-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxFbuNxmBmScrBHNVrtq5FhAXjmYaIIZ7FphoxdwUIOQGpv1NwpIZW7eyuLuY25D TfC1s1Yo7udWbPS/gpqeFw== 0000950144-02-006305.txt : 20020607 0000950144-02-006305.hdr.sgml : 20020607 20020606124524 ACCESSION NUMBER: 0000950144-02-006305 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS FUND INC CENTRAL INDEX KEY: 0000790569 STATE OF INCORPORATION: MD FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04614 FILM NUMBER: 02671785 BUSINESS ADDRESS: STREET 1: 111 CENTER STREET STREET 2: BELLEVUE PARK CORPORATE CNTR CITY: LITTLE ROCK STATE: AR ZIP: 72201 BUSINESS PHONE: 8003217854 MAIL ADDRESS: STREET 1: ONE NATIONSBANK PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: SILVER STAR FUND INC DATE OF NAME CHANGE: 19891016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS FUNDS TRUST CENTRAL INDEX KEY: 0001097519 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-09645 FILM NUMBER: 02671786 BUSINESS ADDRESS: STREET 1: ONE BANK OF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003217854 MAIL ADDRESS: STREET 1: ONE BANKOF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS INSTITUTIONAL RESERVES CENTRAL INDEX KEY: 0000859750 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06030 FILM NUMBER: 02671787 BUSINESS ADDRESS: STREET 1: ONE NATIONSBANK PLZ CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003425734 MAIL ADDRESS: STREET 1: ONE NATIONSBANK PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: SEI CAPITOL FUNDS DATE OF NAME CHANGE: 19900318 FORMER COMPANY: FORMER CONFORMED NAME: CAPITOL MUTUAL FUNDS DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS FUND TRUST CENTRAL INDEX KEY: 0000769100 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04305 FILM NUMBER: 02671788 BUSINESS ADDRESS: STREET 1: 1 BANK OF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003217854 MAIL ADDRESS: STREET 1: ONE BANK OF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: NATIONS FUND DATE OF NAME CHANGE: 19921228 FORMER COMPANY: FORMER CONFORMED NAME: MARKETMASTER TRUST DATE OF NAME CHANGE: 19920203 FORMER COMPANY: FORMER CONFORMED NAME: MARKETMASTER TRUST/DE/ DATE OF NAME CHANGE: 19920407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS MASTER INVESTMENT TRUST CENTRAL INDEX KEY: 0001078410 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-09347 FILM NUMBER: 02671789 BUSINESS ADDRESS: STREET 1: ONE NATIONSBANK PLAZA STREET 2: 101 SOUTH TRYON ST CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 18003217854 MAIL ADDRESS: STREET 1: ONE BANK OF AMERICA PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 N-30D 1 g75297nv30d.txt NATIONS FUND INC / NATIONS STOCK FUNDS Nations Convertible Securities Fund Nations Asset Allocation Fund Nations Equity Income Fund Nations Classic Value Fund Nations LargeCap Value Fund Nations Value Fund Nations MidCap Value Fund Nations Marsico Growth & Income Fund Nations Blue Chip Fund Nations Strategic Growth Fund Nations Capital Growth Fund Nations Aggressive Growth Fund STOCK FUNDS Nations Marsico -------------------------------- Focused Equities Fund Annual report for the year ended March 31, 2002 Nations MidCap Growth Fund Nations Marsico 21st Century Fund Nations Small Company Fund Nations Financial Services Fund [NATIONS FUNDS LOGO] 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 Corporation, 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, LLC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PRESIDENTS' MESSAGE Dear Shareholder: The 12-month period ending March 31, 2002 marked a year of remarkable volatility, uncertainty and change in the markets. The tragic events of September 11, 2001 -- a terrorist attack of unspeakable magnitude -- shocked the United States and the world, sending markets worldwide into a short-term free fall. These events helped push the already fragile U.S. economy into recession for the first time after almost a decade of uninterrupted economic growth. The debacle of Enron and new concerns about corporate accounting also caused growing investor uncertainty. To aid the sagging economy and begin the recovery process from recession, the Federal Reserve Board cut interest rates a record eight times during this reporting period, bringing them to their lowest level in nearly 40 years. For the 12-month period, 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(1) -- had modest, positive returns. Bond results for the same period, represented by the Lehman Aggregate Bond Index(2), were more muted than the prior 12-month period. Since the start of the year 2002, however, many economic indicators suggest we may be well along the path to recovery. The growth rate of the Gross Domestic Product, for example, increased from 1.7% for the fourth quarter of 2001 to 5.8% for first quarter of 2002, the fastest growth rate in more than two years. OPPORTUNITIES ABOUND One strongly advised investment approach, we believe, is to remain focused on long-term investment goals and not on short-term profits or losses. Investors who see the potential in "buying low" and "selling high" may also see the opportunities that a down or volatile market may present. In our view, now may be a good time to capture value by buying -- at a discount -- stocks or bonds of some of the most widely regarded companies. During these volatile times, buying small-, mid-cap and value prospects, in our view, may be an opportunity to acquire some respected companies at a discount, and corporate bonds appear particularly attractive as credit spreads relative to Treasuries narrow. DIVERSIFICATION AND DISCIPLINE These past two years could not have provided a more vivid example of the importance of having a diversified investment strategy. We believe that a carefully selected portfolio of stocks and bonds is a sensible way to reduce some of the risk associated with investing, particularly during uncertain times. It takes discipline to weather market uncertainty. It may be wise for you to meet with your investment professional to review your long-term financial goals, not just during volatile times, but on a more regular, disciplined basis. - --------------- (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 unmanaged index 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. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. (2)The Lehman Aggregate Bond Index is an unmanaged index made up of the Lehman Government/ Corporate Index, the Asset-Backed Securities Index and the Mortgage-Backed Securities Index and includes U.S. government agency and U.S. Treasury securities, corporate bonds and mortgage-backed securities. All dividends are reinvested. The indices are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRESIDENTS' MESSAGE CONTINUED... OUR NEAR-TERM OUTLOOK While the U.S. economy suffered its first downturn in a decade, we look for more positive signs from economic indicators in the coming months, which may provide a favorable backdrop for longer-term equity returns. Interest rates seem to have stabilized, inflation is quiescent and manufacturing data is looking better. We remain cautious, however, realizing that a number of risks could impact the markets, such as the continued war on terrorism, escalating conflict within the Middle East or an increase in oil prices, which has historically been a major contributing factor to the state of global economic conditions. We also continue to look for opportunities on the fixed-income side. With the improving economy, declining default rates and wider spreads, we believe high-yield and corporate bonds may look favorable. INSIGHTS AND ANALYSIS Please read through your annual report to see what your Nations Funds portfolio managers have to say about the markets, the economy and how your investment has fared over the past 12 months. Should you have any questions or comments on your annual report, please contact your investment professional or call us at 1.800.321.7854. If you do not have an investment professional and would like us to put you in contact with one, just let us know. You can visit us online anytime at www.nationsfunds.com for the most current performance and other information about your fund. 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, LLC March 31, 2002 TABLE OF CONTENTS ECONOMIC OVERVIEWS PORTFOLIO COMMENTARY Nations Convertible Securities Fund 7 Nations Asset Allocation Fund 11 Nations Equity Income Fund 17 Nations Classic Value Fund 21 Nations LargeCap Value Fund 26 Nations Value Fund 31 Nations MidCap Value Fund 36 Nations Marsico Growth & Income Fund 41 Nations Blue Chip Fund 46 Nations Strategic Growth Fund 52 Nations Capital Growth Fund 57 Nations Aggressive Growth Fund 62 Nations Marsico Focused Equities Fund 66 Nations MidCap Growth Fund 71 Nations Marsico 21st Century Fund 76 Nations Small Company Fund 81 Nations Financial Services Fund 85 FINANCIAL STATEMENTS Statements of net assets 90 Statements of operations 138 Statements of changes in net assets 142 Schedules of capital stock activity 148 Financial highlights 166 Notes to financial statements 200 Tax information 212 Fund governance 213 Statement of net assets -- Nations Master Investment Trust 216 Nations Marsico Growth & Income Master Portfolio 216 Nations Blue Chip Master Portfolio 218 Nations Marsico Focused Equities Master Portfolio 221 Statement of operations 223 Statement of changes in net assets 224 Financial highlights 225 Notes to financial statements 226
NATIONS FUNDS [DALBAR LOGO] RECOGNIZED FOR OUTSTANDING DALBAR, Inc. is a well-respected SHAREHOLDER AND INTERMEDIARY research firm that measures SERVICE customer service levels and establishes benchmarks in the IN RECOGNITION OF ITS COMMITMENT financial services industry. TO PROVIDE SHAREHOLDERS AND INVESTMENT PROFESSIONALS WITH THE HIGHEST LEVEL OF SERVICE IN THE MUTUAL FUND INDUSTRY, NATIONS FUNDS RECEIVED THE DALBAR MUTUAL FUND SERVICE AWARD AND THE DALBAR KEY HONORS AWARD IN 2001.
[This page intentionally left blank.] ECONOMIC OVERVIEW BANC OF AMERICA CAPITAL MANAGEMENT* THE YEAR IN REVIEW Over the past year, the U.S. economy suffered its first recession in more than a decade as well as the trauma of an unprecedented attack from terrorism. The ability of the U.S. financial markets to cope with these shocks demonstrates the resilience of our economic system. While stock market performance varied by investment style and sector, most measures remained relatively flat or posted gains for the 12 months ended March 31, 2002. The Standard & Poor's 500 Composite Stock Price Index** remained essentially stable, with a total return of almost 0.2%. In contrast, gains by smaller companies pushed the total return of the Russell 2000 Index*** to nearly 14%. Stock market performance across industry segments diverged widely over the past year. Anticipation of an economic recovery gave a sizable boost to basic material stocks, while investors also sought the safety of the consumer staples sector. Excess capacity, however, drove the share prices of many telecommunications service companies sharply lower. The fixed-income markets faced pressure from rising long-term interest rates in early 2002, yet still managed to post a moderate return over the 12 months ending March 31, 2002. U.S. Treasury securities achieved a 3% return, as measured by the Lehman U.S. Treasury Index.+ Meanwhile, the Lehman Corporate Bond Index++ recorded a 5% gain. After the longest expansion in U.S. history, the U.S. economy slipped into recession in March 2001, according to the Business Cycle Dating Committee of the National Bureau of Economic Research. The prior year's tightening of monetary policy, higher energy costs and the contraction in the stock market all acted to slow the economy, especially the "hard-hit" manufacturing sector. The September 11, 2001 terrorist attacks extended the downturn to other sectors, such as travel and tourism. By historical standards, the past year's recession has been relatively short and mild. Real Gross Domestic Product (GDP) declined in only one quarter, the July through September 2001 period. Housing remained strong throughout the downturn and - --------------- *Banc of America Capital Management is the investment management group of Bank of America, N.A. and includes Banc of America Capital Management, LLC, 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 an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ***The Russell 2000 Index is an unmanaged index of 2,000 of the smallest stocks representing approximately 11% of the U.S. equity market. The index is weighted by market capitalization, and is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. +The Lehman U.S. Treasury Index is an index consisting of U.S. Treasury debt obligations and is generally considered to be representative of U.S. Treasury market activity. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. ++The Lehman Corporate Bond Index is an unmanaged market value-weighted index of investment- grade corporate fixed-rate debt issues with maturities of one year or more. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source of all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 3 ECONOMIC OVERVIEW CONTINUED... consumer spending held up relatively well. However, corporate profits plunged and businesses slashed their capital spending budgets. As 2001 drew to a close, forces were converging to produce an economic upswing in 2002. Eleven interest-rate cuts by the Federal Reserve Board (the "Fed") combined with tax cuts and increases in federal spending helped to refuel the U.S. economic engine. Meanwhile, businesses reacted quickly by bringing inventories in line with demand, and Americans displayed a remarkable ability to recover from last September's shock. THE YEAR AHEAD Recent economic statistics indicate that the recession has ended and an economic recovery has taken hold. With companies no longer able to fill sales with goods already on the shelf, production and real GDP turned sharply higher in the first quarter. Although significant risks persist, we believe the recovery should continue over the balance of 2002. We also believe a gradual improvement in the job market, personal income gains and rising home equity values should support a further rise in consumer spending. Companies have been reluctant to increase their spending on technology products and other capital goods, but by the latter part of 2002 we believe many companies could grow more confident in a sustained economic recovery. Some improvement in operating margins and higher sales volumes, we feel, would allow profits to rebound over the next few quarters. Favorable long-term productivity trends remain intact, which we believe should put the economy on track for expansion in 2002. We anticipate that the Fed will raise interest rates from today's extraordinarily low levels to keep inflation in check. However, even by year-end, interest rates may continue to be at moderate levels. Looking ahead, investors may continue to face formidable risks that have recently been exacerbated by the worldwide war against terrorism and violence in the Middle East. Valuation levels also may remain a constraint. Yet, we believe that the fundamentals of the U.S. economy remain strong and the U.S. appears to be leading the rest of the world into recovery. LYNN REASER, PH.D. CHIEF ECONOMIST AND SENIOR MARKET STRATEGIST BANC OF AMERICA CAPITAL MANAGEMENT March 31, 2002 4 ECONOMIC OVERVIEW MARSICO CAPITAL MANAGEMENT, LLC THE YEAR IN REVIEW At Marsico Capital, we have always sought to assess the overall macroeconomic environment and reach assessments about the near- and longer-term investment outlook. That aspect of our investment process is critical; it helps us form a strategic backdrop for actual portfolio construction. Having said that, we readily acknowledge that it is difficult for us to recall a period of such immense uncertainty, particularly from an investment-focused perspective. We do not believe there is an apt historical precedent for what we are presently facing. In our view, there is no question that new risks have been introduced to the equity markets. These risks encompass economic, financial, political and military considerations. We wonder, for example, about the following possibilities: Will the cost of doing business (e.g., security, insurance) be permanently higher? How might that affect the overall future of corporate profits? Will an inevitable military build-up fundamentally re-shape our economy? How might increased defense spending, which in all likelihood spells the end of the "peace dividend" that resulted from the ending of the Cold War, affect corporate productivity? Investor psychology, which we believe always exerts an important, albeit non-quantifiable effect on stock pricing, had been severely tested well prior to the September 11, 2001 terrorist attacks, and -- more recently -- has been even further strained by the fallout from Enron's collapse. The terrorist attacks and Enron collapse occurred at a precarious time for the U.S. economy (and many other economies throughout the world). U.S. corporate profits had been in a general state of decline for the past 18 months. Capital expenditures, which were a primary "driver" behind the robust economic growth that characterized the 1990s, had been severely curtailed by U.S. corporations. Many industries -- including technology and telecommunications -- were experiencing dramatic slowdowns in demand for their products and services and faced a glut of inventory. Stock prices had fallen dramatically from their "highs" achieved in early-2000. Unemployment claims had been rising, while various measures of consumer confidence were recording significant declines. Still, acknowledging all of these concerns, we believe strongly that there are a compelling number of important, positive factors at work today that may augur well for equity investors. We are heartened by a recovery in stock prices that has taken place since September 11. We continue to believe that the combination of lower interest rates, constrained inflation, substantial fiscal stimulus and increasingly attractive equity valuations may provide a favorable backdrop for longer-term equity returns. The Federal Reserve Board has eased monetary policy aggressively in the last year, both in the form of interest rate reductions and injections of considerable liquidity into the capital markets. We believe strongly that the sheer magnitude of the rate cuts could eventually exert a powerful and positive effect on overall economic activity. We note that many other central banks in other countries have also acted to reduce interest rates. Inflation, as measured by the Consumer Price Index ("CPI"), continues to be constrained. In our view, real interest rates (i.e., the "spread" between long-term bond rates and inflation) remain too high. We think that interest rates have room to decline further. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 5 ECONOMIC OVERVIEW CONTINUED... The worldwide downturn in stock markets over the past 18 months has unquestionably been painful. Here again, maintaining a long-term perspective is very important. We are seeing some evidence that excessive equity valuations that prevailed prior to early-to mid-2000 may have been "wrung out" by this decline. To be sure, there are a number of sectors and industries that in our view appear expensively priced in relation to their earnings outlooks. However, there are a growing number of areas that we think have become relatively attractive. There are several other positive economic considerations that we think are important to reiterate. The performance of the U.S. banking system during September's highly turbulent environment merits praise. It underscored the vital point that a critical component of the U.S. financial system appears sound and is functioning well. Inventory corrections seem to be well underway in many sectors of the economy. Finally, and perhaps just as importantly, we would salute the measured, cooperative and effective response by the U.S. and many other countries throughout the world in the aftermath of the terrorist attacks. As we have discussed previously, volatility has always been a central characteristic of equity markets. With the increased degree of globalization and sometimes instantaneous transmission of news and information to all corners of the world, accompanied now by increased uncertainty fueled by global terrorism and escalated military activities, we may well now be in an era when even higher levels of stock market fluctuations will prevail. While we have always sought to convey a message to shareholders that equity investments should be viewed as long-term in nature, we understand and appreciate how difficult it can be to "stay the course" during periods of such immense uncertainty. And yet, it is exactly this type of uncertainty that may eventually reward equity investors. We continue to work diligently to evaluate the overall capital market environment and assess the Funds' holdings. Our investment teams have reviewed each Fund's investment posture carefully on a stock-by-stock basis. For now, we have concluded that, in general, a full-scale realignment of Fund holdings, and/or raising substantial cash positions would be unnecessary. Much of the Funds' investment emphases continue to be in sectors such as consumer-related, health care, financial services and aerospace/defense. While generalizing can sometimes be problematic, in fact many portfolios share some essential premises. One of those premises is that the next economic recovery may in all probability be a consumer-led process, as opposed to the capital expenditure-driven growth that characterized the 1990s. THOMAS F. MARSICO CHAIRMAN AND CHIEF EXECUTIVE OFFICER MARSICO CAPITAL MANAGEMENT, LLC March 31, 2002 6 NATIONS CONVERTIBLE SECURITIES FUND INCOME STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Income Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks to provide investors with a total investment return, comprised of current income and capital appreciation, consistent with prudent investment risk. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Convertible Securities Fund Investor A Shares provided shareholders with a total return of 3.48%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS CONVERTIBLE SECURITIES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Our philosophy is to try to create a somewhat conservative equity investment vehicle that has current income above the overall yield of stocks in general and includes some appreciation potential. Nations Convertible Securities Fund is designed to provide a moderate way of investing in convertible securities. We seek to maintain a portfolio of convertible securities that has balanced risk/reward characteristics. This means as individual issues rise in price, we replace them with other issues selling closer to par. We believe this tends to keep volatility dampened and the Fund's yield above the yields of the popular indices. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? For the twelve months ended March 31, 2002, Nations Convertible Securities Fund (Investor A Shares) was up 3.48%. This compared quite favorably to the Credit Suisse First Boston (CSFB) Convertible Securities Index,*** which returned -0.34%. The Fund's outperformance was due to overweighting the finance and energy sectors which benefited from the Federal Reserve Board's easing of interest rates. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? In the fourth quarter of 2001, we started to increase our weightings in the cyclical areas of the convertible market. We believed the economy was ready to show some cyclical rebound and our weightings in the technology, basic and capital goods sectors were increased. Higher oil and natural gas prices were expected during the period, so we also increased our energy holdings. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& The Fund was overweighted in the finance area, and banks and insurers had good returns in the financial sector over the last twelve months. ACE Ltd., a property and casualty insurance company was up over 22%, while Sovereign Bank Preferred was up 51%. Many technology issues had sharp rebounds after the events of - --------------- *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 Credit Suisse First Boston (CSFB) Convertible Securities Index is a widely used unmanaged index that measures the performance of convertible securities. The index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 7 NATIONS CONVERTIBLE SECURITIES FUND INCOME STRATEGIES TEAM COMMENTARY continued September 11, 2001, and for the year had good returns. Although they were not in the portfolio for the full twelve months, Affiliated Computer Services, Inc. had a 45% return and Symantec Corporation and Network Associates, Inc. had returns of 39% and 53%, respectively. In the capital goods area, many aerospace/defense issues had high returns. For example, L-3 Communications Holdings, Inc. had two convertibles outstanding, the first one rising over 50% in price and the second one over 20%. Lastly, the price of gold moved up in the basics sector, and the Agnico Eagle Mines Ltd. convertible appreciated over 30%. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The sector that underperformed the most last year was utilities. While Calpine Corporation was one of the best-performing holdings for the Fund during fiscal year 2001, this independent power producer sold sharply during the reporting period. This selloff was due to the bankrupt utility PG&E Company's threats to reject certain contracts with Calpine Corporation. Additionally, PG&E Company refused to pay past-due receivables. Calpine Corporation's financial troubles would be magnified later in the year with Enron Corporation's bankruptcy tainting many companies in the industry. Although we had several issues in this sector that were sold for losses, we continue to feel this is a viable industry. As the demand for power grows with the economy, we may revisit this area. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We continue to believe that convertibles may provide a defense against a market decline. This was borne out by the performance of the Fund which had a positive return of over 3% for the last twelve months versus a 0.16% return for the Standard & Poor's 500 Composite Stock Price Index.&& We expect the economy to show growth in future quarters. As a result, we are exposing the portfolio to more cyclical issues while cutting back on defensive areas, such as the health care industry. We believe earnings and stock prices may advance over the coming year, and in that environment, convertible securities could show positive returns. - --------------- &&The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. 8 NATIONS CONVERTIBLE SECURITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.7% Health services 3.9% Networking and telecommunications equipment 4.0% Medical devices and supplies 4.1% Aerospace and defense 4.4% Railroads, trucking and shipping 4.8% Computer services 5.0% Oilfield services 5.3% Commercial banking 6.0% Semiconductors 9.8% Insurance 49.0% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 General Motors Corporation 1.5% ------------------------------------------------- 2 Travelers Property Casualty Corporation, Class A 1.5% ------------------------------------------------- 3 Agilent Technologies, Inc., 3.000% 12/01/21 1.3% ------------------------------------------------- 4 Sovereign Capital Trust II 1.3% ------------------------------------------------- 5 Northrop Grumman Corporation 1.2% ------------------------------------------------- 6 GTECH Holdings Corporation, 1.750% 12/15/21 1.2% ------------------------------------------------- 7 Electro Scientific Industries, Inc., 4.250% 12/21/06 1.2% ------------------------------------------------- 8 Raytheon Company 1.2% ------------------------------------------------- 9 L-3 Communications Holdings, Inc., 4.000% 09/15/11 1.2% ------------------------------------------------- 10 Apogent Technologies Inc., 2.250% 10/15/21 1.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
9 NATIONS CONVERTIBLE SECURITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS CONVERTIBLE LIPPER CONVERTIBLE CSFB CONVERTIBLE SECURITIES SECURITIES FUND SECURITIES FUND AVERAGE INDEX ------------------- ----------------------- --------------------------- Mar. 31 1992 9425.00 10000.00 10000.00 1993 11934.00 11729.00 12047.00 1994 13358.00 12497.00 12923.00 1995 13581.00 12825.00 13423.00 1996 16984.00 15674.00 16604.00 1997 19574.00 17420.00 17952.00 1998 24871.00 21967.00 22597.00 1999 25688.00 21950.00 23116.00 2000 35805.00 30870.00 33713.00 2001 32985.00 26323.00 27368.00 March 31 2002 34134.00 26323.00 27275.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS CONVERTIBLE LIPPER CONVERTIBLE CSFB CONVERTIBLE SECURITIES SECURITIES FUND SECURITIES FUND AVERAGE INDEX ------------------- ----------------------- --------------------------- Mar. 31 1992 10000.00 10000.00 10000.00 1993 12662.00 11729.00 12047.00 1994 14173.00 12497.00 12923.00 1995 14410.00 12825.00 13423.00 1996 18020.00 15674.00 16604.00 1997 20768.00 17420.00 17952.00 1998 26388.00 21967.00 22597.00 1999 27255.00 21950.00 23116.00 2000 37989.00 30870.00 33713.00 2001 34997.00 26323.00 27368.00 Mar. 31 2002 36216.00 26323.00 27275.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
NAV** MOP* 10-YEAR (3/31/92 through 3/31/02) 13.73% 13.06%
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, a widely-used unmanaged index that measures the performance of convertible securities, include reinvestment of dividends. Funds in the Lipper Convertible Securities Funds Average invest their portfolios primarily in convertible bonds and convertible preferred shares. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
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 3.74% 3.48% -2.48% 2.68% -2.31% 2.66% 1.67% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 10.60% 9.94% 7.79% 9.12% 8.36% 9.14% 9.14% 5 YEARS 12.17% 11.76% 10.44% 11.19% 10.95% 11.12% 11.12% 10 YEARS 13.94% 13.73% 13.06% 13.44% 13.44% -- -- SINCE INCEPTION 13.73% 13.59% 13.13% 13.39% 13.39% 11.12% 11.12%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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 NATIONS ASSET ALLOCATION FUND GROWTH STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team and the Fixed Income Management Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks to obtain long-term growth from capital appreciation, and dividend and interest income. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Asset Allocation Fund Investor A Shares provided shareholders with a total return of - -0.05%.** IN THE FOLLOWING INTERVIEW, THE TEAMS SHARE THEIR VIEWS ON NATIONS ASSET ALLOCATION FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. EFFECTIVE JANUARY 1, 2002, BANC OF AMERICA CAPITAL MANAGEMENT, LLC BECAME THE INVESTMENT SUB-ADVISER FOR THE EQUITY PORTION OF NATIONS ASSET ALLOCATION FUND, REPLACING CHICAGO EQUITY PARTNERS, LLC. WHILE THE FUND'S INVESTMENT OBJECTIVE REMAINS THE SAME, THE INVESTMENT STYLE AND PHILOSOPHY FOR THE EQUITY PORTION OF THE FUND HAVE CHANGED AND ARE DISCUSSED BELOW. PERFORMANCE AND COMMENTARY FROM BOTH CURRENT AND PRIOR SUB-ADVISERS DURING THE PERIOD ARE REFLECTED IN THE FOLLOWING COMMENTARY. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. While managed by Chicago Equity Partners, LLC, the equity portion of the Fund remained neutral to the overall stock market in sector weightings and market capitalization and focused on individual stock selection. This risk controlled strategy was designed to provide the potential for the Fund to fully benefit from the market's advances despite major disparities in performance between sectors and the narrowness of the market. Within this discipline, securities were selected that the team believed displayed attractive valuations, while exhibiting positive momentum and solid earnings quality. The current team employs a long-term, large-capitalization growth strategy within the equity portion of the Fund. Securities are generally held in the equity portion of the Fund between a two- to four-year time horizon. We build the Fund by employing an integrated approach to portfolio construction. We start with a macro view, forecasting factors such as the economy, sector trends and long-term investment themes (e.g., the aging of the U.S. population, globalization and innovation). We then combine fundamental and quantitative research analysis to select companies that we believe will grow faster and/or longer than consensus expectations. The Fund typically invests in companies that we believe are recognized leaders, have strong track records and possess key competitive advantages. Through our "top down" framework and the "bottom-up" stock selection, we create a portfolio of 60-80 securities in which we seek to control risk through diversification and quantitative techniques. The fixed income portion of the Fund is generally 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 - --------------- *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. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 11 NATIONS ASSET ALLOCATION FUND GROWTH STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued quantitative approach to sector allocation, sector rotation and relative value security selection. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? Nations Asset Allocation Fund (Investor A Shares) returned -0.05% for the 12-month period ended March 31, 2002, while the Standard & Poor's 500 Composite Stock Price Index,*** returned 0.16% and the Lehman Aggregate Bond Fund Index& returned 5.35% for the same period. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? The fixed income portion of the Fund, despite the volatile markets, remained faithful to its strategy of attempting to control interest rate risk and focusing on relative value opportunities across the fixed income markets. This portion of the Fund was heavily weighted in high quality sectors with a particular focus on U.S. agency mortgage-backed securities and "AAA" rated commercial mortgage-backed securities. While these sectors are not immune from credit risk, they do offer substantial protection from default. U.S. agency mortgage-backed securities are backed by either an explicit or an implicit guarantee of the U.S. government as well as by the real estate underlying each mortgage. "AAA" rated commercial mortgage-backed securities are backed by highly diverse pools of commercial real estate loans and they are structured to attempt to withstand defaults of 50% or more. During the first quarter of 2002, the equity portion of the Fund transitioned from the previous investment style to the current style referenced above. The number of holdings in the Fund was reduced from approximately 150 down to 75 to 80. The reduction is intended to decrease turnover in the long term in the Fund and adopt a greater emphasis on large-capitalization stocks and industry leaders. WHAT SECTORS AND SECURITIES PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?&& From the period of April 1, 2001 through December 31, 2001, stock selection in the consumer staples and consumer cyclicals sectors contributed the most to the Fund's performance. Within consumer staples, Whole Foods and Interstate Bakeries Corporation provided the best returns as both stocks provided better earnings prospects and lower valuations relative to their peers. Other top performers were retailers such as food and drug grocer Albertson's, consumer food product - --------------- ***The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &The Lehman Aggregate Bond Index is an unmanaged index made up of the Lehman Government/ Corporate Index, the Asset-Backed Securities Index and the Mortgage-Backed Securities Index. These indices include U.S. government agency and U.S. Treasury securities, corporate bonds and mortgage- backed securities. All dividends are reinvested. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 12 NATIONS ASSET ALLOCATION FUND GROWTH STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued manufacturer's General Mills and Kellogg Company and tobacco manufacturer Philip Morris & Companies, Inc. Within the consumer cyclicals, Office Depot Inc., Best Buy Co., Inc., Autozone and Lowes Corporation provided the best returns. Our strategic overweight to what we believe were high quality sectors helped the fixed income portion of the Fund's total return performance for the period. The Fund was invested in "AAA" rated commercial and agency residential mortgage-backed securities in lieu of U.S. Treasury notes. In addition, our willingness to increase our exposure to BBB and high yield corporate debt in December of 2001 also enhanced the Fund performance. During the first quarter of 2002, trends in the telecommunication service industry continued to weaken, and associated stocks performed poorly, while healthcare stocks held up well as investors sought out a "safe haven" from the volatile market. The Fund's performance was aided by holding a smaller weighting in telecommunication stocks and by the strong performance of such healthcare stocks as Johnson & Johnson, Pharmacia Corporation and Baxter International Inc. In addition, consumer finance stocks Household International Inc. and MBNA Corporation as well as brokerage firms Merrill Lynch & Company, Inc. and Morgan Stanley Dean Witter & Company boosted performance, as investors gained confidence in the strength of the pending economic recovery. WHAT SECTORS AND SECURITIES PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? From the period of April 1, 2001 through December 31, 2001, lagging sectors were technology and healthcare. Technology stocks' strong performance in the fourth quarter was not enough to pull ahead for the year as a lack of capital spending and high valuations were the reasons for technology's underperformance. The biggest detractors in the technology sector were Ciena Corporation, Scientific-Atlanta Inc., PMC-Sierra Inc. and Oracle Corporation. Within healthcare, major drug companies were the largest detractors as competition and flat sales led to double-digit losses in Merck & Co., Inc., Schering-Plough Corporation and Bristol-Myers Squibb Company. Technology stocks continued to be battered during the first quarter of the calendar year, as investors worried whether future earnings in the sector would be great enough to justify current valuations. Stocks such as Cisco Systems, Inc., International Business Machines Corporation, and Microsoft Corporation pulled Fund performance down. In addition, industrial conglomerate Tyco International and retailer Circuit City Stores -- Circuit City Group both traded sharply lower based on fears of weaker than expected near-term earnings as well as potential accounting concerns. Finally, the Fund's underexposure to traditional value sectors like basic materials and consumer staples hindered performance. Our decision to maintain a sizeable investment in lower quality corporate debt in the third quarter of 2001 hindered the performance for the fixed income portion of the Fund. From the end of March 2001 until the middle of the summer, our corporate and high yield debt exposure enhanced the return of the Fund. As we moved into August, we believed the U.S. economy would narrowly miss a recession. Our expectations were for a flatter yield curve and a tightening of 13 NATIONS ASSET ALLOCATION FUND GROWTH STRATEGIES TEAM AND FIXED INCOME MANAGEMENT TEAM COMMENTARY continued corporate yield spreads as the equity market improved in the face of better prospects for U.S. growth. Unfortunately, the events of September 11, 2001 caused a substantial rally in the U.S. Treasury market and, while the return of the Fund increased, the Fund did not perform as well as if it was more heavily weighted towards U.S. Treasury securities. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We are optimistic about the prospects for the next year. Many signs, we feel, point to a better economic environment over the next twelve months. We believe the recession appears to have ended sometime in the first calendar quarter. Inflation remains tame, and economic growth appears to us to be accelerating. Inventory levels are low, while valuations in the equity market appear to us to be reasonable. These factors could contribute to better earnings growth that may be reflected by higher stock market valuations. Much of the "early cycle" stocks (chemicals, paper and forest products and metals) appear to have already completed the majority of their move. As we progress through the economic cycle, we feel the potential for increasing earnings could favor "mid- to late-cycle" stocks, which may bode well for the large-cap stocks held in the Fund. We believe the Fund is positioned to take advantage of this scenario through exposure to technology, financial services and select communications stocks. Based upon our outlook for the fixed income portion of the Fund, we plan to maintain an overweighting to U.S. investment grade corporate debt and some sectors of the high yield market. In addition, we will probably position the Fund for a flattening of the yield curve with the expectation that the Federal Reserve Board may increase short-term interest rates sometime in the next six to nine months. 14 NATIONS ASSET ALLOCATION FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 2.9% Investment services 3.0% Telecommunications services 3.1% Diversified manufacturing 3.4% Computers and office equipment 3.8% U.S. Treasury notes 3.8% Department and discount stores 4.1% Integrated oil 4.2% Consumer credit and mortgages 6.3% Pharmaceuticals 14.3% Federal National Mortgage Association (FNMA) Certificates 51.1% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Federal National Mortgage Association (FNMA) Certificates, 6.500% 02/01/32 4.3% ------------------------------------------------- 2 Federal National Mortgage Association (FNMA) Certificates, 6.500% 02/01/32 3.0% ------------------------------------------------- 3 Microsoft Corporation 2.4% ------------------------------------------------- 4 U.S. Treasury Notes, 6.250% 02/15/03 2.3% ------------------------------------------------- 5 General Electric Company 2.0% ------------------------------------------------- 6 Pfizer Inc. 2.0% ------------------------------------------------- 7 Federal National Mortgage Association (FNMA) Certificates, 7.000% 07/15/05 2.0% ------------------------------------------------- 8 Exxon Mobil Corporation 1.9% ------------------------------------------------- 9 Citigroup Inc. 1.8% ------------------------------------------------- 10 Wal-Mart Stores, Inc. 1.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
15 NATIONS ASSET ALLOCATION FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS ASSET LIPPER BALANCED FUNDS STANDARD & POOR'S LEHMAN AGGREGATE ALLOCATION FUND AVERAGE 500 INDEX BOND INDEX --------------- --------------------- ----------------- ---------------- Jan. 18 1994 9425.00 10000.00 10000.00 10000.00 1994 9295.00 9621.00 9955.00 9579.00 1995 11795.00 12080.00 13691.00 11348.00 1996 13643.00 13759.00 16833.00 11760.00 1997 16558.00 16425.00 22447.00 12895.00 1998 20050.00 18634.00 28867.00 14016.00 1999 22278.00 20236.00 34938.00 13901.00 2000 22111.00 20542.00 31758.00 15517.00 2001 20658.00 19640.00 27985.00 16827.00 Mar. 31 2002 20495.00 19646.00 28039.00 16842.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS ASSET LIPPER BALANCED FUNDS STANDARD & POOR'S LEHMAN AGGREGATE ALLOCATION FUND AVERAGE 500 INDEX BOND INDEX --------------- --------------------- ----------------- ---------------- Jan. 18 1994 10000.00 10000.00 10000.00 10000.00 1994 9862.00 9621.00 9955.00 9579.00 1995 12515.00 12080.00 13691.00 11348.00 1996 14475.00 13759.00 16833.00 11760.00 1997 17568.00 16425.00 22447.00 12895.00 1998 21273.00 18634.00 28867.00 14016.00 1999 23637.00 20236.00 34938.00 13901.00 2000 23460.00 20542.00 31758.00 15517.00 2001 21918.00 19640.00 27985.00 16827.00 Mar. 31 2002 21745.00 19646.00 28039.00 16842.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (1/18/94 through 3/31/02) 9.94% 9.15%
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), an unmanaged index of 500 widely held common stocks, include reinvestment of dividends. Figures for the Lehman Aggregate Bond Index, an unmanaged index made up of the Lehman Government/Corporate Index, the Asset-Backed Securities Index and the Mortgage-Backed Securities Index and includes U.S. Treasury securities, U.S. government agency securities, corporate bonds and mortgage-backed securities, 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%. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
