10 HOLDINGS ------------------------------------------------- 1 Mirant Trust 1.7% ------------------------------------------------- 2 L-3 Communications Holdings, Inc., 5.250% 06/01/09 1.6% ------------------------------------------------- 3 NRG Energy, Inc. 1.5% ------------------------------------------------- 4 CNB Capital Trust I 1.4% ------------------------------------------------- 5 Sovereign Capital Trust II 1.4% ------------------------------------------------- 6 AmeriSource Health Corporation, Class A, 5.000% 12/01/07 1.4% ------------------------------------------------- 7 United Parcel Service, Inc., Class B, 1.750% 09/27/07 1.4% ------------------------------------------------- 8 Telefonos de Mexico SA, de CV, Series A, 4.250% 06/15/04 1.4% ------------------------------------------------- 9 Duke Energy Corporation 1.4% ------------------------------------------------- 10 Protective Life Corporation 1.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 9 14 NATIONS CONVERTIBLE SECURITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
NAV** MOP* 10-YEAR (3/31/91 through 3/31/01) 15.46% 14.77%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Convertible Securities Fund over the last 10 years. Figures for the CSFB Convertible Securities Index, an unmanaged, market-weighted index of convertible securities that meet minimum quality and liquidity criteria, include reinvestment of dividends. Funds in the Lipper Convertible Securities Funds Average invest their portfolios primarily in convertible bonds and convertible preferred shares. It is not possible to invest in the Index or Lipper Average. Both are unavailable for investment. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* (as of 3/31/01) RETURN CHART] [CHART LEGEND]
LIPPER CONVERTIBLE NATIONS CONVERTIBLE SECURITIES FUND AVERAGE CSFB CONVERTIBLE SECURITIES SECURITIES FUND $39,652 $30,139 INDEX $32,632 ----------------------- ----------------------- --------------------------- Mar. 31|1991 9425 10000 10000 9855 10153 10110 10472 10917 10865 1991 11080 11622 11381 11334 11901 11923 11595 11879 12221 12297 12379 12695 1992 13444 13227 13385 14349 13993 14364 15078 14270 14751 15722 15042 15485 1993 16497 15345 15869 16063 14973 15409 15575 14536 14990 16309 15016 15438 1994 15531 14540 15120 16330 15350 16008 17532 16361 17468 18595 17434 18549 1995 19275 17825 18709 20422 18736 19801 20894 19169 20223 21880 19788 20684 1996 23025 20680 21296 23538 20864 21407 26560 22723 23282 29182 24741 25613 1997 28082 24466 24898 29907 26326 26942 29461 25984 26538 26689 23024 23125 1998 29929 25483 26532 30890 26087 27561 33015 28224 29639 32315 27741 29411 1999 37935 33392 37746 43052 36601 40200 41524 35462 38539 43284 36384 39676 2000 43574 32950 34792 Mar. 31 2001 39652 30139 32632
[INVESTOR A SHARES AT NAV** (as of 3/31/01) RETURN CHART]
LIPPER CONVERTIBLE NATIONS CONVERTIBLE SECURITIES FUND AVERAGE CSFB CONVERTIBLE SECURITIES SECURITIES FUND $42,090 $30,139 INDEX $32,632 ----------------------- ----------------------- --------------------------- Mar. 31|1991 10000 10000 10000 10456 10153 10110 11111 10917 10865 1991 11756 11622 11381 12025 11901 11923 12302 11879 12221 13047 12379 12695 1992 14265 13227 13385 15225 13993 14364 15998 14270 14751 16681 15042 15485 1993 17504 15345 15869 17043 14973 15409 16525 14536 14990 17303 15016 15438 1994 16478 14540 15120 17327 15350 16008 18602 16361 17468 19729 17434 18549 1995 20451 17825 18709 21668 18736 19801 22169 19169 20223 23215 19788 20684 1996 24429 20680 21296 24974 20864 21407 28181 22723 23282 30962 24741 25613 1997 29795 24466 24898 31732 26326 26942 31259 25984 26538 28317 23024 23125 1998 31755 25483 26532 32774 26087 27561 35029 28224 29639 34287 27741 29411 1999 40249 33392 37746 45679 36601 40200 44057 35462 38539 45925 36384 39676 2000 46233 32950 34792 Mar. 31 2001 42090 30139 32632
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B++ INVESTOR C PRIMARY A+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 9/25/87 7/15/98 10/21/96 --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -7.59% -7.88% -13.16% -8.49% -12.09% -8.50% -9.23% --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 10.44% 9.87% 7.72% 9.22% 8.46% 9.27% 9.27% 5 YEARS 14.55% 14.20% 12.85% 13.79% 13.56% -- -- 10 YEARS 15.64% 15.46% 14.77% 15.25% 15.25% -- -- SINCE INCEPTION 15.23% 15.09% 14.59% 14.94% 14.94% 13.12% 13.12%
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 reflect 12b-1 fees of 0.25%. These 12b-1 fees are not applicable to Primary A Shares. Inception date for Investor A Shares is September 25, 1987. ++Investor B Shares commenced operations on July 15, 1998 and have no performance prior to that date. Performance prior to July 15, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 10 15 NATIONS BALANCED ASSETS FUNDS VALUE STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAMS SHARE THEIR VIEWS ON NATIONS BALANCED ASSET FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND THEIR OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Value Strategies Team and the Fixed Nations Balanced Assets Fund seeks to achieve total return Income Management Team of Banc of performance through a balance of long-term capital America Capital Management, Inc., appreciation from equities complemented with the stabilizing investment sub-adviser to the characteristics of fixed income investments. The equity Fund. portion of the Fund is predominately invested in large companies that are considered inexpensive relative to their INVESTMENT OBJECTIVE intrinsic value and the broader market as a whole. The fixed The Fund seeks total return by income portion of the Fund is predominately invested in investing in equity and fixed high-quality bonds. income securities. Management of the equity portion of the Fund is based on the PERFORMANCE REVIEW premise that companies' stock prices are more volatile than For the 12-month period ended their underlying business fundamentals and that active March 31, 2001, Nations Balanced security selection improves performance over time. We also Assets Fund Investor A Shares believe that proprietary research is a critical component of provided shareholders with a total investment success and that opportunities are best uncovered return of 2.80%.** 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. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? The dramatic slow down of U.S. economic activity was reflected in the bear market for stocks. The broad market as measured by the Standard & Poor's 500 Composite
*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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. Source for all statistical data--Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 11 16 NATIONS BALANCED ASSETS FUNDS VALUE STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued Stock Price Index (S&P 500)*** fell over 21% since March 31, 2000. The most severe pull back in stocks occurred in the technology-laden Nasdaq Composite Index (Nasdaq)+ as it fell nearly 60% from a year ago. As the stock market declined, many investors sought the safety of bonds, with the high-quality sector enjoying double-digit gains for the year. Despite the severe pull back in stocks, Nations Balanced Assets Fund (Investor A Shares) produced a positive return of 2.80% for the year, substantially outperforming its peer group, the Lipper Balanced Funds Average++, which returned -6.26%. The bond portion of the portfolio returned 11.2%, in line with high-quality bond indices. The equity portion of the portfolio reaped the benefits of its value orientation and substantially outperformed the broader equity market, losing only -1.6% for the year. WHAT ADJUSTMENTS WERE MADE TO THE FUND AS A RESULT OF THE STOCK MARKET VOLATILITY OF THE FIRST QUARTER OF 2001? Anticipating that the worst of the downside volatility has passed for stocks, the equity allocation was rebalanced to represent 60% of the portfolio rather than the 55% allocation average a year ago. As we expect the economy to gain steam later this year, stock prices may climb as well to hopefully resume their historical tendency of outperforming bonds. Despite increased levels of volatility, higher quality fixed-income securities and some of the more credit sensitive sectors managed to outperform U.S. Treasury notes over the year. Longer-term commercial mortgage-backed securities, U.S. agency debentures, U.S. agency mortgage-backed securities (MBS) and "AAA" rated asset-backed securities all out performed comparable maturity U.S. Treasury notes by 1.5% to 3.0% over the past 12 months. Even high-grade corporates performed well, with "AA" and "A" rated issuers out-performing U.S. Treasury notes by 1.63% and 0.73% respectively WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?+++ The key sector decisions that impacted the Fund's performance relative to the S&P 500 were primarily technology, consumer staples, financials and utilities. Given the dramatic rise in valuations for technology companies in 1999 and early 2000, the Fund reduced its weighting in the technology sector throughout the year.
***The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. (+)The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. (++)Lipper Inc. is an independent mutual fund performance monitor. Funds in the Lipper Balanced Funds Average have a primary objective of conserving principal by maintaining, at all times, a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges from 60%/40%. (+++)Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 12 17 NATIONS BALANCED ASSETS FUNDS VALUE STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued Therefore, the Fund benefited by owning roughly 10% in technology relative to a market weighting of approximately 28%. Stock selection was also beneficial, as the Fund's holding of First Data Corporation increased 35%, due to the predictable nature of its credit card processing business. The Fund's largest holding in the sector, International Business Machines Corporation, declined just 18%. By comparison, the technology sector of the S&P 500 declined 59% for the year. The consumer staples sector of the Fund increased 57%, as many investors sought the comfort of more stable earnings companies in a volatile market. In the Fund, shares of Philip Morris Companies Inc. gained nearly 139% as litigation risk subsided and the company's true intrinsic value appeared to be recognized in the marketplace. Fortune Brands, Inc. and Ralston Purina were also standout performers. The Fund's overweight in the financial services sector also benefited performance by increasing nearly 26%. High-quality holdings, such as Federal Home Loan Mortgage Corporation, CIGNA Corporation and SouthTrust Corporation advanced sharply in response to the end of the Federal Reserve Board's (the Fed) tightening, the anticipation of more easing of interest rates, as well as potential continued industry consolidation. The best performing sector within the market last year was the utilities sector. This was driven by an apparent flight by investors to more stable growth and conservative investments as well as the attraction of buying lower-priced companies with improving fundamentals. We believe that utilities chosen for the Fund were of high-quality and benefited from reduced energy supplies with growing consumer demand. Teco Energy, American Water Works Company, Inc., FPL Group, Inc. and Dominion Resources, Inc. led the group with returns of 35% or better for the year. Our strategic overweight to the high quality sectors in the fixed income portion of the Fund helped total return performance for the period. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The Fund's biggest challenge was in the economically sensitive basic materials and consumer cyclical sectors. Stocks in these groups were generally weak across the board as high raw material costs and weak sales hammered profitability. However, the Fund's average weighting in the basic materials group was just 3% and 8% in the consumer cyclical sector. Each of these was below the market's S&P 500 weighting. It is likely that the Fund will maintain an underweighting in these companies until earnings and stock values improve. One investment decision in the fixed income portion of the Fund that hindered overall performance was maintaining the portfolio's exposure to "BBB" rated corporates. While the portfolio was invested primarily in shorter maturity securities, the slowing of the U.S. economy and the perceived risk of recession widened yield spreads on these securities and reduced the overall performance of the portfolio.
13 18 NATIONS BALANCED ASSETS FUNDS VALUE STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? World equity markets have suffered negative returns as the U.S. has slowed to near recession levels. The Fed has responded to the recession threat by decreasing interest rates in order to stimulate economic activity. We think recession will be avoided and look for the lower interest rates to influence stronger economic growth later in 2001. As a consequence, we believe the U.S. stock market should recognize the pending strength and gain momentum as the year progresses. During the transition period to stronger economic growth, in our opinion, the bond investments should continue to provide a stabilizing influence. We believe the large-cap value style of the equity portion of the portfolio should continue to benefit from a market that has transitioned to be more rational and valuation conscious. The equity portion of the portfolio continues its emphasis on those sectors deemed by us to be the most undervalued. They are capital goods, communication services, consumer staples, energy, financials and utilities. Stocks in these sectors should benefit as the economy hopefully improves over the coming year. We believe that they should also benefit further from the Fed-induced decline in short-term interest rates. The portfolio's value-oriented stock selection style may also provide relative stability if stock market volatility persists. For the fixed income portion of the Fund, despite the fact that we expect weaker short-term corporate profits, we have decided to remain neutral to the Lehman Aggregate Bond Index+ with respect to corporate bonds. The yield spreads of corporate notes to U.S. Treasury notes may already be at recession levels. If we underweight these sectors, we could run the risk of missing the turn in the U.S. economy. Once there is a clear sign that the U.S. economy has stopped slowing, we plan to increase our exposure to corporate securities. Within the high-grade markets, we are planning to reduce our exposure to agency mortgage-backed securities and "AAA"' collateralized mortgage-backed securities as spreads on these sectors tighten to U.S. Treasury notes over the next few months.
+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. 14 19 NATIONS BALANCED ASSETS FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Integrated oil 3.50 Consumer credit and mortgages 4.40 Government National Mortgage Association (GNMA) Certificates 4.50 Tobacco 4.50 Electric power - Nuclear 4.60 Investment services 4.90 Commercial banking 5.80 Commercial mortgage-backed securities 7.90 Federal National Mortgage Association (FNMA) Certificates 8.40 Telecommunications services 9.00 Other 43.10
TOP 10 HOLDINGS ------------------------------------------------- 1 Federal National Mortgage Association (FNMA) Certificates 6.500% 02/01/31 2.5% ------------------------------------------------- 2 Dominion Resources, Inc. 2.3% ------------------------------------------------- 3 FPL Group, Inc. 2.3% ------------------------------------------------- 4 UST Inc. 2.2% ------------------------------------------------- 5 SouthTrust Corporation 2.2% ------------------------------------------------- 6 Philip Morris Companies Inc. 2.1% ------------------------------------------------- 7 General Dynamics Corporation 2.1% ------------------------------------------------- 8 Verizon Communications Inc. 2.0% ------------------------------------------------- 9 Federal National Mortgage Association (FNMA) Certificates 6.500% 07/01/29 2.0% ------------------------------------------------- 10 Government National Mortgage Association (GNMA) Certificates 8.000% 12/15/30 1.9% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 15 20 NATIONS BALANCED ASSETS FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/2/92 through 3/31/01) 9.32% 8.56%
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), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Figures for the Lehman Aggregate Bond Index, which 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 include reinvestment of dividends. Funds in the Lipper Balanced Funds Average have a primary objective of conserving principal by maintaining, at all times, a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. It is not possible to invest in the Indexes or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] [INVESTOR A SHARES AT MOP* (as of 3/31/01) RETURN CHART]
NATIONS|BALANCED|ASSETS STANDARD &|POOR'S FUND|$20,082 LIPPER|BALANCED|FUNDS|AVERAGE|$22,644 500|INDEX|$32,961 ----------------------- ------------------------------------- ----------------- Oct. 2|1992 9425.00 10000.00 10000.00 1992 9776.00 10396.00 10504.00 10179.00 10830.00 10963.00 10431.00 11003.00 11017.00 10659.00 11387.00 11301.00 1993 10726.00 11548.00 11563.00 10381.00 11178.00 11125.00 10050.00 11058.00 11172.00 10441.00 11387.00 11718.00 1994 10369.00 11269.00 11716.00 10955.00 11984.00 12857.00 11862.00 12862.00 14085.00 12491.00 13575.00 15204.00 1995 13070.00 14146.00 16120.00 13504.00 14523.00 16985.00 13864.00 14875.00 17748.00 14178.00 15279.00 18296.00 1996 14946.00 16114.00 19820.00 15148.00 16118.00 20351.00 16679.00 17786.00 23907.00 17997.00 18992.00 25695.00 1997 18137.00 19233.00 26432.00 19713.00 20706.00 30120.00 19408.00 20932.00 31114.00 17657.00 19590.00 28018.00 1998 19637.00 21817.00 33986.00 19444.00 22044.00 35682.00 20348.00 23005.00 38197.00 19182.00 22021.00 35810.00 1999 19614.00 23699.00 41138.00 19533.00 24310.00 42080.00 19213.00 24018.00 40961.00 19998.00 24463.00 40564.00 2000 20742.00 24018.00 37392.00 Mar. 31 2001 20082.00 22644.00 32961.00 LEHMAN|AGGREGATE|BOND INDEX|$17,830 --------------------- Oct. 2|1992 10000.00 1992 10027.00 10441.00 10718.00 10998.00 1993 11004.00 10688.00 10578.00 10643.00 1994 10683.00 11222.00 11905.00 12138.00 1995 12655.00 12431.00 12502.00 12734.00 1996 13116.00 13042.00 13521.00 13970.00 1997 14380.00 14605.00 14947.00 15579.00 1998 15632.00 15554.00 15417.00 15522.00 1999 15503.00 15846.00 16120.00 16605.00 2000 17304.00 Mar. 31 2001 17830.00
[INVESTOR A SHARES AT NAV** (as of 3/31/01) RETURN CHART]
NATIONS|BALANCED|ASSETS STANDARD &|POOR'S FUND|$21,307 LIPPER|BALANCED|FUNDS|AVERAGE|$22,644 500|INDEX|$32,961 ----------------------- ------------------------------------- ----------------- Oct. 2|1992 10000.00 10000.00 10000.00 1992 10372.00 10396.00 10504.00 10800.00 10830.00 10963.00 11067.00 11003.00 11017.00 11310.00 11387.00 11301.00 1993 11361.00 11548.00 11563.00 11014.00 11178.00 11125.00 10668.00 11058.00 11172.00 11078.00 11387.00 11718.00 1994 11001.00 11269.00 11716.00 11623.00 11984.00 12857.00 12585.00 12862.00 14085.00 13254.00 13575.00 15204.00 1995 13867.00 14146.00 16120.00 14328.00 14523.00 16985.00 14710.00 14875.00 17748.00 15043.00 15279.00 18296.00 1996 15858.00 16114.00 19820.00 15072.00 16118.00 20351.00 17697.00 17786.00 23907.00 19095.00 18992.00 25695.00 1997 19244.00 19233.00 26432.00 20916.00 20706.00 30120.00 20592.00 20932.00 31114.00 15734.00 19590.00 28018.00 1998 20835.00 21817.00 33986.00 20630.00 22044.00 35682.00 21589.00 23005.00 38197.00 20352.00 22021.00 35810.00 1999 20810.00 23699.00 41138.00 20725.00 24310.00 42080.00 20385.00 24018.00 40961.00 21218.00 24463.00 40564.00 2000 22008.00 24018.00 37392.00 Mar. 31 2001 21307.00 22644.00 32961.00 LEHMAN|AGGREGATE|BOND INDEX|$17,830 --------------------- Oct. 2|1992 10000.00 1992 10027.00 10441.00 10718.00 10998.00 1993 11004.00 10688.00 10578.00 10643.00 1994 10683.00 11222.00 11905.00 12138.00 1995 12655.00 12431.00 12502.00 12734.00 1996 13116.00 13042.00 13521.00 13970.00 1997 14380.00 14605.00 14947.00 15579.00 1998 15632.00 15554.00 15417.00 15522.00 1999 15503.00 15846.00 16120.00 16605.00 2000 17304.00 Mar. 31 2001 17830.00
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/30/92 10/2/92 6/7/93 10/2/92 ---------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 3.07% 2.80% -3.11% 2.01% -2.99% 1.97% 0.97% ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 0.85% 0.62% -1.35% -0.16% -1.05% -0.17% -0.17% 5 YEARS 8.51% 8.26% 6.99% 7.52% 7.26% 7.57% 7.57% SINCE INCEPTION 9.56% 9.32% 8.56% 8.46% 8.46% 8.58% 8.58%
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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 16 21 NATIONS ASSET ALLOCATION FUND EQUITY MANAGEMENT TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAMS SHARE THEIR VIEWS ON NATIONS ASSET ALLOCATION FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND THEIR OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE. The Fund is managed by the Equity Within the stock component of the Fund, our intent is to Management Team of Chicago Equity stay neutral to the market in terms of sector weightings and Partners, LLC and the Fixed Income market capitalization. The Fund primarily invests in Management Team of Banc of America large-capitalization common stocks represented in the Capital Management, Inc., Standard & Poor's 500 Composite Stock Price Index (S&P investment sub-advisers to the 500)*** as well as common stocks represented in the Standard Fund. & Poor's MidCap 400 Index (S&P MidCap 400)+ and the Standard & Poor's SmallCap 600 Index (S&P SmallCap 600)++. We believe INVESTMENT OBJECTIVE investment across the large-, mid- and small-cap market The Fund seeks to obtain long-term segments allows for greater diversification and potentially growth from capital appreciation, lower volatility and higher returns. and dividend and interest income. We focus on individual stock selections. Our risk-controlled PERFORMANCE REVIEW strategy is designed to provide the potential for the Fund For the 12-month period ended to fully benefit from the equity market's advances despite March 31, 2001, Nations Asset major disparities in performance between sectors and the Allocation Fund Investor A Shares narrowness of the market. Within our discipline, we select provided shareholders with a total securities that display what we believe are attractive return of -10.05%.** valuations, while exhibiting positive momentum and solid earnings quality. By factoring for these three themes, we seek to provide superior stock selection across the industry sectors. We focus on companies that exhibit rising earnings expectations and perceived high-earnings certainty while trading at attractive valuations. Companies with high-earnings certainty are those that have similar estimates by different analysts. Firms with rising earnings expectations are typically those that have experienced the biggest increase in analyst earnings expectations.
*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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. ***The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +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 -- Chicago Equity Partners, LLC and Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 17 22 NATIONS ASSET ALLOCATION FUND EQUITY MANAGEMENT TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued 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. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? Nations Asset Allocation Fund (Investor A Shares) returned -10.05% for the 12-month period ending March 31, 2001. The S&P 500 returned -21.67%, the S&P MidCap 400 returned -6.96% and the S&P SmallCap 600 returned -1.28%. Market conditions over the last twelve months saw a rapid decline in the overall economy, which spilled over into the stock market. The Funds' diversification among large-cap, mid-cap and small-cap stocks helped performance as mid-cap and small-cap stocks outpaced their large-cap brethren over the last three quarters. The smaller-capitalization stocks appeared much more attractive from a valuation perspective and earnings were more immune to the stronger dollar and higher energy prices, which detracted from the larger capitalization stocks. WHAT ADJUSTMENTS WERE MADE TO THE FUND AS A RESULT OF THE STOCK MARKET VOLATILITY OF THE FIRST QUARTER 2001? The diversification among large-cap, mid-cap and small-cap stocks helped reduce the overall portfolio volatility during the last three and twelve months. The total number of stocks within the portfolio has increased from 545 to 575 during the first quarter, which attempts to decrease the volatility relative to the stock market. WHAT SECTORS OR STOCKS PROVED FAVORABLE FOR THE FUND OVER THE LAST 12 MONTHS?+++ The best performing sectors over the last twelve months were financial services (+24%) and health care (+36%), which produced strong returns over the year. The utilities sector posted the best year-over-year performance, but with only a 4% position, its contribution to the Fund's performance lagged behind the financial services and health care sectors. Mid-cap stocks managed to outperform year-over- year, thanks, in part, to a better absolute return from its technology stocks compared to the large-cap technology stocks. The strength of the dollar and a higher weighting in the consumer sectors at a time when consumer spending has held up well versus manufacturing, all played significant roles in enabling small-cap stocks to outperform large-cap and mid-cap stocks over the last twelve months. Despite increased levels of volatility, higher quality fixed-income securities and some of the more credit sensitive sectors managed to outperform U.S. Treasury notes over the year. Longer-term commercial mortgage-backed securities, U.S. agency debentures, U.S. agency mortgage-backed securities and "AAA" rated asset-backed securities all out-performed comparable maturity U.S. Treasury notes
+++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 18 23 NATIONS ASSET ALLOCATION FUND EQUITY MANAGEMENT TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued by 1.5% to 3.0% over the past 12 months. Even high-grade corporates performed well, with "AA" and "A" rated issuers out performing U.S. Treasury notes by 1.63% and 0.73% respectively. Our strategic overweight to the high quality sectors in the fixed income portion of the Fund helped total return performance for the period. WHAT PARTICULAR SECTORS OR STOCKS WERE UNFAVORABLE FOR THE FUND? The lagging sectors were technology and communication services. On an absolute basis, technology lost 38% over the year, and it is the largest weighted sector in the portfolio at 18% as of March 31, 2001. The biggest detractors in the technology sector were Cisco Systems, Inc., Microsoft Corporation, Intel Corporation and Oracle Corporation. Within communication services, AT&T Wireless Group and Worldcom, Inc. were the largest detractors as the earnings slowdown was felt as continued price pressure in long-distance services and capital spending in wireless, Internet and data segments led to disappointing earnings and lower future expectations. Also, the top-performing stocks typically displayed higher-dividend yields, lower-relative price-to-earnings ratios and slower earnings per share growth, not characteristics of the technology stocks held within the Fund. One investment decision in the fixed income portion of the Fund that hindered overall performance was maintaining the portfolio's exposure to "BBB" rated corporates. While the portfolio was invested primarily in shorter maturity securities, the slowing U.S. economy and the perceived risk of recession widened yield spreads on these securities and reduced the overall performance of the portfolio. WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? The U.S. economy still shows signs of slowing, which wreaked havoc on the markets during the second half of 2000, and profit concerns have been at the root of most issues related to stocks. The Federal Reserve Board has been addressing the slowdown with its 150 basis point decrease in rates so far in 2001, and companies are addressing the earnings story through head-count reductions. Many pundits predict by the fourth quarter the economy and corporate profits may turn positive, as the combination of the aforementioned may start to produce a stronger economy and stable earnings. As a leading indicator, we believe the stock market may benefit before we see the economy turn. Overall, our equity philosophy will not change based on short-term trends or conditions in the market. Our goal is to add value through security selection, while attempting to neutralize other risk factors, such as market timing and sector rotation, for which there is not adequate compensation by the market. For the fixed income portion of the Fund, despite the fact that we expect weaker short-term corporate profits, we have decided to remain neutral to the Lehman Aggregate Bond Index+ in terms of weighting with respect to corporate bonds. The
+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. 19 24 NATIONS ASSET ALLOCATION FUND EQUITY MANAGEMENT TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued yield spreads of corporate notes to U.S. Treasury notes may already be at recession levels. If we underweight these sectors, we could run the risk of missing the turn in the U.S. economy. Once there is a clear sign that the U.S. economy has stopped slowing, we plan to increase our exposure to corporate securities. Within the high-grade markets, we are planning to reduce our exposure to agency mortgage-backed securities and "AAA" rated collateralized mortgage-backed securities as spreads on these sectors tighten to U.S. Treasury notes over the next few months.
20 25 NATIONS ASSET ALLOCATION FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Other 51.5 Diversified manufacturing 2.7 Broadcasting and cable 3.2 Computers and office equipment 3.2 Integrated oil 3.5 Telecommunication Services 5.1 Pharmaceuticals 5.5 Government National Mortgage Association (GNMA) Certificates 5.7 Commercial banking 5.7 Federal National Mortgage Association (FNMA) Certificates 5.8 Commercial mortgage-backed securities 8.1
TOP 10 HOLDINGS ------------------------------------------------- 1 Federal National Mortgage Association (FNMA) Certificates 6.500% 02/01/31 2.1% ------------------------------------------------- 2 Government National Mortgage Association (GNMA) Certificates 8.000% 12/15/30 2.0% ------------------------------------------------- 3 General Electric Company 1.9% ------------------------------------------------- 4 Federal National Mortgage Association (FNMA) Certificates 8.000% 04/01/31 1.8% ------------------------------------------------- 5 Exxon Mobil Corporation 1.8% ------------------------------------------------- 6 Government National Mortgage Association (GNMA) Certificates 6.500% 01/15/31 1.7% ------------------------------------------------- 7 Pfizer Inc. 1.6% ------------------------------------------------- 8 Citigroup Inc. 1.5% ------------------------------------------------- 9 Federal National Mortgage Association (FNMA) Certificates 6.500% 02/01/31 1.4% ------------------------------------------------- 10 Microsoft Corporation 1.4% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 21 26 NATIONS ASSET ALLOCATION FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (1/18/94 through 3/31/01) 11.40% 10.49%
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), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Figures for the Lehman Aggregate Bond Index, which 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, include reinvestment of dividends. Funds in the Lipper Balanced Funds Average have a primary objective of conserving principal by maintaining, at all times, a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. It is not possible to invest in the Indexes or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS ASSET ALLOCATION FUND LIPPER BALANCED FUNDS STANDARD & POOR'S LEHMAN AGGREGATE $20,508 AVERAGE $19,608 500 INDEX $29,063 BOND INDEX $16,203 --------------- --------------------- ----------------- ------------------ Jan. 18 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 22795 21051 36392 14400 22730 20798 35424 14649 23095 21183 35767 15090 2000 22116 20797 32970 15725 Mar. 31 2001 20508 19608 29063 16203
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS ASSET ALLOCATION FUND LIPPER BALANCED FUNDS STANDARD & POOR'S LEHMAN AGGREGATE $21,755 AVERAGE $19,608 500 INDEX $29,063 BOND INDEX $16,203 --------------- --------------------- ----------------- ------------------ Jan. 18 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 24186 21051 36392 14400 24112 20798 35424 14649 24500 21183 35767 15090 2000 23460 20797 32970 15725 Mar. 31 2001 21755 19608 29063 16203
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B++ PRIMARY A+ NAV** MOP* NAV** CDSC*** Inception date 5/21/99 1/18/94 7/15/98 ----------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -9.83% -10.05% -15.24% -10.73% -14.90% ----------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 5.05% 4.49% 2.44% 3.81% 2.94% 5 YEARS 11.49% 11.13% 9.81% 10.69% 10.43% SINCE INCEPTION 11.66% 11.40% 10.49% 11.10% 11.10% INVESTOR C NAV** CDSC*** Inception date 11/11/96 ----------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -10.74% -11.58% ----------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 3.80% 3.80% 5 YEARS -- -- SINCE INCEPTION 9.30% 9.30%
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 reflect 12b-1 fees of 0.25%. These 12b-1 fees are not applicable to Primary A Shares. Inception date for Investor A Shares is January 18, 1994. ++Investor B Shares commenced operations on July 15, 1998 and have no performance prior to that date. Performance prior to July 15, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. Inception date for Investor A Shares is January 18, 1994. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 22 27 NATIONS EQUITY INCOME FUND INCOME STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS EQUITY INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Income Nations Equity Income Fund's style and philosophy is based Strategies Team of Banc of America on the premise that stock prices are more volatile than Capital Management, Inc., business fundamentals and that active security selection investment sub-adviser to the improves performance over time. We also believe that Fund. proprietary research is a critical component of investment INVESTMENT OBJECTIVE success and that opportunities are uncovered by a constant The Fund seeks current income and search for new information. In addition, we believe that the growth of capital by investing in reward for assuming risk varies over time. As a result, in companies with above-average our view, dynamic risk management increases consistency. dividend yields. Within this framework, the Fund's style is a fundamental PERFORMANCE REVIEW approach in which the management team seeks superior returns For the 12-month period ended by investing in sound, proven businesses that are March 31, 2001, Nations Equity statistically inexpensive relative to their intrinsic value, Income Fund Investor A Shares typically due to investor indifference or unpopularity. This provided shareholders with a total approach also encompasses a long-term view of equity return of -19.75%.** investing with its potential long-term rewards. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? The last 12 months will be remembered as the year technology dominated investors' thoughts and portfolios. It began with extreme optimism as recent enhancements in technology appeared to have saved the modern world from a severe Y2K conversion crisis. It ended with extreme pessimism as the technology-laden Nasdaq Composite Index*** suffered the worst year in its thirty-year existence when the over-inflated dot.com bubble burst. Oil prices went to an extreme as well, rising to a thirty-year high of $36 a barrel. Energy demand exploded giving utility stocks an annual increase of more than 50%. Bonds provided double-digit gains. And, after nearly 10 years, the U.S. economy flirted with recession, as a broad-based inventory correction, exacerbated by five previous interest rate hikes, had begun to take a toll. In this environment, the Standard & Poor's 500 Composite Stock Price Index (S&P 500)+ declined 21.67%, one of its worst performances on record. By
*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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. ***The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. +The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 23 28 NATIONS EQUITY INCOME FUND INCOME STRATEGIES TEAM COMMENTARY continued comparison, Nations Equity Income Fund (Investor A Shares) declined 19.75%. Over half of this decline occurred in the first quarter of 2001, a period when the equity markets seemed to indiscriminately and severely punish nearly all companies, regardless of their characteristics. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?++ Stellar performing companies for the year included those in the consumer staples sector. The Fund's holdings in this sector increased 40%, as investors sought the comfort of more stable earnings companies in a volatile market. These included Philip Morris Companies Inc., which gained nearly 139% as litigation risk subsided and the company's true intrinsic value appeared to be recognized in the marketplace. UST, Inc., Fortune Brands, Inc. and Ralston Purina were also standout performers. Other notable high quality holdings include Exxon Mobil Corporation, Chevron Corporation, Merck & Company, Inc., Verizon Communications, Inc., Dominion Resources, Inc. and International Business Machines Corporation. The best performing sector within the market for the 12-month period was the utilities sector. Performance was driven by investors' flight to more stable, conservative investments. Also, the attraction of buying lower priced companies with better earnings visibility was a factor. The utility companies chosen for the Fund were strong performers as well. We believe they were of high quality and benefited from reduced energy supplies with growing consumer demand. For example, TECO Energy, Inc. soared +62%, American Water Works Company, Inc. +41%, FPL Group, Inc. +38%, Dominion Resources, Inc. +76%, and Duke Energy Corporation +68%. Strength was also found in the financial services sector, which increased nearly 13% within the Fund. Anticipation of additional interest rate cuts, as well as continued industry consolidation was the main reason for the increase. High-quality holdings such as Federal Home Loan Mortgage Corporation, SouthTrust Corporation, and CIGNA Corporation also advanced sharply. While the Fund's technology holdings declined along with those of the market, the Fund's average percent weighting to technology was less than the market. Therefore, relative to the market, the Fund's technology exposure contributed positively to performance, as compared to the S&P 500. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The Fund's biggest challenge was in the economically sensitive basic materials sector. Stocks in this category, such as E. I. duPont de Nemours and Company and Dow Chemical Company, were weak nearly across the board as high raw material costs and weak sales hammered profitability. We will likely maintain an underweighting in these companies until earnings and stock values improve.
++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 24 29 NATIONS EQUITY INCOME FUND INCOME STRATEGIES TEAM COMMENTARY continued WHAT DO YOU ANTICIPATE FOR THE COMING YEAR? As we look forward, we'll seek to enhance both yield and total return by adding more convertible securities to the portfolio. While the current volatility in the markets is unsettling, we believe this too shall pass. Federal Reserve Board Chairman Alan Greenspan is fully aware of the slowing economy and we believe he will continue to ease interest rates. The prospects for a meaningful tax cut are high as well. In addition, in our view, the volatile markets will present many attractive buying opportunities for the long-term, patient investor. We believe corporate profits will begin improving in the second half of 2001 and, with the help of the consumer, should continue improving as we move into 2002. Traditional, fundamental valuation looks to be again driving the equity markets and may continue to do so in the future. While investors in the past embraced high price-to-earnings companies with little valuation support, in our opinion the markets have now demonstrated that valuation does matter. The stock selection discipline underlying Nations Equity Income Fund is based on fundamental research. That means we look for high-quality companies with strong market positions, selling at depressed prices. Through our research, we attempt to determine the true intrinsic value of a company and then purchase that company if it is selling below its perceived true business value. It also means holding the company over the long term in order for its market value to be recognized. An above-average dividend yield is also a consideration and acts to dampen downside risk. At quarter end, the Fund is overweighted in companies within the financial services sector that meet the above criteria. In fact, many of them were strong performers during the market's recent quarterly decline, such as SouthTrust Corporation, and Washington Mutual, Inc. They each have strong mortgage lending operations, which should benefit from lower interest rates as we expect the Federal Reserve Board to pursue an aggressive easing bias over the coming months. Furthermore, central banks worldwide are easing monetary policy to avoid a global slowdown. Other companies in the sector that are believed by us to be strong, high-quality companies that should also benefit over the long term from a lower interest rate environment, include Citigroup, Inc., Jefferson-Pilot Corporation, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. The overall strategy of the Fund is to continue a market-like allocation among sectors, utilizing what we believe are high-quality, undervalued common stocks and convertible securities to help generate expected long-term capital appreciation as well as income. Real estate investment trusts (REITS) will also be held to attempt to provide a higher income yield, enhance diversification and dampen volatility relative to the market. Current holdings emphasize financial services (21%), technology (16.5%), energy (11%), health care (9%) and utilities (6%).
25 30 NATIONS EQUITY INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] 3.7% Electric power - Nuclear 3.9% Telecommunications services 4.2% Insurance 4.4% Consumer credit and morgages 4.5% Real Estate Investment Trusts (REITs) 4.6% Electri power - Non nuclear 5.1% Software 5.6% Pharmaceuticals 6.0% Integrated oil 7.5% Commercial banking 50.5% Other
TOP 10 HOLDINGS ------------------------------------------------- 1 Microsoft Corporation 3.6% ------------------------------------------------- 2 General Electric Company 3.6% ------------------------------------------------- 3 Exxon Mobil Corporation 3.5% ------------------------------------------------- 4 Philip Morris Companies Inc. 3.4% ------------------------------------------------- 5 Verizon Communications Inc. 3.0% ------------------------------------------------- 6 Wal-Mart Stores, Inc. 2.9% ------------------------------------------------- 7 Citigroup Inc. 2.8% ------------------------------------------------- 8 Chevron Corporation 2.5% ------------------------------------------------- 9 International Business Machines Corporation 2.3% ------------------------------------------------- 10 Freddie Mac 2.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 26 31 NATIONS EQUITY INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (4/16/91 through 3/31/01) 8.39% 7.75%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Equity Income Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Equity Income Funds Average seek relatively high current income and growth of income through investing 65% or more of their portfolios in dividend-paying equity securities. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS EQUITY INCOME FUND STANDARD & POOR'S 500 LIPPER EQUITY INCOME FUNDS $21,025 INDEX $37,110 AVERAGE $30,883 -------------------------- --------------------- -------------------------- Apr. 16 1991 9425 10000 10000 9321 9625 9783 10007 10140 10403 1991 10740 10990 10991 10650 10712 11012 10927 10915 11268 11376 11259 11575 1992 11790 11826 12111 12398 12343 12885 12486 12404 13046 12946 12724 13629 1993 13259 13019 13825 12729 12526 13321 12960 12578 13373 13451 13193 13903 1994 13087 13191 13568 14197 14475 14628 15051 15858 15602 15962 17118 16721 1995 16667 18149 17706 17614 19124 18543 18250 19982 19074 18746 20600 19612 1996 19939 22316 21106 20311 22914 21389 22735 26917 24122 24985 28930 26170 1997 25068 29760 26798 27810 33912 29513 26584 35031 29203 22716 31545 26248 1998 25944 38265 29778 25124 40174 29662 27815 43006 32471 25487 40318 29698 1999 26623 46318 30821 26192 47378 30577 25514 46118 30241 25383 45671 32046 2000 23763 42099 32918 Mar. 31 2001 21025 37110 30883
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS EQUITY INCOME STANDARD & POOR'S 500 LIPPER EQUITY INCOME FUNDS FUNDS $22,302 INDEX $37,110 AVERAGE $30,883 --------------------- --------------------- -------------------------- Apr. 16 1991 10000.00 10000.00 10000.00 9890.00 9625.00 9783.00 10618.00 10140.00 10403.00 1991 11395.00 10990.00 10991.00 11299.00 10712.00 11012.00 11593.00 10915.00 11268.00 12070.00 11259.00 11575.00 1992 12509.00 11826.00 12111.00 13154.00 12343.00 12885.00 13248.00 12404.00 13046.00 13735.00 12724.00 13629.00 1993 14068.00 13019.00 13825.00 13505.00 12526.00 13321.00 13751.00 12578.00 13373.00 14272.00 13193.00 13903.00 1994 13885.00 13191.00 13568.00 15063.00 14475.00 14628.00 15970.00 15858.00 15602.00 16936.00 17118.00 16721.00 1995 17684.00 18149.00 17706.00 18689.00 19124.00 18543.00 19363.00 19982.00 19074.00 19890.00 20600.00 19612.00 1996 21155.00 22316.00 21106.00 21551.00 22914.00 21389.00 24122.00 26917.00 24122.00 26510.00 28930.00 26170.00 1997 26597.00 29760.00 26798.00 29507.00 33912.00 29513.00 28206.00 35031.00 29203.00 24102.00 31545.00 26248.00 1998 27527.00 38265.00 29778.00 26657.00 40174.00 29662.00 29512.00 43006.00 32471.00 27042.00 40318.00 29698.00 1999 28248.00 46318.00 30821.00 27790.00 47378.00 30577.00 27064.00 46118.00 30241.00 26925.00 45671.00 32046.00 2000 25207.00 42099.00 32918.00 Mar. 31 2001 22302.00 37110.00 30883.00
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/11/91 4/16/91 6/7/93 6/17/92 --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -19.73% -19.75% -24.34% -20.35% -24.13% -20.34% -21.10% --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -8.74% -8.90% -10.69% -9.60% -10.38% -9.53% -9.53% 5 YEARS 3.81% 3.60% 2.38% 2.89% 2.65% 3.03% 3.03% SINCE INCEPTION 8.68% 8.39% 7.75% 6.33% 6.33% 7.26% 7.26%
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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 27 32 NATIONS VALUE FUND VALUE STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATION VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Value The investment philosophy of Nations Value Fund is based on Strategies Team of Banc of America the premise that companies' stock prices are more volatile Capital Management, Inc., than their underlying business fundamentals and that active investment sub-adviser to the Fund security selection improves performance over time. We INVESTMENT OBJECTIVE believe that propriety research is a critical component of The Fund seeks growth of capital investment success and that opportunities are uncovered by a by investing in companies that are constant search for new information. In addition, we believe believed to be undervalued. that the reward for assuming risk varies over time, PERFORMANCE REVIEW therefore, dynamic risk management increases performance For the 12-month period ended consistency. March 31, 2001, Nations Value Fund Within this framework, the Fund's style is a value approach Investor A Shares provided in which the management team seeks superior returns by shareholders with a total return investing in sound, proven businesses that are statistically of -2.29%.** inexpensive relative to their intrinsic value, typically due to investor indifference or unpopularity. This approach also encompasses a long-term view of value investing with its potential long-term rewards. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? The last 12 months may well be remembered as the year technology dominated investors' thoughts and portfolios. It began with extreme optimism as recent enhancements in technology appeared to have saved the modern world from a severe Y2K conversion crisis. It ended with extreme pessimism as the technology-laden Nasdaq Composite Index*** suffered the worst year in its thirty-year existence, when the over-inflated dot.com bubble burst. Oil prices went to an extreme as well, rising to a thirty-year high of $36 a barrel. Energy demand exploded, giving utility stocks an annual increase of more than 50%. Bonds provided double-digit gains. And, after nearly ten years, the U.S. economy flirted with recession, as a broad-based inventory correction, exacerbated by five previous interest rate hikes, began to take a toll. In this environment, the Standard & Poor's 500 Composite Stock Price Index (S&P 500)+ declined 21.67%, one of its worst performances on record. By comparison, we are pleased to report, Nations Value Fund (Investor A Shares)
*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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. ***The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. +The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 28 33 NATIONS VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued declined just 2.29%, soundly beating the market and thoroughly confounding many new-era, new-economy types, as contrary to popular belief, value investing was indeed alive and well. It wasn't really different this time. The Fund's performance for the year reflected several factors. First, the market's apparent recognition of the traditional style of investing; i.e., valuation matters. Second, strong stock selection within economic sectors, supported by in-depth research. And third, using our research capabilities to determine appropriate sector weightings within the Fund. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?++ The sectors making the greatest contribution to performance relative to the S&P 500 were technology, consumer staples, financial services and utilities. As we stated in the first quarter of 2000, we believed "that the tremendous increase in technology stocks would dissipate over the coming year as stocks in this sector are now selling, on average, at incredibly high levels relative to their sustainable growth rates." Consequently, we reduced the Fund's weighting in the technology sector throughout the year. Therefore, the Fund benefited by owning roughly 10% in technology relative to a market weighting of approximately 28%. Stock selection was also beneficial, as the Fund's holding of First Data Corporation increased 35%, due to the predictable nature of its credit card processing business. The Fund's largest holding in the sector, International Business Machines Corporation declined just 18%. By comparison, the technology sector of the S&P 500 declined 59% for the year. The consumer staples sector of the Fund increased 57%, as investors sought the comfort of more stable earnings companies in a volatile market. In the Fund, shares of Philip Morris Companies, Inc. gained nearly 139% as litigation risk subsided and the company's true intrinsic value appeared to be recognized in the marketplace. Fortune Brands, Inc. and Ralston Purina were also standout performers. The Fund's overweighting in financial services relative to the market also benefited performance when that sector increased by nearly 26%. High-quality holdings, such as Federal Home Loan Mortgage Corporation, CIGNA Corporation and SouthTrust Corporation, advanced sharply in response to the end of Federal Reserve Board tightening, the anticipation of further easing of interest rates, as well as continued industry consolidation. The best performing sector within the market last year was the utilities sector. This was driven by investors' flight to more stable growth and conservative investments as well as the attraction of buying lower priced companies with improving fundamentals. The utility companies chosen for the Fund were believed to be of high quality and benefited from an environment of growing consumer demand and reduced supply. TECO Energy, American Water Works Company, Inc., FPL Group, Inc., and Dominion Resources, Inc. led the group with returns of 35% or better for the year.
++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 29 34 NATIONS VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The Fund's biggest challenge was in the economically sensitive basic materials and consumer cyclical sectors. Stocks in these groups were generally weak across the board as high raw material costs and weak sales hammered profitability. However, the Fund's average weighting in the basic materials group was just 3% and 8% in the consumer cyclical sector. Each of these was below the S&P 500 Index weighting. We will likely maintain an underweighting in these sectors until earnings and stock values improve. WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? As we look forward, we believe the overall tone of the market continues to improve for value investors. After several years of being out of favor, we believe the large- cap value style should continue to benefit from a market that appears to have become more rational and valuation conscious. Slower economic growth with modest inflation typically bodes well for value equities. In addition, value stocks generally lead the market as economic growth improves. The Fund will maintain its overweighted position in those sectors we deem most undervalued within the value discipline. They are capital goods, communication services, consumer staples, energy, financial services and utilities. In our opinion, stocks in these sectors represent a well-diversified portfolio that should be able to take advantage of improvements expected in the economy over the coming year. We believe they should also allow the Fund to perform relatively well if the markets continue to decline, and should perform well as the Federal Reserve Board continues its easing stance by lowering interest rates. In our view, the most overvalued sectors and, therefore, the most underweighted at this time are technology, health care and consumer cyclicals. As these areas become more attractively priced relative to their projected earnings growth rates, the Fund may add to its holdings in them. This may not occur until late in 2001.
30 35 NATIONS VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] 3.4% Household products 4.2% Insurance 5.0% Investment services 5.3% Aerospace and defense 5.9% Integrated oil 7.1% Electric power-Nuclear 7.2% Tobacco 7.3% Consumer credit and mortgages 8.5% Commercial banking 11.4% Telecommunications services 34.7% Other
TOP 10 HOLDINGS ------------------------------------------------- 1 UST Inc. 3.6% ------------------------------------------------- 2 Dominion Resources, Inc. 3.6% ------------------------------------------------- 3 General Dynamics Corporation 3.6% ------------------------------------------------- 4 FPL Group, Inc. 3.5% ------------------------------------------------- 5 Philip Morris Companies Inc. 3.5% ------------------------------------------------- 6 SouthTrust Corporation 3.3% ------------------------------------------------- 7 Verizon Communications Inc. 3.2% ------------------------------------------------- 8 Tenet Healthcare Corporation 2.1% ------------------------------------------------- 9 Freddie Mac 2.0% ------------------------------------------------- 10 Sprint Corporation (FON Group) 1.9% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 31 36 NATIONS VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
NAV** MOP* 10-YEAR (3/31/91 through 3/31/01) 12.11% 11.45%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Value Fund over the last 10 years. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Multi-Cap Value Funds Average invest in a variety of market capitalization ranges and invest in companies that are considered to be undervalued. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS VALUE FUND STANDARD & POOR'S 500 LIPPER MULTI-CAP VALUE $29,559 INDEX $38,468 FUNDS AVERAGE $33,495 ------------------ --------------------- ---------------------- Mar. 31 1991 9425 10000 10000 9423 9977 9993 9838 10511 10519 1991 10459 11392 11193 10520 11103 11331 10576 11314 11392 10691 11671 11685 1992 11204 12259 12433 11739 12795 13105 12009 12857 13261 12537 13189 13787 1993 13004 13495 14124 12665 12984 13752 12563 13038 13751 12776 13676 14326 1994 12601 13673 14053 13772 15005 15221 15149 16438 16454 16360 17744 17673 1995 17111 18813 18444 17961 19823 19481 18662 20713 20007 19117 21353 20543 1996 20679 23132 22231 21158 23752 22523 23829 27901 25518 26557 29988 28062 1997 26116 30849 27984 29242 35152 31056 29225 36312 30581 25624 32699 26324 1998 30593 39664 30505 30400 41643 30379 32701 44579 33683 29837 41793 30318 1999 30896 48012 32319 30259 49111 32771 29040 47805 32273 30640 47341 34058 2000 32028 43639 35114 Mar. 31 2001 29559 38468 33495
[INVESTOR A SHARES AT NAV** RETURN CHART]
STANDARD & POOR'S 500 LIPPER MULTI-CAP VALUE NATIONS VALUE FUND $31,372 INDEX $38,468 FUNDS AVERAGE $33,495 -------------------------- --------------------- ---------------------- Mar. 31 1991 10000 10000 10000 9998 9977 9993 10438 10511 10519 1991 11098 11392 11193 11162 11103 11331 11221 11314 11392 11343 11671 11685 1992 11888 12259 12433 12455 12795 13105 12741 12857 13261 13302 13189 13787 1993 13797 13495 14124 13438 12984 13752 13329 13038 13751 13556 13676 14326 1994 13370 13673 14053 14612 15005 15221 16074 16438 16454 17358 17744 17673 1995 18155 18813 18444 19057 19823 19481 19800 20713 20007 20283 21353 20543 1996 21940 23132 22231 22449 23752 22523 25282 27901 25518 28177 29988 28062 1997 27709 30849 27984 31026 35152 31056 31008 36312 30581 27188 32699 26324 1998 32459 39664 30505 32255 41643 30379 34696 44579 33683 31657 41793 30318 1999 32781 48012 32319 32106 49111 32771 30812 47805 32273 32509 47341 34058 2000 33982 43639 35114 Mar. 31 2001 31372 38468 33495
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/19/89 12/6/89 6/7/93 6/17/92 ----------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -1.97% -2.29% -7.90% -3.05% -6.84% -2.98% -3.74% ----------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 0.64% 0.37% -1.60% -0.43% -1.05% -0.29% -0.29% 5 YEARS 10.76% 10.48% 9.19% 9.70% 9.50% 9.89% 9.89% 10 YEARS 12.35% 12.11% 11.45% -- -- -- -- SINCE INCEPTION 12.25% 12.25% 11.66% 11.73% 11.73% 12.04% 12.04%
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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 32 37 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, MR. MARSICO SHARES HIS VIEWS ON NATIONS MARSICO GROWTH & INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND HIS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE. Thomas F. Marsico is Portfolio Manager of Nations Marsico Growth Nations Marsico Growth & Income Fund seeks long-term growth & Income Fund and Chief Executive of capital with a limited emphasis on income. Generally, the Officer of Marsico Capital Fund holds 35 to 50 large-capitalization companies selected Management, LLC, investment for their long-term growth potential. The Fund may take sub-adviser to the Fund. substantial positions in individual companies and typically will have substantial allocations to a limited number of INVESTMENT OBJECTIVE major economic sectors. However, the Fund typically will be The Fund seeks long-term growth of allocated across 7 to 10 industry sectors for capital with a limited emphasis on diversification purposes. The Fund focuses on identifying income. companies that we believe have strong brand franchises, improving fundamentals, excellent management teams and PERFORMANCE REVIEW global presences. For the 12-month period ended WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE March 31, 2001, Nations Marsico REPORTING PERIOD? Growth & Income Fund Investor A Shares provided shareholders with In general terms the last 12 months were not kind to a total return of -30.63%.** growth-oriented investment strategies. The fourth quarter of 2000 and first quarter of 2001 were particularly difficult. For the one-year period ending March 31, 2001 the Standard & Poor's 500 Composite Stock Price Index (S&P 500)*** registered four consecutive quarters of declining returns, the first time that has happened since 1974. The technology sector was especially hard-hit; technology stocks declined by nearly 60% from their peak levels reached in March 2000. During calendar year 2000, the S&P 500 had its worst annual return since 1977. The Nasdaq Composite Index (Nasdaq)+, which features a substantial number of technology companies, had its weakest calendar year return since its inception in 1971. Through the reporting period, it appears that equity markets sold off through a combination of both "macro" and company-specific factors. Through part of the reporting period, the Federal Reserve Board (the Fed) clearly was concerned about the potential for inflationary risks in the U.S. economy. The Fed raised interest rates three times in calendar year 2000, which followed three other increases in calendar year 1999, as a means of gradually slowing the overall U.S. economy, which had reached remarkably robust levels of growth. As time passed, however,
*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 a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. Source for all statistical data -- Marsico Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 33 38 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY continued various economic indicators suggested that a sharp economic slowdown was occurring. The magnitude of the slowdown, coupled with sharply rising energy prices, prompted concerns over a possible U.S. recession. That, in turn, put pressure on corporate profits, which was initially felt most acutely by technology companies but eventually by many other companies operating in various other sectors and industries. We think at least some of the unusual market activity that occurred in the past year might be attributable to the unrealistic expectations of investors, consumers and companies had regarding the prospects for the Internet. Specifically, just how the Internet and its attendant technologies were going to fundamentally change people's lives and the manner in which corporations would conduct their business. This euphoria spawned a remarkable amount of capital investments by companies in technology and communications infrastructure. A substantial number of those investments failed to generate positive returns because many of the Internet business plans eventually proved to be unsuccessful. As a result, we saw major inventory corrections, lowered corporate earnings guidance and widespread disappointment in technology stocks. Coincident with this reassessment of the technology sector was a number of other factors that challenged the markets. This included a Federal Reserve Board that, as recently as May 2000, was still increasing interest rates as a means of thwarting inflationary pressures in the U.S. economy and curbing Gross Domestic Product (GDP) growth. In the wake of record levels of corporate profits in 1999 and early 2000, the past 12 months have seen very difficult year-over-year corporate earnings comparisons. Consumers and corporations faced sharply higher energy prices. Multi-national corporations experienced problematic earnings translations due to the weak Euro and declining yen. Tensions flared anew in the Mideast. Finally, the drawn-out U.S. Presidential election, in our view, also contributed to undermining investor confidence. Many of these uncertainties, in our opinion, have either abated altogether or now appear to be priced into the stock market. However, it is important to emphasize that we are not expecting a "quick fix" in the form of a major stock market rally. Nor do we anticipate that future aggregate equity market returns will approach the levels achieved during most of the past decade. We base these views on the overall lack of positive reaction -- at least to date -- to the Fed acting to reduce interest rates three times in the first quarter, 2001 totaling 150 basis points. In addition, as we move into another reporting season for corporate earnings, the initial signs, while not necessarily troubling, generally seem to point to lower corporate earnings and growth rates going forward. Unquestionably, a great deal of damage has been done to the equity markets over the past year. We have seen estimates that four to five trillion dollars in value has been wiped out by the stock market's decline over the past year. We believe there is little doubt that there is a higher correlation between the stock market and the overall U.S. economy, particularly given the higher degree to which U.S. households now own equities.
34 39 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY continued WHAT IS YOUR INVESTMENT PROCESS? The investment process emphasizes investments in high-quality, large-capitalization companies (typically defined as companies with $10 billion or more in market- capitalization) that we believe offer the potential for superior long-term earnings growth. The process is rooted in rigorous, creative, hands-on fundamental research, blending top-down macroeconomic and industry analysis with "bottom-up" stock selection. We are strong believers in "doing the work" internally; Wall Street research, computer-based screening techniques or ratio-driven analysis are seldom utilized as a means of generating investment ideas. We tend to define "growth" somewhat flexibly and are strong advocates of non-linear, "out of the box" thinking as an approach to identifying attractive investment opportunities. The process essentially has two primary dimensions. It begins with the formulation of a macroeconomic outlook. This facet of the process helps create a strategic backdrop for actual portfolio construction. Key considerations include factors such as the direction and trend of interest rates, inflation, productivity gains, federal/state budget surpluses, demographics and the regulatory environment. The stock selection process focuses on industries and companies that, in our opinion, are experiencing positive fundamental change. Our primary investment universe comprises 400 to 600 companies, approximately 150 to 200 are followed closely. Attributes sought in companies include specific market expertise/dominance, strong free cash flow, extensive "R&D" and marketing budgets and excellent management teams. We tend to favor companies that have made significant capital investments and appear poised to benefit from those expenditures. We also generally prefer companies that have improving returns on capital spread over large bases of revenues (i.e., multiple products/services) and different geographies. The Fund will typically own several types of growth companies including core growth, aggressive growth and life cycle change. The core growth segment will typically comprise 40% to 50% of the portfolio. It features companies that have demonstrated the ability to generate solid, relatively predictable, year-over-year earnings growth. The aggressive growth segment generally will comprise 15% to 30% of the portfolio (although it can reach a higher level depending upon our overall level of conviction in the equity market). Generally, the segment features investments in companies -- generally in technology or related fields -- that have the potential to generate rapid earnings growth rates. The life cycle change category also typically will comprise 15% to 30% of the portfolio. This category focuses on companies that are experiencing a significant positive catalyst in their business -- such as an acquisition, a divestiture, the introduction of a new product -- that creates potential for strong future earnings growth. Oftentimes, life cycle change companies trade at relatively low valuations and may be out-of-favor with other growth-oriented equity managers. Detailed earnings and cash-flow models are created internally for all companies of interest. These models "decompose" a company into its various divisions and products. The purpose of these models is to help us understand a stock's leverage points with as much precision as possible. We also engage in a great deal of
35 40 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY continued "channel checking" as a means of further evaluating a company. This process can include analyzing a company's customers, competitors, suppliers and distributors. Similar to the earnings and cash flow models, this process is intended to help gain as complete an understanding as possible about a company. PLEASE COMMENT ON THE FUND'S PERFORMANCE.++ For the 12-month period ended March 31, 2001, the Fund (Investor A Shares) had a total return of -30.63%. The S&P 500, which we consider to be its primary equity market benchmark, had a return of -21.67% over the same time period. The Fund's underperformance was attributable to a variety of factors. Investment results, not unlike the overall market, fluctuated substantially throughout the reporting period. Market leadership shifted dramatically throughout the year, with the most severe changes typically experienced by technology and biotechnology companies. In general, the performance "culprits" over the past year included the Fund's investments in select technology (particularly "B2B" companies such as Akamai and Commerce One). The Fund's technology-related positions at their peak reached more than 50% of the Fund's net assets. As a result, investment returns were adversely affected during the initial, major sell-off that took place in the technology sector during March to May 2000. Other areas of weakness in the Fund during the reporting period included its investments in telecommunications, telecommunications equipment, cable/media/ entertainment and select retail holdings. Performance also was adversely affected through approximately the first half of the reporting period by an underweighting in healthcare-related companies. However, we would note that several technology positions (notably EMC Corporation, Corning, Sun Microsystems, and Oracle Corporation) performed quite well for much of the year. In addition, decisions made to sell Lucent Technologies and Dell Computer added value for the year as a whole. Over the past several months, it appears that the decision to reduce the Fund's technology positions and its overall level of aggressiveness has helped investment results, particularly on a relative basis. The decision to reduce the Fund's technology positions in calendar year 2000, and further in the first quarter of 2001, was based primarily on our belief that a general technology slowdown is not only at hand but may be greater in magnitude and duration than is generally recognized in the marketplace. Increasingly, we have become concerned over end-user demand for various technology products and applications. In our view, many technology companies remain fully valued, particularly in light of our expectations that future growth rates may continue to decelerate. As the Fund's technology positions were reduced last year, increased allocations were made in several sectors, including financial services, health care, consumer-
++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 36 41 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY continued related (e.g., retail, beverages) and aerospace/defense. We believe these sectors/ industries are trading at attractive valuations and offer the potential for solid earnings gains in a slower growth economic environment. The financial services weighting was increased beginning last summer, primarily because we anticipated that the Fed would take steps to reduce interest rates. We believed that a more favorable interest rate environment would provide a favorable backdrop for financial services companies. The sector performed well in the third calendar quarter of 2000, sold off sharply last October and November then rallied in December. Thus far in calendar year 2001, the sector has experienced similar volatility. On balance, we believe the changes implemented in the Fund have contributed positively to performance. WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST OF 2001? While we in no way are attempting to "sugarcoat" the difficulty of the recent stock market environment, it is important to emphasize that we continue to have an overall positive long-term investment outlook. Although the Fund is postured quite differently than previously in terms of its sector emphasis, it remains fully invested in equities. In our opinion, there are a number of very important, positive long-term macroeconomic underpinnings -- highlighted by lower interest rates, constrained inflation, budget surpluses and productivity gains -- that we believe are durable and which should provide a healthy overall backdrop for future equity returns. Although the degree of the overall stock market decline these past several months has triggered some comparisons to the infamous "bear market" of 1973-74, in our view we are in a substantially different, more positive macroeconomic environment. We do not believe there is a high risk of a general recession occurring, although certain market sectors clearly are experiencing difficulties. We believe energy prices will most likely stabilize going forward. Further, we think the three interest rate cuts by the Fed totaling 150 basis points in the first quarter point to a more favorable interest rate environment which, over time, should help provide a more favorable valuation backdrop for the overall equity market. Indeed, our expectation is that the Fed will most likely reduce rates again in the ensuing months. We believe equity valuations have become more compelling as the S&P 500, the Dow Jones Industrial Average+++ and Nasdaq have declined. We are not necessarily expecting an imminent market turn, although -- as evidenced by the Fund's sector and industry allocations -- we have positioned the Fund in several areas that we believe offer compelling long-term growth potential. In an economic environment where inflation is restrained and interest rates are moving lower, we feel the stock market offers opportunities for long-term investors.