INVESTOR A INVESTOR B++ INVESTOR C PRIMARY A+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 1/18/94 7/15/98 11/11/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 0.26% -0.05% -5.79% -0.77% -5.67% -0.78% -1.76% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 0.47% -0.17% -2.13% -0.93% -1.82% -0.94% -0.94% 5 YEARS 8.70% 8.28% 7.01% 7.70% 7.40% 7.51% 7.51% SINCE INCEPTION 10.20% 9.94% 9.15% 9.58% 9.58% 7.36% 7.36%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 16 NATIONS EQUITY INCOME FUND INCOME STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Income Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks current income and growth of capital by investing in companies with above-average dividend yields. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Equity Income Fund Investor A Shares provided shareholders with a total return of 6.53%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS EQUITY INCOME FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY Nations Equity Income Fund's style and philosophy are based on the premise that stock prices are more volatile than business fundamentals and that active security selection improves performance over time. We also believe that proprietary research is a critical component of investment success and that opportunities are uncovered by a constant search for new information. In addition, we believe that the reward for assuming risk varies over time. As a result, in our view, dynamic risk management increases consistency. Within this framework, the Fund's style is a fundamental approach in which the management team seeks superior returns by investing in sound, proven businesses that are statistically inexpensive relative to our estimate of their intrinsic value, typically due to investor indifference or unpopularity. This approach also encompasses a long-term view of equity investing with its potential long-term rewards. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? For the 12 months ended March 31, 2002, Nations Equity Income Fund (Investor A Shares) significantly outperformed its benchmark, returning 6.53%, compared with 0.16% for the Standard & Poor's 500 Composite Stock Price Index.*** The Fund was overweight in the consumer staples, finance, and health care sectors during the period. These sectors benefited from resilient consumer spending and the Federal Reserve Boards' (the Fed) aggressive easing of interest rates during the period of economic downturn. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? The defensive positioning of the Fund helped minimize losses indirectly resulting from the tragedy of September 11, 2001. During the months that followed, we began increasing our holdings in the more cyclical areas of the market in anticipation of a gradual economic recovery. These sectors included aerospace and defense as well as information technology. - --------------- *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 an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 17 NATIONS EQUITY INCOME FUND INCOME STRATEGIES TEAM COMMENTARY continued WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& Our holdings in the consumer staples, finance, capital goods and health care sectors contributed most favorably to the Fund's performance during the last 12 months. In the consumer staple area, the top performers were International Flavors & Fragrances Inc., which gained more than 61%, and Fortune Brands, Inc., which returned more than 47% for the period. In the finance sector, SouthTrust Corporation was up more than 18%. Healthcare's Johnson & Johnson was up more than 50%. Many of the Fund's defense stocks had sharp gains after September 11, 2001. These include Lockheed Martin Corporation, up 23% and General Dynamics Corporation, up 15%. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The biggest setback for the Fund during the past 12 months was due to the overweighting in the utilities sector and resulting indirect exposure to "Enronitis." Enron Corporation's bankruptcy tainted many companies in the industry, and the sector lost about 5.39% for the period. The utilities sector, however, has staged a strong comeback recently, and was the best performing sector in March 2002. We also favor the sector because of the attractive yields it provides and the investment-grade credit quality it generally maintains. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? In a recent monetary policy report to Congress, the Fed's chairman Alan Greenspan said, "Increasing signs have emerged that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm." While we are optimistic for the overall economic growth prospects for the coming year, great emphasis will be placed on tangible corporate profits, strong balance sheets and a balance between the level of market valuations and strength of the economic recovery. We will continue the Fund's neutral market allocation for most sectors and invest in solid companies for their total return potential. - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 18 NATIONS EQUITY INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 4.0% Real Estate Investment Trusts (REITs) 4.0% Pharmaceuticals 4.1% Computers and office equipment 4.4% Household products 4.4% Electric power -- Non nuclear 4.8% Commercial banking 6.5% Software 6.7% Aerospace and defense 7.7% Integrated oil 7.8% Semiconductors 45.6% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Microsoft Corporation 3.5% ------------------------------------------------- 2 International Business Machines Corporation 3.4% ------------------------------------------------- 3 Fortune Brands, Inc. 3.1% ------------------------------------------------- 4 Linear Technology Corporation 3.0% ------------------------------------------------- 5 Exxon Mobil Corporation 2.9% ------------------------------------------------- 6 Affiliated Computer Services, Inc., Class A 2.9% ------------------------------------------------- 7 Analog Devices, Inc. 2.6% ------------------------------------------------- 8 ChevronTexaco Corporation 2.6% ------------------------------------------------- 9 SouthTrust Corporation 2.3% ------------------------------------------------- 10 Unocal Corporation 2.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
19 NATIONS EQUITY INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
STANDARD & POOR'S 500 LIPPER EQUITY INCOME FUNDS NATIONS EQUITY INCOME FUND INDEX AVERAGE -------------------------- --------------------- -------------------------- Mar. 31 1992 9425.00 10000.00 10000.00 1993 10973.00 11521.00 11656.00 1994 11266.00 11689.00 11995.00 1995 12564.00 13506.00 13337.00 1996 15588.00 17837.00 16845.00 1997 17973.00 21372.00 19342.00 1998 24609.00 31622.00 26562.00 1999 22232.00 37469.00 26769.00 2000 23180.00 44188.00 27960.00 2001 18603.00 34612.00 28332.00 Mar. 31 2002 19817.00 34668.00 29250.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
STANDARD & POOR'S 500 LIPPER EQUITY INCOME FUNDS NATIONS EQUITY INCOME FUND INDEX AVERAGE -------------------------- --------------------- -------------------------- Mar. 31 1992 10000.00 10000.00 10000.00 1993 11642.00 11521.00 11656.00 1994 11953.00 11689.00 11995.00 1995 13331.00 13506.00 13337.00 1996 16539.00 17837.00 16845.00 1997 19070.00 21372.00 19342.00 1998 26110.00 31622.00 26562.00 1999 23588.00 37469.00 26769.00 2000 24594.00 44188.00 27960.00 2001 19738.00 34612.00 28332.00 Mar. 31 2002 21026.00 34668.00 29250.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/92 through 3/31/02) 7.72% 7.08%
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 over the last 10 years. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), an unmanaged index of 500 widely held common stocks, 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. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
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 6.85% 6.53% 0.42% 5.85% 0.87% 5.77% 4.77% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -3.58% -3.76% -5.64% -4.46% -5.31% -4.48% -4.48% 5 YEARS 2.19% 1.97% 0.77% 1.24% 0.97% 1.32% 1.32% 10 YEARS 7.98% 7.72% 7.08% -- -- -- -- SINCE INCEPTION 8.51% 8.22% 7.64% 6.28% 6.28% 7.10% 7.10%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 20 NATIONS CLASSIC VALUE FUND INVESTMENT COMMITTEE COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Large Cap Investment Committee of Brandes Investment Partners, L.P., investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks growth of capital by investing in companies believed to be undervalued. PERFORMANCE REVIEW For the period from the Fund's inception on April 16, 2001 through March 31, 2002, Nations Classic Value Fund Investor A Shares provided shareholders with a cumulative total return of 22.00%.** IN THE FOLLOWING INTERVIEW, THE INVESTMENT COMMITTEE SHARES ITS VIEWS ON NATIONS CLASSIC VALUE FUND'S PERFORMANCE SINCE THE FUND'S INCEPTION THROUGH MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Classic Value Fund is managed using a Graham-and-Dodd value discipline to select equities in the U.S., typically within the large- and mid-cap market segments. We search for U.S. stocks that are trading (often for irrational reasons) at a discount to what we believe is their intrinsic value. Our focus is on the creation of long-term capital appreciation. Therefore, when we purchase such stocks, we plan to hold them for three to five years to allow them to achieve their intrinsic value. Our focus on individual security selection -- also known as "bottom-up" research and analysis -- drives our sector and industry weightings. We make no "top-down" predictions. We will not, for example, buy energy stocks because we think oil prices may rise. Instead of speculating on macroeconomic factors, we focus on the fundamental strengths of thousands of individual companies and select only those meeting our strict investment criteria. As value investors, we see opportunity in periods characterized by extremes and believe markets soaring to unprecedented highs or enduring sharp losses often reflect investors' overreaction to short-term events. We believe that over time the market will recognize the underlying value of the stocks we hold and their prices will rise. We believe that by purchasing stocks at discounts from their long-term value, a margin of safety against price declines is created -- thus reducing risk while providing the opportunity for capital appreciation. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED SINCE ITS INCEPTION? Nations Classic Value Fund (Investor A Shares) delivered solid gains during the period. While the Russell 1000 Value Index*** gained 4.38% during the period, the Fund advanced 22.00%. A number of factors contributed to a tenuous investment environment in the U.S. during the period, including: - mixed reports regarding economic strength - evidence of declining corporate profits - weak consumer confidence and - eroding investor sentiment following the terrorist attacks - --------------- *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 Value Index is an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with lower price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Brandes Investment Partners, L.P. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 21 NATIONS CLASSIC VALUE FUND INVESTMENT COMMITTEE COMMENTARY continued Evidence of economic strengthening bolstered investor confidence and lifted share prices in the first quarter of 2002. The Russell 1000 Value Index gained 4.1% in the first quarter. On several occasions in 2001, the Federal Reserve Board's (the Fed) lowered interest rates with the hope of reviving the U.S. economy. But for the most part, interest rate cuts failed to show significant signs of reversing the slumping economy or reversing declines among stocks until the first quarter. Reports released late in the first calendar quarter suggested the economy was indeed recovering. In fact, the U. S. economy wriggled out of recession -- as defined by two consecutive quarters of declining gross domestic product (GDP). While GDP contracted at an annual rate of 1.3% in the third quarter of 2001, the final revision indicated fourth quarter GDP grew at an annualized rate of 1.7%. In addition, retail sales and industrial output showed strength. In February, new home sales rose 5.3% and U.S. consumer confidence climbed to its highest levels since August 2001. As a result, expectations for additional Fed easing diminished. In fact, following the Fed's Open Market Committee meeting late in the quarter, expectations grew for a Fed rate hike. In this uneven environment, many value stocks again showed their mettle. For the most part, the stocks in the portfolio showed greater resilience than the benchmark. We believe that continued strict adherence to our investment philosophy created a margin of safety in the portfolio, which insulated shareholders in a tumultuous environment and created an opportunity for gains during an otherwise difficult period. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? We made no adjustments to the Fund in the wake of the terrorist attacks in the U.S. that preceded a sharp pullback among share prices worldwide. While the attacks that triggered the "sell-off" in late September 2001 were far different than the events we have seen trigger crises in the past, we feel the resulting investor behavior was virtually identical. Since the inception of our firm in 1974, we have witnessed various crises -- both economic and political, including assassinations, recessions, natural disasters, and war -- and the pattern of behavior and market direction have been remarkably similar. Generally, we viewed the decline in stock prices as a buying opportunity. Our approach to managing the Fund did not change at all since the terrorist attacks. As always, we remain focused on evaluating the strengths of existing holdings and comparing current holdings to new opportunities. We continue to seek to manage portfolios in our clients' long-term best interests and remain poised to act on opportunities where we believe stock prices have fallen below the underlying value of sound businesses. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE SINCE ITS INCEPTION?& Favorable gains were evident across a broad cross section of holdings including positions in the following industries: insurance, aerospace and defense, multi-line retail, chemicals, electric utilities, and auto components. Among the best- performing holdings in these areas were Dillards Department Stores, Inc., Boeing - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 22 NATIONS CLASSIC VALUE FUND INVESTMENT COMMITTEE COMMENTARY continued Company, Xerox Corporation, American Greetings Corporation, Lear Corporation and Micron Technology. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE SINCE ITS INCEPTION? The greatest negative influences on Fund returns during the period were issue-specific declines for holdings in the communications equipment, pharmaceuticals, and diversified telecom services industries. Examples of weak-performing holdings include Avaya Inc., Schering-Plough Corporation, Sprint Corporation and Verizon Communications Inc. Although returns for these stocks fell in the quarter, we continue to believe these holdings generally possess sound fundamentals or traits that may contribute to long-term gains. Reflecting our conviction, we took advantage of weaker prices in the period to add to each of the companies cited above. The Fund retains its largest industry exposure in the diversified telecom services area. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? As a "bottom-up" manager, we do not make any "top-down" projections for the U.S. economy, interest rates, or individual industries. We choose companies based on a comprehensive review of their fundamental strengths designed to give us a firm understanding of their businesses and intrinsic values. Applied in the U.S., our investment process continues to uncover what we believe are promising opportunities. During the period, the continued application of our company-specific research and analysis dictated slight changes in the complexion of the Fund. We trimmed exposure on a company-by-company basis within the food products industry and increased our weighting through stock-specific purchases in the diversified telecom services and electric utilities industries. The fundamental strengths of Fund holdings inspire optimism for long-term outperformance. We believe long-term investors will be rewarded for their patience as the U.S. stock market evolves to more accurately reflect companies' underlying values. 23 NATIONS CLASSIC VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.4% Chemicals - Specialty 3.8% Automotive 4.4% Electric power - Non nuclear 4.5% Chemicals - Basic 4.8% Networking and telecommunications equipment 5.5% Tobacco 6.2% Pharmaceuticals 8.0% Computers and office equipment 10.5% Insurance 11.3% Telecommunications services 37.6% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Verizon Communications Inc. 3.8% ------------------------------------------------- 2 SBC Communications Inc. 3.8% ------------------------------------------------- 3 Schering-Plough Corporation 3.3% ------------------------------------------------- 4 Allstate Corporation 3.1% ------------------------------------------------- 5 Xerox Corporation 2.9% ------------------------------------------------- 6 Merck & Company, Inc. 2.9% ------------------------------------------------- 7 Exelon Corporation 2.9% ------------------------------------------------- 8 McDonald's Corporation 2.8% ------------------------------------------------- 9 Boeing Company 2.7% ------------------------------------------------- 10 Motorola, Inc. 2.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
24 NATIONS CLASSIC VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS CLASSIC VALUE FUND AT MOP RUSSELL 1000 VALUE LIPPER MULTI-CAP VALUE -------------------------- ------------------ ---------------------- Apr. 16 2001 9425.00 10000.00 10000.00 10132.00 9998.00 10022.00 9708.00 8903.00 8778.00 10926.00 9559.00 9746.00 Mar. 31 2002 11499.00 9950.00 10002.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS CLASSIC VALUE FUND AT NAV RUSSELL 1000 VALUE LIPPER MULTI-CAP VALUE -------------------------- ------------------ ---------------------- Apr. 16 2001 10000.00 10000.00 10000.00 10750.00 9998.00 10022.00 10300.00 8903.00 8778.00 11593.00 9559.00 9746.00 Mar. 31 2002 12200.00 9950.00 10002.00
CUMULATIVE TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (4/16/01 through 3/31/02) 22.00% 14.99%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Classic Value Fund from the inception of the share class. Figures for the Russell 1000 Value Index, an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with lower price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole, include reinvestment of dividends. Funds in the Lipper Multi-Cap Value Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/16/01 4/16/01 4/16/01 4/16/01 - ------------------------------------------------------------------------------------------------------------------------------- CUMULATIVE RETURNS SINCE INCEPTION 22.21% 22.00% 14.99% 21.08% 16.08% 21.08% 20.08%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 25 NATIONS LARGECAP VALUE FUND VALUE STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Value Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital with income as a secondary consideration. PERFORMANCE REVIEW For the period from the Fund's inception on November 20, 2001 through March 31, 2002, Nations LargeCap Value Fund Investor A Shares provided shareholders with a cumulative total return of 7.03%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS LARGECAP VALUE FUND'S PERFORMANCE SINCE ITS INCEPTION ON NOVEMBER 20, 2001 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY The investment philosophy of Nations LargeCap Value Fund is based on our belief that undervalued and misunderstood stocks can deliver superior risk-adjusted performance over time. Further, we believe companies can go through periods when their fundamentals deteriorate, resulting in their stock being priced below what we perceive to be their fair value. We believe that utilizing a disciplined investment process that combines a valuation screen, fundamental research and a comprehensive risk management strategy is the best way to locate these investment opportunities. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED SINCE ITS INCEPTION? In the few months since the Fund's inception, U.S. investors sustained a series of significant political and economic blows. Recession, the aftereffects of terrorism, and war, combined with the collapse of the country's seventh largest company amid allegations of fraud and deceit, helped weaken U.S. equity markets. And yet, as the fiscal year came to a close, the country and the economy appeared to be gaining strength. Following the events of September 11, 2001 and after a brief market downturn, many sectors staged impressive rallies. Within the transportation sector alone -- one of the best performing sectors after September 11, 2001 -- several important trends took shape. Airline stocks rose as investors came to the conclusion that the industry would ultimately survive the terrorist attacks. Auto companies -- particularly General Motors Corporation, one of the portfolio's core holdings -- advanced as sales incentives resulted in a wave of car buying. And railroad companies, bolstered by recent cost-cutting and restructuring moves, moved higher on expectations of an economic recovery. Oil stocks also moved higher on expectations of an economic recovery, apparent compliance within OPEC on production quotas, and increased tensions in the Middle East. Technology and telecommunications, however, continued to suffer, as the excesses of the "dot.com" bubble continued to be unwound. Value stock indices once again outperformed growth stock indices, as many investors continued to favor companies with tangible earnings and attractive valuations. In this environment, the Russell 1000 Value Index,*** the Fund's - --------------- *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, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 26 NATIONS LARGECAP VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued benchmark, returned 5.90% versus 0.89% for the Standard & Poor's 500 Composite Stock Price Index& for the period November 30, 2001 through March 31, 2002. By comparison, Nations LargeCap Value Fund (Investor A Shares) advanced 7.03% for the same period, outperforming both the benchmark and the overall market. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE SINCE ITS INCEPTION?&& Relative to the benchmark, the Fund benefited from our overweighted position in the transportation and manufacturing sectors, an underweighting in the telecommunications sector and favorable stock picking in the consumer discretionary, producer durables, transportation and technology sectors. Positive contributions to performance came from a number of transportation stocks, many of which had become deeply undervalued after the events of September 11th. Our investment in AMR Corporation (the parent company of American Airlines) was based on our assessment that airline stocks were oversold after the terrorist attacks and that the strongest carriers would be able to stay in business. General Motors Corporation, which we briefly mentioned above, rebounded after September 11, 2001 on restructuring initiatives, attractive financing offers and continued strength in consumer spending. Auto-supplier Lear Corporation also contributed to performance, as auto manufacturers boosted their production schedules. Other contributors to the Fund's performance were our holdings in producer durables companies such as United Technologies Corporation and Raytheon Company, which both gained on expectations of increased defense spending and economic recovery. United Technologies Corporation suffered (we felt unduly) after the September 11th terrorist attacks, as investors worried over the impact on the firm's commercial aerospace division. Another positive was our underweighting in the telecommunications sector, which was based on our expectation that the sector's excess supply will continue to put pressure on pricing, despite evidence of an economic upturn. Simply stated, while stock price declines have led to attractive valuations in the sector, we believe that the fundamentals have not yet shown signs of bottoming. We had some strong performers in the consumer discretionary sector, as our fundamental research helped us capture sizable gains in Carnival Corporation and Circuit City Stores -- Circuit City Group. We felt that Carnival Corporation, a global cruise and leisure company, was deeply undervalued after September 11, 2001, given its balance sheet and ability to keep its cruise ships filled at reasonable prices. Our analysis on Circuit City Stores -- Circuit City Group suggested that the market was "mis-valuing" the company's retailing division, when one subtracted out the value of the firm's other businesses. Needing only marginal improvement in the core consumer electronics business (which we felt was attainable) to make the - --------------- ***The Russell 1000 Value Index is an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with lower price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 27 NATIONS LARGECAP VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued investment successful, the company met and even exceeded our expectations -- and the stock appreciated more than 100% in a relatively short time-frame. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE SINCE ITS INCEPTION? One of the Fund's challenges was in the energy sector. Despite selecting stocks which, as a whole, significantly outperformed the benchmark's energy holdings, the fact that we overweighted the sector meant that we had less of the Fund's assets in some of the better-performing sectors. In the period since the Fund's inception, non oil-related energy companies have tread water as a weaker economy and milder weather have reduced the demand for energy. We have confidence in our weighting in this sector, however. Energy prices have risen recently and we expect this trend to grow more positive given increased economic activity in the U.S. and disciplined supply management from OPEC. In addition, the Fund's performance was modestly held back by the performance of our financial holdings, which, despite some strong performers, lagged the benchmark's holdings. Disappointments included FleetBoston Financial Corp., which was undermined by its exposure to Argentina and by weakness in its capital markets businesses. The company has recently refocused its energies, however, on its core banking businesses, and we think this move will improve the company's operating performance going forward. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? In the quarter ended March 31, 2002, value stock indices, once again outperformed growth stock indices, as many investors largely expected an economic recovery in the U.S., thereby rotating into value-oriented cyclical companies -- a pattern that is typical at this time in the economic cycle. While many of the Fund's holdings benefited from expectations of an economic recovery, we remain cautious in our outlook. We believe that, while the U.S. economy will soon regain its momentum, the path to recovery may contain more bumps than investors expect. Consumer and corporate debt remain at high levels, and accounting worries and corporate bankruptcies continue to create uncertainty, and while inventories are being replenished, true demand and profit growth remain unimpressive. We believe our stock selection and positioning in sectors such as producer durables, transportation, technology, telecommunications, manufacturing and consumer discretionary benefited the Fund since its inception, enabling it to outperform the benchmark and the overall market. As we look ahead, any shift in the Fund's positioning will reflect our thoughts about what we are seeing at the company level. Our "bottom-up" investment process and focus on valuation have led us to become less enthusiastic about cyclically oriented sectors and we are currently finding value in other sectors of the market. As a result, shareholders may witness the Fund's sector and individual stock weightings shifting moderately as we seek new areas of value. What will not shift, however, is our commitment to the disciplines of our investment process -- fundamental research, quantitative analysis and risk management. We remain confident that, over the long-term, these principles will enable us to continue to locate attractive investment opportunities for our shareholders. 28 NATIONS LARGECAP VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 2.9% Electric Power - Non-nuclear 2.9% Paper and forest products 3.0% Specialty stores 3.1% Tobacco 3.1% Semiconductors 4.5% Aerospace and defense 5.8% Investment services 5.9% Insurance 9.6% Integrated oil 12.5% Commercial banking 46.7% Other
Portfolio holdings were current as of March 31, 2002, are subject to change and may not be representative of current holdings. TOP 10 HOLDINGS ------------------------------------------------- 1 Exxon Mobil Corporation 4.3% ------------------------------------------------- 2 Citigroup Inc. 3.4% ------------------------------------------------- 3 US Bancorp 3.2% ------------------------------------------------- 4 Philip Morris Companies Inc. 3.1% ------------------------------------------------- 5 Raytheon Company 2.9% ------------------------------------------------- 6 Honeywell International Inc. 2.9% ------------------------------------------------- 7 FleetBoston Financial Corporation 2.8% ------------------------------------------------- 8 Comcast Corporation, Class A 2.8% ------------------------------------------------- 9 Merrill Lynch & Company, Inc. 2.7% ------------------------------------------------- 10 Verizon Communications Inc. 2.5% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
29 NATIONS LARGECAP VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS LARGECAP VALUE LIPPER MULTI-CAP VALUE FUND RUSSELL 1000 VALUE INDEX FUNDS AVERAGE ---------------------- ------------------------ ---------------------- Nov. 21 2001 9425.00 10000.00 10000.00 9669.00 10236.00 10263.00 2002 9509.00 10157.00 10147.00 9537.00 10173.00 10063.00 Mar. 31 2002 10088.00 10665.00 10532.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS LARGECAP VALUE LIPPER MULTI-CAP VALUE FUND RUSSELL 1000 VALUE INDEX FUNDS AVERAGE ---------------------- ------------------------ ---------------------- Nov. 21 2001 10000.00 10000.00 10000.00 10259.00 10236.00 10263.00 2002 10089.00 10157.00 10147.00 10119.00 10173.00 10063.00 Mar. 31 2002 10703.00 10665.00 10532.00
CUMULATIVE TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (11/20/01 through 3/31/02) 7.03% 0.87%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations LargeCap Value Fund from the inception of the share class. Figures for the Russell 1000 Value Index, an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with lower price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole, include reinvestment of dividends. Funds in the Lipper Multi-Cap Value Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 11/20/01 11/20/01 11/20/01 11/20/01 - ------------------------------------------------------------------------------------------------------------------------------- CUMULATIVE RETURNS SINCE INCEPTION 7.08% 7.03% 0.87% 6.74% 1.74% 6.74% 5.74%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 30 NATIONS VALUE FUND VALUE STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Value Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks growth of capital by investing in companies that are believed to be undervalued. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Value Fund Investor A Shares provided shareholders with a total return of 5.33%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS VALUE FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY In August 2001, new members were added to the team. With these new members came a shift in the investment style and process that embodies a deeper value style than was previously utilized for Nations Value Fund. The investment process seeks stock selection that emphasizes attractive valuation and moderately lower volatility when compared with broad market tendencies. We believe this change could benefit shareholders, as it more clearly defines the portfolio's style. It is our belief that undervalued and misunderstood stocks can deliver superior risk-adjusted performance over time. Further, we believe companies can go through periods when their fundamentals deteriorate, resulting in their stock being priced below what we perceive to be their fair value. We also believe that utilizing a disciplined investment process that combines a valuation screen, fundamental research and a comprehensive risk management strategy is the best way to locate these investment opportunities. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? In the twelve difficult months since our last report, U.S. investors sustained a series of significant political and economic blows. Recession, terrorism and war, combined with the collapse of the country's seventh largest company amid allegations of fraud and deceit, helped weaken U.S. equity markets. And yet, as the year came to a close, the country and the economy appeared to be gaining strength. Cyclical sectors -- such as materials and producer durables as well as consumer-oriented sectors such as consumer discretionaries and consumer staples -- advanced strongly in the period, as the market began discounting an economic rebound. Meanwhile, energy demand, undermined by a weak economy and mild weather, collapsed, sending energy and utility stocks lower. Technology and telecommunications continued to suffer, particularly as the excesses of the "dot.com" world continued to be exposed. Value stock indices once again outperformed growth stock indices, as many investors continued to favor companies with tangible earnings and attractive valuations. In this environment, the Russell 1000 Value Index,*** the Fund's - --------------- *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 Value Index is an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with lower price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 31 NATIONS VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued benchmark, returned 4.38% versus 0.16% for the Standard & Poor's 500 Composite Stock Price Index.& By comparison, Nations Value Fund (Investor A Shares) advanced 5.33%, outperforming both its the benchmark and the broader market. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?&& Relative to the benchmark, the Fund benefited from overweightings in the consumer staples and transportation sectors, underweightings in the telecommunications sector and favorable stock picking in the producer durables and technology sectors. Positive contributions to performance came from transportation stocks, many of which dropped sharply after the events of September 11, 2001. Our investment in AMR Corporation (the parent company of American Airlines) was based on the assessment that airline stocks were oversold after the terrorist attacks and that the strongest carriers would be able to stay in business. General Motors Corporation, another holding in the transportation sector, rebounded after September 11, 2001 on restructuring initiatives, attractive financing offers and continued strength in consumer spending. Also posting strong performance after September 11, 2001 were our holdings in United Technologies Corporation and General Dynamics Corporation, which both gained on expectations of increased defense spending and economic recovery. United Technologies Corporation had suffered after the fall terrorist attacks, as investors worried over the impact on the firm's commercial aerospace division. In the consumer staples sector, the Fund benefited from its holdings in tobacco companies such as Philip Morris Companies Inc. and UST Inc. (up 16% and 37% respectively), whose stable returns proved highly desirable in an environment of economic and accounting-related uncertainties. We had some strong performers in the consumer discretionary sector, as our fundamental research helped us capture sizable gains in Carnival Corporation and Circuit City Stores -- Circuit City Group. We felt that Carnival Corporation, a global cruise and leisure company, was deeply undervalued after September 11, 2001, given its balance sheet and ability to keep its cruise ships filled at reasonable prices. Our analysis on Circuit City Stores -- Circuit City Group suggested that the market was "mis-valuing" the company's retailing division, when one subtracted out the value of the firm's other businesses. Needing only marginal improvement in the core consumer electronics business (which we felt was attainable) to make the investment successful, the company met and even exceeded our expectations -- and the stock appreciated more than 100% in a relatively short time frame. Another positive was our underweighting in the telecommunications sector, which was based on our expectation that the sector's excess supply will continue to put pressure on pricing, despite evidence of an economic upturn. Simply stated, while stock price declines have led to more attractive valuations in the sector, we believe that the fundamentals have not yet shown signs of bottoming. - --------------- &The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 32 NATIONS VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? One of the Fund's challenges was in the energy sector. Despite selecting stocks which, on the whole, outperformed the benchmark's energy holdings, our overweighting in this sector kept us from investing more in better-performing sectors. Energy companies have underperformed due to a weaker economy and milder weather reducing the demand for energy. We have confidence in our weighting in this sector. However, prices have risen recently, and we expect this trend may grow more positively, given increased economic activity in the U.S. and disciplined supply management from OPEC. In addition, the Fund's performance was moderately held back by the performance of our financial and consumer discretionary holdings, which, despite some strong performers, lagged the benchmark's holdings. Disappointments included FleetBoston Financial Corp., which was undermined by its exposure to Argentina and by weakness in its capital markets businesses. The company has recently refocused its energies, however, on its core banking businesses, and we think this move will improve the company's operating performance going forward. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? In the quarter ended March 31, 2002, value stock indices once again outperformed growth stock indices, as many investors largely expected an economic recovery in the U.S., thereby rotating into value-oriented cyclical companies -- a pattern that is typical at this time in the economic cycle. While many of the Fund's holdings have benefited from expectations of an economic recovery, we remain cautious in our outlook. We believe that, while the U.S. economy will soon regain its momentum, the path to recovery may contain more bumps than investors expect. Consumer and corporate debt remain at high levels, and accounting worries and corporate bankruptcies continue to create uncertainty. While inventories are being replenished, true demand and profit growth remain unimpressive. Our stock selection and positioning in sectors such as producer durables, transportation, technology, telecommunications, multi-industry manufacturing and consumer staples have benefited the Fund, enabling us to outperform the benchmark. As we look ahead, any shift in the Fund's positioning will reflect our thoughts about what we are seeing at the company level. Our "bottom-up" investment process and focus on valuation have led us to become less enthusiastic about cyclically oriented sectors. We are currently finding value in other sectors of the market. As a result, shareholders may witness the Fund's sector and individual stock weightings shift moderately as we seek new areas of value. What will not shift, however, is our commitment to the disciplines of our investment process which include fundamental research, quantitative analysis and risk management. We remain confident that, over the long-term, these principles will enable us to continue to locate attractive investment opportunities for our shareholders. 33 NATIONS VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 2.9% Diversified manufacturing 3.0% Paper and forest products 3.1% Specialty stores 4.3% Consumer credit and mortgages 4.7% Tobacco 4.7% Investment services 4.9% Insurance 5.0% Aerospace and defense 9.6% Integrated oil 12.1% Commercial banking 45.7% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Exxon Mobil Corporation 4.4% ------------------------------------------------- 2 Citigroup Inc. 3.4% ------------------------------------------------- 3 US Bancorp 3.3% ------------------------------------------------- 4 Philip Morris Companies Inc. 3.1% ------------------------------------------------- 5 Honeywell International Inc. 2.9% ------------------------------------------------- 6 Raytheon Company 2.8% ------------------------------------------------- 7 Merrill Lynch & Company, Inc. 2.7% ------------------------------------------------- 8 Verizon Communications Inc. 2.5% ------------------------------------------------- 9 Comcast Corporation, Special Class A 2.4% ------------------------------------------------- 10 AMR Corporation 2.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
34 NATIONS VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
LIPPER LARGECAP VALUE RUSSELL 1000 VALUE NATIONS VALUE FUND FUNDS AVERAGE S&P 500 INDEX ------------------ --------------------- ------- ------------------ Mar. 31|1992 9425.00 10000.00 10000.00 10000.00 1993 10516.00 11453.00 11521.00 12313.00 1994 11348.00 11923.00 11689.00 12794.00 1995 12340.00 13261.00 13506.00 14235.00 1996 16092.00 17232.00 17837.00 19002.00 1997 18957.00 20217.00 21372.00 22436.00 1998 26202.00 28089.00 31622.00 33019.00 1999 27238.00 28923.00 37469.00 34683.00 2000 27111.00 30818.00 44188.00 36882.00 2001 26491.00 30833.00 34612.00 36982.00 Mar. 31|2002 27905.00 31262.00 34668.00 38602.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
LIPPER LARGECAP VALUE RUSSELL 1000 VALUE NATIONS VALUE FUND FUNDS AVERAGE S&P 500 INDEX ------------------ --------------------- ------- ------------------ Mar. 31, 1992 10000.00 10000.00 10000.00 10000.00 1993 11158.00 11453.00 11521.00 12313.00 1994 12040.00 11923.00 11689.00 12794.00 1995 13093.00 13261.00 13506.00 14235.00 1996 17074.00 17232.00 17837.00 19002.00 1997 20113.00 20217.00 21372.00 22436.00 1998 27800.00 28089.00 31622.00 33019.00 1999 28900.00 28923.00 37469.00 34683.00 2000 28765.00 30818.00 44188.00 36882.00 2001 28107.00 30833.00 34612.00 36982.00 Mar. 31, 2002 29607.00 31262.00 34668.00 38602.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
10-YEAR NAV** MOP* (3/31/92 through 3/31/02) 11.47% 10.81%
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), an unmanaged index of 500 widely held common stocks, include reinvestment of dividends. Figures for the Russell 1000 Value Index, an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with lower price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole, include reinvestment of dividends. Funds in the Lipper Large-Cap Value Funds Average invest at least 75% of their equity assets in companies with market capitalizations greater than 300% of the dollar-weighted median market capitalization of the Standard & Poor's 500 Index. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/19/89 12/6/89 6/7/93 6/17/92 - ------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 5.64% 5.33% -0.76% 4.66% -0.14% 4.58% 3.62% - ------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 1.12% 0.81% -1.16% 0.07% -0.58% 0.09% 0.09% 5 YEARS 8.33% 8.04% 6.77% 7.24% 7.05% 7.35% 7.35% 10 YEARS 11.73% 11.47% 10.81% -- -- -- -- SINCE INCEPTION 11.71% 11.67% 11.14% 10.91% 10.91% 11.25% 11.25%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. The annual reports for the fiscal year ended March 31, 2001 and prior years compared the Fund's performance to the Standard & Poor's 500 Composite Stock Price Index. The Fund changed the index to which it compares its performance because the Russell 1000 Value Index is a more appropriate benchmark and the composition of the Index more closely resembles the composition of the Fund. 35 NATIONS MIDCAP VALUE FUND VALUE STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Value Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital with income as a secondary consideration. PERFORMANCE REVIEW For the period from the Fund's inception on November 20, 2001 through March 31, 2002, Nations MidCap Value Fund Investor A Shares provided shareholders with a cumulative total return of 13.37%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS MIDCAP VALUE FUND'S PERFORMANCE SINCE THE FUND'S INCEPTION THROUGH MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The investment philosophy of Nations MidCap Value Fund is based on our belief that undervalued and misunderstood stocks can deliver superior risk-adjusted performance over time. Further, we believe companies can go through periods when their fundamentals deteriorate, resulting in their stock being priced below what we perceive to be their fair value. We believe that utilizing a disciplined investment process that combines a valuation screen, fundamental research and a comprehensive risk management strategy is the best way to locate these investment opportunities. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED SINCE ITS INCEPTION? In the months since the inception of the Fund, U.S. investors sustained a series of significant political and economic blows. Recession, the aftereffects of terrorism, and war, combined with the collapse of the country's seventh largest company amid allegations of fraud and deceit, helped weaken U.S. equity markets. And yet, as the fiscal year came to a close, the country and the economy appeared to be gaining strength. Cyclical sectors, such as materials and producer durables as well as consumer-oriented sectors such as consumer discretionary and consumer staples, performed well in the months between the Fund's inception and March 31, 2002, as the market began discounting an economic rebound. Generally, midcap energy stocks also performed well on expectations of an economic recovery, apparent compliance within OPEC on oil production quotas and in spite of renewed tensions in the Middle East. With respect to mid-capitalization stocks, only two sectors posted negative returns since the Fund's inception, healthcare and technology. Healthcare, traditionally a defensive sector, lagged as investors opted for more cyclically oriented companies. Technology suffered as the dot.com and information-technology spending bubbles continues to be unwound. Generally, value stocks once again outperformed growth shares, as many investors continued to favor companies with tangible earnings and attractive valuations. In this environment, we are pleased to report that Nations MidCap Value Fund (Investor A Shares) advanced 13.37% since its inception, outperforming the Fund's - --------------- *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, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 36 NATIONS MIDCAP VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued benchmark, the Russell Midcap Value Index,*** which returned 12.76% for the same period. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE SINCE ITS INCEPTION?& The Fund's outperformance versus its benchmark was the result of superior stock selection in most of the Fund's sectors. These sectors included consumer discretionary, consumer staples, energy, financials, manufacturing and producer durables sectors. Our holdings in the producer durables sector (which also includes defense and aerospace companies) performed particularly well as many investors sought out both economically sensitive and defense-related companies. Both of these trends benefited our position in Rockwell Collins, Inc., a leading provider of aviation communications and electronics equipment with exposure to both military and commercial markets. Also contributing to performance was our position in Pentair, Inc., a diversified manufacturer of tools, enclosures and water control products, which advanced on expectations of cost savings from restructuring and increased demand from an economic recovery. Other manufacturing stocks also performed well, including positions in the paper and building-products firm Georgia-Pacific Corporation, and Brunswick Corporation, a leisure-products company whose products range from billiard tables to powerboats. In the financial sector (which represents roughly 23% of the Fund and 27% of the benchmark), Federal Reserve Board interest rate cuts helped credit-sensitive banks which were facing reduced demand for loans and declining credit quality. Bank holdings in the Fund included City National, which serves a niche market in California, Comerica, Inc., a midwest-based pure commercial lender and Zions Bancorporation. Zions's loan portfolio has better than average credit quality and is experiencing good growth in its markets which are primarily in western and northwestern states. The Fund had some strong performers in the consumer discretionary sector as well, as our fundamental research helped us capture sizable gains in Carnival Corporation and Circuit City Stores -- Circuit City Group. We felt that Carnival Corporation, a global cruise and leisure company, was deeply undervalued after September 11, 2001, given its balance sheet and ability to keep its cruiseships filled at reasonable prices. Our analysis on Circuit City Store -- Circuit City Group suggested that the market was "mis-valuing" the company's retailing division, when one subtracted out the value of the firm's other businesses. Needing only marginal improvement in the core consumer electronics business (which we felt was attainable) to make the investment successful, the company met and even exceeded our expectations -- and the stock appreciated more than 100% in a relatively short time frame. - --------------- ***The Russell MidCap Value Index is an unmanaged index which measures the performance of those Russell MidCap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value Index. The index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 37 NATIONS MIDCAP VALUE FUND VALUE STRATEGIES TEAM COMMENTARY continued WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE SINCE ITS INCEPTION? The Fund's biggest challenge in the period since its inception came in the technology sector, where, despite what we believed were some attractive valuations and promising fundamentals, market conditions continued to be volatile. An example of a company that we like in the sector, despite its volatility, is Symbol Technologies, Inc. which manufacturers wireless communication and scanning devices that have applications in a number of areas including inventory management, retail sales and healthcare services. Most notably, Wal-Mart Stores, Inc. is currently using Symbol's technology to improve productivity and cut costs as it attempts to take on traditional supermarkets. We think Symbol's technologies will be adopted in a number of industries as companies look for ways to cut costs and improve margins. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? In the quarter ended March 31, 2002, value stocks once again generally outperformed growth stocks as investors largely expected an economic recovery in the U.S., thereby rotating into value-oriented cyclical companies -- a pattern that is typical at this time in the economic cycle. While many of the Fund's holdings have benefited from expectations of an economic recovery, we remain cautious in our outlook. We believe that, while the U.S. economy will soon regain its momentum, the path to recovery may contain more bumps than investors expect. Consumer and corporate debt remain at high levels, accounting worries and corporate bankruptcies continue to create uncertainty, and while inventories are being replenished, true demand and profit growth remain unimpressive. We believe our stock selection and positioning in sectors such as consumer discretionary, consumer staples, financials, energy, producer durables, transportation and multi-industry manufacturing have benefited the Fund since its inception, enabling us to outperform the benchmark and the overall market. As we look ahead, any shift in the Fund's positioning will reflect our thoughts about what we are seeing at the company level. Our "bottom-up" investment process and focus on valuation has led us to become less enthusiastic about cyclically oriented sectors and we are currently finding value in other sectors of the market. As a result, shareholders may witness the Fund's sector and individual stock weightings shifting moderately as we find new areas of value. What will not shift, however, is our commitment to the disciplines of our investment process -- fundamental research, quantitative analysis and risk management. We remain confident that, over the long-term, these principles will enable us to continue to locate attractive investment opportunities for our shareholders. 38 NATIONS MIDCAP VALUE FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.7% Paper and forest products 3.9% Specialty stores 4.2% Semiconductors 4.2% Metals and mining 4.3% Diversified electronics 4.4% Insurance 4.5% Aerospace and defense 5.1% Integrated oil 5.9% Lodging and recreation 8.3% Commercial banking 51.5% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Harris Corporation 3.0% ------------------------------------------------- 2 Raytheon Company 2.7% ------------------------------------------------- 3 Comerica Inc. 2.4% ------------------------------------------------- 4 Sovereign Bancorp, Inc. 2.4% ------------------------------------------------- 5 Tektronix, Inc. 2.2% ------------------------------------------------- 6 AptarGroup, Inc. 2.2% ------------------------------------------------- 7 CSX Corporation 2.2% ------------------------------------------------- 8 Marathon Oil Corporation 2.1% ------------------------------------------------- 9 Masco Corporation 2.1% ------------------------------------------------- 10 Kellogg Company 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
39 NATIONS MIDCAP VALUE FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
LIPPER MID-CAP VALUE FUNDS RUSSELL MIDCAP VALUE NATIONS MIDCAP VALUE FUND AVERAGE INDEX ------------------------- -------------------------- -------------------- Nov. 20|2001 9425.00 10000.00 10000.00 9987.00 10456.00 10415.00 10015.00 10453.00 10520.00 10034.00 10509.00 10691.00 Mar. 31|2002 10685.00 11125.00 11237.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
LIPPER MID-CAP VALUE FUNDS RUSSELL MIDCAP VALUE NATIONS MIDCAP VALUE FUND AVERAGE INDEX ------------------------- -------------------------- -------------------- Nov. 20|2001 10000.00 10000.00 10000.00 10596.00 10456.00 10415.00 10626.00 10453.00 10520.00 10646.00 10509.00 10691.00 Mar. 31|2002 11337.00 11125.00 11237.00
CUMULATIVE TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (11/20/01 through 3/31/02) 13.37% 6.85%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations MidCap Value Fund from the inception of the share class. Figures for the Russell MidCap Value Index, an unmanaged index which measures the performance of those Russell MidCap companies with lower price-to-book ratios and forecasted growth values, include reinvestment of dividends. The stocks are also members of the Russell 1000 Value Index. Funds in the Lipper Mid-Cap Value Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 11/20/01 11/20/01 11/20/01 11/20/01 - ------------------------------------------------------------------------------------------------------------------------------- CUMULATIVE RETURNS SINCE INCEPTION 13.63% 13.37% 6.85% 13.14% 8.14% 13.10% 12.10%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 40 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY* PORTFOLIO MANAGEMENT Thomas F. Marsico is the Portfolio Manager of Nations Marsico Growth & Income Fund and Chief Executive Officer of Marsico Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital with a limited emphasis on income. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Marsico Growth & Income Fund Investor A Shares provided shareholders with a total return of -1.01%.** 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, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The Fund seeks long-term growth of capital with a limited emphasis on income. The Fund invests primarily in large-capitalization equity securities that are selected for their long-term growth potential. Generally, the Fund holds 35 to 50 securities allocated across a variety of economic sectors and industries. We seek investments in companies with strong brand franchises, improving financial returns and a global presence. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? For the 12-month period ended March 31, 2002, Nations Marsico Growth & Income Fund (Investor A Shares) decreased 1.01%. This return compares to the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index),*** the Fund's primary benchmark, which was up 0.16%. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? Clearly, the past year has been exceptionally difficult for many equity investors, with growth-oriented investment styles being under particular pressure. Over the course of my entire career managing money, the past twelve months unquestionably ranks as one of the most challenging, complex periods for investing that I have experienced. In reflecting upon the year and studying the Fund's strategic positioning and individual holdings, it is apparent that there were a variety of contributing factors to the Fund's performance. Following September 11, 2001, we continued to work diligently to evaluate the overall capital market environment and assess the Fund's holdings. Our investment team reviewed the Fund's investment posture carefully on a stock-by-stock basis. We concluded that, in general, a full-scale realignment of Fund holdings and/or raising substantial cash positions after the terrorist attacks was unnecessary. Much of the Fund's investment emphases were on consumer-related, health care, financial services and aerospace and defense. These were areas of investment that we felt were appropriate in the market environment in the latter part of the year. One of - --------------- *The outlook for this Fund may differ from that presented for other Nations Funds mutual funds. **The performance shown does not reflect the maximum front-end sales charge of 5.75%, which may apply to purchases of Investor A Shares. For standardized performance, please refer to the Performance table. ***The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Marsico Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 41 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY continued our investment premises is that the next economic recovery will in all probability be a consumer-led process, as opposed to the capital expenditure-driven growth that characterized the 1990s. We are expressing that view quite strongly by having significant investments in retailing, housing, financial services and healthcare companies. A second premise is that we remain cautious on the outlook for many technology and telecommunications companies. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& Over the 12 months ended March 31, 2002, stocks in the consumer discretionary and financial services sectors aided the Fund. Industries within these sectors that contributed to this performance were automobiles, leisure, retailing and diversified financials. Selected industrial stocks also aided performance. The top performing stocks over the course of the fiscal year were General Dynamics Corporation, Tenet Healthcare Corporation, USA Education Inc., Lockheed Martin Corporation, UnitedHealth Group Inc., Tiffany & Company, Wal-Mart Stores, Inc., Siebel Systems, Inc., Bayerische Motoren Werke (BMW) AG and Home Depot, Inc. The Fund was also aided by its underweight in the information technology sector. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Over the 12 months ended March 31, 2002, factors that detracted from performance were primarily disappointing performance of stocks in the consumer staples, energy and utility sectors. Industries within these sectors that demonstrated the greatest underperformance were oil service, power generation, pharmaceuticals and media. The poorest performing stocks over the course of the fiscal year were Calpine Corporation, Boeing Company, Qualcomm, Genentech, Merck & Company, Smith International, Priority Healthcare, Comcast Corporation, AOL Time Warner Inc. and Washington Mutual, Inc. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We begin the new fiscal year with a dual sense of reflection and renewal. We were stunned by the sheer horror of the September 11, 2001 terrorist attacks. We were alarmed by the extensive fallout from the collapse of Enron. From an investment perspective, while we understood the urgent need to sort through and ascertain the possible implications stemming from these issues, it quickly became apparent that arriving at definitive conclusions would be enormously difficult. Much of what was being experienced -- politically, economically and financially -- was without historical precedent. As we move into 2002, however, we are finding reasons to feel increasingly more optimistic about the general outlook for equities. Some of the rampant uncertainty that prevailed in the aftermath of the terrorist attacks -- including the possibility of more attacks, additional anthrax outbreaks, the specific nature of the U.S. response to the attacks and the reaction of the capital markets -- seems to have diminished. There is some evidence that the U.S. economy may be starting to improve. The - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 42 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO MANAGER COMMENTARY continued corporate profit outlook is exhibiting signs of recovering. From a geopolitical perspective, too, there have been some encouraging developments. The allied coalition against terrorism was formed quickly and effectively, has held together well, and appears to have made considerable progress in its campaign against terrorism. To be sure, there are offsets to these positively inclined comments. There is no role for complacency right now. The exact timing and magnitude of a U.S. economic recovery is unclear. The bulk of the "bad news" in terms of corporate earnings may be behind us, but we believe future profit warnings and/or disappointments will almost certainly occur. From a global perspective, too, the ledger is mixed. While the situation in Afghanistan appears considerably better than in September 2001 in terms of terrorist operations and facilities being either eradicated or controlled, there is ample cause for concern elsewhere in the world. Violence has flared anew in the Middle East. Tension between India and Pakistan appears to be potentially quite serious. Japan's economy continues to struggle. However, we believe there are a number of factors at work that create the potential for improved equity returns. In our opinion, ingredients for an improved U.S. economic outlook clearly exist. We believe the resiliency of stock prices in a variety of areas -- including consumer discretionary, consumer staples, select health care and financial services -- could demonstrate that good, long-term investment opportunities are available for investors. From a macroeconomic perspective, our view is that there are a number of encouraging factors that create a favorable backdrop for equity markets. Interest rates remain low. Inflation, as measured by the Consumer Price Index, continues to be quiescent and may, in fact, decelerate in the future. Claims for unemployment assistance recently have stabilized. Manufacturing activity seems to have improved recently, while inventory corrections appear well underway in many sectors. Consumer confidence has improved. While many people undoubtedly have experienced losses in their equity portfolios, we believe the "wealth effect" remains very much an important underlying aspect of the U.S. economy. Consumer spending -- supported by low interest rates, incentives such as "0% financing" on automobiles and rising house prices -- continues to hold up well. Valuations in many sectors and industries appear increasingly attractive to us. While we readily acknowledge that there continue to be abundant crosscurrents in the economy to contend with, as well as geopolitical risk, on balance we think the overall macroeconomic outlook is quite good. 43 NATIONS MARSICO GROWTH & INCOME FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 4.5% Medical devices and supplies 4.6% Beverages 4.6% Department and discount stores 5.1% Commercial banking 5.8% Investment services 7.8% Aerospace and defense 7.9% Automotive 8.5% Consumer credit and mortgages 10.4% Specialty stores 11.3% Health services 29.5% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 USA Education Inc. 5.4% ------------------------------------------------- 2 Tenet Healthcare Corporation 5.2% ------------------------------------------------- 3 UnitedHealth Group Inc. 5.0% ------------------------------------------------- 4 Lockheed Martin Corporation 4.0% ------------------------------------------------- 5 Home Depot, Inc. 3.9% ------------------------------------------------- 6 Citigroup Inc. 3.9% ------------------------------------------------- 7 General Dynamics Corporation 3.5% ------------------------------------------------- 8 Lehman Brothers Holdings Inc. 3.4% ------------------------------------------------- 9 Bayerische Motoren Werke (BMW) AG 3.4% ------------------------------------------------- 10 Johnson & Johnson 3.4% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
44 NATIONS MARSICO GROWTH & INCOME FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN GRAPH]
NATIONS MARISCO GROWTH & LIPPER LARGE-CAP CORE INCOME FUND INDEX S&P 500 INDEX ------------------------ --------------------- ------------- Dec. 31|1997 9425.00 10000.00 10000.00 12330.00 12165.00 11771.00 1998 13065.00 13761.00 12858.00 14899.00 15348.00 14451.00 1999 19874.00 18720.00 15564.00 18613.00 18821.00 15498.00 2000 16800.00 17421.00 14148.00 14701.00 15978.00 13202.00 2001 13480.00 15023.00 12468.00 Mar. 31|2002 14042.00 14970.00 12491.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN GRAPH]
NATIONS MARISCO GROWTH & LIPPER LARGE-CAP CORE INCOME FUND INDEX S&P 500 INDEX ------------------------ --------------------- ------------- Dec. 31|1997 10000.00 10000.00 10000.00 13082.00 12165.00 11771.00 1998 13862.00 13761.00 12858.00 15808.00 15348.00 14451.00 1999 21086.00 18720.00 15564.00 19749.00 18821.00 15498.00 2000 17825.00 17421.00 14148.00 15598.00 15978.00 13202.00 2001 14302.00 15023.00 12468.00 Mar. 31|2002 14899.00 14970.00 12491.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/31/97 through 3/31/02) 9.84% 8.32%
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), an unmanaged index of 500 widely held common stocks, 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. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/31/97 12/31/97 12/31/97 12/31/97 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -0.80% -1.01% -6.72% -1.79% -6.70% -1.78% -2.77% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 0.10% -0.14% -2.09% -0.90% -1.89% -0.87% -0.87% SINCE INCEPTION 9.97% 9.84% 8.32% 9.08% 8.73% 9.12% 9.12%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 45 NATIONS BLUE CHIP FUND GROWTH STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks to achieve long-term capital appreciation through investments in blue chip stocks. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Blue Chip Fund Investor A Shares provided shareholders with a total return of -3.36%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS BLUE CHIP FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. EFFECTIVE JANUARY 1, 2002, BANC OF AMERICA CAPITAL MANAGEMENT, LLC BECAME THE INVESTMENT SUB-ADVISER FOR NATIONS BLUE CHIP FUND, REPLACING CHICAGO EQUITY PARTNERS, LLC. WHILE THE FUND'S INVESTMENT OBJECTIVE REMAINS THE SAME, THE PRINCIPAL INVESTMENT STYLE AND PHILOSOPHY HAVE CHANGED AND ARE DISCUSSED BELOW. PERFORMANCE AND COMMENTARY FROM BOTH CURRENT AND PRIOR PORTFOLIO MANAGERS DURING THE PERIOD ARE REFLECTED IN THE FOLLOWING COMMENTARY. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. While managed by Chicago Equity Partners, LLC, the Fund remained neutral to the overall stock market in sector weightings and market capitalization and focused on individual stock selection. This risk controlled strategy was designed to provide the potential for the Fund to fully benefit from the market's advances despite major disparities in performance between sectors and the narrowness of the market. Within this discipline, securities were selected that displayed attractive valuations, while exhibiting positive momentum and solid earnings quality. As referenced above, Banc of America Capital Management, LLC became the Fund's sub-adviser on January 1, 2002, and the investment approach was changed. Nations Blue Chip Fund employs a long-term, large-capitalization growth strategy. Securities are generally held in the Fund between a two- to four-year time horizon. We employ a quantitative analysis through our "top-down" and "bottom-up" stock selection. Through this framework, we create a portfolio of 60-80 securities in which we seek to control risk through diversification and monitor the risk through quantitative techniques. This is an integrated approach to portfolio construction. We start with a macro view, forecasting factors such as the economy, sector trends and long-term investment themes -- for example, the aging of the U.S. population, globalization and innovation. We then combine fundamental and quantitative research analysis to select companies that we believe will grow faster and/or longer than consensus expectations. We typically invest in companies that we believe have favorable long-term growth potential, competitive advantages and sensible business strategies. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? From the period April 1, 2001 through December 31, 2001, Nations Blue Chip Fund (Investor A Shares) lagged its benchmark and returned -2.34% versus -0.03% - --------------- *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. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 46 NATIONS BLUE CHIP FUND GROWTH STRATEGIES TEAM COMMENTARY continued for the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index).*** Most of the underperformance came in the fourth quarter of 2001, as markets reacted to the uncertainty following the events of September 11, 2001. The markets' lack of direction since that fateful day proved to be a challenging investing environment. Although we remained confident that the companies we purchased held good expectations at reasonable prices and may be rewarded over the long-term, the S&P 500 Index suffered a 126.74 point loss -- its second-worst single-week loss ever. Even though the S&P 500 Index recovered slightly less than half of these losses during the following weeklong recovery, it still was the worst recorded quarter since the crash of 1987. Under Banc of America Capital Management, LLC, the new investment sub-adviser, the Fund returned -1.04% versus the benchmark S&P 500 Index return of 0.19% for the first quarter of 2002. The best performing sectors in the S&P 500 Index during the quarter included those historically favored by "value" managers -- for instance, heavy industrials, consumer cyclicals, consumer staples and transportation. These sectors performed the best, as the U.S. economy emerged from a shallow recession and entered into an economic recovery. On the other hand, more aggressive sectors such as technology and telecommunications performed poorly, as investors had trouble justifying valuations in the face of uncertain near term earnings prospects. The Fund's lack of representation in many of the "value" sectors, as well as the poor performance of a few large holdings, was primarily responsible for the relative underperformance during the quarter. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? For the first three quarters of the reporting period, volatility remained high based on the S&P 500 Index, as 20.56% of the trading days saw an increase of 1% or more, when historically the average has been 12.9%. Also, 21.77% of trading days saw decreases of 1% or more, which also is well above the historical average of 10.9%. Given the market volatility, the team increased the number of stocks held in the portfolio from 180 to 200 over the nine months. During the first quarter of 2002, the Fund was transitioned from the previous investment style to the current style referenced above. Specifically, the team was involved in reducing the number of securities from the 150 range to roughly 75-80, decreasing the level of turnover, in the long term, previously experienced in the Fund, and adopting a greater emphasis on large capitalization stocks and industry leaders. The prior investment adviser relied heavily on a quantitative strategy, whereas the team now seeks to own stocks with strong fundamentals and sustainable competitive advantages. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& The best-performing sectors from the period April 1, 2001 through December 31, 2001, were the consumer staples and the consumer cyclical sectors. Both benefited from strong spending by the consumer as well as investors' appetite for companies - --------------- ***The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 47 NATIONS BLUE CHIP FUND GROWTH STRATEGIES TEAM COMMENTARY continued with predicable earnings. Consumer staples stocks, which composed 8% of the Fund through December 31 2001, performed well given investors' desire for defensive stocks or companies less susceptible to recessions and weak economic environments. The best performers were retailers such as food and drug/grocery store Albertson's, consumer food product manufacturer's General Mills, Inc. and Kellogg Company and tobacco manufacturer Philip Morris Companies, Inc. Within the consumer cyclicals sector, which composed 14% of the Fund through December 31, 2001, Office Depot, Best Buy Company, Autozone and Lowe's Companies provided the best returns. During the first quarter of 2002, trends in the telecommunication service industry continued to weaken, and associated stocks performed poorly, while healthcare stocks held up well as investors sought out a "safe haven" from the volatile market. The Fund's performance was aided by holding a smaller than index weighting in telecommunication stocks and by the strong performance of such healthcare stocks as Johnson & Johnson, Pharmacia Corporation and Baxter International Inc. In addition, consumer finance stocks, such as Household International, Inc. and MBNA Corporation, as well as brokerage firms Merrill Lynch & Company, Inc. and Morgan Stanley Dean Witter & Company, boosted performance as investors gained confidence in the strength of the pending economic recovery. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The lagging sectors during the first three quarters of the fiscal year were technology and healthcare. The strong performance of technology stocks in the fourth quarter was not enough to salvage performance. The biggest detractors in the technology sector were Ciena Corp., Scientific-Atlanta Inc., PMC-Sierra Inc. and Oracle Corporation. Within the healthcare sector, major drug companies were the largest detractors as expiring patents, competition and flat sales led to double-digit losses in Merck & Company, Inc., Schering-Plough Corporation and Bristol-Myers Squibb Corporation. Technology stocks were battered during the first quarter of 2002 as investors worried whether future earnings in the sector would be great enough to justify current valuations. Stocks such as Cisco Systems, Inc., International Business Machines Corporation, and Microsoft Corporation were a drag on the Fund's performance. In addition, industrial conglomerate Tyco International and retailer Circuit City Stores -- Circuit City Group both traded sharply lower based on fears of weaker than expected near term earnings as well as potential accounting issues. Finally, the Fund's underexposure to traditional value sectors, such as basic materials and energy hindered performance. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We are optimistic about the prospects for the next year. In our opinion, most signs point to a better economic environment over the next twelve months. The recession appears to have ended sometime in the first calendar quarter. Inflation remains tame and economic growth appears to be accelerating. Inventory levels are low and valuations in the equity market appear reasonable. These factors could contribute to better earnings growth that could be reflected in higher stock market valuations. Much of the "early cycle" stocks (chemicals, paper & forest products and metals) appear to have already had the majority of their move. As we move later in the 48 NATIONS BLUE CHIP FUND GROWTH STRATEGIES TEAM COMMENTARY continued economic cycle, we feel the potential for increasing earnings should favor mid- to late-cycle stocks which could be positive for large cap portfolios. We believe the Fund is positioned to take advantage of this scenario through increasing exposure to technology, financial services and communications stocks. 49 NATIONS BLUE CHIP FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.7% Specialty stores 3.9% Commercial banking 4.5% Software 4.5% Diversified manufacturing 5.3% Computers and office equipment 5.5% Medical devices and supplies 6.3% Department and discount stores 6.3% Consumer credit and mortgages 6.4% Integrated oil 10.0% Pharmaceuticals 43.6% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Microsoft Corporation 3.8% ------------------------------------------------- 2 Pfizer Inc. 3.4% ------------------------------------------------- 3 General Electric Company 3.3% ------------------------------------------------- 4 Exxon Mobil Corporation 2.9% ------------------------------------------------- 5 Citigroup Inc. 2.9% ------------------------------------------------- 6 Wal-Mart Stores, Inc. 2.8% ------------------------------------------------- 7 International Business Machines Corporation 2.7% ------------------------------------------------- 8 Johnson & Johnson 2.5% ------------------------------------------------- 9 Home Depot, Inc. 2.0% ------------------------------------------------- 10 USA Education Inc. 2.0% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
50 NATIONS BLUE CHIP FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
LIPPER LARGE-CAP CORE STANDARD & POOR'S 500 NATIONS BLUE CHIP FUND FUNDS AVERAGE INDEX ---------------------- --------------------- --------------------- Jan. 13 1994 9425.00 10000.00 10000.00 12/94 9487.00 9687.00 9993.00 12/95 12882.00 12799.00 13744.00 12/96 15942.00 15435.00 16898.00 12/97 21155.00 19795.00 22534.00 12/98 27049.00 24813.00 28981.00 12/99 32773.00 29937.00 35077.00 12/00 29731.00 32619.00 31885.00 12/01 25019.00 28127.00 28097.00 Mar. 31 2002 24757.00 28029.00 28151.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
LIPPER LARGE-CAP CORE STANDARD & POOR'S 500 NATIONS BLUE CHIP FUND FUNDS AVERAGE INDEX ---------------------- --------------------- --------------------- Jan. 13 1994 10000.00 10000.00 10000.00 12/94 10066.00 9687.00 9993.00 12/95 13668.00 12799.00 13744.00 12/96 16915.00 15435.00 16898.00 12/97 22446.00 19795.00 22534.00 12/98 28699.00 24813.00 28981.00 12/99 34772.00 29937.00 35077.00 12/00 31545.00 32619.00 31885.00 12/01 26545.00 28127.00 28097.00 Mar. 31 2002 26267.00 28029.00 28151.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (1/13/94 through 3/31/02) 12.48% 11.67%
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), an unmanaged index of 500 widely held common stocks, 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. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A+ INVESTOR A INVESTOR B++ INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 5/21/99 1/13/94 7/15/98 11/11/96 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -3.15% -3.36% -8.90% -4.12% -8.92% -4.17% -5.13% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -3.59% -4.45% -6.31% -5.16% -5.97% -5.17% -5.17% 5 YEARS 9.25% 8.66% 7.38% 8.07% 7.78% 7.92% 7.92% SINCE INCEPTION 12.85% 12.48% 11.67% 12.11% 12.11% 7.95% 7.95%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 51 NATIONS STRATEGIC GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term, after-tax returns by investing in a diversified portfolio of common stocks. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Strategic Growth Fund Investor A Shares provided shareholders with a total return of - -0.97%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS STRATEGIC GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Strategic Growth Fund is managed using a long-term capital growth strategy with a focus on maximizing after-tax returns. Securities are generally held in the Fund between a two- to four-year time horizon. We "build" the Fund by utilizing an integrated approach to portfolio construction. We start with a macro view, forecasting factors such as the economy, sector trends and long-term investment themes (e.g., the aging of the U.S. population, globalization and innovation). We then combine fundamental and quantitative research analysis to select companies that we believe will grow faster and/or longer than consensus expectations. The Fund typically invests in companies that we believe are recognized leaders, have strong track records and possess key competitive advantages. Through our "top down" framework and the "bottom-up" stock selection, we create a portfolio of 60 to 80 securities in which we attempt to carefully manage and monitor risk through diversification and quantitative techniques. The Fund seeks to maintain a volatility and risk profile similar to the Standard & Poor's Composite Stock Price Index.*** HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? The last 12 months have been a difficult environment for growth investors. Profits of many large-growth companies continued to decline throughout the year, the domestic economy suffered its first recession in over a decade and on September 11, 2001 the U.S. witnessed the terrorist attacks on the World Trade Center and the Pentagon. In spite of the negative surprises and the accompanying market volatility, many of the major stock indices finished the year in positive territory. The Standard & Poor's Composite Stock Price Index, the Fund's benchmark, returned 0.16% and the Nasdaq Composite Index& had a return of 0.28%. Nations Strategic Growth Fund (Investor A Shares) returned -0.97% for the 12-month period ended March 31, 2002. - --------------- *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 represents past performance and is not predictive of future results and does not reflect the deduction of taxes that a shareholder may pay on fund distributions or the redemption of fund shares. ***The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &The 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. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE, BEFORE AND AFTER TAXES, IS NO GUARANTEE OF FUTURE RESULTS. 52 NATIONS STRATEGIC GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued There were two basic market trends over the last 12 months. Between April 1, 2001 and September 21, 2001, the market generally focused on slowing economic growth and the dramatic drop in corporate profits, particularly in the technology sector. After the events of last fall (and the subsequent drop in the stock market), many investors began focusing on the financial liquidity the Federal Reserve had injected into the system and the fiscal stimulus package proposed by the government and became increasingly optimistic that a recovery was nearing. Nations Strategic Growth Fund was a relatively stable performer throughout the reporting period. The Fund was defensively positioned throughout much of the early part of the year, particularly in the summer. The Fund moved to a more aggressive stance following the market drop after September 11, 2001 and outperformed the benchmark in the fourth calendar quarter, returning 12.41% versus 10.68%. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? As evidence mounted that the economy was slowing and profits were eroding, we took several steps to seek to reduce risk in the portfolio. Initially, we increased the diversification in the Fund. This was accomplished by increasing the number of stocks held and by reducing sector "bets," particularly in technology. Throughout the early part of the year, the Fund maintained its defensive position and increased its cash position to the high end of its normal range of 0% to 7%. Following the market decline after the terrorist attacks of September 11, 2001, the Fund moved aggressively into the technology, retail and consumer cyclical stock sectors, and materially reduced its cash position. As a result of these moves, the Fund had very strong performance between late September and January. We were a little late, however, in taking profits in many of the securities that had dramatic increases in the fourth calendar quarter, and the Fund struggled to maintain its performance advantage in the most recent quarter. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?&& There were essentially two distinct trends in the equity market last year. Early in the period, defensive stocks and cash were generally the place in which to be invested. As such, capital goods and healthcare stocks were among the better performers in the Fund. Later in the year, however, the market switched gears, favoring consumer cyclical and retailing stocks. Over the course of the entire 12-month period, the Fund benefited from strength in the financial services, healthcare and energy sectors. Specific stocks that helped performance included Fannie Mae, USA Education Inc., Centex Corporation, Starwood Hotels & Resorts Worldwide, Inc., Nabors Industries, Inc., Johnson Controls and Smith International. Technology, while one of the most volatile and worst performing sectors, contributed positively to the Fund's performance due to superior security selection. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? While the Fund managed to avoid nearly all of the "torpedo" stocks over the last year, two stocks that significantly hurt performance were Tyco International Ltd. Corporation and Circuit City Stores -- Circuit City Group. Following Enron Corporation's collapse and subsequent scandal (Nations Strategic Growth Fund did - --------------- &&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 53 NATIONS STRATEGIC GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued not own Enron stock), stocks of companies whose financial statements or accounting methods appeared confusing were immediately under fire from investors. Tyco International Ltd. was clearly caught in this issue. Its growth through acquisition strategy, which had created tremendous value for shareholders, also spawned confusion by investors regarding the accounting of these acquisitions. Tyco International Ltd.'s management exacerbated the issue by moving from a growth through acquisition strategy to one of breaking-up the company. These two issues, accounting and changing strategy, caused considerable weakness in the shares and resulted in a significant loss for the Fund. Circuit City Stores -- Circuit City Group was also one of the Fund's poorest performers over the last year. Like Tyco International Ltd., Circuit City Stores -- Circuit City Group's accounting practices came into question, but it was more of an operational issue because the company rolled out newly remodeled stores into its sales base. The Fund also was hurt by an underweighting in basic industry sectors, as these stocks had a significant run early in 2002. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We are optimistic about the prospects for the next year. Most signs, we feel, point to a better economic environment over the next twelve months. We believe the recession appears to have ended sometime in the first calendar quarter. Inflation remains tame, and economic growth appears to be accelerating. Inventory levels are low, while valuations in the equity market appear reasonable. These factors could contribute to better earnings growth that may be anticipated by higher stock market valuations. Much of the "early cycle" stocks (chemicals, paper and forest products and metals) appear to have already completed the majority of their move. As we progress within the economic cycle, we feel the potential for increasing earnings could favor mid- to late-cycle stocks that may be positive for large-cap growth funds like Nations Strategic Growth Fund. We believe the Fund is positioned to take advantage of this scenario through increasing exposure to technology, financial services and communications stocks. 54 NATIONS STRATEGIC GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 4.2% Commercial banking 4.3% Software 4.7% Broadcasting and cable 4.7% Diversified manufacturing 5.1% Computers and office equipment 5.2% Integrated oil 5.3% Medical devices and supplies 6.0% Department and discount stores 6.1% Consumer credit and mortgages 9.2% Pharmaceuticals 45.2% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Microsoft Corporation 3.6% ------------------------------------------------- 2 Pfizer Inc. 3.3% ------------------------------------------------- 3 General Electric Company 3.2% ------------------------------------------------- 4 Exxon Mobil Corporation 3.1% ------------------------------------------------- 5 Wal-Mart Stores, Inc. 3.1% ------------------------------------------------- 6 Citigroup Inc. 2.9% ------------------------------------------------- 7 International Business Machines Corporation 2.6% ------------------------------------------------- 8 American International Group, Inc. 2.0% ------------------------------------------------- 9 Home Depot, Inc. 2.0% ------------------------------------------------- 10 Household International, Inc. 1.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
55 NATIONS STRATEGIC GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS STRATEGIC GROWTH LIPPER LARGE-CAP GROWTH STANDARD| & POOR'S 500 FUND FUNDS AVERAGE INDEX ------------------------ ----------------------- ---------------------- Oct. 2|1998 9425.00 10000.00 10000.00 1998 11935.00 12519.00 12130.00 13488.00 14091.00 13633.00 1999 15522.00 17201.00 14683.00 15662.00 17690.00 15015.00 2000 13574.00 14553.00 13707.00 12597.00 12193.00 12790.00 2001 11888.00 11121.00 12079.00 Mar. 31|2001 11802.00 10801.00 12102.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS STRATEGIC GROWTH LIPPER LARGE-CAP GROWTH STANDARD| & POOR'S 500 FUND FUNDS AVERAGE INDEX ------------------------ ----------------------- ---------------------- Oct. 2|1998 10000.00 10000.00 10000.00 1998 12663.00 12519.00 12130.00 14311.00 14091.00 13633.00 1999 16469.00 17201.00 14683.00 16618.00 17690.00 15015.00 2000 14402.00 14553.00 13707.00 13366.00 12193.00 12790.00 2001 12613.00 11121.00 12079.00 Mar. 31|2001 12522.00 10801.00 12102.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/2/98 through 3/31/02) 6.65% 4.86%