+++The Dow Jones Industrial Average is a price-weighted average based on the price movements of 30 blue chip stocks. 37 42 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Other 35.1 Pharmaceuticals 12.3 Investment services 9.4 Aerospace and defense 7.5 Department and discount stores 6.9 Beverages 6.6 Specialty stores 6.2 Broadcasting and cable 4.4 Oilfield services 4.3 Diversified manufacturing 4.1 Commercial banking 3.2
TOP 10 HOLDINGS ------------------------------------------------- 1 Merck & Company, Inc. 4.2% ------------------------------------------------- 2 General Electric Company 4.1% ------------------------------------------------- 3 Boeing Company 4.1% ------------------------------------------------- 4 Merrill Lynch & Company, Inc. 4.0% ------------------------------------------------- 5 Home Depot, Inc. 3.9% ------------------------------------------------- 6 Genentech, Inc. 3.8% ------------------------------------------------- 7 Costco Wholesale Corporation 3.7% ------------------------------------------------- 8 Anheuser-Busch Companies, Inc. 3.6% ------------------------------------------------- 9 General Dynamics Corporation 3.4% ------------------------------------------------- 10 Citigroup Inc. 3.2% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 38 43 NATIONS MARSICO GROWTH & INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
NAV** MOP* SINCE INCEPTION (12/31/97 through 3/31/01) 13.42% 11.37%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico Growth & Income Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market- capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies with long-term earnings expected to grow significantly. It is not possible to invest in the Index or Lipper Average. 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. [LINE GRAPH] INVESTOR A SHARES AT MOP* (AS OF 3/31/00) [CHART LEGEND]
NATIONS MARSICO GROWTH & INCOME LIPPER LARGE-CAP GROWTH STANDARD & POOR'S 500 FUND $14,186 FUNDS AVERAGE $12,374 INDEX $12,470 ----------------------- ----------------------- --------------------- Dec. 31 1997 9425.00 10000.00 10000.00 11338.00 11467.00 11395.00 12329.00 12051.00 11771.00 10820.00 10702.00 10600.00 1998 13065.00 13500.00 12858.00 14103.00 14645.00 13499.00 14898.00 15230.00 14451.00 14700.00 14691.00 13548.00 1999 19873.00 18646.00 15564.00 20450.00 20229.00 15920.00 18614.00 19214.00 15497.00 19071.00 19121.00 15346.00 2000 16800.00 15620.00 14146.00 Mar. 31 2001 14186.00 12374.00 12470.00
[LINE GRAPH] INVESTOR A SHARES AT NAV** (AS OF 3/31/00)
NATIONS MARSICO GROWTH & INCOME LIPPER LARGE-CAP GROWTH STANDARD & POOR'S 500 FUND $15,051 FUNDS AVERAGE $12,374 INDEX $12,470 ----------------------- ----------------------- --------------------- Dec. 31 1997 10000.00 10000.00 10000.00 12030.00 11467.00 11395.00 13081.00 12051.00 11771.00 11480.00 10702.00 10600.00 1998 13862.00 13500.00 12858.00 14963.00 14645.00 13499.00 15807.00 15230.00 14451.00 15597.00 14691.00 13548.00 1999 21085.00 18646.00 15564.00 21697.00 20229.00 15920.00 19749.00 19214.00 15497.00 20234.00 19121.00 15346.00 2000 17824.00 15620.00 14146.00 Mar. 31 2001 15051.00 12374.00 12470.00
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/31/97 12/31/97 12/31/97 12/31/97 ---------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -30.42% -30.63% -34.63% -31.13% -34.54% -31.10% -31.78% ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 7.85% 7.75% 5.66% 6.98% 6.10% 7.03% 7.03% SINCE INCEPTION 13.52% 13.42% 11.37% 12.67% 11.96% 12.72% 12.72%
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. 39 44 NATIONS BLUE CHIP FUND EQUITY MANAGEMENT TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS BLUE CHIP FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE. The Fund is managed by the Equity As a general policy, the philosophy of Nations Blue Chip Management Team of Chicago Equity Fund is to remain neutral to the overall stock market in Partners, LLC, the investment sector weightings and market capitalization and focus on sub-adviser to the Fund. individual stock selection. Our risk-controlled strategy is INVESTMENT OBJECTIVE designed to provide the potential for the Fund to fully The Fund seeks to achieve benefit from the market's advances despite major disparities long-term capital appreciation in performance between sectors and the narrowness of the through investments in blue chip market. Within our discipline, we select securities that stocks. display attractive valuations, while exhibiting positive PERFORMANCE REVIEW momentum and solid earnings quality. By factoring for these For the 12-month period ended three themes, we seek to provide superior stock selection March 31, 2001, Nations Blue Chip across the industry sectors. We focus on companies that Fund Investor A Shares had a total exhibit rising earnings expectations and perceived high return of -23.30%.** earnings certainty while trading at attractive valuations. Companies with high earnings certainty are those that have similar estimates by different analysts. Firms with rising earnings expectations are typically those that have experienced the biggest increase in analyst earnings expectations. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? The Fund (Investor A Shares) returned -23.30% versus -21.67% for the Standard & Poor's 500 Composite Stock Price Index (S&P 500)***. The market conditions over the last twelve months saw a rapid decline in the overall economy, which spilled over into the stock market. Technology stocks declined the most during this period, as the slowdown in the economy and lack of capital spending among corporations was transparent in technology company earnings. Other factors contributing to the overall downfall were higher energy prices and a stronger dollar. WHAT ADJUSTMENTS WERE MADE TO THE FUND AS A RESULT OF THE STOCK MARKET VOLATILITY OF THE FIRST QUARTER 2001? To address the increased volatility within the last three months, the number of stocks held within the portfolio increased from 170 to 184, which we believe decreased the volatility relative to the S&P 500. This is a continuation of what we have seen over the last year.
*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 a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. Source for all statistical data -- Chicago Equity Partners, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 40 45 NATIONS BLUE CHIP FUND EQUITY MANAGEMENT TEAM COMMENTARY continued WHAT SECTORS OR STOCKS PROVED FAVORABLE FOR THE FUND OVER THE LAST 12 MONTHS?+ The best performing sectors over the last twelve months were financials (+10%) and health care (+16%), which produced strong returns in the second and third quarters of 2000. Other contributing sectors were utilities and energy, which saw the rise in energy prices as a boon, as earnings increased greater than expected. Within health care, Cardinal Health, Inc. a drug distributor, was the best-performing stock, while as a group the major drug companies, Merck & Company, Inc. and Eli Lilly and Company, were the largest contributors. WHAT PARTICULAR SECTORS OR STOCKS WERE UNFAVORABLE FOR THE FUND? The lagging sectors were technology and communication services. On an absolute basis, technology lost 58% over the year, and after this drop remains the largest-weighted sector at 18% as of March 31, 2001. The biggest detractors in the technology sector were Cisco Systems, Inc., Microsoft Corporation, Intel Corporation and Oracle Corporation. Within communication services, AT&T Corporation and Worldcom were the largest detractors, as the earnings slowdown was felt as continued price pressure in long-distance services and reduced capital spending in wireless, Internet and data segments led to the disappointing earnings and lower future expectations. WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? The U.S. economy still appears to show signs of slowing, which wreaked havoc on the markets during the second half of 2000. Profit concerns have been at the root of most issues related to stocks. The Federal Reserve Board is addressing the slowdown with its 150 basis point decrease in rates thus far in 2001, and companies are addressing the earnings story through head count reductions. Many pundits predict that by the fourth quarter, the economy and corporate profits could turn positive as the combination of the aforementioned may start to produce a stronger economy and stable earnings. As a leading indicator, we believe the stock market may benefit before we see the economy turn. Overall, our philosophy will not change based on short-term trends or conditions in the market. Our goal is to add value through security selection, while attempting to neutralize other risk factors, such as market timing and sector rotation, for which there is not adequate compensation by the market.
+Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 41 46 NATIONS BLUE CHIP FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Pharmaceuticals 9.1 Commercial banking 8.1 Telecommunications services 6.1 Integrated oil 6 Computers and office equipment 4.9 Diversified manufacturing 4.6 Semiconductors 4.2 Software 4.2 Insurance 4 Department and discount stores 3.7 Other 45.1
TOP 10 HOLDINGS ------------------------------------------------- 1 General Electric Company 3.5% ------------------------------------------------- 2 Exxon Mobil Corporation 3.4% ------------------------------------------------- 3 Pfizer Inc. 3.0% ------------------------------------------------- 4 Citigroup Inc. 2.9% ------------------------------------------------- 5 Microsoft Corporation 2.6% ------------------------------------------------- 6 Merck & Company, Inc. 2.1% ------------------------------------------------- 7 AOL Time Warner Inc. 1.9% ------------------------------------------------- 8 International Business Machines Corporation 1.9% ------------------------------------------------- 9 Intel Corporation 1.7% ------------------------------------------------- 10 Verizon Communications Inc. 1.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 42 47 NATIONS BLUE CHIP FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (1/13/94 through 3/31/01) 14.87% 13.93%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Blue Chip Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Large-Cap Core Funds Average invest at least 75% of their equity assets in companies with market capitalizations of greater than $10 billion. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS BLUE CHIP FUND LIPPER LARGE-CAP CORE STANDARD & POOR'S 500 $25,610 FUNDS AVERAGE $24,477 INDEX $28,505 ---------------------- --------------------- --------------------- Jan. 13 1994 9425 10000 10000 9020 9660 9621 9002 9561 9661 9480 9988 10134 1994 9486 9876 10132 10397 10678 11119 11345 11596 12180 12252 12453 13149 1995 12880 13045 13940 13565 13760 14689 14237 14278 15349 14643 14741 15823 1996 15940 15758 17141 16340 15889 17600 19273 18471 20675 20765 19939 22221 1997 21151 20177 22859 24133 22810 26048 24891 23380 26908 21859 20740 24230 1998 27042 25249 29391 28370 26383 30858 30081 28077 33034 28126 26395 30969 1999 32766 30858 35577 33395 32127 36392 32849 31230 35424 32849 31112 35080 2000 29722 28119 32337 Mar. 31 2001 25610 24477 28505
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS BLUE CHIP FUND LIPPER LARGE-CAP CORE STANDARD & POOR'S 500 $27,181 FUNDS AVERAGE $24,477 INDEX $28,505 ---------------------- --------------------- --------------------- Jan. 13 1994 10000 10000 10000 9570 9660 9621 9551 9561 9661 10058 9988 10134 1994 10065 9876 10132 11031 10678 11119 12037 11596 12180 12999 12453 13149 1995 13666 13045 13940 14393 13760 14689 15105 14278 15349 15536 14741 15823 1996 16912 15758 17141 17337 15889 17600 20449 18471 20675 22032 19939 22221 1997 22441 20177 22859 25606 22810 26048 26410 23380 26908 23193 20740 24230 1998 28692 25249 29391 30101 26383 30858 31916 28077 33034 29841 26395 30969 1999 34765 30858 35577 35433 32127 36392 34864 31230 35424 34864 31112 35080 2000 31545 28119 32337 Mar. 31 2001 27181 24477 28505
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B++ PRIMARY A+ NAV** MOP* NAV** CDSC*** Inception date 5/21/99 1/13/94 7/15/98 ------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -23.09% -23.30% -27.71% -23.85% -27.38% ------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 2.84% 2.00% 0.00% 1.35% 0.54% 5 YEARS 14.12% 13.56% 12.21% 13.12% 12.88% SINCE INCEPTION 15.27% 14.87% 13.93% 14.57% 14.57% INVESTOR C NAV** CDSC*** Inception date 11/11/96 ------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -23.84% -24.54% ------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 1.34% 1.34% 5 YEARS -- -- SINCE INCEPTION 10.92% 10.92%
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 reflect 12b-1 fees of 0.25%. These 12b-1 fees are not applicable to Primary A Shares. Inception date for Investor A Shares is January 13, 1994. ++Investor B Shares commenced operations on July 15, 1998 and have no performance prior to that date. Performance prior to July 15, 1998 is that of Investor A Shares at NAV, which reflect 12b-1 fees of 0.25%. If Investor B Shares 12b-1 fees had been reflected, total returns would have been lower. Inception date for Investor A Shares is January 13, 1994. The performance shown includes the effect of fee waivers and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 43 48 NATIONS STRATEGIC GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS STRATEGIC GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Growth Nations Strategic Growth Fund employs a long-term, Strategies Team of Banc of America large-capitalization growth strategy. We "build" the Fund by Capital Management, Inc., employing an integrated approach to portfolio construction. investment sub-adviser to the We start with a macro view, forecasting factors such as the Fund. economy, sector trends and long-term investment themes INVESTMENT OBJECTIVE (e.g., the aging of the U.S. population, globalization and The Fund seeks long-term, innovation). We then combine fundamental and quantitative after-tax returns by investing in research analysis to select high-growth companies that we a diversified portfolio of common believe will grow faster and/or longer than consensus stocks. expectations. The Fund typically invests in companies that PERFORMANCE REVIEW are recognized leaders, have strong track records and appear For the 12-month period ended to possess key competitive advantages. Through our March 31, 2001, Nations Strategic "top-down" framework and "bottom-up" stock selection, we Growth Fund Investor A Shares create a portfolio of 60-80 securities in which we attempt provided shareholders with a total to control risk through diversification and monitor through return of -26.62%.** quantitative techniques. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? The last year was an extremely difficult period for growth investors. The tremendous appreciation in large capitalization growth stocks from 1996-2000 reversed over the last twelve months as the Standard & Poor's 500 Composite Stock Price Index (S&P 500)*** dropped 21.67% and the Nasdaq Composite Index+ fell nearly 60%. Nations Strategic Growth Fund (Investor A Shares) returned a disappointing -26.62% for the 12-month period ended March 31, 2001. Over the last year, there were three sharp declines in the equity market that were briefly interrupted by two short rallies. From April 1 through July 31, 2000, the speculative fervor that propelled stock valuations to unprecedented levels was wrung from the market. During August, the market staged a brief rally followed by a significant decline through the end of the year as investors adjusted to slower economic growth. The Federal Reserve Board stepped in with an interest rate cut on January 3, 2001 catching investors off guard and igniting a sharp rally through the end of January, only to be followed by the resumption of the bear market through the end of March.
*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 be charged on purchases of Investor A Shares. For standardized performance, please refer to the Performance table. ***The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 44 49 NATIONS STRATEGIC GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued The first quarter of 2001 has been kinder to Nations Strategic Growth Fund, and performance has stabilized. The Fund stayed true to its objective of investing in large-capitalization growth stocks and held up relatively well versus the S&P 500 and its peer group through December, when fear and panic shook investors. In this period, many growth stocks fell precipitously and the Fund lost considerable performance. WHAT STEPS ARE BEING TAKEN TO IMPROVE FUND PERFORMANCE? As evidence mounted that the economy was slowing, we took several steps to seek to reduce risk in the portfolio. Initially, we increased the diversification of the Fund. This was accomplished by increasing the number of stocks held and by reducing sector bets, particularly in technology. Several positions were initiated or increased in the Fund with more "defensive" characteristics, including Lockheed Martin Corporation, United Technologies Corporation and Worldcom Inc. Finally, the Fund carried slightly higher than normal cash positions, allowing the flexibility to opportunistically purchase stocks at what we believe to be better valuations. While the Fund remained true to its large-capitalization growth mandate, it was managed in a more conservative manner in the first quarter. We believe over the next couple of quarters we may again be compensated if we incur greater risk and may adjust the Fund as appropriate in seeking to maximize shareholder appreciation. WHAT SECTORS OR STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?+ As investor focus changed from momentum driven to earnings stability and visibility, defensive sectors and stocks proved the place to be. Several sectors contributed favorably to Fund performance including consumer staples, capital goods, healthcare and energy. These sectors contain companies with stable sales, revenues and earnings. Consumer staples companies, including Anheuser-Busch Companies, Inc., PepsiCo, Inc. and Estee Lauder all positively contributed to Fund performance, as each reported solid earnings growth and stable demand for their products. Capital goods stocks also contributed to performance as the Fund increased or initiated positions in General Dynamics Corporation, Lockheed Martin Corporation and United Technologies Corporation. Healthcare stocks continued to attract investor interest as earnings visibility and strong growth were rewarded. The large capitalization pharmaceutical stocks were the best performing in the Fund. One of the only areas in the economy with pricing power was energy. As the price of oil remained high and electricity shortages hit California, Exxon Mobil Corporation, Schlumberger Ltd. and AES Corporation all contributed positively to Fund performance.
+Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 45 50 NATIONS STRATEGIC GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued WHAT SECTORS OR STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The primary driver of the Fund's negative returns were technology related stocks. After peaking in valuation in March of 2000, technology stocks fell more than 60% over the last twelve months. Nearly all of these stocks suffered significant declines including industry leaders such as Microsoft Corporation, Intel Corporation, Cisco Systems, Inc. and Dell Computer Corporation as well as the more speculative names such as Openwave, VERITAS Software Corporation and Qualcomm Computer Corporation. Communications stocks, which are closely related to technology issues, performed poorly in the period, particularly in the wireless segment. Retailing stocks also underperformed as consumer spending slowed throughout the last year. Best Buy was the Fund's largest disappointment as the company made an unexpected acquisition that was negatively viewed by investors. WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? We are cautiously optimistic. As we enter the new fiscal year, we believe we are in a turbulent transition from a bear to a bull market. The market collapse over the last year has likely set the stage for a recovery as we move through 2001. Our economic forecast suggests we may not be entering a prolonged economic downturn; rather, we may experience a slowdown of growth in gross domestic product, not a recession. The interest rate reductions by the Federal Reserve Board potentially could lead to better economic growth and to a faster recovery in the economy than is widely believed. If our scenario proves to be correct, earnings growth in the fourth quarter of 2001 and into 2002 could be positive and lead to higher stock valuations. Lastly, and very importantly, stock valuations seem much more reasonable as we enter this year than they have been at any time over the last three years. Stock prices tend to lead economic conditions by six to twelve months indicating we may be close to seeing valuations improve and a growth investment strategy pay off for our shareholders.
46 51 NATIONS STRATEGIC GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Other 45.7 Pharmaceuticals 7.8 Broadcasting and able 6 Software 5.9 Computers and office equipment 5.8 Diversified Manufacturing 5.4 Commercial banking 5.3 Department and discount stores 4.9 Medical devices and supplies 4.8 Telecommunications services 4.6 Semiconductors 3.8
TOP 10 HOLDINGS ------------------------------------------------- 1 Microsoft Corporation 4.8% ------------------------------------------------- 2 General Electric Company 3.5% ------------------------------------------------- 3 International Business Machines Corporation 3.2% ------------------------------------------------- 4 Pfizer Inc. 2.8% ------------------------------------------------- 5 Wal-Mart Stores, Inc. 2.5% ------------------------------------------------- 6 Citigroup Inc. 2.4% ------------------------------------------------- 7 Comcast Corporation, Class A 2.2% ------------------------------------------------- 8 Intel Corporation 2.1% ------------------------------------------------- 9 American International Group, Inc. 2.0% ------------------------------------------------- 10 Bank of New York Company, Inc. 2.0% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 47 52 NATIONS STRATEGIC GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT CUMULATIVE TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/2/98 through 3/31/01) 9.87% 7.29%
The chart to the left shows the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Strategic Growth Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies whose long-term earnings are expected to grow significantly. It is not possible to invest in the Index or Lipper Average. The performance of Investor A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS LIPPER LARGE- STRATEGIC GROWTH FUND CAP GROWTH FUNDS STANDARD & POOR'S 500 $11,917 AVERAGE $11,562 INDEX $11,764 --------------------- ---------------- ---------------------- Oct. 2 1998 9425 10000 10000 1998 12141 12614 12130 13068 13684 12735 13721 14231 13633 12883 13727 12781 1999 15520 17423 14683 16239 18902 15019 15663 17953 14620 15356 17867 14478 2000 13574 14595 13346 Mar. 31 2001 11917 11562 11764
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS LIPPER LARGE- STRATEGIC GROWTH FUND CAP GROWTH FUNDS STANDARD & POOR'S 500 $12,644 AVERAGE $11,562 INDEX $11,764 --------------------- ---------------- ---------------------- Oct. 2 1998 10000 10000 10000 1998 12882 12614 12130 13865 13684 12735 14558 14231 13633 13669 13727 12781 1999 16467 17423 14683 17227 18902 15019 16618 17953 14620 16293 17867 14478 2000 14402 14595 13346 Mar. 31 2001 12644 11562 11764
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A+ INVESTOR B+ INVESTOR C+ PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/2/98 8/2/99 8/2/99 8/2/99 --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -26.62% -26.62% -30.85% -27.16% -30.79% -27.14% -27.87% --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS SINCE INCEPTION 9.99% 9.87% 7.29% 9.37% 8.30% 9.40% 9.40%
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. +Investor A, Investor B and Investor C Shares commenced operations on August 2, 1999 and have no performance prior to that date. Performance prior to August 2, 1999 is that of Primary A Shares, which do not have any 12b-1 fees. If Investor A, Investor B and Investor C Shares 12b-1 fees had been reflected, total returns would have been lower. 48 53 NATIONS CAPITAL GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS CAPITAL GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Growth Nations Capital Growth Fund employs a long-term, Strategies Team of Banc of America large-capitalization growth strategy. We "build" the Fund by Capital Management, Inc., employing an integrated approach to portfolio construction. investment sub-adviser to the We start with a macro view, forecasting factors such as the Fund. economy, sector trends and long-term investment themes INVESTMENT OBJECTIVE (e.g., the aging of the U.S. population, globalization and The Fund seeks growth of capital innovation). We then combine fundamental and quantitative by investing in companies that are research analysis to select high-growth companies that we believed to have superior earnings believe will grow faster and/or longer than consensus growth potential. expectations. The Fund typically invests in companies that PERFORMANCE REVIEW are recognized leaders, have strong track records and appear For the 12-month period ended to possess key competitive advantages. Through our March 31, 2001, Nations Capital "top-down" framework and "bottom-up" stock selection, we Growth Fund Investor A Shares create a portfolio of 60-80 securities in which we attempt provided shareholders with a total to control risk through diversification and monitor it return of -30.91%.** through quantitative techniques. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? The last year was an extremely difficult period for growth investors. The tremendous appreciation in large-capitalization growth stocks from 1996-2000 reversed over the last twelve months as the Standard & Poor's 500 Composite Stock Price Index (S&P 500)*** dropped 21.67% and the Nasdaq Composite Index+ fell nearly 60%. Nations Capital Growth Fund (Investor A Shares) returned a disappointing -30.91% for the 12-month period ended March 31, 2001. Over the last year, there were three sharp declines in the equity market that were briefly interrupted by two short rallies. From April 1 through July 31, 2000, the speculative fervor that propelled stock valuations to unprecedented levels was wrung from the market. During August, the market staged a brief rally followed by a significant decline through the end of the year as investors adjusted to slower economic growth. The Federal Reserve Board (the Fed) stepped in with an interest rate cut on January 3, 2001, catching investors off guard and igniting a sharp rally through the end of January, only to be followed by the resumption of the bear market through the end of March.
*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 a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 49 54 NATIONS CAPITAL GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued The first quarter of 2001 has been kinder to Nations Capital Growth Fund and performance has stabilized. The Fund stayed true to its objective of investing in large-capitalization growth stocks and held up relatively well versus the S&P 500 and its peer group through December, when fear and panic shook investors. In this period, many growth stocks fell precipitously, and the Fund lost considerable performance. HOW WAS THE FUND POSITIONED IN THIS ENVIRONMENT? As evidence mounted that the economy was slowing, we took several steps in the Fund to attempt to reduce risk in the portfolio. Initially, we increased diversification. This was accomplished by increasing the number of stocks held and by reducing sector bets, particularly in technology. Several positions were initiated or increased in the Fund with more "defensive" characteristics, including Lockheed Martin Corporation, United Technologies and Worldcom, Inc. Finally, the Fund carried slightly higher than normal cash position, providing the flexibility to opportunistically purchase stocks at what we believe to be better valuations. While the Fund remained true to its large-capitalization growth mandate, it was managed in a more conservative manner in the first quarter. We believe over the next couple of quarters we may again be compensated if we incur greater risk and may adjust the Fund as appropriate in seeking to maximize shareholder appreciation. WHAT SECTORS OR STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?++ As investor focus changed from momentum driven to earnings stability and visibility, defensive sectors and stocks proved the place to be. Several sectors contributed favorably to Fund performance including consumer staples, finance, health care and energy. These sectors contain companies with stable sales, revenues and earnings. Consumer staples companies, including Anheuser-Busch Companies, Inc., PepsiCo, Inc. and Estee Lauder all positively contributed to Fund performance as each reported solid earnings growth and stable demand for their products. Financial service companies tended to recover from two years of disappointing performance as stocks such as Citigroup, Inc., American International Group, Inc. and Fannie Mae all had favorable returns. Health care stocks continued to attract investor interest as earnings visibility and strong growth were rewarded. The large-capitalization pharmaceutical stocks were the best performing in the Fund. Energy was one of the only areas in the economy with pricing power. As the price of oil remained high and electricity shortages hit California, Exxon Mobil Corporation, Schlumberger Ltd. and AES Corporation all contributed positively to Fund performance.
++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 50 55 NATIONS CAPITAL GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued WHAT SECTORS OR STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The primary drivers of the Fund's negative returns were technology-related stocks. After peaking in valuation in March of 2000, technology stocks fell more than 60% over the last twelve months. Nearly all of these stocks suffered significant declines including industry leaders such as Microsoft Corporation, Intel Corporation, Cisco Systems, Inc. and Dell Computer as well as the more speculative names such as Openwave, Veritas and Qualcomm. Communications stocks, which are closely related to technology issues, performed poorly in the period, particularly in the wireless segment. Retailing stocks also underperformed as consumer spending slowed throughout the last year. Best Buy was the Fund's largest disappointment as the company made an unexpected acquisition that was negatively viewed by investors. WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? We are cautiously optimistic. As we enter the new fiscal year, we believe we may be in a turbulent transition from a bear to a bull market. The market collapse over the last year may likely have set the stage for a recovery as we move through 2001. Our economic forecast suggests we may not be entering a prolonged economic downturn; rather, we may experience a slowdown of growth in gross domestic product, not a recession. The interest rate reductions by the Federal Reserve Board will ultimately lead to better economic growth and to a faster recovery in the economy than is widely believed. If our scenario proves to be correct, earnings growth in the fourth quarter of 2001 and into 2002 should be very positive and lead to higher stock valuations. Lastly, and very importantly, we believe stock valuations to be more reasonable as we enter this year than they have been at any time over the last three years. Historically, stock prices tend to lead economic conditions by six to twelve months, indicating we are close to seeing valuations improve and a growth investment strategy pay off for our shareholders.
51 56 NATIONS CAPITAL GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Pharmaceuticals 10.40 Broadcasting and cable 7.90 Software 7.50 Computers and office equipment 7.20 Department and discount stores 6.80 Medical devices and supplies 5.90 Diversified manufacturing 5.60 Semiconductors 4.70 Telecommunications services 4.60 Computer services 4.40 Other 35.00
TOP 10 HOLDINGS ------------------------------------------------- 1 Microsoft Corporation 5.2% ------------------------------------------------- 2 Wal-Mart Stores, Inc. 4.0% ------------------------------------------------- 3 General Electric Company 3.8% ------------------------------------------------- 4 Pfizer Inc. 3.6% ------------------------------------------------- 5 International Business Machines Corporation 3.5% ------------------------------------------------- 6 Intel Corporation 3.3% ------------------------------------------------- 7 AOL Time Warner Inc. 2.9% ------------------------------------------------- 8 Comcast Corporation, Class A 2.4% ------------------------------------------------- 9 Automatic Data Processing, Inc. 2.3% ------------------------------------------------- 10 Amgen Inc. 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 52 57 NATIONS CAPITAL GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
NAV** MOP* SINCE INCEPTION (10/2/92 through 3/31/01) 12.38% 11.60%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Capital Growth Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies whose long-term earnings are expected to grow significantly. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS CAPITAL GROWTH LIPPER LARGE-CAP GROWTH STANDARD & POOR'S 500 FUND $25405 FUNDS AVERAGE $29053 INDEX $32961 ---------------------- ----------------------- --------------------- Oct. 2 1992 9425 10000 10000 1992 10157 10908 10504 10333 11052 10963 10229 11142 11017 10571 11695 11301 1993 10921 11901 11563 10590 11456 11125 10269 11077 11172 10899 11754 11718 1994 10752 11656 11716 11430 12540 12857 12660 13911 14085 13772 15213 15204 1995 13823 15474 16120 14431 16295 16985 15012 17154 17748 15556 17758 18296 1996 16351 18539 19820 16102 18326 20351 18893 21484 23907 20612 23610 25695 1997 21315 23478 26432 24770 26922 30120 25352 28293 31114 21567 25127 28018 1998 27651 31695 33986 28412 34383 35682 30588 35758 38197 28603 34492 35810 1999 34172 43778 41138 36773 47494 42080 35470 45110 40961 35126 44894 40564 2000 30013 36674 37392 Mar. 31 2001 25405 29053 32961
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS CAPITAL GROWTH LIPPER LARGE-CAP GROWTH STANDARD & POOR'S 500 FUND $26955 FUNDS AVERAGE $29053 INDEX $32961 ---------------------- ----------------------- --------------------- Oct. 2 1992 10000 10000 10000 1992 10777 10908 10504 10963 11052 10963 10853 11142 11017 11216 11695 11301 1993 11588 11901 11563 11238 11456 11125 10896 11077 11172 11564 11754 11718 1994 11408 11656 11716 12128 12540 12857 13433 13911 14085 14612 15213 15204 1995 14666 15474 16120 15311 16295 16985 15928 17154 17748 16505 17758 18296 1996 17348 18539 19820 17085 18326 20351 20045 21484 23907 21870 23610 25695 1997 22615 23478 26432 26281 26922 30120 26899 28293 31114 22883 25127 28018 1998 29338 31695 33986 30145 34383 35682 32454 35758 38197 30348 34492 35810 1999 36257 43778 41138 39016 47494 42080 37634 45110 40961 37268 44894 40564 2000 31844 36674 37392 Mar. 31 2001 26955 29053 32961
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/30/92 10/2/92 6/7/93 10/2/92 ---------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -30.69% -30.91% -34.88% -31.37% -34.14% -31.38% -31.94% ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 1.16% 0.84% -1.13% 0.12% -0.47% 0.09% 0.09% 5 YEARS 12.25% 11.97% 10.65% 11.12% 10.97% 11.32% 11.32% SINCE INCEPTION 12.66% 12.38% 11.60% 11.85% 11.85% 11.65% 11.65%
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. 53 58 NATIONS AGGRESSIVE GROWTH FUND (FORMERLY KNOWN AS NATIONS DISCIPLINED EQUITY FUND) GROWTH STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS AGGRESSIVE GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the Growth The Fund seeks common stocks of companies that we believe Strategies Team of Banc of America are growing, or will grow their revenues, cash flow or Capital Management, Inc., earnings at a rate exceeding the growth rates of companies investment sub-adviser to the that comprise the Russell 1000 Growth Index***. Other vital Fund. traits we look for include smart management teams, unique INVESTMENT OBJECTIVE business models and strong unit-volume growth. We use a The Fund seeks capital blend of fundamental and quantitative research to arrive at appreciation. buy, sell and hold decisions for the Fund. Personal meetings PERFORMANCE REVIEW with company management and constant interaction with our For the 12-month period ended sector analysts constitutes the foundation of our March 31, 2001, Nations Aggressive fundamental research effort and aids in our decision as to Growth and Investor A Shares what companies should be acquired, sold or retained for provided shareholders with a total shareholders. Also, we utilize the output generated by our return of -42.68%.** quantitative research, which provides indications as to when securities should be bought, sold or retained. Stocks that are acquired or retained for the Fund fall into three separate categories, which include emerging growth, sustainable growth and cyclical growth. Emerging growth companies are typically new entrants to an industry that is experiencing rapid growth. While such companies normally will not have long-term track records, they may possess strong management teams, solid balance sheets relative to their peers and unique products or services that differentiate them from key competitors. Sustainable growth companies are those we think are likely to generate strong rates of earnings growth for long periods of time, and have low sensitivities to economic cycles. Finally, cyclical growth companies are those we think are either in the early phase of high demand for their products over a short-term horizon or where restructuring activities initiated by management will lead to improved financial performance and product demand. Unlike sustainable growth firms, cyclical growth companies are more reliant upon favorable macro-economic environments. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET CONDITIONS OF THE LAST 12 MONTHS? For the 12-month period ended March 31, 2001, the Fund's (Investor A Shares) total rate of return was -42.68%, which slightly exceeded its benchmark index, the Russell 1000 Growth Index***, return of -42.72% for the same time frame. The
*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 Russell 1000 Growth Index measures the performance of the largest U.S. companies, based upon total market capitalization. Prior to April 17, 2000, the Fund had a different name, investment objective and principal investment strategies. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 54 59 NATIONS AGGRESSIVE GROWTH FUND (FORMERLY KNOWN AS NATIONS DISCIPLINED EQUITY FUND) GROWTH STRATEGIES TEAM COMMENTARY continued Fund underwent a major transition during the year 2000. The former style (when the Fund was known as Nations Disciplined Equity Fund) included a bias toward value stocks, using a strict quantitative process. In early 2000 after shareholder approval, the Fund began a transition toward a more aggressive posture, which included higher allocations in sectors such as technology, health care and communications. Unfortunately, many investors began to prefer stocks having attractive valuations based on traditional measures compared to those companies possessing rapid growth rates, and in many cases high relative valuations. By staying consistent with the Fund's new mandate, and maintaining high weightings in sectors such as technology, this stance materially contributed to the Fund's negative absolute returns. As corporate spending on information technology experienced an abrupt downturn beginning in the fourth quarter of 2000, many technology stocks responded poorly in the form of material price declines. Additionally, as it became more apparent that overall corporate earnings growth was slowing faster than expected, the capital shift to more value-oriented companies having better earnings visibility hastened the fall in those companies possessing high, relative valuations and operating in emerging growth industries. WHAT ADJUSTMENTS WERE MADE TO THE FUND AS A RESULT OF THE STOCK MARKET VOLATILITY OF THE FIRST QUARTER OF 2001?+ During the first quarter of 2001, we increased the Fund's weighting in the retail, energy, communications and consumer-cyclical sectors, while lowering exposures in the technology and consumer-staple areas. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Sectors that proved favorable to the Fund's performance over the past year were the consumer cyclical, energy, utilities and health care groups. Particular stocks that performed well during the last twelve months included Electronic Arts Inc., Cardinal Health, Inc., Pfizer Inc., El Paso Corporation and AES Corporation. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Conversely, sectors that negatively impacted performance during the last twelve months were technology, retailing and capital goods. Particular stocks that performed poorly over the past year included Sycamore Networks Inc., E.piphany, Palm Inc., Circuit City Stores, Best Buy Company Inc. and Sanmina Corporation. HOW ARE YOU CURRENTLY POSITIONING THE FUND? We believe retailers could perform well, as lower interest rates and consumer spending is likely to lead the economy out of its present slowdown. Additionally, the supply and demand characteristics in the energy sector should remain favorable for some time, especially since there is a strong need for additional electrical generating capacity throughout the world. As the growth rates for many technology +Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics.
55 60 NATIONS AGGRESSIVE GROWTH FUND (FORMERLY KNOWN AS NATIONS DISCIPLINED EQUITY FUND) GROWTH STRATEGIES TEAM COMMENTARY continued firms rapidly deteriorated in light of weakening industry conditions, we exited positions in those technology companies we believed had a heightened chance of becoming more marginal. Also, while we are believers in the technology revolution (and will maintain a material exposure to this sector), we are skeptical this group will lead investors out of this bear market. The Fund initiated holdings throughout the quarter in stocks such as Anadarko Petroleum Corporation, Jones Apparel Group, Inc., Nextel Communications, Inc., Gentex Corporation and Smith International Inc. Also, we reduced or eliminated the Fund's exposure to individual stocks where the weighting was too high or where we believed there were better growth opportunities. (e.g., Ariba Inc., Sun Microsystems Inc., Coca Cola Company, Eli Lilly and Co. and Estee Lauder Companies Inc.). WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? We anticipate that the Federal Reserve Board (the Fed) will maintain its easing bias throughout the first half of 2001. In the meantime, the Fed will be closely examining each economic data point. Lower interest rates, combined with the likelihood of improving corporate earnings, could provide a more constructive environment for stocks in the latter part of this year. Such a backdrop could also bode well for those companies yielding relatively high earnings growth rates and sustainable competitive advantages. However, we expect investors to be more discriminating when purchasing stocks, seeking those having attractive risk/reward profiles. In our opinion, they will most likely only invest in companies with strong fundamental prospects and reasonable valuations. The Fund will strive to improve future returns by maintaining positions in companies with varied market capitalizations, and characteristics. By segmenting the Fund into the categories of sustainable growth, cyclical growth and emerging growth, we believe its opportunity set will be significantly broadened. Recently, the Fund's allocation has been raised to companies having mid-sized market capitalizations. We feel this is constructive, as the aggregate growth rates and valuations of such companies may be superior to larger-capitalized firms. Also, as we believe that investors will not seek "growth at any price" going forward, we will be quite mindful of a stock's risk/reward profile coupled with our other stock selection criteria.
56 61 NATIONS AGGRESSIVE GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Department and discount stores 3.70 Broadcasting and cable 4.30 Semiconductors 4.60 Computers and office equipment 5.50 Computer services 5.60 Networking and telecommunications equipment 5.70 Specialty stores 6.20 Diversified manufacturing 7.10 Software 9.60 Pharmaceuticals 16.10 Other 31.60
TOP 10 HOLDINGS ------------------------------------------------- 1 Pfizer Inc. 4.6% ------------------------------------------------- 2 General Electric Company 4.1% ------------------------------------------------- 3 Microsoft Corporation 4.0% ------------------------------------------------- 4 AOL Time Warner Inc. 3.2% ------------------------------------------------- 5 Intel Corporation 2.9% ------------------------------------------------- 6 Wal-Mart Stores, Inc. 2.7% ------------------------------------------------- 7 Home Depot, Inc. 2.3% ------------------------------------------------- 8 Ambac Financial Group, Inc. 2.1% ------------------------------------------------- 9 Merck & Company, Inc. 2.1% ------------------------------------------------- 10 El Paso Corporation 1.9% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 57 62 NATIONS AGGRESSIVE GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
NAV** MOP* SINCE INCEPTION (7/26/93 through 3/31/01) 6.59% 5.77%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Aggressive Growth Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. The Russell 1000 Growth Index measures the performance of the largest U.S. companies, based upon total market capitalization, with higher price-to-book ratios and higher forecasted growth values. Funds in the Lipper Multi-Cap Growth Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. It is not possible to invest in the Indices or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
LIPPER MULTI- NATIONS AGGRESSIVE STANDARD & POOR'S 500 CAP GROWTH FUNDS RUSSELL 1000 GROWTH GROWTH FUND $15,384 INDEX $30,487 AVERAGE $27,514 INDEX $27,030 ------------------- --------------------- --------------- ------------------- Jul. 26 1993 9425 10000 10000 10000 11310 10252 10795 10148 1993 10844 10490 10967 10541 10287 10092 10566 10076 9602 10135 9929 9973 10379 10630 10733 10740 1994 10148 10628 10667 10821 10309 11663 11405 11851 11605 12777 12551 13016 12751 13793 13972 14197 1995 12918 14623 14321 14843 13478 15409 15181 15641 14007 16100 16158 16635 14489 16598 16580 17234 1996 15767 17980 16887 18275 15734 18462 15916 18374 18356 21688 18451 21848 20918 23310 21090 23491 1997 20406 23979 20303 23848 23334 27324 23058 27461 24296 28226 23469 28708 20576 25417 20096 26101 1998 25537 30831 25554 33081 26949 32370 27238 35185 28531 34652 29567 36539 26146 32486 29201 35202 1999 27890 37320 40793 44052 26838 38175 46492 47193 26684 37159 43763 45919 27038 37520 45478 43448 2000 20527 34585 35910 34172 Mar. 31 2001 15384 30487 27514 27030
[INVESTOR A SHARES AT NAV** RETURN CHART]
LIPPER MULTI- NATIONS AGGRESSIVE GROWTH STANDARD & POOR'S 500 CAP GROWTH FUNDS FUND $16,321 INDEX $30,487 AVERAGE $27,514 ------------------------- --------------------- ---------------- Jul. 26 1993 10000 10000 10000 11894 10252 10795 1993 11505 10490 10967 10925 10092 10566 10188 10135 9929 11012 10630 10733 1994 10767 10628 10667 10938 11663 11405 12312 12777 12551 13561 13793 13972 1995 13706 14623 14321 14298 15409 15181 14862 16100 16158 15352 16598 16580 1996 16708 17980 16887 16694 18462 15916 19475 21688 18451 22194 23310 21090 1997 21653 23979 20303 24758 27324 23058 25778 28226 23469 21831 25417 20096 1998 27191 30831 25554 28594 32370 27238 30272 34652 29567 27741 32486 29201 1999 29592 37320 40793 28476 38175 46492 28309 37159 43763 28685 37520 45478 2000 21778 34585 35910 Mar. 31 2001 16321 30487 27514
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/1/92 7/26/93 5/20/94 5/10/95 --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -42.60% -42.68% -45.99% -43.13% -45.57% -43.14% -43.63% --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -12.79% -12.97% -14.67% -13.62% -14.22% -13.63% -13.63% 5 YEARS 2.90% 2.68% 1.47% 1.90% 1.69% 2.03% 2.03% SINCE INCEPTION 11.30% 6.59% 5.77% 5.95% 5.95% 5.42% 5.42%
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 annual reports for the fiscal year ended March 31, 2000 and prior years compare the Fund's performance to the Standard & Poor's 500 Composite Stock Price Index. Fund management believes the Russell 1000 Growth Index is a more appropriate benchmark because the composition of the Index more closely resembles the composition of the Fund. 58 63 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, MR. MARSICO SHARES HIS VIEWS ON NATIONS MARSICO FOCUSED EQUITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001 AND HIS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE. Thomas F. Marsico is Portfolio Nations Marsico Focused Equities Fund seeks long-term growth Manager of Nations Marsico Focused of capital through a relatively concentrated portfolio. Equities Fund and Chief Executive Generally, the Fund holds approximately 30 Officer of Marsico Capital large-capitalization equities that we believe offer Management, LLC, investment attractive long-term growth potential. The Fund may take sub-adviser to the Fund. substantial positions in individual companies and typically INVESTMENT OBJECTIVE will have substantial allocations to a limited number of The Fund seeks long-term growth of major economic sectors. However, the Fund typically will be capital. allocated across 7 to 10 industries within each sector. We PERFORMANCE REVIEW seek investment in companies with strong brand franchises, For the 12-month period ended improving fundamentals, excellent management teams, and March 31, 2001, Nations Marsico global presences. Focused Equities Fund Investor A WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE Shares provided shareholders with REPORTING PERIOD? a total return of -31.80%.** In general terms, the last 12 months were not kind to growth-oriented investment strategies. The fourth quarter of 2000 and first quarter of 2001 were particularly difficult. For the one-year period ending March 31, 2001, the Standard & Poor's 500 Composite Stock Price Index (S&P 500)*** registered four consecutive quarters of declining returns, the first time that has happened since 1974. The technology sector was especially hard-hit; the sector declined by nearly 60% from peak levels reached in March 2000. During calendar year 2000, the S&P 500 had its worst annual return since 1977. The Nasdaq Composite Index+, which features a substantial number of technology companies, had its weakest calendar year return since its inception in 1971. Through the reporting period, it appears that equity markets sold off through a combination of both "macro" and company-specific factors. Through part of the reporting period, the Federal Reserve Board (Fed) clearly was concerned about the potential for inflationary risks in the U.S. economy. The Fed raised interest rates three times in calendar year 2000, which followed three other increases in calendar year 1999, as a means of gradually slowing the overall U.S. economy, which had reached remarkably robust levels of growth. As time passed, however, various
*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 a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. Source for all statistical data -- Marsico Capital Management, LLC. THE FUND NORMALLY INVESTS IN A CORE PORTFOLIO OF 20-30 COMMON STOCKS. BY MAINTAINING A RELATIVELY CONCENTRATED PORTFOLIO, THE FUND MAY BE SUBJECT TO GREATER RISK THAN A FUND THAT IS MORE FULLY DIVERSIFIED. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 59 64 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY continued economic indicators suggested that a sharp economic slowdown was occurring. The magnitude of the slowdown, coupled with sharply rising energy prices, prompted concerns over a possible U.S. recession. That in turn put pressure on corporate profits, which was initially felt most acutely by technology companies but eventually by many other companies operating in various other sectors and industries. We think at least some of the unusual market activity that occurred in the past year might be attributable to the unrealistic expectations of investors, consumers and companies had regarding the prospects for the Internet. Specifically, just how the Internet and its attendant technologies were going to fundamentally change people's lives and the manner in which corporations would conduct their business. This euphoria spawned a remarkable amount of capital investments by companies in technology and communications infrastructure. A substantial number of those investments failed to generate positive returns because many of the Internet business plans eventually proved to be unsuccessful. As a result, we saw major inventory corrections, lowered corporate earnings guidance and widespread disappointment in technology stocks. Coincident with this reassessment of the technology sector were a number of other factors that challenged the markets. This included a Fed that, as recently as May 2000, was still increasing interest rates as a means of thwarting inflationary pressures in the U.S. economy and curbing Gross Domestic Product (GDP) growth. In the wake of record levels of corporate profits in 1999 and early 2000, the past 12 months have seen very difficult year-over-year corporate earnings comparisons. Consumers and corporations faced sharply higher energy prices. Multi-national corporations experienced problematic earnings translations due to the weak Euro and declining yen. Tensions flared anew in the Mideast. Finally, the drawn out U.S. Presidential election, in our view, also contributed to undermining investor confidence. Many of these uncertainties, in our opinion, have either abated altogether or now appear to be priced into the stock market. However, it is important to emphasize that we are not expecting a "quick fix" in the form of a major stock market rally. Nor do we anticipate that future aggregate equity market returns will approach the levels achieved during most of the past decade. We base these views on the overall lack of positive reaction -- at least to date -- to the Fed acting to reduce interest rates three times in the first quarter, 2001 totaling 150 basis points+++. In addition, as we move into another reporting season for corporate earnings, the initial signs, while not necessarily troubling, generally seem to point to lower corporate earnings and growth rates going forward. WHAT IS YOUR INVESTMENT PROCESS? The investment process emphasizes investments in high-quality, large-capitalization companies (typically defined as companies with $10 billion or more in market- capitalization) that we believe offer the potential for superior long-term earnings growth. The process is rooted in rigorous, creative, hands-on fundamental research, blending top-down macroeconomic and industry analysis with "bottom-up" stock selection. We are strong believers in "doing the work" internally; Wall Street research, computer-based screening techniques or ratio-driven analysis are seldom utilized as a means of generating investment ideas. We tend to define "growth"
60 65 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY continued somewhat flexibly and are strong advocates of non-linear, "out of the box" thinking as an approach to identifying attractive investment opportunities. The process essentially has two primary dimensions. It begins with the formulation of a macroeconomic outlook. This facet of the process helps create a strategic backdrop for actual portfolio construction. Key considerations include factors such as the direction and trend of interest rates, inflation, productivity gains, federal/state budget surpluses, demographics, and the regulatory environment. The stock selection process focuses on industries and companies that, in our opinion, are experiencing positive fundamental change. Our primary investment universe comprises 400 to 600 companies, approximately 150 to 200 are followed closely. Attributes sought in companies include specific market expertise/dominance, strong free cash flow, extensive "R&D" and marketing budgets, and excellent management teams. We tend to favor companies that have made significant capital investments and appear poised to benefit from those expenditures. We also generally prefer companies that have improving returns on capital spread over large bases of revenues (i.e., multiple products/services) and different geographies. The Fund will typically own several types of growth companies including core growth, aggressive growth and life cycle change. The core growth segment will typically comprise 40% to 50% of the portfolio. It features companies that have demonstrated the ability to generate solid, relatively predictable, year-over-year earnings growth. The aggressive growth segment generally will comprise 15% to 30% of the portfolio (although it can reach a higher level depending upon our overall level of conviction in the equity market). Generally, the segment features investments in companies -- generally in technology or related fields -- that have the potential to generate rapid earnings growth rates. The life cycle change category also typically will comprise 15% to 30% of the portfolio. This category focuses on companies that are experiencing a significant positive catalyst in their business -- such as an acquisition, a divestiture, the introduction of a new product -- that creates potential for strong future earnings growth. Oftentimes, life cycle change companies trade at relatively low valuations and may be out-of-favor with other growth-oriented equity managers. Detailed earnings and cash flow models are created internally for all companies of interest. These models "decompose" a company into its various divisions and products. The purpose of these models is to help us understand a stock's leverage points with as much precision as possible. We also engage in a great deal of "channel checking" as a means of further evaluating a company. This process can include analyzing a company's customers, competitors, suppliers and distributors. Similar to the earnings and cash flow models, this process is intended to help gain as complete an understanding as possible about a company. PLEASE COMMENT ON THE FUND'S PERFORMANCE.++ For the 12-month period ending March 31, 2001, the Fund (Investor A Shares) had a total return of -31.80%. The S&P 500, which we consider to be its primary equity market benchmark, had a return of -21.67% over the same time period.
++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 61 66 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY continued The Fund's underperformance was attributable to a variety of factors. Investment results, not unlike the overall market, fluctuated substantially throughout the reporting period. Market leadership shifted dramatically throughout the year, with the most severe changes typically experienced by technology and biotechnology companies. In general, the performance "culprits" over the past year included the Fund's investments in select technology companies (particularly "B2B" companies such as Akamai and Commerce One). The Fund's technology-related positions at their peak reached more than 50% of the Fund's net assets. As a result, investment returns were adversely affected during the initial, major sell-off that took place in the technology sector during March to May 2000. Other areas of weakness in the Fund during the reporting period included its investments in telecommunications, telecommunications equipment, cable/media/ entertainment and select retail holdings. Performance also was adversely affected, through approximately the first half of the reporting period, by an underweighting in health care-related companies. However, we would note that several technology positions (notably EMC Corporation, Corning, Sun Microsystems, and Oracle Corporation) performed quite well for much of the year. In addition, decisions made to sell Lucent Technologies and Dell Computer added value for the year as a whole. Over the past several months, it appears that the decision to reduce the Fund's technology positions and its overall level of aggressiveness has helped investment results, particularly on a relative basis. The decision to reduce the Fund's technology positions in calendar year 2000, and further in the first quarter of 2001, was based primarily on our belief that a general technology slowdown is not only at hand, but may be greater in magnitude and duration than is generally recognized in the marketplace. Increasingly, we have become concerned over end-user demand for various technology products and applications. In our view, many technology companies remain fully valued, particularly in light of our expectations that future growth rates may continue to decelerate. As the Fund's technology positions were reduced last year, increased allocations were made in several sectors including financial services, health care, consumer-related (e.g., retail, beverages), and aerospace/defense. We believe these sectors/ industries are trading at attractive valuations and offer the potential for solid earnings gains in a slower growth economic environment. The financial services weighting was increased beginning last summer, primarily because we anticipated that the Fed would take steps to reduce interest rates. We believed that a more favorable interest rate environment would provide a favorable backdrop for financial services companies. The sectors performed well in the third calendar quarter of 2000, sold off sharply last October and November, and rallied in December. Thus far in calendar year 2001, the sector has experienced similar volatility.
62 67 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY continued On balance, we believe the changes implemented in the Fund have contributed positively to performance. WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST OF 2001? While we in no way are attempting to "sugarcoat" the difficulty of the recent stock market environment, it is important to emphasize that we continue to have an overall positive long-term investment outlook. The Fund remains fully invested in equities. In our opinion, there are a number of very important, positive long-term macroeconomic underpinnings -- highlighted by lower interest rates, constrained inflation, budget surpluses and productivity gains -- that we believe are durable and which should provide a healthy overall backdrop for future equity returns. Although the degree of the overall stock market decline these past several months has triggered some comparisons to the infamous "bear market" of 1973-74, in our view we are in a substantially different, more positive macroeconomic environment. We do not believe there is a high risk of a general recession occurring, although certain market sectors clearly are experiencing difficulties. We believe energy prices will most likely stabilize going forward. Further, we think the three interest rate cuts by the Fed totaling 150 basis points in the first quarter point to a more favorable interest rate environment which, over time, should help provide a more favorable valuation backdrop for the overall equity market. Indeed, our expectation is that the Fed may likely reduce rates again in the ensuing months. We believe equity valuations have become more compelling as the S&P 500, the Dow Jones Industrial Average+++ and Nasdaq have declined. We are not necessarily expecting an imminent market turn, although -- as evidenced by the Fund's sector and industry allocations -- we have positioned the Fund in several areas that we believe offer compelling long-term growth potential. In an economic environment where inflation is restrained and interest rates are moving lower, we feel the stock market offers opportunities for long-term investors.
+++The Dow Jones Industrial Average is a price-weighted average based on the price movements of 30 blue chip stocks. 63 68 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Beverages 3.70 Commercial banking 4.10 Diversified manufacturing 4.10 Oilfield services 4.50 Consumer credit and mortgages 6.10 Specialty stores 6.80 Department and discount stores 7.30 Aerospace and defense 8.00 Investment services 9.90 Pharmaceuticals 14.00 Other 31.50
TOP 10 HOLDINGS ------------------------------------------------- 1 Merck & Company, Inc. 4.8% ------------------------------------------------- 2 Boeing Company 4.3% ------------------------------------------------- 3 Home Depot, Inc. 4.3% ------------------------------------------------- 4 Genentech, Inc. 4.3% ------------------------------------------------- 5 Merrill Lynch & Company, Inc. 4.2% ------------------------------------------------- 6 General Electric Company 4.1% ------------------------------------------------- 7 Citigroup Inc. 4.1% ------------------------------------------------- 8 Costco Wholesale Corporation 3.8% ------------------------------------------------- 9 General Dynamics Corporation 3.7% ------------------------------------------------- 10 Anheuser-Busch Companies, Inc. 3.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 64 69 NATIONS MARSICO FOCUSED EQUITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/31/97 through 3/31/01) 14.69% 12.62%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico Focused Equities Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market- capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies with long-term earnings expected to grow significantly. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS FOCUSED EQUITIES STANDARD & POOR'S |500 LIPPER LARGE-CAP GROWTH FUND $14,707 INDEX $12,470 FUNDS AVERAGE $12,374 ------------------------ ---------------------- ----------------------- Dec. 31 1997 9425 10000 10000 11442 11395 11467 12697 11771 12051 11556 10600 10702 1998 14151 12858 13500 15783 13499 14645 16298 14451 15230 16250 13548 14691 1999 21631 15564 18646 21564 15920 20229 19849 15497 19214 20521 15346 19121 2000 17884 14146 15620 Mar. 31 2001 14707 12470 12374
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS FOCUSED EQUITIES STANDARD & POOR'S 500 LIPPER LARGE-CAP GROWTH FUND $15,604 INDEX $12,470 FUNDS AVERAGE $12,374 ------------------------ --------------------- ----------------------- Dec. 31 1997 10000 10000 10000 12140 11395 11467 13472 11771 12051 12261 10600 10702 1998 15014 12858 13500 16746 13499 14645 17292 14451 15230 17242 13548 14691 1999 22951 15564 18646 22879 15920 20229 21060 15497 19214 21773 15346 19121 2000 18975 14146 15620 Mar. 31 2000 15604 12470 12374
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/31/97 12/31/97 12/31/97 12/31/97 ---------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -31.67% -31.80% -35.73% -32.32% -35.69% -32.31% -32.98% ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 8.88% 8.73% 6.60% 8.00% 7.14% 8.12% 8.12% SINCE INCEPTION 14.80% 14.69% 12.62% 13.95% 13.26% 14.07% 14.07%
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 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. 65 70 NATIONS MIDCAP GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS MIDCAP GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001, AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE. The Fund is managed by the Growth The investment philosophy of Nations MidCap Growth Fund is Strategies Team of Banc of America based on the premise that stock prices are driven by Capital Management, Inc., earnings growth and that superior stock market returns occur investment sub-adviser to the when a company experiences rapid and accelerating earnings Fund. growth due to superior fundamentals. Our approach emphasizes INVESTMENT OBJECTIVE a rigorous fundamental process that seeks to identify The Fund seeks capital successful mid-sized companies between $1 billion and $10 appreciation by investing in billion in market capitalization that are poised to become emerging growth companies that are tomorrow's successful larger companies. We attempt to believed to have superior identify these opportunities before others recognize their long-term earnings growth potential. prospects. HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET PERFORMANCE REVIEW CONDITIONS OF THE LAST 12 MONTHS? For the 12-month period ended The last twelve months or so have been one of the most March 31, 2001, Nations MidCap extraordinary periods in stock market history. The Growth Fund Investor A Shares technology sector, and specifically Internet stocks, provided shareholders with a total experienced perhaps the greatest short-term gain and loss of return of -20.98%.** paper wealth investors may ever witness. Although the first wave of this sharp decline spared much of the broader market, it was only a matter of time before the abrupt slowdown in the economy impacted virtually all market segments and investment styles. Hardest hit, though, were the growth investors. Nations MidCap Growth Fund (Investor A Shares) returned a disappointing -20.98% for the 12-month period ended March 31, 2001 compared with a decline of 6.96% for the benchmark Standard & Poor's MidCap 400 Index***. More than anything it has been a year marked by volatility. While the Standard & Poor's 500 Composite Stock Price Index (S&P 500)+ broke its five-year winning streak with a -21.67% return, the 60% decline in the Nasdaq Composite Index (Nasdaq)++ provided all the fireworks. During the months of November and February, the Nasdaq fell more than 20% and swung wildly at other times including a one-day 14% rally on January 3rd in response to a surprise one-half point interest rate cut. In the end, it was a period marked by extremes. Early in the
*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 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 representations. It is unmanaged and unavailable for investment. +The Standard & Poor's 500 Composite Stock Price Index is a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. ++The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 66 71 NATIONS MIDCAP GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued reporting period, with the economy growing at a blistering 6% pace and the technology and telecommunication sectors at record valuations, the Federal Reserve Board (the Fed) tried valiantly to raise rates enough to gently slow the economy. By the end of the period, with the economy sharply weaker, the Fed had cut interest rates by 1.5% trying to keep the economy out of a recession. The very same companies that had basked in the euphoric market environment of a year ago were left admitting that growth had all but disappeared. Mid-cap stocks generally did better than most during this period. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?+++ Many investors rotated in dramatic fashion out of high growth and high valuation companies into businesses that are either defensive in nature or would likely benefit from lower rates. The financial services and utilities sectors contributed favorably to the performance of the Fund. Regional bank holdings such as SouthTrust Corporation, Charter One Financial, Inc. and City National Corporation rebounded sharply as the Fed lowered interest rates. Concord EFS, one of the Fund's largest holdings, rose more than 76% during the year. Through terrific execution, including several successful acquisitions, Concord remains one of the fastest growing electronic payment processors in the U.S. Several of the best performing companies in the portfolio were the independent power producers, Calpine Corporation and AES Corporation. Both companies are non-traditional utilities that are building new generation capacity in the U.S. and overseas. Also contributing to Fund performance was the sale during the period of several significant technology holdings -- JDS Uniphase, Siebel Systems and Altera Corp. -- at levels significantly above their year-end prices. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Nations MidCap Growth Fund is full of rapidly growing businesses in the technology, telecommunications and health care sectors. Over the past year, however, these companies were the primary drivers of the Fund's negative returns. The high-flying dot.com stocks initiated the sell-off in technology, but it quickly seeped into all corners of the market, including semiconductors, software, communications equipment and electronic manufacturers. Clearly, many companies over the past year had extrapolated demand based on unsustainable levels of growth and were still building their inventories after the economy had begun to slow. The telecommunications sector also struggled mightily. The competitive local exchange carriers held in the Fund -- Time Warner Telecom, Inc., Allegiance Telecom, Inc. and XO Communications, Inc. -- have all executed well but their stock prices continue to be challenged by a lack of available capital to the industry as a whole. In fact, the current network expansion plans for Time Warner Telecom and Allegiance are fully funded today. In the health care sector, many biotech and specialty pharmaceutical stocks got clobbered as many investors exited higher-valuation businesses in search of more defensive areas. In our view, secular growth opportunities remain strong for companies held in the Fund that are developing new
+++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 67 72 NATIONS MIDCAP GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued drugs, creating revolutionary tools for the lab and designing innovative drug delivery mechanisms. Although the portfolio has undergone some change over the past year, its strategy remains largely unchanged. It was the right decision to eliminate Siebel, JDS Uniphase and Altera from the Fund and reduce exposure to Checkpoint Software, but it would have been even wiser to take profits more broadly in the technology sector at that same time. Our approach, as always, is to buy what we believe to be excellent businesses at good prices and hold them, if prudent, for a long time. In our opinion, the severe market downturn has presented an opportunity to add to many of the companies we already own, and initiate new positions such as Jack Henry, Precise Software Solutions, Powerwave Technologies, Inc., Shire Pharmaceuticals Group plc and Adelphia Communications. WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? We are cautiously optimistic. As we enter the new fiscal year, we believe we are in a turbulent transition from a bear to a bull market. The market collapse over the last year has likely set the stage for a recovery as we move through 2001. Our economic forecast suggests we may not be entering a prolonged economic downturn. Rather, we may experience a slowdown of growth in gross domestic product, not a recession. The interest rate reductions by the Fed potentially could lead to better economic growth and to a faster recovery in the economy than is widely believed. If our scenario proves to be correct, earnings growth in the fourth quarter of 2001 and into 2002 could be positive and lead to higher stock valuations. Lastly, and very importantly, stock valuations seem much more reasonable as we enter this year than they have been at any time over the last three years. Stock prices tend to lead economic conditions by six to twelve months, indicating we may be close to seeing valuations improve and a growth investment strategy pay off for our shareholders.