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), an unmanaged index of 500 widely held common stocks, 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. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. 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. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A+ INVESTOR B+ INVESTOR C+ NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 10/2/98 8/2/99 8/2/99 8/2/99 - ------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -0.83% -0.97% -6.67% -1.78% -6.69% -1.78% -2.76% - ------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -3.20% -3.34% -5.24% -3.97% -4.93% -3.95% -3.95% SINCE INCEPTION 6.78% 6.65% 4.86% 6.05% 5.30% 6.08% 6.08%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 56 NATIONS CAPITAL GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks growth of capital by investing in companies that are believed to have superior earnings growth potential. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Capital Growth Fund Investor A Shares provided shareholders with a total return of - -3.62%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS CAPITAL GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Capital Growth Fund employs a long-term, large-capitalization growth strategy. Securities are generally held in the Fund between a two- to four-year time horizon. We "build" the Fund by employing an integrated approach to portfolio construction. We start with a macro view, forecasting factors such as the economy, sector trends and long-term investment themes (e.g., the aging of the U.S. population, globalization and innovation). We then combine fundamental and quantitative research analysis to select high-growth companies that we believe will grow faster and/or longer than consensus expectations. The Fund typically invests in companies that we believe are recognized leaders, have strong track records and possess key competitive advantages. Through our "top down" framework and "bottom-up" stock selection, we create a portfolio of 60 to 80 securities in which we attempt to carefully manage and monitor risk through diversification and quantitative techniques. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? The last 12 months have been a difficult environment for large-cap growth investors. Profits of many large-growth companies continued to decline throughout the year, the domestic economy suffered its first recession in over a decade and on September 11, 2001 the U.S. witnessed the terrorist attacks on the World Trade Center and the Pentagon. In spite of the negative surprises and the accompanying market volatility, many of the major stock indices finished the period in positive territory. The Nasdaq Composite Index*** ended the 12-month period at 0.28%, and the Standard & Poor's 500 Composite Stock Index& had a return of 0.16%. Nations Capital Growth Fund (Investor A Shares) returned -3.62% for the 12-month period ended March 31, 2002, and the Russell 1000 Growth Index,&& the Fund's benchmark, ended the year at -2.00%. - --------------- *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 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 and does not reflect fees, brokerage commission or other expenses of investing. &The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &&The Russell 1000 Growth Index is an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with high price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 57 NATIONS CAPITAL GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued There were two basic market trends during the reporting period. Between April 1, 2001 and September 11, 2001, the market generally focused on slowing economic growth and the dramatic drop in corporate profits, particularly in the technology sector. After the events of last fall, many investors began to focus on their personal financial liquidity and became increasingly optimistic that a recovery may be nearing due to the Federal Reserve Board's (the Fed) lowering of interest rates as well as the fiscal stimulus package proposed by the government. Nations Capital Growth Fund was a relatively stable performer throughout the last 12 months. The Fund was defensively positioned throughout much of the early part of the year, particularly in the summer. The Fund moved to a more aggressive stance following the market drop after September 11, 2001 and outperformed the benchmark in the calendar fourth quarter, returning 15.67% versus 15.14% for the benchmark. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? As evidence mounted that the economy was slowing and profits were eroding, we took several steps in the Fund to seek to reduce risk in the portfolio. Initially, we increased the diversification in the Fund. This was accomplished by increasing the number of stocks held and by reducing sector "bets," particularly in technology. Throughout the early part of the period, the Fund maintained its defensive position and increased its cash position to the high end of its normal range of 0% to 7%. Following the market decline in the fall, the Fund moved aggressively into the technology, retail and consumer cyclical stock sectors, and materially reduced its cash position. As a result, the Fund had very strong performance between late September and January. We were a little late, however, in taking profits in many of the securities that had dramatic increases in the fourth quarter of the calendar year, and the Fund struggled to maintain its lead in the most recent quarter. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?&&& There were essentially two distinct trends in the equity market last year. Early in the period, defensive stocks and cash were the place to be invested. Capital goods and health care stocks were among the better performers in the Fund. Later in the year, however, the market switched gears, favoring consumer cyclical and retailing stocks. Over the course of the entire 12-month period, Nations Capital Growth Fund benefited from strength in the financial services, health care and energy sectors. Specific stocks that helped performance included Fannie Mae, USA Education Inc., Pfizer Inc., Nabors Industries, Inc. and Smith International, Inc. Technology, while one of the most volatile and worst performing sectors, neither helped nor hurt performance, as the Fund was underweighted in this sector most of the year. The Fund also made a significant investment in consumer cyclical stocks midway through the year. Centex Corporation and Starwood Hotels & Resorts Worldwide, Inc., while volatile, contributed positively to performance. - --------------- &&&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 58 NATIONS CAPITAL GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? While the Fund managed to avoid nearly all of the "torpedo" stocks over the last year, there were two stocks that significantly hurt performance, Tyco International Ltd. and Circuit City Stores -- Circuit City Group. Following Enron Corporation's collapse and subsequent scandal (Nations Capital Growth Fund did not own Enron stock), stocks of companies whose financial statements or accounting methods appeared confusing were immediately under fire from investors. Tyco International Ltd. was clearly caught in this issue. Its growth through acquisition strategy, which had created tremendous value for shareholders, also spawned confusion by investors regarding the accounting of these acquisitions. Tyco International Ltd.'s management exacerbated the issue by moving from a growth-by-acquisition strategy to one of breaking up the company. These two issues, accounting and changing strategy, caused considerable weakness in the shares and resulted in a significant loss for the Fund. Circuit City Stores -- Circuit City Group was also one of the Fund's poorest performers over the last year. Like Tyco International Ltd., Circuit City Stores -- Circuit City Group's accounting practices came into question, but it was more of an operational issue because the company rolled out newly remodeled stores into its sales base. With the exception of Tyco International and Circuit City -- Circuit City Group, the Fund's performance was solid. The technology sector, while one of the worst performers in the market, did not negatively contribute to the Fund's performance because the sector was underweighted most of the period. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We are optimistic about the prospects for the next year. Most signs, we feel, point to a better economic environment over the next twelve months. We believe the recession appears to have ended sometime in the first calendar quarter. Inflation remains tame, and economic growth appears to be accelerating. Inventory levels are low, while valuations in the equity market appear reasonable. These factors could contribute to better earnings growth that may be reflected in higher stock market valuations. Much of the "early cycle" stocks (chemicals, paper and forest products and metals) appear to have already completed the majority of their move. As we progress within the economic cycle, we feel the potential for increasing earnings could favor "mid- to late-cycle" stocks that may be positive for large-cap growth funds like Nations Capital Growth Fund. We believe the Fund is positioned to take advantage of this scenario through increasing exposure to technology, financial services and communications stocks. 59 NATIONS CAPITAL GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 4.2% Department and discount stores 4.8% Computer services 4.8% Specialty stores 5.2% Consumer credit and mortgages 5.5% Diversified manufacturing 6.1% Broadcasting and cable 6.7% Computers and office equipment 7.0% Software 7.8% Medical devices and supplies 16.2% Pharmaceuticals 31.7% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Pfizer Inc. 5.4% ------------------------------------------------- 2 General Electric Company 5.0% ------------------------------------------------- 3 Microsoft Corporation 4.4% ------------------------------------------------- 4 International Business Machines Corporation 3.6% ------------------------------------------------- 5 Wal-Mart Stores, Inc. 3.1% ------------------------------------------------- 6 Home Depot, Inc. 2.9% ------------------------------------------------- 7 Intel Corporation 2.8% ------------------------------------------------- 8 Johnson & Johnson 2.7% ------------------------------------------------- 9 Concord EFS, Inc. 2.3% ------------------------------------------------- 10 Cisco Systems, Inc. 2.3% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
60 NATIONS CAPITAL GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS CAPITAL LIPPER LARGE-CAP RUSSELL 1000 GROWTH STANDARD & POOR'S GROWTH FUND GROWTH FUNDS AVERAGE FUND 500 INDEX --------------- -------------------- ------------------- ----------------- Oct. 2 1992 9425.00 10000.00 10000.00 10000.00 1993 10922.00 12058.00 10796.00 11229.00 1994 10752.00 11809.00 11079.00 11376.00 1995 13823.00 15685.00 15198.00 15646.00 1996 16351.00 18875.00 18712.00 19236.00 1997 21316.00 24136.00 24417.00 25651.00 1998 27653.00 33213.00 33869.00 32988.00 1999 34170.00 45182.00 45100.00 39925.00 2000 30013.00 37840.00 34988.00 36292.00 2001 25285.00 29159.00 27844.00 31980.00 Mar. 31 2002 24485.00 28319.00 27123.00 32041.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS CAPITAL LIPPER LARGE-CAP RUSSELL 1000 GROWTH STANDARD & POOR'S GROWTH FUND GROWTH FUNDS AVERAGE FUND $27,123 500 INDEX $32961 --------------- -------------------- ------------------- ----------------- Oct. 2 1992 10000.00 10000.00 10000.00 10000.00 1993 11588.00 12058.00 10796.00 11229.00 1994 11408.00 11809.00 11079.00 11376.00 1995 14666.00 15685.00 15198.00 15646.00 1996 17349.00 18875.00 18712.00 19236.00 1997 22616.00 24136.00 24417.00 25651.00 1998 29340.00 33213.00 33869.00 32988.00 1999 36255.00 45182.00 45100.00 39925.00 2000 31844.00 37840.00 34988.00 36292.00 2001 26828.00 29159.00 27844.00 31980.00 Mar. 31 2002 25979.00 28319.00 27123.00 32041.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (10/2/92 through 3/31/02) 10.58% 9.89%
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), an unmanaged index of 500 widely held common stocks, include reinvestment of dividends. Figures for the Russell 1000 Growth Index, an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with higher price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole, 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. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 9/30/92 10/2/92 6/7/93 10/2/92 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE -3.31% -3.62% -9.18% -4.35% -8.99% -4.31% -5.23% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -4.52% -4.84% -6.70% -5.53% -6.22% -5.51% -5.51% 5 YEARS 9.03% 8.74% 7.47% 7.92% 7.74% 7.98% 7.98% SINCE INCEPTION 10.86% 10.58% 9.89% 9.88% 9.88% 9.85% 9.85%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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, 2001 and prior years compared the Fund's performance to the Standard & Poor's 500 Composite Stock Price Index. The Fund changed the index to which it compares its performance because the Russell 1000 Growth Index is a more appropriate benchmark and the composition of the Index more closely resembles the composition of the Fund. 61 NATIONS AGGRESSIVE GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks capital appreciation. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Aggressive Growth Fund Investor A Shares provided shareholders with a total return of - -10.68%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS AGGRESSIVE GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Aggressive Growth Fund is managed for long-term capital growth and employs a combination of fundamental and quantitative analysis to capitalize on long-term strategic themes. Securities are generally held in the Fund between a two-to four-year time horizon. We "build" the Fund by employing an integrated approach to portfolio construction. We start with a macro view, forecasting factors such as the economy, sector trends and long-term investment themes (e.g., the aging of the U.S. population, globalization and innovation). We then combine fundamental and quantitative research analysis to select companies that we believe will grow faster and/or longer than consensus expectations. Through our "top down" framework and "bottom-up" stock selection, we create a portfolio of 50-75 securities in which we attempt to carefully manage and monitor risk through diversification and quantitative techniques. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? The last 12 months have been another tough period for large-cap growth investors. Profits of many large-growth companies continued to decline throughout the year, the domestic economy suffered its first recession in over a decade and on September 11, 2001, the U.S. witnessed the terrorist attacks on the World Trade Center and the Pentagon. In spite of the negative surprises and market volatility, the major stock indices finished the 12-month period in positive territory. However, growth stock indices performed worse than broad market indices. Nations Aggressive Growth Fund (Investor A Shares) returned -10.68% for the 12-month period ended March 31, 2002, while the benchmark Russell 3000 Growth Index*** returned -1.47% for the same period. There were two basic market trends over the last 12 months. Between April 1, 2001 and September 21, 2001, the market generally focused on slowing economic growth and the dramatic drop in corporate profits, particularly in the technology sector. After the terrorist attacks on September 11, 2001 (and the subsequent drop in the stock market), many investors began focusing on the financial liquidity the Federal Reserve Board had injected into the system and the fiscal stimulus package proposed by the government and became increasingly optimistic that a recovery was nearing. - --------------- *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 3000 Growth Index is an unmanaged index comprised of securities in the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, with a greater than average growth orientation. Companies in the Russell 3000 Growth Index tend to exhibit higher price-to-book and price-earnings ratios. The index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 62 NATIONS AGGRESSIVE GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? During the last six months of the fiscal year, the composition of the Fund was changed. Specifically, we trimmed or eliminated many of the more aggressive, smaller-market capitalization stocks that the Fund owned and replaced these positions with larger-market capitalization stocks, which, we believe, tend to hold up better in volatile times. Prior to this realignment, the Fund held a relatively heavy weighting in aggressive technology and biotech stocks. These stocks, many of which were trading at high valuations, performed quite poorly during much of the last 12 months and were largely responsible for the Fund's underperformance relative to its benchmark. During the last six months of the fiscal year as the changes were being made, however, the Fund actually beat its benchmark by 0.90%. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& Many of the "early cycle" stocks which rallied following the events of September 11, 2001 helped the Fund's performance. Consumer discretionary stocks, such as Starwood Hotels & Resorts Worldwide, Inc., Centex Corporation, Target Corporation and Tiffany & Company all rose on the expectations that an economic recovery would result in greater consumer spending. In addition, financial stocks such as MBNA Corporation and Concord EFS, Inc. traded higher based on such optimism. Additionally, the Fund's overweight positions in the finance sector and underweight positions in telecommunication stocks helped performance. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The technology sector was by far the greatest hindrance on relative performance, accounting for almost 3.50% of the Fund's underperformance relative to its benchmark. Holdings in this sector, coupled with "sell-offs" in stocks such as Comverse Technology, Inc., CSG Systems International, Inc., EMC Corporation, and Sandisk Corporation, caused the Fund to lag its benchmark. Additionally, media company AOL Time Warner Inc. and biotech firms IVAX Corporation and Protein Design Labs, Inc. contributed to the Fund's performance decline for the period. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We are optimistic about the prospects for the next year. Most signs, we believe, point to a better economic environment over the next twelve months. The recession appears to have ended sometime in the first calendar quarter. Inflation remains tame, while economic growth may be accelerating. Inventory levels are low, and valuations in the equity market appear reasonable. We feel these factors could contribute to better earnings growth that may be anticipated by higher stock market valuations. Much of the "early cycle" stocks (chemicals, paper and forest products and metals) appear to have already made the majority of their move. As we progress into the economic cycle, the potential for increasing earnings could favor "mid- to late-cycle stocks," which, we believe, may be positive for large-cap portfolios, such as Nations Aggressive Growth Fund. We believe the Fund is positioned to take advantage of this scenario through increasing exposure to large-cap technology, financial services and communications stocks. - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 63 NATIONS AGGRESSIVE GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 4.4% Computers and office equipment 5.2% Networking and telecommunications equipment 5.2% Diversified manufacturing 5.8% Consumer credit and mortgages 6.8% Semiconductors 7.0% Medical devices and supplies 7.1% Specialty stores 7.4% Computer services 7.6% Software 17.5% Pharmaceuticals 26.0% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Pfizer Inc. 5.0% ------------------------------------------------- 2 General Electric Company 4.3% ------------------------------------------------- 3 Microsoft Corporation 4.2% ------------------------------------------------- 4 Wal-Mart Stores, Inc. 3.1% ------------------------------------------------- 5 Home Depot, Inc. 3.1% ------------------------------------------------- 6 Intel Corporation 2.9% ------------------------------------------------- 7 Pharmacia Corporation 2.5% ------------------------------------------------- 8 Medtronic, Inc. 2.3% ------------------------------------------------- 9 Cisco Systems, Inc. 2.3% ------------------------------------------------- 10 AOL Time Warner Inc. 2.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
64 NATIONS AGGRESSIVE GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS LIPPER MULTI-CAP AGGRESSIVE GROWTH STANDARD|& GROWTH|FUNDS RUSSELL 1000 RUSSELL 3000 FUND POOR'S|500 INDEX AVERAGE GROWTH INDEX GROWTH INDEX ----------------- ---------------- ---------------- ------------ ------------ Jul. 26|1993 9425.00 10000.00 10000.00 10000.00 10000.00 12/93 10844.00 10514.00 10991.00 10731.00 10764.00 12/94 10148.00 10652.00 10755.00 11012.00 11255.00 12/95 12918.00 14649.00 14490.00 15106.00 15025.00 12/96 15747.00 18011.00 17095.00 18599.00 18313.00 12/97 20408.00 24018.00 20396.00 24270.00 23576.00 12/98 25627.00 30887.00 25842.00 33665.00 31832.00 12/99 27890.00 37383.00 41740.00 44828.00 42601.00 12/00 20526.00 33981.00 36447.00 34778.00 33050.00 12/01 14379.00 29944.00 26949.00 27676.00 26562.00 Mar. 31|2002 13740.00 30001.00 25909.00 26959.00 25887.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS LIPPER MULTI-CAP AGGRESSIVE GROWTH STANDARD|& GROWTH|FUNDS RUSSELL 1000 RUSSELL 3000 FUND POOR'S|500 INDEX AVERAGE GROWTH INDEX GROWTH INDEX ----------------- ---------------- ---------------- ------------ ------------ Jul. 26|1993 10000.00 10000.00 10000.00 10000.00 10000.00 12/93 11505.00 10514.00 10991.00 10731.00 10764.00 12/94 10767.00 10652.00 10755.00 11012.00 11255.00 12/95 13706.00 14649.00 14490.00 15106.00 15025.00 12/96 16708.00 18011.00 17095.00 18599.00 18313.00 12/97 21653.00 24018.00 20396.00 24270.00 23576.00 12/98 27191.00 30887.00 25842.00 33665.00 31832.00 12/99 29591.00 37383.00 41740.00 44828.00 42601.00 12/00 21778.00 33981.00 36447.00 34778.00 33050.00 12/01 13256.00 29944.00 26949.00 27676.00 26562.00 Mar. 31|2002 14578.00 30001.00 25909.00 26959.00 25887.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (7/26/93 through 3/31/02) 4.44% 3.73%
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), an unmanaged index of 500 widely held common stocks, include reinvestment of dividends. Figures for the Russell 1000 Growth Index, an unmanaged index which measures the performance of the largest U.S. companies based on total market capitalization, with high price-to-book ratios and forecasted growth rates relative to the Russell 1000 Index as a whole, include reinvestment of dividends. Figures for the Russell 3000 Growth Index, an unmanaged index comprised of securities in the Russell 3000 Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, with a greater than average growth orientation, include reinvestment of dividends. Companies in the Russell 3000 Growth Index tend to exhibit higher price-to-book and price-earnings ratios. Funds in the Lipper Multi-Cap Growth Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
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 -10.65% -10.68% -15.84% -11.26% -15.70% -11.32% -12.20% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -20.00% -20.11% -21.68% -20.70% -21.30% -20.72% -20.72% 5 YEARS -2.50% -2.68% -3.82% -3.39% -3.61% -3.38% -3.38% SINCE INCEPTION 8.76% 4.44% 3.73% 3.59% 3.59% 2.81% 2.81%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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, 2001 and prior years compared the Fund's performance to the Standard & Poor's 500 Composite Stock Price Index and the Russell 1000 Growth Index. The Fund changed the index to which it compares its performance because the Russell 3000 Growth Index is a more appropriate benchmark and the composition of the Index more closely resembles the composition of the Fund. 65 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY* PORTFOLIO MANAGEMENT Thomas F. Marsico is the Portfolio Manager of Nations Marsico Focused Equities Fund and Chief Executive Officer of Marsico Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Marsico Focused Equities Fund Investor A Shares provided shareholders with a total return of 3.00%.** 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, 2002 AND HIS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Marsico Focused Equities Fund seeks long-term growth of capital through a relatively concentrated portfolio. Generally, the Fund holds approximately 30 large-capitalization equities that we believe offer attractive long-term growth potential. The Fund may take substantial positions in individual companies, and typically will have substantial allocations to a limited number of major economic sectors. However, the Fund typically will be allocated across 7 to 10 industries within each sector. We seek investment in companies with strong brand franchises, improving fundamentals, excellent management teams and a global presence. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? For the 12-month period ending March 31, 2002, Nations Marsico Focused Equities Fund (Investor A Shares) returned 3.00%. This return compares to the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index),*** the Fund's primary benchmark, which was up 0.16%. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? Clearly, the past year has been exceptionally difficult for many equity investors, with growth-oriented investment styles being under particular pressure. These past 12 months, without a doubt, rank as one of the most challenging periods for investing that I have experienced in my career. In reflecting upon the year and studying the Fund's strategic positioning and individual holdings, it is apparent that there were a variety of contributing factors to the Fund's performance. Following September 11, 2001, we continued to work diligently to evaluate the overall capital market environment and assess the Fund's holdings. Our investment team reviewed the Fund's investment posture carefully on a stock-by-stock basis. We concluded that, in general, a full-scale realignment of Fund holdings and/or - --------------- *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, an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Marsico Capital Management, LLC. THE FUND NORMALLY INVESTS IN A CORE PORTFOLIO OF 20-30 COMMON STOCKS. BY MAINTAINING A RELATIVELY CONCENTRATED PORTFOLIO, THE FUND MAY BE SUBJECT TO A GREATER RISK THAN A FUND THAT IS MORE FULLY DIVERSIFIED. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 66 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY continued raising substantial cash positions after the terrorist attacks was unnecessary. Much of the Fund's investment emphases were on consumer-related, healthcare, financial services and aerospace and defense. These were areas of investment that we felt were appropriate in the market environment in the latter part of the year. One of our investment premises is that the next economic recovery will in all probability be a consumer-led process, as opposed to the capital expenditure-driven growth that characterized the 1990s. We are expressing that view quite strongly by having significant investments in retailing, housing, financial services and healthcare companies. A second premise is that we remain cautious on the outlook for many technology and telecommunications companies. During the last months of the reporting period, the Fund's allocation to the consumer discretionary sector increased somewhat, while technology was reduced. As of March 31, 2002, the Fund did not have exposure to several economic sectors, including telecommunications and utilities. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& Over the 12 months ended March 31, 2002, stocks in the consumer discretionary, financial services, healthcare and industrial sectors aided the Fund. Industries within these sectors that contributed to this performance were automobiles, retailing, diversified financials, healthcare equipment and services and capital goods. The top performing stocks over the course of the year were General Dynamics Corporation, Tenet Healthcare Corporation, Tiffany & Company, Lockheed Martin Corporation, USA Education Inc., Bayerische Motoren Werke (BMW) AG, UnitedHealth Group Inc., Wal-Mart Stores, Inc., Johnson & Johnson and Citigroup Inc. The Fund was also aided by its underweight in information technology. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Over the 12 months ended March 31, 2002, factors that detracted from performance were primarily an underweight in consumer staples and disappointing performance by stocks in the energy and utility sectors. Industries within these sectors that demonstrated the greatest underperformance were oil service, power generation, pharmaceuticals and media. The poorest performing stocks over the course of the year were Smith International, Calpine Corporation, Boeing Company, Genentech, Merck & Company, AOL Time Warner Inc., Washington Mutual, Qualcomm, United Technologies and Clear Channel Communications. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We begin the new year with a dual sense of reflection and renewal. We were stunned by the sheer horror of the September 11, 2001 terrorist attacks. We were alarmed by the extensive fallout from the collapse of Enron. From an investment perspective, while we understood the urgent need to sort through and ascertain the possible implications stemming from these issues, it quickly became apparent that - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 67 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO MANAGER COMMENTARY continued arriving at definitive conclusions would be enormously difficult. Much of what was being experienced -- politically, economically and financially -- was without historical precedent. As we move into 2002, however, we are finding reasons to feel increasingly more optimistic about the general outlook for equities. Some of the rampant uncertainty that prevailed in the aftermath of the terrorist attacks -- including the possibility of more attacks, additional anthrax outbreaks, the specific nature of the U.S. response to the attacks and the reaction of the capital markets -- seems to have diminished. There is some evidence that the U.S. economy may be starting to improve. The corporate profit outlook is exhibiting signs of recovering. From a geopolitical perspective, too, there have been some encouraging developments. The allied coalition against terrorism was formed quickly and effectively, has held together well, and appears to have made considerable progress in its campaign against terrorism. To be sure, there are offsets to these positively inclined comments. There is no role for complacency right now. The exact timing and magnitude of a U.S. economic recovery is unclear. The bulk of the "bad news" in terms of corporate earnings may be behind us, but we believe future profit warnings and/or disappointments will almost certainly occur. From a global perspective, too, the ledger is mixed. While the situation in Afghanistan appears considerably better than in September 2001 in terms of terrorist operations and facilities being either eradicated or controlled, there is ample cause for concern elsewhere in the world. Violence has flared anew in the Middle East. Tension between India and Pakistan appears to be potentially quite serious. Japan's economy continues to struggle. However, we believe there are a number of factors at work that create the potential for improved equity returns. In our opinion, ingredients for an improved U.S. economic outlook clearly exist. We believe the resiliency of stock prices in a variety of areas -- including consumer discretionary, consumer staples, select healthcare and financial services -- could demonstrate that good, long-term investment opportunities are available for investors. From a macroeconomic perspective, our view is that there are a number of encouraging factors that create a favorable backdrop for equity markets. Interest rates remain low. Inflation, as measured by the Consumer Price Index, continues to be quiescent and may, in fact, decelerate in the future. Claims for unemployment assistance recently have stabilized. Manufacturing activity seems to have improved recently, while inventory corrections appear well underway in many sectors. Consumer confidence has improved. While many people undoubtedly have experienced losses in their equity portfolios, we believe the "wealth effect" remains very much an important underlying aspect of the U.S. economy. Consumer spending -- supported by low interest rates, incentives such as "0% financing" on automobiles and rising house prices -- continues to hold up well. Valuations in many sectors and industries appear increasingly attractive to us. While we readily acknowledge that there continue to be abundant crosscurrents in the economy to contend with, as well as geopolitical risk, on balance we think the overall macroeconomic outlook is quite good. 68 NATIONS MARSICO FOCUSED EQUITIES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 4.5% Beverages 4.9% Department and discount stores 5.0% Software 5.6% Medical devices and supplies 7.4% Investment services 8.2% Consumer credit and mortgages 9.6% Aerospace and defense 11.3% Automotive 12.6% Specialty stores 16.6% Health services 14.3% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Tenet Healthcare Corporation 7.8% ------------------------------------------------- 2 UnitedHealth Group Inc. 6.9% ------------------------------------------------- 3 Lockheed Martin Corporation 6.2% ------------------------------------------------- 4 Bayerische Motoren Werke (BMW) AG 6.0% ------------------------------------------------- 5 Tiffany & Company 6.0% ------------------------------------------------- 6 USA Education Inc. 5.1% ------------------------------------------------- 7 Lehman Brothers Holdings Inc. 4.9% ------------------------------------------------- 8 Johnson & Johnson 4.8% ------------------------------------------------- 9 Citigroup Inc. 4.5% ------------------------------------------------- 10 Home Depot, Inc. 4.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
69 NATIONS MARSICO FOCUSED EQUITIES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS MARISCO FOCUSED LIPPER LARGE-CAP CORE STANDARD & POOR'S 500 EQUITIES FUND FUNDS AVERAGE INDEX ----------------------- --------------------- --------------------- Dec. 31 1997 9425 10000 10000 12697 12165 11771 12/98 14151 13761 12858 16298 15348 14451 12/99 21630 18720 15564 19849 18821 15498 12/00 17884 17421 14148 15359 15978 13202 12/01 14466 15023 12468 Mar. 31 2002 15138 14970 12491
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS MARISCO FOCUSED LIPPER LARGE-CAP CORE STANDARD & POOR'S 500 EQUITIES FUND FUNDS AVERAGE INDEX ----------------------- --------------------- --------------------- Dec. 31 1997 10000 10000 10000 13472 12165 11771 12/98 15014 13761 12858 17292 15348 14451 12/99 22950 18720 15564 21060 18821 15498 12/00 18975 17421 14148 16296 15978 13202 12/01 15349 15023 12468 Mar. 31 2002 16062 14970 12491
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/31/97 through 3/31/02) 11.81% 10.26%
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), an unmanaged index of 500 widely held common stocks, 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. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
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 3.25% 3.00% -2.95% 2.20% -2.80% 2.19% 1.19% - ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS -1.09% -1.38% -3.31% -2.09% -3.06% -2.08% -2.08% SINCE INCEPTION 11.97% 11.81% 10.26% 11.07% 10.73% 11.15% 11.15%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. Source for all statistical data -- Marsico Capital Management, LLC. 70 NATIONS MIDCAP GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks capital appreciation by investing in emerging growth companies that are believed to have superior long-term earnings growth prospects. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations MidCap Growth Fund Investor A Shares provided shareholders with a total return of -9.97%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS MIDCAP GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. The investment philosophy of Nations MidCap Growth Fund is based on the premise that stock prices are driven by earnings growth and that superior stock market returns occur when a company experiences rapid and accelerating earnings growth due to superior fundamentals. Our approach emphasizes a rigorous fundamental process that seeks to identify successful mid-sized companies between $1 billion and $10 billion in market capitalization that are poised to become tomorrow's successful larger companies. We attempt to identify these opportunities before others recognize their potential. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? The stock market spent most of the last 12 months in negative territory, and it continues to be a difficult environment for growth investors. The economy entered a recession in March 2001, and the decline in corporate profits accelerated with each quarter. The impact on technology companies was particularly acute after the frenzied pace of the last few years left many businesses with excess capacity and bloated inventories. The combination of harsh business conditions and excessive valuations caused the stock prices of many fundamentally sound and not-so-sound businesses to drop precipitously. Prior to the terrorist attacks on September 11, 2001, the Federal Reserve Board (the Fed) had been steadily lowering rates in order to attempt to boost the stubbornly weak economy. The events of September 11, 2001 moved the Fed to swiftly lower rates and inject liquidity into the economy. The fourth quarter of 2001 produced a substantial rally, as investors looked forward to an economic recovery. The broader market posted additional gains in the first quarter of 2002. Nations MidCap Growth Fund (Investor A Shares) returned a disappointing -9.97% for the 12-month period ended March 31, 2002 compared with an increase of 4.70% for the benchmark Russell MidCap Growth Index.*** Performance was impacted on several fronts. The portfolio was positioned for a much more stable economy. Many of the companies held in the Fund are fast-growing businesses dependent on normal investment in productivity and outsourcing. As such, a lack of defensiveness in a deteriorating economy proved harmful, and stocks in the Fund suffered as companies repeatedly postponed their prospects for a return to growth. - --------------- *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 MidCap Growth Index is an unmanaged index which measures the performance of those Russell MidCap companies with higher price-to-book ratios and forecasted growth values. The stocks are also members of the Russell 1000 Growth Index. The index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 71 NATIONS MIDCAP GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? Following the market decline after the terrorist attacks on September 11, 2001, the Fund made several moves to change the complexion of the portfolio. Many stocks that we expected to do quite well in a gradually improving economy appeared sharply oversold. We took several steps to better expose ourselves to these companies while also lowering our risk profile. We sought to increase the diversification in the Fund by increasing the number of names and reducing sector bets. In doing so we added aggressively to technology, consumer cyclical and retail. We also moved to reduce a significant underweight in the biotech sector given what we believe to be attractive valuations. These actions combined to produce very strong performance between October 2001 and early January 2002. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& Early in the year, with recession and uncertainty looming, many investors sought the safety of defensive investments. Gradually, however, attention shifted to the more cyclical segments of the economy that traditionally benefit from lower interest rates. We feel value stocks perform well in such an environment. While generally less hospitable for growth investors, the cyclical portions of the Fund did well. Financial, energy and broadcasting stocks were among the better performers. AmeriCredit Corporation, which makes consumer auto loans, rebounded sharply as the credit quality of their loan portfolio suffered relatively brief deterioration in the third quarter. The oil service and drilling stocks recovered from the lows of September 11, 2001 after commodity prices and supply and demand fundamentals strengthened. Radio One, Inc., Hispanic Broadcasting and Communications, Inc. also rebounded dramatically from the September lows as a long and painful recession in the advertising market showed the first signs of stabilizing. Despite the overall weakness in the technology sector, bright spots were semiconductor and computer service stocks. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? As quickly as the biotech and pharmaceutical sectors recovered in the October to December period, the stocks gave back virtually all of their gains in the first quarter of 2002. We did not take profits when we had the opportunity, and this decline had a significant impact during the first quarter. Investing in drug companies requires investors to have a somewhat long investment time horizon and, by default, a greater tolerance for risk. An understaffed Food & Drug Administration has hindered many companies seeking drug approvals, while the large-capitalization pharmaceutical companies -- traditionally big spenders within other segments of health care -- have experienced their own fundamental slowdown. The future of drug discovery remains incredibly promising, and we continue to hold a number of well-positioned companies. The pervasive weakness in the communications sector, from wireless to cable, impacted many companies. While the fundamentals in the cable industry remained good, investors had low tolerance for the leverage on the balance sheet. CSG Systems International, Inc. underperformed as their business slowed on all fronts - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 72 NATIONS MIDCAP GROWTH FUND GROWTH STRATEGIES TEAM COMMENTARY continued and their largest customer, AT&T Broadband, renewed a dispute over the terms of their contract (a similar arbitration claim in October 2000 was settled largely in CSG's favor). While the company made a key acquisition in the fourth quarter that enhances its strategic position in outsourced billing, the company must settle these grievances with AT&T. Western Wireless, a rural wireless carrier, fell sharply as the growth prospects for the wireless industry dimmed. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? In our opinion, recent data on the economy show unmistakable signs of strengthening. The Fed responded to the economic stresses, and the fiscal and monetary stimulus put in place could lay the groundwork for a vigorous recovery. However, we believe the market in general discounts much of this recovery and, therefore, we continue our focus on businesses with operating leverage and attractive risk/return trade-offs. Many of the "early-cycle" companies -- industrials, basic materials and commodities -- have already experienced a period of outperformance. As we hope the economy will stabilize over the next 6 to 12 months, we believe a recovery in business investment and manufacturing could be positive for growth stocks. 73 NATIONS MIDCAP GROWTH FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.7% Networking and telecommunications equipment 3.9% Investment services 4.4% Broadcasting and cable 4.8% Medical devices and supplies 6.4% Oilfield services 6.4% Specialty stores 6.5% Semiconductors 8.7% Software 10.8% Computer services 11.8% Pharmaceuticals 32.6% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Concord EFS, Inc. 3.1% ------------------------------------------------- 2 AmeriCredit Corporation 2.8% ------------------------------------------------- 3 Sungard Data Systems, Inc. 2.5% ------------------------------------------------- 4 Pentair, Inc. 2.1% ------------------------------------------------- 5 CSG Systems International, Inc. 2.1% ------------------------------------------------- 6 Health Management Associates, Inc., Class A 1.9% ------------------------------------------------- 7 Convergys Corporation 1.7% ------------------------------------------------- 8 Express Scripts, Inc. 1.7% ------------------------------------------------- 9 Legg Mason, Inc. 1.7% ------------------------------------------------- 10 Precise Software Solutions Ltd. 1.6% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
74 NATIONS MIDCAP GROWTH FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS LIPPER MULTI-CAP STANDARD |& POOR'S RUSSELL MIDCAP MIDCAP|GROWTH FUND| GROWTH|FUNDS AVERAGE| |MIDCAP|400 INDEX| GROWTH INDEX ------------------- --------------------- ------------------ -------------- Dec. 10|1992 9425.00 10000.00 10000.00 10000.00 1993 11026.00 11674.00 11630.00 11224.00 11070.00 11536.00 11214.00 10982.00 1995 14358.00 15662.00 14684.00 14713.00 16989.00 18022.00 17504.00 17285.00 1997 20467.00 20959.00 23149.00 21181.00 21143.00 23856.00 27572.00 24964.00 1999 30330.00 40791.00 31631.00 37768.00 34667.00 37928.00 37169.00 33330.00 2001 27672.00 30077.00 36939.00 26614.00 Mar. 31|2002 26113.00 29325.00 39421.00 26143.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS LIPPER MULTI-CAP STANDARD |& POOR'S RUSSELL MIDCAP MIDCAP|GROWTH FUND| GROWTH|FUNDS AVERAGE| |MIDCAP|400 INDEX| GROWTH INDEX ------------------- --------------------- ------------------ -------------- Dec. 10|1992 10000.00 10000.00 10000.00 10000.00 1993 11699.00 11674.00 11630.00 11224.00 11745.00 11536.00 11214.00 10982.00 1995 15234.00 15662.00 14684.00 14713.00 18025.00 18022.00 17504.00 17285.00 1997 21716.00 20959.00 23149.00 21181.00 22433.00 23856.00 27572.00 24964.00 1999 32180.00 40791.00 31631.00 37768.00 36782.00 37928.00 37169.00 33330.00 2001 29360.00 30077.00 36939.00 26614.00 Mar. 31|2002 27706.00 29325.00 39421.00 26143.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/10/92 through 3/31/02) 11.58% 10.87%
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 index of 400 domestic stocks chosen for market size, liquidity and industry representation, include reinvestment of dividends. Figures for the Russell MidCap Growth Index, an unmanaged index which measures the performance of those Russell MidCap companies with higher price-to-book ratios and forecasted growth values, include reinvestment of dividends. The stocks are also members of the Russell 1000 Growth Index. Funds in the Lipper Mid-Cap Growth Funds Average invest in a variety of market capitalization ranges, without concentrating 75% of one market capitalization range. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
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 -9.71% -9.97% -15.13% -10.57% -15.04% -10.66% -11.55% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 7.90% 7.54% 5.42% 6.79% 5.96% 6.78% 6.78% 5 YEARS 11.08% 10.77% 9.48% 9.96% 9.70% 9.98% 9.98% SINCE INCEPTION 11.69% 11.58% 10.87% 11.43% 11.43% 10.85% 10.85%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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, 2001 and prior years compared the Fund's performance to the Standard & Poor's MidCap 400 Index. The Fund changed the index to which it compares its performance because the Russell MidCap Growth Index is a more appropriate benchmark and the composition of the Index more closely resembles the composition of the Fund. 75 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by James A. Hillary of Marsico Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Marsico 21st Century Fund Investor A Shares provided shareholders with a total return of 1.29%.** IN THE FOLLOWING INTERVIEW, MR. HILLARY SHARES HIS VIEWS ON NATIONS MARSICO 21ST CENTURY FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND HIS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Marsico 21st Century Fund seeks long-term growth of capital. The Fund is a diversified portfolio and invests primarily in common stocks that are selected for their long-term growth potential. The Fund may invest in companies of any size across the market capitalization spectrum, and typically will own a core position of between 35 and 50 stocks. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? For the 12-month period ended March 31, 2002, Nations Marsico 21st Century Fund (Investor A Shares) returned 1.29%. This return compares favorably to the Nasdaq Composite Index,*** which was up 0.28% and to the Standard & Poor's 500 Composite Price Index&, the Fund's primary benchmark, which returned 0.16%. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? Clearly, the past year has been exceptionally difficult for many equity investors, with growth-oriented investment styles being under particular pressure. In reflecting upon the year and studying the Fund's strategic positioning and individual holdings, it is apparent that there were a variety of contributing factors to the Fund's performance. Following September 11, 2001, we continued to work diligently to evaluate the overall capital market environment and assess the Fund's holdings. Our investment team reviewed the Fund's investment posture carefully on a stock-by-stock basis. We concluded that, in general, a full-scale realignment of Fund holdings and/or raising substantial cash positions after the terrorist attacks was unnecessary. Much of the Fund's investment emphases were on consumer-related, healthcare, financial services and aerospace and defense. These were areas of investment that we felt were appropriate in the market environment in the latter part of the year. One of our investment premises is that the next economic recovery will in all probability - --------------- *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 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. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. &The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Marsico Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 76 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY continued be a consumer-led process, as opposed to the capital expenditure-driven growth that characterized the 1990s. We are expressing that view quite strongly by having significant investments in retailing, housing, financial services and healthcare companies. A second premise is that we remain cautious on the outlook for many technology and telecommunications companies. During the last months of the fiscal year, the Fund's allocation to the consumer discretionary sector increased somewhat, while technology was reduced. As of March 31, 2002, the Fund did not have exposure to several economic sectors, including telecommunications and utilities. WHAT SECTORS AND STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?&& Over the 12 months ended March 31, 2002, stocks in the consumer discretionary, financial services, healthcare and industrial sectors aided Fund performance. Industries within these sectors that contributed to performance were consumer durables, automobiles, leisure, retailing, diversified financials, healthcare equipment and services and pharmaceuticals and transportation. The top-performing stocks over the course of the fiscal year were InterMune Inc., Cytyc Corporation, USA Education Inc., Siebel Systems, Inc., Quest Diagnostics, Inc. M.DC. Holdings, Inc., Mcdata Corporation, Four Seasons Hotels Inc., Frontier Airlines and Lockheed Martin Corporation. The Fund was also aided by its underweight in telecommunication services and utilities. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Over the 12 months ended March 31, 2002, factors that detracted from performance were primarily an underweight in consumer staples and disappointing performance by selected stocks in the energy, healthcare, industrial and information technology. Industries within these sectors that demonstrated the greatest underperformance were oil service, power generation, technology and media. The poorest performing stocks over the course of the fiscal year were Smith International, BJ Services, Priority Healthcare, Devon Energy, United Technologies, AOL Time Warner Inc., Calpine Corporation, Quanta Services, Qualcomm and Oni Systems. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We begin the new fiscal year with a dual sense of reflection and renewal. We were stunned by the sheer horror of the September 11, 2001 terrorist attacks. We were alarmed by the extensive fallout from the collapse of Enron. From an investment perspective, while we understood the urgent need to sort through and ascertain the possible implications stemming from these issues, it quickly became apparent that arriving at definitive conclusions would be enormously difficult. Much of what was being experienced -- politically, economically and financially -- was without historical precedent. As we move into 2002, however, we are finding reasons to feel increasingly more optimistic about the general outlook for equities. Some of the rampant uncertainty - --------------- &&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 77 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO MANAGER COMMENTARY continued that prevailed in the aftermath of the terrorist attacks -- including the possibility of more attacks, additional anthrax outbreaks, the specific nature of the U.S. response to the attacks and the reaction of the capital markets -- seems to have diminished. There is some evidence that the U.S. economy may be starting to improve. The corporate profit outlook is exhibiting signs of recovering. From a geopolitical perspective, too, there have been some encouraging developments. The allied coalition against terrorism was formed quickly and effectively, has held together well, and appears to have made considerable progress in its campaign against terrorism. To be sure, there are offsets to these positively inclined comments. There is no role for complacency right now. The exact timing and magnitude of a U.S. economic recovery is unclear. The bulk of the "bad news" in terms of corporate earnings may be behind us, but we believe future profit warnings and/or disappointments will almost certainly occur. From a global perspective, too, the ledger is mixed. While the situation in Afghanistan appears considerably better than in September 2001 in terms of terrorist operations and facilities being either eradicated or controlled, there is ample cause for concern elsewhere in the world. Violence has flared anew in the Middle East. Tension between India and Pakistan appears to be potentially quite serious. Japan's economy continues to struggle. However, we believe there are a number of factors at work that create the potential for improved equity returns. In our opinion, ingredients for an improved U.S. economic outlook clearly exist. We believe the resiliency of stock prices in a variety of areas -- including consumer discretionary, consumer staples, select healthcare and financial services -- could demonstrate that good, long-term investment opportunities are available for investors. From a macroeconomic perspective, our view is that there are a number of encouraging factors that create a favorable backdrop for equity markets. Interest rates remain low. Inflation, as measured by the Consumer Price Index, continues to be quiescent and may, in fact, decelerate in the future. Claims for unemployment assistance recently have stabilized. Manufacturing activity seems to have improved recently, while inventory corrections appear well underway in many sectors. Consumer confidence has improved. While many people undoubtedly have experienced losses in their equity portfolios, we believe the "wealth effect" remains very much an important underlying aspect of the U.S. economy. Consumer spending -- supported by low interest rates, incentives such as "0% financing" on automobiles and rising house prices -- continues to hold up well. Valuations in many sectors and industries appear increasingly attractive to us. While we readily acknowledge that there continue to be abundant crosscurrents in the economy to contend with, as well as geopolitical risk, on balance we think the overall macroeconomic outlook is quite good. As of March 31, 2002, the Fund emphasized industries such as automobiles, consumer durables, diversified financials, aerospace/defense, and healthcare equipment/services. These areas, in our view, offer attractive growth and valuation characteristics, particularly in the context of a potentially modest economic recovery. 78 NATIONS MARSICO 21ST CENTURY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.8% Specialty stores 3.9% Commercial services 4.3% Diversified electronics 4.7% Aerospace and defense 6.5% Lodging and recreation 7.7% Software 9.5% Health services 11.8% Consumer credit and mortgages 12.1% Housing and furnishing 13.2% Automotive 22.5% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 USA Education Inc. 6.2% ------------------------------------------------- 2 UnitedHealth Group Inc. 5.9% ------------------------------------------------- 3 Fannie Mae 5.6% ------------------------------------------------- 4 Porsche AG 4.5% ------------------------------------------------- 5 Four Seasons Hotels Inc. 4.0% ------------------------------------------------- 6 Tenet Healthcare Corporation 3.5% ------------------------------------------------- 7 M.D.C. Holdings, Inc. 3.2% ------------------------------------------------- 8 General Motors Corporation 3.0% ------------------------------------------------- 9 Lockheed Martin Corporation 3.0% ------------------------------------------------- 10 Lehman Brothers Holdings Inc. 2.8% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
79 NATIONS MARSICO 21ST CENTURY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS MARSICO 21ST STANDARD & POOR'S 500 LIPPER MULTI-CAP GROWTH CENTURY FUND INDEX FUNDS AVERAGE -------------------- --------------------- ----------------------- Apr. 10, 2000 9425 10000 10000 8973 9958 10995 9500 9861 11440 2000 8040 9090 9008 6569 8013 6855 6909 8482 7506 5598 7238 5568 2001 6541 8011 6615 Mar. 31|2002 6654 8026 6360
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS MARSICO 21ST STANDARD & POOR'S 500 LIPPER MULTI-CAP GROWTH CENTURY FUND INDEX FUNDS AVERAGE -------------------- --------------------- ----------------------- Apr. 10, 2000 10000 10000 10000 9520 9958 10995 10080 9861 11440 2000 8530 9090 9008 6970 8013 6855 7330 8482 7506 5940 7238 5568 2001 6940 8011 6615 Mar. 31|2002 7060 8026 6360
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (4/10/00 through 3/31/02) -16.18% -18.66%
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), an unmanaged index of 500 widely held common stocks, 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. The Index and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
INVESTOR A INVESTOR B INVESTOR C PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 4/10/00 4/10/00 4/10/00 4/10/00 - --------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 1.57% 1.29% -4.59% 0.58% -4.42% 0.58% -0.42% - --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS SINCE INCEPTION -15.94% -16.18% -18.66% -16.78% -18.49% -16.78% -16.78%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 80 NATIONS SMALL COMPANY FUND SMALLCAP STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the SmallCap Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks long-term capital growth by investing primarily in equity securities. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Small Company Fund Investor A Shares provided shareholders with a total return of 9.76%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS SMALL COMPANY FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. We believe the potential for above-average returns may be attained through investment in small companies that are strategically well positioned to achieve rapid growth in earnings. We typically invest in companies between $200 million and $2 billion in market capitalization with projected growth in profits of at least 20%. Companies are subject to thorough fundamental analysis and we attempt to identify companies that display a competitive edge, financial strength, management expertise, solid partnerships and valuation attractiveness. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? Over the last 12 months, most equities reacted positively to the Federal Reserve Board's (the "Fed") continued easing of interest rates and the potential economic recovery ahead of us. Within the Fund, it was good stock selection that allowed us to outperform our benchmark, the Russell 2000 Growth Index.*** For the period ending March 31, 2002, Nations Small Company Fund (Investor A shares) returned 9.76%, substantially outperforming the benchmark, which returned 4.95%. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? Even though the economy and market contained a great deal of uncertainty during the latter half of the year, it ended on a positive note. Regardless of market or economic conditions, we attempt to be "style consistent" and disciplined in our approach to investing. We continually look for the best-quality small company growth stocks that are generating solid earnings and cash flows while trading at reasonable valuations. Through the course of the year, the Fund held slightly more stocks than normal as a means of seeking diversification and risk management. 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 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 Growth Index is an unmanaged index comprised of securities in the Russell 2000 Index, which is a measure of small company performance, with a greater than average growth orientation. Companies in the Russell 2000 Growth Index tend to exhibit higher price-to-book and price- earnings ratios. The index is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. BECAUSE SMALL COMPANIES OFTEN HAVE NARROWER MARKETS, LIMITED FINANCIAL RESOURCES AND STOCKS THAT ARE NOT AS ACTIVELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE PRICES MAY BE MORE VOLATILE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 81 NATIONS SMALL COMPANY FUND SMALLCAP STRATEGIES TEAM COMMENTARY continued Fund also held slightly more cash than normal during the latter half of the year, putting us in an excellent position to take advantage of compelling investment opportunities. WHAT SECTORS AND STOCKS PROVED FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?& Financial stocks generally fared better than most during the year, as they generally displayed stable earnings, a higher return on equity and lower volatility. They benefited from lower interest rates, a new tax plan and minimal foreign exposure. Financial stocks in the Fund, such as City National Corporation, were rewarded for steady and positive earnings growth. Stocks such as Affiliated Managers Group, Inc., were rewarded for their healthy cash flow, strong brand name recognition, and potential growth in assets resulting from components of the new tax plan. The Fund's technology stocks fared well during the period, resulting from good stock selection combined with investors feeling more comfortable about a potential rebound in technology during the coming year. Strength in the Fund was broad based with gains in the network equipment, computer services and software sectors. TTI Team Telecom International Ltd. was up nearly 125%, as they consistently reported strong revenue and earnings, maintained a healthy pipeline/backlog of business and continued to extend their product line and customer reach. CCor.net was up nearly 170% due to strong cable equipment demand that continued from major service providers. In addition, Ccor.net hosted a well-received analyst day where senior management displayed confidence in future business trends. WHAT SECTORS AND STOCKS PROVED UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? The Fund's energy stocks suffered slight losses during the period. Falling natural gas prices, economic uncertainty and a potential OPEC market share battle led to broad-based weakness in the sector. Exploration and production, integrated oil and oil services were all affected. Stocks within the Fund that declined included Precision Drilling Corporation, Patterson-UTI Energy, Inc. and Energen Corporation. Communication stocks also detracted from performance. There was a clear weakness in the telecommunication services industry, which contributed to the decline. During the second half of the year, investors cited unimpressive earnings results, slowing industry growth, competitive pricing and weak subscriber numbers as reasons to invest elsewhere. Within the Fund, both AirGate PCS, Inc. and Triton PCS Holdings Inc. declined over 50%. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We remain optimistic regarding the outlook for small-capitalization stocks in the coming year. Small-cap stocks, we believe, may continue their relative positive performance versus other investments due to compelling earnings and valuations, minimal foreign exposure and history's lesson that small-cap stocks (notably small-cap growth stocks) typically outperform other stocks coming out of a recession. As such, we are indeed optimistic about the year ahead. Nations Small Company Fund is positioned with holdings that we feel could provide the greatest performance. - --------------- &Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 82 NATIONS SMALL COMPANY FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 3.5% Specialty stores 3.7% Commercial services 3.9% Commercial banking 4.3% Finance - Miscellaneous 4.3% Semiconductors 4.9% Software 5.2% Networking and telecommunications equipment 5.4% Medical devices and supplies 8.2% Pharmaceuticals 8.4% Health services 48.2% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 Affiliated Managers Group, Inc. 2.6% ------------------------------------------------- 2 City National Corporation 2.2% ------------------------------------------------- 3 C-COR.Net Corporation 2.1% ------------------------------------------------- 4 Orthodontic Centers of America, Inc. 1.9% ------------------------------------------------- 5 Martek Biosciences Corporation 1.9% ------------------------------------------------- 6 Province Healthcare Company 1.8% ------------------------------------------------- 7 Cato Corporation 1.8% ------------------------------------------------- 8 Kinder Morgan Energy Partners, LP 1.7% ------------------------------------------------- 9 Career Education Corporation 1.7% ------------------------------------------------- 10 TTI Team Telecom International Ltd. 1.7% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
83 NATIONS SMALL COMPANY FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
NATIONS CAPITAL RUSSELL 2000 FUNDS RUSSELL 2000 GROWTH LIPPER SMALL CAP GROWTH FUND AVERAGE FUND GROWTH INDEX --------------- ------------------ ------------------- ---------------- Dec. 12 1995 9425.00 10000.00 10000.00 10000.00 1995 9313.00 10264.00 10213.00 9879.00 1996 11169.00 11957.00 11302.00 11719.00 1997 13343.00 14630.00 12710.00 13707.00 1998 13506.00 14257.00 12812.00 14486.00 1999 20868.00 17288.00 18258.00 23438.00 2000 20486.00 16766.00 14119.00 22278.00 2001 17984.00 17183.00 12770.00 19874.00 Mar. 31 2002 18204.00 17867.00 12520.00 19355.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
NATIONS CAPITAL RUSSELL 2000 FUNDS RUSSELL 2000 GROWTH LIPPER SMALL CAP GROWTH FUND AVERAGE FUND GROWTH INDEX --------------- ------------------ ------------------- ---------------- Dec. 12 1995 10000.00 10000.00 10000.00 10000.00 1995 9881.00 10264.00 10213.00 9879.00 1996 11850.00 11957.00 11302.00 11719.00 1997 14157.00 14630.00 12710.00 13707.00 1998 14330.00 14257.00 12812.00 14486.00 1999 22141.00 17288.00 18258.00 23438.00 2000 21736.00 16766.00 14119.00 22278.00 2001 19081.00 17183.00 12770.00 19874.00 Mar. 31 2002 19315.00 17867.00 12520.00 19355.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (12/12/95 through 3/31/02) 11.01% 9.97%
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 of 2,000 of the smallest stocks representing approximately 11% of the U.S. equity market, include reinvestment of dividends. Figures for the Russell 2000 Growth Index, an unmanaged index comprised of securities in the Russell 2000 Index, which is a measure of small company performance, with a greater than average growth orientation. Companies in the Russell 2000 Growth Index tend to exhibit higher price-to-book and price-earnings ratios. Funds in the Lipper Small-Cap Growth Funds Average invest at least 75% of their equity assets in companies with market capitalizations of less than $3 billion. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the differences in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 12/12/95 12/12/95 12/12/95 9/22/97 - -------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 10.08% 9.76% 3.49% 8.94% 3.94% 8.97% 7.97% - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS 3 YEARS 13.99% 13.72% 11.49% 12.95% 12.16% 12.94% 12.94% 5 YEARS 11.80% 11.53% 10.21% 10.75% 10.48% -- -- SINCE INCEPTION 11.34% 11.01% 9.97% 10.28% 10.28% 4.63% 4.63%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. The annual reports for the fiscal year ended March 31, 2001 and prior years compared the Fund's performance to the Russell 2000 Index. The Fund changed the index to which it compares its performance because the Russell 2000 Growth Index is a more appropriate benchmark and the composition of the Index more closely resembles the composition of the Fund. 84 NATIONS FINANCIAL SERVICES FUND GROWTH STRATEGIES TEAM COMMENTARY* PORTFOLIO MANAGEMENT The Fund is managed by the Growth Strategies Team of Banc of America Capital Management, LLC, investment sub-adviser to the Fund. INVESTMENT OBJECTIVE The Fund seeks growth of capital. PERFORMANCE REVIEW For the 12-month period ended March 31, 2002, Nations Financial Services Fund Investor A Shares provided shareholders with a total return of 3.41%.** IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS FINANCIAL SERVICES FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2002 AND ITS OUTLOOK FOR THE FUTURE. PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY. Nations Financial Services Fund seeks to employ a long-term, capital appreciation strategy through investments primarily in the financial services sector. Securities are generally held in the Fund between a two- to four-year time horizon. We "build" the Fund by employing an integrated approach to portfolio construction. We start with a macro view, forecasting factors for the overall economy, as well as within the financial services sector. We then combine fundamental and quantitative research analysis to select companies within the financial services industry that we believe will grow faster and/or longer than consensus expectations. The Fund typically invests in companies that we believe are recognized leaders, have strong track records and possess key competitive advantages. Through our "top down" framework and the "bottom-up" stock selection, we create a portfolio of 40-60 securities. HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT PREVAILED OVER THE PAST 12 MONTHS? The last year has been another tough one for investors. Profits of many large-growth companies continued to decline throughout the year, the domestic economy suffered its first recession in over a decade and on September 11, 2001 the U.S. witnessed the terrorist attacks on the World Trade Center and the Pentagon. In spite of the negative surprises and the accompanying market volatility, many of the major stock indices finished the year in positive territory. The Nasdaq Composite Index*** ended the year at 0.28%, and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500")&, the Fund's benchmark, had a return of 0.16%. Nations Financial Services Fund (Investor A Shares) returned 3.41% for the 12-month period ended March 31, 2002. There were two basic market trends during the reporting period. Between April 1, 2001 and September 21, 2001, the market generally continued to focus on slowing economic growth and the dramatic drop in corporate profits. After the events of last fall, many investors began to focus on their personal financial liquidity and became - --------------- *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 and does not reflect fees, brokerage commissions or other expenses of investing. &The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 widely held common stocks. It is not available for investment and does not reflect fees, brokerage commissions or other expenses of investing. Source for all statistical data -- Banc of America Capital Management, LLC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 85 NATIONS FINANCIAL SERVICES FUND GROWTH STRATEGIES TEAM COMMENTARY continued increasingly optimistic that an economic recovery was in the foreseeable future due to the Federal Reserve Board's lowering of interest rates as well as the fiscal stimulus package proposed by the government. As the year progressed, many investors rotated through the financial services sector and at various points found different industries and companies attractive. One constant concern was the potential of deteriorating credit quality. While this concern plagued many banks for much of the reporting period, it was the primary driver of performance for consumer-lending stocks. Investors seemed hesitant to invest in brokerage stocks as the level of trading activity decreased during the year as did investment banking revenues. Last, but certainly not least, asset management stocks struggled due to falling market values. WHAT ADJUSTMENTS WERE MADE TO THE FUND, IF ANY, AS A RESULT OF THE STOCK MARKET VOLATILITY IN THE LATTER PART OF THE YEAR? Nations Financial Services Fund remained conservatively positioned throughout the early part of the year. The Fund maintained a larger than usual cash position and invested in high-quality, defensive names within the sector. Prior to the tragic events of September 11, 2001, the Fund was overweighted in the more stable growth companies within the financial services sector. Subsequent to September 11, 2001, the Fund significantly increased its exposure to companies more leveraged to an economic upturn. WHAT STOCKS PROVED TO BE FAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS?&& As we mentioned, prior to the tragic events of last fall, the Fund was overweighted in what we believed were the more stable growth companies within the financial services sector, including Fannie Mae, Freddie Mac and Automatic Data Processing. After September 11, 2001, the Fund significantly increased its exposure to brokers and asset managers. Throughout the reporting period, the numerous interest rate reductions were something of a "wind at the back" of the group. However, investor concerns over credit quality deterioration allowed the stocks of companies such as Fannie Mae, Freddie Mac, USA Education, Inc. and credit/debit card processors such as Concord EFS, Inc. to lead the Fund's performance. Later in the year, companies more leveraged to an economic recovery, including Merrill Lynch & Company, Inc., Morgan Stanley Dean Witter & Company, Household International, Inc. and AmeriCredit Corporation took over leadership in the Fund. These stocks, while volatile in the second half of the fiscal year, significantly contributed to the Fund's performance. WHAT SECTORS AND STOCKS PROVED TO BE UNFAVORABLE TO FUND PERFORMANCE DURING THE LAST 12 MONTHS? Over the last year, the vast majority of the stocks in Nations Financial Services Fund posted nominal gains. The primary disappointment for the Fund was American International Group, Inc., an insurance company that met with some specific challenges regarding pricing and growth potential. J.P. Morgan Company also underperformed as the company was hit with both a significant decrease in investment banking revenues and credit losses. While down for the year, stocks - --------------- &&Portfolio holdings and characteristics are subject to change and may not be representative of current holdings and characteristics. 86 NATIONS FINANCIAL SERVICES FUND GROWTH STRATEGIES TEAM COMMENTARY continued such as Household International, Inc., Citigroup Inc. and Freddie Mac, posted strong second half returns. WHAT IS YOUR OUTLOOK FOR THE COMING YEAR, AND HOW ARE YOU POSITIONING THE FUND? We are optimistic about the prospects for the next year. Most signs, we feel, point to a better economic environment over the next twelve months. We believe the recession appears to have ended sometime in the first calendar quarter. Inflation remains tame, and economic growth appears to be accelerating. Inventory levels are low, while valuations in the equity market appear reasonable. These factors could contribute to better earnings growth that may be reflected in higher stock market valuations. Two issues facing financial services stocks that we are mindful of are the possibility of higher credit losses and the potential of rising interest rates over the next few quarters. Credit losses have historically increased through the early recovery portion of the economic cycle as unemployment peaks. It is our belief that we are currently seeing peak unemployment rates with the beginning of the second quarter of 2002. Also, we feel that credit deterioration over the next few quarters will be very modest and is largely priced into the stocks. Rising interest rates are more of a concern. Historically, interest sensitive stocks do not fair well versus the broader market when interest rates are rising. We are forecasting a modest increase in interest rates, primarily focused on the "short end" of the yield curve. We anticipate rising interest rates on bonds with less than a seven-year maturity and fairly stable rates on longer-term bonds. We have positioned the Fund to take advantage of asset management and brokerage stocks that we believe may do well in light of this scenario and as the stock market rises. We have reduced exposure to the most interest sensitive holdings, which we believe may bode well for the Fund's performance if interest rates rise modestly. 87 NATIONS FINANCIAL SERVICES FUND PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/02) [PIE CHART] 0.9% Health services 4.7% Finance - Miscellaneous 9.0% Computer services 13.0% Insurance 19.8% Consumer credit and mortgages 20.7% Investment services 22.6% Commercial banking 9.3% Other
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2002, ARE SUBJECT TO CHANGE AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS. TOP 10 HOLDINGS ------------------------------------------------- 1 AmeriCredit Corporation 5.1% ------------------------------------------------- 2 Citigroup Inc. 5.0% ------------------------------------------------- 3 American International Group, Inc. 4.6% ------------------------------------------------- 4 MBNA Corporation 4.5% ------------------------------------------------- 5 Concord EFS, Inc. 4.0% ------------------------------------------------- 6 Household International, Inc. 3.8% ------------------------------------------------- 7 Morgan Stanley Dean Witter & Company 3.6% ------------------------------------------------- 8 Merrill Lynch & Company, Inc. 3.6% ------------------------------------------------- 9 Charter One Financial, Inc. 3.1% ------------------------------------------------- 10 Compass Bancshares, Inc. 3.1% ------------------------------------------------- THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND SECURITIES IN WHICH THE FUND MAY INVEST.
88 NATIONS FINANCIAL SERVICES FUND PERFORMANCE GROWTH OF A $10,000 INVESTMENT [INVESTOR A SHARES AT MOP* (AS OF 3/31/02) RETURN CHART]
LIPPER FINANCIAL NATIONS FINANCIAL STANDARD & POOR'S STANDARD & POOR'S SERVICES FUNDS SERVICES FUND 500 INDEX FINANCIALS INDEX AVERAGE ----------------- ----------------- ----------------- ---------------- Mar. 30 2001 9425.00 10000.00 10000.00 10000.00 9877.00 10585.00 10787.00 10797.00 8662.00 9032.00 9377.00 9596.00 9464.00 9997.00 10076.00 10271.00 Mar. 31 2002 9746.00 10016.00 10424.00 10720.00
[INVESTOR A SHARES AT NAV** (AS OF 3/31/02) RETURN CHART]
LIPPER FINANCIAL NATIONS FINANCIAL STANDARD & POOR'S STANDARD & POOR'S SERVICES FUNDS SERVICES FUND 500 INDEX FINANCIALS INDEX AVERAGE ----------------- ----------------- ----------------- ---------------- Mar. 30 2001 10000.00 10000.00 10000.00 10000.00 10480.00 10585.00 10787.00 10797.00 9190.00 9032.00 9377.00 9596.00 10041.00 9997.00 10076.00 10271.00 Mar. 31 2002 10341.00 10016.00 10424.00 10720.00
AVERAGE ANNUAL TOTAL RETURN Investor A Shares
SINCE INCEPTION NAV** MOP* (03/30/01 through 3/31/02) 3.39% -2.53%
The charts to the left show the growth in value of a hypothetical $10,000 investment in Investor A Shares of Nations Financial Services Fund from the inception of the share class. Figures for the Standard & Poor's 500 Composite Stock Price Index (Standard & Poor's 500 Index), an unmanaged index of 500 widely held common stocks, include reinvestment of dividends. The Standard & Poor's Financials Index is a capitalization-weighted index of all stocks designed to measure the performance of the financial sector of the Standard & Poor's 500 Index. Funds in the Lipper Financial Services Funds Average invest at least 65% of its portfolio in equity securities of companies engaged in providing financial services, including but not limited to banks, finance companies, insurance companies and securities/brokerage firms. The Indices and Lipper Average are unavailable for investment and do not reflect fees, brokerage commissions or other expenses of investing. The performance of Primary A, Investor B and Investor C Shares may vary based on the difference in sales loads and fees paid by the shareholders investing in each class. [CHART LEGEND] TOTAL RETURN (AS OF 3/31/02)
PRIMARY A INVESTOR A INVESTOR B INVESTOR C NAV** MOP* NAV** CDSC*** NAV** CDSC*** Inception date 03/30/01 03/30/01 03/30/01 12/13/01 - ------------------------------------------------------------------------------------------------------------------------------- 1 YEAR PERFORMANCE 3.71% 3.41% -2.53% 2.70% -2.30% -- -- - ------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS SINCE INCEPTION 3.69% 3.39% -2.53% 2.69% -1.29% 5.86% 4.86%
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS AND DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER MAY PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. 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. 89 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - ------------------------------------------------------------------------------ COMMON STOCKS -- 11.2% APPAREL AND TEXTILES -- 0.5% 30,000 Jones Apparel Group, Inc.!!.............................. $ 1,049 77,000 Reebok International, Ltd.!!............................. 2,081 -------- 3,130 -------- COMMERCIAL BANKING -- 1.0% 100,000 Fifth Third Bancorp...................................... 6,748 -------- DIVERSIFIED MANUFACTURING -- 0.2% 30,000 General Electric Company................................. 1,124 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.0%+ 1 TXU Corporation.......................................... 0++ -------- HEALTH SERVICES -- 0.3% 20,000 Laboratory Corporation of America Holdings!!............. 1,917 -------- HEAVY MACHINERY -- 0.9% 118,439 Ingersoll-Rand Company................................... 5,924 -------- INSURANCE -- 2.0% 80,000 Allstate Corporation..................................... 3,022 24,000 AmerUs Group Company..................................... 923 85,000 Philadelphia Consolidated Holding Corporation!!.......... 3,383 186,750 Protective Life Corporation.............................. 5,822 -------- 13,150 -------- INTEGRATED OIL -- 0.3% 60,000 Unocal Corporation....................................... 2,337 -------- INVESTMENT SERVICES -- 0.2% 30,000 Merrill Lynch & Company, Inc. ........................... 1,661 -------- MEDICAL DEVICES AND SUPPLIES -- 1.0% 104,646 Johnson & Johnson........................................ 6,797 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.2% 93,000 Comverse Technology, Inc.!!.............................. 1,178 -------- OILFIELD SERVICES -- 2.2% 151,500 Diamond Offshore Drilling, Inc. ......................... 4,736 299,651 Pride International, Inc.!!.............................. 4,764 150,000 Transocean Sedco Forex Inc. ............................. 4,984 -------- 14,484 -------- PHARMACEUTICALS -- 0.4% 95,000 Schering-Plough Corporation.............................. 2,974 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.9% 150,000 CSX Corporation.......................................... 5,717 --------
VALUE SHARES (000) - ------------------------------------------------------------------------------ RESTAURANTS -- 0.3% 70,000 McDonald's Corporation................................... $ 1,943 -------- SEMICONDUCTORS -- 0.7% 100,315 Motorola, Inc. .......................................... 4,455 30,000 RF Micro Devices, Inc.!!................................. 537 -------- 4,992 -------- SOFTWARE -- 0.1% 13,000 Mercury Interactive Corporation!!........................ 489 20,000 Rational Software Corporation!!.......................... 317 -------- 806 -------- TOTAL COMMON STOCKS (Cost $72,977)......................................... 74,882 -------- PRINCIPAL AMOUNT (000) - --------- CONVERTIBLE BONDS AND NOTES -- 55.5% AEROSPACE AND DEFENSE -- 1.2% $ 6,500 L-3 Communications Holdings, Inc., 4.000% 09/15/11@....................................... 7,694 -------- APPAREL AND TEXTILES -- 1.5% 10,000 Jones Apparel Group, Inc., 3.793%*** 02/01/21@.................................... 5,175 3,405 Reebok International Ltd., 4.250%** 03/01/21@..................................... 3,520 980 Reebok International Ltd., 4.250%** 03/01/21...................................... 1,013 -------- 9,708 -------- BEVERAGES -- 0.9% 5,700 Convertibles Ltd., 2.000% 10/15/07@....................................... 5,821 -------- BROADCASTING AND CABLE -- 1.3% 4,500 AT&T Corporation -- Liberty Media Group, 3.250% 03/15/31@....................................... 4,617 1,925 Charter Communications, Inc., 4.750% 06/01/06........................................ 1,497 750 EchoStar Communications Corporation, 5.750% 05/15/08@....................................... 697 1,975 Liberty Media Corporation, 3.250% 03/15/31........................................ 2,027 -------- 8,838 -------- COMMERCIAL BANKING -- 0.8% 5,625 JMH Finance Ltd., 4.750% 09/06/07@....................................... 5,337 -------- COMMERCIAL SERVICES -- 1.1% 6,280 Acxiom Corporation, 3.750% 02/15/09@....................................... 7,261 --------
SEE NOTES TO FINANCIAL STATEMENTS. 90 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- COMPUTER SERVICES -- 3.7% $ 4,800 Affiliated Computer Services, Inc., Class A, 3.500% 02/15/06@....................................... $ 6,870 6,300 First Data Corporation, 2.000% 03/01/08........................................ 7,568 3,195 Symantec Corporation, 3.000% 11/01/06@....................................... 4,441 975 The BISYS Group, Inc., 4.000% 03/15/06........................................ 1,205 3,850 The BISYS Group, Inc., 4.000% 03/15/06@....................................... 4,760 -------- 24,844 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.4% 5,400 Hewlett-Packard Company, 4.712%*** 10/14/17..................................... 2,619 -------- DEPARTMENT AND DISCOUNT STORES -- 1.1% 7,455 Best Buy Company, Inc., 2.250% 01/15/22@....................................... 7,641 -------- DIVERSIFIED ELECTRONICS -- 2.4% 6,775 Electro Scientific Industries, Inc., 4.250% 12/21/06........................................ 7,782 2,995 SCI Systems, Inc., 3.000% 03/15/07........................................ 2,269 5,840 Tech Data Corporation, 2.000% 12/15/21@....................................... 5,877 -------- 15,928 -------- DIVERSIFIED MANUFACTURING -- 1.1% 9,500 SPX Corporation, 3.358%*** 02/06/21@.................................... 7,184 -------- EDUCATION -- 1.0% 970 School Specialty Inc., 6.000% 08/01/08........................................ 1,059 5,330 School Specialty, Inc., 6.000% 08/01/08@....................................... 5,816 -------- 6,875 -------- EXPLORATION AND PRODUCTION -- 1.8% 4,705 Devon Energy Corporation, 4.950% 08/15/08........................................ 4,729 6,425 Kerr-McGee Corporation, 5.250% 02/15/10........................................ 7,629 -------- 12,358 -------- FOOD PRODUCTS -- 1.0% 5,500 Performance Food Group Company, 5.500% 10/16/08........................................ 6,683 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- HEALTH SERVICES -- 2.1% $ 3,545 AmeriSource Health Corporation, Class A, 5.000% 12/01/07@....................................... $ 5,238 5,530 Universal Health Services, Inc., Class B, .426% 06/23/20@........................................ 3,069 5,880 WebMD Corporation, 3.250% 04/01/07@....................................... 5,821 -------- 14,128 -------- INSURANCE -- 3.0% 5,892 Ohio Casualty Corporation, 5.000% 03/19/22@....................................... 6,312 5,850 PMI Group Inc., 2.500% 07/15/21@....................................... 6,406 7,000 Radian Group Inc., 2.250% 01/01/22@....................................... 7,481 -------- 20,199 -------- LODGING AND RECREATION -- 1.2% 7,175 GTECH Holdings Corporation, 1.750% 12/15/21@....................................... 7,794 -------- MEDICAL DEVICES AND SUPPLIES -- 3.0% 7,400 Apogent Technologies Inc., 2.250% 10/15/21@....................................... 7,650 7,410 Charles River Labs Inc., 3.500% 02/01/22@....................................... 7,401 4,750 Invitrogen Corporation, 5.500% 03/01/07@....................................... 4,138 900 Invitrogen Corporation, 5.500% 03/01/07........................................ 784 -------- 19,973 -------- METALS AND MINING -- 0.4% 1,000 Freeport-McMoRan Copper & Gold, Inc., Class B, 8.250% 01/31/06........................................ 1,449 950 Freeport-McMoRan Copper & Gold, Inc., Class B, 8.250% 01/31/06@....................................... 1,376 -------- 2,825 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 2.4% 6,329 Adaptec, Inc., 3.000% 03/05/07@....................................... 6,977 4,700 Comverse Technology, Inc., 1.500% 12/01/05@....................................... 3,584 7,570 Nortel Networks Corporation, 4.250% 09/01/08@....................................... 5,337 -------- 15,898 -------- OILFIELD SERVICES -- 2.8% 4,850 Diamond Offshore Drilling Inc., 1.500% 04/15/31@....................................... 4,480 550 Diamond Offshore Drilling, Inc., 1.500% 04/15/31........................................ 508 5,306 Hanover Compressor Company, 4.750% 03/15/08........................................ 4,304 3,890 Loews Corporation, 3.125% 09/15/07........................................ 3,302
SEE NOTES TO FINANCIAL STATEMENTS. 91 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- OILFIELD SERVICES -- (CONTINUED) $ 966 SEACOR SMIT, Inc., 5.380% 11/05/06........................................ $ 1,110 522 SEACOR SMIT, Inc., 5.375% 11/15/06@....................................... 600 5,050 Transocean Sedco Forex Inc., 1.500% 05/15/21........................................ 4,501 -------- 18,805 -------- PHARMACEUTICALS -- 3.2% 5,000 Cephalon, Inc., 5.250% 05/01/06@....................................... 5,350 4,310 Genzyme Corporation, 3.000% 05/15/21@....................................... 4,068 2,125 Gilead Sciences, Inc., 5.000% 12/15/07@....................................... 3,485 5,700 IVAX Corporation, 4.500% 05/15/08@....................................... 4,457 1,940 Teva Pharmaceuticals Finance, LLC, 1.500% 10/15/05@....................................... 1,913 2,420 Teva Pharmaceuticals Finance, NV, .750% 08/15/21@........................................ 2,242 -------- 21,515 -------- PUBLISHING AND ADVERTISING -- 1.6% 2,000 Interpublic Group of Companies, Inc., 1.870% 06/01/06........................................ 1,648 2,020 Interpublic Group of Companies, Inc., 1.870% 06/01/06@....................................... 1,664 6,755 Lamar Advertising Company, 5.250% 09/15/06........................................ 7,286 -------- 10,598 -------- RAILROADS, TRUCKING AND SHIPPING -- 2.5% 3,928 Airborne, Inc., 5.750% 04/01/07@....................................... 4,080 5,455 GATX Corporation, 7.500% 02/01/07@....................................... 6,314 6,520 United Parcel Service, Inc., Class B, 1.750% 09/27/07........................................ 6,594 -------- 16,988 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.6% 3,800 EOP Operating, LP, 7.250%** 11/15/08@..................................... 4,023 -------- RETAIL -- SPECIALTY -- 0.8% 5,975 J.C. Penney Company, Inc., 5.000% 10/15/08@....................................... 5,572 -------- SEMICONDUCTORS -- 5.3% 7,140 Agilent Technologies, Inc., 3.000% 12/01/21@....................................... 8,926 830 ASML Holding N.V., 5.750% 10/15/06@....................................... 1,311 5,330 AT&T Corporation - Liberty Media Group, 3.500% 01/15/31@....................................... 3,838
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- SEMICONDUCTORS -- (CONTINUED) $ 585 ATMI Inc., 5.250% 11/15/06@....................................... $ 931 488 Axcelis Technologies, Inc., 4.250% 01/15/07@....................................... 481 4,818 Fairchild Semiconductor Corporation, 5.000% 11/01/08@....................................... 5,902 4,950 General Semiconductor, Inc., 5.750% 12/15/06........................................ 4,907 4,801 LSI Logic Corporation, 4.000% 11/01/06@....................................... 4,633 3,890 Veeco Instruments Inc., 4.125% 12/21/08@....................................... 4,381 -------- 35,310 -------- SOFTWARE -- 3.6% 1,950 BEA Systems, Inc., 4.000% 12/15/06........................................ 1,625 4,280 Citrix Systems, Inc., 5.239%*** 03/22/19@.................................... 1,776 1,000 Citrix Systems, Inc., 5.239%*** 03/22/19..................................... 415 4,906 Computer Associates International, Inc., 5.000% 03/15/07@....................................... 5,752 4,855 HNC Software Inc., 5.250% 09/01/08@....................................... 4,442 7,540 Mercury Interactive Corporation, 4.750% 07/01/07 6,243 2,620 Network Associates, Inc., 5.250% 08/15/06@....................................... 4,028 -------- 24,281 -------- SPECIALTY STORES -- 1.9% 5,295 Barnes & Noble, Inc., 5.250% 03/15/09@....................................... 6,116 5,920 Gap, Inc., 5.750% 03/15/09@....................................... 6,852 -------- 12,968 -------- TELECOMMUNICATIONS SERVICES -- 1.8% 4,000 AT&T Corporation -- Liberty Media Group, 4.000% 11/15/29@....................................... 2,080 3,000 AT&T Corporation -- Liberty Media Group, 4.000% 11/15/29........................................ 1,560 1,250 Bell Atlantic Financial Services, 5.750% 04/01/03@....................................... 1,264 1,000 Bell Atlantic Financial Services, 5.750% 04/01/03........................................ 1,012 4,105 Telefonos de Mexico SA, de CV, Series A, 4.250% 06/15/04........................................ 5,793 -------- 11,709 -------- TOTAL CONVERTIBLE BONDS AND NOTES (Cost $358,327)........................................ 371,377 --------
SEE NOTES TO FINANCIAL STATEMENTS. 92 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS -- 31.6% AEROSPACE AND DEFENSE -- 2.9% 66,600 Northrop Grumman Corporation............................. $ 8,134 114,200 Raytheon Company......................................... 7,767 97,000 Titan Capital Trust...................................... 3,771 -------- 19,672 -------- AUTOMOTIVE -- 2.4% 105,750 Ford Motor Company Capital Trust II!!.................... 5,947 386,200 General Motors Corporation............................... 10,266 -------- 16,213 -------- BROADCASTING AND CABLE -- 1.1% 299,980 Equity Securities Trust II............................... 7,260 -------- COMMERCIAL BANKING -- 3.5% 25,000 Bank United Corporation!!................................ 3 146,600 Commerce Bancorp, Inc.!!................................. 7,733 111,400 Sovereign Capital Trust II............................... 8,911 112,000 Washington Mutual Capital Trust I........................ 5,390 19,000 Washington Mutual Inc. .................................. 1,386 -------- 23,423 -------- COMPUTER SERVICES -- 1.1% 143,550 Electronic Data Systems Corporation...................... 7,256 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.8% 77,580 Xerox Corporation........................................ 5,411 -------- DIVERSIFIED ELECTRONICS -- 0.7% 203,600 Solectron Corporation.................................... 4,449 -------- ELECTRIC POWER -- NON NUCLEAR -- 2.8% 59,000 Ameren Corporation....................................... 1,599 174,150 Duke Energy Corporation.................................. 4,478 82,000 NiSource Inc. ........................................... 3,674 14,300 NRG Energy, Inc. ........................................ 191 145,300 PPL Capital Fund Trust I................................. 3,008 74,000 TXU Corporation.......................................... 4,203 45,580 TXU Corporation.......................................... 1,307 -------- 18,460 -------- HEALTH SERVICES -- 1.3% 58,200 Anthem, Inc. ............................................ 4,237 43,300 Express Scripts.......................................... 4,373 -------- 8,610 -------- HEAVY MACHINERY -- 0.4% 21,800 Cummins Capital Trust I.................................. 1,283 25,000 Cummins Capital Trust I@................................. 1,472 -------- 2,755 --------