68 73 NATIONS MIDCAP GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Semiconductors 3.60 Telecommunications services 3.60 Networking and telecommunications equipment 4.10 Investment services 4.10 Broadcasting and cable 4.80 Software 5.50 Electric power-Non nuclear 5.70 Oilfield services 6.30 Pharmaceuticals 7.00 Computer services 10.00 Other 45.30
TOP 10 HOLDINGS ------------------------------------------------- 1 Calpine Corporation 3.0% ------------------------------------------------- 2 Sungard Data Systems, Inc. 2.3% ------------------------------------------------- 3 Concord EFS, Inc. 2.3% ------------------------------------------------- 4 CSG Systems International, Inc. 2.2% ------------------------------------------------- 5 Convergys Corporation 2.0% ------------------------------------------------- 6 AES Corporation 2.0% ------------------------------------------------- 7 Comverse Technology, Inc. 2.0% ------------------------------------------------- 8 BJ Services Company 1.9% ------------------------------------------------- 9 Health Management Associates, Inc., Class A 1.8% ------------------------------------------------- 10 Stryker Corporation 1.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 69 74 NATIONS MIDCAP GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/10/92 through 3/31/01) 14.50% 13.69%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations MidCap Growth Fund from the inception of the share class. Figures for the Standard & Poor's MidCap 400 Index, an unmanaged, market-value-weighted index that measures the market value of 400 domestic stocks chosen for market size, liquidity and industry representation, include reinvestment of dividends. Funds in the Lipper Multi-Cap Growth Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
LIPPER MULTI-CAP NATIONS MIDCAP GROWTH STANDARD & POOR'S GROWTH FUNDS FUND $29,011 |MIDCAP 400 INDEX $33,430 AVERAGE $29,372 --------------------- ------------------------- ---------------- Dec. 10|1992 9425 10000 10000 1992 9875 10280 10249 9487 10617 10339 9764 10865 10675 10604 11411 11524 1993 11025 11715 11707 10435 11269 11280 9749 10858 10600 11064 11593 11458 1994 11068 11294 11387 11630 12208 12175 12645 13285 13399 13961 14581 14916 1995 14357 14790 15288 15627 15701 16206 16772 16153 17249 17044 16623 17700 1996 16986 17630 18027 15654 17367 16990 18356 19921 19697 21563 23124 22514 1997 20465 23316 21567 22678 25883 24615 21705 25329 25053 15957 21664 21465 1998 21142 27771 27280 20996 25999 29077 24024 29678 31564 22866 27209 31172 1999 30327 31883 43548 36704 35929 49631 35740 34743 46718 39119 38965 48549 2000 34674 37465 38334 Mar. 31, 2001 29011 33430 29372
[INVESTOR A SHARES AT NAV** RETURN CHART]
LIPPER MULTI-CAP NATIONS MIDCAP GROWTH STANDARD & POOR'S GROWTH FUNDS FUND $30,775 MIDCAP 400 INDEX $33,430 AVERAGE $29,372 --------------------- ------------------------- ---------------- Dec. 10, 1992 9425 10000 10000 1992 9875 10280 10249 9487 10617 10339 9764 10865 10675 10604 11411 11524 1993 11025 11715 11707 10435 11269 11280 9749 10858 10600 11064 11593 11458 1994 11068 11294 11387 11630 12208 12175 12645 13285 13399 13961 14581 14916 1995 14357 14790 15288 15627 15701 16206 16772 16153 17249 17044 16623 17700 1996 16986 17630 18027 15654 17367 16990 18356 19921 19697 21563 23124 22514 1997 20465 23316 21567 22678 25883 24615 21705 25329 25053 15957 21664 21465 1998 21142 27771 27280 20996 25999 29077 24024 29678 31564 22866 27209 31172 1999 30327 31883 43548 36704 35929 49631 37912 34743 46718 41497 38965 48549 2000 36782 37465 38334 Mar. 31|2001 30775 33430 29372
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/4/92 12/10/92 6/7/93 12/18/92 ---------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -20.67% -20.98% -25.51% -21.51% -24.67% -21.46% -22.09% ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 8.88% 8.55% 6.43% 7.76% 7.04% 7.80% 7.80% 5 YEARS 13.46% 13.17% 11.83% 12.31% 12.07% 12.48% 12.48% SINCE INCEPTION 14.58% 14.50% 13.69% 14.61% 14.61% 13.78% 13.78%
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. 70 75 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY* IN THE FOLLOWING INTERVIEW, MR. HILLARY SHARES HIS VIEWS ON NATIONS MARSICO 21ST CENTURY FUND'S PERFORMANCE FOR THE PERIOD SINCE INCEPTION ON APRIL 10, 2000, TO MARCH 31, 2001 AND HIS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE. The Fund is managed by James A. Nations Marsico 21st Century Fund seeks long-term growth of Hillary of Marsico Capital capital. The Fund is a diversified portfolio and invests Management, LLC, investment primarily in common stocks that are selected for their sub-adviser to the Fund. long-term growth potential. The Fund may invest in companies INVESTMENT OBJECTIVE of any size across the market capitalization spectrum, and The Fund seeks long-term growth of typically will own a core position of between 35 and 50 capital. common stocks. PERFORMANCE REVIEW WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE From the Fund's inception on April REPORTING PERIOD? 10, 2000 to the period ended March Generally, the last 12 months were not kind to 31, 2001, Nations Marsico 21st growth-oriented equity investors. The fourth quarter of 2000 Century Fund Investor A Shares and first quarter of 2001 were particularly difficult. For provided shareholders with a total the 12-month period ended March 31, 2001, the Standard & return of -30.30%.** Poor's 500 Composite Stock Price Index (S&P 500)*** registered four consecutive quarters of declining returns, the first time that has happened since 1974. The technology sector was especially hard-hit, declining by nearly 60% from peak levels reached in March 2000. During calendar year 2000, the S&P 500 had its worst annual return since 1977. The Nasdaq Composite Index (Nasdaq)+, which features a substantial number of technology companies, had its weakest calendar year return since its inception in 1971. Through the reporting period, it appeared that many equity markets sold off through a combination of both "macro" and company-specific factors. Through part of the reporting period, the Federal Reserve Board (the Fed) clearly was concerned about the potential for inflationary risks in the U.S. economy. The Fed raised interest rates three times in calendar year 2000, which followed three other increases in calendar year 1999, as a means of gradually slowing the overall U.S. economy, which had reached remarkably robust levels of growth. As time passed, however, various economic indicators suggested that a sharp economic slowdown was occurring. The magnitude of the slowdown, coupled with sharply rising energy prices, prompted concerns over a possible U.S. recession. That in turn put pressure on corporate profits, which was initially felt most acutely by technology companies but eventually by many other companies operating in various other sectors and industries.
*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 a market-capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks and 40 financial issues. It is unmanaged and unavailable for investment. +The Nasdaq Composite Index tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign stocks and ADRs. It is unmanaged and unavailable for investment. Source for all statistical data -- Marsico Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 71 76 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY continued We think at least some of the unusual market activity that occurred in the past year might be attributable to the unrealistic expectations of investors, consumers and companies had regarding the prospects for the Internet. Specifically, just how the Internet and its attendant technologies were going to fundamentally change people's lives and the manner in which corporations would conduct their business. This euphoria spawned a remarkable amount of capital investments by companies in technology and communications infrastructure. A substantial number of those investments failed to generate positive returns because many of the Internet business plans eventually proved to be unsuccessful. As a result, we saw major inventory corrections, lowered corporate earnings guidance and widespread disappointment in technology stocks. Coincident with this reassessment of the technology sector were a number of other factors that challenged the markets. This included a Fed that, as recently as May 2000, was still increasing interest rates as a means of thwarting inflationary pressures in the U.S. economy and curbing Gross Domestic Product growth. In the wake of record levels of corporate profits in 1999 and early 2000, the past 12 months have seen very difficult year-over-year corporate earnings comparisons. Consumers and corporations faced sharply higher energy prices. Multi-national corporations experienced problematic earnings translations due to the weak Euro and declining yen. Tensions flared anew in the Mideast. Finally, the drawn out U.S. Presidential election, in our view, also contributed to undermining investor confidence. Many of these uncertainties, in our opinion, have either abated altogether or now appear to be priced into the stock market. However, it is important to emphasize that we are not expecting a "quick fix" in the form of a major stock market rally. Nor do we anticipate that future aggregate equity market returns will approach the levels achieved during most of the past decade. We base these views on the overall lack of positive reaction -- at least to date -- to the Fed acting to reduce interest rates three times in the first quarter, 2001 totaling 150 basis points. In addition, as we move into another reporting season for corporate earnings, the initial signs, while not necessarily troubling, generally seem to point to lower corporate earnings and growth rates going forward. WHAT IS YOUR INVESTMENT PROCESS? The Fund's investment process enables it to invest in companies of all sizes (in terms of market capitalization). The process is rooted in rigorous, creative, hands-on fundamental research, blending "top-down" macroeconomic and industry analysis with "bottom-up" stock selection. We are strong believers in "doing the work" internally; Wall Street research, computer-based screening techniques, or ratio-driven analysis are seldom utilized as a means of generating investment ideas. We tend to define "growth" somewhat flexibly and are strong advocates of non-linear, "out of the box" thinking as an approach to identifying attractive investment opportunities. The process essentially has two primary dimensions. It begins with the formulation of a macroeconomic outlook. This facet of the process helps create a strategic backdrop for actual portfolio construction. Key considerations include factors such
72 77 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY continued as the direction and trend of interest rates, inflation, productivity gains, federal/state budget surpluses, demographics and the regulatory environment. The stock selection process focuses on industries and companies that, in our opinion, are experiencing positive fundamental change. The primary investment universe comprises 400 to 600 companies, approximately 150 to 200 are followed closely. Attributes sought in companies include specific market expertise/ dominance, strong free cash flow, extensive "R&D" and marketing budgets, and excellent management teams. We tend to favor companies that have made significant capital investments and appear poised to benefit from those expenditures. We also generally prefer companies that have improving returns on capital spread over large bases of revenues (i.e., multiple products/services) and different geographies. Detailed earnings and cash flow models are created internally for all companies of interest. These models "decompose" a company into its various divisions and products. The purpose of these models is to help us understand a stock's leverage points with as much precision as possible. We also engage in a great deal of "channel checking" as a means of further evaluating a company. This process can include analyzing a company's customers, competitors, suppliers and distributors. Similar to the earnings and cash flow models, this process is intended to help gain as complete an understanding as possible about a company. PLEASE COMMENT ON THE FUND'S PERFORMANCE.++ From inception on April 10, 2000 to the period ended March 31, 2001, the Fund (Investor A Shares) had a total return of -30.30%. The S&P 500 had total return of -21.67%, and the Nasdaq fell nearly 60%. Since the Fund commenced operations in April 2000, it has seemed as though several market cycles have been compressed into its first year of operations, particularly in the technology and telecommunications sectors. The Fund, which can invest in companies of all sizes, generally followed the Nasdaq's performance pattern during the last year, despite being more diversified in terms of sector and industry allocations. The overall investor sentiment about the technology sector, which had become quite pessimistic at calendar year-end 2000, grew even more negative as the first quarter 2001 unfolded. In retrospect, while there was a general rally in technology companies during January 2001, it was fueled primarily by the Fed's surprise interest rate cut and resultant covering by short-sellers as opposed to company fundamentals. In February and March, a great deal of company-specific information was provided, generally in the form of weaker-than-expected earnings announcements. The cloudy earnings outlook, which spared very few companies, created a remarkably hostile backdrop for most technology investing. Hardware, software, fiber optics, networking products and biotechnology were among the weakest-performing areas. Although Nations Marsico 21st Century Fund's technology allocation had been substantially reduced, the Fund still absorbed its share of investment losses in this
++Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 73 78 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY continued sector. In particular, Siebel Systems, Inc. McData Corporation, EMC Corporation, Sun Microsystems, Corning, Inc., Network Appliance, and Cisco Systems were among the Fund's larger technology-related positions that adversely affected investment results. QUALCOMM Inc., which was the Fund's primary telecommunications position, struggled in the latter stages of the year. Finally, the Fund's biotechnology and biomedical positions in aggregate traded down sharply. Holdings in Genentech, Inc. Amgen, Inc. and Affymetrix were especially hard-hit. The Fund's financial services positions, also detracted from performance, with the notable exception of USA Education Inc. (formerly Student Loan Marketing Association or "Sallie Mae"). In the retail sector, investments in companies such as Home Depot, Inc. and Tiffany generally have held up reasonably well, providing a measure of downside protection for the Fund. The Fund's health care-related investments, outside of biomedical and biotechnology holdings, produced mixed results. Companies such as Priority Healthcare, Tenet Healthcare, Quest Diagnostics, Inc. and Baxter International posted solid returns in relation to the performance of the S&P 500. However, Merck & Company, Inc., Cytyc Corporation, and Albany Molecular Research, Inc. were under pressure and lagged the overall market. The Fund's positions in aerospace/defense companies -- highlighted by Boeing and Alliant Techsystems, Inc. -- also were mixed. Boeing, which had performed well late in 2000 for the Fund, gave back some of its gains. However, Alliant Techsystems registered strong gains. Another solid performer for the Fund was Delta and Pine Land Company, an agricultural operations company. HOW ARE YOU POSITIONING THE FUND FOR THE COMING YEAR? Although the Fund remains substantially invested in equities, its overall complexion is presently somewhat defensively postured, primarily in terms of a reduced overall technology weighting and greater sector and industry distribution. The Fund continues to have significant positions in health care, financial services, retail and select consumer-related companies. Technology-related positions, while quite a bit smaller than earlier, continue to represent an important aspect of the Fund. While we very much remain a believer that technology will be a major driver of the U.S. economy for years to come, we believe the sector's near-term outlook is not compelling. This view is based on a number of factors, including a slowing economy, our concerns about overall end-user demand for various types of technology, reduced capital spending, concern about decelerating corporate profits and negative market psychology. As a result, we have taken a variety of steps to restructure the Fund and invest more substantially in non-technology sectors that, in our view, offer the dual combination of attractive valuations and growth potential.
74 79 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Specialty stores 3.60 Commercial banking 4.80 Aerospace and defense 5.00 Natural gas distribution 5.20 Investment services 7.20 Integrated oil 7.90 Oilfield services 9.00 Consumer credit and mortgages 9.30 Pharmaceuticals 10.10 Medical devices and supplies 12.30 Other 25.60
TOP 10 HOLDINGS ------------------------------------------------- 1 Smith International, Inc. 8.2% ------------------------------------------------- 2 USA Education Inc. 5.9% ------------------------------------------------- 3 Enron Corporation 5.2% ------------------------------------------------- 4 Priority Healthcare Corporation, Class B 5.1% ------------------------------------------------- 5 BP Amoco plc, ADR 4.8% ------------------------------------------------- 6 Citigroup Inc. 4.8% ------------------------------------------------- 7 Cytyc Corporation 4.5% ------------------------------------------------- 8 Merrill Lynch & Company, Inc. 4.1% ------------------------------------------------- 9 Merck & Company, Inc. 3.9% ------------------------------------------------- 10 Home Depot, Inc. 3.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 75 80 NATIONS MARSICO 21ST CENTURY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT CUMULATIVE TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (4/10/00 through 3/31/01) -30.30% -34.31%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Marsico 21st Century Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), a market- capitalization weighted index that measures the market value of 400 industrial stocks, 60 transportation and utility company stocks, and 40 financial issues, include reinvestment of dividends. Funds in the Lipper Large-Cap Growth Funds Average normally invest in large capitalization companies with long-term earnings expected to grow significantly. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS MARSICO 21ST STANDARD & POOR'S 500 LIPPER LARGE-CAP GROWTH CENTURY FUND INDEX FUNDS AVERAGE -------------------- --------------------- ----------------------- Apr. 10, 2000 10000 10000 10000 8973 9734 9498 9500 9640 9452 2000 8040 8886 7722 Mar. 31 2001 6569 7833 6117
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS MARSICO 21ST STANDARD & POOR'S 500 LIPPER LARGE-CAP GROWTH CENTURY FUND INDEX FUNDS AVERAGE -------------------- --------------------- ----------------------- Apr. 10, 2000 10000 10000 10000 9520 9734 9498 10080 9640 9452 2000 8530 8886 7722 Mar. 31 2001 6970 7833 6117
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/10/00 4/10/00 4/10/00 4/10/00 ----------------------------------------------------------------------------------------------------------------------------------- CUMULATIVE RETURNS SINCE INCEPTION -30.10% -30.30% -34.31% -30.80% -34.26% -30.80% -31.49%
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. 76 81 NATIONS SMALL COMPANY FUND SMALLCAP STRATEGIES TEAM COMMENTARY* IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS SMALL COMPANY FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2001, AND ITS OUTLOOK FOR THE FUTURE. PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund is managed by the The investment philosophy of Nations Small Company Fund is SmallCap Strategies Team of Banc based on the premise that stock prices are driven by of America Capital Management, earnings growth and that superior returns occur when a Inc., investment sub-adviser to company experiences rapid and accelerating earnings growth the Fund. due to improving fundamentals. The Fund typically invests in INVESTMENT OBJECTIVE companies with market capitalizations of less then $2 The Fund seeks long-term capital billion and with projected earnings growth of at least 20%. growth by investing primarily in Companies are subjected to a rigorous fundamental analysis. equity securities. This analysis includes, but is not limited to, an evaluation PERFORMANCE REVIEW of the firm's competitive position, management ability and For the 12-month period ended valuation attractiveness. We attempt to identify companies March 31, 2001, Nations Small in the early stages of their economic lifecycles and before Company Fund Investor A Shares their potential is recognized by the investing public. provided shareholders with a total HOW DID THE FUND PERFORM THROUGH THE ECONOMIC AND MARKET return of -31.96%.** CONDITIONS OF THE LAST 12 MONTHS? Along with many other small-capitalization growth funds, the Fund's performance labored over the last 12 months. A slowing economic environment helped to increase inventories as well as reduce many capital expenditure budgets. Although the Fund's technology weightings did encumber the Fund's performance for much of the year, our stock selection was, in fact, good enough to beat the benchmark Russell 2000 Index***. The Fund (Investor A shares) returned -31.96% compared with a return of -39.81% for the Russell 2000 Index. WHAT ADJUSTMENTS WERE MADE TO THE FUND AS A RESULT OF THE STOCK MARKET VOLATILITY OF THE FIRST QUARTER OF 2001? The volatility of the first quarter of 2001 was a painful reminder to investors of how quickly stock prices can deteriorate. The Fund's turnover rate was fairly high in the first quarter, as many technology stocks were jettisoned from the portfolio. The resulting cash was used to buy stocks considered to have more defensive characteristics and potentially predictable earnings in sectors such as financial, health care and consumer cyclicals.
*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 and/or expense reimbursements by the investment adviser and/or other services providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. ***The Russell 2000 Index is a capitalization- weighted index that includes 2,000 of the smallest stocks representing approximately 10% of the U.S. equity market. It is unmanaged and unavailable for investment. Source for all statistical data -- Banc of America Capital Management, Inc. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 77 82 NATIONS SMALL COMPANY FUND SMALLCAP STRATEGIES TEAM COMMENTARY continued In our view, financials are attractive due to their sensitivity to interest rates within a lower interest rate environment. Favorable demographics -- for example, the aging of the Baby Boomer population -- should help health care stocks such as pharmaceuticals and hospitals. Finally, we feel consumer cyclical stocks may be among the first to benefit from falling interest rates and potential income tax relief. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?+ From our perspective, technology proved to be a positive contributor to performance. That is, even though our technology stocks performed poorly, they did not perform as poorly as the benchmark Index. Additionally, we sold some stocks early in the year to lock-in gains before the market declined. For example, we were aggressive in selling Anaren Microwave, Inc., a telecommunications equipment company, early in the year, locking in significant gains before the stock began its dramatic decline. The Fund's consumer cyclical holdings had positive performance for the last 12 months, which was primarily driven by one holding, Career Education Corporation. The post-secondary education provider benefited from increased enrollment and a smart acquisition strategy. Finally, the Fund's financial sector performed well, as these interest-rate sensitive stocks benefited from the Federal Reserve Board's easing of interest rates during the year. Our two regional bank holdings, City National Corporation and National Commerce Bancorporation, gained 14% and 34%, respectively during the year. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Technology and communications sectors were where most of the losses occurred over the past 12 months. Wireless and wireline service providers had been big purchasers of telecommunications equipment in previous years. But as capital became more difficult to accumulate, these companies slowed -- and some even stopped -- buying equipment. The stocks of large companies like Cisco Systems and Nortel Networks with built up inventories as well as the small companies that supply those larger ones were punished severely. REMEC, Inc., a manufacturer of wireless equipment, declined 70% during the year, as domestic orders essentially came to a halt when their customers began to lose resources. Companies like C-Cor Electronics (down 86%), a supplier of cable equipment to cable companies like Time Warner and AT&T, severely cut their capital expenditure budgets as they neared completion in the build out of advanced cable television networks.
+Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 78 83 NATIONS SMALL COMPANY FUND SMALLCAP STRATEGIES TEAM COMMENTARY continued WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? If we use history as our guide, we hope the next twelve months may be kind to small-cap investors. Historically, the period following a series of Federal Reserve Board rate cuts has resulted in above-average equity gains. In addition, there is strong momentum behind the President's proposed tax cut (and alternatives that may happen sooner) which may put money into the pockets of many consumers and give the economy a needed boost. Finally, we feel valuations are much more attractive today than a year ago, making this a good time to initiate new holdings in the Fund's portfolio.
79 84 NATIONS SMALL COMPANY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/01) [PIE CHART] Diversified electronics 3.90 Restaurants 4.10 Housing and Furnishings 4.70 Oilfield services 5.00 Commercial services 5.20 Software 5.50 Commercial banking 5.60 Networking and telecommunications equipment 5.60 Health services 6.50 Pharmaceuticals 9.40 Other 44.50
TOP 10 HOLDINGS ------------------------------------------------- 1 Career Education Corporation 3.4% ------------------------------------------------- 2 Rent-A-Center, Inc. 3.3% ------------------------------------------------- 3 Affiliated Managers Group, Inc. 2.9% ------------------------------------------------- 4 City National Corporation 2.9% ------------------------------------------------- 5 Kinder Morgan Energy Partners, L.P. 2.8% ------------------------------------------------- 6 Province Healthcare Company 2.6% ------------------------------------------------- 7 Shire Pharmaceuticals Group plc, ADR 2.6% ------------------------------------------------- 8 CEC Entertainment Inc. 2.4% ------------------------------------------------- 9 Orthodontic Centers of America, Inc. 2.1% ------------------------------------------------- 10 Quicksilver, Inc. 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2001, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. 80 85 NATIONS SMALL COMPANY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/12/95 through 3/31/01) 11.25% 10.01%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Small Company Fund from the inception of the share class. Figures for the Russell 2000 Index, an unmanaged capitalization-weighted index that includes 2,000 of the smallest stocks representing approximately 10% of the U.S. equity market, include reinvestment of dividends. Funds in the Lipper SmallCap Growth Funds Average invest at least 75% of their equity assets in companies with market capitalizations of less than $3 billion. It is not possible to invest in the Index or Lipper Average. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
NATIONS SMALL COMPANY LIPPER SMALLCAP GROWTH FUND $16,586 RUSSELL 2000 INDEX $15,675 FUNDS AVERAGE $18,750 --------------------- -------------------------- ---------------------- Dec. 12|1995 9425 10000 10000 1995 9313 10264 10175 9843 10787 10912 10474 11327 11945 10584 11365 12161 1996 11167 11956 12243 10547 11338 11094 12643 13176 13143 14577 15137 15465 1997 13341 14630 14558 15732 16101 16361 14764 15351 15762 10955 12258 12316 1998 13505 14257 15368 12378 13484 14998 14144 15581 17290 14579 14596 17494 1999 20868 17289 24495 24376 18514 28524 23798 17814 27078 24391 18011 27189 2000 20487 16767 23029 Mar. 31|2001 16586 15675 18750
[INVESTOR A SHARES AT NAV** RETURN CHART]
NATIONS SMALL COMPANY LIPPER SMALLCAP GROWTH FUND $17,597 RUSSELL 2000 INDEX $15,675 FUNDS AVERAGE $18,750 --------------------- -------------------------- ---------------------- Dec. 12|1995 10000 10000 10000 1995 9881 10264 10175 10443 10787 10912 11113 11327 11945 11229 11365 12161 1996 11848 11956 12243 11190 11338 11094 13414 13176 13143 15466 15137 15465 1997 14155 14630 14558 16691 16101 16361 15665 15351 15762 11623 12258 12316 1998 14329 14257 15368 13133 13484 14998 15007 15581 17290 15468 14596 17494 1999 22141 17289 24495 25862 18514 28524 25249 17814 27078 25879 18011 27189 2000 21736 16767 23029 Mar. 31|2001 17597 15675 18750
TOTAL RETURN (AS OF 3/31/01)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/12/95 12/12/95 12/12/95 9/22/97 ---------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -31.86% -31.96% -35.87% -32.45% -35.43% -32.46% -33.06% ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 2.03% 1.77% -0.22% 1.10% 0.27% 1.18% 1.18% 5 YEARS 11.30% 11.00% 9.68% 10.26% 9.98% -- -- SINCE INCEPTION 11.58% 11.25% 10.01% 10.54% 10.42% 3.43% 3.43%
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 and/or expense reimbursements by the investment adviser and/or other service providers, which have the effect of increasing total return. Had all fees and expenses been considered, the total returns would have been lower. 81 86 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- COMMON STOCKS -- 8.6% APPAREL AND TEXTILES -- 0.3% 30,000 Jones Apparel Group, Inc.(-)........... $ 1,134 -------- COMMERCIAL BANKING -- 0.9% 72,500 Washington Mutual, Inc................ 3,969 -------- DIVERSIFIED MANUFACTURING -- 0.3% 31,500 Tyco International Ltd................ 1,362 -------- HEAVY MACHINERY -- 0.2% 20,000 Ingersoll-Rand Company................ 794 -------- INSURANCE -- 2.4% 90,000 Allstate Corporation.................. 3,775 140,000 Penn Treaty American Corporation(-).... 1,424 191,750 Protective Life Corporation........... 5,880 -------- 11,079 -------- MEDICAL DEVICES AND SUPPLIES -- 0.8% 47,000 Johnson & Johnson..................... 4,111 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.9% 68,000 Comverse Technology, Inc.(-)........... 4,005 -------- OILFIELD SERVICES -- 0.3% 18,250 SEACOR SMIT Inc.(-).................... 825 9,386 SEACOR SMIT Inc.(-)(+)................. 424 -------- 1,249 -------- PHARMACEUTICALS -- 0.8% 95,000 Schering-Plough Corporation........... 3,470 -------- PUBLISHING AND ADVERTISING -- 0.4% 58,264 Readers Digest Association, Inc., Class A............................. 1,601 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.7% 100,000 CSX Corporation....................... 3,370 -------- RESTAURANTS -- 0.4% 70,000 McDonald's Corporation................ 1,859 -------- SOFTWARE -- 0.1% 10,000 Affiliated Computer Services, Inc., Class A(-)........................... 649 -------- TELECOMMUNICATIONS SERVICES -- 0.1% 20,000 Nextel Communications, Inc., Class A(-)................................. 288 -------- TOTAL COMMON STOCKS (Cost $41,946)........................ 38,940 -------- PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- CONVERTIBLE BONDS AND NOTES -- 54.3% APPAREL AND TEXTILES -- 1.7% $10,000 Jones Apparel Group, Inc., 3.300%*** 02/01/21(+)......................... $ 5,075 2,430 Reebok International Ltd., 4.250% 03/01/21(+)......................... 2,391 -------- 7,466 -------- BEVERAGES -- 1.2% 5,700 Convertibles Ltd., 2.000% 10/15/07(+)......................... 5,451 -------- BROADCASTING AND CABLE -- 3.9% 4,000 AT&T Corporation - Liberty Media Group, 4.000% 11/15/29(+)........... 2,590 1,000 AT&T Corporation - Liberty Media Group, 4.000% 11/15/29.............. 648 5,330 AT&T Corporation - Liberty Media Group, 3.500% 01/15/31(+)........... 3,978 4,500 AT&T Corporation - Liberty Media Group, 3.250% 03/15/31(+)........... 4,358 2,100 Clear Channel Communications, Inc., 1.500% 12/01/02..................... 1,971 1,850 Clear Channel Communications, Inc., 2.625% 04/01/03..................... 1,936 2,000 Cox Enterprises, Inc., 2.000% 02/15/21(+)......................... 2,028 -------- 17,509 -------- COMMERCIAL BANKING -- 1.3% 5,625 JMH Finance Ltd., 4.750% 09/06/07(+)......................... 5,716 -------- COMMERCIAL SERVICES -- 0.7% 3,590 Young & Rubicam Inc., 3.000% 01/15/05............................ 3,348 -------- COMPUTER SERVICES -- 2.3% 4,800 Affiliated Computer Services, Inc., Class A, 3.500% 02/15/06(+)......... 4,812 8,215 DoubleClick Inc., 4.750% 03/15/06..... 5,607 -------- 10,419 -------- COMPUTERS AND OFFICE EQUIPMENT -- 1.3% 5,400 Hewlett-Packard Company, 3.700%*** 10/14/17............................ 2,997 2,100 VERITAS Software Corporation, 1.856% 08/13/06............................ 3,016 -------- 6,013 -------- DIVERSIFIED ELECTRONICS -- 2.2% 6,700 SCI Systems, Inc., 3.000% 03/15/07.... 5,000 10,125 Solectron Corporation, 3.700%*** 05/08/20............................ 5,050 -------- 10,050 --------
SEE NOTES TO FINANCIAL STATEMENTS. 82 87 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- DIVERSIFIED MANUFACTURING -- 3.5% $ 6,160 L-3 Communications Holdings, Inc., 5.250% 06/01/09(+).................. $ 7,176 9,500 SPX Corporation, 2.900%*** 02/06/21(+)......................... 5,225 4,820 Tyco International Ltd., 1.500%*** 11/17/20............................ 3,549 -------- 15,950 -------- EXPLORATION AND PRODUCTION -- 1.5% 3,725 Devon Energy Corporation, 4.950% 08/15/08............................ 3,678 2,555 Kerr-McGee Corporation, 5.250% 02/15/10............................ 3,143 -------- 6,821 -------- HEALTH SERVICES -- 4.0% 5,220 AmeriSource Health Corporation, Class A, 5.000% 12/01/07(+)............... 6,257 2,820 Health Management Associates, Inc., Class A, .250% 08/16/20(+).......... 1,896 4,606 Province Healthcare Company, 4.500% 11/20/05(+)......................... 4,635 8,880 Universal Health Services, Inc., Class B, .426% 06/23/20(+)................ 5,206 -------- 17,994 -------- INSURANCE -- 0.8% 890 Penn Treaty American Corporation, 6.250% 12/01/03..................... 609 4,180 Penn Treaty American Corporation, 6.250% 12/01/03(+).................. 2,858 -------- 3,467 -------- MEDICAL DEVICES AND SUPPLIES -- 2.0% 3,850 Aviron, 5.250% 02/01/08............... 3,354 4,750 Invitrogen Corporation, 5.500% 03/01/07(+)......................... 4,703 900 Invitrogen Corporation, 5.500% 03/01/07............................ 891 -------- 8,948 -------- METALS AND MINING -- 1.1% 6,450 Agnico-Eagle Mines Ltd., 3.500% 01/27/04............................ 4,846 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.1% 5,255 CIENA Corporation, 3.750% 02/01/08.... 4,079 4,700 Comverse Technology, Inc., 1.500% 12/01/05(+)......................... 4,001 2,700 Corning Inc., 3.700%*** 11/08/15...... 1,580 6,100 Juniper Networks, Inc., 4.750% 03/15/07............................ 4,437 -------- 14,097 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- OILFIELD SERVICES -- 5.4% $ 8,400 Diamond Offshore Drilling, Inc., 3.500%*** 06/06/20(+)............... $ 4,295 3,356 Hanover Compressor Company, 4.750% 03/15/08............................ 3,377 5,600 Loews Corporation, 3.125% 09/15/07.... 5,074 7,600 Pride International, Inc., 2.000%*** 01/16/21............................ 4,987 1,087 SEACOR SMIT, Inc., 5.375% 11/15/06(+)......................... 1,151 2,097 SEACOR SMIT, Inc., 5.375% 11/15/06.... 2,220 5,900 Transocean Sedco Forex Inc., 2.600%*** 05/24/20............................ 3,459 -------- 24,563 -------- PHARMACEUTICALS -- 4.4% 1,500 ALZA Corporation, 1.900%*** 07/28/20............................ 1,003 1,500 Elan Finance Corporation Ltd., 1.100%*** 12/14/18.................. 1,185 4,650 Elan Finance Corporation, Ltd., 1.100%*** 12/14/18(+)............... 3,674 6,200 Gilead Sciences, Inc., 5.000% 12/15/07............................ 5,664 1,540 IVAX Corporation, 5.500% 05/15/07(+)......................... 1,671 2,540 Roche Holdings, Inc., 6.800%*** 05/06/12(+)......................... 1,299 2,120 Teva Pharmaceuticals Finance, LLC, 1.500% 10/15/05(+).................. 2,096 4,240 Vertex Pharmaceuticals, Inc., 5.000% 09/19/07(+)......................... 3,037 -------- 19,629 -------- PUBLISHING AND ADVERTISING -- 2.2% 3,400 Interpublic Group of Companies, Inc., 1.870% 06/01/06(+).................. 2,894 2,000 Interpublic Group of Companies, Inc., 1.870% 06/01/06..................... 1,703 5,000 Lamar Advertising Company, 5.250% 09/15/06............................ 5,125 -------- 9,722 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.4% 6,020 United Parcel Service, Inc., Class B, 1.750% 09/27/07..................... 6,171 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.9% 3,800 EOP Operating, LP, 7.250% 11/15/08(+)......................... 3,852 -------- SEMICONDUCTORS -- 2.0% 1,470 Cypress Semiconductor Corporation, 3.750% 07/01/05..................... 1,143 4,950 General Semiconductor, Inc., 5.750% 12/15/06............................ 4,201
SEE NOTES TO FINANCIAL STATEMENTS. 83 88 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- SEMICONDUCTORS -- (CONTINUED) $ 2,820 Transwitch Corporation, 4.500% 09/12/05(+)......................... $ 1,833 2,700 Transwitch Corporation, 4.500% 09/12/05............................ 1,755 -------- 8,932 -------- SOFTWARE -- 0.8% 2,800 America Online Inc., 3.500%*** 12/06/19............................ 1,453 4,280 Citrix Systems, Inc., 4.900%*** 03/22/19(+)......................... 1,819 1,000 Citrix Systems, Inc., 4.900%*** 03/22/19............................ 425 -------- 3,697 -------- SPECIALTY STORES -- 1.0% 4,505 Barnes & Noble, Inc., 5.250% 03/15/09(+)......................... 4,511 -------- TELECOMMUNICATIONS SERVICES -- 5.6% 4,050 American Tower Corporation, Class A, 5.000% 02/15/10(+).................. 3,169 2,000 American Tower Corporation, Class A, 5.000% 02/15/10..................... 1,565 3,500 Bell Atlantic Financial Services, 5.750% 04/01/03..................... 3,513 3,300 Bell Atlantic Financial Services, 4.250% 09/15/05(+).................. 3,304 1,575 Hutchison Whampoa International, Ltd., 2.875% 09/15/03(+).................. 1,532 1,000 Nextel Communications, Inc., Class A, 5.250% 01/15/10..................... 641 3,550 Nextel Communications, Inc., Class A, 5.250% 01/15/10(+).................. 2,276 5,090 Telefonos de Mexico SA, de CV, Series A, 4.250% 06/15/04.................. 6,134 6,450 US Cellular Corporation, 3.600%*** 06/15/15............................ 3,757 -------- 25,891 -------- TOTAL CONVERTIBLE BONDS AND NOTES (Cost $260,291)....................... 245,063 -------- SHARES ------ CONVERTIBLE PREFERRED STOCKS -- 30.9% AEROSPACE AND DEFENSE -- 1.0% 97,000 Titan Capital Trust................... 2,862 60,000 Titan Capital Trust(+)................ 1,770 -------- 4,632 -------- COMMERCIAL BANKING -- 3.2% 25,000 Bank United Corporation............... 6 177,300 CNB Capital Trust I................... 6,383
VALUE SHARES (000) ----------------------------------------------------------- COMMERCIAL BANKING -- (CONTINUED) 121,000 Sovereign Capital Trust II............ $ 6,337 19,000 Washington Mutual Inc. ............... 1,560 -------- 14,286 -------- ELECTRIC POWER -- NON NUCLEAR -- 9.1% 6,000 AES Trust VII......................... 383 79,600 AES Trust VII(+)...................... 5,084 61,500 Calpine Capital Trust III(+).......... 4,413 40,250 Calpine Capital Trust III............. 2,888 225,000 Duke Energy Corporation............... 6,131 100,900 Mirant Trust.......................... 7,518 82,000 NiSource Inc.......................... 4,457 200,000 NRG Energy, Inc....................... 6,600 68,700 TXU Corporation....................... 3,208 -------- 40,682 -------- HEALTH SERVICES -- 1.1% 64,300 Express Scripts....................... 5,080 -------- HEAVY MACHINERY -- 0.9% 190,000 Ingersoll-Rand Company................ 3,971 -------- INSURANCE -- 4.9% 60,000 ACE Ltd............................... 4,560 120,100 AmerUs Group Company.................. 3,495 50,000 Metlife Capital Trust I............... 4,725 380,000 Philadelphia Consolidated Holdings Corporation......................... 4,180 85,400 QBE Insurance Group Ltd.(+)........... 5,241 -------- 22,201 -------- INTEGRATED OIL -- 1.0% 90,000 Unocal Corporation.................... 4,354 -------- NATURAL GAS DISTRIBUTION -- 2.7% 90,400 Coastal Corporation................... 4,050 56,750 El Paso Energy Capital Trust I........ 4,597 101,500 EOG Resources......................... 3,720 -------- 12,367 -------- PAPER AND FOREST PRODUCTS -- 0.7% 78,100 International Paper Capital Trust..... 3,368 -------- PHARMACEUTICALS -- 0.9% 88,000 Pharmacia Corporation................. 3,929 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.4% 72,000 Union Pacific Capital Trust(+)........ 3,528 58,400 Union Pacific Capital Trust........... 2,862 -------- 6,390 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 1.7% 92,000 Apartment Investment & Management Company, Class A.................... 2,507 211,200 Equity Residential Properties Trust... 5,096 -------- 7,603 --------
SEE NOTES TO FINANCIAL STATEMENTS. 84 89 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- RESTAURANTS -- 0.7% 64,200 Wendy's Financing I................... $ 3,094 -------- TELECOMMUNICATIONS SERVICES -- 1.6% 14,300 Adelphia Communications, Class A...... 1,811 80,000 Citizens Utilities Trust.............. 4,374 19,250 Global Crossing Ltd................... 1,042 -------- 7,227 -------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $121,146)....................... 139,184 -------- SHARES (000) ------- INVESTMENT COMPANIES -- 5.1% (Cost $22,965) 22,965 Nations Cash Reserves#................ 22,965 -------- TOTAL INVESTMENTS (Cost $446,348*)............... 98.9% 446,152 -------- OTHER ASSETS AND LIABILITIES (NET).............. 1.1% Receivable for investment securities sold................................ $ 8,347 Receivable for Fund shares sold....... 1,930 Dividends receivable.................. 367 Interest receivable................... 1,719 Payable for Fund shares redeemed...... (618) Investment advisory fee payable....... (244) Administration fee payable............ (86) Shareholder servicing and distribution fees payable........................ (117) Payable for investment securities purchased........................... (6,210) Accrued Trustees' fees and expenses... (20) Accrued expenses and other liabilities......................... (146) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... 4,922 -------- NET ASSETS..................... 100.0% $451,074 ======== NET ASSETS CONSIST OF: Distributions in excess of net investment income................... $ (3) Accumulated net realized loss on investments sold.................... (3,951) Net unrealized depreciation of investments......................... (196) Paid-in capital....................... 455,224 -------- NET ASSETS............................ $451,074 ========
VALUE ----------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($75,627,144 / 4,712,445 shares outstanding)........................ $16.05 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($315,856,785 / 19,689,909 shares outstanding)................. $16.04 ------ ------ Maximum sales charge.................. 5.75% Maximum offering price per share...... $17.02 INVESTOR B SHARES: Net asset value and offering price per share+ ($49,762,943 / 3,126,212 shares outstanding)................. $15.92 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share+ ($9,827,423 / 611,283 shares outstanding)........................ $16.08 ------ ------
--------------- * Federal Income Tax Information: Net unrealized depreciation of $299 on investment securities was comprised of gross appreciation of $33,669 and gross depreciation of $33,968 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $446,451. *** Zero coupon security. The rate shown reflects the yield to maturity at March 31, 2001. (+) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. SEE NOTES TO FINANCIAL STATEMENTS. 85 90 NATIONS FUNDS Nations Balanced Assets Fund STATEMENT OF NET ASSETS MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- ASSET-BACKED SECURITIES -- 1.0% ASSET-BACKED -- AUTO LOANS -- 0.3% $ 250 Premier Auto Trust, Series 1998-1, Class B, 5.920% 10/06/04..................... $ 253 -------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 0.5% 500 Citibank Credit Card Master Trust I, Series 1999-5, Class A, 6.100% 05/15/08............................ 511 -------- ASSET-BACKED -- HOME EQUITY LOANS -- 0.2% 90 CS First Boston Mortgage Securities Corporation, Series 1996-2, Class A4, 6.620% 02/25/18................. 90 73 IMC Home Equity Loan Trust, Series 1997-7, Class A3, 6.540% 11/20/12... 73 -------- 163 -------- TOTAL ASSET-BACKED SECURITIES (Cost $913)........................... 927 -------- SHARES --------- COMMON STOCKS -- 60.9% AEROSPACE AND DEFENSE -- 3.2% 26,600 B.F. Goodrich Company................. 1,021 31,300 General Dynamics Corporation.......... 1,963 -------- 2,984 -------- AUTOMOTIVE -- 0.5% 7,700 Johnson Controls, Inc. ............... 481 -------- BEVERAGES -- 0.3% 5,100 Brown-Forman Corporation, Class B..... 316 -------- BROADCASTING AND CABLE -- 1.7% 24,200 Comcast Corporation, Class A(-)....... 1,015 12,600 Viacom Inc., Class B(-)............... 554 -------- 1,569 -------- CHEMICALS -- BASIC -- 1.1% 24,000 E.I. duPont de Nemours and Company.... 977 -------- COMMERCIAL BANKING -- 5.0% 23,000 Citigroup Inc. ....................... 1,035 23,700 J.P. Morgan Chase & Company........... 1,064 43,800 SouthTrust Corporation................ 2,003 10,700 Washington Mutual, Inc. .............. 586 -------- 4,688 --------
VALUE SHARES (000) ----------------------------------------------------------- COMPUTER SERVICES -- 2.2% 18,275 Electronic Data Systems Corporation... $ 1,020 16,925 First Data Corporation................ 1,011 -------- 2,031 -------- COMPUTERS AND OFFICE EQUIPMENT -- 1.9% 11,800 Eastman Kodak Company................. 471 15,800 Hewlett-Packard Company............... 494 8,600 International Business Machines Corporation......................... 827 -------- 1,792 -------- CONGLOMERATES -- 1.2% 14,800 United Technologies Corporation....... 1,085 -------- CONSUMER CREDIT AND MORTGAGES -- 4.4% 26,900 American Express Company.............. 1,111 12,700 Fannie Mae............................ 1,011 16,850 Freddie Mac........................... 1,092 27,425 MBNA Corporation...................... 908 -------- 4,122 -------- DEPARTMENT AND DISCOUNT STORES -- 1.0% 13,300 May Department Stores Company......... 472 14,000 Sears, Roebuck and Company............ 494 -------- 966 -------- ELECTRIC POWER -- NUCLEAR -- 4.6% 33,100 Dominion Resources, Inc. ............. 2,134 34,500 FPL Group, Inc. ...................... 2,115 -------- 4,249 -------- ELECTRICAL EQUIPMENT -- 1.1% 26,000 Honeywell International Inc. ......... 1,061 -------- EXPLORATION AND PRODUCTION -- 0.9% 13,700 Anadarko Petroleum Corporation........ 860 -------- FOOD AND DRUG STORES -- 0.6% 17,900 Albertson's, Inc. .................... 570 -------- HEALTH SERVICES -- 1.3% 26,500 Tenet Healthcare Corporation(-)....... 1,166 -------- HOUSEHOLD PRODUCTS -- 2.1% 29,000 Fortune Brands, Inc. ................. 998 16,000 Procter & Gamble Company.............. 1,001 -------- 1,999 -------- INSURANCE -- 2.3% 9,000 Ambac Financial Group, Inc. .......... 571 15,200 American General Corporation.......... 581 9,200 CIGNA Corporation..................... 988 -------- 2,140 --------
SEE NOTES TO FINANCIAL STATEMENTS. 86 91 NATIONS FUNDS Nations Balanced Assets Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- INTEGRATED OIL -- 3.5% 17,000 BP Amoco plc, ADR..................... $ 844 5,700 Chevron Corporation................... 500 12,900 Exxon Mobil Corporation............... 1,045 16,500 Phillips Petroleum Company(a)......... 908 -------- 3,297 -------- INVESTMENT SERVICES -- 3.1% 11,000 Goldman Sachs Group, Inc. ............ 936 16,850 Merrill Lynch & Company, Inc. ........ 933 16,700 Northern Trust Corporation............ 1,044 -------- 2,913 -------- MEDICAL DEVICES AND SUPPLIES -- 0.8% 11,100 Guidant Corporation(-)................ 500 3,000 Johnson & Johnson..................... 262 -------- 762 -------- METALS AND MINING -- 1.1% 29,400 Alcoa Inc. ........................... 1,057 -------- NATURAL GAS DISTRIBUTION -- 1.6% 14,900 El Paso Corporation................... 973 12,000 Williams Companies, Inc. ............. 514 -------- 1,487 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.5% 20,600 Corning Inc. ......................... 426 -------- PHARMACEUTICALS -- 1.1% 13,000 Merck & Company, Inc. ................ 987 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.0% 22,000 FedEx Corporation(-).................. 917 -------- TELECOMMUNICATIONS SERVICES -- 7.3% 9,600 ALLTEL Corporation.................... 504 30,000 Qwest Communications International Inc.(-)............................. 1,052 23,600 SBC Communications Inc. .............. 1,053 48,500 Sprint Corporation (FON Group)........ 1,067 38,400 Verizon Communications Inc. .......... 1,892 58,600 WorldCom, Inc.(-)..................... 1,094 -------- 6,662 -------- TOBACCO -- 4.3% 42,100 Philip Morris Companies Inc. ......... 1,998 68,000 UST Inc. ............................. 2,043 -------- 4,041 -------- UTILITIES -- MISCELLANEOUS -- 1.2% 33,775 American Water Works Company, Inc. ... 1,089 -------- TOTAL COMMON STOCKS (Cost $53,164)........................ 56,694 -------- PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- CORPORATE BONDS AND NOTES -- 14.8% AEROSPACE AND DEFENSE -- 0.3% $ 250 Raytheon Company, Class B, 6.750% 08/15/07............................ $ 248 -------- AIRLINES -- 0.0%+ 40 Air Canada, 10.250% 03/15/11(+)(a)...................... 39 -------- AUTOMOTIVE -- 0.6% 380 General Motors Acceptance Corporation, 6.150% 04/05/07..................... 370 180 Toyota Motor Credit Corporation, 5.625% 11/13/03..................... 181 40 Universal Compression Inc., Class A, 9.276%*** 02/15/08.................. 35 -------- 586 -------- BROADCASTING AND CABLE -- 1.2% 500 Clear Channel Communications, Inc., 7.875% 06/15/05..................... 529 180 Cox Radio, Inc., Class A, 6.625% 02/15/06............................ 182 85 Insight Communications Company, Inc., 12.530%*** 02/15/11(+)(a)........... 47 40 Jones International Networks, Ltd., Class A, 11.750% 07/01/05........... 37 80 Spanish Broadcasting Systems, Inc., Class A, 9.625% 11/01/09............ 72 175 Time Warner Inc., 8.110% 08/15/06..... 191 -------- 1,058 -------- BUILDING MATERIALS -- 0.1% 40 American Standard Inc., 7.375% 04/15/05............................ 40 35 Hercules Inc., 11.125% 11/15/07(+)......................... 35 35 Nortek, Inc., 9.875% 03/01/04(a)...... 34 -------- 109 -------- CHEMICALS -- BASIC -- 0.0%+ 40 IMC Global Inc., 7.400% 11/01/02...... 39 -------- CHEMICALS -- SPECIALTY -- 0.4% 325 Equistar Chemicals, L.P., 8.500% 02/15/04............................ 326 --------
SEE NOTES TO FINANCIAL STATEMENTS. 87 92 NATIONS FUNDS Nations Balanced Assets Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- COMMERCIAL BANKING -- 0.7% $ 250 Citigroup Inc., 6.750% 12/01/05....... $ 261 233 FCB/NC Capital Trust I, Gtd. Notes, 8.050% 03/01/28..................... 199 40 Golden State Holdings, Escrow Corporation, 7.000% 08/01/03........ 40 180 PNC Funding Corporation, 7.000% 09/01/04............................ 187 -------- 687 -------- COMMERCIAL SERVICES -- 0.2% 40 Allied Waste North America, Inc., 8.875% 04/01/08( 7/8)............... 41 500 Xerox Capital Trust I, Gtd. Notes, 8.000% 02/01/27(++)................. 140 -------- 181 -------- COMPUTER SERVICES -- 0.6% 282 Comdisco, Inc., 9.500% 08/15/03(++)(a)..................... 231 350 Computer Sciences Corporation, 7.500% 08/08/05............................ 362 -------- 593 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.4% 350 Compaq Computer Corporation, 7.450% 08/01/02............................ 353 40 Seagate Technology International, 12.500% 11/15/07(+)................. 40 -------- 393 -------- CONGLOMERATES -- 0.5% 250 Waste Management, Inc., 6.125% 07/15/01............................ 250 250 Waste Management, Inc., 7.000% 07/15/28............................ 218 -------- 468 -------- CONSUMER SERVICES -- 0.1% 115 The Dow Chemical Company, 6.125% 02/01/11............................ 114 -------- DIVERSIFIED ELECTRONICS -- 0.2% 215 Arrow Electronics, Inc., 7.286%** 10/05/01(+)......................... 215 -------- DIVERSIFIED MANUFACTURING -- 0.3% 25 Doane Pet Care Company, 9.750% 05/15/07............................ 20 55 Scotts Company, Class A, 8.625% 01/15/09............................ 56 175 Tyco International Group SA, 6.375% 06/15/05............................ 177 -------- 253 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- ELECTRIC POWER -- NON NUCLEAR -- 0.1% $ 70 AES Corporation, 8.750% 12/15/02...... $ 71 45 AES Corporation, 8.875% 02/15/11...... 46 -------- 117 -------- ENERGY -- MISCELLANEOUS -- 0.3% 40 Calpine Corporation, 8.500% 02/15/11............................ 41 175 Nisource Finance Corporation, 7.500% 11/15/03(+)......................... 182 95 Progress Energy, Inc., 7.100% 03/01/11............................ 98 -------- 321 -------- FINANCE -- MISCELLANEOUS -- 1.6% 62 Case Credit Corporation, 6.125% 02/15/03(++)........................ 50 200 CIT Group, Inc., Class A, 7.500% 11/14/03............................ 208 500 ERAC USA Finance Company, 6.625% 02/15/05(+)(++)..................... 494 240 General Electric Capital Corporation, 6.800% 11/01/05..................... 254 225 Lehman Brothers Holdings, 7.750% 01/15/05............................ 237 150 Merrill Lynch & Company, Inc., 6.150% 01/26/06............................ 152 -------- 1,395 -------- FOOD AND DRUG STORES -- 0.4% 175 Fred Meyer, Inc., 7.450% 03/01/08..... 183 20 Marsh Supermarkets, Inc., 8.875% 08/01/07............................ 19 190 Safeway Inc., 6.150% 03/01/06......... 192 -------- 394 -------- FOOD PRODUCTS -- 0.3% 60 Fleming Companies, Inc., 10.500% 12/01/04............................ 61 200 Kellogg Company, 6.000% 04/01/06(+)......................... 200 -------- 261 -------- HEALTH SERVICES -- 0.5% 200 American Home Products, 6.250% 03/15/06(+)......................... 201 150 Cardinal Health, Inc., 6.750% 02/15/11............................ 156 60 HCA - The Healthcare Company, 8.750% 09/01/10............................ 64 -------- 421 -------- HOUSING AND FURNISHING -- 0.2% 185 Hanson Overseas B.V., 7.375% 01/15/03............................ 189 --------
SEE NOTES TO FINANCIAL STATEMENTS. 88 93 NATIONS FUNDS Nations Balanced Assets Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- INVESTMENT SERVICES -- 1.8% $ 500 Aristar, Inc., 8.250% 06/15/05........ $ 536 340 Bear Stearns Companies, Inc., 7.800% 08/15/07............................ 363 450 Morgan Stanley Dean Witter & Company, 7.750% 06/15/05..................... 483 175 Principal Life Global Funding, 6.125% 03/01/06(+)......................... 178 -------- 1,560 -------- METALS AND MINING -- 0.5% 385 Alcoa Inc., 7.375% 08/01/10(a)........ 419 -------- NATURAL GAS PIPELINES -- 0.5% 225 KN Energy, Inc., 6.650% 03/01/05...... 229 180 Union Pacific Resources Group Inc., 7.950% 04/15/29..................... 196 -------- 425 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.0%+ 40 SBA Communications Corporation, 10.250% 02/01/09(+)................. 37 -------- OIL REFINING AND MARKETING -- 0.6% 30 Chesapeake Energy Corporation, 9.625% 05/01/05............................ 32 25 Ocean Energy, Inc., 8.375% 07/01/08... 26 180 PDV America Inc., Gtd. Sr. Notes, 7.875% 08/01/03..................... 181 180 Union Oil Company of California, 7.500% 02/15/29..................... 185 175 USX Corporation, 6.650% 02/01/06...... 177 -------- 601 -------- OILFIELD SERVICES -- 0.0%+ 30 Compagnie Generale de Geophysique SA, 10.625% 11/15/07(+)................. 32 -------- PACKAGING AND CONTAINERS -- 0.0%+ 15 Container Corporation of America, 9.750% 04/01/03..................... 15 38 Crown Cork & Seal Company, Inc., 7.125% 09/01/02..................... 31 -------- 46 -------- PAPER AND FOREST PRODUCTS -- 0.1% 120 Abitibi-Consolidated Inc., 8.550% 08/01/10............................ 128 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- PUBLISHING AND ADVERTISING -- 0.2% $ 20 Advanstar Communications Inc., 12.000% 02/15/11(+)......................... $ 20 187 Viacom Inc., 7.875% 07/30/30.......... 200 -------- 220 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.2% 150 FedEx Corporation, 6.625% 02/12/04(+)......................... 153 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.0%+ 39 Meristar Hospitality Corporation, 9.000% 01/15/08(+).................. 39 -------- TELECOMMUNICATIONS SERVICES -- 1.7% 50 American Cellular Corporation, 9.500% 10/15/09(+)(a)...................... 48 200 France Telecom, 7.200% 03/01/06(+)......................... 203 70 Global Crossing Holdings Ltd., 9.125% 11/15/06............................ 66 45 ITC Deltacom, Inc., 11.000% 06/01/07(a)......................... 37 60 McLeodUSA Inc., Class A, 11.375% 01/01/09............................ 59 50 Metromedia Fiber Network, Inc., Class A, 10.000% 12/15/09(a).............. 41 50 Nextel Communications, Inc., Class A, 9.500% 02/01/11(+).................. 43 135 Qwest Capital Funding Inc., 7.750% 08/15/06(+)......................... 143 500 Sprint Capital Corporation, 6.875% 11/15/28............................ 425 25 Tritel PCS Inc., 10.375% 01/15/11(+)......................... 24 175 Verizon Global Funding Corporation, 7.250% 12/01/10(+).................. 183 175 Vodafone Group plc, 7.750% 02/15/10... 189 37 XO Communications Inc., Class A, 10.750% 06/01/09(a)................. 22 -------- 1,483 -------- TOBACCO -- 0.2% 175 R.J. Reynolds Tobacco Holdings, Inc., 7.375% 05/15/03..................... 173 -------- TOTAL CORPORATE BONDS AND NOTES (Cost $13,881)........................ 13,723 --------
SEE NOTES TO FINANCIAL STATEMENTS. 89 94 NATIONS FUNDS Nations Balanced Assets Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- FOREIGN BONDS AND NOTES -- 1.2% $ 395 AT&T Canada Inc., (0.00)% due 06/15/08 9.95% beginning 06/01/03............ $ 339 500 Corp Andina de Fomento, 8.875% 06/01/05............................ 544 200 Ontario (Province of), 7.000% 08/04/05............................ 213 -------- TOTAL FOREIGN BONDS AND NOTES (Cost $1,045)......................... 1,096 -------- MORTGAGE-BACKED SECURITIES -- 21.2% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 7.4% 750 DLJ Commercial Mortgage Corporation, Series 1999-CG1, Class A1B, 6.460% 01/10/09(++)........................ 761 750 DLJ Commercial Mortgage Corporation, Series 1999-CG2, Class A1B, 7.300% 06/10/09............................ 796 750 DLJ Commercial Mortgage Corporation, Series 1999-CG3, Class A1B, 7.340% 09/10/09............................ 808 750 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 7.390% 11/15/09(++)................. 800 800 Heller Financial Commercial Mortgage Asset Corporation, Series 2000-PH1, Class A2, 7.750% 11/15/09(++)....... 868 600 JP Morgan Chase Commercial Mortgage Securities Corporation, Series 2001-CIBC, Class A3, 6.260% 03/15/33............................ 597 800 Prudential Securities Secured Financing Corporation, Series 1999-C2, Class A2, 7.193% 04/15/09(a)......................... 844 760 Salomon Brothers Mortgage Securities, Series 2000-C1, Class A2, 7.520% 12/18/09(++)........................ 814 578 Salomon Brothers Mortgage Securities, Series 2000-NL1, Class A1, 6.601% 04/15/08(+)(++)..................... 592 -------- 6,880 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 0.9% 821 8.000% 07/01/10 - 09/01/25(++)........ 851 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 8.4% 474 8.500% 08/01/11....................... 501 262 7.000% 01/25/21 - 07/01/29............ 266 3,242 6.500% 07/01/29 - 02/01/30............ 3,232 1,375 8.000% 04/01/30(b).................... 1,418 2,350 6.500% 02/01/31(b).................... 2,338 -------- 7,755 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 4.5% $ 427 7.500% 12/15/23....................... $ 439 1,941 8.000% 07/15/30 - 12/15/30(++)........ 2,004 1,749 6.500% 01/15/31....................... 1,750 -------- 4,193 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $19,110)........................ 19,679 -------- U.S. TREASURY OBLIGATIONS -- 0.9% U.S. TREASURY STRIPS -- 0.9% 1,455 Interest only, 5.838%*** 05/15/20..... 483 650 Principal only, 5.883%*** 11/15/21.... 197 825 Principal only, 5.789%*** 11/15/27.... 181 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $870)........................... 861 -------- SHARES (000) --------- INVESTMENT COMPANIES -- 4.8% (Cost $4,505) 4,505 Nations Cash Reserves#................ 4,505 -------- TOTAL INVESTMENTS (Cost $93,488*)................ 104.8% 97,485 -------- OTHER ASSETS AND LIABILITIES (NET)........................ (4.8)% Cash.................................. 1 Receivable for investment securities sold................................ 6,182 Receivable for Fund shares sold....... 76 Dividends receivable.................. 60 Interest receivable................... 397 Collateral on securities loaned....... (1,977) Payable for Fund shares redeemed...... (48) Investment advisory fee payable....... (46) Administration fee payable............ (18) Shareholder servicing and distribution fees payable........................ (40) Payable for investment securities purchased........................... (8,956) Accrued Trustees' fees and expenses... (37) Accrued expenses and other liabilities......................... (82) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (4,488) -------- NET ASSETS..................... 100.0% $ 92,997 ========
SEE NOTES TO FINANCIAL STATEMENTS. 90 95 NATIONS FUNDS Nations Balanced Assets Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE (000) ----------------------------------------------------------- NET ASSETS CONSIST OF: Undistributed net investment income... $ 929 Accumulated net realized loss on investments sold.................... (121) Net unrealized appreciation of investments......................... 3,997 Paid-in capital....................... 88,192 -------- NET ASSETS............................ $92,997 -------- -------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($34,151,178 / 3,346,616 shares outstanding)........................ $10.20 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($15,584,684 / 1,529,731 shares outstanding)................. $10.19 ------ ------ Maximum sales charge.................. 5.75% Maximum offering price per share...... $10.81 INVESTOR B SHARES: Net asset value and offering price per share(x) ($41,538,513 / 4,092,433 shares outstanding)................. $10.15 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share(x) ($1,722,150 / 170,469 shares outstanding)........................ $10.10 ------ ------
--------------- * Federal Income Tax Information: Net unrealized appreciation of $3,876 on investment securities was comprised of gross appreciation of $5,647 and gross depreciation of $1,771 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $93,609. *** Zero coupon security. The rate shown reflects the yield to maturity at March 31, 2001. (+) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. (-) Non-income producing security. (x) The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (++) All or a portion of security segregated as collateral for TBA. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $2,044 and $1,922, respectively. (b) TBA -- Securities purchased on a forward commitment basis. + Amount represents less than 0.1%. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $1,977.
SEE NOTES TO FINANCIAL STATEMENTS. 91 96 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- ASSET-BACKED SECURITIES -- 0.4% ASSET-BACKED -- HOME EQUITY LOANS -- 0.4% $ 394 ContiMortgage Home Equity Loan Trust, Series 1998-1, Class A4, 6.280% 01/15/13..................... $ 393 214 EQCC Home Equity Loan Trust, Series 1997-2, Class A6, 6.720% 02/15/12..................... 214 427 First Plus Home Loan Trust, Series 1996-3, Class A6, 7.600% 09/20/14..................... 429 391 First Plus Home Loan Trust, Series 1997-1, Class A6, 6.950% 12/10/15..................... 394 100 IMC Home Equity Loan Trust, Series 1997-5, Class A7, 6.900% 01/20/22..................... 102 -------- TOTAL ASSET-BACKED SECURITIES (Cost $1,534)......................... 1,532 --------
SHARES --------- COMMON STOCKS -- 60.4% AEROSPACE AND DEFENSE -- 1.1% 3,100 Alliant Techsystems Inc.++............ 275 31,400 Boeing Company........................ 1,748 10,100 Northrop Grumman Corporation.......... 879 2,800 Precision Castparts Corporation....... 93 22,600 Rockwell International Corporation.... 822 -------- 3,817 -------- AIRLINES -- 0.2% 2,300 Atlantic Coast Airlines Holdings, Inc.++.............................. 48 13,300 Delta Air Lines, Inc. ................ 526 2,400 Northwest Airlines Corporation++...... 54 -------- 628 -------- APPAREL AND TEXTILES -- 0.3% 800 Columbia Sportswear Company++......... 36 2,100 Genesco Inc.++........................ 58 2,200 Jones Apparel Group, Inc.++........... 83 1,000 K-Swiss Inc., Class A................. 26 9,500 Liz Claiborne, Inc. .................. 447 3,600 Phillips-Van Heusen Corporation....... 54 1,200 Quiksilver, Inc.++.................... 32 2,800 Reebok International, Ltd.++.......... 70 1,600 Timberland Company, Class A++......... 81 -------- 887 -------- AUTOMOTIVE -- 0.8% 3,400 Copart, Inc.++........................ 70 65,142 Ford Motor Company.................... 1,832 4,100 Johnson Controls, Inc. ............... 256 3,650 Lear Corporation++.................... 107 900 Oshkosh Truck Corporation............. 32 2,800 Superior Industries International, Inc. ............................... 97
VALUE SHARES (000) ------------------------------------------------------------- AUTOMOTIVE -- (CONTINUED) 4,700 Tower Automotive, Inc.++.............. $ 50 14,700 Visteon Corporation................... 221 -------- 2,665 -------- BEVERAGES -- 1.3% 400 Adolph Coors Company, Class B......... 26 31,800 Anheuser-Busch Companies, Inc. ....... 1,461 15,100 Coca-Cola Company..................... 682 2,200 Constellation Brands, Inc.++.......... 158 47,300 PepsiCo, Inc. ........................ 2,078 -------- 4,405 -------- BROADCASTING AND CABLE -- 2.0% 89,300 AOL Time Warner Inc.++................ 3,585 800 Chris-Craft Industries, Inc.++........ 51 9,300 Cox Communications, Inc., Class A++... 414 1,800 Pixar Inc.++.......................... 55 32,667 Viacom Inc., Class B++................ 1,436 42,100 Walt Disney Company................... 1,204 5,550 Westwood One, Inc.++.................. 128 -------- 6,873 -------- BUILDING MATERIALS -- 0.0%+ 2,700 American Standard Companies Inc.++.... 159 -------- CHEMICALS -- BASIC -- 0.5% 12,700 Air Products and Chemicals, Inc. ..... 488 1,600 Cambrex Corporation................... 66 6,500 Dow Chemical Company.................. 205 9,793 E.I. duPont de Nemours and Company.... 399 1,200 FMC Corporation++..................... 88 10,700 Praxair, Inc. ........................ 478 -------- 1,724 -------- CHEMICALS -- SPECIALTY -- 0.4% 4,600 Albemarle Corporation................. 103 3,300 Arch Chemicals, Inc. ................. 70 3,600 Cabot Corporation..................... 113 2,500 Cytec Industries Inc.++............... 80 7,300 Engelhard Corporation................. 189 2,600 Lubrizol Corporation.................. 79 2,700 Millipore Corporation................. 125 1,800 OM Group, Inc. ....................... 96 900 Rogers Corporation++.................. 32 2,200 Scotts Company, Class A++............. 84 11,200 Sigma-Aldrich Corporation............. 536 -------- 1,507 -------- COMMERCIAL BANKING -- 4.8% 4,020 Associated Banc-Corp. ................ 134 5,000 Astoria Financial Corporation......... 267 119,366 Citigroup Inc. ....................... 5,368 2,900 City National Corporation............. 111 1,500 Commerce Bancorp, Inc. ............... 90 2,500 Commercial Federal Corporation........ 56 2,600 Cullen Frost Bankers, Inc. ........... 89 4,300 Dime Bancorp, Inc. ................... 141 2,600 Downey Financial Corporation.......... 118 4,100 First Tennessee National Corporation......................... 127 17,800 First Union Corporation............... 587
SEE NOTES TO FINANCIAL STATEMENTS. 92 97 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------- COMMERCIAL BANKING -- (CONTINUED) 2,300 First Virginia Banks, Inc. ........... $ 100 4,700 FirstFed Financial Corporation++...... 132 5,243 FleetBoston Financial Corporation..... 198 1,000 Greater Bay Bancorp................... 25 5,100 Hibernia Corporation, Class A......... 71 1,000 Investors Financial Services Corporation......................... 59 41,110 J.P. Morgan Chase & Company........... 1,845 1,900 M&T Bank Corporation.................. 133 2,300 MAF Bancorp Inc. ..................... 63 16,800 Mellon Financial Corporation.......... 681 3,000 Mercantile Bankshares Corporation..... 111 2,800 National Commerce Bancorporation...... 69 5,000 North Fork Bancorporation, Inc. ...... 130 11,100 PNC Financial Services Group.......... 752 5,600 Provident Bankshares Corporation...... 125 30,900 Regions Financial Corporation......... 879 1,000 Silicon Valley Bancshares++........... 24 13,700 SunTrust Banks, Inc. ................. 888 2,900 TCF Financial Corporation............. 110 59,465 US Bancorp............................ 1,380 3,400 Washington Federal, Inc. ............. 84 30,500 Washington Mutual, Inc. .............. 1,669 12,300 Wells Fargo & Company................. 608 800 Whitney Holding Corporation........... 32 -------- 17,256 -------- COMMERCIAL SERVICES -- 0.6% 1,100 Administaff, Inc.++................... 20 2,200 ADVO Inc.++........................... 81 3,900 Apollo Group Inc., Class A++.......... 128 1,500 ChoicePoint Inc.++.................... 51 4,300 Comdisco, Inc. ....................... 34 2,000 DeVry, Inc.++......................... 60 1,000 F.Y.I. Inc.++......................... 33 1,500 Factset Research Systems Inc. ........ 45 3,700 Fiserv, Inc.++........................ 166 1,280 Global Payments Inc.++................ 24 1,200 Heidrick & Struggles International, Inc.++.............................. 35 3,100 Manpower Inc. ........................ 89 1,600 National Data Corporation............. 37 300 NCO Group, Inc.++..................... 8 9,100 Omnicom Group Inc. ................... 755 1,300 On Assignment, Inc.++................. 27 3,200 SEI Investment Company................ 100 3,500 Sylvan Learning Systems, Inc.++....... 72 2,900 Tetra Tech, Inc.++.................... 59 400 TMP Worldwide Inc.++.................. 15 1,000 True North Communications............. 38 1,000 United Rentals, Inc.++................ 16 2,200 Viad Corporation...................... 52 -------- 1,945 -------- COMPUTER SERVICES -- 1.0% 1,200 Acxiom Corporation++.................. 25 8,600 Automatic Data Processing, Inc. ...... 468 4,900 Concord EFS, Inc.++................... 198 1,000 CSG Systems International, Inc.++..... 41 11,400 Electronic Data Systems Corporation... 637 600 Fair, Issac and Company Inc. ......... 35 18,975 First Data Corporation................ 1,132
VALUE SHARES (000) ------------------------------------------------------------- COMPUTER SERVICES -- (CONTINUED) 400 Forrester Research, Inc.++............ $ 10 2,600 Galileo International, Inc. .......... 57 2,600 Jack Henry & Associates, Inc. ........ 62 14,300 Paychex, Inc. ........................ 530 3,400 Sungard Data Systems, Inc.++.......... 167 4,000 Synopsys, Inc.++...................... 188 -------- 3,550 -------- COMPUTERS AND OFFICE EQUIPMENT -- 2.8% 2,900 Advanced Digital Information Corporation++....................... 50 2,550 Avocent Corporation++................. 56 21,700 Compaq Computer Corporation........... 395 38,300 Dell Computer Corporation++........... 984 5,300 Eastman Kodak Company................. 211 2,400 Electronics For Imaging, Inc.++....... 59 47,200 EMC Corporation++..................... 1,388 11,700 Hewlett-Packard Company............... 366 1,400 InFocus Corporation++................. 23 36,400 International Business Machines Corporation......................... 3,501 7,700 Jabil Circuit, Inc.++................. 166 8,300 Lexmark International, Inc.++......... 378 1,700 McDATA Corporation, Class A++......... 32 1,700 Mercury Computer Systems, Inc.++...... 65 1,600 National Instruments Corporation++.... 52 8,600 NCR Corporation++..................... 336 9,200 Network Appliance, Inc.++............. 155 2,100 Quantum Corporation - DLT & Storage Systems++........................... 24 6,800 Read-Rite Corporation++............... 56 12,400 Sanmina Corporation++................. 243 2,400 Sensormatic Electronics Corporation++....................... 46 37,500 Sun Microsystems, Inc.++.............. 576 2,100 Tech Data Corporation++............... 62 10,800 Tektronix, Inc.++..................... 295 11,600 Unisys Corporation++.................. 162 400 Zebra Technologies Corporation, Class A++................................. 15 -------- 9,696 -------- CONGLOMERATES -- 0.5% 600 SPX Corporation++..................... 54 2,800 The Shaw Group Inc.++................. 131 20,425 United Technologies Corporation....... 1,497 -------- 1,682 -------- CONSTRUCTION -- 0.0%+ 2,600 Quanta Services, Inc.++............... 58 1,000 SCP Pool Corporation++................ 33 -------- 91 -------- CONSUMER CREDIT AND MORTGAGES -- 2.0% 12,300 American Express Company.............. 508 30,400 Fannie Mae............................ 2,420 24,400 Freddie Mac........................... 1,582 4,700 Greenpoint Financial Corporation...... 153 23,700 MBNA Corporation...................... 784 13,000 Providian Financial Corporation....... 638 11,400 USA Education Inc. ................... 828 -------- 6,913 --------
SEE NOTES TO FINANCIAL STATEMENTS. 93 98 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------- DEPARTMENT AND DISCOUNT STORES -- 2.0% 18,600 Federated Department Stores, Inc.++... $ 773 10,400 Kohl's Corporation++.................. 642 19,500 May Department Stores Company......... 692 37,900 Sears, Roebuck and Company............ 1,337 20,500 Target Corporation.................... 740 54,400 Wal-Mart Stores, Inc. ................ 2,746 -------- 6,930 -------- DIVERSIFIED ELECTRONICS -- 0.2% 900 Act Manufacturing Inc.++.............. 10 4,400 Aeroflex, Inc.++...................... 45 3,400 Anixter International Inc.++.......... 82 1,100 Artesyn Technologies, Inc.++.......... 12 1,900 Benchmark Electronics Inc.++.......... 37 1,500 Dionex Corporation++.................. 47 3,200 Esterline Technologies Corporation++....................... 70 2,500 Harris Corporation.................... 62 900 Helix Technology Corporation.......... 21 800 Keithley Instruments, Inc. ........... 13 1,900 Kent Electronics Corporation++........ 34 2,100 Pioneer Standard Electronics.......... 26 6,000 Symbol Technologies, Inc. ............ 209 -------- 668 -------- DIVERSIFIED MANUFACTURING -- 2.6% 8,500 Belden Inc. .......................... 170 1,400 Delta and Pine Land Company........... 34 3,400 Energizer Holdings Inc.++............. 85 155,400 General Electric Company.............. 6,506 3,100 Harsco Corporation.................... 76 2,200 Plexus Corporation++.................. 56 1,400 Roper Industries, Inc. ............... 50 1,100 SPS Technologies Inc.++............... 50 48,100 Tyco International Ltd. .............. 2,079 500 Vicor Corporation++................... 10 -------- 9,116 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.4% 1,100 Allegheny Energy, Inc. ............... 51 4,100 Allete................................ 106 3,400 Alliant Energy Corporation............ 108 1,300 Cleco Corporation..................... 59 10,800 Dynegy Inc., Class A.................. 552 1,100 OGE Energy Corporation................ 25 5,200 TECO Energy, Inc. .................... 156 1,800 The Montana Power Company............. 25 5,300 UniSource Energy Corporation.......... 111 4,600 UtiliCorp United Inc. ................ 149 -------- 1,342 -------- ELECTRIC POWER -- NUCLEAR -- 1.6% 4,000 Conectiv, Inc. ....................... 87 31,700 Duke Energy Corporation............... 1,355 6,100 Energy East Corporation............... 106 22,725 Exelon Corporation.................... 1,490 15,200 FPL Group, Inc. ...................... 932 3,500 Kansas City Power & Light Company..... 86 2,610 NSTAR................................. 100 6,400 Public Service Company of New Mexico.............................. 186
VALUE SHARES (000) ------------------------------------------------------------- ELECTRIC POWER -- NUCLEAR -- (CONTINUED) 28,500 Reliant Energy, Inc. ................. $ 1,290 1,700 RGS Energy Group Inc. ................ 63 -------- 5,695 -------- ELECTRICAL EQUIPMENT -- 0.2% 2,200 AMETEK, Inc. ......................... 61 2,200 C&D Technologies, Inc. ............... 61 14,200 Honeywell International Inc. ......... 579 -------- 701 -------- FINANCE -- MISCELLANEOUS -- 0.1% 4,800 AmeriCredit Corporation++............. 156 1,100 Investment Technology Group, Inc.++... 56 -------- 212 -------- FOOD AND DRUG STORES -- 1.1% 3,000 Casey's General Stores, Inc. ......... 36 15,700 CVS Corporation....................... 918 2,500 Fleming Companies, Inc. .............. 64 22,000 Safeway Inc.++........................ 1,213 35,600 Walgreen Company...................... 1,453 700 Whole Foods Market, Inc.++............ 29 -------- 3,713 -------- FOOD PRODUCTS -- 1.2% 500 American Italian Pasta Company++...... 16 16,300 Archer-Daniels-Midland Company........ 214 9,500 General Mills, Inc. .................. 409 1,391 Hain Celestial Group, Inc.++.......... 40 6,500 Hershey Foods Corporation............. 451 4,600 Hormel Foods Corporation.............. 90 2,000 IBP, Inc. ............................ 33 3,500 McCormick and Company, Inc. .......... 147 700 Michael Foods, Inc. .................. 21 2,600 Performance Food Group Company++...... 137 6,000 Quaker Oats Company................... 582 4,900 Smithfield Foods, Inc.++.............. 159 2,800 Suiza Foods Corporation++............. 135 37,100 SYSCO Corporation..................... 983 14,600 Unilever NV, NY Shares................ 768 -------- 4,185 -------- HEALTH SERVICES -- 0.9% 1,350 Accredo Health, Inc.++................ 44 1,700 AmeriSource Health Corporation, Class A++................................. 83 2,300 Cerner Corporation++.................. 79 4,100 Coventry Health Care, Inc.++.......... 68 1,100 Express Scripts Inc., Class A++....... 95 21,500 HCA - The Healthcare Company.......... 866 1,300 IMPATH Inc.++......................... 60 1,300 Invacare Corporation.................. 51 1,700 Lincare Holdings Inc.++............... 90 3,300 Omnicare, Inc. ....................... 71 1,200 Oxford Health Plans, Inc.++........... 32 2,700 PAREXEL International Corporation++... 34 1,600 Pediatrix Medical Group, Inc.++....... 36 600 Quest Diagnostics Inc.++.............. 53 3,600 Trigon Healthcare, Inc.++............. 185 16,800 UnitedHealth Group Inc. .............. 997 2,200 Universal Health Services, Inc., Class B++................................. 194
SEE NOTES TO FINANCIAL STATEMENTS. 94 99 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------- HEALTH SERVICES -- (CONTINUED) 3,200 Waters Corporation++.................. $ 149 750 Wellpoint Health Networks Inc.++...... 71 -------- 3,258 -------- HEAVY MACHINERY -- 0.4% 13,500 Deere & Company....................... 491 1,200 Flowserve Corporation++............... 27 6,400 JLG Industries, Inc. ................. 83 3,300 Milacron Inc. ........................ 60 17,100 Parker-Hannifin Corporation........... 678 2,300 Toro Company.......................... 106 -------- 1,445 -------- HOUSEHOLD PRODUCTS -- 1.0% 14,500 Avon Products, Inc. .................. 580 2,200 Church & Dwight Company, Inc. ........ 48 12,500 Colgate-Palmolive Company............. 691 7,800 Fortune Brands, Inc. ................. 268 29,200 Kimberly-Clark Corporation............ 1,980 1,000 Tupperware Corporation................ 24 -------- 3,591 -------- HOUSING AND FURNISHING -- 0.2% 3,000 Applica Inc.++........................ 19 4,390 D.R. Horton, Inc. .................... 93 4,700 Furniture Brands International, Inc.++.............................. 110 2,300 Lennar Corporation.................... 92 2,610 M.D.C. Holdings, Inc. ................ 103 500 NVR, Inc.++........................... 82 1,800 Pulte Corporation..................... 73 1,400 Rent-A-Center, Inc.++................. 64 2,000 Standard Pacific Corporation.......... 42 2,000 The Ryland Group, Inc. ............... 83 1,800 Toll Brothers, Inc.++................. 69 -------- 830 -------- INSURANCE -- 2.4% 38,900 Allstate Corporation.................. 1,631 40,300 American General Corporation.......... 1,541 27,850 American International Group, Inc. ... 2,243 2,900 Everest Re Group, Ltd. ............... 193 3,200 Fidelity National Financial, Inc. .... 86 2,700 First American Financial Corporation......................... 70 15,500 Hartford Financial Services Group, Inc. ............................... 915 10,400 Lincoln National Corporation.......... 442 24,200 MetLife, Inc. ........................ 727 7,000 Old Republic International Corporation......................... 199 2,700 PMI Group, Inc. ...................... 175 1,600 Radian Group Inc. .................... 108 1,600 RenaissanceRe Holdings Ltd. .......... 112 -------- 8,442 -------- INTEGRATED OIL -- 3.5% 2,800 AGL Resources Inc. ................... 61 17,100 Apache Corporation.................... 985 1,300 Barrett Resources Corporation++....... 78 22,300 Chevron Corporation................... 1,958 22,900 Conoco Inc. .......................... 647 5,200 Cross Timbers Oil Company............. 129 2,100 EOG Resources, Inc. .................. 87 77,907 Exxon Mobil Corporation............... 6,309
VALUE SHARES (000) ------------------------------------------------------------- INTEGRATED OIL -- (CONTINUED) 1,500 HS Resources, Inc.++.................. $ 68 2,500 Louis Dreyfus Natural Gas Corporation++....................... 93 2,500 Noble Affiliates, Inc. ............... 104 3,000 Pogo Producing Company................ 89 3,800 Pride International Inc.++............ 90 1,900 Swift Energy Company++................ 61 10,500 Texaco Inc. .......................... 697 3,500 Ultramar Diamond Shamrock Corporation......................... 127 23,975 USX-Marathon Group.................... 646 5,500 Vintage Petroleum, Inc. .............. 112 -------- 12,341 -------- INVESTMENT SERVICES -- 1.0% 2,000 A.G. Edwards, Inc. ................... 74 1,100 Corporate Executive Board Company++... 33 6,400 E*TRADE Group, Inc.++................. 45 1,800 Eaton Vance Corporation............... 56 1,100 Jefferies Group, Inc. ................ 32 1,900 Legg Mason, Inc. ..................... 80 16,800 Lehman Brothers Holdings Inc. ........ 1,053 23,700 Merrill Lynch & Company, Inc. ........ 1,313 13,000 Morgan Stanley Dean Witter & Company............................. 696 500 Neuberger Berman Inc. ................ 31 1,600 Raymond James Financial, Inc. ........ 44 1,700 Waddell & Reed Financial, Inc., Class A................................... 48 -------- 3,505 -------- LODGING AND RECREATION -- 0.5% 1,600 Anchor Gaming++....................... 98 3,500 Aztar Corporation++................... 37 3,600 Callaway Golf Company................. 80 23,000 Carnival Corporation.................. 636 18,500 Harley-Davidson, Inc. ................ 702 1,600 International Game Technology++....... 81 2,200 Oakley, Inc.++........................ 39 8,900 Park Place Entertainment Corporation++....................... 91 1,700 Polaris Industries Inc. .............. 77 -------- 1,841 -------- MEDICAL DEVICES AND SUPPLIES -- 2.2% 22,500 Abbott Laboratories................... 1,062 8,000 Baxter International Inc. ............ 753 700 Beckman Coulter, Inc. ................ 27 27,050 Biomet, Inc. ......................... 1,066 900 C.R. Bard, Inc. ...................... 41 18,100 Cardinal Health, Inc. ................ 1,751 1,600 Coherent, Inc.++...................... 57 2,500 Cooper Companies, Inc. ............... 118 800 Datascope Corporation................. 29 1,500 Diagnostic Products Corporation....... 78 4,800 Edwards Lifesciences Corporation++.... 94 1,600 Hillenbrand Industries, Inc. ......... 77 2,500 IDEXX Laboratories, Inc.++............ 55 24,500 Johnson & Johnson..................... 2,143 3,400 Mentor Corporation.................... 77 2,000 Patterson Dental Company++............ 62 900 PolyMedica Corporation++.............. 20 2,674 Priority Healthcare Corporation, Class B++................................. 101 1,900 Respironics, Inc.++................... 58
SEE NOTES TO FINANCIAL STATEMENTS. 95 100 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------- MEDICAL DEVICES AND SUPPLIES -- (CONTINUED) 2,000 Techne Corporation++.................. $ 52 1,700 Varian Medical Systems, Inc.++........ 103 -------- 7,824 -------- METALS AND MINING -- 0.4% 24,900 Alcoa Inc. ........................... 895 15,700 Barrick Gold Corporation.............. 224 2,500 Carpenter Technology Corporation...... 70 2,200 Massey Energy Company................. 53 2,100 Reliance Steel & Aluminum Company..... 49 4,500 Stillwater Mining Company++........... 122 1,000 Texas Industries, Inc. ............... 29 -------- 1,442 -------- NATURAL GAS DISTRIBUTION -- 0.7% 24,954 El Paso Corporation................... 1,629 5,200 Energen Corporation................... 184 8,400 Enron Corporation..................... 488 1,800 Equitable Resources, Inc. ............ 124 2,250 KeySpan Corporation................... 86 3,700 Northwest Natural Gas Company......... 89 -------- 2,600 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.8% 1,900 Advanced Fibre Communications, Inc.++.............................. 27 1,400 Black Box Corporation++............... 62 3,450 Cable Design Technologies Corporation++....................... 46 18,400 Cabletron Systems, Inc.++............. 237 104,800 Cisco Systems, Inc.++................. 1,658 8,700 Comverse Technology, Inc.++........... 512 12,800 Corning Inc. ......................... 265 7,500 DMC Stratex Networks, Inc.++.......... 62 22,285 JDS Uniphase Corporation++............ 411 1,800 Juniper Networks, Inc.++.............. 68 1,000 L-3 Communications Holdings, Inc.++... 79 34,400 Nortel Networks Corporation........... 483 2,700 Plantronics, Inc.++................... 48 2,700 Polycom, Inc.++....................... 33 1,900 Powerwave Technologies, Inc.++........ 26 1,500 Proxim, Inc.++........................ 15 21,100 QUALCOMM Inc.++....................... 1,196 12,400 Scientific-Atlanta, Inc. ............. 516 13,600 Tellabs, Inc.++....................... 553 2,300 ViaSat, Inc.++........................ 35 -------- 6,332 -------- OILFIELD SERVICES -- 0.8% 11,200 BJ Services Company++................. 798 22,350 ENSCO International Inc. ............. 782 3,400 Helmerich & Payne, Inc. .............. 157 5,300 Offshore Logistics, Inc.++............ 132 7,100 Schlumberger Ltd. .................... 409 2,500 Smith International, Inc.++........... 176 1,400 THQ Inc.++............................ 53 3,300 Veritas DGC Inc.++.................... 105 4,200 Weatherford International, Inc.++..... 207 -------- 2,819 --------
VALUE SHARES (000) ------------------------------------------------------------- PACKAGING AND CONTAINERS -- 0.1% 1,300 AptarGroup, Inc. ..................... $ 40 500 Ball Corporation...................... 23 1,100 Bemis Company, Inc. .................. 36 700 Libbey Inc. .......................... 21 3,100 Sonoco Products Company............... 66 -------- 186 -------- PAPER AND FOREST PRODUCTS -- 0.3% 5,700 Bowater Inc. ......................... 270 1,600 Georgia - Pacific Corporation (Timber Group).............................. 46 600 Rayonier Inc. ........................ 25 1,600 Schweitzer-Mauduit International, Inc. ............................... 28 4,100 United Stationers Inc.++.............. 99 13,800 Weyerhaeuser Company.................. 701 -------- 1,169 -------- PHARMACEUTICALS -- 5.1% 13,300 Allergan, Inc. ....................... 986 1,300 Alpharma Inc., Class A................ 43 11,300 Amgen Inc.++.......................... 680 500 Barr Laboratories, Inc.++............. 29 4,300 Bergen Brunswig Corporation, Class A................................... 71 7,500 Biogen, Inc.++........................ 475 49,900 Bristol-Myers Squibb Company.......... 2,964 1,000 Cephalon, Inc.++...................... 48 1,300 Chiron Corporation++.................. 57 600 COR Therapeutics, Inc.++.............. 14 7,300 Eli Lilly and Company................. 560 9,700 Forest Laboratories, Inc.++........... 575 2,700 Genzyme Corporation++................. 244 1,200 Gilead Sciences, Inc.++............... 39 4,100 IDEC Pharmaceuticals Corporation++.... 164 4,650 IVAX Corporation++.................... 146 1,600 Medicis Pharmaceutical Corporation, Class A++........................... 72 51,200 Merck & Company, Inc. ................ 3,886 4,600 Millennium Pharmaceuticals, Inc.++.... 140 600 Noven Pharmaceuticals, Inc.++......... 17 138,600 Pfizer Inc. .......................... 5,675 1,700 Pharmaceutical Product Development, Inc.++.............................. 72 20,800 Pharmacia Corporation................. 1,048 1,200 Protein Design Labs, Inc.++........... 53 700 Regeneron Pharmaceuticals, Inc.++..... 16 200 Sepracor Inc.++....................... 6 1,400 Syncor International Corporation++.... 45 400 Vertex Pharmaceuticals Inc.++......... 15 -------- 18,140 -------- PUBLISHING AND ADVERTISING -- 0.5% 4,700 Dun & Bradstreet Corporation++........ 111 1,400 Information Holdings Inc.++........... 30 1,300 John H. Harland Company............... 24 13,000 McGraw-Hill Companies, Inc. .......... 776 12,400 New York Times Company, Class A....... 508 2,850 Readers Digest Association, Inc., Class A............................. 78 3,600 Scholastic Corporation................ 130
SEE NOTES TO FINANCIAL STATEMENTS. 96 101 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------- PUBLISHING AND ADVERTISING -- (CONTINUED) 1,100 The Standard Register Company......... $ 18 175 The Washington Post Company, Class B................................... 101 -------- 1,776 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.4% 4,500 Arkansas Best Corporation++........... 71 27,500 Burlington Northern Santa Fe Corporation......................... 836 3,000 C.H. Robinson Worldwide, Inc. ........ 82 1,600 CNF Inc. ............................. 46 1,400 EGL, Inc.++........................... 34 1,700 Expeditors International of Washington, Inc. ................... 86 1,400 GATX Corporation...................... 59 2,000 Heartland Express, Inc.++............. 51 1,100 J.B. Hunt Transport Services, Inc.++.............................. 17 1,300 Landstar System, Inc.++............... 88 2,300 Werner Enterprises, Inc. ............. 39 2,100 Yellow Corporation++.................. 36 -------- 1,445 -------- RESTAURANTS -- 0.4% 5,700 Brinker International, Inc.++......... 159 3,400 Jack in the Box Inc.++................ 102 2,200 Panera Bread Company, Class A++....... 59 2,600 RARE Hospitality International, Inc.++.............................. 65 5,200 Ruby Tuesday, Inc. ................... 102 17,100 Starbucks Corporation++............... 725 2,400 The Cheesecake Factory++.............. 88 -------- 1,300 -------- SEMICONDUCTORS -- 2.7% 19,400 Agilent Technologies, Inc.++.......... 596 3,600 Alliance Semiconductor Corporation++....................... 42 14,100 Analog Devices, Inc.++................ 511 13,300 Applied Materials, Inc.++............. 579 6,200 Applied Micro Circuits Corporation++....................... 102 2,900 Arrow Electronics, Inc.++............. 66 3,700 Atmel Corporation++................... 36 1,100 Avnet, Inc. .......................... 23 2,600 Axcelis Technologies, Inc.++.......... 30 1,300 AXT, Inc.++........................... 20 800 Cree, Inc.++.......................... 12 1,400 Cypress Semiconductor Corporation++... 25 1,200 Dallas Semiconductor Corporation...... 31 1,500 DSP Group, Inc.++..................... 23 1,300 Dupont Photomasks, Inc.++............. 57 2,800 Electro Scientific Industries, Inc.++.............................. 79 3,000 General Semiconductor, Inc.++......... 28 119,750 Intel Corporation..................... 3,150 1,400 Intergrated Device Technology, Inc.++.............................. 41 3,200 International Rectifier Corporation++....................... 130 2,900 KEMET Corporation++................... 49 7,000 KLA-Tencor Corporation++.............. 276 3,100 Lam Research Corporation++............ 74 15,100 Linear Technology Corporation......... 620 7,500 Maxim Integrated Products, Inc.++..... 312 1,300 Micrel, Inc.++........................ 36 1,300 MIPS Technologies, Inc.++............. 30 10,000 Novellus Systems, Inc.++.............. 406 1,900 Nvidia Corporation++.................. 123 1,500 Park Electrochemical Corporation...... 34
VALUE SHARES (000) ------------------------------------------------------------- SEMICONDUCTORS -- (CONTINUED) 3,600 PerkinElmer, Inc. .................... $ 189 2,800 Photronics, Inc.++.................... 69 2,900 QLogic Corporation++.................. 65 2,700 Semtech Corporation++................. 79 1,400 Silicon Valley Group, Inc.++.......... 39 2,200 Technitrol, Inc. ..................... 55 19,400 Texas Instruments Inc. ............... 601 3,000 TranSwitch Corporation++.............. 39 2,900 TriQuint Semiconductor, Inc.++........ 43 2,200 Ultratech Stepper, Inc.++............. 54 1,700 Varian Semiconductor Equipment Associates, Inc.++.................. 54 4,350 Vishay Intertechnology, Inc.++........ 87 3,200 Vitesse Semiconductor Corporation++... 76 11,900 Xilinx, Inc.++........................ 418 -------- 9,409 -------- SOFTWARE -- 2.6% 7,000 Adobe Systems Inc. ................... 245 500 Affiliated Computer Services, Inc., Class A++........................... 32 800 Ariba, Inc.++......................... 6 1,700 Aspen Technology, Inc.++.............. 41 7,100 Autodesk, Inc. ....................... 217 2,500 Avid Technology, Inc.++............... 33 1,750 BARRA, Inc.++......................... 95 6,700 BMC Software, Inc.++.................. 144 7,200 Cadence Design Systems, Inc.++........ 133 1,300 Checkfree Corporation++............... 38 3,700 DST Systems, Inc.++................... 178 1,200 Electronic Arts Inc.++................ 65 2,000 FileNET Corporation++................. 31 900 HNC Software Inc.++................... 16 4,100 Intuit Inc.++......................... 114 1,300 Macrovision Corporation++............. 57 400 Manhattan Associates, Inc. ........... 6 600 Manugistics Group, Inc.++............. 11 4,000 Mentor Graphics Corporation++......... 83 3,100 Mercury Interactive Corporation++..... 130 87,100 Microsoft Corporation++............... 4,763 89,300 Oracle Corporation++.................. 1,338 8,700 Peoplesoft, Inc.++.................... 204 4,600 Rational Software Corporation++....... 82 800 Reynolds & Reynolds Company, Class A................................... 15 3,150 RSA Security Inc.++................... 78 8,900 Siebel Systems, Inc.++................ 242 4,400 Sybase, Inc.++........................ 68 2,250 Symantec Corporation++................ 94 2,300 The BISYS Group, Inc.++............... 123 9,500 VERITAS Software Corporation++........ 439 2,100 Verity, Inc.++........................ 48 -------- 9,169 -------- SPECIALTY STORES -- 0.8% 2,850 American Eagle Outfitters, Inc.++..... 82 24,300 Bed Bath & Beyond Inc.++.............. 597 6,600 Best Buy Company, Inc.++.............. 237 3,500 BJ's Wholesale Club, Inc.++........... 167 1,900 Burlington Coat Factory Warehouse Corporation......................... 37
SEE NOTES TO FINANCIAL STATEMENTS. 97 102 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------- SPECIALTY STORES -- (CONTINUED) 2,800 CDW Computer Centers, Inc.++.......... $ 87 1,500 Chico's FAS, Inc.++................... 49 2,300 Dress Barn, Inc.++.................... 54 2,300 Family Dollar Stores, Inc. ........... 59 1,900 Footstar, Inc.++...................... 76 2,800 Gymboree Corporation++................ 28 14,450 Home Depot, Inc. ..................... 624 2,200 Insight Enterprises, Inc.++........... 46 1,700 Linens 'N Things, Inc.++.............. 47 1,600 Pacific Sunwear of California, Inc.++.............................. 44 2,000 Payless ShoeSource, Inc.++............ 125 9,500 Pier 1 Imports, Inc. ................. 124 4,900 Ross Stores, Inc. .................... 92 2,600 Stein Mart Inc.++..................... 28 3,500 Talbots, Inc. ........................ 149 1,300 Wet Seal, Inc., Class A++............. 33 -------- 2,785 -------- TELECOMMUNICATIONS SERVICES -- 3.3% 13,200 Avaya Inc.++.......................... 172 34,250 BellSouth Corporation................. 1,402 2,900 Broadwing Inc.++...................... 56 1,100 Newport Corporation................... 32 15,400 Nextel Communications, Inc., Class A++................................. 221 4,200 Pac-West Telecomm, Inc.++............. 15 60,700 Qwest Communications International Inc.++.............................. 2,128 59,866 SBC Communications Inc. .............. 2,671 1,700 Telephone and Data Systems, Inc. ..... 159 59,939 Verizon Communications Inc. .......... 2,954 91,286 WorldCom, Inc.++...................... 1,706 -------- 11,516 -------- TOBACCO -- 0.7% 2,100 DiMon Inc. ........................... 16 45,100 Philip Morris Companies Inc. ......... 2,140 2,200 R.J. Reynolds Tobacco Holdings, Inc. ............................... 123 600 Universal Corporation................. 24 -------- 2,303 -------- UTILITIES -- MISCELLANEOUS -- 0.0%+ 1,850 Philadelphia Suburban Corporation..... 44 -------- TOTAL COMMON STOCKS (Cost $192,535)....................... 211,872 -------- PRINCIPAL AMOUNT (000) --------- CORPORATE BONDS AND NOTES -- 15.8% AEROSPACE AND DEFENSE -- 0.2% $ 708 Raytheon Company, Class B, 6.750% 08/15/07..................... 702 -------- AIRLINES -- 0.0%+ 130 Air Canada, 10.250% 03/15/11(+)................. 126 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- AUTOMOTIVE -- 0.9% $ 1,200 Delphi Automotive Systems Corporation, 6.125% 05/01/04..................... $ 1,195 800 Ford Motor Credit Company, 7.600% 08/01/05..................... 845 1,060 General Motors Acceptance Corporation, 6.150% 04/05/07..................... 1,034 170 Universal Compression Inc., Class A, 9.276%*** 02/15/08.................. 147 -------- 3,221 -------- BROADCASTING AND CABLE -- 1.2% 798 British Sky Broadcasting Group plc, 6.875% 02/23/09..................... 743 1,750 Clear Channel Communications, Inc., 7.875% 06/15/05..................... 1,856 400 Comcast Cable Communications, 6.750% 01/30/11..................... 401 350 Cox Radio, Inc., Class A, 6.625% 02/15/06..................... 354 310 Insight Communications Company, Inc., 12.530%*** 02/15/11(+).............. 170 Jones International Networks, Ltd., 175 Class A, 11.750% 07/01/05.................... 160 330 Spanish Broadcasting Systems, Inc., Class A, 9.625% 11/01/09..................... 295 -------- 3,979 -------- BUILDING MATERIALS -- 0.1% 160 Hercules Inc., 11.125% 11/15/07(+)................. 162 130 Nortek, Inc., 9.875% 03/01/04..................... 126 -------- 288 -------- CHEMICALS -- BASIC -- 0.0%+ 175 IMC Global Inc., 7.400% 11/01/02..................... 172 -------- CHEMICALS -- SPECIALTY -- 0.4% 1,500 Praxair, Inc., 6.750% 03/01/03++................... 1,536 -------- COMMERCIAL BANKING -- 0.9% 900 Citigroup Inc., 6.750% 12/01/05..................... 937 800 First Union Corporation, 7.550% 08/18/05++................... 848 1,425 J.P. Morgan Chase & Company, 5.750% 04/15/04..................... 1,439 -------- 3,224 --------
SEE NOTES TO FINANCIAL STATEMENTS. 98 103 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- COMMERCIAL SERVICES -- 0.3% $ 175 Allied Waste North America, Inc., 8.875% 04/01/08(+).................. $ 179 700 Panamerican Beverages, 7.250% 07/01/09..................... 638 260 Xerox Capital Trust I, Gtd. Notes, 8.000% 02/01/27..................... 73 -------- 890 -------- COMPUTER SERVICES -- 0.3% 1,110 Comdisco, Inc., 9.500% 08/15/03++................... 910 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.4% 1,300 Compaq Computer Corporation, 7.450% 08/01/02++................... 1,313 175 Seagate Technology International, 12.500% 11/15/07(+)................. 174 -------- 1,487 -------- CONGLOMERATES -- 0.5% 1,000 Tyco International Group SA, 7.000% 06/15/28..................... 946 1,000 Waste Management, Inc., 7.000% 07/15/28..................... 873 -------- 1,819 -------- CONSUMER SERVICES -- 0.1% 350 The Dow Chemical Company, 6.125% 02/01/11..................... 347 -------- DIVERSIFIED MANUFACTURING -- 0.1% 100 Doane Pet Care Company, 9.750% 05/15/07..................... 80 240 Scotts Company, Class A, 8.625% 01/15/09..................... 242 -------- 322 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.5% 315 AES Corporation, 8.750% 12/15/02..................... 320 115 AES Corporation, 8.875% 02/15/11..................... 118 1,300 Consumers Energy Company, 6.200% 05/01/03..................... 1,297 135 SCANA Corporation, 6.050% 01/13/03..................... 136 -------- 1,871 -------- ENERGY -- MISCELLANEOUS -- 0.3% 160 Calpine Corporation, 8.500% 02/15/11..................... 163 525 Nisource Finance Corporation, 7.500% 11/15/03(+)++................ 547 350 Progress Energy, Inc., 7.100% 03/01/11..................... 360 -------- 1,070 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- FINANCE -- MISCELLANEOUS -- 2.2% $ 1,725 Capital One Bank, 8.250% 06/15/05++................... $ 1,768 231 Case Credit Corporation, 6.125% 02/15/03..................... 186 Caterpillar Financial Services 1,800 Corporation, 6.875% 08/01/04++................... 1,875 700 CIT Group Inc., 6.500% 02/07/06..................... 712 425 Crown Cork & Seal Financial plc, 6.750% 12/15/03++................... 281 1,000 General Electric Capital Corporation, 6.800% 11/01/05..................... 1,056 750 Lehman Brothers Holdings, 7.750% 01/15/05..................... 791 800 Washington Mutual, Inc., 7.500% 08/15/06..................... 845 -------- 7,514 -------- FOOD AND DRUG STORES -- 0.9% 750 Fred Meyer, Inc., 7.450% 03/01/08..................... 783 70 Marsh Supermarkets, Inc., 8.875% 08/01/07..................... 67 1,500 Nabisco Inc., 6.125% 02/01/33..................... 1,514 750 Safeway Inc., 6.150% 03/01/06..................... 756 -------- 3,120 -------- FOOD PRODUCTS -- 0.4% 230 Fleming Companies, Inc., 10.500% 12/01/04.................... 232 1,000 Unilever Capital Corporation, 7.125% 11/01/10..................... 1,062 -------- 1,294 -------- HEALTH SERVICES -- 0.3% 700 American Home Products, 6.250% 03/15/06(+).................. 704 215 HCA - The Healthcare Company, 8.750% 09/01/10..................... 230 -------- 934 -------- HEAVY MACHINERY -- 0.4% 1,500 Thermo Electron Corporation, 7.625% 10/30/08++................... 1,510 -------- HOUSING AND FURNISHING -- 0.2% 725 Hanson Overseas B.V., 7.375% 01/15/03++................... 742 -------- INSURANCE -- 0.5% 1,675 American General Finance Corporation, 7.450% 01/15/05++................... 1,773 --------
SEE NOTES TO FINANCIAL STATEMENTS. 99 104 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- INVESTMENT SERVICES -- 0.9% $ 750 Bear Stearns Companies, Inc., 7.800% 08/15/07++................... 800 1,500 MCN Investment Corporation, 6.890% 01/16/02..................... 1,516 750 Principal Life Global Funding, 6.125% 03/01/06(+).................. 762 -------- 3,078 -------- NATURAL GAS PIPELINES -- 0.4% 725 KN Energy, Inc., 6.650% 03/01/05..................... 737 800 Williams Companies, Inc., 6.500% 08/01/06..................... 804 -------- 1,541 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.0%@ 170 SBA Communications Corporation, 10.250% 02/01/09(+)................. 159 -------- OIL REFINING AND MARKETING -- 1.0% 150 Chesapeake Energy Corporation, 9.625% 05/01/05..................... 162 750 Occidental Petroleum Corporation, Sr. Notes, 7.650% 02/15/06..................... 799 105 Ocean Energy, Inc., 8.375% 07/01/08..................... 111 800 PDV America Inc., Gtd. Sr. Notes, 7.875% 08/01/03..................... 804 700 Union Oil Company of California, 7.500% 02/15/29..................... 718 750 USX Corporation, 6.650% 02/01/06..................... 757 -------- 3,351 -------- OILFIELD SERVICES -- 0.0%@ 125 Compagnie Generale de Geophysique SA, 10.625% 11/15/07(+)................. 133 -------- PACKAGING AND CONTAINERS -- 0.0%@ 70 Container Corporation of America, 9.750% 04/01/03..................... 71 -------- PAPER AND FOREST PRODUCTS -- 0.1% 490 Abitibi-Consolidated Inc., 8.550% 08/01/10..................... 521 -------- PHARMACEUTICALS -- 0.4% 1,500 Pharmacia Corporation, 6.600% 12/01/28..................... 1,457 -------- PUBLISHING AND ADVERTISING -- 0.0%@ 70 Advanstar Communications Inc., 12.000% 02/15/11(+)................. 71 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.0%@ $ 171 Meristar Hospitality Corporation, 9.000% 01/15/08(+).................. 173 -------- TELECOMMUNICATIONS SERVICES -- 1.8% 175 American Cellular Corporation, 9.500% 10/15/09(+).................. 169 750 AT&T Wireless Group, 7.350% 03/01/06(+).................. 756 750 France Telecom, 7.200% 03/01/06(+).................. 762 250 Global Crossing Holdings Ltd., 9.125% 11/15/06..................... 236 165 ITC Deltacom, Inc., 11.000% 06/01/07.................... 137 260 McLeodUSA Inc., Class A, 11.375% 01/01/09.................... 256 Metromedia Fiber Network, Inc., Class 205 A, 10.000% 12/15/09.................... 168 205 Nextel Communications, Inc., Class A, 9.500% 02/01/11(+).................. 174 750 Qwest Capital Funding Inc., 7.750% 08/15/06(+).................. 795 500 Sprint Capital Corporation, 7.125% 01/30/06..................... 504 75 Sprint Capital Corporation, 6.875% 11/15/28..................... 64 100 Tritel PCS Inc., 10.375% 01/15/11(+)................. 96 750 Verizon Global Funding Corporation, 7.250% 12/01/10(+).................. 785 750 Vodafone Group plc, 7.750% 02/15/10..................... 808 175 XO Communications Inc., Class A, 10.750% 06/01/09.................... 105 -------- 5,815 -------- TOBACCO -- 0.1% 350 R.J. Reynolds Tobacco Holdings, Inc., 7.375% 05/15/03..................... 346 -------- TOTAL CORPORATE BONDS AND NOTES (Cost $54,775)........................ 55,567 -------- FOREIGN BONDS AND NOTES -- 1.2% 2,275 AT&T Canada Inc., (0.00)% due 06/15/08 9.95% beginning 06/01/03............ 1,952 1,000 Banco Latinoamericano de Exportaciones, SA, Class E, 7.200% 05/28/02(+)++................ 1,000
SEE NOTES TO FINANCIAL STATEMENTS. 100 105 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- FOREIGN BONDS AND NOTES -- (CONTINUED) $ 145 Kimberly-Clark de Mexico, SA de CV, Class A,(+) 8.875% 08/01/09..................... 154 1,238 Pemex Finance Ltd., 5.720% 11/15/03..................... 1,243 -------- TOTAL FOREIGN BONDS AND NOTES (Cost $4,340)......................... 4,349 -------- MORTGAGE-BACKED SECURITIES -- 20.7% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 8.1% Commercial Mortgage Acceptance 750 Corporation, Series 1999-C1, Class A2, 7.030% 05/15/09++................... 785 1,054 Criimi Mae CMBS Corporation, Series 1998-1, Class A1, 5.697% 10/20/01(+)++................ 1057 CS First Boston Mortgage Securities 1,880 Corporation, Series 1998-C1, Class A1B, 6.480% 05/17/08++................... 1,911 2,600 DLJ Commercial Mortgage Corporation, Series 1999-CG1, Class A1B, 6.460% 01/10/09++................... 2,639 1,000 DLJ Commercial Mortgage Corporation, Series 2000-CF1, Class A1B, 7.620% 05/10/10..................... 1,075 2,300 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 7.390% 11/15/09++................... 2,454 GE Capital Commercial Mortgage 2,500 Corporation, Series 2000-1, Class A2, 6.496% 12/15/10++................... 2,523 2,600 GMAC Commercial Mortgage Securities Inc., Series 1999-C2, Class A2, 6.945% 09/15/33++................... 2,708 1,000 JP Morgan Chase Commercial Mortgage Securities Corporation, Series 2001-CIBC, Class A3, 6.260% 03/15/33..................... 995 JP Morgan Commercial Mortgage Finance 6,438 Corporation, Series 1997-C4, Class X, 1.248%** 12/26/28................... 335 2,050 Nomura Asset Securities Corporation, Series 1998-D6, Class A1B, 6.590% 03/17/28++................... 2,103 2,000 PNC Mortgage Acceptance Corporation, Series 1999-CM1, Class A1B, 7.330% 10/10/09++................... 2,125 2,715 Prudential Securities Secured Financing Corporation, Series 1999-NRF1, Class A2, 6.480% 01/15/09++................... 2,756 1,715 Salomon Brothers Mortgage Securities, Series 2000-C1, Class A2, 7.520% 12/18/09++................... 1,837
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- (CONTINUED) $ 1,600 Salomon Brothers Mortgage Securities, Series 2000-C2, Class A2, 7.455% 04/18/10++................... 1,709 139 Salomon Brothers Mortgage Securities, Series 2000-NL1, Class A1, 6.601% 04/15/08(+)++................ 142 40,643 Vendee Mortgage Trust, Series 1998-1, Class 2, Interest only, .453%** 09/15/27++.................. 688 44,025 Vendee Mortgage Trust, Series 1998-3, Class 1, Interest only, .312%** 03/15/29++.................. 538 -------- 28,380 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 0.0%@ 59 8.000% 01/01/04....................... 60 2 10.500% 04/01/19...................... 2 -------- 62 -------- FEDERAL HOUSING AUTHORITY (FHA) CERTIFICATES -- 0.6% 691 7.000% 01/15/27 - 01/01/40............ 701 592 6.750% 01/01/40....................... 591 287 6.850% 02/01/40....................... 286 640 6.530% 02/28/41....................... 622 -------- 2,200 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 5.8% 118 6.500% 01/01/06....................... 118 347 7.500% 10/01/11....................... 358 402 10.000% 09/01/18...................... 442 175 6.000% 09/01/28(b).................... 171 12,400 6.500% 02/01/31(b).................... 12,338 6,270 8.000% 04/01/31(b).................... 6,464 410 8.177%** 08/01/36++................... 420 -------- 20,311 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 5.7% 723 6.750% 09/15/01....................... 724 14 10.000% 02/15/16...................... 16 751 9.000% 10/15/19 - 01/15/20++.......... 800 11,327 8.000% 07/15/27 - 12/15/30++.......... 11,695 176 7.000% 11/15/27++..................... 179 6,011 6.500% 01/15/31++..................... 6,015 79 6.750% 06/01/39(b)(c)................. 79 304 6.550% 03/15/40....................... 302 410 6.600% 01/15/41++..................... 407 -------- 20,217 --------
SEE NOTES TO FINANCIAL STATEMENTS. 101 106 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II (GNMA) CERTIFICATES -- 0.5% $ 492 6.650% 01/15/34++..................... 502 1,190 7.375% 10/15/34++..................... 1,230 -------- 1,732 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $71,782)........................ 72,902 -------- U.S. TREASURY OBLIGATIONS -- 1.0% U.S. TREASURY STRIPS -- 1.0% 2,675 Interest only, 5.077%*** 02/15/10.................. 1,714 850 Principal only, 5.883%*** 11/15/21.................. 257 7,400 Principal only, 5.789%*** 11/15/27.................. 1,620 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $3,575)......................... 3,591 --------
SHARES (000) --------- INVESTMENT COMPANIES -- 3.0% (Cost $10,699) 10,699 Nations Cash Reserves#................ 10,699 -------- TOTAL INVESTMENTS (Cost $339,239*)............... 102.5% $360,512 -------- OTHER ASSETS AND LIABILITIES (NET)........................ (2.5)% Cash.................................. $ 1,024 Receivable for investment securities sold................................ 27,650 Receivable for Fund shares sold....... 345 Dividends receivable.................. 177 Interest receivable................... 1,478 Variation margin/due to broker........ (27) Payable for Fund shares redeemed...... (423) Investment advisory fee payable....... (199) Administration fee payable............ (71) Shareholder servicing and distribution fees payable........................ (144) Payable for investment securities purchased........................... (38,429) Accrued Trustees' fees and expenses... (21) Accrued expenses and other liabilities......................... (228) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (8,868) -------- NET ASSETS..................... 100.0% $351,644 ======== NET ASSETS CONSIST OF: Undistributed net investment income... $ 233 Accumulated net realized loss on investments sold and futures contracts........................... (5,528) Net unrealized appreciation of investments and futures contracts... 21,123 Paid-in capital....................... 335,816 -------- NET ASSETS............................ $351,644 ========
VALUE ------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($12,847,045 / 632,236 shares outstanding)........................ $20.32 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($231,519,426 / 11,396,277 shares outstanding)................. $20.32 ====== Maximum sales charge.................. 5.75% Maximum offering price per share...... $21.55 INVESTOR B SHARES: Net asset value and offering price per share+ ($104,745,330 / 5,180,719 shares outstanding)................. $20.22 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($2,531,864 / 125,073 shares outstanding)........................ $20.24 ======
--------------- * Federal Income Tax Information: Net unrealized appreciation of $20,492 on investment securities was comprised of gross appreciation of $39,091 and gross depreciation of $18,599 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $340,020. ** Variable rate security. The interest rate shown reflects the rate in effect at March 31, 2001. *** Zero coupon security. The rate shown reflects the yield to maturity at March 31, 2001. (+) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. (++) Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. ++ All or a portion of security segregated as collateral for futures contracts and TBA. (b) TBA -- Securities purchased on a forward commitment basis. (c) Construction loan security. Security was issued on a when-issued basis. @ Amount represents less than 0.1%. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. SEE NOTES TO FINANCIAL STATEMENTS. 102 107 NATIONS FUNDS Nations Equity Income Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- COMMON STOCKS -- 85.4% AEROSPACE AND DEFENSE -- 3.3% 85,000 B.F. Goodrich Company................. $ 3,261 104,000 General Dynamics Corporation.......... 6,525 80,000 Rockwell International Corporation.... 2,908 -------- 12,694 -------- BEVERAGES -- 1.3% 112,000 Anheuser-Busch Companies, Inc. ....... 5,144 -------- BROADCASTING AND CABLE -- 2.5% 114,000 Comcast Corporation, Class A++........ 4,781 116,000 Viacom Inc., Class B++................ 5,100 -------- 9,881 -------- CHEMICALS -- BASIC -- 1.2% 110,000 E.I. duPont de Nemours and Company.... 4,477 -------- COMMERCIAL BANKING -- 7.5% 240,000 Citigroup Inc. ....................... 10,794 134,000 J.P. Morgan Chase & Company........... 6,017 170,000 SouthTrust Corporation................ 7,778 88,000 Washington Mutual, Inc................ 4,818 -------- 29,407 -------- COMPUTERS AND OFFICE EQUIPMENT -- 3.4% 140,000 EMC Corporation++..................... 4,116 94,000 International Business Machines Corporation......................... 9,041 -------- 13,157 -------- CONSUMER CREDIT AND MORTGAGES -- 4.4% 50,000 American Express Company.............. 2,065 78,000 Fannie Mae............................ 6,209 138,000 Freddie Mac........................... 8,946 -------- 17,220 -------- DEPARTMENT AND DISCOUNT STORES -- 2.9% 221,000 Wal-Mart Stores, Inc.................. 11,161 -------- DIVERSIFIED MANUFACTURING -- 3.6% 330,000 General Electric Company.............. 13,814 -------- ELECTRIC POWER -- NON NUCLEAR -- 1.6% 209,000 TECO Energy, Inc...................... 6,262 -------- ELECTRIC POWER -- NUCLEAR -- 3.7% 107,000 Dominion Resources, Inc............... 6,898 124,000 FPL Group, Inc........................ 7,601 -------- 14,499 -------- ELECTRICAL EQUIPMENT -- 0.7% 76,000 Cooper Industries, Inc................ 2,542 --------
VALUE SHARES (000) ----------------------------------------------------------- EXPLORATION AND PRODUCTION -- 2.9% 65,000 Anadarko Petroleum Corporation........ $ 4,081 64,000 Devon Energy Corporation(a)........... 3,725 100,000 Unocal Corporation.................... 3,457 -------- 11,263 -------- FOOD PRODUCTS -- 0.8% 164,000 ConAgra Foods, Inc. .................. 2,991 -------- HEAVY MACHINERY -- 1.0% 66,000 Illinois Tool Works Inc. ............. 3,751 -------- HOUSEHOLD PRODUCTS -- 1.9% 217,000 Fortune Brands, Inc. ................. 7,465 -------- INSURANCE -- 4.2% 81,000 American International Group, Inc. ... 6,521 34,000 CIGNA Corporation..................... 3,650 47,000 Jefferson-Pilot Corporation........... 3,191 67,000 The St. Paul Companies, Inc. ......... 2,951 -------- 16,313 -------- INTEGRATED OIL -- 6.0% 110,000 Chevron Corporation................... 9,658 167,000 Exxon Mobil Corporation............... 13,527 -------- 23,185 -------- INVESTMENT SERVICES -- 0.7% 64,000 Alliance Capital Management Holding LP.................................. 2,637 -------- MEDICAL DEVICES AND SUPPLIES -- 1.4% 62,000 Johnson & Johnson..................... 5,423 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.7% 335,000 Cisco Systems, Inc.++................. 5,297 104,000 Nortel Networks Corporation........... 1,461 -------- 6,758 -------- OILFIELD SERVICES -- 1.0% 69,000 Schlumberger Ltd. .................... 3,975 -------- PHARMACEUTICALS -- 5.6% 106,000 Merck & Company, Inc. ................ 8,045 190,000 Pfizer Inc. .......................... 7,781 165,000 Schering-Plough Corporation........... 6,027 -------- 21,853 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.6% 100,000 CSX Corporation....................... 3,370 53,000 United Parcel Service, Inc., Class B................................... 3,016 -------- 6,386 --------
SEE NOTES TO FINANCIAL STATEMENTS. 103 108 NATIONS FUNDS Nations Equity Income Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 4.5% 74,000 Avalonbay Communities, Inc. .......... $ 3,390 83,000 Boston Properties, Inc. .............. 3,191 114,000 Equity Office Properties Trust........ 3,192 63,000 Equity Residential Properties Trust... 3,278 168,000 Simon Property Group, Inc. ........... 4,301 -------- 17,352 -------- SEMICONDUCTORS -- 2.6% 132,000 Analog Devices, Inc.++................ 4,784 126,000 Linear Technology Corporation......... 5,174 -------- 9,958 -------- SOFTWARE -- 5.1% 20,000 Affiliated Computer Services, Inc., Class A++........................... 1,298 253,000 Microsoft Corporation++............... 13,836 300,000 Oracle Corporation++.................. 4,494 -------- 19,628 -------- TELECOMMUNICATIONS SERVICES -- 3.9% 160,000 Sprint Corporation (FON Group)........ 3,518 234,000 Verizon Communications Inc. .......... 11,537 -------- 15,055 -------- TOBACCO -- 3.4% 280,000 Philip Morris Companies Inc. ......... 13,286 -------- UTILITIES -- MISCELLANEOUS -- 1.0% 116,000 American Water Works Company, Inc. ... 3,741 -------- TOTAL COMMON STOCKS (Cost $313,868)....................... 331,278 -------- PRINCIPAL AMOUNT (000) --------- CONVERTIBLE BONDS AND NOTES -- 3.6% APPAREL AND TEXTILES -- 0.3% $ 1,215 Reebok International Ltd., 4.250% 03/01/21(+)(a)...................... 1,195 -------- BEVERAGES -- 0.7% 3,000 Convertibles Ltd., 2.000% 10/15/07(+)......................... 2,869 -------- BROADCASTING AND CABLE -- 1.1% 4,200 AT&T Corporation -- Liberty Media Group, 3.250% 03/15/31(+)........... 4,069 -------- OILFIELD SERVICES -- 0.6% 2,750 Loews Corporation, 3.125% 09/15/07.... 2,506 --------
PRINCIPAL AMOUNT VALUE (000) (000) ------------------------------------------------------------- PUBLISHING AND ADVERTISING -- 0.6% $ 2,890 Interpublic Group of Companies, Inc., 1.870% 06/01/06(a).................. $ 2,460 -------- SEMICONDUCTORS -- 0.3% 950 Texas Instruments, 4.250% 02/15/07.... 1,050 -------- TOTAL CONVERTIBLE BONDS AND NOTES (Cost $14,634)........................ 14,149 -------- SHARES --------- CONVERTIBLE PREFERRED STOCKS -- 3.9% ELECTRIC POWER -- NON NUCLEAR -- 3.0% 195,000 Duke Energy Corporation............... 5,314 184,500 NRG Energy, Inc.(a)................... 6,088 -------- 11,402 -------- NATURAL GAS DISTRIBUTION -- 0.9% 80,000 Coastal Corporation................... 3,584 -------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $13,703)........................ 14,986 -------- SHARES (000) --------- INVESTMENT COMPANIES -- 10.4% 21,965 Nations Cash Reserves#................ 21,965 1,152 Nations Convertible Securities Fund##.............................. 18,495 -------- TOTAL INVESTMENT COMPANIES (Cost $42,078)........................ 40,460 -------- TOTAL INVESTMENTS (Cost $384,283*)............... 103.3% 400,873 -------- OTHER ASSETS AND LIABILITIES (NET)........................ (3.3)% Receivable for investment securities sold................................ $ 1,030 Receivable for Fund shares sold....... 4,637 Dividends receivable.................. 643 Interest receivable................... 167 Collateral on securities loaned....... (8,146) Payable for Fund shares redeemed...... (1,758) Investment advisory fee payable....... (185) Administration fee payable............ (78) Shareholder servicing and distribution fees payable........................ (45) Payable for investment securities purchased........................... (9,086) Accrued Directors' fees and expenses............................ (24) Accrued expenses and other liabilities......................... (84) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (12,929) -------- NET ASSETS..................... 100.0% $387,944 ========
SEE NOTES TO FINANCIAL STATEMENTS. 104 109 NATIONS FUNDS Nations Equity Income Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE (000) ------------------------------------------------------------- NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold.................... $ (5,852) Net unrealized appreciation of investments......................... 16,590 Paid-in capital....................... 377,206 -------- NET ASSETS............................ $387,944 ======== PRIMARY A SHARES: Net asset value, offering and redemption price per share ($321,026,086 / 36,725,644 shares outstanding)........................ $8.74 ===== INVESTOR A SHARES: Net asset value and redemption price per share ($21,474,909 / 2,463,503 shares outstanding)................. $8.72 ===== Maximum sales charge.................. 5.75% Maximum offering price per share...... $9.25 INVESTOR B SHARES: Net asset value and offering price per share+ ($42,723,371 / 4,909,082 shares outstanding)................. $8.70 ===== INVESTOR C SHARES: Net asset value and offering price per share+ ($2,719,158 / 308,291 shares outstanding)........................ $8.82 =====
--------------- * Federal Income Tax Information: Net unrealized appreciation of $14,737 on investment securities was comprised of gross appreciation of $52,149 and gross depreciation of $37,412 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $386,136. (+) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $7,440 and $8,061, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $8,146. ## Mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc.