VALUE SHARES (000) - ------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS -- 0.4% 68,430 Newell Financial Trust I................................. $ 2,831 -------- INSURANCE -- 4.8% 60,000 ACE Ltd. ................................................ 4,748 50,000 Metlife Capital Trust I.................................. 4,893 131,375 Prudential Financial Inc.!!.............................. 7,256 130,000 Reinsurance Group of America Inc. ....................... 6,175 368,300 Travelers Property Casualty Corporation, Class A......... 9,759 -------- 32,831 -------- INTEGRATED OIL -- 0.7% 90,000 Unocal Corporation....................................... 4,590 -------- NATURAL GAS DISTRIBUTION -- 0.4% 90,400 El Paso Corporation...................................... 2,792 -------- NATURAL GAS PIPELINES -- 1.0% 259,900 Williams Companies Inc. ................................. 6,661 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.3% 157,500 Merrill Lynch Pfd STRIDES................................ 2,662 66,200 Lucent Technologies Inc. ................................ 6,057 -------- 8,719 -------- PACKAGING AND CONTAINERS -- 1.1% 154,410 Sealed Air Corporation................................... 7,080 -------- PAPER AND FOREST PRODUCTS -- 1.5% 93,150 Boise Cascade Corporation................................ 5,210 100,100 International Paper Capital Trust........................ 4,642 -------- 9,852 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.0% 58,400 Union Pacific Capital Trust.............................. 2,920 72,000 Union Pacific Capital Trust@............................. 3,600 -------- 6,520 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 1.1% 86,000 Apartment Investment & Management Company, Class A....... 2,460 181,200 Equity Residential Properties Trust...................... 4,613 -------- 7,073 -------- RESTAURANTS -- 0.2% 20,100 Wendy's Financing I...................................... $ 1,350 --------
SEE NOTES TO FINANCIAL STATEMENTS. 93 NATIONS FUNDS Nations Convertible Securities Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - ------------------------------------------------------------------------------ TELECOMMUNICATIONS SERVICES -- 1.1% 170,000 Citizens Communications Company.......................... $ 3,952 79,300 Citizens Utilities Trust................................. 3,729 -------- 7,681 -------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $191,836)........................................ 211,489 -------- SHARES (000) - ------- INVESTMENT COMPANIES -- 0.7% (Cost $4,556) 4,556 Nations Cash Reserves, Capital Class Shares#............. 4,556 -------- TOTAL INVESTMENTS (Cost $627,696*)................................ 99.0% 662,304 -------- OTHER ASSETS AND LIABILITIES (NET)................ 1.0% Cash..................................................... $ 2,558 Receivable for investment securities sold................ 11,047 Receivable for Fund shares sold.......................... 2,796 Dividends receivable..................................... 478 Interest receivable...................................... 2,802 Payable for Fund shares redeemed......................... (1,229) Investment advisory fee payable.......................... (359) Administration fee payable............................... (127) Shareholder servicing and distribution fees payable...... (162) Payable for investment securities purchased.............. (10,995) Accrued Trustees' fees and expenses...................... (39) Accrued expenses and other liabilities................... (236) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. 6,534 -------- NET ASSETS........................................ 100.0% $668,838 ======== NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 1,659 Accumulated net realized loss on investments sold........ (38,278) Net unrealized appreciation of investments............... 34,608 Paid-in capital.......................................... 670,849 -------- NET ASSETS............................................... $668,838 ======== VALUE - ------------------------------------------------------------------------------ PRIMARY A SHARES: Net asset value, offering and redemption price per share ($236,201,589 / 14,738,723 shares outstanding)......... $16.03 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($321,857,957 / 20,093,721 shares outstanding)......... $16.02 ------ ------ 5.75% Maximum sales charge..................................... $17.00 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($90,408,194 / 5,693,598 shares outstanding)........... $15.88 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($20,370,042 / 1,269,971 shares outstanding)........... $16.04 ------ ------
- --------------- * Federal income tax information (see Note 9). **Variable rate security. The interest rate shown reflects the rate in effect at March 31, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at March 31, 2002. @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. + 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, LLC. SEE NOTES TO FINANCIAL STATEMENTS. 94 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 0.5% ASSET-BACKED -- AUTO LOANS -- 0.3% $ 800 Americredit Automobile Receivables Trust, Series 2001-B, Class A4, 5.370% 06/12/08........................................ $ 811 450 Ford Credit Auto Owner Trust, Series 2002-B, Class B, 5.180% 10/16/06........................................ 450 -------- 1,261 -------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 0.1% 500 Citibank Credit Card Master Trust I, Series 1999-5, Class A, 6.100% 05/15/08........................................ 515 -------- ASSET-BACKED -- HOME EQUITY LOANS -- 0.1% 167 First Plus Home Loan Trust, Series 1998-2, Class M1, 7.220% 05/10/24........................................ 169 36 IMC Home Equity Loan Trust, Series 1997-5, Class A7, 6.900% 01/20/22........................................ 37 -------- 206 -------- TOTAL ASSET-BACKED SECURITIES (Cost $1,959).......................................... 1,982 -------- SHARES - --------- COMMON STOCKS -- 58.3% AEROSPACE AND DEFENSE -- 1.9% 50,000 Boeing Company........................................... 2,413 12,800 General Dynamics Corporation............................. 1,203 9,500 Lockheed Martin Corporation.............................. 547 42,900 United Technologies Corporation.......................... 3,182 -------- 7,345 -------- AIRLINES -- 0.4% 66,000 AMR Corporation!!........................................ 1,743 -------- AUTOMOTIVE -- 0.9% 26,500 Delphi Automotive Systems Corporation.................... 424 11,200 General Motors Corporation(a)............................ 677 52,950 Lear Corporation!!....................................... 2,520 -------- 3,621 -------- BEVERAGES -- 1.7% 17,500 Anheuser-Busch Companies, Inc. .......................... 914 34,300 Coca-Cola Company........................................ 1,793 2,700 Constellation Brands, Inc.!!............................. 148 1,000 Pepsi Bottling Group, Inc. .............................. 26 70,430 PepsiCo, Inc. ........................................... 3,626 -------- 6,507 -------- BROADCASTING AND CABLE -- 2.4% 110,000 AOL Time Warner Inc.!!................................... 2,602 47,000 Cablevision Systems Corporation!!(a)..................... 1,598
VALUE SHARES (000) - -------------------------------------------------------------------------------- BROADCASTING AND CABLE -- (CONTINUED) 105,000 Comcast Corporation, Class A(a).......................... $ 3,339 37,567 Viacom Inc., Class B!!................................... 1,817 -------- 9,356 -------- COMMERCIAL BANKING -- 1.8% 140,266 Citigroup Inc. .......................................... 6,946 -------- COMMERCIAL SERVICES -- 0.6% 48,000 Cendant Corporation!!(a)................................. 922 47,400 Interpublic Group of Companies, Inc.(a).................. 1,624 -------- 2,546 -------- COMPUTER SERVICES -- 1.9% 63,000 Automatic Data Processing, Inc. ......................... 3,671 108,000 Concord EFS, Inc.!!(a)................................... 3,591 -------- 7,262 -------- COMPUTERS AND OFFICE EQUIPMENT -- 3.3% 108,975 Dell Computer Corporation!!.............................. 2,845 164,495 EMC Corporation!!........................................ 1,961 62,125 International Business Machines Corporation.............. 6,460 375 Micros Systems, Inc.!!................................... 10 175,000 Sun Microsystems, Inc.!!................................. 1,544 -------- 12,820 -------- CONSUMER CREDIT AND MORTGAGES -- 4.0% 42,400 Fannie Mae............................................... 3,387 80,100 Household International, Inc.(a)......................... 4,550 63,850 MBNA Corporation......................................... 2,463 49,825 USA Education Inc. ...................................... 4,872 -------- 15,272 -------- DEPARTMENT AND DISCOUNT STORES -- 3.5% 66,800 Sears, Roebuck and Company............................... 3,425 84,000 Target Corporation....................................... 3,622 111,400 Wal-Mart Stores, Inc. ................................... 6,828 -------- 13,875 -------- DIVERSIFIED ELECTRONICS -- 0.0%+ 6,200 PNM Resources Inc. ...................................... 190 -------- DIVERSIFIED MANUFACTURING -- 2.9% 213,700 General Electric Company................................. 8,003 93,000 Honeywell International Inc. ............................ 3,559 -------- 11,562 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.2% 3,200 IDACORP, Inc. ........................................... 130 2,700 Northwestern Corporation................................. 59 12,300 Pinnacle West Capital Corporation........................ 558 1,100 UIL Holdings Corporation................................. 64 -------- 811 -------- ELECTRIC POWER -- NUCLEAR -- 1.4% 5,800 Alliant Energy Corporation(a)............................ 175 18,200 American Electric Power Company, Inc.(a)................. 839 6,800 Conectiv, Inc. .......................................... 169 21,000 DTE Energy Company....................................... 956 53,500 Duke Energy Corporation.................................. 2,022 4,300 Energy East Corporation.................................. 94
SEE NOTES TO FINANCIAL STATEMENTS. 95 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- ELECTRIC POWER -- NUCLEAR -- (CONTINUED) 10,900 FirstEnergy Corporation(a)............................... $ 377 13,100 FPL Group, Inc. ......................................... 780 2,610 NSTAR.................................................... 118 1,300 RGS Energy Group Inc.(a)................................. 51 -------- 5,581 -------- ENERGY -- MISCELLANEOUS -- 0.0%+ 3,800 Wisconsin Energy Corporation(a).......................... 95 -------- EXPLORATION AND PRODUCTION -- 0.3% 18,900 Anadarko Petroleum Corporation(a)........................ 1,067 -------- FOOD AND DRUG STORES -- 0.0%+ 2,100 Fleming Companies, Inc.(a)............................... 47 2,300 Ruddick Corporation...................................... 38 800 United Natural Foods, Inc.!!............................. 20 -------- 105 -------- FOOD PRODUCTS -- 0.9% 1,400 American Italian Pasta Company!!......................... 64 24,000 ConAgra Foods, Inc.(a)................................... 582 1,300 Dean Foods Company!!(a).................................. 98 800 Dole Food Company(a)..................................... 25 14,200 General Mills, Inc. ..................................... 693 2,400 Hormel Foods Corporation................................. 66 1,700 International Multifoods Corporation!!................... 40 1,800 Interstate Bakeries Corporation.......................... 44 1,300 J & J Snack Foods Corporation!!.......................... 49 17,300 Kellogg Company.......................................... 581 2,800 McCormick and Company, Inc. ............................. 143 2,700 Performance Food Group Company!!(a)...................... 88 1,100 Ralcorp Holdings, Inc.!!................................. 30 4,100 Smithfield Foods, Inc.!!................................. 107 9,500 Tyson Foods Inc., Class A(a)............................. 119 10,500 Unilever NV, NY Shares................................... 595 5,300 Wm. Wrigley Jr. Company.................................. 283 -------- 3,607 -------- HEALTH SERVICES -- 0.7% 17,900 Tenet Healthcare Corporation!!........................... 1,200 20,000 UnitedHealth Group Inc. ................................. 1,528 -------- 2,728 -------- HOUSEHOLD PRODUCTS -- 1.6% 13,800 Avon Products, Inc.(a)................................... 750 2,700 Church & Dwight Company, Inc.(a)......................... 80 6,500 Fortune Brands, Inc. .................................... 321 8,700 International Flavors & Fragrances, Inc. ................ 304 10,800 Kimberly-Clark Corporation............................... 698 39,700 Procter & Gamble Company................................. 3,577 11,700 The Clorox Company....................................... 510 3,900 The Dial Corporation..................................... 70 -------- 6,310 -------- HOUSING AND FURNISHING -- 0.6% 12,400 Centex Corporation(a).................................... 644 66,000 Masco Corporation(a)..................................... 1,812 -------- 2,456 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- INSURANCE -- 1.2% 66,694 American International Group, Inc. ...................... $ 4,811 -------- INTEGRATED OIL -- 3.9% 35,000 BP Amoco plc, ADR........................................ 1,859 37,564 ChevronTexaco Corporation(a)............................. 3,391 165,914 Exxon Mobil Corporation.................................. 7,271 41,600 Royal Dutch Petroleum Company............................ 2,260 -------- 14,781 -------- INVESTMENT SERVICES -- 2.0% 51,450 Merrill Lynch & Company, Inc. ........................... 2,850 45,700 Morgan Stanley Dean Witter & Company..................... 2,619 40,000 Northern Trust Corporation............................... 2,404 -------- 7,873 -------- LODGING AND RECREATION -- 1.1% 13,400 Harley-Davidson, Inc.(a)................................. 739 100,000 Starwood Hotels & Resorts Worldwide, Inc. ............... 3,761 -------- 4,500 -------- MEDICAL DEVICES AND SUPPLIES -- 2.9% 28,200 Abbott Laboratories...................................... 1,483 43,000 Baxter International Inc. ............................... 2,559 81,200 Johnson & Johnson........................................ 5,275 48,400 Medtronic, Inc. ......................................... 2,188 -------- 11,505 -------- NATURAL GAS DISTRIBUTION -- 0.2% 4,654 El Paso Corporation...................................... 205 2,600 Equitable Resources, Inc. ............................... 91 2,850 New Jersey Resources Corporation......................... 86 1,400 NICOR Inc. .............................................. 64 3,900 Northwest Natural Gas Company............................ 109 1,900 Peoples Energy Corporation............................... 75 3,100 UGI Corporation.......................................... 97 -------- 727 -------- NATURAL GAS PIPELINES -- 0.0%+ 5,200 Aquila, Inc. ............................................ 129 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.0% 159,725 Cisco Systems, Inc.!!.................................... 2,704 30,575 QUALCOMM Inc.!!.......................................... 1,151 -------- 3,855 -------- PAPER AND FOREST PRODUCTS -- 0.0%+ 1,700 Schweitzer-Mauduit International, Inc. .................. 42 -------- PHARMACEUTICALS -- 6.1% 37,600 Amgen Inc.!!............................................. 2,244 25,500 Eli Lilly and Company.................................... 1,943 50,000 Genentech, Inc.!!(a)..................................... 2,523 47,900 Merck & Company, Inc. ................................... 2,758 201,300 Pfizer Inc. ............................................. 7,999 78,000 Pharmacia Corporation.................................... 3,516 39,200 Schering-Plough Corporation.............................. 1,227
SEE NOTES TO FINANCIAL STATEMENTS. 96 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- PHARMACEUTICALS -- (CONTINUED) 300 Sepracor Inc.!!.......................................... $ 6 20,700 Wyeth.................................................... 1,359 -------- 23,575 -------- PUBLISHING AND ADVERTISING -- 0.6% 34,400 McGraw-Hill Companies, Inc............................... 2,348 -------- RESTAURANTS -- 0.0%+ 1,300 Panera Bread Company, Class A!!.......................... 83 -------- SEMICONDUCTORS -- 1.4% 675 AXT, Inc.!!.............................................. 7 108,700 Intel Corporation........................................ 3,306 26,150 Linear Technology Corporation............................ 1,156 27,850 Texas Instruments Inc. .................................. 922 -------- 5,391 -------- SOFTWARE -- 2.8% 153,275 Microsoft Corporation!!.................................. 9,244 124,975 Oracle Corporation!!..................................... 1,600 -------- 10,844 -------- SPECIALTY STORES -- 1.9% 80,000 Circuit City Stores - Circuit City Group................. 1,443 97,450 Home Depot, Inc. ........................................ 4,738 2,900 Regis Corporation........................................ 81 55,000 Staples, Inc.!!.......................................... 1,098 -------- 7,360 -------- TELECOMMUNICATIONS SERVICES -- 1.4% 88,966 SBC Communications Inc. ................................. 3,331 1,800 Touch America Holding, Inc.!!............................ 7 47,339 Verizon Communications Inc. ............................. 2,161 -------- 5,499 -------- TOBACCO -- 0.8% 2,100 DiMon Inc. .............................................. 14 55,600 Philip Morris Companies Inc. ............................ 2,929 2,200 R.J. Reynolds Tobacco Holdings, Inc.(a).................. 142 700 Universal Corporation.................................... 28 -------- 3,113 -------- UTILITIES -- MISCELLANEOUS -- 0.0%+ 2,100 American Water Works Company, Inc. ...................... 92 2,312 Philadelphia Suburban Corporation........................ 54 -------- 146 -------- TOTAL COMMON STOCKS (Cost $200,289)........................................ 228,387 -------- PRINCIPAL AMOUNT (000) - --------- CORPORATE BONDS AND NOTES -- 15.7% AEROSPACE AND DEFENSE -- 0.2% $ 890 Boeing Capital Corporation, 5.650% 05/15/06........................................ 881 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- AIRLINES -- 0.1% $ 190 AMR Corporation, 9.000% 08/01/12........................................ $ 184 85 Continental Airlines, Inc., Class B, 8.000% 12/15/05........................................ 82 137 Delta Air Lines, Inc., 8.300% 12/15/29........................................ 116 190 US Airways, Inc., Series 2002-G, 8.020% 02/05/19........................................ 194 -------- 576 -------- APPAREL AND TEXTILES -- 0.0%+ 129 Levi Strauss & Company, 6.800% 11/01/03........................................ 126 -------- AUTOMOTIVE -- 1.3% 255 Delphi Automotive Systems Corporation, 6.125% 05/01/04........................................ 259 632 Ford Motor Company, 7.450% 07/16/31........................................ 571 915 Ford Motor Credit Company, 7.600% 08/01/05........................................ 931 790 Ford Motor Credit Company, 5.800% 01/12/09........................................ 712 427 Ford Motor Credit Company, 7.375% 10/28/09........................................ 419 474 General Motors Acceptance Corporation, 6.125% 09/15/06........................................ 468 332 General Motors Acceptance Corporation, 6.150% 04/05/07........................................ 326 632 General Motors Acceptance Corporation, 6.875% 09/15/11........................................ 615 749 General Motors Acceptance Corporation, 8.000% 11/01/31........................................ 750 203 Lear Corporation, Series B, 8.110% 05/15/09........................................ 207 -------- 5,258 -------- BROADCASTING AND CABLE -- 0.5% 181 Adelphia Communications Corporation, Class A, 10.250% 11/01/06....................................... 168 545 AOL Time Warner Inc., 7.625% 04/15/31........................................ 541 456 Charter Communications Holdings LLC, 10.000% 05/15/11@...................................... 435 203 Comcast Cable Communications, 7.125% 06/15/13........................................ 199 162 EchoStar DBS Corporation, 9.125% 01/15/09@(a).................................... 167 200 Emmis Communications Corporation, Series B, 8.125% 03/15/09........................................ 204 101 Insight Communications Company, (0.000)% due 02/15/11 12.250% beginning 02/15/06............................. 66
SEE NOTES TO FINANCIAL STATEMENTS. 97 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- BROADCASTING AND CABLE -- (CONTINUED) $ 234 Time Warner Inc., 8.110% 08/15/06........................................ $ 252 122 Walt Disney Company, 6.375% 03/01/12........................................ 119 -------- 2,151 -------- BUILDING MATERIALS -- 0.1% 122 American Standard Inc., 7.125% 02/15/03(a)..................................... 124 40 American Standard Inc., 7.375% 04/15/05........................................ 40 133 Nortek, Inc., Series B, 9.875% 06/15/11(a)..................................... 138 -------- 302 -------- CHEMICALS -- BASIC -- 0.1% 423 IMC Global Inc., 6.500% 08/01/03........................................ 426 147 Lyondell Chemical Company, Series B, 9.875% 05/01/07........................................ 150 -------- 576 -------- CHEMICALS -- SPECIALTY -- 0.7% 260 Methanex Corporation, 7.400% 08/15/02........................................ 261 290 NL Industries, Inc., 11.750% 10/15/03....................................... 293 1,500 Praxair, Inc., 6.750% 03/01/03........................................ 1,547 168 Praxair, Inc., 6.500% 03/01/08........................................ 170 285 The Dow Chemical Company, 6.125% 02/01/11(a)..................................... 275 187 The Dow Chemical Company, 7.375% 11/01/29(a)..................................... 191 -------- 2,737 -------- COMMERCIAL BANKING -- 0.7% 700 Bank One Corporation, 6.000% 08/01/08........................................ 696 40 Golden State Holdings, Escrow Corporation, 7.000% 08/01/03........................................ 40 180 PNC Funding Corporation, 7.000% 09/01/04........................................ 188 304 PNC Funding Corporation, 5.750% 08/01/06........................................ 303 347 Popular North America Inc., Series E, 6.125% 10/15/06........................................ 340 424 U.S. Bank NA, Minnesota, 6.375% 08/01/11........................................ 422 582 Wachovia Corporation, 4.950% 11/01/06........................................ 565 -------- 2,554 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- COMMERCIAL SERVICES -- 0.1% $ 322 Allied Waste North America, Inc., Series B, 10.000% 08/01/09....................................... $ 327 131 Coinmach Corporation, 9.000% 02/01/10@....................................... 135 35 Vicar Operating Inc., 9.875% 12/01/09@....................................... 37 -------- 499 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.1% 146 International Business Machines Corporation, 6.500% 01/15/28........................................ 139 222 Seagate Technology International, 13.500%** 11/15/07@.................................... 252 -------- 391 -------- CONGLOMERATES -- 0.1% 261 Waste Management, Inc., 7.375% 08/01/10........................................ 259 -------- CONSUMER CREDIT AND MORTGAGES -- 0.2% 829 Countrywide Home Loans, Inc., Series J, 5.500% 08/01/06........................................ 815 -------- DEPARTMENT AND DISCOUNT STORES -- 0.3% 500 Sears Roebuck Acceptance Corporation, 6.750% 08/15/11........................................ 497 167 Target Corporation, 5.875% 03/01/12........................................ 162 383 Wal-Mart Stores, Inc., 5.450% 08/01/06........................................ 387 -------- 1,046 -------- DIVERSIFIED MANUFACTURING -- 0.2% 155 General Electric Global Insurance Holding Corporation, 7.000% 02/15/26........................................ 151 77 The Scotts Company, 8.625% 01/15/09@....................................... 80 305 The Scotts Company, Class A, 8.625% 01/15/09........................................ 316 198 Tyco International Group SA, 6.875% 01/15/29........................................ 166 -------- 713 -------- ELECTRIC POWER -- NON NUCLEAR -- 1.6% 398 AES Corporation, 8.750% 12/15/02(a)..................................... 370 690 American Electric Power Company, Inc., Series A, 6.125% 05/15/06........................................ 685 206 Calpine Corporation, 8.500% 02/15/11(a)..................................... 164 288 Cinergy Corporation, 6.250% 09/01/04........................................ 287 327 Constellation Energy Group, Inc., 7.600% 04/01/32........................................ 322
SEE NOTES TO FINANCIAL STATEMENTS. 98 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- ELECTRIC POWER -- NON NUCLEAR -- (CONTINUED) $ 1,300 Consumers Energy Company, Series B, 6.200% 05/01/03........................................ $ 1,298 270 DPL Inc., 6.875% 09/01/11........................................ 256 230 Duke Energy Corporation, 6.250% 01/15/12........................................ 225 850 Exelon Generation Company LLC, 6.950% 06/15/11@....................................... 846 259 FirstEnergy Corporation, Series B, 6.450% 11/15/11........................................ 238 445 Progress Energy, Inc., 7.100% 03/01/11........................................ 454 158 Progress Energy, Inc., 7.750% 03/01/31........................................ 164 500 PSEG Power LLC, 6.875% 04/15/06........................................ 504 232 Southern Company Capital Funding, Series A, 5.300% 02/01/07........................................ 226 187 Virginia Electric and Power Company, Series A, 5.375% 02/01/07........................................ 183 -------- 6,222 -------- ELECTRICAL EQUIPMENT -- 0.1% 198 Flextronics International Ltd., 9.875% 07/01/10(a)..................................... 212 -------- ENERGY -- MISCELLANEOUS -- 0.2% 595 Nisource Finance Corporation, 7.500% 11/15/03........................................ 590 320 PSEG Energy Holdings Inc., 8.500% 06/15/11........................................ 306 -------- 896 -------- EXPLORATION AND PRODUCTION -- 0.2% 185 Anadarko Finance Company, Series B, 6.750% 05/01/11........................................ 186 312 Anadarko Finance Company, Series B, 7.500% 05/01/31........................................ 318 152 Pure Resources, Inc., 7.125% 06/15/11........................................ 144 -------- 648 -------- FINANCE -- MISCELLANEOUS -- 1.6% 265 Associates Corporation of North America, 6.950% 11/01/18........................................ 266 489 Capital One Bank, 6.875% 02/01/06........................................ 472 128 Capital One Bank, Series 4, 6.500% 07/30/04........................................ 125 835 Caterpillar Finance Services Corporation, 5.950% 05/01/06........................................ 842 616 Citigroup Inc., 7.250% 10/01/10........................................ 648 147 Citigroup Inc., 6.000% 02/21/12........................................ 142 958 General Electric Capital Corporation, Series A, 6.750% 03/15/32........................................ 926
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- FINANCE -- MISCELLANEOUS -- (CONTINUED) $ 890 Household Finance Corporation, 6.500% 01/24/06........................................ $ 892 546 Household Finance Corporation, 5.875% 02/01/09........................................ 513 546 Household Finance Corporation, 6.750% 05/15/11........................................ 529 625 Prudential Funding LLC, 6.600% 05/15/08@....................................... 632 65 Rent-A-Center, Inc., 11.000% 08/15/08@...................................... 69 381 Washington Mutual, Inc., 7.500% 08/15/06........................................ 404 -------- 6,460 -------- FOOD AND DRUG STORES -- 0.6% 424 Fred Meyer, Inc., 7.450% 03/01/08........................................ 448 90 Marsh Supermarkets, Inc., Series B, 8.875% 08/01/07........................................ 90 1,500 Nabisco Inc., 6.125%** 02/01/33...................................... 1,519 189 Pathmark Stores Inc., 8.750% 02/01/12(a)@.................................... 195 -------- 2,252 -------- FOOD PRODUCTS -- 0.7% 168 Del Monte Corporation, Series B, 9.250% 05/15/11........................................ 176 200 Kellogg Company, Series B, 6.000% 04/01/06........................................ 201 149 Land O' Lakes Inc., 8.750% 11/15/11@....................................... 148 63 Pilgrim's Pride Corporation, Class B, 9.625% 09/15/11........................................ 66 592 Sara Lee Corporation, 6.250% 09/15/11........................................ 586 99 The Great Atlantic & Pacific Tea Company, Inc., 7.750% 04/15/07........................................ 98 491 Tyson Foods, Inc., Class A, 7.250% 10/01/06@....................................... 502 200 Unilever Capital Corporation, 6.750% 11/01/03........................................ 210 615 Unilever Capital Corporation, 7.125% 11/01/10........................................ 652 -------- 2,639 -------- HEALTH SERVICES -- 0.2% 150 Cardinal Health, Inc., 6.750% 02/15/11........................................ 154 387 Wellpoint Health Networks Inc., 6.375% 06/15/06........................................ 392 45 Wellpoint Health Networks Inc., 6.375% 01/15/12........................................ 44 -------- 590 --------
SEE NOTES TO FINANCIAL STATEMENTS. 99 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- HOUSING AND FURNISHING -- 0.1% $ 185 Hanson Overseas B.V., 6.750% 09/15/05........................................ $ 190 122 Standard Pacific Corporation, 8.500% 04/01/09........................................ 123 125 The Ryland Group, Inc., 8.000% 08/15/06........................................ 128 -------- 441 -------- INTEGRATED OIL -- 0.2% 234 Amerada Hess Corporation, 7.875% 10/01/29........................................ 246 300 Conoco Funding Company, 6.350% 10/15/11........................................ 297 416 PEMEX Master Trust, 8.625% 02/01/22@....................................... 421 -------- 964 -------- INVESTMENT SERVICES -- 0.9% 402 Bear Stearns Companies, Inc., 7.800% 08/15/07........................................ 428 240 Credit Suisse First Boston USA, Inc., 5.875% 08/01/06........................................ 241 380 Credit Suisse First Boston USA, Inc., 6.125% 11/15/11........................................ 366 975 Lehman Brothers Holdings Inc., 7.750% 01/15/05........................................ 1,023 298 Merrill Lynch & Company, Inc., 6.000% 02/17/09........................................ 294 298 Morgan Stanley Dean Witter & Company, 6.100% 04/15/06........................................ 304 805 Morgan Stanley Dean Witter & Company, 6.750% 04/15/11........................................ 809 180 Washington Mutual Finance Corporation, 8.250% 06/15/05........................................ 194 -------- 3,659 -------- LODGING AND RECREATION -- 0.5% 99 Argosy Gaming Company, 9.000% 09/01/11........................................ 104 237 Aztar Corporation, 9.000% 08/15/11........................................ 247 137 Choctaw Resort Development Enterprise, 9.250% 04/01/09........................................ 141 200 Harrahs Operating Company Inc., 7.875% 12/15/05........................................ 206 125 Horseshoe Gaming Holding Corporation, Series B, 8.625% 05/15/09........................................ 131 308 Host Marriott Corporation, Series A, 7.875% 08/01/05........................................ 306 115 Isle of Capri Casinos, Inc., 9.000% 03/15/12@....................................... 115 231 Meristar Hospitality Corporation, 9.125% 01/15/11@....................................... 236 200 Park Place Entertainment Corporation, 8.125% 05/15/11........................................ 201 277 Six Flags, Inc., 8.875% 02/01/10@....................................... 280 -------- 1,967 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- METALS AND MINING -- 0.1% $ 278 Alcoa Inc., 7.375% 08/01/10........................................ $ 295 37 Compass Minerals Group Inc., 10.000% 08/15/11@...................................... 39 120 United States Steel LLC, 10.750% 08/01/08(a)@................................... 120 -------- 454 -------- NATURAL GAS PIPELINES -- 0.4% 300 EL Paso Corporation, 7.800% 08/01/31........................................ 293 650 Kinder Morgan, Inc., 6.650% 03/01/05........................................ 660 573 The Williams Companies, Inc., 6.500% 08/01/06........................................ 546 97 The Williams Companies, Inc., 7.625% 07/15/19........................................ 90 -------- 1,589 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 0.0%+ 200 SBA Communications Corporation, 10.250% 02/01/09(a).................................... 138 -------- OIL REFINING AND MARKETING -- 0.4% 865 PDV America Inc., Gtd. Sr. Notes, 7.875% 08/01/03........................................ 867 640 USX Corporation, 6.650% 02/01/06........................................ 654 -------- 1,521 -------- PACKAGING AND CONTAINERS -- 0.2% 146 Container Corporation of America, 9.750% 04/01/03........................................ 148 45 Container Corporation of America, Series B, 10.750% 05/01/02....................................... 45 206 Owens-Brockway, 8.875% 02/15/09@....................................... 211 174 Riverwood International Corporation, 10.625% 08/01/07....................................... 184 -------- 588 -------- PAPER AND FOREST PRODUCTS -- 0.3% 204 Appleton Papers Inc., 12.500% 12/15/08@...................................... 200 109 FiberMark, Inc., 10.750% 04/15/11(a).................................... 96 201 International Paper Company, 8.000% 07/08/03........................................ 210 280 Tembec Finance Corporation, 9.875% 09/30/05........................................ 289 119 Tembec Industries Inc., 8.500% 02/01/11........................................ 121 247 Tembec Industries Inc., 7.750% 03/15/12@....................................... 242 96 Weyerhaeuser Company, 7.375% 03/15/32@....................................... 94 -------- 1,252 --------
SEE NOTES TO FINANCIAL STATEMENTS. 100 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.2% $ 900 Wyeth, 6.250% 03/15/06........................................ $ 927 -------- PUBLISHING AND ADVERTISING -- 0.2% 177 Gannett Company, Inc., 6.375% 04/01/12........................................ 176 203 Viacom Inc., Class B, 6.625% 05/15/11........................................ 203 203 Viacom Inc., Class B, 7.875% 07/30/30........................................ 219 -------- 598 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.3% 277 Burlington Northern Santa Fe Corporation, 6.750% 07/15/11........................................ 278 697 FedEx Corporation, 6.625% 02/12/04........................................ 719 -------- 997 -------- REAL ESTATE -- 0.1% 312 EOP Operating LP, 7.000% 07/15/11........................................ 311 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.1% 199 Felcor Lodging LP, 9.500% 09/15/08........................................ 210 136 iStar Financial Inc., 8.750% 08/15/08........................................ 140 -------- 350 -------- RESTAURANTS -- 0.0%+ 135 Tricon Global Restaurants, Inc., 7.450% 05/15/05........................................ 137 -------- TELECOMMUNICATIONS SERVICES -- 1.6% 2,670 AT&T Canada Inc., (0.000)% due 06/15/08 9.950% beginning 06/15/03.............................. 434 128 AT&T Corporation, 8.000% 11/15/31@....................................... 124 238 AT&T Wireless Services Inc., 7.875% 03/01/11........................................ 237 308 BellSouth Telecommunications Inc., 6.375% 06/01/28........................................ 286 177 Cingular Wireless, 7.125% 12/15/31@....................................... 168 399 Cox Communications, Inc., Class A, 7.750% 11/01/10........................................ 407 302 Dobson Communications Corporation, Class A, 10.875% 07/01/10(a).................................... 293 317 Nextel Communications, Inc., Class A, 9.375% 11/15/09(a)..................................... 208 207 Qwest Capital Funding, Inc., 7.000% 08/03/09........................................ 169 319 Qwest Capital Funding, Inc., 6.875% 07/15/28........................................ 225
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- (CONTINUED) $ 298 Rural Cellular Corporation, Class A, 9.750% 01/15/10@....................................... $ 246 540 SBC Communications Inc., 6.250% 03/15/11........................................ 536 111 Sprint Capital Corporation, 6.125% 11/15/08........................................ 99 290 Sprint Capital Corporation, 8.375% 03/15/12@....................................... 286 222 Sprint Capital Corporation, 6.900% 05/01/19........................................ 183 350 TELUS Corporation, 7.500% 06/01/07........................................ 357 477 Verizon Global Funding Corporation, 7.750% 12/01/30........................................ 497 399 Verizon New England Inc., 6.500% 09/15/11........................................ 390 396 Verizon Pennsylvania, Series A, 5.650% 11/15/11........................................ 363 249 WorldCom, Inc. - WorldCom Group, 8.000% 05/15/06........................................ 219 159 WorldCom, Inc. - WorldCom Group, 7.500% 05/15/11........................................ 133 477 WorldCom, Inc. - WorldCom Group, 8.250% 05/15/31........................................ 379 -------- 6,239 -------- TOBACCO -- 0.2% 150 DIMON Inc., Series B, 9.625% 10/15/11........................................ 159 525 R.J. Reynolds Tobacco Holdings, Inc., 7.375% 05/15/03........................................ 540 -------- 699 -------- TOTAL CORPORATE BONDS AND NOTES (Cost $64,304)......................................... 61,634 -------- FOREIGN BONDS AND NOTES -- 1.2% 1,000 Banco Latinoamericano de Exportaciones, SA, Class E, 7.200% 05/28/02@....................................... 1,003 75 Compagnie Generale de Geophysique SA, 10.625% 11/15/07(a)@................................... 78 160 Compagnie Generale De Geophysique SA, 10.625% 11/15/07(a).................................... 166 815 Corp Andina de Fomento, 8.875% 06/01/05........................................ 887 301 Government of Canada, 5.250% 11/05/08........................................ 296 263 Hellenic Republic, 6.950% 03/04/08........................................ 275 233 Kimberly-Clark de Mexico, SA de CV, Class A, 8.875% 08/01/09@....................................... 248 788 Pemex Finance Ltd., 5.720% 11/15/03........................................ 802 464 Republic of Italy, 6.000% 02/22/11........................................ 462
SEE NOTES TO FINANCIAL STATEMENTS. 101 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- FOREIGN BONDS AND NOTES -- (CONTINUED) $ 309 Republic of Italy, 6.875% 09/27/23........................................ $ 318 309 United Mexican States, 8.375% 01/14/11........................................ 324 -------- TOTAL FOREIGN BONDS AND NOTES (Cost $4,843).......................................... 4,859 -------- MORTGAGE-BACKED SECURITIES -- 18.0% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.4% 547 Criimi Mae CMBS Corporation, Series 1998-1, Class A1, 5.697% 06/20/30@....................................... 558 2,300 First Union National Bank Commercial Mortgage, Series 1999-C4, Class A2, 7.390% 11/15/09........................................ 2,446 5,517 JP Morgan Commercial Mortgage Finance Corporation, Series 1997-C4, Class X, Interest only, 1.229%** 12/26/28...................................... 234 6,961 Merrill Lynch Mortgage Investors, Inc., Series 1998-C3, Class IO, .990%** 12/15/30....................................... 306 300 Nomura Depositor Trust, Series 1998-ST1, Class A4, 2.800%** 02/15/34...................................... 300 2,000 PNC Mortgage Acceptance Corporation, Series 1999-CM1, Class A1B, 7.330% 10/10/09........................................ 2,111 2,475 Salomon Brothers Mortgage Securities VII, Series 2000-C1, Class A2, 7.520% 12/18/09........................................ 2,640 33,115 Vendee Mortgage Trust, Series 1998-1, Class 2, Interest only, .436%** 09/15/27&&..................................... 417 37,681 Vendee Mortgage Trust, Series 1998-3, Class 1, Interest only, .301%** 03/15/29....................................... 368 -------- 9,380 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 0.5% 26 8.000% 01/01/04........................................ 27 26 8.000% 07/01/10........................................ 27 2 10.500% 04/01/19....................................... 2 460 8.000% 09/01/25(c)..................................... 486 1,437 6.500% 07/01/29........................................ 1,436 -------- 1,978 -------- FEDERAL HOUSING AUTHORITY (FHA) CERTIFICATES -- 0.1% 415 7.000% 01/01/40(b)..................................... 415 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 14.3% $ 7,300 7.000% 07/15/05(a)(c).................................. $ 7,803 29 6.500% 01/01/06........................................ 29 655 5.000% 01/15/07........................................ 648 349 8.500% 08/01/11........................................ 375 173 7.500% 10/01/11........................................ 182 5,690 6.000% 03/01/17(c)..................................... 5,669 290 10.000% 09/01/18....................................... 326 174 7.000% 01/25/21........................................ 178 6,063 7.000% 05/01/30(c)..................................... 6,148 5,812 7.000% 05/01/30(c)..................................... 5,894 11,875 6.500% 02/01/32(c)..................................... 11,811 16,800 6.500% 02/01/32(c)..................................... 16,710 237 6.244%** 08/01/36...................................... 241 -------- 56,014 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 0.7% 13 10.000% 02/15/16....................................... 15 99 9.000% 10/15/19........................................ 108 44 9.000% 11/15/19........................................ 48 285 9.000% 12/15/19........................................ 312 21 9.000% 01/15/20........................................ 23 62 9.000% 01/15/20........................................ 67 294 7.500% 12/15/23(c)..................................... 309 1,838 6.500% 01/15/31........................................ 1,837 -------- 2,719 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $70,805)......................................... 70,506 -------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 0.8% (Cost $3,177) FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 0.8% 3,200 3.250% 01/15/04........................................ 3,170 -------- U.S. TREASURY OBLIGATIONS -- 3.9% U.S. TREASURY NOTES -- 3.8% 8,600 6.250% 02/15/03(a)..................................... 8,864 5,900 3.875% 07/31/03(a)..................................... 5,961 -------- 14,825 -------- U.S. TREASURY STRIPS -- 0.1% 1,650 Principal only, 5.946%*** 11/15/27..................................... 349 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $15,210)......................................... 15,174 --------
SEE NOTES TO FINANCIAL STATEMENTS. 102 NATIONS FUNDS Nations Asset Allocation Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
SHARES VALUE (000) (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 22.3% (Cost $87,417) 87,417 Nations Cash Reserves, Capital Class Shares#............. $ 87,417 -------- TOTAL INVESTMENTS (Cost $448,004*)................................ 120.7% 473,129 -------- OTHER ASSETS AND LIABILITIES (NET)................ (20.7)% Receivable for investment securities sold................ $ 13,974 Receivable for Fund shares sold.......................... 540 Dividends receivable..................................... 279 Interest receivable...................................... 1,738 Variation margin due to broker........................... (112) Collateral on securities loaned.......................... (31,278) Payable for Fund shares redeemed......................... (704) Investment advisory fee payable.......................... (218) Administration fee payable............................... (77) Shareholder servicing and distribution fees payable...... (161) Due to custodian......................................... (1) Payable for investment securities purchased.............. (64,663) Accrued Trustees' fees and expenses...................... (74) Accrued expenses and other liabilities................... (303) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (81,060) -------- NET ASSETS........................................ 100.0% $392,069 ======== NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 494 Accumulated net realized loss on investments sold and futures contracts...................................... (16,577) Net unrealized appreciation of investments and futures contracts.............................................. 24,594 Paid-in capital.......................................... 383,558 -------- NET ASSETS............................................... $392,069 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($40,286,557 / 2,021,511 shares outstanding)........... $19.93 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($223,579,314 / 11,224,209 shares outstanding)......... $19.92 ----- ----- 5.75% Maximum sales charge..................................... $21.14 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($124,982,960 / 6,308,813 shares outstanding).......... $19.81 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($3,219,920 / 162,302 shares outstanding).............. $19.84 ----- -----