SEE NOTES TO FINANCIAL STATEMENTS. 105 110 NATIONS FUNDS Nations Value Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ COMMON STOCKS -- 98.7% AEROSPACE AND DEFENSE -- 5.3% 451,000 B.F. Goodrich Company.............. $ 17,305 575,000 General Dynamics Corporation....... 36,075 ---------- 53,380 ---------- AUTOMOTIVE -- 0.9% 138,000 Johnson Controls, Inc. ............ 8,619 ---------- BEVERAGES -- 0.6% 104,200 Brown-Forman Corporation, Class B................................ 6,455 ---------- BROADCASTING AND CABLE -- 2.7% 444,000 Comcast Corporation, Class A++..... 18,620 197,000 Viacom Inc., Class B++............. 8,662 ---------- 27,282 ---------- CHEMICALS -- BASIC -- 1.6% 409,000 E.I. duPont de Nemours and Company.......................... 16,646 ---------- COMMERCIAL BANKING -- 8.5% 392,000 Citigroup Inc. .................... 17,632 403,000 J.P. Morgan Chase & Company........ 18,095 727,000 SouthTrust Corporation............. 33,261 311,000 Washington Mutual, Inc. ........... 17,027 ---------- 86,015 ---------- COMPUTER SERVICES -- 2.5% 133,000 Electronic Data Systems Corporation...................... 7,429 304,000 First Data Corporation............. 18,152 ---------- 25,581 ---------- COMPUTERS AND OFFICE EQUIPMENT -- 2.9% 210,000 Eastman Kodak Company(a)........... 8,377 200,000 Hewlett-Packard Company............ 6,254 152,000 International Business Machines Corporation...................... 14,619 ---------- 29,250 ---------- CONGLOMERATES -- 1.8% 251,000 United Technologies Corporation.... 18,398 ---------- CONSUMER CREDIT AND MORTGAGES -- 7.3% 456,000 American Express Company........... 18,833 227,000 Fannie Mae......................... 18,069 311,000 Freddie Mac........................ 20,163 514,000 MBNA Corporation................... 17,013 ---------- 74,078 ---------- DEPARTMENT AND DISCOUNT STORES -- 1.7% 239,000 May Department Stores Company...... 8,480 242,000 Sears, Roebuck and Company(a)...... 8,535 ---------- 17,015 ---------- ELECTRIC POWER -- NUCLEAR -- 7.1% 563,000 Dominion Resources, Inc. .......... 36,296 586,000 FPL Group, Inc. ................... 35,922 ---------- 72,218 ----------
VALUE SHARES (000) ------------------------------------------------------------ ELECTRICAL EQUIPMENT -- 1.8% 443,000 Honeywell International Inc. ...... $ 18,074 ---------- EXPLORATION AND PRODUCTION -- 1.8% 293,000 Anadarko Petroleum Corporation..... 18,395 ---------- FOOD AND DRUG STORES -- 1.0% 320,000 Albertson's, Inc. ................. 10,182 ---------- HEALTH SERVICES -- 2.1% 475,000 Tenet Healthcare Corporation++..... 20,900 ---------- HOUSEHOLD PRODUCTS -- 3.4% 498,000 Fortune Brands, Inc. .............. 17,131 279,000 Procter & Gamble Company........... 17,466 ---------- 34,597 ---------- INSURANCE -- 4.2% 160,000 Ambac Financial Group, Inc. ....... 10,149 374,000 American General Corporation....... 14,306 168,000 CIGNA Corporation.................. 18,036 ---------- 42,491 ---------- INTEGRATED OIL -- 5.9% 350,000 BP Amoco plc, ADR.................. 17,367 97,000 Chevron Corporation................ 8,517 218,000 Exxon Mobil Corporation............ 17,658 285,000 Phillips Petroleum Company(a)...... 15,689 ---------- 59,231 ---------- INVESTMENT SERVICES -- 5.0% 187,000 Goldman Sachs Group, Inc. ......... 15,914 311,000 Merrill Lynch & Company, Inc. ..... 17,229 283,000 Northern Trust Corporation......... 17,688 ---------- 50,831 ---------- MEDICAL DEVICES AND SUPPLIES --1.7% 190,000 Guidant Corporation++(a)........... 8,548 98,000 Johnson & Johnson.................. 8,572 ---------- 17,120 ---------- METALS AND MINING -- 1.8% 500,000 Alcoa Inc. ........................ 17,975 ---------- NATURAL GAS DISTRIBUTION -- 2.6% 262,000 El Paso Corporation................ 17,108 208,000 Williams Companies, Inc. .......... 8,913 ---------- 26,021 ---------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.6% 300,000 Corning Inc. ...................... 6,207 ---------- PHARMACEUTICALS -- 1.8% 238,000 Merck & Company, Inc. ............. 18,064 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 106 111 NATIONS FUNDS Nations Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ RAILROADS, TRUCKING AND SHIPPING -- 1.6% 391,000 FedEx Corporation++(a)............. $ 16,297 ---------- TELECOMMUNICATIONS SERVICES --11.4% 164,000 ALLTEL Corporation................. 8,603 537,000 Qwest Communications International Inc.++........................... 18,822 401,000 SBC Communications Inc. ........... 17,897 869,000 Sprint Corporation (FON Group)(a)........................ 19,109 655,000 Verizon Communications Inc. ....... 32,293 995,000 WorldCom, Inc.++................... 18,594 ---------- 115,318 ---------- TOBACCO -- 7.2% 755,000 Philip Morris Companies Inc. ...... 35,825 1,227,000 UST Inc.(a)........................ 36,871 ---------- 72,696 ---------- UTILITIES -- MISCELLANEOUS -- 1.9% 591,000 American Water Works Company, Inc. ............................ 19,060 ---------- TOTAL COMMON STOCKS (Cost: $908,633)................... 998,396 ---------- SHARES (000) --------- INVESTMENT COMPANIES -- 5.3% (Cost $53,919) 53,919 Nations Cash Reserves#............. 53,919 ---------- TOTAL INVESTMENTS (Cost $962,552*)............ 104.0% 1,052,315 ---------- OTHER ASSETS AND LIABILITIES (NET)......... (4.0)% Receivable for Fund shares sold.... $ 4,555 Dividends receivable............... 1,203 Interest receivable................ 143 Collateral on securities loaned.... (41,497) Payable for Fund shares redeemed... (2,279) Investment advisory fee payable.... (568) Administration fee payable......... (201) Shareholder servicing and distribution fees payable........ (103) Due to custodian................... (42) Payable for investment securities purchased........................ (1,336) Accrued Trustees' fees and expenses......................... (93) Accrued expenses and other liabilities...................... (147) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................ (40,365) ---------- NET ASSETS.................. 100.0% $1,011,950 ==========
VALUE (000) ------------------------------------------------------------ NET ASSETS CONSIST OF: Accumulated net realized gain on investments sold and futures contracts........................ $ 84,425 Net unrealized appreciation of investments...................... 89,763 Paid-in capital.................... 837,762 ---------- NET ASSETS......................... $1,011,950 ========== PRIMARY A SHARES: Net asset value, offering and redemption price per share ($844,432,503 / 68,174,134 shares outstanding)..................... $12.39 ===== INVESTOR A SHARES: Net asset value and redemption price per share ($65,974,567 / 5,330,591 shares outstanding)..................... $12.38 ===== Maximum sales charge............... 5.75% Maximum offering price per share... $13.14 INVESTOR B SHARES: Net asset value and offering price per share+ ($93,063,877 / 7,669,546 shares outstanding)..................... $12.13 ===== INVESTOR C SHARES: Net asset value and offering price per share+ ($8,479,371 / 699,248 shares outstanding).............. $12.13 =====
--------------- * Federal Income Tax Information: Net unrealized appreciation of $88,996 on investment securities was comprised of gross appreciation of $111,443 and gross depreciation of $22,447 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $963,319. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $43,274 and $40,099, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $41,497.
ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 107 112 NATIONS FUNDS Nations Marsico Growth & Income Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE (000) ------------------------------------------------------------ INVESTMENT COMPANIES -- 100.1% Investment in Nations Master Investment Trust, Marsico Growth & Income Master Portfolio*........... $517,282 -------- TOTAL INVESTMENTS............. 100.1% 517,282 -------- OTHER ASSETS AND LIABLITIES (NET)....................... (0.1)% Receivable for Fund shares sold...... $ 761 Payable for Fund shares redeemed..... (1,025) Administration fee payable........... (58) Shareholder servicing and distribution fees payable.......... (272) Accrued Trustees' fees and expenses........................... (27) Accrued expenses and other liabilities........................ (118) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET).............. (739) -------- NET ASSETS.................... 100.0% $516,543 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold................... $(56,004) Net unrealized depreciation of investments........................ (2,963) Paid-in capital...................... 575,510 -------- NET ASSETS........................... $516,543 ======== PRIMARY A SHARES: Net asset value, offering and redemption price per share ($80,525,929 / 5,401,044 shares outstanding)....................... $14.91 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($164,030,935 / 11,028,927 shares outstanding)....................... $14.87 ====== Maximum sales charge................. 5.75% Maximum offering price per share..... $15.78 INVESTOR B SHARES: Net asset value and offering price per share+ ($239,620,873 / 16,468,256 shares outstanding)....................... $14.55 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($32,365,213 / 2,221,584 shares outstanding)................ $14.57 ======
--------------- * The financial statements of the Marsico Growth & Income Master Portfolio, including its portfolio of investments, are included elsewhere within this report and should be read in conjunction with the Marsico Growth & Income Fund's financial statements. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 108 113 NATIONS FUNDS Nations Blue Chip Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE (000) ----------------------------------------------------------- INVESTMENT COMPANIES -- 100.1% Investment in Nations Master Investment Trust, Blue Chip Master Portfolio*.......................... $746,122 -------- TOTAL INVESTMENTS.............. 100.1% 746,122 -------- OTHER ASSETS AND LIABLITIES (NET)........................ (0.1)% Receivable for Fund shares sold....... $ 1,359 Payable for Fund shares redeemed...... (1,232) Administration fee payable............ (118) Shareholder servicing and distribution fees payable........................ (215) Accrued Trustees' fees and expenses... (22) Accrued expenses and other liabilities......................... (157) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............... (385) -------- NET ASSETS..................... 100.0% $745,737 ======== NET ASSETS CONSIST OF: Net investment loss................... $ (4) Accumulated net realized loss on investments sold.................... (21,989) Net unrealized appreciation of investments......................... 70,423 Paid-in capital....................... 697,307 -------- NET ASSETS............................ $745,737 ======== PRIMARY A SHARES: Net asset value, offering and redemption price per share ($49,457,702 / 1,858,580 shares outstanding)........................ $26.61 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($603,622,170 / 22,800,177 shares outstanding)................. $26.47 ====== Maximum sales charge.................. 5.75% Maximum offering price per share...... $28.08 INVESTOR B SHARES: Net asset value and offering price per share+ ($75,622,974 / 2,914,195 shares outstanding)................. $25.95 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($17,034,182 / 658,439 shares outstanding)........................ $25.87 ======
--------------- * The financial statements of the Blue Chip Master Portfolio, including its portfolio of investments, are included elsewhere within this report and should be read in conjunction with the Blue Chip Fund's financial statements. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 109 114 NATIONS FUNDS Nations Strategic Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ COMMON STOCKS -- 96.9% AEROSPACE AND DEFENSE -- 2.4% 156,200 General Dynamics Corporation....... $ 9,800 333,875 Lockheed Martin Corporation........ 11,903 197,850 TRW Inc. .......................... 6,727 ---------- 28,430 ---------- AUTOMOTIVE -- 2.7% 200,000 General Motors Corporation......... 10,370 359,125 Johnson Controls, Inc. ............ 22,431 ---------- 32,801 ---------- BEVERAGES -- 2.7% 298,900 Anheuser-Busch Companies, Inc. .... 13,729 216,550 Coca-Cola Company.................. 9,779 191,700 PepsiCo, Inc. ..................... 8,425 ---------- 31,933 ---------- BROADCASTING AND CABLE -- 6.0% 516,790 AOL Time Warner Inc.++............. 20,749 234,875 Clear Channel Communications, Inc.++........................... 12,789 628,650 Comcast Corporation, Class A++..... 26,364 265,950 Viacom Inc., Class B++............. 11,694 ---------- 71,596 ---------- COMMERCIAL BANKING -- 5.3% 490,025 Bank of New York Company, Inc. .... 24,129 641,796 Citigroup Inc. .................... 28,868 200,000 Washington Mutual, Inc. ........... 10,950 ---------- 63,947 ---------- COMPUTER SERVICES -- 2.9% 410,625 Automatic Data Processing, Inc. ... 22,330 302,625 Concord EFS, Inc.++................ 12,237 ---------- 34,567 ---------- COMPUTERS AND OFFICE EQUIPMENT -- 5.8% 416,000 Dell Computer Corporation++........ 10,686 225,700 EMC Corporation++.................. 6,636 400,200 International Business Machines Corporation...................... 38,490 329,075 Sanmina Corporation++.............. 6,438 463,050 Sun Microsystems, Inc.++........... 7,117 ---------- 69,367 ---------- CONGLOMERATES -- 1.9% 309,075 United Technologies Corporation.... 22,655 ---------- CONSUMER CREDIT AND MORTGAGES -- 3.5% 270,540 Fannie Mae......................... 21,535 200,575 Household International, Inc. ..... 11,882 246,925 MBNA Corporation................... 8,173 ---------- 41,590 ---------- DEPARTMENT AND DISCOUNT STORES -- 4.9% 299,575 Costco Wholesale Corporation++..... 11,758 481,575 Target Corporation................. 17,375 600,625 Wal-Mart Stores, Inc. ............. 30,332 ---------- 59,465 ----------
VALUE SHARES (000) ------------------------------------------------------------ DIVERSIFIED MANUFACTURING -- 5.4% 1,001,325 General Electric Company........... $ 41,915 535,250 Tyco International Ltd. ........... 23,139 ---------- 65,054 ---------- ELECTRIC POWER -- NON NUCLEAR -- 1.0% 249,175 AES Corporation++.................. 12,449 ---------- ELECTRIC POWER -- NUCLEAR -- 1.7% 251,350 Duke Energy Corporation............ 10,743 151,900 FPL Group, Inc. ................... 9,311 ---------- 20,054 ---------- ELECTRICAL EQUIPMENT -- 0.9% 265,200 Honeywell International Inc. ...... 10,820 ---------- FOOD AND DRUG STORES -- 1.9% 229,550 Safeway Inc.++..................... 12,660 248,900 Walgreen Company................... 10,155 ---------- 22,815 ---------- HOUSEHOLD PRODUCTS -- 0.6% 118,375 Procter & Gamble Company........... 7,410 ---------- HOUSING AND FURNISHING -- 0.8% 219,475 Centex Corporation................. 9,141 ---------- INSURANCE -- 2.0% 305,612 American International Group, Inc. ............................ 24,602 ---------- INTEGRATED OIL -- 3.3% 126,600 BP Amoco plc, ADR.................. 6,282 114,550 Chevron Corporation................ 10,057 287,800 Exxon Mobil Corporation............ 23,312 ---------- 39,651 ---------- INVESTMENT SERVICES -- 3.2% 324,475 Merrill Lynch & Company, Inc. ..... 17,976 218,650 Morgan Stanley Dean Witter & Company.......................... 11,698 141,525 Northern Trust Corporation......... 8,845 ---------- 38,519 ---------- LODGING AND RECREATION -- 0.7% 259,850 Starwood Hotels & Resorts Worldwide Inc.(a).......................... 8,837 ---------- MEDICAL DEVICES AND SUPPLIES --4.8% 212,650 Abbott Laboratories................ 10,035 148,275 Baxter International Inc. ......... 13,959 287,025 Guidant Corporation++.............. 12,913 156,850 Johnson & Johnson.................. 13,720 147,160 Medtronic, Inc. ................... 6,731 ---------- 57,358 ---------- METALS AND MINING -- 0.5% 165,000 Nucor Corporation.................. 6,612 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 110 115 NATIONS FUNDS Nations Strategic Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ NATURAL GAS DISTRIBUTION -- 0.9% 173,722 El Paso Corporation................ $ 11,344 ---------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.1% 903,775 Cisco Systems, Inc.++.............. 14,291 591,650 Motorola, Inc. .................... 8,437 532,950 Nortel Networks Corporation........ 7,488 128,925 QUALCOMM Inc.++.................... 7,300 ---------- 37,516 ---------- OILFIELD SERVICES -- 0.8% 161,400 ENSCO International Inc. .......... 5,649 72,050 Schlumberger Ltd. ................. 4,151 ---------- 9,800 ---------- PHARMACEUTICALS -- 7.8% 294,125 Amgen Inc.++....................... 17,703 166,375 Bristol-Myers Squibb Company....... 9,883 146,675 Eli Lilly and Company.............. 11,244 213,400 Merck & Company, Inc. ............. 16,197 829,325 Pfizer Inc. ....................... 33,962 168,200 Schering-Plough Corporation........ 6,144 ---------- 95,133 ---------- PUBLISHING AND ADVERTISING -- 1.2% 242,750 McGraw-Hill Companies, Inc. ....... 14,480 ---------- RAILROADS, TRUCKING AND SHIPPING -- 1.1% 223,600 Burlington Northern Santa Fe Corporation...................... 6,793 381,150 Norfolk Southern Corporation(a).... 6,380 ---------- 13,173 ---------- SEMICONDUCTORS -- 3.8% 943,200 Intel Corporation.................. 24,818 175,125 Linear Technology Corporation...... 7,191 262,225 Texas Instruments Inc. ............ 8,124 161,550 Xilinx, Inc.++(a).................. 5,674 ---------- 45,807 ---------- SOFTWARE -- 5.9% 1,062,800 Microsoft Corporation++............ 58,122 414,575 Oracle Corporation++............... 6,210 134,625 VERITAS Software Corporation++(a)................. 6,225 ---------- 70,557 ---------- SPECIALTY STORES -- 1.1% 295,150 Home Depot, Inc. .................. 12,721 ----------
VALUE SHARES (000) ------------------------------------------------------------ TELECOMMUNICATIONS SERVICES -- 4.6% 322,025 BellSouth Corporation.............. $ 13,178 252,000 SBC Communications Inc. ........... 11,247 406,550 Sprint Corporation (FON Group)..... 8,940 182,950 Verizon Communications Inc. ....... 9,019 700,975 WorldCom, Inc.++................... 13,099 ---------- 55,483 ---------- TOBACCO -- 1.7% 420,375 Philip Morris Companies Inc. ...... 19,947 ---------- TOTAL COMMON STOCKS (Cost: $1,134,314)................. 1,165,634 ----------
SHARES (000) ------ INVESTMENT COMPANIES -- 3.7% (Cost: $44,372) 44,372 Nations Cash Reserves#................ $ 44,372 ---------- TOTAL INVESTMENTS (Cost $1,178,686*)............ 100.6% 1,210,006 ---------- OTHER ASSETS AND LIABILITIES (NET)....................... (0.6)% Cash.................................. $ 1 Receivable for Fund shares sold....... 20,948 Dividends receivable.................. 896 Interest receivable................... 167 Collateral on securities loaned....... (21,763) Payable for Fund shares redeemed...... (6,270) Investment advisory fee payable....... (674) Administration fee payable............ (239) Shareholder servicing and distribution fees payable........................ (11) Accrued Trustees' fees and expenses... (21) Accrued expenses and other liabilities......................... (222) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (7,188) ---------- NET ASSETS.................... 100.0% $1,202,818 ========== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold.................... $ (84,919) Net unrealized appreciation of investments......................... 31,320 Paid-in capital....................... 1,256,417 ---------- NET ASSETS............................ $1,202,818 ==========
SEE NOTES TO FINANCIAL STATEMENTS. 111 116 NATIONS FUNDS Nations Strategic Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE ------------------------------------------------------------ PRIMARY A SHARES: Net asset value, offering and redemption price per share ($1,182,028,492 / 94,801,909 shares outstanding)........................ $12.47 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($11,895,196 / 955,926 shares outstanding)................. $12.44 ====== Maximum sales charge.................. 5.75% Maximum offering price per share...... $13.20 INVESTOR B SHARES: Net asset value and offering price per share+ ($6,757,985 / 549,759 shares outstanding)........................ $12.29 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($2,136,593 / 173,674 shares outstanding)........................ $12.30 ======
--------------- * Federal Income Tax Information: Net unrealized appreciation of $26,216 on investment securities was comprised of gross appreciation of $125,464 and gross depreciation of $99,248 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $1,183,790. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $28,041 and $18,402, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $21,763. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 112 117 NATIONS FUNDS Nations Capital Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- COMMON STOCKS -- 95.5% AEROSPACE AND DEFENSE -- 0.5% 87,200 Lockheed Martin Corporation........... $ 3,109 -------- BEVERAGES -- 3.4% 197,600 Anheuser-Busch Companies, Inc. ....... 9,076 132,400 Coca-Cola Company..................... 5,979 125,600 PepsiCo, Inc. ........................ 5,520 -------- 20,575 -------- BROADCASTING AND CABLE -- 7.9% 442,902 AOL Time Warner Inc.++................ 17,782 151,525 Clear Channel Communications, Inc.++.............................. 8,251 344,175 Comcast Corporation, Class A++........ 14,434 175,550 Viacom Inc., Class B++................ 7,719 -------- 48,186 -------- COMMERCIAL BANKING -- 2.8% 151,300 Bank of New York Company, Inc. ....... 7,450 212,833 Citigroup Inc. ....................... 9,573 -------- 17,023 -------- COMPUTER SERVICES -- 4.4% 260,875 Automatic Data Processing, Inc. ...... 14,186 310,375 Concord EFS, Inc.++................... 12,551 -------- 26,737 -------- COMPUTERS AND OFFICE EQUIPMENT -- 7.2% 292,100 Dell Computer Corporation++........... 7,503 242,330 EMC Corporation++..................... 7,125 222,145 International Business Machines Corporation......................... 21,365 238,500 Sanmina Corporation++................. 4,666 247,500 Sun Microsystems, Inc.++.............. 3,804 -------- 44,463 -------- CONGLOMERATES -- 1.9% 161,665 United Technologies Corporation....... 11,850 -------- CONSUMER CREDIT AND MORTGAGES -- 3.3% 118,515 Fannie Mae............................ 9,434 100,000 Household International, Inc. ........ 5,924 155,090 MBNA Corporation...................... 5,133 -------- 20,491 -------- DEPARTMENT AND DISCOUNT STORES -- 6.8% 142,400 Costco Wholesale Corporation++........ 5,589 326,410 Target Corporation.................... 11,777 485,150 Wal-Mart Stores, Inc. ................ 24,500 -------- 41,866 -------- DIVERSIFIED MANUFACTURING -- 5.6% 556,570 General Electric Company.............. 23,298 257,960 Tyco International Ltd.(a)............ 11,152 -------- 34,450 -------- ELECTRIC POWER -- NON NUCLEAR -- 1.3% 164,000 AES Corporation++..................... 8,193 --------
VALUE SHARES (000) ----------------------------------------------------------- ELECTRICAL EQUIPMENT -- 1.1% 159,425 Honeywell International Inc. ......... $ 6,505 -------- FOOD AND DRUG STORES -- 0.9% 101,900 Safeway Inc.++........................ 5,620 -------- HOUSING AND FURNISHING -- 1.0% 150,000 Centex Corporation.................... 6,248 -------- INSURANCE -- 1.0% 74,343 American International Group, Inc. ... 5,985 -------- INTEGRATED OIL -- 1.4% 109,700 Exxon Mobil Corporation............... 8,886 -------- INVESTMENT SERVICES -- 3.0% 218,800 Merrill Lynch & Company, Inc. ........ 12,122 121,925 Morgan Stanley Dean Witter & Company............................. 6,523 -------- 18,645 -------- LODGING AND RECREATION -- 0.8% 135,725 Starwood Hotels & Resorts Worldwide Inc. ............................... 4,616 -------- MEDICAL DEVICES AND SUPPLIES -- 5.9% 116,875 Baxter International Inc. ............ 11,002 172,730 Guidant Corporation++................. 7,771 104,375 Johnson & Johnson..................... 9,130 187,775 Medtronic, Inc. ...................... 8,589 -------- 36,492 -------- NATURAL GAS DISTRIBUTION -- 0.5% 45,430 El Paso Corporation................... 2,967 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.6% 801,995 Cisco Systems, Inc.++................. 12,681 392,825 Motorola, Inc. ....................... 5,602 277,860 Nortel Networks Corporation........... 3,904 -------- 22,187 -------- OILFIELD SERVICES -- 1.6% 148,405 Halliburton Company................... 5,454 73,785 Schlumberger Ltd. .................... 4,251 -------- 9,705 -------- PHARMACEUTICALS -- 10.4% 213,475 Amgen Inc.++.......................... 12,849 128,675 Bristol-Myers Squibb Company.......... 7,643 42,775 Eli Lilly and Company................. 3,279 156,290 Merck & Company, Inc. ................ 11,862 533,941 Pfizer Inc. .......................... 21,865 150,765 Schering-Plough Corporation........... 5,507 -------- 63,005 --------
SEE NOTES TO FINANCIAL STATEMENTS. 113 118 NATIONS FUNDS Nations Capital Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
VALUE SHARES (000) ----------------------------------------------------------- PUBLISHING AND ADVERTISING -- 0.8% 80,450 McGraw-Hill Companies, Inc. .......... $ 4,799 -------- SEMICONDUCTORS -- 4.7% 776,320 Intel Corporation..................... 20,427 111,500 Texas Instruments Inc. ............... 3,454 137,275 Xilinx, Inc.++(a)..................... 4,822 -------- 28,703 -------- SOFTWARE -- 7.5% 587,130 Microsoft Corporation++............... 32,109 484,200 Oracle Corporation++.................. 7,253 142,925 VERITAS Software Corporation++(a)..... 6,609 -------- 45,971 -------- SPECIALTY STORES -- 1.6% 234,675 Home Depot, Inc. ..................... 10,114 -------- TELECOMMUNICATIONS SERVICES -- 4.6% 178,300 BellSouth Corporation................. 7,296 158,350 SBC Communications Inc. .............. 7,067 285,975 Sprint Corporation (FON Group)........ 6,289 401,425 WorldCom, Inc.++...................... 7,501 -------- 28,153 -------- TOTAL COMMON STOCKS (Cost: $503,051)...................... 585,544 -------- SHARES (000) ------- INVESTMENT COMPANIES -- 6.3% (Cost $38,727) 38,727 Nations Cash Reserves#................ 38,727 -------- TOTAL INVESTMENTS (Cost $541,778*)............... 101.8% 624,271 -------- OTHER ASSETS AND LIABILITIES (NET)........................ (1.8)% Receivable for investment securities sold................................ $ 4,487 Receivable for Fund shares sold....... 12,224 Dividends receivable.................. 341 Interest receivable................... 111 Collateral on securities loaned....... (19,255) Payable for Fund shares redeemed...... (5,309) Investment advisory fee payable....... (353) Administration fee payable............ (125) Shareholder servicing and distribution fees payable........................ (52) Payable for investment securities purchased........................... (2,820) Accrued Trustees' fees and expenses... (61) Accrued expenses and other liabilities......................... (113) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (10,925) -------- NET ASSETS..................... 100.0% $613,346 ========
VALUE (000) ----------------------------------------------------------- ------- NET ASSETS CONSIST OF: Accumulated net realized gain on investments sold.................... $ 7,109 Net unrealized appreciation of investments......................... 82,493 Paid-in capital....................... 523,744 -------- NET ASSETS............................ $613,346 ========
PRIMARY A SHARES: Net asset value, offering and redemption price per share ($531,657,070 / 64,039,120 shares outstanding)........................... $8.30 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($32,519,300 / 3,984,043 shares outstanding)........................... $8.16 ====== Maximum sales charge..................... 5.75% Maximum offering price per share......... $8.66 INVESTOR B SHARES: Net asset value and offering price per share+ ($45,831,927 / 6,100,631 shares outstanding)........................... $7.51 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($3,337,875 / 439,543 shares outstanding)........................... $7.59 ======
--------------- * Federal Income Tax Information: Net unrealized appreciation of $70,976 on investment securities was comprised of gross appreciation of $117,568 and gross depreciation of $46,592 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $553,295. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $21,814 and $19,049, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $19,255. SEE NOTES TO FINANCIAL STATEMENTS. 114 119 NATIONS FUNDS Nations Aggressive Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ COMMON STOCKS -- 96.8% AEROSPACE AND DEFENSE -- 1.9% 57,700 B.F. Goodrich Company................ $ 2,214 11,475 General Dynamics Corporation......... 720 -------- 2,934 -------- APPAREL AND TEXTILES -- 1.6% 65,900 Jones Apparel Group, Inc.++.......... 2,491 -------- AUTOMOTIVE -- 0.9% 61,375 Gentex Corporation++(a).............. 1,419 -------- BEVERAGES -- 1.1% 37,300 Anheuser-Busch Companies, Inc........ 1,713 -------- BROADCASTING AND CABLE -- 4.3% 122,500 AOL Time Warner Inc.++............... 4,918 37,175 Viacom Inc., Class B++............... 1,635 -------- 6,553 -------- CHEMICALS -- BASIC -- 0.5% 14,500 Avery Dennison Corporation........... 754 -------- COMMERCIAL BANKING -- 1.0% 35,258 Citigroup Inc. ...................... 1,586 -------- COMPUTER SERVICES -- 5.6% 35,550 Concord EFS, Inc.++.................. 1,438 70,225 Convergys Corporation++.............. 2,533 30,475 First Data Corporation............... 1,820 60,375 I2 Technologies Inc.++............... 875 76,700 Jack Henry & Associates, Inc. ....... 1,817 -------- 8,483 -------- COMPUTERS AND OFFICE EQUIPMENT -- 5.5% 82,775 Compaq Computer Corporation.......... 1,507 88,725 Dell Computer Corporation++.......... 2,279 82,225 EMC Corporation++.................... 2,418 3,081 McDATA Corporation, Class A++........ 58 113,275 Palm, Inc.++......................... 952 56,200 Sanmina Corporation++................ 1,099 -------- 8,313 -------- CONSUMER CREDIT AND MORTGAGES -- 1.2% 55,000 MBNA Corporation..................... 1,821 -------- CONSUMER SERVICES -- 0.8% 31,725 Estee Lauder Companies Inc., Class A(a)............................... 1,155 -------- DEPARTMENT AND DISCOUNT STORES -- 3.7% 43,900 Target Corporation................... 1,584 80,850 Wal-Mart Stores, Inc. ............... 4,083 -------- 5,667 --------
VALUE SHARES (000) ------------------------------------------------------------ DIVERSIFIED MANUFACTURING -- 7.1% 39,125 Danaher Corporation(a)............... $ 2,135 147,075 General Electric Company............. 6,156 55,075 Tyco International Ltd.(a)........... 2,381 -------- 10,672 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.5% 12,975 Calpine Corporation++(a)............. 715 -------- EXPLORATION AND PRODUCTION -- 1.9% 23,925 Anadarko Petroleum Corporation....... 1,502 24,550 Devon Energy Corporation............. 1,429 -------- 2,931 -------- FOOD AND DRUG STORES -- 1.1% 30,025 Safeway Inc.++....................... 1,656 -------- FOOD PRODUCTS -- 1.4% 71,700 Hain Celestial Group, Inc.++(a)...... 2,079 -------- INSURANCE -- 2.1% 50,675 Ambac Financial Group, Inc. ......... 3,214 -------- INVESTMENT SERVICES -- 0.4% 40,975 Charles Schwab Corporation........... 632 -------- LODGING AND RECREATION -- 1.3% 111,325 Mattel, Inc. ........................ 1,975 -------- MEDICAL DEVICES AND SUPPLIES -- 3.7% 24,900 Baxter International Inc. ........... 2,344 17,200 Cardinal Health, Inc. ............... 1,664 36,175 Guidant Corporation++................ 1,628 -------- 5,636 -------- NATURAL GAS DISTRIBUTION -- 3.0% 44,757 El Paso Corporation.................. 2,923 27,950 Enron Corporation.................... 1,624 -------- 4,547 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 5.7% 87,275 Cisco Systems, Inc.++................ 1,380 26,875 Comverse Technology, Inc.++(a)....... 1,583 21,025 L-3 Communications Holdings, Inc.++(a).......................... 1,660 99,125 Motorola, Inc. ...................... 1,414 44,125 Openwave Systems Inc.++.............. 875 29,200 QUALCOMM Inc.++...................... 1,653 -------- 8,565 -------- OILFIELD SERVICES -- 1.0% 20,525 Smith International, Inc.++(a)....... 1,441 --------
SEE NOTES TO FINANCIAL STATEMENTS. 115 120 NATIONS FUNDS Nations Aggressive Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ PHARMACEUTICALS -- 16.1% 15,375 Allergan, Inc. ...................... $ 1,140 38,450 Amgen Inc.++......................... 2,314 76,225 Caliper Technologies Corporation++(a)................... 1,229 45,450 Genentech, Inc.++.................... 2,295 41,750 Merck & Company, Inc. ............... 3,169 33,875 Millennium Pharmaceuticals, Inc.++... 1,032 171,350 Pfizer Inc. ......................... 7,016 45,600 Pharmacia Corporation................ 2,297 33,600 Shire Pharmaceuticals Group plc, ADR++.............................. 1,470 46,100 Watson Pharmaceuticals, Inc.++....... 2,425 -------- 24,387 -------- SEMICONDUCTORS -- 4.6% 50,275 Analog Devices, Inc.++............... 1,822 169,275 Intel Corporation.................... 4,454 15,900 Linear Technology Corporation........ 653 -------- 6,929 -------- SOFTWARE -- 9.6% 14,125 BEA Systems, Inc.++(a)............... 415 10,725 Check Point Software Technologies Ltd.++(a).......................... 509 66,275 E. piphany, Inc.++(a)................ 775 21,675 Electronic Arts Inc.++............... 1,176 35,175 Mercury Interactive Corporation++.... 1,473 109,425 Microsoft Corporation++.............. 5,984 95,625 Oracle Corporation++................. 1,432 73,725 Quest Software, Inc.++............... 1,309 30,150 VERITAS Software Corporation++(a).... 1,394 -------- 14,467 -------- SPECIALTY STORES -- 6.2% 72,525 Barnes & Noble, Inc.++............... 1,733 81,175 Home Depot, Inc. .................... 3,499 74,075 Limited, Inc. ....................... 1,164 100,425 Staples, Inc.++(a)................... 1,494 68,775 The Men's Wearhouse, Inc.++.......... 1,484 -------- 9,374 -------- TELECOMMUNICATIONS SERVICES -- 2.2% 94,175 McLeodUSA Inc., Class A++............ 818 37,550 Nextel Communications, Inc., Class A++................................ 540 47,850 Western Wireless Corporation, Class A++................................ 1,944 -------- 3,302 --------
VALUE SHARES (000) ------------------------------------------------------------ TOBACCO -- 0.8% 24,350 Philip Morris Companies Inc. ........ $ 1,155 -------- TOTAL COMMON STOCKS (Cost $172,491)...................... 146,566 --------
SHARES (000) ------ INVESTMENT COMPANIES -- 11.3% (Cost $17,100) 17,100 Nations Cash Reserves#................ $ 17,100 -------- TOTAL INVESTMENTS (Cost $189,591*)............... 108.1% 163,666 -------- OTHER ASSETS AND LIABILITIES (NET)........................ (8.1)% Receivable for investment securities sold................................ $ 20,398 Receivable for Fund shares sold....... 26 Dividends receivable.................. 71 Interest receivable................... 22 Collateral on securities loaned....... (13,858) Payable for Fund shares redeemed...... (15) Investment advisory fee payable....... (89) Administration fee payable............ (31) Shareholder servicing and distribution fees payable........................ (20) Payable for investment securities purchased........................... (18,723) Accrued Trustees' fees and expenses... (32) Accrued expenses and other liabilities......................... (59) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (12,310) -------- NET ASSETS..................... 100.0% $151,356 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold.................... $(25,949) Net unrealized depreciation of investments......................... (25,925) Paid-in capital....................... 203,230 -------- NET ASSETS............................ $151,356 ========
SEE NOTES TO FINANCIAL STATEMENTS. 116 121 NATIONS FUNDS Nations Aggressive Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE ----------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($113,051,919 / 11,052,214 shares outstanding)........................ $10.23 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($21,621,777 / 2,139,658 shares outstanding)................. $10.11 ====== Maximum sales charge.................. 5.75% Maximum offering price per share...... $10.73 INVESTOR B SHARES: Net asset value and offering price per share+ ($16,119,308 / 1,696,786 shares outstanding)................. $9.50 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($562,921 / 57,918 shares outstanding)........................ $9.72 ======
--------------- * Federal Income Tax Information: Net unrealized depreciation of $31,473 on investment securities was comprised of gross appreciation of $9,828 and gross depreciation of $41,301 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $195,139. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $21,746 and $13,511, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $13,858. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 117 122 NATIONS FUNDS Nations Marsico Focused Equities Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE (000) ------------------------------------------------------------ INVESTMENT COMPANIES -- 100.0% Investment in Nations Master Investment Trust, Marsico Focused Equities Master Portfolio*....... $1,791,412 ---------- TOTAL INVESTMENTS........... 100.0% 1,791,412 ---------- OTHER ASSETS AND LIABILITIES (NET)..................... (0.0)% Receivable for Fund shares sold.... $ 5,609 Payable for Fund shares redeemed... (4,260) Administration fee payable......... (203) Shareholder servicing and distribution fees payable........ (931) Accrued Trustees' fees and expenses......................... (28) Accrued expenses and other liabilities...................... (437) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................ (250) ---------- NET ASSETS.................. 100.0% $1,791,162 ========== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold and foreign currencies and net other assets........................... $ (265,155) Net unrealized depreciation of investments...................... (63,385) Paid-in capital.................... 2,119,702 ---------- NET ASSETS......................... $1,791,162 ==========
VALUE ------------------------------------------------------------ ------------------------------------------------------------ PRIMARY A SHARES: Net asset value, offering and redemption price per share ($354,797,504 / 23,080,929 shares outstanding)..................... $15.37 ====== INVESTOR A SHARES: Net asset value and redemption price per share ($491,437,177 / 32,095,781 shares outstanding)..................... $15.31 ====== Maximum sales charge............... 5.75% Maximum offering price per share... $16.24 INVESTOR B SHARES: Net asset value and offering price per share+ ($741,284,832 / 49,420,843 shares outstanding)..................... $15.00 ====== INVESTOR C SHARES: Net asset value and offering price per share+ ($203,642,126 / 13,535,459 shares outstanding)..................... $15.05 ======
--------------- * The financial statements of the Marsico Focused Equities Master Portfolio, including its portfolio of investments, are included elsewhere within this report and should be read in conjunction with the Marsico Focused Equities Fund's financial statements. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 118 123 NATIONS FUNDS Nations MidCap Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- COMMON STOCKS -- 77.4% BROADCASTING AND CABLE -- 4.8% 84,505 Clear Channel Communications, Inc.++.............................. $ 4,601 146,600 Hispanic Broadcasting Corporation++... 2,800 299,146 Metro-Goldwyn-Mayer, Inc.++........... 5,127 160,650 Radio One, Inc., Class D++(a)......... 2,470 171,600 Univision Communications, Inc., Class A++(a).............................. 6,549 -------- 21,547 -------- BUILDING MATERIALS -- 0.7% 69,000 Martin Marietta Materials, Inc. ...... 2,946 -------- COMMERCIAL BANKING -- 3.3% 145,500 Charter One Financial, Inc. .......... 4,118 110,000 City National Corporation(a).......... 4,225 147,000 SouthTrust Corporation................ 6,725 -------- 15,068 -------- COMMERCIAL SERVICES -- 0.7% 229,850 KPMG Consulting Inc.++................ 2,988 -------- COMPUTER SERVICES -- 10.0% 253,000 Concord EFS, Inc.++................... 10,231 252,975 Convergys Corporation++............... 9,125 240,200 CSG Systems International, Inc.++..... 9,893 207,250 Jack Henry & Associates, Inc. ........ 4,909 215,350 Sungard Data Systems, Inc.++.......... 10,601 -------- 44,759 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.5% 94,275 Research In Motion Ltd.++(a).......... 2,071 -------- CONGLOMERATES -- 0.8% 141,500 Pentair, Inc. ........................ 3,605 -------- CONSUMER CREDIT AND MORTGAGES -- 1.4% 130,500 Providian Financial Corporation....... 6,401 -------- DIVERSIFIED ELECTRONICS -- 2.2% 201,000 SCI Systems, Inc.++(a)................ 3,658 115,000 Solectron Corporation++(a)............ 2,186 115,000 Symbol Technologies, Inc.(a).......... 4,014 -------- 9,858 -------- DIVERSIFIED MANUFACTURING -- 1.1% 172,000 Capstone Turbine Corporation++(a)..... 4,881 -------- ELECTRIC POWER -- NON NUCLEAR -- 5.7% 180,000 AES Corporation++..................... 8,993 249,200 Calpine Corporation++(a).............. 13,723 42,300 Mirant Corporation++(a)............... 1,502 56,250 Orion Power Holdings, Inc.++.......... 1,727 -------- 25,945 -------- ELECTRICAL EQUIPMENT -- 0.7% 118,000 C&D Technologies, Inc. ............... 3,257 --------
VALUE SHARES (000) ----------------------------------------------------------- FOOD PRODUCTS -- 0.6% 95,500 Hain Celestial Group, Inc.++.......... $ 2,770 -------- HEALTH SERVICES -- 2.7% 529,375 Health Management Associates, Inc., Class A++........................... 8,231 86,900 Waters Corporation++.................. 4,037 -------- 12,268 -------- INSURANCE -- 0.9% 61,000 Ambac Financial Group, Inc. .......... 3,869 -------- INVESTMENT SERVICES -- 4.1% 172,998 Legg Mason, Inc. ..................... 7,283 87,500 Northern Trust Corporation............ 5,469 202,750 Waddell & Reed Financial, Inc., Class A,(a)............................... 5,748 -------- 18,500 -------- MEDICAL DEVICES AND SUPPLIES -- 2.7% 204,675 Inhale Therapeutic Systems, Inc.++(a)........................... 4,375 154,250 Stryker Corporation................... 8,059 -------- 12,434 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 4.1% 223,100 ADC Telecommunications, Inc.++........ 1,896 151,275 Comverse Technology, Inc.++(a)........ 8,909 128,175 McDATA Corporation, Class B++(a)...... 2,906 105,650 Openwave Systems Inc.++............... 2,096 130,000 Powerwave Technologies, Inc.++........ 1,771 83,350 Sycamore Networks, Inc.++(a).......... 834 -------- 18,412 -------- OILFIELD SERVICES -- 6.3% 123,000 BJ Services Company++................. 8,757 109,500 ENSCO International Inc. ............. 3,833 185,150 Global Marine Inc.++.................. 4,740 75,000 Smith International, Inc.++(a)........ 5,265 123,800 Weatherford International, Inc.++(a)........................... 6,109 -------- 28,704 -------- PHARMACEUTICALS -- 7.0% 101,075 Alkermes, Inc.++(a)................... 2,217 93,825 Biogen, Inc.++........................ 5,940 198,375 Caliper Technologies Corporation++(a).................... 3,199 87,175 MedImmune, Inc.++..................... 3,127 184,000 Millennium Pharmaceuticals, Inc.++.... 5,605 98,400 Shire Pharmaceuticals Group plc, ADR++(a)............................ 4,305 139,750 Watson Pharmaceuticals, Inc.++........ 7,351 -------- 31,744 -------- PUBLISHING AND ADVERTISING -- 0.3% 42,900 Lamar Advertising Company++(a)........ 1,577 -------- SEMICONDUCTORS -- 3.6% 112,050 Linear Technology Corporation......... 4,601 104,350 Maxim Integrated Products, Inc.++(a)........................... 4,340 129,050 SanDisk Corporation++................. 2,629 92,800 Vitesse Semiconductor Corporation++... 2,210 75,325 Xilinx, Inc.++(a)..................... 2,646 -------- 16,426 --------
SEE NOTES TO FINANCIAL STATEMENTS. 119 124 NATIONS FUNDS Nations MidCap Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- SOFTWARE -- 5.5% 163,475 BMC Software, Inc.++(a)............... $ 3,515 76,650 Check Point Software Technologies Ltd.++(a)........................... 3,641 273,450 Citrix Systems, Inc.++................ 5,776 148,250 E. piphany, Inc.++(a)................. 1,733 95,425 Intuit Inc.++......................... 2,648 263,575 Precise Software Solutions Ltd.++..... 3,987 202,775 Quest Software, Inc.++(a)............. 3,599 -------- 24,899 -------- SPECIALTY STORES -- 2.6% 226,000 Bed Bath & Beyond Inc.++.............. 5,551 140,000 The Men's Wearhouse, Inc.++........... 3,021 123,000 Tiffany & Company..................... 3,352 -------- 11,924 -------- TELECOMMUNICATIONS SERVICES -- 3.6% 189,425 Allegiance Telecom, Inc.++............ 2,794 156,800 Broadwing Inc.++...................... 3,003 96,500 Time Warner Telecom, Inc., Class A++................................. 3,510 120,025 Western Wireless Corporation, Class A++................................. 4,876 326,950 XO Communications, Inc., Class A++(a).............................. 2,289 -------- 16,472 -------- UNIT INVESTMENT TRUST -- 1.5% 78,000 S&P Mid-Cap 400 Depositary Receipts(a)......................... 6,583 -------- TOTAL COMMON STOCKS (Cost $308,842)..................... 349,908 --------
SHARES (000) -------- INVESTMENT COMPANIES -- 30.1% (Cost $136,241) 136,241 Nations Cash Reserves#............... 136,241 -------- TOTAL INVESTMENTS (Cost $445,083*)............ 107.5% 486,149 -------- OTHER ASSETS AND LIABILITIES (NET)....................... (7.5)% Cash................................. $ 308 Receivable for Fund shares sold...... 57,898 Dividends receivable................. 84 Interest receivable.................. 279 Collateral on securities loaned...... (91,107) Payable for Fund shares redeemed..... (634) Investment advisory fee payable...... (218) Administration fee payable........... (77) Shareholder servicing and distribution fees payable.......... (47) Payable for investment securities purchased.......................... (308) Accrued Trustees' fees and expenses........................... (41) Accrued expenses and other liabilities........................ (89) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)........... (33,952) -------- NET ASSETS.................... 100.0% $452,197 ========
VALUE (000) ----------------------------------------------------------- NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold................... $ (240) Net unrealized appreciation of investments........................ 41,066 Paid-in capital...................... 411,371 -------- NET ASSETS........................... $452,197 ======== PRIMARY A SHARES: Net asset value, offering and redemption price per share ($388,151,600 / 26,526,735 shares outstanding)....................... $14.63 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($16,536,406 / 1,169,853 shares outstanding)................ $14.14 ------ ------ Maximum sales charge................. 5.75% Maximum offering price per share..... $15.00 INVESTOR B SHARES: Net asset value and offering price per share+ ($44,261,556 / 3,438,561 shares outstanding)................ $12.87 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share+ ($3,247,682 / 250,856 shares outstanding)................ $12.95 ------ ------
--------------- * Federal Income Tax Information: Net unrealized appreciation of $40,827 on investment securities was comprised of gross appreciation of $88,789 and gross depreciation of $47,962 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $445,322. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $72,231 and $88,002, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $91,107. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 120 125 NATIONS FUNDS Nations Marsico 21st Century Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ COMMON STOCKS -- 88.4% AEROSPACE AND DEFENSE -- 5.0% 14,068 Alliant Techsystems Inc.++........... $ 1,246 51,206 Boeing Company....................... 2,852 -------- 4,098 -------- APPAREL AND TEXTILES -- 1.0% 20,000 Nike, Inc., Class B.................. 811 -------- COMMERCIAL BANKING -- 4.8% 87,304 Citigroup Inc. ...................... 3,927 -------- CONSUMER CREDIT AND MORTGAGES -- 9.3% 35,308 Fannie Mae........................... 2,811 66,810 USA Education Inc. .................. 4,853 -------- 7,664 -------- DIVERSIFIED MANUFACTURING -- 1.6% 53,094 Delta and Pine Land Company.......... 1,280 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.6% 8,511 Calpine Corporation++(a)............. 469 -------- HEALTH SERVICES -- 2.6% 24,172 Quest Diagnostics Inc.++............. 2,148 -------- INTEGRATED OIL -- 7.9% 80,000 BP Amoco plc, ADR.................... 3,970 58,462 Transocean Sedco Forex Inc. ......... 2,534 -------- 6,504 -------- INVESTMENT SERVICES -- 7.2% 40,000 Lehman Brothers Holdings Inc. ....... 2,508 61,276 Merrill Lynch & Company, Inc. ....... 3,395 -------- 5,903 -------- LODGING AND RECREATION -- 0.3% 5,257 Four Seasons Hotels Inc. ............ 260 -------- MEDICAL DEVICES AND SUPPLIES -- 12.3% 224,751 Cytyc Corporation++(a)............... 3,708 10,000 Enzon, Inc.++(a)..................... 475 86,719 Intermune Pharmaceuticals, Inc.++(a).......................... 1,821 111,115 Priority Healthcare Corporation, Class B++.......................... 4,194 -------- 10,198 --------
VALUE SHARES (000) ------------------------------------------------------------ METALS AND MINING -- 3.2% 19,608 Arch Coal, Inc. ..................... $ 588 85,902 Massey Energy Company................ 2,055 -------- 2,643 -------- NATURAL GAS DISTRIBUTION -- 5.2% 74,018 Enron Corporation.................... 4,300 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.5% 33,060 Corning Inc. ........................ 684 38,416 QUALCOMM Inc.++...................... 2,175 -------- 2,859 -------- OILFIELD SERVICES -- 9.0% 75,000 Petroleum Geo-Services ASA, ADR++.... 671 96,330 Smith International, Inc.++.......... 6,763 -------- 7,434 -------- PHARMACEUTICALS -- 10.1% 43,016 Albany Molecular Research, Inc.++.... 1,506 25,636 Amgen Inc.++......................... 1,543 36,520 Genentech, Inc.++.................... 1,844 34,444 Inspire Pharmaceuticals Inc.++....... 232 42,573 Merck & Company, Inc. ............... 3,232 -------- 8,357 -------- SOFTWARE -- 1.2% 35,144 Siebel Systems, Inc.++............... 956 -------- SPECIALTY STORES -- 3.6% 68,202 Home Depot, Inc. .................... 2,940 -------- TOTAL COMMON STOCKS (Cost $76,031)....................... 72,751 -------- PRINCIPAL AMOUNT (000) --------- SHORT TERM INVESTMENTS -- 10.1% (Cost $8,299) FEDERAL HOME LOAN BANK (FHLB) -- 10.1% $ 8,300 Discount note 04/02/01............... 8,298 --------
SEE NOTES TO FINANCIAL STATEMENTS. 121 126 NATIONS FUNDS Nations Marsico 21st Century Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
SHARES VALUE (000) (000) ----------------------------------------------------------- INVESTMENT COMPANIES -- 8.8% (Cost $7,278) 7,278 Nations Cash Reserves#................ $ 7,278 -------- TOTAL INVESTMENTS (Cost $91,608*)................ 107.3% 88,327 -------- OTHER ASSETS AND LIABLITIES (NET)........................ (7.3)% Receivable for investment securities sold................................ $ 6,096 Dividends receivable.................. 21 Collateral on securities loaned....... (7,199) Investment advisory fee payable....... (54) Administration fee payable............ (17) Shareholder servicing and distribution fees payable........................ (54) Due to custodian...................... (59) Payable for investment securities purchased........................... (4,681) Accrued Trustees' fees and expenses... (9) Accrued expenses and other liabilities......................... (80) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................... (6,036) -------- NET ASSETS..................... 100.0% $ 82,291 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold and foreign currencies and net other assets..... $(27,839) Net unrealized depreciation of investments......................... (3,281) Paid-in capital....................... 113,411 -------- NET ASSETS............................ $ 82,291 ========
VALUE ----------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($5,686,483 / 814,074 shares outstanding)........................ $6.99 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($19,643,966 / 2,819,358 shares outstanding)................. $6.97 ----- ----- Maximum sales charge.................. 5.75% Maximum offering price per share...... $7.40 INVESTOR B SHARES: Net asset value and offering price per share+ ($50,403,833 / 7,287,415 shares outstanding)................. $6.92 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share+ ($6,556,984 / 948,028 shares outstanding)........................ $6.92 ----- -----
--------------- * Federal Income Tax Information: Net unrealized depreciation of $5,094 on investment securities was comprised of gross appreciation of $1,254 and gross depreciation of $6,348 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $93,421. ++ Non-income producing security. + The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $6,095 and $5,258, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $7,199. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 122 127 NATIONS FUNDS Nations Small Company Fund STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ COMMON STOCKS -- 94.3% AEROSPACE AND DEFENSE -- 0.9% 149,000 Triumph Group, Inc.(++)............. $ 5,662 --------- AIRLINES -- 1.7% 453,400 SkyWest, Inc. ...................... 10,542 --------- APPAREL AND TEXTILES -- 3.2% 136,300 Columbia Sportswear Company(++)(a).................... 6,200 11,900 Polymer Group, Inc. ................ 21 504,050 Quiksilver, Inc.(++)................ 13,383 434,300 Tefron Ltd.(++)..................... 825 --------- 20,429 --------- BEVERAGES -- 1.3% 118,400 Constellation Brands, Inc.(++)...... 8,495 --------- BROADCASTING AND CABLE -- 1.3% 141,600 Entercom Communications Corporation(++)(a)................ 5,565 180,550 Salem Communications Corporation(++)................... 2,934 --------- 8,499 --------- CHEMICALS -- SPECIALTY -- 0.7% 330,000 Agrium Inc. ........................ 4,158 --------- COMMERCIAL BANKING -- 5.6% 269,400 Boston Private Financial Holdings, Inc. ............................. 4,782 477,000 City National Corporation(a)........ 18,321 499,000 National Commerce Bancorporation.... 12,381 --------- 35,484 --------- COMMERCIAL SERVICES -- 5.2% 673,600 AHL Services, Inc.(++).............. 5,347 239,700 Catalina Marketing Corporation(++)(a)................ 7,807 954,398 Encompass Services Corporation(++)................... 4,677 274,700 HeadHunter.NET, Inc.(++)............ 1,442 224,000 Iron Mountain Inc.(++).............. 8,584 394,800 SCB Computer Technology, Inc.(++)... 201 412,800 Trammell Crow Company(++)........... 4,912 --------- 32,970 --------- COMPUTERS AND OFFICE EQUIPMENT -- 1.4% 300,012 Avocent Corporation(++)............. 6,544 65,900 Zebra Technologies Corporation, Class A(++)....................... 2,512 --------- 9,056 --------- CONSTRUCTION -- 1.4% 268,100 KB HOME............................. 8,751 --------- CONSUMER SERVICES -- 3.4% 435,000 Career Education Corporation(++).... 21,859 ---------
VALUE SHARES (000) ------------------------------------------------------------ DIVERSIFIED ELECTRONICS -- 3.9% 986,600 Aeroflex, Inc.(++).................. $ 10,174 401,500 Anaren Microwave, Inc.(++).......... 5,044 150,100 AstroPower, Inc.(++)(a)............. 4,503 162,700 Dionex Corporation(++).............. 5,115 --------- 24,836 --------- DIVERSIFIED MANUFACTURING -- 2.4% 218,300 Actuant Corporation, Class A(a)..... 3,547 269,800 DDi Corporation(++)(a).............. 4,553 281,800 Plexus Corporation(++).............. 7,221 --------- 15,321 --------- ELECTRICAL EQUIPMENT -- 0.4% 309,900 APW Ltd.(++)........................ 2,659 --------- ENERGY -- MISCELLANEOUS -- 2.8% 281,800 Kinder Morgan Energy Partners, L.P.(a)........................... 17,782 --------- FINANCE -- MISCELLANEOUS -- 2.9% 392,900 Affiliated Managers Group, Inc.(++).......................... 18,466 --------- HEALTH SERVICES -- 6.5% 22,800 Lifepoint Hospitals, Inc.(++)....... 815 661,100 Orthodontic Centers of America, Inc.(++)(a)....................... 13,553 549,650 Province Healthcare Company(++)..... 16,729 127,000 Triad Hospitals, Inc.(++)(a)........ 3,588 853,200 US Oncology, Inc.(++)(a)............ 6,932 --------- 41,617 --------- HOUSING AND FURNISHING -- 4.7% 267,512 Ethan Allen Interiors Inc.(a)....... 9,037 460,300 Rent-A-Center, Inc.(++)(a).......... 21,145 --------- 30,182 --------- INSURANCE -- 2.1% 276,397 Delphi Financial Group, Inc., Class A................................. 8,181 148,400 Triad Guaranty Inc.(++)............. 4,925 --------- 13,106 --------- LODGING AND RECREATION -- 1.4% 666,150 Station Casinos, Inc.(++)(a)........ 9,200 --------- MEDICAL DEVICES AND SUPPLIES -- 3.6% 179,900 Ciphergen Biosystems, Inc.(++)...... 798 280,000 Cooper Companies, Inc. ............. 13,259 222,100 Datascope Corporation............... 8,037 153,100 Exact Sciences Corporation(++)...... 1,167 --------- 23,261 --------- METALS AND MINING -- 1.2% 265,400 Mueller Industries, Inc.(++)........ 7,973 --------- NATURAL GAS DISTRIBUTION -- 0.5% 88,400 Energen Corporation................. 3,121 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 123 128 NATIONS FUNDS Nations Small Company Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 5.6% 489,200 AudioCodes Ltd.(++)................. $ 4,342 347,100 BreezeCOM Ltd.(++).................. 2,321 930,300 C-COR Electronics(++)............... 6,220 140,700 Harmonic Inc.(++)(a)................ 791 917,100 P-Com, Inc.(++)..................... 1,175 112,600 Plantronics, Inc.(++)............... 2,001 335,000 Proxim, Inc.(++).................... 3,371 961,950 REMEC, Inc.(++)..................... 9,619 376,700 Spectrian Corporation(++)(a)........ 4,638 27,600 Three-Five Systems, Inc.(++)........ 337 46,700 Tollgrade Communications, Inc.(++).......................... 1,203 --------- 36,018 --------- OILFIELD SERVICES -- 5.0% 493,200 Marine Drilling Companies, Inc.(++).......................... 13,145 256,700 Precision Drilling Corporation(++)................... 9,156 321,600 UTI Energy Corporation(++).......... 9,728 --------- 32,029 --------- PHARMACEUTICALS -- 9.4% 452,100 Allos Therapeutics Inc.(++)......... 2,628 373,800 Alpharma Inc., Class A(a)........... 12,238 88,600 Human Genome Sciences, Inc.(a)...... 4,076 175,200 Introgen Therapeutics, Inc.(++)(a)....................... 712 591,247 Martek Biosciences Corporation(++)(a)................ 9,164 135,100 Medicis Pharmaceutical Corporation, Class A(++)....................... 6,055 115,900 Praecis Pharmaceuticals Inc.(++).... 2,311 373,100 Shire Pharmaceuticals Group plc, ADR(++)(a)........................ 16,322 124,400 Tanox, Inc.(++)(a).................. 2,418 353,579 Vical, Inc.(++)..................... 3,381 --------- 59,305 --------- RESTAURANTS -- 4.1% 347,500 CEC Entertainment Inc.(++).......... 15,411 301,900 Jack in the Box Inc.(++)............ 9,042 66,200 Panera Bread Company, Class A(++)... 1,771 --------- 26,224 --------- SEMICONDUCTORS -- 2.4% 233,800 Alpha Industries, Inc.(++).......... 3,682 262,000 Camtek Ltd.(++)..................... 1,212 72,000 Cymer, Inc.(++)..................... 1,557 392,700 Sawtek Inc.(++)..................... 6,996 210,000 Sipex Corporation(++)(a)............ 1,962 --------- 15,409 --------- SOFTWARE -- 5.5% 60,000 Aspen Technology, Inc.(++).......... 1,433 621,500 Dendrite International, Inc.(++).... 8,702 412,500 Genomica Corporation(++)............ 1,702 389,765 Hyperion Solutions Corporation(++)................... 6,285 92,100 Macrovision Corporation(++)(a)...... 4,012 228,100 OTG Software, Inc.(++)(a)........... 1,443 695,200 Prosoft Training.Com(++)(a)......... 5,474 452,500 TTI Team Telecom International Ltd.(++).......................... 5,769 --------- 34,820 ---------
VALUE SHARES (000) ------------------------------------------------------------ SPECIALTY STORES -- 0.5% 206,400 Cato Corporation.................... $ 3,109 --------- TELECOMMUNICATIONS SERVICES -- 3.3% 259,200 AirGate PCS, Inc.(++)............... 9,753 324,400 Gilat Satellite Networks Ltd.(++)(a)....................... 3,771 910,300 Spectrasite Holdings, Inc.(++)(a)... 3,926 107,900 Triton PCS Holdings, Inc., Class A(++)............................. 3,594 --------- 21,044 --------- TOTAL COMMON STOCKS (Cost $574,666)..................... 601,387 --------- WARRANTS -- 0.0%+ (Cost $0++) 25,000 Martek Biosciences Corporation...... 146 --------- SHARES (000) --------- INVESTMENT COMPANIES -- 25.9% 65 iShares Russell 2000 Growth Index Fund(a)........................... 3,562 88 iShares Russell 2000 Index Fund(a)........................... 7,885 154,171 Nations Cash Reserves#.............. 154,171 --------- TOTAL INVESTMENT COMPANIES (Cost $167,184)..................... 165,618 --------- TOTAL INVESTMENTS (Cost $741,850*)............. 120.2% 767,151 --------- OTHER ASSETS AND LIABILITIES (NET)...................... (20.2)% Cash................................ $ 1 Receivable for investment securities sold.............................. 19,662 Receivable for Fund shares sold..... 1,036 Dividends receivable................ 107 Interest receivable................. 181 Collateral on securities loaned..... (146,774) Payable for Fund shares redeemed.... (347) Investment advisory fee payable..... (502) Administration fee payable.......... (135) Shareholder servicing and distribution fees payable......... (46) Payable for investment securities purchased......................... (1,950) Accrued Directors' fees and expenses.......................... (25) Accrued expenses and other liabilities....................... (99) --------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................. (128,891) --------- NET ASSETS................... 100.0% $ 638,260 ========= NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold.................. $ (7,923) Net unrealized appreciation of investments....................... 25,301 Paid-in capital..................... 620,882 --------- NET ASSETS.......................... $ 638,260 =========
SEE NOTES TO FINANCIAL STATEMENTS. 124 129 NATIONS FUNDS Nations Small Company Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE ------------------------------------------------------------ PRIMARY A SHARES: Net asset value, offering and redemption price per share ($477,246,057 / 34,852,655 shares outstanding)...................... $13.69 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($146,456,937 / 10,834,444 shares outstanding)...................... $13.52 ------ ------ Maximum sales charge................ 5.75% Maximum offering price per share.... $14.34 INVESTOR B SHARES: Net asset value and offering price per share+ ($11,744,023 / 898,126 shares outstanding)............... $13.08 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share+ ($2,812,849 / 212,148 shares outstanding)............... $13.26 ------ ------
--------------- * Federal Income Tax Information: Net unrealized appreciation of $20,690 on investment securities was comprised of gross appreciation of $153,142 and gross depreciation of $132,452 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $746,461. (++) Non-income producing security. (+) The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $115,314 and $128,482, respectively. + Amount represents less than 0.1%. ++ Amount represents less than $500. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $146,774. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 125 130 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2001 CONVERTIBLE BALANCED SECURITIES ASSETS ------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $5, $4, $15, $41, $123, $0 and $0, respectively)....................... $ 8,903 $ 1,133 Dividends allocated from Portfolio (Net of foreign withholding taxes of $0, $0, $0, $0, $0, $26 and $55, respectively)+............................................ -- -- Interest.................................................... 7,651 3,117 Interest allocated from Portfolio+.......................... -- -- Securities lending.......................................... -- 5 Expenses allocated from Portfolio+.......................... -- -- -------------- -------------- Total investment income................................. 16,554 4,255 -------------- -------------- EXPENSES: Investment advisory fee..................................... 2,621 600 Administration fee.......................................... 927 212 Transfer agent fees......................................... 135 29 Custodian fees.............................................. 38 16 Legal and audit fees........................................ 69 45 Registration and filing fees................................ 75 35 Trustees'/Directors' fees and expenses...................... 17 17 Interest expense............................................ --* --* Printing expense............................................ 119 127 Other....................................................... 37 7 -------------- -------------- Subtotal................................................ 4,038 1,088 Shareholder servicing and distribution fees: Investor A Shares......................................... 858 26 Investor B Shares......................................... 254 462 Investor C Shares......................................... 59 10 Seafirst Shares**......................................... -- -- -------------- -------------- Total expenses.......................................... 5,209 1,586 Fees waived by investment advisor, administrator and/or distributor............................................... (12) (179) Fees reduced by credits allowed by the custodian............ (15) (1) -------------- -------------- Net expenses............................................ 5,182 1,406 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 11,372 2,849 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... 12,906 1,573 Security transactions allocated from Portfolio+........... -- -- Written options........................................... -- -- Futures contracts......................................... -- -- Foreign currency and net other assets..................... -- -- Foreign currency and net other assets allocated from Portfolio+.............................................. -- -- -------------- -------------- Net realized gain/(loss) on investments..................... 12,906 1,573 -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities (Note 10)...................................... (60,106) (2,109) Securities allocated from Portfolio (Note 10)+............ -- -- Futures contracts......................................... -- -- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... (60,106) (2,109) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (47,200) (536) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (35,828) $ 2,313 ============== ==============
--------------- * Amount represents less than $500. ** Seafirst Shares converted into Investor A Shares on June 23, 2000. + Allocated from Growth & Income Master Portfolio and Blue Chip Master Portfolio, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 126 131 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED) ASSET EQUITY GROWTH & BLUE ALLOCATION INCOME VALUE INCOME CHIP -------------------------------------------------------------------------------------- $ 2,495 $ 9,470 $ 27,409 $ -- $ -- -- -- -- 3,279 9,415 11,504 652 1,310 -- -- -- -- -- 3,262 1,368 -- 13 180 -- -- -- -- -- (5,311) (6,551) -------------- -------------- -------------- -------------- -------------- 13,999 10,135 28,899 1,230 4,232 -------------- -------------- -------------- -------------- -------------- 2,648 2,923 8,462 -- -- 937 1,207 2,994 800 1,656 135 157 392 363 328 33 35 93 -- -- 71 68 74 50 62 41 35 59 76 59 17 17 17 17 17 1 27 32 -- -- 201 101 113 138 133 14 23 21 -- 20 -------------- -------------- -------------- -------------- -------------- 4,098 4,593 12,257 1,444 2,275 555 70 200 459 1,675 1,184 597 1,080 2,911 858 26 37 94 370 188 117 -- -- -- 265 -------------- -------------- -------------- -------------- -------------- 5,980 5,297 13,631 5,184 5,261 (200) (17) -- -- (283) (6) (4) (16) -- -- -------------- -------------- -------------- -------------- -------------- 5,774 5,276 13,615 5,184 4,978 -------------- -------------- -------------- -------------- -------------- 8,225 4,859 15,284 (3,954) (746) -------------- -------------- -------------- -------------- -------------- (3,168) 25,883 274,996 -- -- -- -- -- (51,334) (6,956) -- -- -- -- -- (458) -- (4,402) -- -- -- -- -- -- -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- (3,626) 25,883 270,594 (51,334) (6,956) -------------- -------------- -------------- -------------- -------------- (44,921) (130,290) (301,954) -- -- -- -- -- (164,423) (220,399) (171) -- -- -- -- -------------- -------------- -------------- -------------- -------------- (45,092) (130,290) (301,954) (164,423) (220,399) -------------- -------------- -------------- -------------- -------------- (48,718) (104,407) (31,360) (215,757) (227,355) -------------- -------------- -------------- -------------- -------------- $ (40,493) $ (99,548) $ (16,076) $ (219,711) $ (228,101) ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 127 132 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED) For the year ended March 31, 2001 STRATEGIC CAPITAL GROWTH GROWTH ------------------------------ (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $19, $2, $1, $0, $4, $5 and $2, respectively).......................... $ 8,082 $ 4,409 Dividends allocated from Portfolio (Net of foreign withholding taxes of $0, $0, $0, $152, $0, $0 and $0, respectively)+............................................ -- -- Interest.................................................... 2,395 975 Interest allocated from Portfolio+.......................... -- -- Securities lending.......................................... 53 47 Expenses allocated from Portfolio+.......................... -- -- -------------- -------------- Total investment income................................. 10,530 5,431 -------------- -------------- EXPENSES: Investment advisory fee..................................... 8,006 5,352 Administration fee.......................................... 2,833 1,894 Transfer agent fees......................................... 361 245 Custodian fees.............................................. 85 59 Legal and audit fees........................................ 82 70 Registration and filing fees................................ 170 63 Trustees'/Directors' fees and expenses...................... 17 17 Interest expense............................................ 1 6 Printing expense............................................ 83 78 Other....................................................... 6 -- -------------- -------------- Subtotal................................................ 11,644 7,784 Shareholder servicing and distribution fees: Investor A Shares......................................... 29 127 Investor B Shares......................................... 70 652 Investor C Shares......................................... 23 45 -------------- -------------- Total expenses.......................................... 11,766 8,608 Fees waived by investment advisor........................... -- -- Fees reduced by credits allowed by the custodian............ (8) (1) -------------- -------------- Net expenses.............................................. 11,758 8,607 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ (1,228) (3,176) -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... (84,919) 150,683 Security transactions allocated from Porfolio+............ -- -- Written options........................................... -- -- Futures contracts......................................... -- -- Foreign currency and net other assets..................... -- -- Foreign currency and net other assets allocated from Portfolio+.............................................. -- -- -------------- -------------- Net realized gain/(loss) on investments..................... (84,919) 150,683 -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities (Note 10)...................................... (279,463) (423,082) Securities allocated from Portfolio (Note 10)+............ -- -- Futures contracts......................................... -- -- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... (279,463) (423,082) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (364,382) (272,399) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (365,610) $ (275,575) ============== ==============
--------------- * Amount represents less than $500. + Allocated from Focused Equities Master Portfolio. (a) 21st Century commenced operations on April 10, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 128 133 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED) AGGRESSIVE FOCUSED MIDCAP 21ST SMALL GROWTH EQUITIES GROWTH CENTURY(A) COMPANY -------------------------------------------------------------------------------------- $ 1,139 $ -- $ 748 $ 324 $ 2,310 -- 12,049 -- -- -- 296 -- 1,606 560 2,813 -- 11,269 -- -- -- 37 -- 134 12 392 -- (19,502) -- -- -- -------------- -------------- -------------- -------------- -------------- 1,472 3,816 2,488 896 5,515 -------------- -------------- -------------- -------------- -------------- 1,972 -- 2,271 710 7,844 698 2,942 804 218 2,004 91 1,503 105 45 259 34 -- 28 8 60 70 70 64 90 72 45 194 68 144 26 17 17 17 17 17 -- -- -- -- --* 93 388 74 53 119 4 -- 5 4 105 -------------- -------------- -------------- -------------- -------------- 3,024 5,114 3,436 1,289 10,506 95 1,680 52 60 502 301 9,394 500 575 139 11 2,511 33 73 35 -------------- -------------- -------------- -------------- -------------- 3,431 18,699 4,021 1,997 11,182 -- -- -- -- (496) (2) -- (5) (7) (4) -------------- -------------- -------------- -------------- -------------- 3,429 18,699 4,016 1,990 10,682 -------------- -------------- -------------- -------------- -------------- (1,957) (14,883) (1,528) (1,094) (5,167) -------------- -------------- -------------- -------------- -------------- 27,539 -- 44,773 (27,839) 49,901 -- (257,147) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (2) -- (2) -- -------------- -------------- -------------- -------------- -------------- 27,539 (257,149) 44,773 (27,841) 49,901 -------------- -------------- -------------- -------------- -------------- (148,812) -- (136,460) (3,281) (342,864) -- (573,763) -- -- -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- (148,812) (573,763) (136,460) (3,281) (342,864) -------------- -------------- -------------- -------------- -------------- (121,273) (830,912) (91,687) (31,122) (292,963) -------------- -------------- -------------- -------------- -------------- $ (123,230) $ (845,795) $ (93,215) $ (32,216) $ (298,130) ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 129 134 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS CONVERTIBLE SECURITIES BALANCED ASSETS ------------------------------------------------ ------------------------------- YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED 3/31/01 3/31/00 5/14/99(A) 3/31/01 3/31/00 --------------------------------------------------------------------------------- (IN THOUSANDS) Net investment income / (loss)....... $ 11,372 $ 7,795 $ 2,273 $ 2,849 $ 2,556 Net realized gain / (loss) on investments........................ 12,906 69,747 12,894 $ 1,573 1,268 Net change in unrealized appreciation / (depreciation) of investments........................ (60,106) 26,348 6,835 $ (2,109) (3,486) -------------- -------------- -------------- -------------- -------------- Net increase / (decrease) in net assets resulting from operations... (35,828) 103,890 22,002 2,313 338 Distributions to shareholders from net investment income: Primary A Shares................... (1,035) (204) -- (894) (1,132) Primary B Shares................... -- -- (2,168) -- -- Investor A Shares.................. (10,397) (7,793) (17) (285) (381) Investor B Shares.................. (679) (117) (21) (855) (1,144) Investor C Shares.................. (149) (47) -- (22) (27) Seafirst Shares**.................. -- -- -- -- -- Distributions to shareholders from net realized gain on investments: Primary A Shares................... (3,939) (577) -- -- -- Primary B Shares................... -- -- -- -- -- Investor A Shares.................. (68,053) (23,353) -- -- -- Investor B Shares.................. (3,817) (449) -- -- -- Investor C Shares.................. (930) (150) -- -- -- Seafirst Shares**.................. -- -- -- -- -- Distributions to shareholders in excess of net realized gain on investments: Primary A Shares................... (73) -- -- -- -- Primary B Shares................... -- -- -- -- -- Investor A Shares.................. (1,257) -- -- -- -- Investor B Shares.................. (71) -- -- -- -- Investor C Shares.................. (17) -- -- -- -- Seafirst Shares**.................. -- -- -- -- -- Net increase / (decrease) in net assets from Fund share transactions....................... 179,935 (34,193) (22,853) (8,475) (41,140) -------------- -------------- -------------- -------------- -------------- Net increase / (decrease) in net assets............................. 53,690 37,007 (3,057) (8,218) (43,486) NET ASSETS: Beginning of period.................. 397,384 360,377 363,434 101,215 144,701 -------------- -------------- -------------- -------------- -------------- End of period........................ $ 451,074 $ 397,384 $ 360,377 $ 92,997 $ 101,215 ============== ============== ============== ============== ============== Undistributed net investment income / (loss) / (distributions in excess of net investment income) at end of period............................. $ (3) $ 1,161 $ 1,527 $ 929 $ 134 ============== ============== ============== ============== ==============
--------------- ** Seafirst Shares converted into Investor A Shares on June 23, 2000. (a) Represents financial information for the Pacific Horizon Capital Income Fund, which was reorganized into Convertible Securities on May 21, 1999. (b) Represents financial information for the Pacific Horizon Asset Allocation Fund, which was reorganized into Asset Allocation on May 21, 1999. SEE NOTES TO FINANCIAL STATEMENTS. 130 135 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ASSET ALLOCATION EQUITY INCOME VALUE ------------------------------- ------------------------------- ---------------------------------------------------- YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/01 3/31/00 5/14/99(B) 3/31/01 3/31/00 3/31/01 3/31/00 ------------------------------------------------------------------------------------------------------------------------- $ 8,225 $ 7,051 $ 1,317 $ 4,859 $ 7,014 $ 15,284 $ 10,874 (3,626) 23,761 9,905 25,883 8,707 270,594 358,083 (45,092) 5,470 1,712 (130,290) 16,930 (301,954) (366,372) -------------- -------------- -------------- -------------- -------------- -------------- -------------- (40,493) 36,282 12,934 (99,548) 32,651 (16,076) 2,585 (436) (208) -- (4,453) (6,631) (14,824) (10,165) -- -- (352) -- -- -- -- (4,946) (1,207) (27) (219) (457) (865) (456) (1,703) (937) (8) (107) (334) (489) (18) (39) (18) (1,429) (6) (18) (42) (1) (1,266) (4,797) -- -- -- -- -- (798) (430) -- (21,098) (6,078) (264,210) (181,165) -- -- -- -- -- -- -- (8,723) (2,658) -- (1,347) (521) (18,874) (13,331) (6,200) (3,480) -- (2,793) (1,172) (25,721) (15,816) (134) (64) -- (166) (64) (2,211) (1,251) (7,245) (8,339) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (5,074) 116,201 (22) 8,302 (247,899) (163,608) (504,038) -------------- -------------- -------------- -------------- -------------- -------------- -------------- (77,057) 130,345 11,096 (121,435) (230,523) (506,920) (723,656) 428,701 298,356 287,260 509,379 739,902 1,518,870 2,242,526 -------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 351,644 $ 428,701 $ 298,356 $ 387,944 $ 509,379 $ 1,011,950 $ 1,518,870 ============== ============== ============== ============== ============== ============== ============== $ 233 $ 405 $ 499 $ -- $ -- $ -- $ 234 ============== ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 131 136 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) GROWTH & INCOME BLUE CHIP ------------------------------- ----------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED 3/31/01 3/31/00(A) 3/31/01 3/31/00 5/14/99(B) --------------------------------------------------------------------------------- (IN THOUSANDS) Net investment income / (loss)........ $ (3,954) $ (3,482) $ (746) $ 163 $ 218 Net realized gain / (loss) on investments......................... -- (2,435)# -- -- -- Net realized gain / (loss) on investments allocated from Portfolio+.......................... (51,334) 9,153 (6,956) 79,588 53,032 Net change in unrealized appreciation / (depreciation) of investments......................... -- 257,111# -- -- -- Net change in unrealized appreciation / (depreciation) of investments allocated from Portfolio+.......................... (164,423) (121,686) (220,399) 44,368 10,012 -------------- -------------- -------------- -------------- -------------- Net increase / (decrease) in net assets resulting from operations.... (219,711) 138,661 (228,101) 124,119 63,262 Distributions to shareholders from net investment income: Primary A Shares.................... -- -- (19) (28) -- Primary B Shares.................... -- -- -- -- -- Investor A Shares................... -- -- (47) -- (3) Investor B Shares................... -- -- --* -- -- Investor C Shares................... -- -- --* -- -- Seafirst Shares**................... -- -- -- (438) (343) Distributions to shareholders from net realized gain on investments:*** Primary A Shares.................... (865) (175) (2,146) (2,964) -- Primary B Shares.................... -- -- -- -- -- Investor A Shares................... (1,389) (156) (27,997) (34,227) -- Investor B Shares................... (2,398) (353) (5,094) (4,060) -- Investor C Shares................... (290) (19) (1,125) (1,239) -- Seafirst Shares**................... -- -- (25,348) (45,811) -- Distributions to shareholders in excess of net realized gain on investments: Primary A Shares.................... -- -- (434) -- -- Primary B Shares.................... -- -- -- -- -- Investor A Shares................... -- -- (5,657) -- -- Investor B Shares................... -- -- (1,030) -- -- Investor C Shares................... -- -- (227) -- -- Seafirst Shares**................... -- -- (5,122) -- -- Net increase / (decrease) in net assets from Fund share transactions........................ 111,917 293,210 54,974 54,280 (4,053) -------------- -------------- -------------- -------------- -------------- Net increase / (decrease) in net assets.............................. (112,736) 431,168 (247,373) 89,632 58,863 NET ASSETS: Beginning of period................... 629,279 198,111 993,110 903,478 844,615 -------------- -------------- -------------- -------------- -------------- End of period......................... $ 516,543 $ 629,279 $ 745,737 $ 993,110 $ 903,478 ============== ============== ============== ============== ============== Undistributed net investment income / (loss) / (distributions in excess of net investment income) at end of period....................... $ -- $ (3) $ (4) $ 71 $ 152 ============== ============== ============== ============== ==============
--------------- * Amount represents less than $500. ** Seafirst Shares converted into Investor A Shares on June 23, 2000. *** Amount includes distributions in excess of realized gains in the amount of $3,275 for Aggressive Growth during March 31, 2000 fiscal year. # Amount represents results from operations prior to conversion to master-feeder structure. + Allocated from Growth & Income Master Portfolio and Blue Chip Master Portfolio, respectively. (a) As of October 8, 1999, Growth & Income converted to a master-feeder structure. (b) Represents financial information for the Pacific Horizon Blue Chip Fund, which was reorganized into Blue Chip on May 21, 1999. SEE NOTES TO FINANCIAL STATEMENTS. 132 137 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) STRATEGIC GROWTH CAPITAL GROWTH AGGRESSIVE GROWTH ---------------------------------- ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/01 3/31/00 3/31/01 3/31/00 3/31/01 3/31/00 ------------------------------------------------------------------------------------------------------- $ (1,228) $ (503) $ (3,176) $ (4,116) $ (1,957) $ 100 (84,919) 2,255 150,683 91,754 27,539 30,721 -- -- -- -- -- -- (279,463) 123,466 (423,082) 140,970 (148,812) (33,570) -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- (365,610) 125,218 (275,575) 228,608 (123,230) (2,749) (560) -- -- -- -- (82) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (1,357) (4,912) (132,800) (50,238) (20,611) (48,417) -- -- -- -- -- -- (10) (4) (9,887) (3,711) (3,755) (7,321) (8) (3) (13,119) (4,876) (3,043) (6,431) (3) (2) (895) (309) (104) (220) -- -- -- -- -- -- -- -- -- -- (6,485) -- -- -- -- -- -- -- -- -- -- -- (1,182) -- -- -- -- -- (957) -- -- -- -- -- (33) -- -- -- -- -- -- -- 698,100 485,146 86,769 (71,428) (106,263) (49,719) -------------- -------------- -------------- -------------- -------------- -------------- 330,552 605,443 (345,507) 98,046 (265,663) (114,939) 872,266 266,823 958,853 860,807 417,019 531,958 -------------- -------------- -------------- -------------- -------------- -------------- $ 1,202,818 $ 872,266 $ 613,346 $ 958,853 $ 151,356 $ 417,019 ============== ============== ============== ============== ============== ============== $ -- $ -- $ -- $ -- $ -- $ (26) ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 133 138 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOCUSED EQUITIES ------------------------------- YEAR ENDED YEAR ENDED 3/31/01 3/31/00(A) ------------------------------- (IN THOUSANDS) Net investment income / (loss).............................. $ (14,883) $ (12,382) Net realized gain / (loss) on investments................... -- (5,148)# Net realized gain / (loss) on investments allocated from Portfolio+................................................ (257,149) 22,127 Net change in unrealized appreciation / (depreciation) of investments............................................... -- 40,122# Net change in unrealized appreciation / (depreciation) of investments allocated from Portfolio+..................... (573,763) 376,082 -------------- -------------- Net increase / (decrease) in net assets resulting from operations................................................ (845,795) 420,801 Distributions to shareholders from net investment income: Primary A Shares.......................................... -- -- Primary B Shares.......................................... -- -- Investor A Shares......................................... -- -- Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Seafirst Shares**......................................... -- -- Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... (1,258) (1,702) Primary B Shares.......................................... -- -- Investor A Shares......................................... (2,722) (3,761) Investor B Shares......................................... (3,996) (5,232) Investor C Shares......................................... (1,029) (435) Seafirst Shares**......................................... -- -- Net increase / (decrease) in net assets from Fund share transactions.............................................. 377,702 1,194,947 -------------- -------------- Net increase / (decrease) in net assets..................... (477,098) 1,604,618 NET ASSETS: Beginning of period......................................... 2,268,260 663,642 -------------- -------------- End of period............................................... $ 1,791,162 $ 2,268,260 ============== ============== Undistributed net investment income / (loss) /(distributions in excess of net investment income) at end of period...... $ -- $ -- ============== ==============
--------------- ** Seafirst Shares converted into Investor A Shares on June 23, 2000. # Amount represents results from operations prior to conversion to master-feeder structure. + Allocated from Focused Equities Master Portfolio. (a) As of October 8, 1999, Focused Equities converted to a master-feeder structure. (b) 21st Century commenced operations on April 10, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 134 139 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) MIDCAP GROWTH 21ST CENTURY SMALL COMPANY ------------------------------- -------------- ------------------------------- YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED 3/31/01 3/31/00 3/31/01(B) 3/31/01 3/31/00 -------------------------------------------------------------------------------------- $ (1,528) $ (1,619) $ (1,094) $ (5,167) $ (4,427) 44,773 45,199 (27,841) 49,901 94,410 -- -- -- -- -- (136,460) 110,683 (3,281) (342,864) 342,129 -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- (93,215) 154,263 (32,216) (298,130) 432,112 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (49,056) (7,942) -- (70,449) (682) -- -- -- -- -- (4,105) (711) -- (22,843) (268) (10,018) (1,551) -- (1,589) (12) (640) (71) -- (406) (4) -- -- -- -- -- 252,305 (17,593) 114,507 121,000 128,329 -------------- -------------- -------------- -------------- -------------- 95,271 126,395 82,291 (272,417) 559,475 356,926 230,531 -- 910,677 351,202 -------------- -------------- -------------- -------------- -------------- $ 452,197 $ 356,926 $ 82,291 $ 638,260 $ 910,677 ============== ============== ============== ============== ============== $ -- $ -- $ -- $ -- $ -- ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 135 140 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
CONVERTIBLE SECURITIES YEAR ENDED PERIOD ENDED PERIOD ENDED MARCH 31, 2001 MARCH 31, 2000 MAY 14, 1999(A) ------------------ ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS ------------------------------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold....................................... 4,303 $ 74,930 738 $ 13,925 -- $ -- Issued as reinvestment of dividends........ 56 979 15 284 -- -- Redeemed................................... (263) (4,739) (136) (2,464) -- -- ------ -------- ------ -------- ------ -------- Net increase/(decrease).................... 4,096 $ 71,170 617 $ 11,745 -- $ -- ====== ======== ====== ======== ====== ======== INVESTOR A SHARES: Sold....................................... 1,877 $ 34,026 859 $ 16,460 249 $ 4,450 Issued as reinvestment of dividends........ 4,124 74,335 1,556 28,423 110 1,937 Redeemed................................... (2,979) (54,653) (4,975) (94,506) (1,666) (29,719) ------ -------- ------ -------- ------ -------- Net increase/(decrease).................... 3,022 $ 53,708 (2,560) $(49,623) (1,307) $(23,332) ====== ======== ====== ======== ====== ======== INVESTOR B SHARES: Sold....................................... 2,606 $ 46,115 294 $ 5,681 52 $ 918 Issued as reinvestment of dividends........ 241 4,250 30 541 1 17 Redeemed................................... (227) (3,928) (58) (1,115) (6) (113) ------ -------- ------ -------- ------ -------- Net increase/(decrease).................... 2,620 $ 46,437 266 $ 5,107 47 $ 822 ====== ======== ====== ======== ====== ======== INVESTOR C SHARES: Sold....................................... 486 $ 8,810 72 $ 1,364 23 $ 417 Issued as reinvestment of dividends........ 52 935 11 196 1 21 Redeemed................................... (64) (1,125) (158) (2,982) (43) (781) ------ -------- ------ -------- ------ -------- Net increase/(decrease).................... 474 $ 8,620 (75) $ (1,422) (19) $ (343) ====== ======== ====== ======== ====== ======== Total net increase/(decrease).............. 10,212 $179,935 (1,752) $(34,193) (1,279) $(22,853) ====== ======== ====== ======== ====== ========
--------------- (a) Represents financial information from March 1, 1999 for the Pacific Horizon Capital Income Fund, which was reorganized into Convertible Securities on May 21, 1999. SEE NOTES TO FINANCIAL STATEMENTS. 136 141 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
BALANCED ASSETS YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 258 $ 2,661 149 $ 1,589 Issued as reinvestment of dividends....................... 77 773 93 950 Redeemed.................................................. (514) (5,322) (1,371) (14,441) ------ -------- ------ -------- Net increase/(decrease)................................... (179) $ (1,888) (1,129) $(11,902) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 663 $ 6,848 123 $ 1,296 Issued as reinvestment of dividends....................... 26 262 34 352 Redeemed.................................................. (266) (2,733) (1,072) (11,093) ------ -------- ------ -------- Net increase/(decrease)................................... 423 $ 4,377 (915) $ (9,445) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 230 $ 2,346 418 $ 4,430 Issued as reinvestment of dividends....................... 81 811 106 1,091 Redeemed.................................................. (1,427) (14,539) (2,433) (25,045) ------ -------- ------ -------- Net increase/(decrease)................................... (1,116) $(11,382) (1,909) $(19,524) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 96 $ 979 23 $ 242 Issued as reinvestment of dividends....................... 2 22 3 27 Redeemed.................................................. (58) (583) (52) (538) ------ -------- ------ -------- Net increase/(decrease)................................... 40 $ 418 (26) $ (269) ====== ======== ====== ======== Total net increase/(decrease)............................. (832) $ (8,475) (3,979) $(41,140) ====== ======== ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 137 142 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
ASSET ALLOCATION YEAR ENDED PERIOD ENDED PERIOD ENDED MARCH 31, 2001 MARCH 31, 2000 MAY 14, 1999(A) ------------------- ----------------- ---------------- SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS ------------------------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold.............................................. 84 $ 1,988 677 $ 15,720 -- $ -- Issued in exchange for assets of Boatmen's Trust Company Balanced Investment Fund (Note 10)...... 595 13,617 -- -- -- -- Issued as reinvestment of dividends............... 38 851 16 366 -- -- Redeemed.......................................... (723) (17,027) (55) (1,271) -- -- ------- --------- ------ -------- ---- ------- Net increase/(decrease)........................... (6) $ (571) 638 $ 14,815 -- $ -- ======= ========= ====== ======== ==== ======= INVESTOR A SHARES: Sold.............................................. 8,718 $ 203,704 301 $ 7,189 129 $ 3,014 Issued in exchange for:........................... -- A Shares of Time Horizon Portfolio I (Note 10)........................................... -- -- 336 7,832 -- -- A Shares of Time Horizon Portfolio II (Note 10)........................................... -- -- 489 11,379 -- -- A Shares of Time Horizon Portfolio III (Note 10)........................................... -- -- 529 12,317 -- -- Issued as reinvestment of dividends............... 592 13,217 153 3,514 15 338 Redeemed.......................................... (1,339) (30,373) (1,468) (34,435) (261) (6,117) ------- --------- ------ -------- ---- ------- Net increase/(decrease)........................... 7,971 $ 186,548 340 $ 7,796 (117) $(2,765) ======= ========= ====== ======== ==== ======= INVESTOR B SHARES: Sold.............................................. 713 $ 16,349 1,127 $ 26,086 199 $ 4,627 Issued in exchange for: B Shares of Time Horizon Portfolio I (Note 10)........................................... -- -- 1,063 24,689 -- -- B Shares of Time Horizon Portfolio II (Note 10)........................................... -- -- 1,381 32,027 -- -- B Shares of Time Horizon Portfolio III (Note 10)........................................... -- -- 1,641 38,074 -- -- Issued as reinvestment of dividends............... 306 6,828 159 3,640 1 27 Redeemed.......................................... (856) (19,326) (797) (18,438) (6) (130) ------- --------- ------ -------- ---- ------- Net increase/(decrease)........................... 163 $ 3,851 4,574 $106,078 194 $ 4,524 ======= ========= ====== ======== ==== ======= INVESTOR C SHARES: Sold.............................................. 42 $ 963 77 $ 1,782 26 $ 611 Issued in exchange for: K Shares of Time Horizon Portfolio I (Note 10)........................................... -- -- --* 11 -- -- K Shares of Time Horizon Portfolio II (Note 10)........................................... -- -- --* 8 -- -- K Shares of Time Horizon Portfolio III (Note 10)........................................... -- -- --* 1 -- -- Issued as reinvestment of dividends............... 7 164 3 82 -- 8 Redeemed.......................................... (19) (440) (84) (1,978) (7) (176) ------- --------- ------ -------- ---- ------- Net increase/(decrease)........................... 30 $ 687 (4) $ (94) 19 $ 443 ======= ========= ====== ======== ==== ======= SEAFIRST SHARES:** Sold.............................................. 3 $ (1,244) 118 $ 2,600 211 $ 3,725 Issued as reinvestment of dividends............... 511 8,511 763 13,135 82 1,428 Redeemed.......................................... (11,904) (202,856) (1,584) (28,129) (418) (7,377) ------- --------- ------ -------- ---- ------- Net increase/(decrease)........................... (11,390) $(195,589) (703) $(12,394) (125) $(2,224) ======= ========= ====== ======== ==== ======= Total net increase/(decrease)..................... (3,232) $ (5,074) 4,845 $116,201 (29) $ (22) ======= ========= ====== ======== ==== =======
--------------- * Amount represents less than 500 shares and/or $500, as applicable. ** Seafirst Shares converted into Investor A Shares on June 23, 2000. (a) Represents financial information from March 1, 1999 for the Pacific Horizon Asset Allocation Fund, which was reorganized into Asset Allocation on May 21, 1999. SEE NOTES TO FINANCIAL STATEMENTS. 138 143 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
EQUITY INCOME YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 4,627 $ 46,558 3,880 $ 45,563 Issued in exchange for assets of Boatmen's Trust Company Equity Income Fund (Note 10)............................ 8,529 95,694 -- -- Issued in exchange for assets of BCA Equity Income Fund (Note 10)............................................... 8,236 92,411 -- -- Issued as reinvestment of dividends....................... 67 693 45 515 Redeemed.................................................. (19,102) (205,163) (20,182) (237,504) ------- --------- ------- --------- Net increase/(decrease)................................... 2,357 $ 30,193 (16,257) $(191,426) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 2,329 $ 25,364 516 $ 6,159 Issued as reinvestment of dividends....................... 134 1,369 76 886 Redeemed.................................................. (2,914) (31,664) (2,210) (26,050) ------- --------- ------- --------- Net increase/(decrease)................................... (451) $ (4,931) (1,618) $ (19,005) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 76 $ 802 160 $ 1,918 Issued as reinvestment of dividends....................... 264 2,696 124 1,422 Redeemed.................................................. (1,855) (19,717) (3,384) (39,252) ------- --------- ------- --------- Net increase/(decrease)................................... (1,515) $ (16,219) (3,100) $ (35,912) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 18 $ 194 19 $ 226 Issued as reinvestment of dividends....................... 16 163 7 82 Redeemed.................................................. (100) (1,098) (158) (1,864) ------- --------- ------- --------- Net increase/(decrease)................................... (66) $ (741) (132) $ (1,556) ======= ========= ======= ========= Total net increase/(decrease)............................. 325 $ 8,302 (21,107) $(247,899) ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 139 144 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
VALUE YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 13,724 $ 187,454 6,945 $ 118,586 Issued in exchange for assets of Boatmen's Trust Company Equity Value Fund (Note 10)............................. 8,401 119,967 -- -- Issued in exchange for assets of Bank IV Kansas Stock Fund (Note 10)............................................... 3,322 47,444 -- -- Issued as reinvestment of dividends....................... 10,399 140,495 4,592 79,800 Redeemed.................................................. (47,130) (650,863) (38,909) (661,959) ------- --------- ------- --------- Net increase/(decrease)................................... (11,284) $(155,503) (27,372) $(463,573) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 2,029 $ 28,207 3,144 $ 54,395 Issued as reinvestment of dividends....................... 1,270 17,208 702 12,174 Redeemed.................................................. (3,772) (52,575) (5,568) (94,505) ------- --------- ------- --------- Net increase/(decrease)................................... (473) $ (7,160) (1,722) $ (27,936) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 461 $ 6,099 968 $ 17,110 Issued as reinvestment of dividends....................... 1,878 24,984 889 15,224 Redeemed.................................................. (2,419) (32,995) (2,666) (44,195) ------- --------- ------- --------- Net increase/(decrease)................................... (80) $ (1,912) (809) $ (11,861) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 105 $ 1,395 105 $ 1,806 Issued as reinvestment of dividends....................... 165 2,187 71 1,219 Redeemed.................................................. (199) (2,615) (221) (3,693) ------- --------- ------- --------- Net increase/(decrease)................................... 71 $ 967 (45) $ (668) ======= ========= ======= ========= Total net increase/(decrease)............................. (11,766) $(163,608) (29,948) $(504,038) ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 140 145 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
GROWTH & INCOME YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ---------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 3,718 $ 68,304 6,082 $110,230 Issued as reinvestment of dividends....................... 22 394 7 118 Redeemed.................................................. (3,568) (64,897) (4,363) (78,685) ------ -------- ------ -------- Net increase/(decrease)................................... 172 $ 3,801 1,726 $ 31,663 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 7,578 $138,255 6,807 $128,700 Issued as reinvestment of dividends....................... 63 1,161 6 95 Redeemed.................................................. (4,748) (85,066) (1,580) (28,598) ------ -------- ------ -------- Net increase/(decrease)................................... 2,893 $ 54,350 5,233 $100,197 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 4,479 $ 82,747 8,825 $156,540 Issued as reinvestment of dividends....................... 123 2,210 21 328 Redeemed.................................................. (2,475) (42,741) (1,190) (21,099) ------ -------- ------ -------- Net increase/(decrease)................................... 2,127 $ 42,216 7,656 $135,769 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 1,144 $ 20,876 1,506 $ 27,336 Issued as reinvestment of dividends....................... 13 244 1 15 Redeemed.................................................. (566) (9,570) (94) (1,770) ------ -------- ------ -------- Net increase/(decrease)................................... 591 $ 11,550 1,413 $ 25,581 ====== ======== ====== ======== Total net increase/(decrease)............................. 5,783 $111,917 16,028 $293,210 ====== ======== ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 141 146 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
BLUE CHIP YEAR ENDED PERIOD ENDED PERIOD ENDED MARCH 31, 2001 MARCH 31, 2000 MAY 14, 1999(a) -------------------- ------------------- ------------------ SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS ----------------------------------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold................................... 1,128 $ 35,311 1,263 $ 45,270 -- $ -- Issued as reinvestment of dividends.... 37 1,238 33 1,102 -- -- Redeemed............................... (281) (9,285) (321) (11,193) -- -- ------- --------- ------ --------- ---- -------- Net increase/(decrease)................ 884 $ 27,264 975 $ 35,179 -- $ -- ======= ========= ====== ========= ==== ======== INVESTOR A SHARES: Sold................................... 14,386 $ 491,446 1,493 $ 53,082 520 $ 18,418 Issued as reinvestment of dividends.... 945 31,343 914 30,421 -- 6 Redeemed............................... (3,114) (100,615) (3,608) (128,588) (721) (25,590) ------- --------- ------ --------- ---- -------- Net increase/(decrease)................ 12,217 $ 422,174 (1,201) (45,085) (201) $ (7,166) ======= ========= ====== ========= ==== ======== INVESTOR B SHARES: Sold................................... 1,189 $ 39,252 1,525 $ 53,125 210 $ 7,461 Issued as reinvestment of dividends.... 177 5,811 117 3,877 -- -- Redeemed............................... (504) (15,554) (177) (5,879) (9) (311) ------- --------- ------ --------- ---- -------- Net increase/(decrease)................ 862 $ 29,509 1,465 $ 51,123 201 $ 7,150 ======= ========= ====== ========= ==== ======== INVESTOR C SHARES: Sold................................... 256 $ 8,277 296 $ 10,373 58 $ 2,048 Issued as reinvestment of dividends.... 41 1,336 37 1,233 -- -- Redeemed............................... (105) (3,215) (288) (10,175) (37) (1,319) ------- --------- ------ --------- ---- -------- Net increase/(decrease)................ 192 $ 6,398 45 $ 1,431 21 $ 729 ======= ========= ====== ========= ==== ======== SEAFIRST SHARES:* Sold................................... 45 $ 1,381 273 $ 8,531 350 $ 10,944 Issued as reinvestment of dividends.... 1,047 30,470 1,597 46,245 11 343 Redeemed............................... (15,610) (462,222) (1,389) (43,144) (513) (16,053) ------- --------- ------ --------- ---- -------- Net increase/(decrease)................ (14,518) $(430,371) 481 $ 11,632 (152) $ (4,766) ======= ========= ====== ========= ==== ======== Total net increase/(decrease).......... (363) $ 54,974 1,765 $ 54,280 (131) $ (4,053) ======= ========= ====== ========= ==== ========
--------------- * Seafirst Shares converted into Investor A Shares on June 23, 2000. (a) Represents financial information from March 1, 1999 for the Pacific Horizon Blue Chip Fund, which was reorganized into Blue Chip on May 21, 1999. SEE NOTES TO FINANCIAL STATEMENTS. 142 147 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
STRATEGIC GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 -------------------- ------------------ SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 41,452 $ 624,841 36,734 $556,572 Issued in exchange for assets of BCA Diversified Stock Fund (Note 10).......................................... 19,506 307,415 -- -- Issued as reinvestment of dividends....................... 9 135 38 543 Redeemed.................................................. (16,684) (250,071) (5,508) (83,129) ------- --------- ------ -------- Net increase/(decrease)................................... 44,283 $ 682,320 31,264 $473,986 ======= ========= ====== ======== INVESTOR A SHARES:+ Sold...................................................... 1,733 $ 26,456 365 $ 5,684 Issued as reinvestment of dividends....................... 1 9 --* 3 Redeemed.................................................. (1,102) (15,994) (41) (630) ------- --------- ------ -------- Net increase/(decrease)................................... 632 $ 10,471 324 $ 5,057 ======= ========= ====== ======== INVESTOR B SHARES:+ Sold...................................................... 343 $ 5,403 301 $ 4,692 Issued as reinvestment of dividends....................... 1 8 --* 3 Redeemed.................................................. (86) (1,266) (9) (145) ------- --------- ------ -------- Net increase/(decrease)................................... 258 $ 4,145 292 $ 4,550 ======= ========= ====== ======== INVESTOR C SHARES:+ Sold...................................................... 100 $ 1,518 101 $ 1,555 Issued as reinvestment of dividends....................... --* 3 --* 2 Redeemed.................................................. (27) (357) --* (4) ------- --------- ------ -------- Net increase/(decrease)................................... 73 $ 1,164 101 $ 1,553 ======= ========= ====== ======== Total net increase/(decrease)............................. 45,246 $ 698,100 31,981 $485,146 ======= ========= ====== ========
--------------- * Amount represents less than 500 shares and/or $500, as applicable. + Strategic Growth Investor A, Investor B and Investor C Shares commenced operations on August 2, 1999. SEE NOTES TO FINANCIAL STATEMENTS. 143 148 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
CAPITAL GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 24,361 $ 279,518 10,051 $ 130,555 Issued as reinvestment of dividends....................... 4,523 50,458 1,564 18,939 Redeemed.................................................. (20,791) (246,813) (16,881) (216,390) ------- --------- ------- --------- Net increase/(decrease)................................... 8,093 $ 83,163 (5,266) $ (66,896) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 8,560 $ 112,054 12,595 $ 159,304 Issued as reinvestment of dividends....................... 755 8,291 268 3,217 Redeemed.................................................. (9,611) (123,107) (13,011) (164,173) ------- --------- ------- --------- Net increase/(decrease)................................... (296) $ (2,762) (148) $ (1,652) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 433 $ 4,873 462 $ 5,452 Issued as reinvestment of dividends....................... 1,236 12,568 418 4,739 Redeemed.................................................. (1,155) (11,999) (1,117) (13,279) ------- --------- ------- --------- Net increase/(decrease)................................... 514 $ 5,442 (237) $ (3,088) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 49 $ 588 68 $ 824 Issued as reinvestment of dividends....................... 79 814 26 299 Redeemed.................................................. (45) (476) (74) (915) ------- --------- ------- --------- Net increase/(decrease)................................... 83 $ 926 20 $ 208 ======= ========= ======= ========= Total net increase/(decrease)............................. 8,394 $ 86,769 (5,631) $ (71,428) ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 144 149 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
AGGRESSIVE GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 ------------------- ------------------- SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 433 $ 8,044 3,001 $ 77,380 Issued in exchange for assets of BCA Retail Trust Equity Fund (Note 10).......................................... 1,485 28,949 -- -- Issued as reinvestment of dividends....................... 1,409 21,618 1,774 37,908 Redeemed.................................................. (8,196) (154,852) (6,497) (150,271) ------ --------- ------ --------- Net increase/(decrease)................................... (4,869) $ (96,241) (1,722) $ (34,983) ====== ========= ====== ========= INVESTOR A SHARES: Sold...................................................... 1,366 $ 25,038 2,593 $ 57,533 Issued as reinvestment of dividends....................... 303 4,592 318 6,776 Redeemed.................................................. (1,861) (33,329) (3,479) (75,702) ------ --------- ------ --------- Net increase/(decrease)................................... (192) $ (3,699) (568) $ (11,393) ====== ========= ====== ========= INVESTOR B SHARES: Sold...................................................... 43 $ 711 369 $ 9,218 Issued as reinvestment of dividends....................... 268 3,827 304 6,194 Redeemed.................................................. (648) (10,539) (900) (18,890) ------ --------- ------ --------- Net increase/(decrease)................................... (337) $ (6,001) (227) $ (3,478) ====== ========= ====== ========= INVESTOR C SHARES: Sold...................................................... 5 $ 75 25 $ 577 Issued as reinvestment of dividends....................... 9 133 10 218 Redeemed.................................................. (31) (530) (31) (660) ------ --------- ------ --------- Net increase/(decrease)................................... (17) $ (322) 4 $ 135 ====== ========= ====== ========= Total net increase/(decrease)............................. (5,415) $(106,263) (2,513) $ (49,719) ====== ========= ====== =========
SEE NOTES TO FINANCIAL STATEMENTS. 145 150 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
FOCUSED EQUITIES YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 -------------------- --------------------- SHARES DOLLARS SHARES DOLLARS ----------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 23,979 $ 481,030 19,546 $ 392,072 Issued as reinvestment of dividends....................... 31 612 53 923 Redeemed.................................................. (15,395) (296,319) (11,452) (235,823) ------- --------- ------- ---------- Net increase/(decrease)................................... 8,615 $ 185,323 8,147 $ 157,172 ======= ========= ======= ========== INVESTOR A SHARES: Sold...................................................... 17,843 $ 349,226 23,689 $ 469,267 Issued as reinvestment of dividends....................... 131 2,551 189 3,274 Redeemed.................................................. (16,475) (305,968) (7,516) (147,452) ------- --------- ------- ---------- Net increase/(decrease)................................... 1,499 $ 45,809 16,362 $ 325,089 ======= ========= ======= ========== INVESTOR B SHARES: Sold...................................................... 11,165 $ 218,887 29,697 $ 567,819 Issued as reinvestment of dividends....................... 193 3,708 281 4,822 Redeemed.................................................. (7,024) (127,737) (3,330) (63,436) ------- --------- ------- ---------- Net increase/(decrease)................................... 4,334 $ 94,858 26,648 $ 509,205 ======= ========= ======= ========== INVESTOR C SHARES: Sold...................................................... 5,140 $ 100,905 10,976 $ 217,458 Issued as reinvestment of dividends....................... 49 940 16 285 Redeemed.................................................. (2,736) (50,133) (730) (14,262) ------- --------- ------- ---------- Net increase/(decrease)................................... 2,453 $ 51,712 10,262 $ 203,481 ======= ========= ======= ========== Total net increase/(decrease)............................. 16,901 $ 377,702 61,419 $1,194,947 ======= ========= ======= ==========
SEE NOTES TO FINANCIAL STATEMENTS. 146 151 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MIDCAP GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 ------------------- -------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 15,842 $ 267,234 1,226 $ 23,013 Issued as reinvestment of dividends....................... 1,824 33,238 362 5,621 Redeemed.................................................. (3,722) (69,296) (2,368) (37,950) ------ --------- ------- --------- Net increase/(decrease)................................... 13,944 $ 231,176 (780) $ (9,316) ====== ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 8,527 $ 160,482 13,817 $ 222,914 Issued as reinvestment of dividends....................... 200 3,531 45 688 Redeemed.................................................. (8,597) (161,868) (14,206) (228,626) ------ --------- ------- --------- Net increase/(decrease)................................... 130 $ 2,145 (344) $ (5,024) ====== ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 922 $ 15,604 191 $ 3,200 Issued as reinvestment of dividends....................... 593 9,608 107 1,516 Redeemed.................................................. (510) (8,365) (572) (8,217) ------ --------- ------- --------- Net increase/(decrease)................................... 1,005 $ 16,847 (274) $ (3,501) ====== ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 188 $ 3,217 57 $ 944 Issued as reinvestment of dividends....................... 35 574 5 70 Redeemed.................................................. (100) (1,654) (46) (766) ------ --------- ------- --------- Net increase/(decrease)................................... 123 $ 2,137 16 $ 248 ====== ========= ======= ========= Total net increase/(decrease)............................. 15,202 $ 252,305 (1,382) $ (17,593) ====== ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 147 152 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
21ST CENTURY PERIOD ENDED MARCH 31, 2001 ------------------ SHARES DOLLARS ------------------ (IN THOUSANDS) PRIMARY A SHARES:+ Sold...................................................... 1,161 $ 10,793 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. (347) (3,291) ------ -------- Net increase/(decrease)................................... 814 $ 7,502 ====== ======== INVESTOR A SHARES:+ Sold...................................................... 3,791 $ 35,864 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. (972) (8,241) ------ -------- Net increase/(decrease)................................... 2,819 $ 27,623 ====== ======== INVESTOR B SHARES:+ Sold...................................................... 8,142 $ 77,371 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. (854) (7,062) ------ -------- Net increase/(decrease)................................... 7,288 $ 70,309 ====== ======== INVESTOR C SHARES:+ Sold...................................................... 1,128 $ 10,604 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. (180) (1,531) ------ -------- Net increase/(decrease)................................... 948 $ 9,073 ====== ======== Total net increase/(decrease)............................. 11,869 $114,507 ====== ========
--------------- + 21st Century Primary A, Investor A, Investor B and Investor C Shares commenced operations on April 10, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 148 153 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SMALL COMPANY YEAR ENDED YEAR ENDED MARCH 31, 2001 MARCH 31, 2000 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 30,059 $ 551,615 19,767 $ 320,356 Issued in exchange for assets of Boatmen's Trust Company Managed Small Capitalization Fund (Note 10)............. 4,939 88,407 -- -- Issued as reinvestment of dividends....................... 2,589 45,725 35 524 Redeemed.................................................. (31,324) (563,141) (19,725) (312,274) ------- --------- ------- --------- Net increase/(decrease)................................... 6,263 $ 122,606 77 $ 8,606 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 27,263 $ 510,037 22,290 $ 343,670 Issued in exchange for A Shares of Pacific Horizon Aggressive Growth Fund (Note 10)........................ -- -- 12,965 159,453 Issued as reinvestment of dividends....................... 1,211 21,153 17 250 Redeemed.................................................. (28,577) (538,591) (25,748) (386,849) ------- --------- ------- --------- Net increase/(decrease)................................... (103) $ (7,401) 9,524 $ 116,524 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 311 $ 5,648 248 $ 4,544 Issued in exchange for B Shares of Pacific Horizon Aggressive Growth Fund (Note 10)........................ -- -- 49 591 Issued as reinvestment of dividends....................... 86 1,462 1 12 Redeemed.................................................. (130) (2,277) (124) (1,696) ------- --------- ------- --------- Net increase/(decrease)................................... 267 $ 4,833 174 $ 3,451 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 78 $ 1,427 62 $ 1,002 Issued in exchange for K Shares of Pacific Horizon Aggressive Growth Fund (Note 10)........................ -- -- 337 4,122 Issued as reinvestment of dividends....................... 22 386 --* 4 Redeemed.................................................. (49) (851) (409) (5,380) ------- --------- ------- --------- Net increase/(decrease)................................... 51 $ 962 (10) $ (252) ======= ========= ======= ========= Total net increase/(decrease)............................. 6,478 $ 121,000 9,765 $ 128,329 ======= ========= ======= =========
--------------- * Amount represents less than 500 shares and/or $500, as applicable. SEE NOTES TO FINANCIAL STATEMENTS. 149 154 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- CONVERTIBLE SECURITIES PRIMARY A SHARES Year ended 3/31/2001...................... $22.18 $0.51 $(2.00) $(1.49) $(0.60) Period ended 3/31/2000***#................ 18.15 0.42 5.52 5.94 (0.50) INVESTOR A SHARES* Year ended 3/31/2001...................... $22.17 $0.51 $(2.05) $(1.54) $(0.55) Period ended 3/31/2000#................... 18.31 0.46 5.26 5.72 (0.45) Period ended 5/14/1999.................... 17.34 0.12 0.96 1.08 (0.11) Year ended 2/28/1999...................... 17.28 0.51 0.25 0.76 (0.52) Year ended 2/28/1998...................... 17.35 0.58 2.89 3.47 (0.59) Year ended 2/28/1997**.................... 16.42 0.57 2.34 2.91 (0.57) INVESTOR B SHARES* Year ended 3/31/2001...................... $22.06 $0.35 $(2.00) $(1.65) $(0.45) Period ended 3/31/2000#................... 18.27 0.44 5.12 5.56 (0.36) Period ended 5/14/1999.................... 17.30 0.09 0.96 1.05 (0.27) Period ended 2/28/1999***................. 17.67 0.22 (0.17) 0.05 (0.24) INVESTOR C SHARES* Year ended 3/31/2001...................... $22.23 $0.35 $(2.02) $(1.67) $(0.44) Period ended 3/31/2000#................... 18.35 0.38 5.22 5.60 (0.31) Period ended 5/14/1999.................... 17.37 0.10 0.97 1.07 (0.09) Year ended 2/28/1999...................... 17.24 0.40 0.31 0.71 (0.40) Year ended 2/28/1998...................... 17.30 0.48 2.89 3.37 (0.48) Period ended 2/28/1997***................. 16.24 0.32 2.43 2.75 (0.28) DISTRIBUTIONS FROM NET REALIZED GAINS ------------- CONVERTIBLE SECURITIES PRIMARY A SHARES Year ended 3/31/2001...................... $(3.97) Period ended 3/31/2000***#................ (1.41) INVESTOR A SHARES* Year ended 3/31/2001...................... $(3.97) Period ended 3/31/2000#................... (1.41) Period ended 5/14/1999.................... -- Year ended 2/28/1999...................... (0.18) Year ended 2/28/1998...................... (2.95) Year ended 2/28/1997**.................... (1.41) INVESTOR B SHARES* Year ended 3/31/2001...................... $(3.97) Period ended 3/31/2000#................... (1.41) Period ended 5/14/1999.................... -- Period ended 2/28/1999***................. (0.18) INVESTOR C SHARES* Year ended 3/31/2001...................... $(3.97) Period ended 3/31/2000#................... (1.41) Period ended 5/14/1999.................... -- Year ended 2/28/1999...................... (0.18) Year ended 2/28/1998...................... (2.95) Period ended 2/28/1997***................. (1.41)
--------------- + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * The financial information for the fiscal periods through May 14, 1999 reflect the financial information for the Pacific Horizon Capital Income Fund A, B and K Shares, which were reorganized into the Convertible Securities Investor A, Investor B and Investor C Shares, respectively, as of May 21, 1999. Prior to May 21, 1999, the Fund's investment adviser was Bank of America National Trust and Savings Association. Effective May 21, 1999, its investment adviser became Banc of America Advisors, Inc. and its investment sub-adviser became Banc of America Capital Management, Inc. ** As of July 22, 1996, the Portfolio designated the existing series of shares as "A" Shares. *** Convertible Securities Primary A, Investor B and Investor C Shares commenced operations on May 21, 1999, July 15, 1998 and October 21, 1996, respectively. # Per share net investment income has been calculated using the monthly average shares method. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 150 155 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS TOTAL NET ASSETS OPERATING NET INVESTMENT IN EXCESS DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO OF NET AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER REALIZED GAINS DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS RATE ------------------------------------------------------------------------------------------------------------------- $(0.07) $(4.64) $16.05 (7.59)% $ 75,627 0.99%(a)(b) 3.08% 73% -- (1.91) 22.18 35.21 13,688 0.97+(b) 2.21+ 65 $(0.07) $(4.59) $16.04 (7.88)% $315,857 1.24%(a)(b) 2.86% 73% -- (1.86) 22.17 33.68 369,488 1.22+(b) 1.96+ 65 -- (0.11) 18.31 6.25 352,000 1.30+ 3.07+ 16 -- (0.70) 17.34 4.64 356,000 1.15(a) 2.97 66 -- (3.54) 17.28 21.54 391,000 1.10(a) 3.35 69 -- (1.98) 17.35 18.53 309,000 1.18(a) 3.40 124 $(0.07) $(4.49) $15.92 (8.49)% $ 49,763 1.99%(a)(b) 2.08% 73% -- (1.77) 22.06 32.76 11,175 1.97+(b) 1.21+ 65 -- (0.08) 18.27 6.10 4,000 2.06+ 2.34+ 16 -- (0.42) 17.30 0.44 3,000 1.96+(a) 2.14+ 66 $(0.07) $(4.48) $16.08 (8.50)% $ 9,827 1.99%(a)(b) 2.08% 73% -- (1.72) 22.23 32.81 3,033 1.97+(b) 1.21+ 65 -- (0.09) 18.35 6.17 4,000 1.80+ 2.56+ 16 -- (0.58) 17.37 4.29 4,000 1.65(a) 2.45 66 -- (3.43) 17.24 20.97 3,000 1.60 2.85 69 -- (1.69) 17.30 17.47 1,000 1.66+ 2.85+ 124 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS --------------- 1.00%(a) 0.98+ 1.25%(a) 1.23+ 1.32+ 1.16(a) 1.12(a) 1.19(a) 2.00%(a) 1.98+ 2.08+ 1.97(a)+ 2.00%(a) 1.98+ 2.07+ 1.91(a) 1.86 1.91+
SEE NOTES TO FINANCIAL STATEMENTS. 151 156 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF YEAR INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS ---------------------------------------------------------------------------------------------- BALANCED ASSETS PRIMARY A SHARES Year ended 3/31/2001#.......... $10.17 $0.37 $(0.07) $ 0.30 $(0.27) $ -- Year ended 3/31/2000#.......... 10.39 0.30 (0.22) 0.08 (0.30) -- Year ended 3/31/1999#.......... 11.49 0.26 (0.39) (0.13) (0.23) (0.74) Year ended 3/31/1998........... 11.15 0.29 2.68 2.97 (0.29) (2.34) Year ended 3/31/1997........... 11.65 0.39 1.03 1.42 (0.38) (1.54) INVESTOR A SHARES Year ended 3/31/2001#.......... $10.16 $0.33 $(0.05) $ 0.28 $(0.25) $ -- Year ended 3/31/2000#.......... 10.38 0.24 (0.19) 0.05 (0.27) -- Year ended 3/31/1999#.......... 11.47 0.23 (0.38) (0.15) (0.20) (0.74) Year ended 3/31/1998........... 11.13 0.27 2.68 2.95 (0.27) (2.34) Year ended 3/31/1997........... 11.64 0.34 1.05 1.39 (0.36) (1.54) INVESTOR B SHARES Year ended 3/31/2001#.......... $10.14 $0.27 $(0.07) $ 0.20 $(0.19) $ -- Year ended 3/31/2000#.......... 10.36 0.17 (0.20) (0.03) (0.19) -- Year ended 3/31/1999#.......... 11.45 0.15 (0.38) (0.23) (0.12) (0.74) Year ended 3/31/1998........... 11.11 0.19 2.68 2.87 (0.19) (2.34) Year ended 3/31/1997........... 11.62 0.29 1.04 1.33 (0.30) (1.54) INVESTOR C SHARES Year ended 3/31/2001#.......... $10.10 $0.25 $(0.05) $ 0.20 $(0.20) $ -- Year ended 3/31/2000#.......... 10.32 0.17 (0.20) (0.03) (0.19) -- Year ended 3/31/1999#.......... 11.41 0.15 (0.38) (0.23) (0.12) (0.74) Year ended 3/31/1998........... 11.08 0.20 2.67 2.87 (0.20) (2.34) Year ended 3/31/1997........... 11.60 0.33 1.02 1.35 (0.33) (1.54)
--------------- ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average shares method. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 152 157 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND VALUE TOTAL YEAR AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS END OF YEAR RETURN++ (000) ASSETS ASSETS RATE NET ASSETS -------------------------------------------------------------------------------------------------------------------- $(0.27) $10.20 3.07% $ 34,151 0.98%(a)(b) 3.61% 189% 1.18%(a) (0.30) 10.17 0.73 35,850 1.01(a)(b) 2.61 103 1.15(a) (0.97) 10.39 (1.20) 48,373 1.00(a)(b) 2.43 126 1.00(a) (2.63) 11.49 30.35 20,299 1.08(a)(b) 2.70 276 1.08(a) (1.92) 11.15 12.50 135,731 1.00(a) 3.31 264 1.00(a) $(0.25) $10.19 2.80% $ 15,585 1.23%(a)(b) 3.36% 189% 1.43%(a) (0.27) 10.16 0.47 11,240 1.26(a)(b) 2.36 103 1.40(a) (0.94) 10.38 (1.36) 20,979 1.25(a)(b) 2.18 126 1.25(a) (2.61) 11.47 30.13 16,009 1.33(a)(b) 2.45 276 1.33(a) (1.90) 11.13 12.18 9,075 1.25(a) 3.06 264 1.25(a) $(0.19) $10.15 2.01% $ 41,539 1.98%(a)(b) 2.61% 189% 2.18%(a) (0.19) 10.14 (0.30) 52,810 2.01(a)(b) 1.61 103 2.15(a) (0.86) 10.36 (2.13) 73,735 2.00(a)(b) 1.43 126 2.00(a) (2.53) 11.45 29.35 78,813 2.00(a)(b) 1.78 276 2.00(a) (1.84) 11.11 11.62 64,058 1.75(a) 2.56 264 1.75(a) $(0.20) $10.10 1.97% $ 1,722 1.98%(a)(b) 2.61% 189% 2.18%(a) (0.19) 10.10 (0.27) 1,315 2.01(a)(b) 1.61 103 2.15(a) (0.86) 10.32 (2.17) 1,614 2.00(a)(b) 1.43 126 2.00(a) (2.54) 11.41 29.43 1,947 1.91(a)(b) 1.87 276 1.91(a) (1.87) 11.08 11.85 1,396 1.50(a) 2.81 264 1.50(a)