- --------------- * Federal Income Tax Information (see Note 9). **Variable rate security. The interest rate shown reflects the rate in effect at March 31, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at March 31, 2002. @ 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. + Amount represents less than 0.1%. (a)All or a portion of security was on loan at March 31, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $28,455 and $29,976, respectively. (b)Construction loan security. Security was issued on a when-issued basis. (c)TBA -- Securities purchased on a forward commitment basis. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $31,278. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 103 NATIONS FUNDS Nations Equity Income Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 74.0% AEROSPACE AND DEFENSE -- 3.4% 19,000 General Dynamics Corporation............................. $ 1,785 30,403 Lockheed Martin Corporation.............................. 1,751 25,099 Rockwell International Corporation....................... 503 -------- 4,039 -------- AUTOMOTIVE -- 1.1% 14,620 Johnson Controls, Inc. .................................. 1,291 -------- BEVERAGES -- 1.5% 34,170 Anheuser-Busch Companies, Inc. .......................... 1,784 -------- BROADCASTING AND CABLE -- 0.8% 28,880 Comcast Corporation, Class A(a).......................... 918 -------- COMMERCIAL BANKING -- 3.6% 31,000 Citigroup Inc. .......................................... 1,535 103,000 SouthTrust Corporation................................... 2,719 -------- 4,254 -------- COMPUTERS AND OFFICE EQUIPMENT -- 3.4% 39,000 International Business Machines Corporation.............. 4,056 -------- CONSUMER CREDIT AND MORTGAGES -- 2.5% 19,120 Fannie Mae............................................... 1,527 23,000 Freddie Mac.............................................. 1,458 -------- 2,985 -------- DEPARTMENT AND DISCOUNT STORES -- 1.4% 28,000 Wal-Mart Stores, Inc. ................................... 1,716 -------- DIVERSIFIED MANUFACTURING -- 1.3% 40,000 General Electric Company................................. 1,498 -------- ELECTRIC POWER -- NON NUCLEAR -- 1.5% 60,549 TECO Energy, Inc.(a)..................................... 1,734 -------- ELECTRIC POWER -- NUCLEAR -- 2.9% 26,192 Dominion Resources, Inc.(a).............................. 1,707 29,911 FPL Group, Inc. ......................................... 1,781 -------- 3,488 -------- EXPLORATION AND PRODUCTION -- 2.5% 19,451 Anadarko Petroleum Corporation(a)........................ 1,098 39,742 Devon Energy Corporation(a).............................. 1,918 -------- 3,016 -------- HEALTH SERVICES -- 1.4% 3,125 Laboratory Corporation of America Holdings!!............. 300 19,680 Tenet Healthcare Corporation!!........................... 1,319 -------- 1,619 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- HEAVY MACHINERY -- 1.1% 22,405 Caterpillar Inc.(a)...................................... $ 1,274 -------- HOUSEHOLD PRODUCTS -- 4.4% 75,000 Fortune Brands, Inc. .................................... 3,703 44,650 International Flavors & Fragrances, Inc. ................ 1,561 -------- 5,264 -------- INSURANCE -- 2.3% 27,535 Jefferson-Pilot Corporation.............................. 1,379 30,292 The St. Paul Companies, Inc. ............................ 1,389 -------- 2,768 -------- INTEGRATED OIL -- 7.7% 34,385 ChevronTexaco Corporation................................ 3,104 80,000 Exxon Mobil Corporation.................................. 3,506 68,796 Unocal Corporation....................................... 2,680 -------- 9,290 -------- INVESTMENT SERVICES -- 0.7% 18,635 Alliance Capital Management Holding LP!!................. 865 -------- MEDICAL DEVICES AND SUPPLIES -- 2.1% 38,929 Johnson & Johnson........................................ 2,528 -------- OILFIELD SERVICES -- 1.8% 35,676 Schlumberger Ltd. ....................................... 2,098 -------- PHARMACEUTICALS -- 2.9% 55,350 Pfizer Inc. ............................................. 2,200 40,006 Schering-Plough Corporation.............................. 1,252 -------- 3,452 -------- RAILROADS, TRUCKING AND SHIPPING -- 2.0% 35,775 CSX Corporation(a)....................................... 1,363 16,031 United Parcel Service, Inc., Class B(a).................. 975 -------- 2,338 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 4.0% 22,351 Boston Properties, Inc. ................................. 882 32,888 Equity Office Properties Trust........................... 986 39,710 Equity Residential Properties Trust...................... 1,141 55,323 Simon Property Group, Inc. .............................. 1,806 -------- 4,815 -------- SEMICONDUCTORS -- 6.6% 70,000 Analog Devices, Inc.!!(a)................................ 3,153 81,000 Linear Technology Corporation............................ 3,581 24,000 Motorola, Inc. .......................................... 1,066 -------- 7,800 -------- SOFTWARE -- 6.5% 62,060 Affiliated Computer Services, Inc., Class A!!(a)......... 3,483 69,825 Microsoft Corporation!!.................................. 4,212 -------- 7,695 --------
SEE NOTES TO FINANCIAL STATEMENTS. 104 NATIONS FUNDS Nations Equity Income Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- 1.7% 47,880 Sprint Corporation (FON Group)........................... $ 732 27,997 Verizon Communications Inc. ............................. 1,278 -------- 2,010 -------- TOBACCO -- 1.4% 32,100 Philip Morris Companies Inc. ............................ 1,691 -------- UTILITIES -- MISCELLANEOUS -- 1.5% 42,074 American Water Works Company, Inc. ...................... 1,843 -------- TOTAL COMMON STOCKS (Cost $82,139)......................................... 88,129 -------- PRINCIPAL AMOUNT (000) - --------- CONVERTIBLE BONDS AND NOTES -- 10.6% AEROSPACE AND DEFENSE -- 1.3% $ 1,440 L-3 Communications Holdings, Inc., 4.000% 09/15/11@....................................... 1,704 -------- APPAREL AND TEXTILES -- 0.5% 615 Reebok International Ltd., 4.250%** 03/01/21@..................................... 636 -------- BEVERAGES -- 1.4% 1,650 Convertibles Ltd., 2.000% 10/15/07@....................................... 1,685 -------- BROADCASTING AND CABLE -- 1.1% 1,245 AT&T Corporation -- Liberty Media Group, 3.250% 03/15/31@(a).................................... 1,278 -------- COMPUTER SERVICES -- 0.8% 655 Symantec Corporation, 3.000% 11/01/06@....................................... 910 -------- FOOD PRODUCTS -- 1.2% 1,200 Performance Food Group Company, 5.500% 10/16/08........................................ 1,458 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.0% 1,650 Nortel Networks Corporation, 4.250% 09/01/08@....................................... 1,163 -------- PHARMACEUTICALS -- 1.1% 1,330 Genzyme Corporation, 3.000% 05/15/21@....................................... 1,255 -------- RETAIL -- SPECIALTY -- 1.0% 1,250 J.C. Penney Company, Inc., 5.000% 10/15/08@(a).................................... 1,166 --------
PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- SEMICONDUCTORS -- 1.2% $ 920 Agilent Technologies, Inc., 3.000% 12/01/21@....................................... $ 1,150 140 ATMI Inc., 5.250% 11/15/06@....................................... 223 -------- 1,373 -------- TOTAL CONVERTIBLE BONDS AND NOTES (Cost $12,111)......................................... 12,628 -------- SHARES - --------- CONVERTIBLE PREFERRED STOCKS -- 13.4% AEROSPACE AND DEFENSE -- 2.0% 9,200 Northrop Grumman Corporation............................. 1,124 21,000 Raytheon Company......................................... 1,428 -------- 2,552 -------- AUTOMOTIVE -- 0.4% 7,500 Ford Motor Company Capital Trust II!!.................... 422 -------- COMMERCIAL BANKING -- 1.2% 29,000 Washington Mutual Capital Trust I........................ 1,396 -------- COMPUTER SERVICES -- 1.1% 25,600 Electronic Data Systems Corporation...................... 1,294 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.7% 12,300 Xerox Corporation........................................ 858 -------- ELECTRIC POWER -- NON NUCLEAR -- 2.9% 72,500 Duke Energy Corporation(a)............................... 1,863 30,000 TXU Corporation.......................................... 1,704 -------- 3,567 -------- NATURAL GAS DISTRIBUTION -- 0.6% 21,600 El Paso Corporation...................................... 667 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.0% 70,000 Cisco Pfd STRIDES(a)..................................... 1,183 -------- PACKAGING AND CONTAINERS -- 0.4% 9,800 Sealed Air Corporation................................... 449 -------- PAPER AND FOREST PRODUCTS -- 0.7% 14,000 Boise Cascade Corporation................................ 783 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.3% 30,000 Union Pacific Capital Trust.............................. 1,500 --------
SEE NOTES TO FINANCIAL STATEMENTS. 105 NATIONS FUNDS Nations Equity Income Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- 1.1% 54,000 Citizens Communications Company.......................... $ 1,256 -------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $15,251)......................................... 15,927 -------- SHARES (000) - --------- INVESTMENT COMPANIES -- 14.2% (Cost $16,931) 16,931 Nations Cash Reserves, Capital Class Shares#............. 16,931 -------- TOTAL INVESTMENTS (Cost $126,432*)................................ 112.2% 133,615 -------- OTHER ASSETS AND LIABILITIES (NET)................ (12.2)% Cash..................................................... $ 20 Receivable for investment securities sold................ 1,069 Receivable for Fund shares sold.......................... 7 Dividends receivable..................................... 154 Interest receivable...................................... 125 Collateral on securities loaned.......................... (15,444) Payable for Fund shares redeemed......................... (207) Investment advisory fee payable.......................... (66) Administration fee payable............................... (24) Shareholder servicing and distribution fees payable...... (36) Accrued Directors' fees and expenses..................... (43) Accrued expenses and other liabilities................... (118) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (14,563) -------- NET ASSETS........................................ 100.0% $119,052 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold........ $ (2,781) Net unrealized appreciation of investments............... 7,183 Paid-in capital.......................................... 114,650 -------- NET ASSETS............................................... $119,052 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($60,968,666 / 6,996,228 shares outstanding)........... $8.71 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($21,556,666 / 2,482,639 shares outstanding)........... $8.68 ----- ----- 5.75% Maximum sales charge..................................... $9.21 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($34,190,141 / 3,948,395 shares outstanding)........... $8.66 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($2,336,351 / 266,003 shares outstanding).......................... $8.78 ----- -----
- --------------- *Federal income tax information (see Note 9). ** Variable rate security. The interest rate shown reflects the rate in effect at March 31, 2002. @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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $14,249 and $14,915, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $15,444. SEE NOTES TO FINANCIAL STATEMENTS. 106 NATIONS FUNDS Nations Classic Value Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - ---------------------------------------------------------------------------------- COMMON STOCKS -- 97.8% AEROSPACE AND DEFENSE -- 2.7% 206,790 Boeing Company........................................... $ 9,978 -------- AIRLINES -- 1.5% 209,100 AMR Corporation!!(a)..................................... 5,522 -------- AUTOMOTIVE -- 3.8% 334,200 Ford Motor Company(a).................................... 5,511 331,900 Goodyear Tire & Rubber Company(a)............................................. 8,487 -------- 13,998 -------- CHEMICALS -- BASIC -- 4.5% 165,900 E.I. duPont de Nemours and Company....................... 7,822 159,600 PPG Industries, Inc. .................................... 8,764 -------- 16,586 -------- CHEMICALS -- SPECIALTY -- 3.4% 251,800 Great Lakes Chemical Corporation(a)...................... 7,093 152,600 Lubrizol Corporation..................................... 5,309 -------- 12,402 -------- COMMERCIAL BANKING -- 1.5% 130,900 Banc One Corporation(a).................................. 5,469 -------- COMMERCIAL SERVICES -- 1.7% 235,600 Waste Management, Inc.(a)................................ 6,420 -------- COMPUTERS AND OFFICE EQUIPMENT -- 8.0% 389,700 Hewlett-Packard Company(a)............................... 6,991 61,200 NCR Corporation!!........................................ 2,739 694,400 Unisys Corporation!!..................................... 8,770 1,011,700 Xerox Corporation!!(a)................................... 10,876 -------- 29,376 -------- DEPARTMENT AND DISCOUNT STORES -- 2.0% 315,700 Dillard's, Inc., Class A................................. 7,533 -------- DIVERSIFIED ELECTRONICS -- 1.9% 219,500 Eastman Kodak Company(a)................................. 6,842 -------- ELECTRIC POWER -- NON NUCLEAR -- 4.4% 278,500 Edison International!!................................... 4,665 246,200 PG & E Corporation!!..................................... 5,800 144,000 PPL Corporation.......................................... 5,704 -------- 16,169 -------- ELECTRIC POWER -- NUCLEAR -- 2.9% 199,400 Exelon Corporation....................................... 10,562 -------- ELECTRICAL EQUIPMENT -- 0.7% 49,300 Tecumseh Products Company................................ 2,628 --------
VALUE SHARES (000) - ---------------------------------------------------------------------------------- FOOD AND DRUG STORES -- 3.2% 215,600 Albertson's, Inc.(a)..................................... $ 7,145 214,400 The Kroger Company!!..................................... 4,751 -------- 11,896 -------- FOOD PRODUCTS -- 2.9% 484,465 Archer-Daniels-Midland Company........................... 6,749 160,800 ConAgra Foods, Inc.(a)................................... 3,899 -------- 10,648 -------- HOUSEHOLD PRODUCTS -- 3.1% 453,200 American Greetings Corporation, Class A(a)............... 8,226 133,500 Tupperware Corporation................................... 3,037 -------- 11,263 -------- INSURANCE -- 10.5% 299,500 Allstate Corporation..................................... 11,312 72,200 American National Insurance Company...................... 6,823 153,700 Loews Corporation........................................ 9,004 224,200 Prudential Financial, Inc.!!............................. 6,961 244,100 The Phoenix Companies, Inc.!!............................ 4,687 -------- 38,787 -------- LODGING AND RECREATION -- 1.4% 335,100 Hasbro, Inc.(a).......................................... 5,301 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 4.8% 1,144,888 Avaya Inc.!!(a).......................................... 8,449 657,000 Motorola, Inc. .......................................... 9,330 -------- 17,779 -------- PHARMACEUTICALS -- 6.2% 183,500 Merck & Company, Inc. ................................... 10,566 394,500 Schering-Plough Corporation.............................. 12,348 -------- 22,914 -------- PROFESSIONAL SERVICES -- 1.8% 1,265,000 Service Corporation International........................ 6,705 -------- RESTAURANTS -- 2.8% 368,800 McDonald's Corporation................................... 10,234 -------- RETAIL -- SPECIALTY -- 1.8% 236,600 Sherwin-Williams Company(a).............................. 6,738 -------- SPECIALTY STORES -- 2.1% 433,990 Toys R Us, Inc.!!(a)..................................... 7,794 -------- STEEL -- 1.4% 291,300 United States Steel Corporation.......................... 5,287 --------
SEE NOTES TO FINANCIAL STATEMENTS. 107 NATIONS FUNDS Nations Classic Value Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - ---------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- 11.3% 158,700 CenturyTel, Inc. ........................................ $ 5,396 371,600 SBC Communications Inc. ................................. 13,912 571,600 Sprint Corporation (FON Group)........................... 8,740 309,200 Verizon Communications Inc. ............................. 14,114 -------- 42,162 -------- TOBACCO -- 5.5% 164,900 Philip Morris Companies Inc. ............................ 8,685 72,100 R.J. Reynolds Tobacco Holdings, Inc.(a).................. 4,668 178,000 UST Inc.(a).............................................. 6,930 -------- 20,283 -------- TOTAL COMMON STOCKS (Cost $341,039)........................................ 361,276 -------- SHARES (000) - ----------- INVESTMENT COMPANIES -- 24.4% (Cost $89,977) 89,977 Nations Cash Reserves, Capital Class Shares#............. 89,977 -------- TOTAL INVESTMENTS (Cost $431,016*)................................ 122.2% 451,253 -------- OTHER ASSETS AND LIABLITIES (NET)................. (22.2)% Cash..................................................... $ 170 Receivable for Fund shares sold.......................... 4,335 Dividends receivable..................................... 433 Interest receivable...................................... 6 Collateral on securities loaned.......................... (73,636) Investment advisory fee payable.......................... (192) Administration fee payable............................... (68) Shareholder servicing and distribution fees payable...... (64) Payable for Fund shares redeemed......................... (422) Payable for investment securities purchased.............. (12,517) Accrued Trustees' fees and expenses...................... (8) Accrued expenses and other liabilities................... (74) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (82,037) -------- NET ASSETS........................................ 100.0% $369,216 ======== NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 496 Accumulated net realized gain on investments sold........ 11,175 Net unrealized appreciation of investments............... 20,237 Paid-in capital.......................................... 337,308 -------- NET ASSETS............................................... $369,216 ======== VALUE - ---------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($274,660,706 / 22,750,878 shares outstanding)......... $12.07 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($17,127,822 / 1,420,279 shares outstanding)........... $12.06 ------ ------ 5.75% Maximum sales charge..................................... $12.80 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($36,511,349 / 3,043,226 shares outstanding)........... $12.00 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($40,916,288 / 3,409,309 shares outstanding)........... $12.00 ------ ------
- --------------- *Federal income tax information (see Note 9). !! 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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $66,032 and $71,249, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $73,636. SEE NOTES TO FINANCIAL STATEMENTS. 108 NATIONS FUNDS Nations LargeCap Value Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.3% AEROSPACE AND DEFENSE -- 4.5% 13,125 Raytheon Company......................................... $ 539 3,800 United Technologies Corporation.......................... 282 -------- 821 -------- AIRLINES -- 2.5% 17,100 AMR Corporation!!........................................ 452 -------- AUTOMOTIVE -- 2.3% 3,100 General Motors Corporation............................... 187 4,600 Goodyear Tire & Rubber Company........................... 118 2,400 Lear Corporation!!....................................... 114 -------- 419 -------- BEVERAGES -- 1.8% 6,200 Diageo plc, ADR.......................................... 325 -------- BROADCASTING AND CABLE -- 2.8% 16,375 Comcast Corporation, Class A............................. 521 -------- CHEMICALS -- BASIC -- 1.0% 5,364 The Dow Chemical Company................................. 176 -------- COMMERCIAL BANKING -- 12.5% 12,500 Citigroup Inc. .......................................... 618 15,000 FleetBoston Financial Corporation........................ 525 7,600 J.P. Morgan Chase & Company.............................. 271 26,000 US Bancorp............................................... 587 8,500 Wachovia Corporation..................................... 315 -------- 2,316 -------- COMPUTERS AND OFFICE EQUIPMENT -- 2.2% 14,500 Compaq Computer Corporation.............................. 152 2,375 International Business Machines Corporation.............. 247 -------- 399 -------- CONSUMER CREDIT AND MORTGAGES -- 2.3% 6,600 Freddie Mac.............................................. 418 -------- DIVERSIFIED MANUFACTURING -- 2.9% 13,875 Honeywell International Inc. ............................ 531 -------- ELECTRIC POWER -- NON NUCLEAR -- 2.9% 7,000 PPL Corporation.......................................... 277 5,800 Public Service Enterprise Group Inc. .................... 266 -------- 543 -------- ELECTRIC POWER -- NUCLEAR -- 1.7% 4,825 Dominion Resources, Inc. ................................ 314 -------- EXPLORATION AND PRODUCTION -- 1.6% 5,100 Anadarko Petroleum Corporation........................... 288 -------- FOOD PRODUCTS -- 1.7% 9,500 Kellogg Company.......................................... 319 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.3% 1,700 Procter & Gamble Company................................. $ 153 2,300 The Estee Lauder Companies Inc., Class A................................................ 79 -------- 232 -------- INSURANCE -- 5.9% 2,500 American International Group, Inc. ...................... 180 2,600 Chubb Corporation........................................ 190 3,150 Hartford Financial Services Group, Inc. ................. 215 5,970 Prudential Financial, Inc.!!............................. 185 15,500 Travelers Property Casualty Corporation, Class A!!....... 310 -------- 1,080 -------- INTEGRATED OIL -- 9.6% 5,000 ChevronTexaco Corporation................................ 451 18,300 Exxon Mobil Corporation.................................. 801 9,400 Occidental Petroleum Corporation......................... 274 4,300 Phillips Petroleum Company............................... 270 -------- 1,796 -------- INVESTMENT SERVICES -- 5.8% 2,550 Goldman Sachs Group, Inc. ............................... 230 9,100 Merrill Lynch & Company, Inc. ........................... 504 6,000 Morgan Stanley Dean Witter & Company..................... 344 -------- 1,078 -------- LODGING AND RECREATION -- 2.1% 6,400 Carnival Corporation..................................... 209 4,700 Starwood Hotels & Resorts Worldwide, Inc. ............... 177 -------- 386 -------- MEDICAL DEVICES AND SUPPLIES -- 0.5% 2,900 Zimmer Holdings, Inc.!!.................................. 99 -------- METALS AND MINING -- 1.4% 7,000 Alcoa Inc. .............................................. 264 -------- NATURAL GAS DISTRIBUTION -- 0.4% 1,700 El Paso Corporation...................................... 75 -------- OILFIELD SERVICES -- 1.3% 2,100 BJ Services Company!!.................................... 72 3,900 Nabors Industries, Inc.!!................................ 165 -------- 237 -------- PAPER AND FOREST PRODUCTS -- 2.9% 3,550 Bowater Inc. ............................................ 177 8,400 International Paper Company.............................. 361 -------- 538 -------- PHARMACEUTICALS -- 2.9% 3,900 Pharmacia Corporation.................................... 176 11,400 Schering-Plough Corporation.............................. 357 -------- 533 -------- PUBLISHING AND ADVERTISING -- 1.2% 4,700 New York Times Company, Class A.......................... 225 --------
SEE NOTES TO FINANCIAL STATEMENTS. 109 NATIONS FUNDS Nations LargeCap Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- RAILROADS, TRUCKING AND SHIPPING -- 2.5% 11,900 CSX Corporation.......................................... $ 454 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.7% 4,600 Equity Office Properties Trust........................... 138 -------- RESTAURANTS -- 2.2% 14,475 McDonald's Corporation................................... 402 -------- SEMICONDUCTORS -- 3.1% 5,200 Micron Technology, Inc.!!................................ 171 5,200 National Semiconductor Corporation!!..................... 175 5,800 Teradyne, Inc.!!......................................... 229 -------- 575 -------- SOFTWARE -- 1.4% 11,800 Cadence Design Systems, Inc.!!........................... 267 -------- SPECIALTY STORES -- 2.8% 5,900 Gap, Inc. ............................................... 89 11,500 Staples, Inc.!!.......................................... 230 11,044 Toys R Us, Inc.!!........................................ 198 -------- 517 -------- TELECOMMUNICATIONS SERVICES -- 2.5% 10,100 Verizon Communications Inc. ............................. 461 -------- TOBACCO -- 3.1% 11,000 Philip Morris Companies Inc. ............................ 579 -------- TOTAL COMMON STOCKS (Cost $17,366)......................................... 17,778 -------- PRINCIPAL AMOUNT (000) ------- CONVERTIBLE BONDS AND NOTES -- 0.2% (Cost $24) SPECIALTY STORES -- 0.2% $ 24 Gap, Inc., 5.750% 03/15/09@....................................... 28 -------- SHARES VALUE (000) (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 3.9% (Cost $722) 722 Nations Cash Reserves, Capital Class Shares#............. $ 722 -------- TOTAL INVESTMENTS (Cost $18,112*)................................. 100.4% 18,528 -------- OTHER ASSETS AND LIABLITIES (NET)................. (0.4)% Cash..................................................... $ 1 Receivable for investment securities sold................ 174 Receivable for Fund shares sold.......................... 363 Dividends receivable..................................... 20 Receivable from administrator............................ 14 Investment advisory fee payable.......................... (7) Payable for fund shares redeemed......................... (1) Payable for investment securities purchased.............. (516) Accrued Trustees' fees and expenses...................... (4) Accrued expenses and other liabilities................... (124) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (80) -------- NET ASSETS........................................ 100% $ 18,448 ======== NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 7 Accumulated net realized gain on investments sold........ 27 Net unrealized appreciation of investments............... 416 Paid-in capital.......................................... 17,998 -------- NET ASSETS............................................... $ 18,448 ========
SEE NOTES TO FINANCIAL STATEMENTS. 110 NATIONS FUNDS Nations LargeCap Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002 VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($17,822,094 / 1,666,505 shares outstanding)........... $10.69 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($315,106 / 29,483 shares outstanding)................. $10.69 ----- ----- Maximum sales charge..................................... 5.75% Maximum offering price per share......................... $11.34 INVESTOR B SHARES: Net asset value and offering price per share& ($290,077 / 27,185 shares outstanding)................. $10.67 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($20,619 / 1,933 shares outstanding)................... $10.67 ----- -----
- --------------- *Federal income tax information (see Note 9). @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, LLC. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 111 NATIONS FUNDS Nations Value Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 97.1% AEROSPACE AND DEFENSE -- 5.0% 454,500 Raytheon Company......................................... $ 18,658 193,441 United Technologies Corporation(a)....................... 14,353 --------- 33,011 --------- AIRLINES -- 2.3% 580,543 AMR Corporation!!(a)..................................... 15,332 --------- AUTOMOTIVE -- 2.3% 137,464 General Motors Corporation(a)............................ 8,309 264,981 Goodyear Tire & Rubber Company(a)........................ 6,776 --------- 15,085 --------- BEVERAGES -- 2.2% 97,724 Brown-Forman Corporation, Class B........................ 7,110 134,851 Diageo plc, ADR.......................................... 7,076 --------- 14,186 --------- BROADCASTING AND CABLE -- 2.4% 504,715 Comcast Corporation, Special Class A(a)............................................. 16,050 --------- CHEMICALS -- BASIC -- 1.0% 210,290 The Dow Chemical Company................................. 6,881 --------- COMMERCIAL BANKING -- 12.1% 458,824 Citigroup Inc. .......................................... 22,720 345,217 FleetBoston Financial Corporation........................ 12,083 305,771 J.P. Morgan Chase & Company.............................. 10,901 964,107 US Bancorp............................................... 21,760 323,900 Wachovia Corporation(a).................................. 12,010 --------- 79,474 --------- COMPUTER SERVICES -- 0.9% 102,529 Electronic Data Systems Corporation...................... 5,946 --------- COMPUTERS AND OFFICE EQUIPMENT -- 1.6% 98,510 International Business Machines Corporation.............. 10,245 --------- CONSUMER CREDIT AND MORTGAGES -- 4.3% 236,873 American Express Company (a)............................. 9,702 202,608 Freddie Mac.............................................. 12,840 150,179 MBNA Corporation......................................... 5,792 --------- 28,334 --------- DIVERSIFIED MANUFACTURING -- 2.9% 500,684 Honeywell International Inc. ............................ 19,161 --------- ELECTRIC POWER -- NON NUCLEAR -- 1.0% 142,400 Public Service Enterprise Group Inc. .................... 6,522 ---------
VALUE SHARES (000) - -------------------------------------------------------------------------------- ELECTRIC POWER -- NUCLEAR -- 1.8% 183,214 Dominion Resources, Inc.(a).............................. $ 11,938 --------- EXPLORATION AND PRODUCTION -- 1.6% 186,642 Anadarko Petroleum Corporation(a)........................ 10,534 --------- FOOD PRODUCTS -- 1.8% 347,700 Kellogg Company.......................................... 11,672 --------- HEALTH SERVICES -- 0.9% 76,406 Trigon Healthcare, Inc.!!................................ 5,640 --------- HOUSEHOLD PRODUCTS -- 0.4% 77,844 The Estee Lauder Companies Inc., Class A(a).............. 2,659 --------- INSURANCE -- 4.9% 86,388 American International Group, Inc. ...................... 6,232 96,729 Chubb Corporation(a)..................................... 7,071 52,170 CIGNA Corporation........................................ 5,290 202,291 Prudential Financial, Inc.!!............................. 6,281 378,300 Travelers Property Casualty Corporation, Class A!!(a).... 7,566 --------- 32,440 --------- INTEGRATED OIL -- 9.6% 148,788 ChevronTexaco Corporation................................ 13,431 668,377 Exxon Mobil Corporation.................................. 29,295 421,546 Occidental Petroleum Corporation......................... 12,288 136,494 Phillips Petroleum Company(a)............................ 8,572 --------- 63,586 --------- INVESTMENT SERVICES -- 4.7% 323,968 Merrill Lynch & Company, Inc.(a)......................... 17,941 222,489 Morgan Stanley Dean Witter & Company................................................ 12,751 --------- 30,692 --------- LODGING AND RECREATION -- 2.2% 251,149 Carnival Corporation(a).................................. 8,200 172,200 Starwood Hotels & Resorts Worldwide, Inc. ............... 6,476 --------- 14,676 --------- MEDICAL DEVICES AND SUPPLIES -- 1.6% 31,827 Hillenbrand Industries, Inc.(a).......................... 1,961 251,748 Zimmer Holdings, Inc.!!.................................. 8,573 --------- 10,534 --------- METALS AND MINING -- 1.7% 293,590 Alcoa Inc. .............................................. 11,080 --------- NATURAL GAS DISTRIBUTION -- 0.7% 108,181 El Paso Corporation(a)................................... 4,763 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 112 NATIONS FUNDS Nations Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- OILFIELD SERVICES -- 1.7% 93,710 BJ Services Company!!(a)................................. $ 3,230 196,319 Nabors Industries, Inc.!!(a)............................. 8,295 --------- 11,525 --------- PAPER AND FOREST PRODUCTS -- 3.0% 132,820 Bowater Inc.(a).......................................... 6,614 303,173 International Paper Company(a)........................... 13,040 --------- 19,654 --------- PHARMACEUTICALS -- 2.4% 79,200 Pharmacia Corporation.................................... 3,570 389,465 Schering-Plough Corporation.............................. 12,191 --------- 15,761 --------- RAILROADS, TRUCKING AND SHIPPING -- 2.3% 214,505 CSX Corporation.......................................... 8,174 117,051 Union Pacific Corporation................................ 7,274 --------- 15,448 --------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 1.4% 311,695 Equity Office Properties Trust........................... 9,348 --------- RESTAURANTS -- 2.2% 532,546 McDonald's Corporation(a)................................ 14,778 --------- SEMICONDUCTORS -- 2.8% 204,497 Micron Technology, Inc.!!(a)............................. 6,728 292,393 Teradyne, Inc.!!(a)...................................... 11,529 --------- 18,257 --------- SOFTWARE -- 1.5% 433,844 Cadence Design Systems, Inc.!!........................... 9,809 --------- SPECIALTY STORES -- 2.7% 108,059 Abercrombie & Fitch Company Class A!!(a)................. 3,328 52,249 American Eagle Outfitters, Inc.!!........................ 1,294 221,955 Gap, Inc.(a)............................................. 3,338 330,500 Staples, Inc.!!(a)....................................... 6,601 170,350 Toys R Us, Inc.!!(a)..................................... 3,059 --------- 17,620 --------- TELECOMMUNICATIONS SERVICES -- 2.5% 359,598 Verizon Communications Inc. ............................. 16,416 --------- TOBACCO -- 4.7% 393,248 Philip Morris Companies Inc.(a).......................... 20,713 261,220 UST Inc.(a).............................................. 10,169 --------- 30,882 --------- TOTAL COMMON STOCKS (Cost $560,686)........................................ 639,939 --------- PRINCIPAL AMOUNT VALUE (000) (000) - --------------------------------------------------------------------------------- CONVERTIBLE BONDS AND NOTES -- 0.4% (Cost $2,303) SPECIALTY STORES -- 0.4% $ 2,303 Gap, Inc., 5.750% 03/15/09@....................................... $ 2,666 --------- SHARES (000) - --------- INVESTMENT COMPANIES -- 28.5% (Cost $187,579) 187,579 Nations Cash Reserves, Capital Class Shares#............. 187,579 --------- TOTAL INVESTMENTS (Cost $750,568*)................................ 126.0% 830,184 --------- OTHER ASSETS AND LIABILITIES (NET)................ (26.0)% Cash..................................................... $ 167 Receivable for investment securities sold................ 13,271 Receivable for Fund shares sold.......................... 1,912 Dividends receivable..................................... 1,219 Interest receivable...................................... 26 Collateral on securities loaned.......................... (176,156) Payable for Fund shares redeemed......................... (738) Investment advisory fee payable.......................... (360) Administration fee payable............................... (128) Shareholder servicing and distribution fees payable...... (87) Payable for investment securities purchased.............. (9,990) Accrued Trustees' fees and expenses...................... (112) Accrued expenses and other liabilities................... (200) --------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (171,176) --------- NET ASSETS........................................ 100.0% $ 659,008 ========= NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 520 Accumulated net realized gain on investments sold........ 10,024 Net unrealized appreciation of investments............... 79,616 Paid-in capital.......................................... 568,848 --------- NET ASSETS............................................... $ 659,008 =========
SEE NOTES TO FINANCIAL STATEMENTS. 113 NATIONS FUNDS Nations Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE - --------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($513,206,534 / 42,900,324 shares outstanding)......... $11.96 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($58,143,842 / 4,868,398 shares outstanding)........... $11.94 ------ ------ 5.75% Maximum sales charge..................................... $12.67 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($80,161,874 / 6,876,404 shares outstanding)........... $11.66 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($7,495,889 / 643,447 shares outstanding).............. $11.65 ------ ------
- --------------- *Federal income tax information (see Note 9). @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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $147,812 and $169,405, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $176,156. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 114 NATIONS FUNDS Nations MidCap Value Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 96.5% AEROSPACE AND DEFENSE -- 4.5% 65,000 Raytheon Company......................................... $ 2,668 72,800 Rockwell Collins, Inc. .................................. 1,836 -------- 4,504 -------- AIRLINES -- 2.1% 78,850 AMR Corporation!!........................................ 2,082 -------- AUTOMOTIVE -- 2.6% 46,300 Dana Corporation......................................... 993 27,200 Goodyear Tire & Rubber Company........................... 696 20,100 Lear Corporation!!....................................... 957 -------- 2,646 -------- BROADCASTING AND CABLE -- 3.0% 59,425 Cablevision Systems Corporation!!........................ 2,021 83,450 Charter Communications, Inc., Class A!!.................. 942 -------- 2,963 -------- CHEMICALS -- SPECIALTY -- 1.1% 56,125 Pall Corporation......................................... 1,150 -------- COMMERCIAL BANKING -- 8.3% 39,100 Charter One Financial, Inc. ............................. 1,221 38,000 Comerica Inc. ........................................... 2,378 15,700 Compass Bancshares, Inc. ................................ 485 168,400 Sovereign Bancorp, Inc. ................................. 2,366 29,450 Zions Bancorporation..................................... 1,746 -------- 8,196 -------- COMPUTERS AND OFFICE EQUIPMENT -- 2.2% 93,450 Tektronix, Inc. ......................................... 2,211 -------- CONGLOMERATES -- 1.6% 36,650 Pentair, Inc. ........................................... 1,648 -------- DEPARTMENT AND DISCOUNT STORES -- 0.9% 37,500 Dillard's, Inc., Class A................................. 895 -------- DIVERSIFIED ELECTRONICS -- 4.3% 83,525 Harris Corporation....................................... 2,999 120,375 Symbol Technologies, Inc. ............................... 1,353 -------- 4,352 -------- DIVERSIFIED MANUFACTURING -- 2.1% 57,350 Allegheny Technologies Inc. ............................. 949 25,500 Black & Decker Corporation............................... 1,186 -------- 2,135 -------- ELECTRIC POWER -- NON NUCLEAR -- 3.3% 36,200 PPL Corporation.......................................... 1,434 40,875 Public Service Enterprise Group Inc. .................... 1,872 -------- 3,306 -------- ELECTRIC POWER -- NUCLEAR -- 3.2% 23,725 Dominion Resources, Inc. ................................ 1,546 46,775 FirstEnergy Corporation.................................. 1,617 -------- 3,163 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- FOOD PRODUCTS -- 2.1% 63,200 Kellogg Company.......................................... $ 2,122 -------- HEALTH SERVICES -- 1.2% 84,975 HEALTHSOUTH Corporation!!................................ 1,219 -------- HEAVY MACHINERY -- 0.6% 13,475 Deere & Company.......................................... 614 -------- HOUSEHOLD PRODUCTS -- 1.9% 18,375 Avon Products, Inc. ..................................... 998 25,975 The Estee Lauder Companies Inc., Class A................. 887 -------- 1,885 -------- HOUSING AND FURNISHING -- 2.1% 78,200 Masco Corporation........................................ 2,147 -------- INSURANCE -- 4.4% 20,625 Jefferson-Pilot Corporation.............................. 1,033 25,700 PartnerRe Ltd. .......................................... 1,403 42,500 The St. Paul Companies, Inc. ............................ 1,949 -------- 4,385 -------- INTEGRATED OIL -- 5.1% 74,750 Marathon Oil Corporation................................. 2,154 52,400 Occidental Petroleum Corporation......................... 1,527 74,200 Ocean Energy Inc. ....................................... 1,468 -------- 5,149 -------- INVESTMENT SERVICES -- 3.7% 47,375 A.G. Edwards, Inc. ...................................... 2,083 8,525 Legg Mason, Inc. ........................................ 453 37,950 Waddell & Reed Financial, Inc., Class A.................. 1,157 -------- 3,693 -------- LODGING AND RECREATION -- 5.9% 74,350 Brunswick Corporation.................................... 2,032 36,925 Carnival Corporation..................................... 1,206 77,900 Mattel, Inc. ............................................ 1,623 25,800 Starwood Hotels & Resorts Worldwide, Inc. ............... 970 -------- 5,831 -------- MEDICAL DEVICES AND SUPPLIES -- 1.0% 29,550 Zimmer Holdings, Inc.!!.................................. 1,006 -------- METALS AND MINING -- 4.2% 43,825 Arch Coal, Inc. ......................................... 937 64,400 Massey Energy Company.................................... 1,088 18,250 Mueller Industries, Inc.!!............................... 639 54,675 Newmont Mining Corporation............................... 1,514 -------- 4,178 -------- OILFIELD SERVICES -- 1.6% 14,950 BJ Services Company!!.................................... 515 26,175 Nabors Industries, Inc.!!................................ 1,106 -------- 1,621 -------- PACKAGING AND CONTAINERS -- 2.2% 62,575 AptarGroup, Inc. ........................................ 2,193 --------
SEE NOTES TO FINANCIAL STATEMENTS. 115 NATIONS FUNDS Nations MidCap Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 3.7% 23,775 Bowater Inc. ............................................ $ 1,184 36,300 Georgia-Pacific Corporation.............................. 1,087 25,975 Temple-Inland Inc. ...................................... 1,473 -------- 3,744 -------- PHARMACEUTICALS -- 1.4% 42,875 ICN Pharmaceuticals Inc. ................................ 1,361 -------- PUBLISHING AND ADVERTISING -- 0.9% 15,900 Dow Jones & Company, Inc. ............................... 926 -------- RAILROADS, TRUCKING AND SHIPPING -- 2.2% 57,150 CSX Corporation.......................................... 2,178 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 2.7% 15,375 AMB Property Corporation................................. 423 18,575 Avalonbay Communities, Inc. ............................. 925 24,200 Boston Properties, Inc. ................................. 955 11,400 CarRamerica Realty Corporation........................... 358 -------- 2,661 -------- SEMICONDUCTORS -- 4.2% 121,200 Axcelis Technologies, Inc.!!............................. 1,733 42,975 National Semiconductor Corporation!!..................... 1,448 26,650 Teradyne, Inc.!!......................................... 1,051 -------- 4,232 -------- SOFTWARE -- 1.6% 70,875 Cadence Design Systems, Inc.!!........................... 1,602 -------- SPECIALTY STORES -- 3.6% 31,400 Gap, Inc. ............................................... 472 32,000 Linens 'N Things, Inc.!!................................. 977 47,400 Staples, Inc.!!.......................................... 947 65,881 Toys R Us, Inc.!!........................................ 1,183 -------- 3,579 -------- STEEL -- 1.0% 56,250 United States Steel Corporation.......................... 1,021 -------- TOTAL COMMON STOCKS (Cost $90,540)......................................... 96,598 -------- PRINCIPAL AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- CONVERTIBLE BONDS AND NOTES -- 0.3% (Cost $261) SPECIALTY STORES -- 0.3% $ 261 Gap, Inc., 5.750% 03/15/09@....................................... $ 302 -------- SHARES (000) - --------- INVESTMENT COMPANIES -- 7.1% (Cost $7,063) 7,063 Nations Cash Reserves, Capital Class Shares#............. 7,063 -------- TOTAL INVESTMENTS (Cost $97,864*)................................. 103.9% 103,963 -------- OTHER ASSETS AND LIABILITIES (NET)................ (3.9)% Cash..................................................... $ 16 Receivable for investment securities sold................ 1,025 Receivable for Fund shares sold.......................... 1,324 Dividends receivable..................................... 99 Interest receivable...................................... 7 Investment advisory fee payable.......................... (55) Administration fee payable............................... (5) Payable for Fund shares redeemed......................... (76) Payable for investment securities purchased.............. (6,109) Accrued Trustees' fees and expenses...................... (3) Accrued expenses and other liabilities................... (108) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (3,885) -------- NET ASSETS........................................ 100% $100,078 ======== NET ASSETS CONSIST OF: Accumulated net realized gain on investments sold........ $ 209 Net unrealized appreciation of investments............... 6,099 Paid-in capital.......................................... 93,770 -------- NET ASSETS............................................... $100,078 ========
SEE NOTES TO FINANCIAL STATEMENTS. 116 NATIONS FUNDS Nations MidCap Value Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($98,888,471 / 8,739,491 shares outstanding)........... $11.32 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($572,631 / 50,659 shares outstanding)................. $11.30 ------ ------ 5.75% Maximum sales charge..................................... $11.99 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($523,725 / 46,398 shares outstanding)................. $11.29 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($93,198 / 8,237 shares outstanding)................... $11.31 ------ ------