SEE NOTES TO FINANCIAL STATEMENTS. 153 158 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS ---------------------------------------------------------------------------------------------- ASSET ALLOCATION PRIMARY A SHARES Year ended 3/31/2001#.......... $24.35 $0.57 $(2.84) $(2.27) $(0.55) $(1.21) Period ended 3/31/2000***#..... 23.06 0.49 1.93 2.42 (0.41) (0.72) INVESTOR A SHARES*,**** Year ended 3/31/2001#.......... $24.35 $0.50 $(2.82) $(2.32) $(0.50) $(1.21) Period ended 3/31/2000#........ 23.40 0.43 1.59 2.02 (0.35) (0.72) Period ended 5/14/1999......... 22.50 0.10 0.91 1.01 (0.11) -- Year ended 2/28/1999........... 21.41 0.55 2.48 3.03 (0.45) (1.49) Year ended 2/28/1998........... 19.40 0.52 3.72 4.24 (0.47) (1.76) Year ended 2/28/1997**......... 17.52 0.48 2.50 2.98 (0.46) (0.64) INVESTOR B SHARES* Year ended 3/31/2001#.......... $24.24 $0.33 $(2.81) $(2.48) $(0.33) $(1.21) Period ended 3/31/2000#........ 23.32 0.47 1.39 1.86 (0.22) (0.72) Period ended 5/14/1999......... 22.45 0.06 0.89 0.95 (0.08) -- Period ended 2/28/1999***...... 23.17 0.22 0.75 0.97 (0.20) (1.49) INVESTOR C SHARES* Year ended 3/31/2001#.......... $24.27 $0.33 $(2.82) $(2.49) $(0.33) $(1.21) Period ended 3/31/2000#........ 23.33 0.42 1.43 1.85 (0.19) (0.72) Period ended 5/14/1999......... 22.45 0.05 0.92 0.97 (0.09) -- Year ended 2/28/1999........... 21.36 0.44 2.49 2.93 (0.35) (1.49) Year ended 2/28/1998........... 19.40 0.41 3.66 4.07 (0.36) (1.75) Period ended 2/28/1997***...... 17.23 0.19 2.80 2.99 (0.18) (0.64)
--------------- + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * The financial information for the fiscal periods through May 14, 1999 reflect the financial information for the Pacific Horizon Asset Allocation Fund A, B, and K Shares, which were reorganized into the Asset Allocation Investor A, Investor B, and Investor C Shares, respectively, as of May 21, 1999. Prior to May 21, 1999, the Fund's investment adviser was Bank of America National Trust and Savings Association. Effective May 21, 1999, its investment adviser became Banc of America Advisors, Inc. and its investment sub-adviser became Banc of America Capital Management, Inc. ** As of July 22, 1996, the Fund designated the existing series of shares as "A" Shares. *** Asset Allocation Primary A, Investor B, and Investor C Shares commenced operations on May 21, 1999, July 15, 1998, and November 11, 1996, respectively. **** Seafirst Shares converted into Investor A Shares on June 23, 2000. # Per share net investment income has been calculated using the monthly average shares method. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 154 159 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS -------------------------------------------------------------------------------------------------------------------- $(1.76) $20.32 (9.83)% $ 12,847 0.98%(a)(b) 2.45% 88% 1.00%(a) (1.13) 24.35 10.88 15,532 0.95+(a)(b) 1.85+ 84 1.02+(a) $(1.71) $20.32 (10.05)% $231,520 1.23%(a)(b) 2.20% 88% 1.25%(a) (1.07) 24.35 8.99 83,412 1.20+(a)(b) 1.60+ 84 1.27+(a) (0.11) 23.40 4.50 72,000 1.18+ 2.01+ 20 1.20+ (1.94) 22.50 14.72 72,000 0.94 2.64 114 0.94 (2.23) 21.41 23.07 49,000 1.03 2.67 67 1.09 (1.10) 19.40 17.64 35,000 1.25 2.59 116 1.94 $(1.54) $20.22 (10.73)% $104,745 1.98%(a)(b) 1.45% 88% 2.00%(a) (0.94) 24.24 8.31 121,644 1.95+(a)(b) 0.85+ 84 2.02+(a) (0.08) 23.32 4.26 10,000 1.95+ 1.26+ 20 1.97+ (1.69) 22.45 4.59 6,000 1.74+ 1.92+ 114 1.74 $(1.54) $20.24 (10.74)% $ 2,532 1.98%(a)(b) 1.45% 88% 2.00%(a) (0.91) 24.27 8.24 2,305 1.95+(a)(b) 0.85+ 84 2.02+(a) (0.09) 23.33 4.31 2,000 1.67+ 1.52+ 20 1.96+ (1.84) 22.45 14.23 2,000 1.44 2.14 114 1.69 (2.11) 21.36 22.10 2,000 1.52 2.17 67 1.58 (0.82) 19.40 17.69 1,000 1.94+ 2.31+ 116 3.26+
SEE NOTES TO FINANCIAL STATEMENTS. 155 160 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF YEAR INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS ---------------------------------------------------------------------------------------------- EQUITY INCOME PRIMARY A SHARES Year ended 3/31/2001........... $11.57 $0.11 $(2.30) $(2.19) $(0.11) $(0.53) Year ended 3/31/2000........... 11.36 0.15 0.36 0.51 (0.15) (0.15) Year ended 3/31/1999#.......... 13.94 0.23 (1.45) (1.22) (0.23) (1.13) Year ended 3/31/1998#.......... 12.30 0.29 3.79 4.08 (0.28) (2.16) Year ended 3/31/1997........... 13.14 0.43 1.55 1.98 (0.41) (2.41) INVESTOR A SHARES Year ended 3/31/2001........... $11.52 $0.09 $(2.28) $(2.19) $(0.08) $(0.53) Year ended 3/31/2000........... 11.31 0.12 0.36 0.48 (0.12) (0.15) Year ended 3/31/1999#.......... 13.89 0.20 (1.45) (1.25) (0.20) (1.13) Year ended 3/31/1998#.......... 12.26 0.26 3.77 4.03 (0.24) (2.16) Year ended 3/31/1997........... 13.11 0.36 1.58 1.94 (0.38) (2.41) INVESTOR B SHARES Year ended 3/31/2001........... $11.51 $0.00## $(2.26) $(2.26) $(0.02) $(0.53) Year ended 3/31/2000........... 11.31 0.03 0.36 0.39 (0.04) (0.15) Year ended 3/31/1999#.......... 13.87 0.11 (1.45) (1.34) (0.09) (1.13) Year ended 3/31/1998#.......... 12.25 0.17 3.77 3.94 (0.16) (2.16) Year ended 3/31/1997........... 13.10 0.31 1.57 1.88 (0.32) (2.41) INVESTOR C SHARES Year ended 3/31/2001........... $11.66 $0.00## $(2.29) $(2.29) $(0.02) $(0.53) Year ended 3/31/2000........... 11.45 0.03 0.37 0.40 (0.04) (0.15) Year ended 3/31/1999#.......... 14.01 0.12 (1.44) (1.32) (0.11) (1.13) Year ended 3/31/1998#.......... 12.35 0.18 3.83 4.01 (0.19) (2.16) Year ended 3/31/1997........... 13.19 0.33 1.59 1.92 (0.35) (2.41)
--------------- ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average shares method. ## Amount represents less than $0.01 per share. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 156 161 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS -------------------------------------------------------------------------------------------------------------------- $(0.64) $ 8.74 (19.73)% $321,026 0.87%(a)(b) 1.06% 139% 0.87%(a) (0.30) 11.57 4.51 397,479 0.85(a)(b) 1.25 54 0.85(a) (1.36) 11.36 (9.40) 575,076 0.80(a)(b) 1.92 69 0.80(a) (2.44) 13.94 37.21 915,630 0.86(a) 2.22 74 0.86(a) (2.82) 12.30 15.62 200,772 0.91(a) 3.09 102 0.91(a) $(0.61) $ 8.72 (19.75)% $ 21,475 1.12%(a)(b) 0.81% 139% 1.12%(a) (0.27) 11.52 4.26 33,569 1.10(a)(b) 1.00 54 1.10(a) (1.33) 11.31 (9.87) 51,278 1.05(a)(b) 1.67 69 1.05(a) (2.40) 13.89 36.92 68,006 1.11(a) 1.97 74 1.11(a) (2.79) 12.26 15.30 47,891 1.16(a) 2.84 102 1.16(a) $(0.55) $ 8.70 (20.35)% $ 42,724 1.87%(a)(b) 0.06% 139% 1.87%(a) (0.19) 11.51 3.43 73,966 1.85(a)(b) 0.25 54 1.85(a) (1.22) 11.31 (10.49) 107,747 1.80(a)(b) 0.92 69 1.80(a) (2.32) 13.87 36.02 144,929 1.78(a) 1.30 74 1.78(a) (2.73) 12.25 14.76 108,055 1.66(a) 2.34 102 1.66(a) $(0.55) $ 8.82 (20.34)% $ 2,719 1.87%(a)(b) 0.06% 139% 1.87%(a) (0.19) 11.66 3.46 4,365 1.85(a)(b) 0.25 54 1.85(a) (1.24) 11.45 (10.28) 5,801 1.64(a)(b) 1.08 69 1.80(a) (2.35) 14.01 36.28 10,348 1.69(a) 1.39 74 1.69(a) (2.76) 12.35 15.01 5,007 1.41(a) 2.59 102 1.41(a)
SEE NOTES TO FINANCIAL STATEMENTS. 157 162 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF YEAR INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- VALUE PRIMARY A SHARES Year ended 3/31/2001...................... $16.24 $ 0.17 $(0.42) $(0.25) $(0.18) Year ended 3/31/2000#..................... 18.16 0.11 (0.06) 0.05 (0.11) Year ended 3/31/1999#..................... 19.92 0.13 0.64 0.77 (0.14) Year ended 3/31/1998#..................... 17.87 0.20 5.98 6.18 (0.19) Year ended 3/31/1997...................... 16.60 0.26 2.69 2.95 (0.26) INVESTOR A SHARES Year ended 3/31/2001...................... $16.24 $ 0.14 $(0.43) $(0.29) $(0.15) Year ended 3/31/2000#..................... 18.16 0.07 (0.07) -- (0.06) Year ended 3/31/1999#..................... 19.92 0.09 0.63 0.72 (0.09) Year ended 3/31/1998#..................... 17.87 0.15 5.98 6.13 (0.14) Year ended 3/31/1997...................... 16.60 0.21 2.70 2.91 (0.22) INVESTOR B SHARES Year ended 3/31/2001...................... $16.00 $ 0.04 $(0.43) $(0.39) $(0.06) Year ended 3/31/2000#..................... 18.00 (0.06) (0.08) (0.14) (0.00)## Year ended 3/31/1999#..................... 19.81 (0.05) 0.63 0.58 -- Year ended 3/31/1998#..................... 17.81 0.02 5.96 5.98 (0.04) Year ended 3/31/1997...................... 16.55 0.14 2.68 2.82 (0.14) INVESTOR C SHARES Year ended 3/31/2001...................... $15.99 $ 0.04 $(0.42) $(0.38) $(0.06) Year ended 3/31/2000#..................... 17.98 (0.06) (0.07) (0.13) (0.00)## Year ended 3/31/1999#..................... 19.75 (0.02) 0.65 0.63 (0.01) Year ended 3/31/1998#..................... 17.75 0.04 5.95 5.99 (0.05) Year ended 3/31/1997...................... 16.50 0.17 2.68 2.85 (0.18) DISTRIBUTIONS FROM NET REALIZED GAINS ------------- VALUE PRIMARY A SHARES Year ended 3/31/2001...................... $(3.42) Year ended 3/31/2000#..................... (1.86) Year ended 3/31/1999#..................... (2.39) Year ended 3/31/1998#..................... (3.94) Year ended 3/31/1997...................... (1.42) INVESTOR A SHARES Year ended 3/31/2001...................... $(3.42) Year ended 3/31/2000#..................... (1.86) Year ended 3/31/1999#..................... (2.39) Year ended 3/31/1998#..................... (3.94) Year ended 3/31/1997...................... (1.42) INVESTOR B SHARES Year ended 3/31/2001...................... $(3.42) Year ended 3/31/2000#..................... (1.86) Year ended 3/31/1999#..................... (2.39) Year ended 3/31/1998#..................... (3.94) Year ended 3/31/1997...................... (1.42) INVESTOR C SHARES Year ended 3/31/2001...................... $(3.42) Year ended 3/31/2000#..................... (1.86) Year ended 3/31/1999#..................... (2.39) Year ended 3/31/1998#..................... (3.94) Year ended 3/31/1997...................... (1.42)
--------------- ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average shares method. ## Amount represents less than $0.01 per share. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 158 163 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET NET ASSETS EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND VALUE TOTAL END OF YEAR AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS END OF YEAR RETURN++ (000) ASSETS ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------------------------------------- $(3.60) $12.39 (1.97)% $ 844,432 0.94%(a)(b) 1.28% 181% 0.94%(a) (1.97) 16.24 (0.16) 1,290,572 0.93(a)(b) 0.65 95 0.93(a) (2.53) 18.16 4.15 1,939,704 0.94(a)(b) 0.76 38 0.94(a) (4.13) 19.92 38.53 2,248,460 0.95(a) 1.04 79 0.95(a) (1.68) 17.87 18.07 1,200,853 0.97(a) 1.51 47 0.97(a) $(3.57) $12.38 (2.29)% $ 65,975 1.19%(a)(b) 1.03% 181% 1.19%(a) (1.92) 16.24 (0.47) 94,256 1.18(a)(b) 0.40 95 1.18(a) (2.48) 18.16 3.96 136,691 1.19(a)(b) 0.51 38 1.19(a) (4.08) 19.92 38.22 149,167 1.20(a) 0.79 79 1.20(a) (1.64) 17.87 17.80 70,305 1.22(a) 1.26 47 1.22(a) $(3.48) $12.13 (3.05)% $ 93,064 1.94%(a)(b) 0.28% 181% 1.94%(a) (1.86) 16.00 (1.24) 124,000 1.93(a)(b) (0.35) 95 1.93(a) (2.39) 18.00 3.11 154,025 1.94(a)(b) (0.24) 38 1.94(a) (3.98) 19.81 37.29 149,635 1.87(a) 0.12 79 1.87(a) (1.56) 17.81 17.21 99,999 1.72(a) 0.76 47 1.72(a) $(3.48) $12.13 (2.98)% $ 8,479 1.94%(a)(b) 0.28% 181% 1.94%(a) (1.86) 15.99 (1.18) 10,042 1.93(a)(b) (0.32) 95 1.93(a) (2.40) 17.98 3.39 12,106 1.70(a)(b) 0.00 38 1.94(a) (3.99) 19.75 37.55 13,969 1.78(a) 0.21 79 1.78(a) (1.60) 17.75 17.51 6,519 1.47(a) 1.01 47 1.47(a)
SEE NOTES TO FINANCIAL STATEMENTS. 159 164 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET NET ASSET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED VALUE OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS END OF PERIOD ------------------------------------------------------------------------------------------------- GROWTH & INCOME PRIMARY A SHARES Year ended 3/31/2001........ $21.61 $ (0.01) $(6.53) $(6.54) $(0.16) $14.91 Year ended 3/31/2000........ 14.91 (0.07) 6.81 6.74 (0.04) 21.61 Year ended 3/31/1999#....... 12.03 0.00## 2.89 2.89 (0.01) 14.91 Period ended 3/31/1998*#.... 10.00 0.01 2.02 2.03 -- 12.03 INVESTOR A SHARES Year ended 3/31/2001........ $21.62 $ (0.05) $(6.54) $(6.59) $(0.16) $14.87 Year ended 3/31/2000........ 14.95 (0.11) 6.82 6.71 (0.04) 21.62 Year ended 3/31/1999#....... 12.02 (0.03) 2.97 2.94 (0.01) 14.95 Period ended 3/31/1998*#.... 10.00 0.00## 2.02 2.02 -- 12.02 INVESTOR B SHARES Year ended 3/31/2001........ $21.31 $ (0.18) $(6.42) $(6.60) $(0.16) $14.55 Year ended 3/31/2000........ 14.85 (0.24) 6.74 6.50 (0.04) 21.31 Year ended 3/31/1999#....... 12.02 (0.12) 2.96 2.84 (0.01) 14.85 Period ended 3/31/1998*#.... 10.00 (0.02) 2.04 2.02 -- 12.02 INVESTOR C SHARES Year ended 3/31/2001........ $21.34 $ (0.17) $(6.44) $(6.61) $(0.16) $14.57 Year ended 3/31/2000........ 14.86 (0.25) 6.77 6.52 (0.04) 21.34 Year ended 3/31/1999#....... 12.02 (0.12) 2.97 2.85 (0.01) 14.86 Period ended 3/31/1998*#.... 10.00 (0.02) 2.04 2.02 -- 12.02
--------------- + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * Growth & Income Primary A, Investor A, Investor B and Investor C Shares commenced operations on December 31, 1997. # Per share net investment income has been calculated using the monthly average shares method. ## Amount represents less than $0.01 per share. ### Amount represents results prior to conversion to a master-feeder structure. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 160 165 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE RETURN++ (000) ASSETS ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------ (30.42)% $ 80,526 1.10% (0.03)% -- 1.10% 45.33 113,028 1.23(a) (0.37) 55%### 1.23(a) 24.05 52,229 1.25(a) 0.05 150 1.25(a) 20.30 2,517 1.09+(a) 0.38+ 22 1.97+(a) (30.63)% $164,031 1.35% (0.28)% -- 1.35% 45.01 175,859 1.48(a) (0.62) 55%### 1.48(a) 24.38 43,392 1.50(a) (0.20) 150 1.50(a) 20.20 1,141 1.34+(a) 0.13+ 22 2.22+(a) (31.13)% $239,621 2.10% (1.03)% -- 2.10% 43.90 305,607 2.23(a) (1.37) 55%### 2.23(a) 23.55 99,257 2.25(a) (0.95) 150 2.25(a) 20.20 7,907 2.09+(a) (0.62)+ 22 2.97+(a) (31.10)% $ 32,365 2.10% (1.03)% -- 2.10% 43.93 34,785 2.23(a) (1.37) 55%### 2.23(a) 23.63 3,233 2.25(a) (0.95) 150 2.25(a) 20.20 518 2.09+(a) (0.62)+ 22 2.97+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 161 166 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ----------------------------------------------------------------------------- BLUE CHIP PRIMARY A SHARES Year ended 3/31/2001#........................... $37.33 $ 0.08 $(8.17) $(8.09) $(0.01) Period ended 3/31/2000***#...................... 35.00 0.06 5.65 5.71 (0.03) INVESTOR A SHARES*,**** Year ended 3/31/2001#........................... $37.24 $(0.01) $(8.14) $(8.15) $ 0.00## Period ended 3/31/2000#......................... 35.92 0.02 4.65 4.67 -- Period ended 5/14/1999.......................... 33.43 0.00## 2.49 2.49 -- Year ended 2/28/1999............................ 29.90 0.09 5.26 5.35 (0.10) Year ended 2/28/1998............................ 25.22 0.16 7.91 8.07 (0.15) Year ended 2/28/1997**.......................... 20.53 0.23 5.21 5.44 (0.22) INVESTOR B SHARES* Year ended 3/31/2001#........................... $36.80 $(0.25) $(7.98) $(8.23) $ -- Period ended 3/31/2000#......................... 35.77 (0.26) 4.64 4.38 -- Period ended 5/14/1999.......................... 33.34 (0.02) 2.45 2.43 -- Period ended 2/28/1999***....................... 33.73 (0.05) 1.39 1.34 (0.01) INVESTOR SHARES C* Year ended 3/31/2001#........................... $36.71 $(0.25) $(7.97) $(8.22) $ -- Period ended 3/31/2000#......................... 35.69 (0.24) 4.61 4.37 -- Period ended 5/14/1999.......................... 33.24 (0.04) 2.49 2.45 -- Year ended 2/28/1999............................ 29.79 (0.06) 5.23 5.17 -- Year ended 2/28/1998............................ 25.20 0.04 7.83 7.87 (0.04) Period ended 2/28/1997***....................... 20.38 0.07 5.35 5.42 (0.07)
--------------- + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * The financial information for the fiscal periods through May 14, 1999 reflect the financial information for the Pacific Horizon Blue Chip Fund A, B, and K Shares, which were reorganized into the Blue Chip Investor A, Investor B, and Investor C Shares, respectively, as of May 21,1999. Prior to May 21, 1999, the Fund's investment adviser was Bank of America National Trust and Savings Association. Effective May 21, 1999, its investment adviser became Banc of America Advisors, Inc. and its investment sub-adviser became Banc of America Capital Management, Inc. ** As of July 22, 1996, the Fund designated the existing series of shares as "A" Shares. *** Blue Chip Primary A, Investor B, and Investor C Shares commenced operations on May 21, 1999, July 15, 1998, and November 11, 1996. **** Seafirst Shares converted into Investor A Shares on June 23, 2000. # Per share net investment income has been calculated using the monthly average shares method. ## Amount represents less than $0.01. SEE NOTES TO FINANCIAL STATEMENTS. 162 167 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT FROM NET IN EXCESS DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO REALIZED OF NET AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET GAINS REALIZED GAINS DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS ASSETS ------------------------------------------------------------------------------------------------------------------------ $(2.18) $(0.44) $(2.63) $26.61 (23.09)% $ 49,458 0.96% 0.23% (3.35) -- (3.38) 37.33 17.54 36,393 0.95+ 0.17+ $(2.18) $(0.44) $(2.62) $26.47 (23.30)% $603,622 1.21% (0.02)% (3.35) -- (3.35) 37.24 14.10 394,071 1.20+ (0.08)+ -- -- -- 35.92 7.45 423,000 1.29+ (0.03)+ (1.72) -- (1.82) 33.43 18.58 401,000 1.16 0.31 (3.24) -- (3.39) 29.90 33.96 288,000 1.18 0.63 (0.53) -- (0.75) 25.22 27.01 153,000 1.28 0.99 $(2.18) $(0.44) $(2.62) $25.95 (23.85)% $ 75,623 1.96% (0.77)% (3.35) -- (3.35) 36.80 13.37 75,538 1.95+ (0.83)+ -- -- -- 35.77 7.29 21,000 2.05+ (0.77)+ (1.72) -- (1.73) 33.34 4.53 13,000 1.97+ (0.58)+ $(2.18) $(0.44) $(2.62) $25.87 (23.84)% $ 17,034 1.96% (0.77)% (3.35) -- (3.35) 36.71 13.35 17,123 1.95+ (0.83)+ -- -- -- 35.69 7.37 15,000 1.80+ (0.54)+ (1.72) -- (1.72) 33.24 17.96 13,000 1.66 (0.22) (3.24) -- (3.28) 29.79 33.08 7,000 1.67 0.12 (0.53) -- (0.60) 25.20 26.96 1,000 1.92+ 0.45+ WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS --- --------------- 0.96% 0.98+ 1.21% 1.23+ 1.33+ 1.17 1.22 1.71 1.96% 1.98+ 2.09+ 1.99+ 1.96% 1.98+ 2.08+ 1.92 1.69 2.12+
SEE NOTES TO FINANCIAL STATEMENTS. 163 168 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS ---------------------------------------------------------------------------------------------- STRATEGIC GROWTH PRIMARY A SHARES Year ended 3/31/2001........... $17.03 $(0.01) $(4.51) $(4.52) $(0.01) $(0.03) Year ended 3/31/2000#.......... 13.86 (0.02) 3.39 3.37 -- (0.20) Period ended 3/31/1999*#....... 10.00 0.00## 3.87 3.87 -- (0.01) INVESTOR A SHARES Year ended 3/31/2001........... $16.98 $(0.04) $(4.47) $(4.51) $ -- $(0.03) Period ended 3/31/2000**#...... 13.88 (0.03) 3.19 3.16 -- (0.06) INVESTOR B SHARES Year ended 3/31/2001........... $16.90 $(0.14) $(4.44) $(4.58) $ -- $(0.03) Period ended 3/31/2000**#...... 13.88 (0.10) 3.18 3.08 -- (0.06) INVESTOR C SHARES Year ended 3/31/2001........... $16.92 $(0.14) $(4.45) $(4.59) $ -- $(0.03) Period ended 3/31/2000**#...... 13.88 (0.10) 3.20 3.10 -- (0.06)
--------------- + Annualized ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * Strategic Growth Primary A Shares commenced operations on October 2, 1998. ** Strategic Growth Investor A, Investor B and Investor C Shares commenced operations on August 2, 1999. # Per share net investment income has been calculated using the monthly average shares method. ## Amount represents less than $0.01 per share. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 164 169 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS ----------------------------------------------------------------------------------------------------------------------- $(0.04) $12.47 (26.62)% $1,182,028 0.94%(a)(b) (0.09)% 56% 0.94%(a) (0.20) 17.03 24.63 860,124 0.97 (0.10) 23 0.97 (0.01) 13.86 38.65 266,823 1.07+(a) (0.03)+ 34 1.07+(a) $(0.03) $12.44 (26.62)% $ 11,895 1.19%(a)(b) (0.34)% 56% 1.19%(a) (0.06) 16.98 22.86 5,503 1.22+ (0.35)+ 23 1.22+ $(0.03) $12.29 (27.16)% $ 6,758 1.94%(a)(b) (1.09)% 56% 1.94%(a) (0.06) 16.90 22.29 4,934 1.97+ (1.10)+ 23 1.97+ $(0.03) $12.30 (27.14)% $ 2,137 1.94%(a)(b) (1.09)% 56% 1.94%(a) (0.06) 16.92 22.36 1,706 1.97+ (1.10)+ 23 1.97+
SEE NOTES TO FINANCIAL STATEMENTS. 165 170 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF YEAR INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS ---------------------------------------------------------------------------------------------- CAPITAL GROWTH PRIMARY A SHARES Year ended 3/31/2001........... $14.59 $(0.03) $(3.90) $(3.93) $ -- $(2.36) Year ended 3/31/2000........... 12.05 (0.05) 3.47 3.42 -- (0.88) Year ended 3/31/1999#.......... 13.30 0.00## 1.59 1.59 -- (2.84) Year ended 3/31/1998#.......... 11.70 0.02 5.27 5.29 (0.01) (3.68) Year ended 3/31/1997#.......... 13.43 0.05 1.66 1.71 (0.05) (3.39) INVESTOR A SHARES Year ended 3/31/2001........... $14.43 $(0.07) $(3.84) $(3.91) $ -- $(2.36) Year ended 3/31/2000........... 11.97 (0.08) 3.42 3.34 -- (0.88) Year ended 3/31/1999#.......... 13.26 (0.03) 1.58 1.55 -- (2.84) Year ended 3/31/1998#.......... 11.67 (0.01) 5.28 5.27 -- (3.68) Year ended 3/31/1997#.......... 13.41 0.02 1.65 1.67 (0.02) (3.39) INVESTOR B SHARES Year ended 3/31/2001........... $13.58 $(0.14) $(3.57) $(3.71) $ -- $(2.36) Year ended 3/31/2000........... 11.39 (0.17) 3.24 3.07 -- (0.88) Year ended 3/31/1999#.......... 12.83 (0.11) 1.51 1.40 -- (2.84) Year ended 3/31/1998#.......... 11.47 (0.10) 5.14 5.04 -- (3.68) Year ended 3/31/1997#.......... 13.31 (0.08) 1.63 1.55 -- (3.39) INVESTOR C SHARES Year ended 3/31/2001........... $13.70 $(0.13) $(3.62) $(3.75) $ -- $(2.36) Year ended 3/31/2000........... 11.48 (0.16) 3.26 3.10 -- (0.88) Year ended 3/31/1999#.......... 12.92 (0.11) 1.51 1.40 -- (2.84) Year ended 3/31/1998#.......... 11.50 (0.08) 5.18 5.10 -- (3.68) Year ended 3/31/1997#.......... 13.26 (0.01) 1.64 1.63 -- (3.39)
--------------- ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average shares method. ## Amount represents less than $0.01 per share. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 166 171 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL YEAR TO AVERAGE AVERAGE TURNOVER AVERAGE DISTRIBUTIONS YEAR RETURN++ (000) NET ASSETS NET ASSETS RATE NET ASSETS --------------------------------------------------------------------------------------------------------------------- $(2.36) $ 8.30 (30.69)% $531,657 0.95%(a)(b) (0.28)% 96% 0.95%(a) (0.88) 14.59 29.90 816,371 0.96(a)(b) (0.38) 39 0.96(a) (2.84) 12.05 14.99 737,620 0.96(a) (0.04) 39 0.96(a) (3.69) 13.30 53.89 872,150 0.95(a)(b) 0.13 113 0.95(a) (3.44) 11.70 11.88 533,168 0.96(b) 0.39 75 0.96 $(2.36) $ 8.16 (30.91)% $ 32,519 1.20%(a)(b) (0.53)% 96% 1.20%(a) (0.88) 14.43 29.41 61,756 1.21(a)(b) (0.63) 39 1.21(a) (2.84) 11.97 14.70 52,987 1.21(a) (0.29) 39 1.21(a) (3.68) 13.26 53.83 43,380 1.20(a)(b) (0.12) 113 1.20(a) (3.41) 11.67 11.58 20,465 1.21(b) 0.14 75 1.21 $(2.36) $ 7.51 (31.37)% $ 45,832 1.95%(a)(b) (1.28)% 96% 1.95%(a) (0.88) 13.58 28.42 75,844 1.96(a)(b) (1.38) 39 1.96(a) (2.84) 11.39 13.86 66,338 1.96(a) (1.04) 39 1.96(a) (3.68) 12.83 52.52 59,496 1.95(a)(b) (0.87) 113 1.95(a) (3.39) 11.47 10.68 41,933 1.96(b) (0.61) 75 1.96 $(2.36) $ 7.59 (31.38)% $ 3,338 1.95%(a)(b) (1.28)% 96% 1.95%(a) (0.88) 13.70 28.46 4,883 1.96(a)(b) (1.38) 39 1.96(a) (2.84) 11.48 13.76 3,862 1.96(a) (1.04) 39 1.96(a) (3.68) 12.92 53.02 6,176 1.78(a)(b) (0.70) 113 1.78(a) (3.39) 11.50 11.39 5,752 1.46(b) (0.11) 75 1.46
SEE NOTES TO FINANCIAL STATEMENTS. 167 172 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF YEAR INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS ---------------------------------------------------------------------------------------------- AGGRESSIVE GROWTH PRIMARY A SHARES Year ended 3/31/2001#.......... $20.61 $(0.09) $(7.89) $(7.98) $ -- $(1.83) Year ended 3/31/2000#.......... 23.36 0.03 (0.03) -- (0.01) (2.74) Year ended 3/31/1999........... 22.17 0.02 3.22 3.24 (0.01)### (2.04) Year ended 3/31/1998#.......... 18.47 0.08 7.88 7.96 (0.03) (4.23) Year ended 3/31/1997........... 17.19 0.14 2.79 2.93 (0.14) (1.51) INVESTOR A SHARES Year ended 3/31/2001#.......... $20.43 $(0.13) $(7.79) $(7.92) $ -- $(1.83) Year ended 3/31/2000#.......... 23.23 (0.02) (0.04) (0.06) -- (2.74) Year ended 3/31/1999........... 22.09 (0.03) 3.21 3.18 -- (2.04) Year ended 3/31/1998#.......... 18.44 0.02 7.87 7.89 (0.01) (4.23) Year ended 3/31/1997........... 17.16 0.08 2.80 2.88 (0.09) (1.51) INVESTOR B SHARES Year ended 3/31/2001#.......... $19.51 $(0.25) $(7.36) $(7.61) $ -- $(1.83) Year ended 3/31/2000#.......... 22.47 (0.18) (0.04) (0.22) -- (2.74) Year ended 3/31/1999........... 21.57 (0.17) 3.11 2.94 -- (2.04) Year ended 3/31/1998#.......... 18.20 (0.12) 7.72 7.60 -- (4.23) Year ended 3/31/1997........... 17.00 (0.05) 2.76 2.71 -- (1.51) INVESTOR C SHARES Year ended 3/31/2001#.......... $19.90 $(0.25) $(7.53) $(7.78) $ -- $(1.83) Year ended 3/31/2000#.......... 22.86 (0.18) (0.04) (0.22) -- (2.74) Year ended 3/31/1999........... 21.92 (0.17) 3.15 2.98 -- (2.04) Year ended 3/31/1998#.......... 18.41.. (0.09) 7.83 7.74 -- (4.23) Year ended 3/31/1997........... 17.10 0.04 2.79 2.83 (0.01) (1.51)
--------------- ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average shares method. ### Amount includes distributions in excess of net investment income of less than $0.01 per share. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 168 173 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
RATIO OF RATIO OF DISTRIBUTIONS TOTAL NET ASSETS OPERATING NET INVESTMENT IN EXCESS DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO OF NET AND VALUE TOTAL YEAR AVERAGE NET AVERAGE NET TURNOVER REALIZED GAINS DISTRIBUTIONS END OF YEAR RETURN++ (000) ASSETS ASSETS RATE ------------------------------------------------------------------------------------------------------------------- $(0.57) $(2.40) $10.23 (42.60)% $113,052 1.00%(a) (0.51)% 135% -- (2.75) 20.61 (0.16) 328,219 0.98(a)(b) 0.15 79 -- (2.05) 23.36 15.74 412,176 0.97(a)(b) 0.12 72 -- (4.26) 22.17 48.65 132,504 0.98(a)(b) 0.37 79 -- (1.65) 18.47 17.00 100,260 1.04(b) 0.70 120 $(0.57) $(2.40) $10.11 (42.68)% $ 21,622 1.25%(a) (0.76)% 135% -- (2.74) 20.43 (0.41) 47,624 1.23(a)(b) (0.10) 79 -- (2.04) 23.23 15.49 67,356 1.22(a)(b) (0.13) 72 -- (4.24) 22.09 48.28 21,725 1.23(a)(b) 0.12 79 -- (1.60) 18.44 16.76 6,837 1.29(b) 0.45 120 $(0.57) $(2.40) $ 9.50 (43.13)% $ 16,119 2.00%(a) (1.51)% 135% -- (2.74) 19.51 (1.19) 39,680 1.98(a)(b) (0.85) 79 -- (2.04) 22.47 14.69 50,797 1.97(a)(b) (0.88) 72 -- (4.23) 21.57 47.14 38,079 1.98(a)(b) (0.63) 79 -- (1.51) 18.20 15.86 20,257 2.04(b) (0.30) 120 $(0.57) $(2.40) $ 9.72 (43.14)% $ 563 2.00%(a) (1.51)% 135% -- (2.74) 19.90 (1.16) 1,496 1.98(a)(b) (0.85) 79 -- (2.04) 22.86 14.64 1,629 1.97(a)(b) (0.88) 72 -- (4.23) 21.92 47.38 1,199 1.81(a)(b) (0.46) 79 -- (1.52) 18.41 16.45 446 1.54(b) 0.20 120 WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS --------------- 1.00%(a) 0.98(a) 0.97(a) 0.98+(a) 1.04 1.25%(a) 1.23(a) 1.22(a) 1.23(a) 1.29 2.00%(a) 1.98(a) 1.97(a) 1.98(a) 2.04 2.00%(a) 1.98(a) 1.97(a) 1.81(a) 1.54
SEE NOTES TO FINANCIAL STATEMENTS. 169 174 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS -------------------------------------------------------------------------------- FOCUSED EQUITIES PRIMARY A SHARES Year ended 3/31/2001......................... $22.59 $(0.01) $(7.13) $(7.14) $(0.08) Year ended 3/31/2000#........................ 16.69 (0.01) 6.14 6.13 (0.23) Year ended 3/31/1999#........................ 12.13 (0.01) 4.58 4.57 (0.01) Period ended 3/31/1998*#..................... 10.00 (0.01) 2.14 2.13 -- INVESTOR A SHARES Year ended 3/31/2001......................... $22.56 $(0.06) $(7.11) $(7.17) $(0.08) Year ended 3/31/2000#........................ 16.73 (0.03) 6.09 6.06 (0.23) Year ended 3/31/1999#........................ 12.14 (0.04) 4.64 4.60 (0.01) Period ended 3/31/1998*#..................... 10.00 (0.01) 2.15 2.14 -- INVESTOR B SHARES Year ended 3/31/2001......................... $22.26 $(0.20) $(6.98) $(7.18) $(0.08) Year ended 3/31/2000#........................ 16.62 (0.09) 5.96 5.87 (0.23) Year ended 3/31/1999#........................ 12.13 (0.12) 4.62 4.50 (0.01) Period ended 3/31/1998*#..................... 10.00 (0.04) 2.17 2.13 -- INVESTOR C SHARES Year ended 3/31/2001......................... $22.33 $(0.20) $(7.00) $(7.20) $(0.08) Year ended 3/31/2000#........................ 16.67 (0.08) 5.97 5.89 (0.23) Year ended 3/31/1999#........................ 12.13 (0.14) 4.69 4.55 (0.01) Period ended 3/31/1998*#..................... 10.00 (0.04) 2.17 2.13 --
--------------- + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * Focused Equities Primary A, Investor A, Investor B and Investor C Shares commenced operations on December 31, 1997. # Per share net investment income has been calculated using the monthly average shares method. ### Amount represents results prior to conversion to a master-feeder structure. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 170 175 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------------------ $15.37 (31.67)% $354,798 1.09% (0.05)% -- 1.09% 22.59 37.13 326,745 1.16(a) (0.35) 53%### 1.16(a) 16.69 37.73 105,458 1.06(a) 0.05 177 1.06(a) 12.13 21.30 8,808 1.52+(a) (0.30)+ 25 1.52+(a) $15.31 (31.80)% $491,437 1.34% (0.30)% -- 1.34% 22.56 36.62 690,166 1.41(a) (0.60) 53%### 1.41(a) 16.73 37.94 238,137 1.31(a) (0.20) 177 1.31(a) 12.14 21.40 6,056 1.77+(a) (0.55)+ 25 1.77+(a) $15.00 (32.32)% $741,285 2.09% (1.05)% -- 2.09% 22.26 35.71 1,003,840 2.16(a) (1.35) 53%### 2.16(a) 16.62 37.15 306,365 2.06(a) (0.95) 177 2.06(a) 12.13 21.30 20,446 2.52+(a) (1.30)+ 25 2.52+(a) $15.05 (32.31)% $203,642 2.09% (1.05)% -- 2.09% 22.33 35.72 247,509 2.16(a) (1.35) 53%### 2.16(a) 16.67 37.56 13,682 2.06(a) (0.95) 177 2.06(a) 12.13 21.30 469 2.52+(a) (1.30)+ 25 2.52+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 171 176 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF YEAR INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS -------------------------------------------------------------------------------- MIDCAP GROWTH PRIMARY A SHARES Year ended 3/31/2001......................... $22.41 $(0.03) $(4.02) $(4.05) $(3.73) Year ended 3/31/2000#........................ 13.31 (0.07) 9.81 9.74 (0.64) Year ended 3/31/1999#........................ 16.56 (0.04) (0.94) (0.98) (2.27) Year ended 3/31/1998#........................ 12.86 (0.06) 5.55 5.49 (1.79) Year ended 3/31/1997#........................ 14.04 (0.04) 0.20 0.16 (1.34) INVESTOR A SHARES Year ended 3/31/2001......................... $21.87 $(0.09) $(3.91) $(4.00) $(3.73) Year ended 3/31/2000#........................ 13.04 (0.12) 9.59 9.47 (0.64) Year ended 3/31/1999#........................ 16.30 (0.07) (0.92) (0.99) (2.27) Year ended 3/31/1998#........................ 12.69 (0.10) 5.50 5.40 (1.79) Year ended 3/31/1997#........................ 13.91 (0.07) 0.19 0.12 (1.34) INVESTOR B SHARES Year ended 3/31/2001......................... $20.38 $(0.19) $(3.59) $(3.78) $(3.73) Year ended 3/31/2000#........................ 12.28 (0.22) 8.96 8.74 (0.64) Year ended 3/31/1999#........................ 15.58 (0.15) (0.88) (1.03) (2.27) Year ended 3/31/1998#........................ 12.29 (0.20) 5.28 5.08 (1.79) Year ended 3/31/1997#........................ 13.61 (0.18) 0.20 0.02 (1.34) INVESTOR C SHARES Year ended 3/31/2001......................... $20.47 $(0.17) $(3.62) $(3.79) $(3.73) Year ended 3/31/2000#........................ 12.33 (0.22) 9.00 8.78 (0.64) Year ended 3/31/1999#........................ 15.63 (0.15) (0.88) (1.03) (2.27) Year ended 3/31/1998#........................ 12.31 (0.18) 5.29 5.11 (1.79) Year ended 3/31/1997#........................ 13.56 (0.10) 0.19 0.09 (1.34)
--------------- ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average shares method. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 172 177 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS RATIO OF AND/OR EXPENSE OPERATING REIMBURSEMENTS EXPENSES --------------- RATIO OF INCLUDING RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING INTEREST NET INVESTMENT OPERATING VALUE END OF EXPENSES TO EXPENSE INCOME/(LOSS) TO PORTFOLIO EXPENSES TO END OF TOTAL YEAR AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER AVERAGE YEAR RETURN++ (000) ASSETS NET ASSETS ASSETS RATE NET ASSETS -------------------------------------------------------------------------------------------------------------- $14.63 (20.67)% $388,152 0.98%(a) -- (0.27)% 39% 0.98%(a) 22.41 75.34 281,951 1.00(a)(b) -- (0.45) 46 1.00(a) 13.31 (7.21) 177,861 0.98(a)(b) -- (0.29) 43 0.98(a) 16.56 45.09 318,584 0.98(a) 0.99% (0.42) 76 0.98(a) 12.86 0.48 267,319 0.98(a) -- (0.26) 93 0.98(a) $14.14 (20.98)% $ 16,536 1.23%(a) -- (0.52)% 39% 1.23%(a) 21.87 74.82 22,741 1.25(a)(b) -- (0.70) 46 1.25(a) 13.04 (7.41) 18,042 1.23(a)(b) -- (0.54) 43 1.23(a) 16.30 44.86 21,591 1.23(a) -- (0.67) 76 1.23(a) 12.69 0.18 12,126 1.23(a) -- (0.51) 93 1.23(a) $12.87 (21.51)% $ 44,261 1.98%(a) -- (1.27)% 39% 1.98%(a) 20.38 73.47 49,606 2.00(a)(b) -- (1.45) 46 2.00(a) 12.28 (8.10) 33,245 1.98(a)(b) -- (1.29) 43 1.98(a) 15.58 43.64 45,451 1.98(a) 1.99% (1.42) 76 1.98(a) 12.29 (0.57) 33,342 1.98(a) -- (1.26) 93 1.98(a) $12.95 (21.46)% $ 3,248 1.98%(a) -- (1.27)% 39% 1.98%(a) 20.47 73.50 2,628 2.00(a)(b) -- (1.45) 46 2.00(a) 12.33 (8.08) 1,383 1.98(a)(b) -- (1.29) 43 1.98(a) 15.63 43.80 2,266 1.81(a) 1.82% (1.25) 76 1.81(a) 12.31 (0.04) 1,437 1.48(a) -- (0.76) 93 1.48(a)
SEE NOTES TO FINANCIAL STATEMENTS. 173 178 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ VALUE NET AND UNREALIZED (DECREASE) IN BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS --------------------------------------------------------------- 21ST CENTURY PRIMARY A SHARES Period ended 3/31/2001*..................................... $10.00 $(0.03) $(2.98) $(3.01) INVESTOR A SHARES Period ended 3/31/2001*..................................... $10.00 $(0.06) $(2.97) $(3.03) INVESTOR B SHARES Period ended 3/31/2001*..................................... $10.00 $(0.11) $(2.97) $(3.08) INVESTOR C SHARES Period ended 3/31/2001*..................................... $10.00 $(0.11) $(2.97) $(3.08)
--------------- + Annualized ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * 21st Century Primary A, Investor A, Investor B and Investor C Shares commenced operations on April 10, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 174 179 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------------------ $6.99 (30.10)% $ 5,686 1.35%+ (0.41)%+ 426% 1.35%+ $6.97 (30.30)% $19,644 1.60%+ (0.66)%+ 426% 1.60%+ $6.92 (30.80)% $50,404 2.35%+ (1.41)%+ 426% 2.35%+ $6.92 (30.80)% $ 6,557 2.35%+ (1.41)%+ 426% 2.35%+
SEE NOTES TO FINANCIAL STATEMENTS. 175 180 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME GAINS -------------------------------------------------------------------------------------------- SMALL COMPANY PRIMARY A SHARES* Year ended 3/31/2001............. $22.66 $(0.10) $(6.67) $(6.77) $ -- $(2.20) Year ended 3/31/2000#............ 11.50 (0.10) 11.29 11.19 -- (0.03) Year ended 3/31/1999#............ 15.79.. (0.05) (3.11) (3.16) -- (1.13) Period ended 3/31/1998........... 12.07 0.01 4.43 4.44 (0.01) (0.71) Period ended 5/16/1997........... 10.65 0.04 1.47 1.51 (0.04) (0.05) Period ended 8/31/1996**......... 10.00 0.09 0.64 0.73 (0.08) -- INVESTOR A SHARES* Year ended 3/31/2001............. $22.44 $(0.14) $(6.58) $(6.72) $ -- $(2.20) Year ended 3/31/2000#............ 11.43 (0.15) 11.19 11.04 -- (0.03) Year ended 3/31/1999#............ 15.74 (0.07) (3.11) (3.18) -- (1.13) Period ended 3/31/1998........... 12.05 (0.02) 4.42 4.40 -- (0.71) Period ended 5/16/1997........... 10.64 0.03 1.46 1.49 (0.03) (0.05) Period ended 8/31/1996 **........ 10.00 0.05 0.64 0.69 (0.05) -- INVESTOR B SHARES* Year ended 3/31/2001............. $21.94 $(0.23) $(6.43) $(6.66) $ -- $(2.20) Year ended 3/31/2000#............ 11.23 (0.25) 10.99 10.74 -- (0.03) Year ended 3/31/1999#............ 15.59 (0.11) (3.12) (3.23) -- (1.13) Period ended 3/31/1998........... 12.03 (0.08) 4.35 4.27 -- (0.71) Period ended 5/16/1997........... 10.65 (0.03) 1.46 1.43 -- (0.05) Period ended 8/31/1996 **........ 10.00 0.01 0.65 0.66 (0.01) -- INVESTOR C SHARES Year ended 3/31/2001............. $22.21 $(0.25) $(6.50) $(6.75) $ -- $(2.20) Year ended 3/31/2000#............ 11.38 (0.23) 11.09 10.86 -- (0.03) Year ended 3/31/1999#............ 15.74 (0.12) (3.11) (3.23) -- (1.13) Period ended 3/31/1998 ***....... 15.18 (0.08) 1.35 1.27 -- (0.71)
--------------- + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. * The financial information for the fiscal periods prior to May 23, 1997 reflects the financial information for the Pilot Small Capitalization Equity Fund Pilot, Class A and Class B Shares, which were reorganized into the Small Company Primary A, Investor A and Investor B Shares, respectively, as of the close of business on May 23, 1997. Prior to May 23, 1997, the investment manager to Small Company was Boatmen's Trust Company. Effective May 23, 1997, the investment manager to Small Company became TradeStreet Investment Associates, Inc. (now known as Banc of America Capital Management, Inc.) ** Represents the period from December 12, 1995 (commencement of operations) to August 31, 1996. *** Small Company Investor C Shares commenced operations on September 22, 1997. # Per share net investment income has been calculated using the monthly average shares method. (a) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (b) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 176 181 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS ----------------------------------------------------------------------------------------------------------------------- $(2.20) $13.69 (31.86)% $477,246 1.15%(a)(b) (0.52)% 48% 1.20%(a) (0.03) 22.66 97.46 647,825 1.13(a)(b) (0.65) 63 1.22(a) (1.13) 11.50 (21.05) 327,981 0.95(a) (0.42) 87 1.22(a) (0.72) 15.79 37.27 235,427 0.95+(a) 0.05+ 59 1.26+(a) (0.09) 12.07 14.21 109,450 0.98+ 0.54+ 48 1.41+ (0.08) 10.65 7.37 70,483 1.00+ 1.06+ 31 1.54+ $(2.20) $13.52 (31.96)% $146,457 1.40%(a)(b) (0.77)% 48% 1.45%(a) (0.03) 22.44 96.91 245,425 1.38(a)(b) (0.90) 63 1.47(a) (1.13) 11.43 (21.32) 16,143 1.20(a) (0.67) 87 1.47(a) (0.71) 15.74 37.02 6,772 1.20+(a) (0.20)+ 59 1.51+(a) (0.08) 12.05 13.98 3,697 1.23+ 0.30+ 48 1.66+ (0.05) 10.64 6.88 2,611 1.25+ 0.66+ 31 1.65+ $(2.20) $13.08 (32.45)% $ 11,744 2.15%(a)(b) (1.52)% 48% 2.20%(a) (0.03) 21.94 95.79 13,839 2.13(a)(b) (1.65) 63 2.22(a) (1.13) 11.23 (21.86) 5,127 1.95(a) (1.42) 87 2.22(a) (0.71) 15.59 36.06 3,384 1.87+(a) (0.87)+ 59 2.18+(a) (0.05) 12.03 13.43 2,635 1.97+ (0.45)+ 48 2.41+ (0.01) 10.65 6.65 1,878 2.01+ (0.07)+ 31 2.44+ $(2.20) $13.26 (32.46)% $ 2,813 2.15%(a)(b) (1.52)% 48% 2.20%(a) (0.03) 22.21 95.76 3,588 2.13(a)(b) (1.65) 63 2.22(a) (1.13) 11.38 (21.66) 1,951 1.70(a) (1.17) 87 2.22(a) (0.71) 15.74 8.75 3,122 1.95+(a) (0.95)+ 59 2.26+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 177 182 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS Nations Fund Trust (the "Trust"), Nations Fund, Inc. (the "Company"), 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. At March 31, 2001, the Trust offered thirty-four separate portfolios, the Company offered six separate portfolios, Reserves offered sixteen separate portfolios and Funds Trust offered five separate portfolios. These financial statements pertain only to certain domestic stock portfolios of the Trust, the Company, Reserves and Funds Trust: Convertible Securities Fund, Balanced Assets Fund, Asset Allocation Fund, Equity Income Fund, Value Fund, Growth & Income Fund, Blue Chip Fund, Strategic Growth Fund, Capital Growth Fund, Aggressive Growth Fund (formerly Disciplined Equity Fund), Focused Equities Fund, MidCap Growth Fund, 21st Century Fund and Small Company Fund (each a "Fund" and collectively, the "Funds"). Financial statements for the other portfolios of the Trust, the Company, Reserves and Funds Trust are presented under separate cover. The Funds currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. Seafirst Shares of Asset Allocation Fund and Blue Chip Fund were converted into Investor A Shares on June 23, 2000. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. Growth & Income Fund, Blue Chip Fund and Focused Equities Fund (the "Feeder Funds") seek to achieve their investment objectives by investing substantially all of their assets in Growth & Income Master Portfolio, Blue Chip Master Portfolio and Focused Equities Master Portfolio, respectively (the "Master Portfolios"), each a series of Nations Master Investment Trust (the "Master Trust"), another open-end management investment company in the Nations Funds family. The Master Portfolios each have the same investment objective as that of its corresponding Feeder Fund. The values of the Feeder Funds' investments in the respective Master Portfolios included in the Statements of net assets reflect the Feeder Funds' proportionate beneficial interests in the net assets of the respective Master Portfolios (97.6% for Growth & Income Master Portfolio, 95.4% for Blue Chip Master Portfolio and 98.9% for Focused Equities Master Portfolio at March 31, 2001). The financial statements of the Master Portfolios, including their schedules of investments, are included elsewhere within this report and should be read in conjunction with the Feeder Funds' financial statements. Other funds not registered under the 1940 Act managed by Banc of America Advisors, Inc. ("BAAI"), whose financial statements are not presented here, also invest in the Master Portfolios. On April 10, 2000, 21st Century Fund commenced operations in a master-feeder structure. The Fund seeks to achieve its investment objective by investing substantially all of its assets in 21st Century Master Portfolio of the Master Trust, which has the same investment objective as the Fund. Because the value of the Fund's investment in the 21st Century Master Portfolio as of and for the period ended March 31, 2001 represented substantially all of the beneficial interests in the 21st Century Master Portfolio, financial statements for the 21st Century Master Portfolio have not been prepared and references in this report to 21st Century Fund should be read to include references to the corresponding Master Portfolio. 1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. Securities valuation: Securities traded on a recognized exchange or on NASDAQ are valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded only over-the-counter are valued at the last sale price, or if no sale occurred on such day, at the mean of the current bid and asked prices. Certain securities may be valued using broker quotations or on the basis of prices provided by pricing services. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be valued under procedures adopted by the Board of Trustees/Directors. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. The valuation of each Feeder Fund's investment in its corresponding Master Portfolio is based on the reported net asset value of that Master Portfolio. The Master Portfolios use valuation policies consistent with those described above. 178 183 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Futures contracts: All Funds may invest in futures contracts. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gain or loss by "marking-to-market" on a daily basis to reflect the market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income is recorded on ex- dividend date. Each Fund's investment income and realized and unrealized gains and losses are allocated among its share classes based upon the relative net assets of each class of shares. In November 2000, a revised AICPA Audit and Accounting Guide (the "Guide"), Audits of Investment Companies, was issued, and is effective for fiscal years beginning after December 15, 2000. The revised Guide will require all of the Funds to classify gains and losses realized on principal paydowns received on mortgage-backed securities presently included in realized gain/loss, as part of interest income. Adopting this accounting principle will not affect the Funds' net asset value but will change the classification between interest income and realized gain/loss in the Statement of operations. The Funds expect that the impact of the adoption of this principle will not be material to the financial statements. The Feeder Funds record their share of the investment income and realized and unrealized gains and losses reported by the Master Portfolios on a daily basis. The investment income and realized and unrealized gains and losses are allocated daily to investors in the Master Portfolios based upon the relative value of their investments in the Master Portfolios. Dividends and distributions to shareholders: Distributions from net investment income, if any, are declared and paid each calendar quarter by the Convertible Securities, Balanced Assets, Asset Allocation, Growth & Income, Blue Chip, Focused Equities, MidCap Growth and 21st Century Funds; all other Funds declare and pay distributions monthly. Each Fund will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. Income distributions and capital gain distributions on a Fund level are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. Certain reclassifications are made to each Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under federal income tax regulations. These reclassifications are due to different book and tax accounting for paydowns, net operating losses, currency gains and losses and use of the tax accounting practice known as equalization. Reclassifications for the period ended March 31, 2001 were as follows:
INCREASE/ INCREASE/ INCREASE/ (DECREASE) (DECREASE) (DECREASE) UNDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT NET REALIZED CAPITAL INCOME GAIN/(LOSS) (000) (000) (000) ------------------------------------------ Convertible Securities... $ 2,659 $ (276) $ (2,383) Balanced Assets.......... 3 2 (5) Asset Allocation......... 830 (7) (823) Equity Income............ 5,786 (74) (5,712) Value.................... 60,846 702 (61,548) Growth & Income.......... (3,228) 3,957 (729) Blue Chip................ 186 737 (923) Strategic Growth......... (1,789) 1,788 1 Capital Growth........... 15,545 3,176 (18,721) Aggressive Growth........ 11,747 1,983 (13,730) Focused Equities......... (13,726) 14,883 (1,157) MidCap Growth............ 6,984 1,528 (8,512) 21st Century............. (1,096) 1,094 2 Small Company............ 3,625 5,167 (8,792)
Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue 179 184 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Code of 1986, as amended, and by distributing substantially all of its earnings to its shareholders. Therefore, no provision is made for federal income or excise taxes. Expenses: General expenses of the Trust, the Company, Reserves and Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. The Feeder Funds record their share of the expenses reported by the Master Portfolios on a daily basis. The expenses are allocated daily to investors in the Master Portfolios based upon the relative value of the Feeder Funds' investments in the Master Portfolios. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Each of the Trust, the Company, Reserves, Funds Trust and Master Trust has entered into an investment advisory agreement (the "Investment Advisory Agreements") with BAAI, a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BAAI provides investment advisory services to the Funds. Under the terms of the Investment Advisory Agreements, BAAI is entitled to receive an advisory fee, calculated daily and payable monthly, based on the following annual rates multiplied by the average daily net assets of each Fund:
ANNUAL RATE ----------- Convertible Securities, Balanced Assets, Asset Allocation, Value, Strategic Growth, Capital Growth, Aggressive Growth, MidCap Growth.................................... 0.65% 21st Century................................ 0.75% Small Company............................... 0.90%
FEES ON FEES ON NET ASSETS FEES ON NET ASSETS BETWEEN $100 NET ASSETS UP TO AND $250 EXCEEDING $100 MILLION MILLION $250 MILLION ---------------------------------------------- Equity Income........ 0.65% 0.60% 0.50%
The Feeder Funds indirectly pay for investment advisory services through their investments in their corresponding Master Portfolios (See Note 2 of Notes to financial statements of the Master Portfolios). Each of the Trust, the Company, Reserves and Funds Trust has entered into a sub-advisory agreement with BAAI and Banc of America Capital Management, Inc. ("BACAP"), a wholly-owned subsidiary of Bank of America, pursuant to which BACAP is entitled to receive a sub-advisory fee from BAAI at the following maximum annual rate of each Fund's average daily net assets:
ANNUAL RATE ----------- Equity Income............................... 0.20% Convertible Securities, Balanced Assets, Value, Strategic Growth, Capital Growth, Aggressive Growth, MidCap Growth, Small Company................................... 0.25%
Reserves has, on behalf of the Asset Allocation Fund, entered into a sub-advisory agreement with BAAI and BACAP, pursuant to which BACAP is entitled to receive a sub-advisory fee from BAAI for management of the fixed income and money market portions of the Fund at the maximum annual rate of 0.25% of the Fund's average daily net assets. Reserves has, on behalf of the Asset Allocation Fund, entered into a sub-advisory agreement with BAAI and Chicago Equity Partners, LLC ("Chicago Equity"), pursuant to which Chicago Equity is entitled to receive a sub-advisory fee from BAAI for management of the equity portion of the Fund at the maximum annual rate of 0.25% of the Fund's average daily net assets. Master Trust has, on behalf of the 21st Century Fund, entered into a sub-advisory agreement with BAAI and Marsico Capital Management, LLC ("Marsico"), a wholly-owned subsidiary of Bank of America, pursuant to which Marsico is entitled to receive a sub-advisory fee from BAAI at the maximum annual rate of 0.45% of the Fund's average daily net assets. The Feeder Funds indirectly pay for sub-advisory services through their investments in their corresponding Master Portfolios (See Note 2 of Notes to financial statements of the Master Portfolios). Stephens Inc. ("Stephens") and BAAI serve as co-administrators of the Trust, the Company, Reserves and Funds Trust. Under the co-administration agreements, Stephens and BAAI are currently entitled to receive a combined fee, computed daily and paid monthly, at the maximum annual rate of 0.23% of the average daily net assets of all Funds except for Blue Chip Fund, which pays a monthly fee at the maximum annual rate of 0.18% of its average daily net assets and Growth & Income and Focused Equities Funds, which pay a monthly fee at the maximum annual rate of 0.13% of their average daily net assets. The Bank of New York ("BNY") serves as sub-administrator of the Trust, the Company, Reserves and Funds Trust pursuant to agreements with BAAI. For the 180 185 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) year ended March 31, 2001, Stephens and BAAI earned 0.07% and 0.11%, respectively, of the Funds' average daily net assets for their co-administration services. BAAI and/or the sub-advisers and Stephens may, from time to time, reduce their fees payable by each Fund. During the year ended March 31, 2001 and until July 31, 2001, BAAI and/or the sub-advisers and Stephens have agreed to reimburse expenses and/or waive their fees to the extent that total expenses (excluding shareholder servicing and distribution fees), exceed an annual rate of 1.15% of the Small Company Fund's average daily net assets. Effective December 1, 2000, BAAI and/or the sub-advisers and Stephens have agreed to reimburse expenses and/or waive fees as necessary for Balanced Assets Fund so that, on a daily basis, the net fund level expense ratio will not exceed the annual rate maintained for the Asset Allocation Fund. BNY serves as the custodian of the Trust's, the Company's, Reserves' and Funds Trust's assets. For the year ended March 31, 2001, expenses of the Funds were reduced by $70,369 under expense offset arrangements with BNY. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if they had not entered into such arrangements. PFPC Inc. ("PFPC") serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A and Primary B Shares of the Funds. For the year ended March 31, 2001, Bank of America earned approximately $55,243 for providing such services. Stephens also serves as distributor of the Funds' shares. For the year ended March 31, 2001, the Funds were informed that the distributor received $4,118,476 in front-end sales charges for sales of Investor A Shares and $4,085,508 in contingent deferred sales charges from redemption of shares which were subject to such charges. A substantial portion of these fees is paid to affiliates of Bank of America. For the year ended March 31, 2001, 21st Century Master Portfolio paid commissions of $16,157 to certain affiliates of BAAI in connection with the execution of various portfolio transactions. No officer, director or employee of Bank of America, BAAI or BACAP, or any affiliate thereof, receives any compensation from the Trust, the Company, Reserves and Funds Trust for serving as Trustee/Director or Officer of the Trust, the Company, Reserves and Funds Trust. The Trust's, the Company's, Reserves' and Funds Trust's eligible Trustees/Directors may participate in non-qualified deferred compensation and retirement plans which may be terminated at any time. All benefits provided under these plans are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on each plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Fund, a portfolio of the Company. The expense for the deferred compensation and retirement plans is included in "Trustees'/Directors' fees and expenses" in the Statements of operations. Certain Funds have made daily investments of cash balances in Nations Cash Reserves, a portfolio of Reserves, pursuant to an exemptive order received from the Securities and Exchange Commission. For the year ended March 31, 2001, the Funds earned $13,750,201 in the aggregate from such investments, which is included in interest income. Equity Income Fund has invested in Convertible Securities Fund, pursuant to an exemptive order received from the Securities and Exchange Commission. For the year ended March 31, 2001, Equity Income earned $113,378 from such investments, which is included in dividend income. A significant portion of each Fund's Primary A Shares represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. 3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS The Trust, the Company, Reserves and Funds Trust each has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Fund, a combined distribution and shareholder servicing plan for Investor A Shares of each Fund and a shareholder servicing plan for Seafirst Shares (Seafirst Shares converted into Investor A Shares on June 23, 2000) of Asset Allocation and Blue Chip Funds. The shareholder servicing plans permit the Funds to compensate or reimburse servicing agents for shareholder services provided by the servicing agents. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940 Act, permit the Funds to compensate or reimburse the distributor (and for Investor A Shares, the distributor 181 186 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) and/or selling agents) for activities or expenses primarily intended to result in the sale of the classes' shares. Payments are made at an annual rate, as a percentage of average daily net assets, set from time to time by the Board of Trustees/Directors, and are charged as expenses of each Fund directly to the applicable share class. A substantial portion of the expenses incurred pursuant to these plans is paid to affiliates of Bank of America and BAAI. At March 31, 2001, the annual rates in effect and plan limits, as a percentage of average daily net assets, were and will be as follows:
CURRENT PLAN RATE LIMIT ------------------ INVESTOR A COMBINED DISTRIBUTION AND SHAREHOLDER SERVICING PLAN... 0.25% 0.25% INVESTOR B AND INVESTOR C SHAREHOLDER SERVICING PLANS...... 0.25% 0.25% INVESTOR B DISTRIBUTION PLAN....... 0.75% 0.75% INVESTOR C DISTRIBUTION PLAN....... 0.75% 0.75% SEAFIRST SHAREHOLDER SERVICING PLAN*............................ N/A 0.25%
--------------- * Seafirst Shares converted into Investor A Shares on June 23, 2000. 4. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2001 were as follows:
PURCHASES SALES (000) (000) ------------------------ Convertible Securities...... $ 389,950 $ 287,957 Balanced Assets............. 132,804 135,205 Asset Allocation............ 244,073 247,929 Equity Income............... 693,348 773,223 Value....................... 2,261,184 2,808,552 Strategic Growth............ 1,217,705 660,804 Capital Growth.............. 764,320 851,024 Aggressive Growth........... 398,299 550,867 MidCap Growth............... 231,547 128,982 21st Century................ 446,917 346,348 Small Company............... 459,267 394,718
The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2001 were as follows:
PURCHASES SALES (000) (000) -------------------- Balanced Assets.................. $ 40,225 $40,850 Asset Allocation................. 113,327 129,015 Equity Income.................... 6,658 -- Value............................ 24,668 4,972 Strategic Growth................. 17,751 2,243 Capital Growth................... 7,772 13,060 21st Century..................... 5,269 1,987
5. FUTURES CONTRACTS At March 31, 2001, the following Fund had futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) ------------------------------------------------------------------------------------------------------------------------------ ASSET ALLOCATION: U.S. 2 year Treasury Note Futures (long position) expiring June 2001(a).............................................. 15 $ 3,071 $ 3,090 $ 19 U.S. Treasury Note Futures (long position) expiring June 2001(a)................................................... 120 12,362 12,502 140 U.S. 10 year Treasury Note Futures (short position) expiring June 2001(a).............................................. (180) (18,808) (19,117) (309) ----- Total net unrealized depreciation....................... $(150) =====
--------------- (a) Securities have been segregated as collateral for the Asset Allocation Fund for open futures contracts. 6. SHARES OF BENEFICIAL INTEREST/CAPITAL STOCK As of March 31, 2001, an unlimited number of shares of beneficial interest without par value were authorized for each of the Trust, Reserves and Funds Trust and 330,000,000,000 shares of $.001 par value capital stock were authorized for the Company. The Trust's, Reserves' and Funds Trust's Declarations of Trust and the Company's Articles of Incorporation authorize the Board of 182 187 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Trustees/Directors to classify or reclassify any authorized but unissued shares into one or more additional classes or series of shares. See Schedules of capital stock activity. 7. LINES OF CREDIT The Trust, the Company, Reserves and Funds Trust each participate with other Nations Funds in an uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). Advances under the Agreement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest on borrowings is payable at a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. At March 31, 2001, there were no loans outstanding under this agreement. For the year ended March 31, 2001, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING INTEREST FUND (000) RATE ----------------------------------------------------------- Convertible Securities............ $ 2 6.00% Balanced Assets................... --* 6.93 Asset Allocation.................. 13 6.83 Equity Income..................... 363 6.91 Value............................. 416 6.91 Strategic Growth.................. 10 7.00 Capital........................... 6,649 6.61 21st Century...................... --* 6.44 Small Company..................... 3 6.09
--------------- * Amount represents less than $500. The average amount outstanding was calculated based on daily balances during the period. The Trust, the Company, Reserves and Funds Trust also participated with other Nations Funds in a committed line of credit provided by BNY that was terminated on December 7, 2000. Interest on borrowings under the committed line was payable at a specified Federal Funds rate plus 0.50% on an annualized basis. A facility fee of 0.09% per annum of the total amounts available under the line of credit was charged, of which each Fund paid its pro rata share. This fee was paid quarterly in arrears. Each participating Fund was required to maintain an asset coverage ratio of at least 300% under the terms of the arrangement. For the period ended December 7, 2000, there were no borrowings by the Funds under the committed line of credit. 8. SECURITIES LENDING Under an agreement with BNY, the Funds can lend their securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash, in an amount at least equal to the market value of the securities loaned. The cash collateral received is invested in Nations Cash Reserves. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of counterparty default, the Fund has the right to use the collateral to offset losses incurred. There would be a potential loss to the Fund in the event the Fund is delayed or prevented from exercising its right to dispose of the collateral. The Fund bears the risk of loss with respect to the investment of collateral. At March 31, 2001, the following Funds had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) --------------------------------------------------------------- Balanced Assets............ $ 1,922 $ 1,977 Equity Income.............. 8,061 8,146 Value...................... 40,099 41,497 Strategic Growth........... 18,402 21,763 Capital Growth............. 19,049 19,255 Aggressive Growth.......... 13,511 13,858 MidCap Growth.............. 88,002 91,107 21st Century............... 5,258 7,199 Small Company.............. 128,482 146,774
9. CAPITAL LOSS CARRYFORWARD At March 31, 2001, the following Funds had available for Federal income tax purposes the following unused capital losses expiring March 31:
2009 FUND (000) ------------------------------------------------------ Growth & Income............................. $ 32,076 Strategic Growth............................ 42,323 Focused Equities............................ 112,609 21st Century................................ 12,772
Under the current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended March 31, 2001, the following Funds 183 188 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) elected to defer losses occurring between November 1, 2000 and March 31, 2001 under these rules:
POST-OCTOBER CAPITAL/CURRENCY LOSSES DEFERRED FUND (000) ----------------------------------------------------- Convertible Securities............. $ 5,194 Asset Allocation................... 5,453 Equity Income...................... 4,087 Growth & Income.................... 22,498 Blue Chip.......................... 20,225
POST-OCTOBER CAPITAL/CURRENCY LOSSES DEFERRED FUND (000) ----------------------------------------------------- Strategic Growth................... $37,492 Aggressive Growth.................. 20,401 Focused Equities................... 145,981 21st Century....................... 13,254 Small Company...................... 5,312
10. REORGANIZATIONS ACQUISITION OF PACIFIC HORIZON FUNDS On May 14, 1999, the Small Company Growth Fund (the "Acquiring Fund"), acquired the assets and assumed the liabilities of the Pacific Horizon Aggressive Growth Fund (the "Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in the Schedules of capital stock activity. Net assets and unrealized appreciation as of the reorganization date were as follows:
ACQUIRED TOTAL NET ASSETS FUND TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND UNREALIZED OF ACQUIRED FUND OF ACQUIRING FUND AFTER ACQUISITION APPRECIATION (000) (000) (000) (000) ---------------------------------------------------------------------------------- $164,166 $366,213 $530,379 $12,433
On May 21, 1999, the Capital Income Fund, Asset Allocation Fund and Blue Chip Fund, newly established portfolios, acquired the assets and assumed the liabilities of the Pacific Horizon Capital Income Fund, Pacific Horizon Asset Allocation Fund and Pacific Horizon Blue Chip Fund, respectively, pursuant to a plan of reorganization approved by its shareholders. The acquisition was accomplished by a tax-free exchange of shares of Capital Income Fund, Asset Allocation Fund and Blue Chip Fund in an amount equal to the value of the outstanding shares of the Pacific Horizon Capital Income Fund, Pacific Horizon Asset Allocation Fund and Pacific Horizon Blue Chip Fund, respectively. The financial statements of the Capital Income Fund, Asset Allocation Fund and Blue Chip Fund reflect the historical financial results of the Pacific Horizon Capital Income Fund, Pacific Horizon Asset Allocation Fund and Pacific Horizon Blue Chip Fund prior to the reorganization.
PACIFIC HORIZON FUND SHARE CLASS CORRESPONDING RESERVES SHARE CLASS --------------------------------------------------------------------- Capital Income Nations Capital Income A Shares Investor A Shares B Shares Investor B Shares K Shares Investor C Shares Asset Allocation Nations Asset Allocation A Shares Investor A Shares B Shares Investor B Shares K Shares Investor C Shares SRF Shares Seafirst Shares Blue Chip Nations Blue Chip A Shares Investor A Shares B Shares Investor B Shares K Shares Investor C Shares SRF Shares Seafirst Shares
184 189 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) ACQUISITION OF TIME HORIZON FUNDS On August 20, 1999, the Asset Allocation Fund (the "Acquiring Fund"), acquired the assets and assumed the liabilities of the Time Horizon Funds, listed below (each an "Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Funds' shareholders. The number and value of shares issued by the Acquiring Fund are presented in the Schedules of capital stock activity. Net assets and unrealized appreciation as of the reorganization date were as follows:
TOTAL NET ASSETS TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND OF ACQUIRED FUND OF ACQUIRING FUND AFTER ACQUISITION ACQUIRING FUND ACQUIRED FUND (000) (000) (000) ------------------------------------------------------------------------------------------------------------ Asset Allocation Time Horizon Portfolio I $32,506 $293,022 $419,334 Asset Allocation Time Horizon Portfolio II 43,414 293,022 419,334 Asset Allocation Time Horizon Portfolio III 50,392 293,022 419,334 ACQUIRED FUND UNREALIZED APPRECIATION ACQUIRING FUND (000) --------------------- ----------------------- Asset Allocation $1,890 Asset Allocation 3,206 Asset Allocation 5,511
CHANGE OF REGISTERED INVESTMENT COMPANY On August 20, 1999, the Growth & Income and Focused Equities Funds, newly established shell portfolios of Reserves (the "Successor Funds"), acquired the assets and liabilities of their predecessor funds, which were series of the Trust, pursuant to a plan of reorganization approved by each predecessor fund's shareholders. The predecessor funds had the same name, investment objective and principal investment strategies as the Successor Funds. The acquisition was accomplished by a tax-free exchange of shares of the Successor Funds in an amount equal to the value of the outstanding shares of the predecessor funds. The financial statements of the Successor Funds reflect the historical financial results of the predecessor funds prior to the reorganizations. CONVERSION OF COMMON TRUST FUNDS On May 12, 2000, certain Funds, as listed below (each an "Acquiring Fund"), acquired the assets of certain common trust funds, managed by Bank of America, also listed below (each an "Acquired Fund"), in a tax-free exchange for shares of the Acquiring Fund. The number and value of shares issued by the Acquiring Fund are presented in the Schedules of capital stock activity. Net assets and unrealized appreciation as of the conversion date were as follows:
TOTAL NET ASSETS TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND ACQUIRED FUND OF ACQUIRED FUND OF ACQUIRING FUND AFTER CONVERSION UNREALIZED APPRECIATION ACQUIRING FUND ACQUIRED FUND (000) (000) (000) (000) -------------------------------------------------------------------------------------------------------------------------------- Asset Allocation Boatmen's Trust Company Balanced Investment Fund $ 13,617 $ 410,438 $ 424,055 $ 1,099 Equity Income Boatmen's Trust Company Equity Income Fund 95,694 463,209 558,903 15,874 Equity Income BCA Equity Income Fund 92,411 463,209 555,620 28,871 Value Boatmen's Trust Company Equity Value Fund 119,967 1,364,400 1,484,367 34,539 Value Bank IV Kansas Stock Fund 47,444 1,364,400 1,411,844 8,399 Strategic Growth BCA Diversified Stock Fund 307,415 858,884 1,166,299 115,146
185 190 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TOTAL NET ASSETS TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND ACQUIRED FUND OF ACQUIRED FUND OF ACQUIRING FUND AFTER CONVERSION UNREALIZED APPRECIATION ACQUIRING FUND ACQUIRED FUND (000) (000) (000) (000) -------------------------------------------------------------------------------------------------------------------------------- Aggressive Growth BCA Retail Trust Equity Fund 28,949 383,624 412,573 12,864 Small Company Boatmen's Trust Company Managed Small Capitalization Fund 88,407 769,936 858,343 27,179
11. SUBSEQUENT EVENTS On August 23, 2000, the Boards of Trustees of the Trust and Reserves approved an Agreement and Plan of Reorganization (the "Reorganization") pursuant to which Asset Allocation Fund's successor will acquire all of the assets of Balanced Assets Fund in exchange for shares of equal value of Asset Allocation Fund's successor. Additionally, the Board of Trustees of Reserves approved the Reorganization of the Asset Allocation Fund into a newly established successor fund in Funds Trust. This Reorganization was approved by shareholders, and it is anticipated that the Reorganization will take place on or about June 8, 2001. On August 23, 2000, the Board of Trustees of Reserves approved the Reorganization of the Growth & Income and Focused Equities Funds into newly established successor funds in Funds Trust. The Growth & Income and Focused Equities Funds will retain their name, investment objectives and principal investment strategies without change. This Reorganization was approved by shareholders, and it is anticipated that the Reorganization will take place on or about June 8, 2001. On April 5, 2001, BAAI and BACAP reorganized into successor entities named Banc of America Advisors, LLC and Banc of America Capital Management, LLC, respectively. The successor entities are organized as limited liability companies under the laws of the State of North Carolina. 186 191 NATIONS FUNDS REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS, DIRECTORS AND TRUSTEES OF NATIONS FUNDS In our opinion, the accompanying statements of net assets, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nations Convertible Securities Fund, Nations Balanced Assets Fund, Nations Asset Allocation Fund, Nations Equity Income Fund, Nations Value Fund, Nations Marsico Growth & Income Fund, Nations Blue Chip Fund, Nations Stategic Growth Fund, Nations Capital Growth, Nations Aggressive Growth Fund (formerly, Nations Disciplined Equity Fund), Nations Marsico Focused Equities Fund, Nations MidCap Growth Fund, Nations Small Company Fund and Nations Marsico 21st Century Fund (portfolios of Nations Fund Trust, Nations Reserves, Nations Fund, Inc. or Nations Funds Trust, hereafter referred to as the "Funds") at March 31, 2001, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. The financial highlights of Nations Small Company Fund, formerly Pilot Small Capitalization Equity Fund, for the periods ended May 16, 1997 and August 31, 1996 were audited by other independent accountants whose report dated June 20, 1997 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP New York, New York May 16, 2001 187 192 NATIONS FUNDS TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2001, the amount of long-term capital gains designated by the Trust, the Company, Reserves and Funds Trust were as follows:
FUND TOTAL -------------------------------------------------------------------------- Convertible Securities...................................... $ 37,743,257 Balanced Assets............................................. 3,660 Asset Allocation............................................ 20,267,137 Equity Income............................................... 31,297,382 Value....................................................... 360,866,210 Growth & Income............................................. 1,734,921 Blue Chip................................................... 67,227,943 Strategic Growth............................................ 1,377,174 Capital Growth.............................................. 175,422,152 Aggressive Growth........................................... 49,125,138 Focused Equities............................................ 8,998,699 MidCap Growth............................................... 61,495,012 Small Company............................................... 100,862,890
Of the ordinary income (including short-term capital gain) distributions made by the Trust, the Company, Reserves and Funds Trust during the fiscal year ended March 31, 2001, the following percentages qualify for the dividend received deduction available to corporate shareholders: Convertible Securities...................................... 16.31% Balanced Assets............................................. 37.93% Asset Allocation............................................ 21.53% Equity Income............................................... 100.00% Value....................................................... 100.00% Growth & Income............................................. 30.36% Blue Chip................................................... 100.00% MidCap Growth............................................... 7.55% Small Company............................................... 22.29%
188 193 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth & Income Master Portfolio, Nations Blue Chip Master Portfolio and Nations Marsico Focused Equities Master Portfolio Annual Report MARCH 31, 2001 The following pages should be read in conjunction with Nations Marsico Growth & Income, Nations Blue Chip and Nations Marsico Focused Equities Funds' Annual Report. 189 194 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth & Income Master Portfolio STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- COMMON STOCKS -- 86.7% AEROSPACE AND DEFENSE -- 7.5% 390,352 Boeing Company......................... $21,746 286,163 General Dynamics Corporation........... 17,954 ------- 39,700 ------- AIRLINES -- 2.8% 828,825 Southwest Airlines Company............. 14,712 ------- APPAREL AND TEXTILES -- 1.1% 141,464 Nike, Inc., Class B.................... 5,736 ------- BEVERAGES -- 6.6% 82,659 Adolph Coors Company, Class B(a)....... 5,409 417,634 Anheuser-Busch Companies, Inc. ........ 19,182 160,000 Coca-Cola Enterprises Inc. ............ 2,845 200,299 Pepsi Bottling Group, Inc. ............ 7,613 ------- 35,049 ------- BROADCASTING AND CABLE -- 4.4% 181,723 Clear Channel Communications, Inc.++... 9,895 320,469 Comcast Corporation, Class A++......... 13,439 ------- 23,334 ------- COMMERCIAL BANKING -- 3.2% 382,506 Citigroup Inc. ........................ 17,205 ------- COMMERCIAL SERVICES -- 0.4% 25,384 Omnicom Group Inc.(a).................. 2,104 ------- COMPUTER SERVICES -- 1.7% 169,497 Automatic Data Processing, Inc. ....... 9,217 ------- CONSUMER CREDIT AND MORTGAGES -- 2.5% 178,718 USA Education Inc. .................... 12,984 ------- CONSUMER SERVICES -- 0.2% 30,630 Estee Lauder Companies Inc., Class A(a)................................. 1,116 ------- DEPARTMENT AND DISCOUNT STORES -- 6.9% 501,609 Costco Wholesale Corporation++......... 19,689 337,710 Wal-Mart Stores, Inc. ................. 17,054 ------- 36,743 ------- DIVERSIFIED MANUFACTURING -- 4.1% 520,552 General Electric Company............... 21,790 ------- ELECTRIC POWER -- NON NUCLEAR -- 2.8% 191,412 Calpine Corporation++(a)............... 10,541 119,542 Mirant Corporation++(a)................ 4,244 ------- 14,785 ------- FOOD AND DRUG STORES -- 1.1% 104,269 Safeway Inc.++......................... 5,750 -------
VALUE SHARES (000) ----------------------------------------------------------- HEALTH SERVICES -- 1.4% 171,068 Tenet Healthcare Corporation++......... $ 7,527 ------- HOUSING AND FURNISHING -- 0.5% 73,910 M.D.C. Holdings, Inc. ................. 2,908 ------- INTEGRATED OIL -- 1.1% 112,954 BP Amoco plc, ADR...................... 5,605 ------- INVESTMENT SERVICES -- 9.4% 188,832 Goldman Sachs Group, Inc. ............. 16,070 137,760 Lehman Brothers Holdings Inc. ......... 8,638 385,713 Merrill Lynch & Company, Inc. ......... 21,368 53,561 Northern Trust Corporation............. 3,348 ------- 49,424 ------- LODGING AND RECREATION -- 1.6% 173,262 Four Seasons Hotels Inc.(a)............ 8,575 ------- MEDICAL DEVICES AND SUPPLIES -- 1.9% 50,406 Baxter International Inc. ............. 4,745 141,538 Priority Healthcare Corporation, Class B++.................................. 5,343 ------- 10,088 ------- OILFIELD SERVICES -- 4.3% 243,977 Schlumberger Ltd. ..................... 14,055 123,860 Smith International, Inc.++(a)......... 8,695 ------- 22,750 ------- PHARMACEUTICALS -- 12.3% 158,416 Amgen Inc.++........................... 9,535 401,054 Genentech, Inc.++(a)................... 20,253 295,126 Merck & Company, Inc. ................. 22,401 309,598 Pfizer Inc. ........................... 12,678 ------- 64,867 ------- PUBLISHING AND ADVERTISING -- 0.3% 41,183 New York Times Company, Class A........ 1,687 ------- RAILROADS, TRUCKING AND SHIPPING --1.0% 131,901 FedEx Corporation++.................... 5,498 ------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.2% 44,855 Equity Office Properties Trust......... 1,256 ------- SOFTWARE -- 1.2% 119,322 Microsoft Corporation++................ 6,525 ------- SPECIALTY STORES -- 6.2% 474,849 Home Depot, Inc. ...................... 20,466 447,348 Tiffany & Company...................... 12,190 ------- 32,656 ------- TOTAL COMMON STOCKS (Cost $463,364)........................ 459,591 -------
SEE NOTES TO FINANCIAL STATEMENTS. 190 195 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth & Income Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 0.4% (Cost $1,405) ELECTRIC POWER -- NON NUCLEAR -- 0.4% 28,100 Mirant Trust........................... $ 2,093 ------- PRINCIPAL AMOUNT (000) --------- CORPORATE BONDS AND NOTES -- 0.1% (Cost $537) HOUSING AND FURNISHING -- 0.1% $ 550 M.D.C. Holdings, Inc., 8.375% 02/01/08...................... 549 ------- SHORT TERM INVESTMENTS -- 10.4% (Cost $54,892) FEDERAL HOME LOAN BANK (FHLB) -- 10.4% 54,900 Discount note 04/02/01................. 54,885 -------
SHARES VALUE (000) (000) ----------------------------------------------------------- INVESTMENT COMPANIES -- 9.6% (Cost $50,691) 50,691 Nations Cash Reserves#............... 50,691 -------- TOTAL INVESTMENTS (Cost $570,889*).............. 107.1% 567,809 -------- OTHER ASSETS AND LIABILITIES (NET)....... (7.1)% Cash................................. $ 81 Receivable for investment securities sold............................... 13,669 Dividends receivable................. 355 Interest receivable.................. 8 Collateral on securities loaned...... (50,637) Investment advisory fee payable...... (345) Administration fee payable........... (46) Payable for investment securities purchased.......................... (799) Accrued Trustees' fees and expenses........................... (12) Accrued expenses and other liabilities........................ (33) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET).................. (37,759) -------- NET ASSETS.................... 100.0% $530,050 ========
--------------- * Federal Income Tax Information: Net unrealized depreciation of $4,510 on investment securities was comprised of gross appreciation of $29,667 and gross depreciation of $34,177 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $572,319. ++ Non-income producing security. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $45,045 and $49,490, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 6). The portion that represents cash collateral is $50,637. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 191 196 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- COMMON STOCKS -- 98.3% AEROSPACE AND DEFENSE -- 1.9% 131,600 Boeing Company........................ $ 7,331 42,400 Northrop Grumman Corporation.......... 3,689 95,300 Rockwell International Corporation.... 3,464 -------- 14,484 -------- AIRLINES -- 0.3% 56,300 Delta Air Lines, Inc. ................ 2,224 -------- APPAREL AND TEXTILES -- 0.2% 33,300 Liz Claiborne, Inc. .................. 1,567 -------- AUTOMOTIVE -- 1.2% 274,405 Ford Motor Company.................... 7,716 17,300 Johnson Controls, Inc. ............... 1,081 61,700 Visteon Corporation................... 928 -------- 9,725 -------- BEVERAGES -- 2.3% 133,100 Anheuser-Busch Companies, Inc. ....... 6,113 61,900 Coca-Cola Company..................... 2,795 197,900 PepsiCo, Inc. ........................ 8,698 -------- 17,606 -------- BROADCASTING AND CABLE -- 3.6% 374,900 AOL Time Warner Inc.++................ 15,052 39,000 Cox Communications, Inc., Class A++(a).............................. 1,735 138,100 Viacom Inc., Class B++................ 6,072 177,400 Walt Disney Company................... 5,074 -------- 27,933 -------- CHEMICALS -- BASIC -- 0.9% 53,000 Air Products and Chemicals, Inc. ..... 2,035 27,398 Dow Chemical Company.................. 865 40,300 E.I. duPont de Nemours and Company.... 1,640 5,100 FMC Corporation++..................... 376 45,200 Praxair, Inc. ........................ 2,018 -------- 6,934 -------- CHEMICALS -- SPECIALTY -- 0.5% 30,700 Engelhard Corporation................. 794 11,400 Millipore Corporation................. 527 47,000 Sigma-Aldrich Corporation............. 2,250 -------- 3,571 -------- COMMERCIAL BANKING -- 8.1% 509,900 Citigroup Inc. ....................... 22,934 74,500 First Union Corporation............... 2,459 22,200 FleetBoston Financial Corporation..... 838 175,500 J.P. Morgan Chase & Company........... 7,880 70,600 Mellon Financial Corporation.......... 2,861 46,800 PNC Financial Services Group.......... 3,171 132,000 Regions Financial Corporation(a)...... 3,754 58,500 SunTrust Banks, Inc. ................. 3,791 249,350 US Bancorp............................ 5,785 129,800 Washington Mutual, Inc. .............. 7,107 51,200 Wells Fargo & Company................. 2,533 -------- 63,113 --------
VALUE SHARES (000) ----------------------------------------------------------- COMMERCIAL SERVICES -- 0.4% 38,500 Omnicom Group Inc. ................... $ 3,191 -------- COMPUTER SERVICES -- 1.5% 36,100 Automatic Data Processing, Inc. ...... 1,963 47,900 Electronic Data Systems Corporation... 2,676 79,500 First Data Corporation................ 4,747 60,000 Paychex, Inc. ........................ 2,224 7,700 Synopsys, Inc.++...................... 361 -------- 11,971 -------- COMPUTERS AND OFFICE EQUIPMENT -- 4.9% 89,100 Compaq Computer Corporation........... 1,622 159,700 Dell Computer Corporation++........... 4,102 22,200 Eastman Kodak Company................. 886 197,300 EMC Corporation++..................... 5,801 49,000 Hewlett-Packard Company............... 1,532 153,300 International Business Machines Corporation......................... 14,745 26,100 Jabil Circuit, Inc.++(a).............. 564 35,200 Lexmark International, Inc.++(a)...... 1,602 7,262 McDATA Corporation, Class A++......... 137 34,100 NCR Corporation++(a).................. 1,331 35,300 Network Appliance, Inc.++(a).......... 593 53,200 Sanmina Corporation++................. 1,041 157,800 Sun Microsystems, Inc.++.............. 2,425 42,800 Tektronix, Inc.++..................... 1,168 48,700 Unisys Corporation++.................. 682 -------- 38,231 -------- CONGLOMERATES -- 0.8% 85,800 United Technologies Corporation....... 6,289 -------- CONSUMER CREDIT AND MORTGAGES -- 3.6% 51,800 American Express Company.............. 2,139 127,400 Fannie Mae............................ 10,142 104,200 Freddie Mac........................... 6,755 99,500 MBNA Corporation...................... 3,293 55,400 Providian Financial Corporation....... 2,717 47,900 USA Education Inc. ................... 3,480 -------- 28,526 -------- DEPARTMENT AND DISCOUNT STORES -- 3.7% 78,300 Federated Department Stores, Inc.++... 3,253 43,100 Kohl's Corporation++.................. 2,659 82,400 May Department Stores Company......... 2,924 158,900 Sears, Roebuck and Company............ 5,604 85,900 Target Corporation.................... 3,099 227,800 Wal-Mart Stores, Inc. ................ 11,504 -------- 29,043 -------- DIVERSIFIED ELECTRONICS -- 0.1% 25,100 Symbol Technologies, Inc.(a).......... 876 -------- DIVERSIFIED MANUFACTURING -- 4.6% 654,500 General Electric Company++............ 27,397 202,100 Tyco International Ltd. .............. 8,737 -------- 36,134 --------
SEE NOTES TO FINANCIAL STATEMENTS. 192 197 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- ELECTRIC POWER -- NON NUCLEAR -- 0.3% 45,600 Dynegy Inc., Class A.................. $ 2,326 -------- ELECTRIC POWER -- NUCLEAR -- 2.7% 133,800 Duke Energy Corporation............... 5,719 95,900 Exelon Corporation.................... 6,291 64,000 FPL Group, Inc. ...................... 3,923 119,500 Reliant Energy, Inc. ................. 5,407 -------- 21,340 -------- ELECTRICAL EQUIPMENT -- 0.3% 59,800 Honeywell International Inc. ......... 2,440 -------- FOOD AND DRUG STORES -- 1.9% 65,300 CVS Corporation....................... 3,819 93,000 Safeway Inc.++........................ 5,129 150,200 Walgreen Company...................... 6,129 -------- 15,077 -------- FOOD PRODUCTS -- 1.8% 69,400 Archer-Daniels-Midland Company........ 913 39,600 General Mills, Inc. .................. 1,703 27,300 Hershey Foods Corporation............. 1,892 25,300 Quaker Oats Company................... 2,455 154,400 SYSCO Corporation..................... 4,093 61,200 Unilever NV, NY Shares................ 3,222 -------- 14,278 -------- HEALTH SERVICES -- 1.0% 90,300 HCA - The Healthcare Company.......... 3,636 69,000 UnitedHealth Group Inc. .............. 4,089 -------- 7,725 -------- HEAVY MACHINERY -- 0.6% 55,400 Deere & Company....................... 2,013 70,500 Parker-Hannifin Corporation........... 2,800 -------- 4,813 -------- HOUSEHOLD PRODUCTS -- 1.9% 60,600 Avon Products, Inc. .................. 2,423 51,600 Colgate-Palmolive Company............. 2,851 33,200 Fortune Brands, Inc. ................. 1,142 122,600 Kimberly-Clark Corporation............ 8,317 -------- 14,733 -------- INSURANCE -- 4.0% 163,000 Allstate Corporation.................. 6,836 168,200 American General Corporation.......... 6,434 117,150 American International Group, Inc. ... 9,430 65,000 Hartford Financial Services Group, Inc. ............................... 3,835 43,600 Lincoln National Corporation.......... 1,852 101,600 MetLife, Inc.(a)...................... 3,053 -------- 31,440 -------- INTEGRATED OIL -- 6.0% 72,400 Apache Corporation.................... 4,171 93,400 Chevron Corporation................... 8,200 98,500 Conoco Inc. .......................... 2,783 325,577 Exxon Mobil Corporation............... 26,371
VALUE SHARES (000) ----------------------------------------------------------- INTEGRATED OIL -- (CONTINUED) 44,000 Texaco Inc. .......................... $ 2,922 100,000 USX-Marathon Group.................... 2,695 -------- 47,142 -------- INVESTMENT SERVICES -- 1.6% 70,500 Lehman Brothers Holdings Inc. ........ 4,420 99,900 Merrill Lynch & Company, Inc. ........ 5,535 54,000 Morgan Stanley Dean Witter & Company............................. 2,889 -------- 12,844 -------- LODGING AND RECREATION -- 0.7% 96,500 Carnival Corporation.................. 2,670 77,700 Harley-Davidson, Inc. ................ 2,949 -------- 5,619 -------- MEDICAL DEVICES AND SUPPLIES -- 3.6% 93,800 Abbott Laboratories................... 4,426 33,600 Baxter International Inc. ............ 3,163 107,850 Biomet, Inc. ......................... 4,248 76,200 Cardinal Health, Inc. ................ 7,373 102,600 Johnson & Johnson..................... 8,975 -------- 28,185 -------- METALS AND MINING -- 0.6% 104,700 Alcoa Inc. ........................... 3,764 65,800 Barrick Gold Corporation.............. 940 -------- 4,704 -------- NATURAL GAS DISTRIBUTION -- 1.1% 105,042 El Paso Corporation................... 6,859 35,300 Enron Corporation..................... 2,051 -------- 8,910 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.2% 79,200 Cabletron Systems, Inc.++............. 1,022 436,500 Cisco Systems, Inc.++................. 6,903 36,400 Comverse Technology, Inc.++........... 2,144 53,800 Corning Inc. ......................... 1,113 91,610 JDS Uniphase Corporation++............ 1,689 7,700 Juniper Networks, Inc.++(a)........... 292 144,300 Nortel Networks Corporation........... 2,027 88,200 QUALCOMM Inc.++....................... 4,994 52,000 Scientific-Atlanta, Inc. ............. 2,163 57,300 Tellabs, Inc.++....................... 2,331 -------- 24,678 -------- OILFIELD SERVICES -- 0.9% 36,600 BJ Services Company++................. 2,606 69,600 ENSCO International Inc. ............. 2,436 30,000 Schlumberger Ltd. .................... 1,728 -------- 6,770 -------- PAPER AND FOREST PRODUCTS -- 0.5% 19,500 Bowater Inc. ......................... 924 58,200 Weyerhaeuser Company.................. 2,956 -------- 3,880 -------- PHARMACEUTICALS -- 9.1% 55,300 Allergan, Inc. ....................... 4,100 47,600 Amgen Inc.++.......................... 2,865 31,000 Biogen, Inc.++........................ 1,963
SEE NOTES TO FINANCIAL STATEMENTS. 193 198 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
VALUE SHARES (000) ----------------------------------------------------------- PHARMACEUTICALS -- (CONTINUED) 210,600 Bristol-Myers Squibb Company.......... $ 12,510 30,300 Eli Lilly and Company................. 2,323 40,800 Forest Laboratories, Inc.++........... 2,417 214,700 Merck & Company, Inc. ................ 16,296 581,525 Pfizer Inc. .......................... 23,814 87,100 Pharmacia Corporation................. 4,387 -------- 70,675 -------- PUBLISHING AND ADVERTISING -- 0.7% 54,800 McGraw-Hill Companies, Inc. .......... 3,269 51,700 New York Times Company, Class A....... 2,118 -------- 5,387 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.4% 115,700 Burlington Northern Santa Fe Corporation......................... 3,515 -------- RESTAURANTS -- 0.4% 71,600 Starbucks Corporation++............... 3,039 -------- SEMICONDUCTORS -- 4.2% 81,600 Agilent Technologies, Inc.++.......... 2,508 59,100 Analog Devices, Inc.++................ 2,142 54,700 Applied Materials, Inc.++............. 2,379 26,600 Applied Micro Circuits Corporation++(a).................... 439 502,300 Intel Corporation..................... 13,216 29,200 KLA-Tencor Corporation++(a)........... 1,150 64,600 Linear Technology Corporation......... 2,653 31,200 Maxim Integrated Products, Inc.++..... 1,298 43,100 Novellus Systems, Inc.++(a)........... 1,748 15,200 PerkinElmer, Inc. .................... 797 10,400 QLogic Corporation++.................. 234 81,000 Texas Instruments Inc. ............... 2,509 13,100 Vitesse Semiconductor Corporation++... 312 50,300 Xilinx, Inc.++(a)..................... 1,767 -------- 33,152 -------- SOFTWARE -- 4.2% 29,600 Adobe Systems Inc. ................... 1,035 3,600 Ariba, Inc.++(a)...................... 28 22,700 Autodesk, Inc.(a)..................... 694
VALUE SHARES (000) ----------------------------------------------------------- SOFTWARE -- (CONTINUED) 28,000 BMC Software, Inc.++(a)............... $ 602 16,900 Intuit Inc.++......................... 469 12,900 Mercury Interactive Corporation++(a).................... 540 365,000 Microsoft Corporation++++............. 19,962 374,300 Oracle Corporation++.................. 5,607 36,500 Peoplesoft, Inc.++.................... 855 37,000 Siebel Systems, Inc.++(a)............. 1,006 40,200 VERITAS Software Corporation++(a)..... 1,859 -------- 32,657 -------- SPECIALTY STORES -- 0.8% 102,000 Bed Bath & Beyond Inc.++.............. 2,505 27,700 Best Buy Company, Inc.++.............. 996 59,350 Home Depot, Inc. ..................... 2,558 -------- 6,059 -------- TELECOMMUNICATIONS SERVICES -- 6.1% 56,800 Avaya Inc.++.......................... 738 146,800 BellSouth Corporation................. 6,007 64,400 Nextel Communications, Inc., Class A++................................. 926 253,600 Qwest Communications International Inc.++.............................. 8,889 250,001 SBC Communications Inc. .............. 11,158 256,816 Verizon Communications Inc. .......... 12,661 382,650 WorldCom, Inc.++...................... 7,151 -------- 47,530 -------- TOBACCO -- 1.1% 188,300 Philip Morris Companies Inc. ......... 8,935 -------- TOTAL COMMON STOCKS (Cost $691,232)..................... 769,271 --------
PRINCIPAL AMOUNT (000) --------- U.S. TREASURY OBLIGATIONS -- 0.4% (Cost $2,956) U.S. TREASURY BILLS -- 0.4% $ 3,000 Discount note 07/19/01++....................... 2,962 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 194 199 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
SHARES VALUE (000) (000) ----------------------------------------------------------- INVESTMENT COMPANIES -- 4.0% (Cost $31,442) 31,442 Nations Cash Reserves#............. $ 31,442 ---------- TOTAL INVESTMENTS (Cost $725,630*)............ 102.7% 803,675 ---------- OTHER ASSETS AND LIABILITIES (NET)......... (2.7)% Receivable for investment securities sold............................. $ 14,776 Dividends receivable............... 709 Interest receivable................ 78 Receivable for variation margin.... 67 Collateral on securities loaned.... (22,037) Investment advisory fee payable.... (447) Administration fee payable......... (34) Due to custodian................... (12) Payable for investment securities purchased........................ (14,478) Accrued Trustees' fees and expenses......................... (14) Accrued expenses and other liabilities...................... (33) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)............................ (21,425) ---------- NET ASSETS.................. 100.0% $ 782,250 ==========
--------------- * Federal Income Tax Information: Net unrealized appreciation of $75,999 on investment securities was comprised of gross appreciation of $141,987 and gross depreciation of $65,988 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $727,676. ++ Non-income producing security. ++ All or a portion of security segregated as collateral for futures contracts. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $32,907 and $21,232, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 6). The portion that represents cash collateral is $22,037. SEE NOTES TO FINANCIAL STATEMENTS. 195 200 NATIONS MASTER INVESTMENT TRUST Nations Marsico Focused Equities Master Portfolio STATEMENT OF NET ASSETS MARCH 31, 2001
VALUE SHARES (000) ------------------------------------------------------------ COMMON STOCKS -- 89.4% AEROSPACE AND DEFENSE -- 8.0% 1,407,921 Boeing Company $ 78,435 1,076,251 General Dynamics Corporation....... 67,524 ---------- 145,959 ---------- AIRLINES -- 3.0% 3,078,688 Southwest Airlines Company......... 54,647 ---------- APPAREL AND TEXTILES -- 1.1% 509,376 Nike, Inc., Class B................ 20,655 ---------- BEVERAGES -- 3.7% 1,464,407 Anheuser-Busch Companies, Inc. .... 67,260 ---------- BROADCASTING AND CABLE -- 2.0% 657,809 Clear Channel Communications, 35,818 Inc.++........................... ---------- COMMERCIAL BANKING -- 4.1% 1,643,534 Citigroup Inc. .................... 73,926 ---------- COMPUTER SERVICES -- 2.7% 890,370 Automatic Data Processing, Inc. ... 48,418 ---------- CONSUMER CREDIT AND MORTGAGES -- 6.2% 831,720 Fannie Mae......................... 66,204 623,104 USA Education Inc. ................ 45,269 ---------- 111,473 ---------- DEPARTMENT AND DISCOUNT STORES -- 7.3% 1,749,856 Costco Wholesale Corporation++..... 68,682 1,251,490 Wal-Mart Stores, Inc. ............. 63,200 ---------- 131,882 ---------- DIVERSIFIED MANUFACTURING -- 4.1% 1,776,869 General Electric Company........... 74,380 ---------- ELECTRIC POWER -- NON NUCLEAR -- 1.8% 600,706 Calpine Corporation++(a)........... 33,081 ---------- HEALTH SERVICES -- 1.9% 772,208 Tenet Healthcare Corporation++..... 33,977 ---------- INTEGRATED OIL -- 2.9% 1,058,533 BP Amoco plc, ADR.................. 52,524 ----------
VALUE SHARES (000) ------------------------------------------------------------ INVESTMENT SERVICES -- 9.9% 679,076 Goldman Sachs Group, Inc.(a)....... $ 57,789 733,560 Lehman Brothers Holdings Inc. ..... 45,994 1,366,896 Merrill Lynch & Company, Inc. ..... 75,727 ---------- 179,510 ---------- LODGING AND RECREATION -- 2.0% 745,655 Four Seasons Hotels Inc.(a)........ 36,902 ---------- MEDICAL DEVICES AND SUPPLIES --1.0% 187,939 Baxter International Inc. ......... 17,693 ---------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.3% 422,548 QUALCOMM Inc.++.................... 23,927 ---------- OILFIELD SERVICES -- 4.5% 863,033 Schlumberger Ltd. ................. 49,720 459,066 Smith International, Inc.++(a)..... 32,226 ---------- 81,946 ---------- PHARMACEUTICALS -- 13.9% 616,925 Amgen Inc.++....................... 37,131 1,540,016 Genentech, Inc.++.................. 77,771 1,140,349 Merck & Company, Inc. ............. 86,553 1,217,447 Pfizer Inc......................... 49,854 ---------- 251,309 ---------- SOFTWARE -- 1.2% 406,546 Microsoft Corporation++............ 22,233 ---------- SPECIALTY STORES -- 6.8% 1,812,986 Home Depot, Inc. .................. 78,140 1,649,653 Tiffany & Company(a)............... 44,953 ---------- 123,093 ---------- TOTAL COMMON STOCKS (Cost $1,684,732).................. 1,620,613 ---------- PRINCIPAL AMOUNT (000) --------- SHORT TERM INVESTMENTS -- 6.0% (Cost $108,385) FEDERAL HOME LOAN BANK (FHLB) -- 6.0% $ 108,400 Discount note 04/02/01............. 108,370 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 196 201 NATIONS MASTER INVESTMENT TRUST Nations Marsico Focused Equities Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2001
SHARES VALUE (000) (000) ------------------------------------------------------------ INVESTMENT COMPANIES -- 7.6% (Cost $136,833) 136,833 Nations Cash Reserves#............. 136,833 ---------- TOTAL INVESTMENTS 103.0% 1,865,816 (Cost $1,929,950*)...... ---------- OTHER ASSETS AND (3.0)% LIABILITIES (NET)....... Cash............................... $ 348 Receivable for investment 83,121 securities sold.................. Dividends receivable............... 1,128 Collateral on securities loaned.... (136,751) Investment advisory fee payable.... (1,185) Administration fee payable......... (158) Accrued Trustees' fees and (13) expenses......................... Accrued expenses and other (44) liabilities...................... ---------- TOTAL OTHER ASSETS AND LIABILITIES (53,554) (NET)............................ ---------- NET ASSETS................ 100.0% $1,812,262 ==========
--------------- * Federal Income Tax Information: Net unrealized depreciation of $70,698 on investment securities was comprised of gross appreciation of $55,064 and gross depreciation of $125,762 for federal income tax purposes. At March 31, 2001, the aggregate cost of securities for federal income tax purposes was $1,936,514. ++ Non-income producing security. (a) All or a portion of security was on loan at March 31, 2001. The aggregate cost and market value of securities on loan at March 31, 2001 is $139,443 and $130,644, respectively. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, Inc. A portion of this amount represents cash collateral received from securities lending activity (Note 6). The portion that represents cash collateral is $136,751. ABBREVIATIONS: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 197 202 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF OPERATIONS For the year ended March 31, 2001 GROWTH & INCOME BLUE CHIP FOCUSED EQUITIES MASTER PORTFOLIO MASTER PORTFOLIO MASTER PORTFOLIO -------------------------------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $26, $58 and $153, respectively)...................................... $ 3,344 $ 9,891 $ 12,184 Interest................................................... 3,249 1,391 11,095 Securities lending......................................... 70 46 298 ----------------- ----------------- ----------------- Total investment income........................... 6,663 11,328 23,577 ----------------- ----------------- ----------------- EXPENSES: Investment advisory fee.................................... 4,704 6,291 17,180 Administration fee......................................... 627 484 2,291 Fund accounting fees and expenses.......................... -- -- -- Custodian fees............................................. 41 61 159 Legal and audit fees....................................... 29 34 30 Trustees' fees and expenses................................ 19 19 19 Interest expense........................................... -- -- 15 Other...................................................... 7 -- 35 ----------------- ----------------- ----------------- Total expenses.................................... 5,427 6,889 19,729 Fees reduced by credits allowed by the custodian........... (17) (6) (10) ----------------- ----------------- ----------------- Net expenses........................................... 5,410 6,883 19,719 ----------------- ----------------- ----------------- NET INVESTMENT INCOME...................................... 1,253 4,445 3,858 ----------------- ----------------- ----------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions.................................... (55,082) (28) (262,982) Written options.......................................... -- -- -- Futures contracts........................................ -- (5,059) -- Foreign currency and net other assets.................... -- -- (2) ----------------- ----------------- ----------------- Net realized gain/(loss) on investments.................... (55,082) (5,087) (262,984) Change in unrealized appreciation/(depreciation) of: Securities (Note 7)...................................... (165,087) (231,980) (577,214) Futures contracts........................................ -- (1,507) -- Foreign currency and net other assets.................... -- -- --* ----------------- ----------------- ----------------- Net change in unrealized appreciation/(depreciation) of investments.............................................. (165,087) (233,487) (577,214) Net realized and unrealized gain/(loss) on investments..... (220,169) (238,574) (840,198) ----------------- ----------------- ----------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................... $ (218,916) $ (234,129) $ (836,340) ================= ================= =================
--------------- * Amount represents less than $500. SEE NOTES TO FINANCIAL STATEMENTS. 198 203 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS GROWTH & INCOME FOCUSED EQUITIES MASTER PORTFOLIO BLUE CHIP MASTER PORTFOLIO MASTER PORTFOLIO -------------------------- ----------------------------------------- ------------------------- PERIOD PERIOD PERIOD PERIOD YEAR ENDED ENDED YEAR ENDED ENDED ENDED YEAR ENDED ENDED 3/31/01 3/31/00(a) 3/31/01 3/31/00 5/14/99(b) 3/31/01 3/31/00(c) ---------------------------------------------------------------------------------------------------- (IN THOUSANDS) Net investment income............... $ 1,253 $ (90) $ 4,445 $ 3,435 $ 1,287 $ 3,858 $ (540) Net realized gain/(loss) on investments.......... (55,082) 9,101 (5,087) 86,647 57,394 (262,984) 24,535 Net change in unrealized appreciation/ (depreciation) of investments.......... (165,087) 43,475 (233,487) 44,620 10,459 (577,214) 137,004 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations........... (218,916) 52,486 (234,129) 134,702 69,140 (836,340) 160,999 Contributions.......... 336,334 670,827 139,235 37,026 45,223 1,235,706 2,482,428 Withdrawals............ (216,867) (93,814) (169,959) (96,955) (49,779) (850,270) (380,261) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets........ (99,449) 629,499 (264,853) 74,773 64,584 (450,904) 2,263,166 NET ASSETS: Beginning of period.... 629,499 -- 1,047,103 972,330 907,746 2,263,166 -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- End of period.......... $ 530,050 $ 629,499 $ 782,250 $ 1,047,103 $ 972,330 $ 1,812,262 $ 2,263,166 =========== =========== =========== =========== =========== =========== ===========
SUPPLEMENTARY DATA
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS ---------------- RATIO OF RATIO OF NET RATIO OF OPERATING INVESTMENT OPERATING EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO TO AVERAGE TO AVERAGE TURNOVER AVERAGE NET ASSETS NET ASSETS RATE NET ASSETS ------------------------------------------------------------------------ GROWTH & INCOME MASTER PORTFOLIO: Year ended 3/31/2001.............................. 0.86%(d) 0.20% 113% 0.86%(d) Period ended 3/31/2000(a)......................... 0.86+(d) (0.04)+ 60 0.86+(d) BLUE CHIP MASTER PORTFOLIO: Year ended 3/31/2001.............................. 0.71%(d) 0.46% 59% 0.71%(d) Period ended 3/31/2000............................ 0.73+(d) 0.40+ 47 0.73+(d) Period ended 5/14/1999(b)......................... 0.61+ 0.65+ 19 0.61 Year ended 2/28/1999(b)........................... 0.62 0.85 57 0.62 Year ended 2/28/1998(b)........................... 0.65 1.11 67 1.06 Year ended 2/28/1997(b)........................... 0.62 1.62 91 1.34 FOCUSED EQUITIES MASTER PORTFOLIO: Year ended 3/31/2001.............................. 0.86%(d)(e) 0.17% 134% 0.86%(d) Period ended 3/31/2000(c)......................... 0.84+(d) (0.07)+ 84% 0.84+(d)
--------------- + Annualized. (a) Growth & Income Master Portfolio commenced operations on October 8, 1999. (b) Represents financial information for the Pacific Horizon Blue Chip Portfolio, which was reorganized into Blue Chip Master Portfolio on May 21, 1999. (c) Focused Equities Master Portfolio commenced operations on October 8, 1999. (d) The effect of the custodial expense offset (Note 2) on the operating expense ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. (e) The effect of interest expense on the operating expense ratio was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 199 204 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS Nations Master Investment Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. At March 31, 2001, the Trust offered ten separate portfolios. These financial statements pertain only to Nations Marsico Growth & Income Master Portfolio, Blue Chip Master Portfolio and Nations Marsico Focused Equities Master Portfolio (each a "Master Portfolio" and collectively, the "Master Portfolios"). Financial statements for the other portfolios of the Trust are presented under separate cover. The following investors were invested in the Master Portfolios at March 31, 2001: Growth & Income Master Portfolio: Nations Marsico Growth & Income Fund........ 97.6% Nations Marsico Growth & Income Fund (Offshore)................................ 1.3% Banc of America Capital Management Funds I -- Growth & Income Fund................. 1.1% Blue Chip Master Portfolio: Nations Blue Chip Fund...................... 95.4% Nations Blue Chip Fund (Offshore)........... 4.6% Focused Equities Master Portfolio: Nations Marsico Focused Equities Fund....... 98.9% Nations Marsico Focused Equities Fund (Offshore)................................ 0.7% Banc of America Capital Management Funds I -- Focused Equities Fund................ 0.4%
1. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Master Portfolios in the preparation of their financial statements. Securities valuation: Securities traded on a recognized exchange or on NASDAQ are valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities traded only over-the-counter are valued at the last sale price, or if no sale occurred on such day, at the mean of the current bid and asked prices. Certain securities may be valued using broker quotations or on the basis of prices provided by pricing services. Restricted securities, securities for which market quotations are not readily available, and certain other assets may be valued under procedures adopted by the Board of Trustees. Short-term investments that mature in 60 days or less are valued at amortized cost, which approximates current market value. Futures contracts: All Master Portfolios may invest in futures contracts. Upon entering into a futures contract, a Master Portfolio is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Master Portfolio each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect the market value of the contract. When the contract is closed, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income is recorded on ex- dividend date. Federal income taxes: The Master Portfolios are treated as partnerships for federal income tax purposes and therefore are not subject to federal income tax. Each investor in the Master Portfolios will be subject to taxation on its allocated share of the Master Portfolio's ordinary income and capital gains. Expenses: General expenses of the Trust are allocated to the Master Portfolios based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Master Portfolio are charged to such Portfolio. 200 205 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS The Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Advisors, Inc. ("BAAI"), a wholly- owned subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation, pursuant to which BAAI provides investment advisory services to the Master Portfolios. Under the terms of the Investment Advisory Agreement, BAAI is entitled to receive an advisory fee, calculated daily and payable monthly, based on the following annual rates multiplied by the average daily net assets of each Master Portfolio:
ANNUAL RATE ------ Growth & Income Master Portfolio.............. 0.75% Blue Chip Master Portfolio.................... 0.65% Focused Equities Master Portfolio............. 0.75%
The Trust has, on behalf of the Growth & Income and Focused Equities Master Portfolios, entered into a sub-advisory agreement with BAAI and Marsico Capital Management, LLC ("Marsico"), a wholly-owned subsidiary of Bank of America, pursuant to which Marsico is entitled to receive a sub-advisory fee from BAAI at the maximum annual rate of 0.45% of each Master Portfolio's average daily net assets. The Trust has, on behalf of the Blue Chip Master Portfolio, entered into a sub-advisory agreement with BAAI and Chicago Equity Partners, LLC ("Chicago Equity"), pursuant to which Chicago Equity is entitled to receive a sub-advisory fee from BAAI at the maximum annual rate of 0.25% of the Master Portfolio's average daily net assets. Stephens Inc. ("Stephens") and BAAI serve as co-administrators of the Trust. Under the co-administration agreements, Stephens and BAAI are currently entitled to receive a combined fee, computed daily and paid monthly, at the maximum annual rate of 0.05% of the Blue Chip Master Portfolio's average daily net assets and 0.10% of the Growth & Income and Focused Equities Master Portfolios' average daily net assets. The Bank of New York ("BNY") serves as sub-administrator of the Trust pursuant to an agreement with BAAI. For the year ended March 31, 2001, BAAI earned 0.10%, 0.05%, and 0.10%, respectively, from the average daily net assets of the Growth & Income, Blue Chip and Focused Equities Master Portfolios for its co-administration services. BNY serves as the custodian of the Trust's assets. For the year ended March 31, 2001, expenses of the Master Portfolios were reduced by $32,228 under expense offset arrangements with BNY. The Master Portfolios could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if they had not entered into such arrangements. For the year ended March 31, 2001, Growth & Income Master Portfolio and Focused Equities Master Portfolio paid commissions of $68,542 and $318,814, respectively, to certain affiliates of BAAI in connection with the execution of various portfolio transactions. No officer, director or employee of Bank of America or BAAI, or any affiliate thereof, receives any compensation from the Trust for serving as a Trustee or Officer of the Trust. The Trust's eligible Trustees may participate in non-qualified deferred compensation and retirement plans which may be terminated at any time. All benefits provided under these plans are unfunded and any payments to plan participants are paid solely out of the Master Portfolios' assets. Income earned on each plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Fund, a portfolio of Nations Fund, Inc., another registered investment company in the Nations Funds family. The expense for the deferred compensation and retirement plans is included in "Trustees' fees and expenses" in the Statements of operations. The Master Portfolios have made daily investments of cash balances in Nations Cash Reserves, a portfolio of Nations Reserves, pursuant to an exemptive order received from the Securities and Exchange Commission. For the year ended March 31, 2001, the Master Portfolios earned $1,230,253 in the aggregate from such investments, which is included in interest income. 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, excluding long-term U.S. government securities and short-term investments, for the year ended March 31, 2001 were as follows:
PURCHASES SALES (000) (000) ----------------------- Growth & Income Master Portfolio................... $ 718,157 $ 636,120 Blue Chip Master Portfolio.... 548,574 563,709 Focused Equities Master Portfolio................... 3,019,135 2,726,824
201 206 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2001 were as follows:
PURCHASES SALES (000) (000) -------------------- Growth & Income Master Portfolio....................... $15,148 $19,324 Blue Chip Master Portfolio........ 5,847 312 Focused Equities Master Portfolio....................... 68,054 97,901
4. FUTURES CONTRACTS At March 31, 2001, the following Master Portfolio had futures contracts open:
VALUE OF CONTRACT WHEN MARKET VALUE UNREALIZED NUMBER OF OPENED OF CONTRACTS DEPRECIATION DESCRIPTION CONTRACTS (000) (000) (000) -------------------------------------------------------------------------------- BLUE CHIP MASTER PORTFOLIO: S&P Futures (long position) expiring June 2001(a)........ 35 $10,426 $10,231 $(195)
--------------- (a) Securities have been segregated as collateral for the Blue Chip Master Portfolio for open futures contracts. 5. LINES OF CREDIT The Trust participates with other Nations Funds in an uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). Advances under the Agreement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest on borrowings is payable at a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Master Portfolio maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. At March 31, 2001, there were no loans outstanding under this Agreement. For the year ended March 31, 2001, borrowings by the Master Portfolios under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING INTEREST PORTFOLIO (000) RATE ------------------------------------------------------------ Focused Equities Master Portfolio........................ $184 5.96%
The average amount outstanding was calculated based on daily balances in the period. The Trust also participated with other Nations Funds in a committed line of credit provided by BNY that was terminated on December 7, 2000. Interest on borrowings under the committed line was payable at a specified Federal Funds rate plus 0.50% on an annualized basis. A facility fee of 0.09% per annum of the total amounts available under the line of credit was charged, of which each Master Portfolio paid its pro rata share. This fee was paid quarterly in arrears. Each participating Master Portfolio was required to maintain an asset coverage ratio of at least 300% under the terms of the arrangement. For the period ended December 7, 2000, there were no borrowings by the Master Portfolios under the committed line of credit. 6. SECURITIES LENDING Under an agreement with BNY, the Master Portfolios can lend their securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash, in an amount at least equal to the market value of the securities loaned. The cash collateral received is invested in Nations Cash Reserves. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Master Portfolios. Generally, in the event of counterparty default, the Master Portfolio has the right to use the collateral to offset losses incurred. There would be a potential loss to the Master Portfolio in the event the Master Portfolio is delayed or prevented from exercising its right to dispose of the collateral. The Master Portfolio bears the risk of loss with respect to the investment of collateral. At March 31, 2001, the following Master Portfolios had securities on loan:
MARKET VALUE MARKET OF LOANED VALUE SECURITIES OF COLLATERAL PORTFOLIO (000) (000) --------------------------------------------------------------- Growth & Income Master Portfolio...................... $ 49,490 $ 50,637 Blue Chip Master Portfolio....... 21,232 22,037 Focused Equities Master Portfolio...................... 130,644 136,751
7. REORGANIZATION OF MASTER INVESTMENT TRUST, SERIES I On May 21, 1999, Blue Chip Master Portfolio, a newly established portfolio, acquired the assets and assumed the liabilities of the Pacific Horizon Blue Chip Master Portfolio ("Acquired Portfolio"), a series of Master Investment Trust, Series I, pursuant to a plan of reorganization approved by its investors. The acquisition 202 207 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) was accomplished by a tax-free exchange of shares of Blue Chip Master Portfolio in an amount equal to the outstanding interests of the Acquired Portfolio. The financial statements of the Blue Chip Master Portfolio reflect the historical financial results of the Acquired Portfolio prior to the reorganization. Additionally, the fiscal year end of the Blue Chip Master Portfolio for financial reporting purposes was changed to coincide with that of the Trust. 8. SUBSEQUENT EVENT On April 5, 2001, BAAI reorganized into a successor entity named Banc of America Advisors, LLC. The successor entity is organized as a limited liability company under the laws of the State of North Carolina. 203 208 NATIONS MASTER INVESTMENT TRUST REPORT OF INDEPENDENT ACCOUNTANTS TO THE INVESTORS AND TRUSTEES OF NATIONS MASTER INVESTMENT TRUST In our opinion, the accompanying statements of net assets, and the related statements of operations and of changes in net assets and the supplementary data present fairly, in all material respects, the financial position of Nations Marsico Growth & Income Master Portfolio, Nations Blue Chip Master Portfolio and Nations Marsico Focused Equities Master Portfolio (portfolios of Nations Master Investment Trust, hereafter referred to as the "Portfolios") at March 31, 2001, and the results of each of their operations, the changes in each of their net assets and the supplementary data for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and supplementary data (hereafter referred to as "financial statements") are the responsibility of the Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York May 16, 2001 204 209 [This page intentionally left blank.] 210 THE NATIONS FUNDS FAMILY OF FUNDS A spectrum of fund choices for building a total asset-allocation strategy LOWER RISK/REWARD POTENTIAL MONEY MARKET FUNDS Nations Prime Fund Nations Cash Reserves Nations Money Market Reserves Nations Government Money Market Fund Nations Government Reserves Nations Treasury Fund Nations Treasury Reserves Nations Tax Exempt Fund Nations Municipal Reserves Nations California Tax-Exempt Reserves FIXED INCOME FUNDS INCOME FUNDS Nations High Yield Bond Fund Nations Strategic Income Fund Nations U.S. Government Bond Fund Nations Government Securities Fund Nations Bond Fund Nations Intermediate Bond Fund Nations Short-Intermediate Government Fund Nations Short-Term Income Fund TAX-EXEMPT INCOME FUNDS Nations Municipal Income Fund Nations State-Specific Long-Term Municipal Bond Funds (CA, FL, GA, KS, MD, NC, SC, TN, TX, VA) Nations Intermediate Municipal Bond Fund Nations State-Specific Intermediate Municipal Bond Funds (FL, GA, MD, NC, SC, TN, TX, VA) Nations Short-Term Municipal Income Fund EQUITY FUNDS GROWTH FUNDS Nations Financial Services Fund Nations Small Company Fund Nations Marsico 21st Century Fund Nations MidCap Growth Fund Nations Marsico Focused Equities Fund Nations Aggressive Growth Fund Nations Capital Growth Fund Nations Strategic Growth Fund Nations Blue Chip Fund GROWTH AND INCOME FUNDS Nations Marsico Growth & Income Fund Nations Value Fund Nations Classic Value Fund Nations Equity Income Fund Nations Asset Allocation Fund Nations Balanced Assets Fund Nations Convertible Securities Fund INTERNATIONAL/GLOBAL FUNDS Nations Emerging Markets Fund Nations Marsico International Opportunities Fund Nations International Equity Fund Nations International Value Fund Nations Global Value Fund HIGHER RISK/REWARD POTENTIAL INDEX FUNDS Nations Managed Index Fund Nations LargeCap Index Fund Nations MidCap Index Fund Nations SmallCap Index Fund ASSET ALLOCATION PORTFOLIOS Nations LifeGoal Balanced Growth Portfolio Nations LifeGoal Growth Portfolio Nations LifeGoal Income and Growth Portfolio STKAR (3/01)