- --------------- *Federal income tax information (see Note 9). @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, LLC. SEE NOTES TO FINANCIAL STATEMENTS. 117 NATIONS FUNDS Nations Marsico Growth & Income Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 99.6% Investment in Nations Master Investment Trust, Marsico Growth & Income Master Portfolio*...................... $515,876 -------- TOTAL INVESTMENTS................................. 99.6% 515,876 -------- OTHER ASSETS AND LIABILITIES (NET)................ 0.4% Receivable for Fund shares sold.......................... $ 3,805 Payable for Fund shares redeemed......................... (1,108) Administration fee payable............................... (56) Shareholder servicing and distribution fees payable...... (248) Accrued Trustees' fees and expenses...................... (45) Accrued expenses and other liabilities................... (120) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. 2,228 -------- NET ASSETS........................................ 100.0% $518,104 ======== NET ASSETS CONSIST OF: Distributions in excess of net investment income......... $ (8) Accumulated net realized loss on investments............. (133,683) Net unrealized appreciation of investments............... 72,659 Paid-in capital.......................................... 579,136 -------- NET ASSETS............................................... $518,104 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($58,751,886 / 3,971,855 shares outstanding)........... $14.79 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($217,963,046 / 14,807,287 shares outstanding)......... $14.72 ------ ------ 5.75% Maximum sales charge..................................... $15.62 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($209,503,280 / 14,658,335 shares outstanding)......... $14.29 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($31,885,385 / 2,228,175 shares outstanding)........... $14.31 ------ ------
- --------------- *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. 118 NATIONS FUNDS Nations Blue Chip Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 100.3% Investment in Nations Master Investment Trust, Blue Chip Master Portfolio*...................................... $661,383 -------- TOTAL INVESTMENTS................................. 100.3% 661,383 -------- OTHER ASSETS AND LIABILITIES (NET)................ (0.3)% Receivable for Fund shares sold.......................... $ 189 Payable for Fund shares redeemed......................... (1,435) Administration fee payable............................... (102) Shareholder servicing and distribution fees payable...... (201) Accrued Trustees' fees and expenses...................... (41) Accrued expenses and other liabilities................... (207) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (1,797) -------- NET ASSETS........................................ 100.0% $659,586 ======== NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 110 Accumulated net realized loss on investments............. (75,906) Net unrealized appreciation of investments............... 96,698 Paid-in capital.......................................... 638,684 -------- NET ASSETS............................................... $659,586 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($49,906,522 / 1,936,733 shares outstanding)........... $25.77 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($524,910,540 / 20,523,919 shares outstanding)......... $25.58 ------ ------ 5.75% Maximum sales charge..................................... $27.14 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($67,588,670 / 2,716,429 shares outstanding)........... $24.88 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($17,180,214 / 692,614 shares outstanding)............. $24.80 ------ ------
- --------------- *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. 119 NATIONS FUNDS Nations Strategic Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - ---------------------------------------------------------------------------------- COMMON STOCKS -- 96.5% AEROSPACE AND DEFENSE -- 3.8% 296,900 Boeing Company........................................... $ 14,325 69,275 General Dynamics Corporation............................. 6,508 182,450 Lockheed Martin Corporation.............................. 10,505 222,300 United Technologies Corporation.......................... 16,496 ---------- 47,834 ---------- AIRLINES -- 0.8% 365,000 AMR Corporation!!........................................ 9,640 ---------- AUTOMOTIVE -- 1.1% 285,000 Lear Corporation!!(a).................................... 13,566 ---------- BEVERAGES -- 3.9% 365,650 Anheuser-Busch Companies, Inc. .......................... 19,086 316,150 Coca-Cola Company........................................ 16,522 279,525 PepsiCo, Inc. ........................................... 14,396 ---------- 50,004 ---------- BROADCASTING AND CABLE -- 4.7% 769,365 AOL Time Warner Inc.!!................................... 18,195 380,000 Cablevision Systems Corporation!!(a)..................... 12,920 195,800 Clear Channel Communications, Inc.!!(a).................. 10,066 559,325 Comcast Corporation, Class A(a).......................... 17,787 ---------- 58,968 ---------- COMMERCIAL BANKING -- 4.2% 747,596 Citigroup Inc. .......................................... 37,021 296,525 TCF Financial Corporation................................ 15,600 ---------- 52,621 ---------- COMMERCIAL SERVICES -- 0.8% 300,000 Interpublic Group of Companies, Inc. .................... 10,284 ---------- COMPUTER SERVICES -- 4.0% 357,950 Automatic Data Processing, Inc. ......................... 20,858 574,860 Concord EFS, Inc.!!(a)................................... 19,114 322,925 Sungard Data Systems, Inc.!!(a).......................... 10,647 ---------- 50,619 ---------- COMPUTERS AND OFFICE EQUIPMENT -- 5.1% 565,775 Dell Computer Corporation!!.............................. 14,772 735,427 EMC Corporation!!........................................ 8,766 312,775 International Business Machines Corporation.............. 32,529 928,975 Sun Microsystems, Inc.!!................................. 8,194 ---------- 64,261 ---------- CONSUMER CREDIT AND MORTGAGES -- 6.1% 246,465 Fannie Mae............................................... 19,688 411,175 Household International, Inc.(a)......................... 23,354 290,250 MBNA Corporation......................................... 11,195 232,750 USA Education Inc. ...................................... 22,763 ---------- 77,000 ----------
VALUE SHARES (000) - ---------------------------------------------------------------------------------- DEPARTMENT AND DISCOUNT STORES -- 6.0% 397,825 Sears, Roebuck and Company............................... $ 20,396 381,075 Target Corporation....................................... 16,432 632,800 Wal-Mart Stores, Inc. ................................... 38,785 ---------- 75,613 ---------- DIVERSIFIED MANUFACTURING -- 4.7% 1,078,875 General Electric Company................................. 40,404 495,200 Honeywell International Inc. ............................ 18,951 ---------- 59,355 ---------- ELECTRIC POWER -- NUCLEAR -- 1.7% 309,075 Duke Energy Corporation(a)............................... 11,683 160,000 FPL Group, Inc. ......................................... 9,528 ---------- 21,211 ---------- HOUSEHOLD PRODUCTS -- 1.2% 172,325 Procter & Gamble Company................................. 15,525 ---------- HOUSING AND FURNISHING -- 1.4% 116,550 Centex Corporation(a).................................... 6,052 415,000 Masco Corporation(a)..................................... 11,392 ---------- 17,444 ---------- INSURANCE -- 3.0% 448,925 AFLAC, Inc. ............................................. 13,243 350,087 American International Group, Inc. ...................... 25,256 ---------- 38,499 ---------- INTEGRATED OIL -- 5.2% 197,000 BP Amoco plc, ADR........................................ 10,461 173,675 ChevronTexaco Corporation(a)............................. 15,678 893,350 Exxon Mobil Corporation.................................. 39,155 ---------- 65,294 ---------- INVESTMENT SERVICES -- 3.6% 357,850 Merrill Lynch & Company, Inc.(a)......................... 19,818 262,750 Morgan Stanley Dean Witter & Company..................... 15,058 175,125 Northern Trust Corporation............................... 10,527 ---------- 45,403 ---------- LODGING AND RECREATION -- 1.6% 545,350 Starwood Hotels & Resorts Worldwide, Inc.(a)............. 20,511 ---------- MEDICAL DEVICES AND SUPPLIES -- 5.3% 253,175 Abbott Laboratories...................................... 13,317 389,575 Baxter International Inc.(a)............................. 23,187 297,400 Johnson & Johnson(a)..................................... 19,316 261,460 Medtronic, Inc. ......................................... 11,821 ---------- 67,641 ---------- NATURAL GAS DISTRIBUTION -- 0.9% 269,772 El Paso Corporation(a)................................... 11,878 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 120 NATIONS FUNDS Nations Strategic Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - ---------------------------------------------------------------------------------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.6% 831,650 Cisco Systems, Inc.!!.................................... $ 14,080 162,850 QUALCOMM Inc.!!.......................................... 6,130 ---------- 20,210 ---------- OILFIELD SERVICES -- 0.5% 163,969 Nabors Industries, Inc.!!(a)............................. 6,928 ---------- PHARMACEUTICALS -- 9.2% 201,950 Amgen Inc.!!(a).......................................... 12,052 140,850 Eli Lilly and Company(a)................................. 10,733 239,475 Genentech, Inc.!!(a)..................................... 12,082 259,600 Merck & Company, Inc. ................................... 14,948 1,065,050 Pfizer Inc. ............................................. 42,324 433,000 Pharmacia Corporation.................................... 19,519 202,625 Schering-Plough Corporation.............................. 6,342 ---------- 118,000 ---------- PUBLISHING AND ADVERTISING -- 0.9% 176,425 McGraw-Hill Companies, Inc. ............................. 12,041 ---------- SEMICONDUCTORS -- 2.3% 578,700 Intel Corporation........................................ 17,598 138,400 Linear Technology Corporation............................ 6,120 155,000 Texas Instruments Inc. .................................. 5,131 ---------- 28,849 ---------- SOFTWARE -- 4.3% 754,900 Microsoft Corporation!!.................................. 45,528 665,900 Oracle Corporation!!..................................... 8,524 ---------- 54,052 ---------- SPECIALTY STORES -- 3.1% 416,025 Circuit City Stores -- Circuit City Group................ 7,505 509,650 Home Depot, Inc. ........................................ 24,774 325,000 Staples, Inc.!!.......................................... 6,490 ---------- 38,769 ---------- TELECOMMUNICATIONS SERVICES -- 2.2% 493,825 SBC Communications Inc. ................................. 18,489 207,075 Verizon Communications Inc. ............................. 9,453 ---------- 27,942 ---------- TOBACCO -- 1.8% 437,275 Philip Morris Companies Inc. ............................ 23,031 UNIT INVESTMENT TRUST -- 1.5% 170,000 Standard And Poor's Depositary Receipts(a)............... 19,468 ---------- TOTAL COMMON STOCKS (Cost $1,081,364)...................................... 1,222,461 ---------- ----------
SHARES VALUE (000) (000) - ---------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 19.6% (Cost $248,924) 248,924 Nations Cash Reserves, Capital Class Shares#............. $ 248,924 ---------- TOTAL INVESTMENTS (Cost $1,330,288*).............................. 116.1% 1,471,385 ---------- OTHER ASSETS AND LIABILITIES (NET)................ (16.1)% Cash..................................................... $ 60 Receivable for investment securities sold................ 23,091 Receivable for Fund shares sold.......................... 2,630 Dividends receivable..................................... 1,103 Interest receivable...................................... 19 Collateral on securities loaned.......................... (207,456) Payable for Fund shares redeemed......................... (2,935) Investment advisory fee payable.......................... (702) Administration fee payable............................... (248) Shareholder servicing and distribution fees payable...... (15) Payable for investment securities purchased.............. (18,913) Accrued Trustees' fees and expenses...................... (40) Accrued expenses and other liabilities................... (204) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (203,610) ---------- NET ASSETS........................................ 100.0% $1,267,775 ========== NET ASSETS CONSIST OF: Undistributed net investment income...................... $ 680 Accumulated net realized loss on investments sold........ (197,909) Net unrealized appreciation of investments............... 141,097 Paid-in capital.......................................... 1,323,907 ---------- NET ASSETS............................................... $1,267,775 ==========
SEE NOTES TO FINANCIAL STATEMENTS. 121 NATIONS FUNDS Nations Strategic Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE - ---------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($1,230,029,943 / 99,567,494 shares outstanding)....... $12.35 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($26,742,551 / 2,173,238 shares outstanding)........... $12.31 ------ ------ 5.75% Maximum sales charge..................................... $13.06 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($8,357,713 / 692,274 shares outstanding).............. $12.07 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($2,644,760 / 218,895 shares outstanding).............. $12.08 ------ ------
- --------------- *Federal income tax information (see Note 9). !! 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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $160,016 and $177,727, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $207,456. ABBREVIATION: ADR -- American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. 122 NATIONS FUNDS Nations Capital Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - ------------------------------------------------------------------------------ COMMON STOCKS -- 95.5% AEROSPACE AND DEFENSE -- 1.5% 40,090 Boeing Company........................................... $ 1,934 50,129 United Technologies Corporation.......................... 3,720 -------- 5,654 -------- BEVERAGES -- 4.0% 81,889 Anheuser-Busch Companies, Inc. .......................... 4,275 113,619 Coca-Cola Company........................................ 5,938 93,717 PepsiCo, Inc. ........................................... 4,826 -------- 15,039 -------- BROADCASTING AND CABLE -- 6.1% 317,289 AOL Time Warner Inc.!!................................... 7,505 115,000 Cablevision Systems Corporation!!........................ 3,910 107,708 Clear Channel Communications, Inc.!!(a).................. 5,537 117,074 Comcast Corporation, Class A(a).......................... 3,723 47,559 Viacom Inc., Class B!!................................... 2,300 -------- 22,975 -------- COMMERCIAL BANKING -- 1.1% 83,815 Citigroup Inc. .......................................... 4,151 -------- COMMERCIAL SERVICES -- 0.9% 100,000 Interpublic Group of Companies, Inc. .................... 3,428 -------- COMPUTER SERVICES -- 4.8% 82,786 Automatic Data Processing, Inc. ......................... 4,824 261,955 Concord EFS, Inc.!!(a)................................... 8,710 136,389 Sungard Data Systems, Inc.!!(a).......................... 4,497 -------- 18,031 -------- COMPUTERS AND OFFICE EQUIPMENT -- 6.7% 205,342 Dell Computer Corporation!!.............................. 5,361 300,185 EMC Corporation!!........................................ 3,578 128,382 International Business Machines Corporation.............. 13,353 290,748 Sun Microsystems, Inc.!!................................. 2,564 -------- 24,856 -------- CONSUMER CREDIT AND MORTGAGES -- 5.2% 59,791 Fannie Mae............................................... 4,776 92,966 Household International, Inc.(a)......................... 5,280 98,488 MBNA Corporation......................................... 3,799 58,978 USA Education Inc. ...................................... 5,768 -------- 19,623 -------- DEPARTMENT AND DISCOUNT STORES -- 4.2% 92,861 Target Corporation....................................... 4,004 188,474 Wal-Mart Stores, Inc. ................................... 11,552 -------- 15,556 -------- DIVERSIFIED MANUFACTURING -- 5.5% 494,813 General Electric Company................................. 18,531 56,000 Honeywell International Inc. ............................ 2,143 -------- 20,674 -------- HOUSING AND FURNISHING -- 1.3% 57,769 Centex Corporation(a).................................... 2,999 70,000 Masco Corporation(a)..................................... 1,922 -------- 4,921 --------
VALUE SHARES (000) - ------------------------------------------------------------------------------ INSURANCE -- 2.5% 117,611 AFLAC, Inc. ............................................. $ 3,470 82,426 American International Group, Inc. ...................... 5,946 -------- 9,416 -------- INTEGRATED OIL -- 1.5% 32,263 ChevronTexaco Corporation................................ 2,913 58,806 Exxon Mobil Corporation.................................. 2,577 -------- 5,490 -------- INVESTMENT SERVICES -- 2.1% 71,722 Merrill Lynch & Company, Inc.(a)......................... 3,972 70,129 Morgan Stanley Dean Witter & Company..................... 4,019 -------- 7,991 -------- LODGING AND RECREATION -- 1.6% 161,964 Starwood Hotels & Resorts Worldwide, Inc. .................................................. 6,091 -------- MEDICAL DEVICES AND SUPPLIES -- 7.8% 72,164 Abbott Laboratories...................................... 3,796 126,230 Baxter International Inc. ............................... 7,513 155,262 Johnson & Johnson (a).................................... 10,084 160,290 Medtronic, Inc.(a)....................................... 7,247 -------- 28,640 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.4% 500,975 Cisco Systems, Inc.!!.................................... 8,482 115,207 QUALCOMM Inc.!!.......................................... 4,336 -------- 12,818 -------- OILFIELD SERVICES -- 1.3% 57,373 Nabors Industries, Inc.!!(a)............................. 2,424 42,519 Schlumberger Ltd. ....................................... 2,501 -------- 4,925 -------- PHARMACEUTICALS -- 16.2% 106,119 Amgen Inc.!!(a).......................................... 6,333 70,451 Bristol-Myers Squibb Company............................. 2,853 53,693 Eli Lilly and Company(a)................................. 4,091 113,942 Genentech, Inc.!!(a)..................................... 5,748 137,939 Merck & Company, Inc. ................................... 7,943 512,922 Pfizer Inc. ............................................. 20,383 90,000 Pharmacia Corporation.................................... 4,057 128,763 Schering-Plough Corporation.............................. 4,030 75,711 Wyeth.................................................... 4,970 -------- 60,408 -------- SEMICONDUCTORS -- 3.7% 348,695 Intel Corporation........................................ 10,604 25,828 Linear Technology Corporation............................ 1,142 68,124 Texas Instruments Inc. .................................. 2,255 -------- 14,001 -------- SOFTWARE -- 7.0% 85,065 Check Point Software Technologies Ltd.!!(a).............................................. 2,586 271,253 Microsoft Corporation!!.................................. 16,360 333,293 Oracle Corporation!!..................................... 4,266 57,749 VERITAS Software Corporation!!(a)........................ 2,531 -------- 25,743 --------
SEE NOTES TO FINANCIAL STATEMENTS. 123 NATIONS FUNDS Nations Capital Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - ------------------------------------------------------------------------------ SPECIALTY STORES -- 4.8% 82,758 Abercrombie & Fitch Company!!(a)......................... $ 2,549 249,007 Circuit City Stores -- Circuit City Group................ 4,492 222,193 Home Depot, Inc. ........................................ 10,801 -------- 17,842 -------- TELECOMMUNICATIONS SERVICES -- 1.0% 102,008 SBC Communications Inc. ................................. 3,819 -------- TOBACCO -- 1.3% 95,528 Philip Morris Companies Inc. ............................ 5,031 -------- TOTAL COMMON STOCKS (Cost $276,696)........................................ 357,123 -------- SHARES (000) - ------- INVESTMENT COMPANIES -- 24.5% (Cost $91,849) 91,849 Nations Cash Reserves, Capital Class Shares#............. 91,849 -------- TOTAL INVESTMENTS (Cost $368,545*)................................ 120.0% 448,972 -------- OTHER ASSETS AND LIABILITIES (NET)................ (20.0)% Cash..................................................... $ 14 Receivable for Fund shares sold.......................... 717 Dividends receivable..................................... 314 Interest receivable...................................... 12 Collateral on securities loaned.......................... (66,618) Payable for Fund shares redeemed......................... (753) Investment advisory fee payable.......................... (210) Administration fee payable............................... (74) Shareholder servicing and distribution fees payable...... (42) Payable for investment securities purchased.............................................. (7,980) Accrued Trustees' fees and expenses...................... (80) Accrued expenses and other liabilities................... (130) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (74,830) -------- NET ASSETS........................................ 100.0% $374,142 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold........ $(42,186) Net unrealized appreciation of investments............................................ 80,427 Paid-in capital.......................................... 335,901 -------- NET ASSETS............................................... $374,142 ======== VALUE - ------------------------------------------------------------------------------ PRIMARY A SHARES: Net asset value, offering and redemption price per share ($302,843,015/ 38,791,934 shares outstanding).......... $7.81 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($28,994,295 / 3,788,007 shares outstanding)........... $7.65 ----- ----- 5.75% Maximum sales charge..................................... $8.12 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($37,766,978 / 5,414,896 shares outstanding)........... $6.97 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($4,537,393 / 643,348 shares outstanding).............. $7.05 ----- -----
- --------------- *Federal income tax information (see Note 9). !! 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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $77,335 and $64,212, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending actively (Note 8). The portion that represents cash collateral is $66,618. SEE NOTES TO FINANCIAL STATEMENTS. 124 NATIONS FUNDS Nations Aggressive Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 100.4% AEROSPACE AND DEFENSE -- 1.0% 4,918 United Technologies Corporation.......................... $ 365 -------- BEVERAGES -- 2.5% 8,826 Coca-Cola Company........................................ 461 8,826 PepsiCo, Inc. ........................................... 455 -------- 916 -------- BROADCASTING AND CABLE -- 3.9% 32,745 AOL Time Warner Inc.!!................................... 775 8,593 Comcast Corporation, Class A(a).......................... 273 7,694 Viacom Inc., Class B!!................................... 372 -------- 1,420 -------- CHEMICALS -- BASIC -- 1.3% 10,568 Ecolab, Inc. ............................................ 483 -------- COMMERCIAL BANKING -- 1.1% 8,346 Citigroup Inc. .......................................... 413 -------- COMPUTER SERVICES -- 7.4% 15,994 Concord EFS, Inc.!!(a)................................... 532 13,177 Convergys Corporation!!.................................. 390 11,927 CSG Systems International, Inc.!!........................ 340 7,885 First Data Corporation................................... 688 22,069 Sungard Data Systems, Inc.!!............................. 727 -------- 2,677 -------- COMPUTERS AND OFFICE EQUIPMENT -- 4.4% 22,444 Dell Computer Corporation!!.............................. 585 30,041 EMC Corporation!!........................................ 358 3,968 International Business Machines Corporation.............. 413 28,650 Sun Microsystems, Inc.!!................................. 253 -------- 1,609 -------- CONSUMER CREDIT AND MORTGAGES -- 5.8% 5,959 Fannie Mae............................................... 476 9,551 Household International, Inc.(a)......................... 542 11,627 MBNA Corporation......................................... 448 6,434 USA Education Inc. ...................................... 630 -------- 2,096 -------- DEPARTMENT AND DISCOUNT STORES -- 4.1% 8,568 Target Corporation....................................... 369 18,358 Wal-Mart Stores, Inc. ................................... 1,126 -------- 1,495 -------- DIVERSIFIED MANUFACTURING -- 5.2% 41,262 General Electric Company................................. 1,545 8,493 Honeywell International Inc. ............................ 325 -------- 1,870 -------- FOOD AND DRUG STORES -- 0.7% 5,510 Safeway Inc.!!........................................... 248 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- HOUSING AND FURNISHING -- 1.4% 5,876 Centex Corporation(a).................................... $ 305 7,000 Masco Corporation(a)..................................... 192 -------- 497 -------- INSURANCE -- 2.3% 12,368 AFLAC, Inc. ............................................. 365 6,301 American International Group, Inc. ...................... 454 -------- 819 -------- INVESTMENT SERVICES -- 3.5% 4,959 Goldman Sachs Group, Inc. ............................... 448 7,518 Merrill Lynch & Company, Inc. ........................... 416 7,351 Morgan Stanley Dean Witter & Company..................... 421 -------- 1,285 -------- LODGING AND RECREATION -- 1.8% 16,985 Starwood Hotels & Resorts Worldwide, Inc. ............... 639 -------- MEDICAL DEVICES AND SUPPLIES -- 7.0% 5,485 Abbott Laboratories...................................... 289 5,876 Baxter International Inc. ............................... 350 8,393 Guidant Corporation!!.................................... 364 10,985 Johnson & Johnson........................................ 713 18,336 Medtronic, Inc. ......................................... 828 -------- 2,544 -------- NATURAL GAS DISTRIBUTION -- 1.1% 9,379 El Paso Corporation(a)................................... 413 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 5.2% 48,830 Cisco Systems, Inc.!!.................................... 826 29,337 Comverse Technology, Inc.!!.............................. 372 11,418 QUALCOMM Inc.!!.......................................... 430 23,036 Tekelec!!................................................ 264 -------- 1,892 -------- OILFIELD SERVICES -- 0.6% 5,429 Nabors Industries, Inc.!!(a)............................. 229 -------- PHARMACEUTICALS -- 17.5% 9,700 Amgen Inc.!!(a).......................................... 579 4,776 Eli Lilly and Company.................................... 364 5,276 Forest Laboratories, Inc.!!.............................. 431 10,169 Genentech, Inc.!!(a)..................................... 513 6,826 Genzyme Corporation!!.................................... 298 19,902 IVAX Corporation!!....................................... 319 7,810 Merck & Company, Inc. ................................... 450 45,972 Pfizer Inc. ............................................. 1,828 20,269 Pharmacia Corporation.................................... 914 8,660 Protein Design Labs, Inc.!!(a)........................... 148 6,780 Wyeth.................................................... 445 -------- 6,289 -------- SEMICONDUCTORS -- 6.8% 13,118 Analog Devices, Inc.!!................................... 591 9,099 Applied Materials, Inc.!!................................ 494 34,387 Intel Corporation........................................ 1,046
SEE NOTES TO FINANCIAL STATEMENTS. 125 NATIONS FUNDS Nations Aggressive Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- SEMICONDUCTORS -- (CONTINUED) 2,518 Linear Technology Corporation(a)......................... $ 111 6,743 Texas Instruments Inc. .................................. 223 -------- 2,465 -------- SOFTWARE -- 7.6% 6,784 Check Point Software Technologies Ltd.!!................. 206 25,403 Microsoft Corporation!!.................................. 1,533 33,004 Oracle Corporation!!..................................... 422 14,560 Quest Software, Inc.!!(a)................................ 220 7,493 VERITAS Software Corporation!!(a)........................ 328 -------- 2,709 -------- SPECIALTY STORES -- 7.1% 13,668 Abercrombie & Fitch Company!!............................ 421 24,777 Circuit City Stores -- Circuit City Group................ 447 22,836 Home Depot, Inc. ........................................ 1,110 16,894 Tiffany & Company........................................ 601 -------- 2,579 -------- TOBACCO -- 1.1% 7,510 Philip Morris Companies Inc. ............................ 396 -------- TOTAL COMMON STOCKS (Cost $37,327)......................................... 36,348 -------- SHARES (000) - --------- INVESTMENT COMPANIES -- 11.4% (Cost $4,139) 4,139 Nations Cash Reserves, Capital Class Shares#............. 4,139 -------- TOTAL INVESTMENTS (Cost $41,466*)................................. 111.8% 40,487 -------- OTHER ASSETS AND LIABILITIES (NET)................ (11.8)% Cash..................................................... $ 2 Receivable for Fund shares sold.......................... 224 Dividends receivable..................................... 27 Collateral on securities loaned.......................... (3,987) Payable for Fund shares redeemed......................... (365) Investment advisory fee payable.......................... (20) Administration fee payable............................... (7) Shareholder servicing and distribution fees payable...... (13) Accrued Trustees' fees and expenses...................... (51) Accrued expenses and other liabilities................... (91) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (4,281) -------- NET ASSETS........................................ 100.0% $ 36,206 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold........ $(58,661) Net unrealized depreciation of investments............... (979) Paid-in capital.......................................... 95,846 -------- NET ASSETS............................................... $ 36,206 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($10,872,509 / 1,189,521 shares outstanding)........... $9.14 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($14,082,403 / 1,559,389 shares outstanding)........... $9.03 ----- ----- 5.75% Maximum sales charge..................................... $9.58 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($10,803,757 / 1,282,223 shares outstanding)........... $8.43 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($446,886 / 51,839 shares outstanding)................. $8.62 ----- -----
- --------------- *Federal income tax information (see Note 9). !! 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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $4,208 and $3,821, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $3,987. SEE NOTES TO FINANCIAL STATEMENTS. 126 NATIONS FUNDS Nations Marsico Focused Equities Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE (000) - ---------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 100.1% Investment in Nations Master Investment Trust, Marsico Focused Equities Master Portfolio*..................... $1,723,632 ---------- TOTAL INVESTMENTS................................. 100.1% 1,723,632 ---------- OTHER ASSETS AND LIABLITIES (NET)................. (0.1)% Receivable for Fund shares sold.......................... $ 4,423 Payable for Fund shares redeemed......................... (3,969) Administration fee payable............................... (188) Shareholder servicing and distribution fees payable...... (843) Accrued Trustees' fees and expenses...................... (46) Accrued expenses and other liabilities................... (454) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (1,077) ---------- NET ASSETS........................................ 100.0% $1,722,555 ========== NET ASSETS CONSIST OF: Accumulated net realized loss on investments............. $ (523,697) Net unrealized appreciation of investments............... 246,396 Paid-in capital.......................................... 1,999,856 ---------- NET ASSETS............................................... $1,722,555 ========== VALUE - ---------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($346,434,516 / 21,833,407 shares outstanding)......... $15.87 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($507,590,289 / 32,196,865 shares outstanding)......... $15.77 ------ ------ 5.75% Maximum sales charge..................................... $16.73 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($679,688,537 / 44,341,680 shares outstanding)......... $15.33 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($188,842,064 / 12,282,318 shares outstanding)......... $15.38 ------ ------
- --------------- *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. 127 NATIONS FUNDS Nations MidCap Growth Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 95.4% BROADCASTING AND CABLE -- 4.4% 372,109 Adelphia Communications Corporation!!(a)....................................... $ 5,544 129,459 Cablevision Systems Corporation!!(a)..................... 4,402 609,696 Charter Communications, Inc., Class A!!(a)........................................... 6,883 230,967 Radio One, Inc., Class D!!(a)............................ 4,758 142,859 Univision Communications, Inc., Class A!!(a)........................................... 6,000 -------- 27,587 -------- BUILDING MATERIALS -- 0.0%+ 6,940 Martin Marietta Materials, Inc. ......................... 293 -------- COMMERCIAL BANKING -- 2.5% 160,902 Charter One Financial, Inc. ............................. 5,023 62,792 City National Corporation(a)............................. 3,303 157,255 Commerce Bancorp, Inc. .................................. 7,062 -------- 15,388 -------- COMMERCIAL SERVICES -- 0.8% 144,900 Interpublic Group of Companies, Inc.(a).................. 4,967 -------- COMPUTER SERVICES -- 10.8% 589,487 Concord EFS, Inc.!!(a)................................... 19,601 369,762 Convergys Corporation!!.................................. 10,934 468,644 CSG Systems International, Inc.!!(a)..................... 13,342 366,434 Jack Henry & Associates, Inc.(a)......................... 8,128 484,937 Sungard Data Systems, Inc.!!(a).......................... 15,988 -------- 67,993 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.9% 204,839 Research In Motion Ltd.!!(a)............................. 5,688 -------- CONGLOMERATES -- 2.9% 297,966 Pentair, Inc. ........................................... 13,400 35,000 SPX Corporation!!........................................ 4,955 -------- 18,355 -------- CONSUMER CREDIT AND MORTGAGES -- 2.8% 467,140 AmeriCredit Corporation!!(a)............................. 17,747 -------- DIVERSIFIED ELECTRONICS -- 2.5% 149,681 Amphenol Corporation, Class A!!.......................... 7,005 762,187 Symbol Technologies, Inc. ............................... 8,567 -------- 15,572 -------- DIVERSIFIED MANUFACTURING -- 1.2% 626,388 Sanmina Corporation!!(a)................................. 7,360 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- ELECTRIC POWER -- NON NUCLEAR -- 1.4% 386,316 Calpine Corporation!!(a)................................. $ 4,906 253,443 Mirant Corporation!!..................................... 3,662 -------- 8,568 -------- EXPLORATION AND PRODUCTION -- 0.7% 101,479 EOG Resources, Inc. ..................................... 4,116 -------- FOOD PRODUCTS -- 0.6% 175,283 Hain Celestial Group, Inc.!!............................. 3,900 -------- HEALTH SERVICES -- 3.0% 147,575 Community Health Systems!!(a)............................ 3,263 571,344 Health Management Associates, Inc., Class A!!(a)......... 11,844 143,950 Lincare Holdings Inc.!!.................................. 3,904 -------- 19,011 -------- HOUSING AND FURNISHING -- 0.6% 139,000 Masco Corporation(a)..................................... 3,816 -------- INSURANCE -- 1.6% 167,250 Ambac Financial Group, Inc. ............................. 9,879 -------- INVESTMENT SERVICES -- 3.9% 201,391 Legg Mason, Inc.(a)...................................... 10,689 100,908 Northern Trust Corporation............................... 6,066 254,162 Waddell & Reed Financial, Inc., Class A.................. 7,747 -------- 24,502 -------- LODGING AND RECREATION -- 2.1% 50,975 International Game Technology!!.......................... 3,177 367,860 Park Place Entertainment Corporation!!................... 3,881 169,131 Starwood Hotels & Resorts Worldwide, Inc. ....................................... 6,361 -------- 13,419 -------- MEDICAL DEVICES AND SUPPLIES -- 4.8% 204,818 Apogent Technologies Inc.!!.............................. 5,055 337,670 Caliper Technologies Corporation!!....................... 4,380 75,686 Enzon, Inc.!!(a)......................................... 3,352 70,000 Guidant Corporation!!.................................... 3,032 335,556 Inhale Therapeutic Systems, Inc.!!....................... 3,540 153,022 Invitrogen Corporation!!(a).............................. 5,252 203,000 Waters Corporation!!(a).................................. 5,678 -------- 30,289 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 3.7% 795,570 ADC Telecommunications, Inc.!!........................... 3,238 190,750 CIENA Corporation!!(a)................................... 1,717 550,221 Comverse Technology, Inc.!!.............................. 6,971 401,770 Powerwave Technologies, Inc.!!........................... 5,171 554,750 Tekelec!!................................................ 6,357 -------- 23,454 --------
SEE NOTES TO FINANCIAL STATEMENTS. 128 NATIONS FUNDS Nations MidCap Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- OILFIELD SERVICES -- 6.4% 214,500 BJ Services Company!!.................................... $ 7,394 277,967 ENSCO International Inc.(a).............................. 8,378 174,936 GlobalSantaFe Corporation(a)............................. 5,720 157,271 Nabors Industries, Inc.!!(a)............................. 6,645 82,071 Smith International, Inc.!!(a)........................... 5,560 137,208 Weatherford International, Inc.!!(a)..................... 6,535 -------- 40,232 -------- PHARMACEUTICALS -- 11.8% 178,666 Alkermes, Inc.!!(a)...................................... 4,656 42,275 Andrx Group!!(a)......................................... 1,604 60,000 Biogen, Inc.!!........................................... 2,944 166,827 Biovail Corporation!!(a)................................. 8,338 187,313 Express Scripts, Inc.!!(a)............................... 10,788 148,455 Genzyme Corporation!!(a)................................. 6,483 256,910 Medarex, Inc.!!.......................................... 4,144 165,302 MedImmune, Inc.!!(a)..................................... 6,501 385,661 Millennium Pharmaceuticals, Inc.!!(a).................... 8,604 148,434 Myriad Genetics, Inc.!!.................................. 4,974 256,403 Shire Pharmaceuticals Group plc, ADR!!................... 6,018 100,000 Taro Pharmaceutical Industries Ltd.!!.................... 2,835 251,688 Watson Pharmaceuticals, Inc.!!........................... 6,818 -------- 74,707 -------- PUBLISHING AND ADVERTISING -- 1.0% 148,535 Lamar Advertising Company!!.............................. 6,033 -------- RAILROADS, TRUCKING AND SHIPPING -- 1.1% 109,935 Expeditors International of Washington, Inc. ............ 6,706 -------- SEMICONDUCTORS -- 6.5% 60,000 Broadcom Corporation, Class A!!(a)....................... 2,154 137,588 Linear Technology Corporation(a)......................... 6,084 146,573 Maxim Integrated Products, Inc.!!(a)..................... 8,166 131,922 MKS Instruments Inc.!!................................... 4,517 180,661 Novellus Systems, Inc.!!(a).............................. 9,781 265,750 RF Micro Devices, Inc.!!(a).............................. 4,757 161,668 Vitesse Semiconductor Corporation!!(a)................... 1,584 93,234 Xilinx, Inc.!!(a)........................................ 3,716 -------- 40,759 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- SOFTWARE -- 8.7% 71,250 Affiliated Computer Services, Inc., Class A!!(a)......... $ 3,999 252,217 BEA Systems, Inc.!!(a)................................... 3,458 196,974 BMC Software, Inc.!!..................................... 3,831 190,870 Check Point Software Technologies Ltd.!!(a).............................................. 5,802 544,321 Citrix Systems, Inc.!!(a)................................ 9,407 117,187 Intuit Inc.!!............................................ 4,495 442,573 Precise Software Solutions Ltd.!!........................ 10,309 476,378 Quest Software, Inc.!!(a)................................ 7,198 196,636 Siebel Systems, Inc.!!(a)................................ 6,412 -------- 54,911 -------- SPECIALTY STORES -- 6.4% 234,541 Abercrombie & Fitch Company!!(a)......................... 7,224 183,333 Bed Bath & Beyond Inc.!!................................. 6,187 382,568 Circuit City Stores - Circuit City Group................. 6,902 219,500 Staples, Inc.!!(a)....................................... 4,383 145,438 The Men's Wearhouse, Inc.!!(a)........................... 3,396 87,621 The Talbots, Inc. ....................................... 3,102 244,986 Tiffany & Company........................................ 8,709 -------- 39,903 -------- TELECOMMUNICATIONS SERVICES -- 0.3% 295,768 Time Warner Telecom, Inc., Class A!!(a).................. 1,798 -------- UNIT INVESTMENT TRUST -- 1.4% 89,893 S&P Mid-Cap 400 Depositary Receipts(a)................... 8,881 -------- UTILITIES -- MISCELLANEOUS -- 0.6% 193,025 Republic Services, Inc.!!................................ 3,606 -------- TOTAL COMMON STOCKS (Cost $599,866)........................................ 599,440 --------
SEE NOTES TO FINANCIAL STATEMENTS. 129 NATIONS FUNDS Nations MidCap Growth Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
SHARES VALUE (000) (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 48.6% 95 iShares Russell Midcap Growth Index...................... $ 6,711 298,399 Nations Cash Reserves, Capital Class Shares#............. 298,399 -------- TOTAL INVESTMENT COMPANIES (Cost $304,381)........................................ 305,110 -------- TOTAL INVESTMENTS (Cost $904,247*)................................ 144.0% 904,550 -------- OTHER ASSETS AND LIABILITIES (NET)................ (44.0)% Cash..................................................... $ 18 Receivable for investment securities sold................ 1,360 Receivable for Fund shares sold.......................... 2,142 Dividends receivable..................................... 104 Interest receivable...................................... 29 Collateral on securities loaned.......................... (278,045) Payable for Fund shares redeemed......................... (1,371) Investment advisory fee payable.......................... (347) Administration fee payable............................... (123) Shareholder servicing and distribution fees payable...... (47) Accrued Trustees' fees and expenses...................... (60) Accrued expenses and other liabilities................... (166) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (276,506) -------- NET ASSETS........................................ 100.0% $628,044 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold........ $(47,930) Net unrealized appreciation of investments............................................ 303 Paid-in capital.......................................... 675,671 -------- NET ASSETS............................................... $628,044 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($547,513,390 / 41,434,296 shares outstanding)......... $13.21 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($32,138,334 / 2,524,016 shares outstanding)........... $12.73 ------ ------ 5.75% Maximum sales charge..................................... $13.51 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($45,368,341 / 3,942,715 shares outstanding)........... $11.51 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share& ($3,024,152 / 261,311 shares outstanding).............. $11.57 ------ ------
- --------------- *Federal income tax information (see Note 9). !! Non-income producing security. &The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. +Amount represents less than 0.1%. (a) All or a portion of security was on loan at March 31, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $252,694 and $267,952, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $278,045. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 130 NATIONS FUNDS Nations Marsico 21st Century Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 92.5% AEROSPACE AND DEFENSE -- 4.7% 11,120 Alliant Techsystems Inc.!!............................... $ 1,134 34,698 Lockheed Martin Corporation.............................. 1,998 -------- 3,132 -------- AIRLINES -- 1.5% 32,726 Ryanair Holdings plc, ADR!!(a)........................... 982 -------- AUTOMOTIVE -- 8.7% 20,164 Bayerische Motoren Werke (BMW) AG!!...................... 804 72,832 Delphi Automotive Systems Corporation.................... 1,165 33,268 General Motors Corporation(a)............................ 2,011 242,000 Nissan Motor Company, Ltd.!!............................. 1,749 -------- 5,729 -------- BUILDING MATERIALS -- 0.8% 226,000 Corporacion Geo S.A. de C.V., Series B!!................. 539 -------- CHEMICALS -- SPECIALTY -- 1.0% 31,032 Symyx Technologies Inc.!!................................ 641 -------- COMMERCIAL BANKING -- 2.6% 34,772 Citigroup Inc. .......................................... 1,722 -------- COMMERCIAL SERVICES -- 3.9% 12,088 Omnicom Group Inc.(a).................................... 1,141 53,186 Waste Management, Inc.(a)................................ 1,449 -------- 2,590 -------- COMPUTERS AND OFFICE EQUIPMENT -- 1.3% 33,126 Dell Computer Corporation!!.............................. 865 -------- CONSUMER CREDIT AND MORTGAGES -- 11.8% 46,056 Fannie Mae............................................... 3,679 41,786 USA Education Inc. ...................................... 4,087 -------- 7,766 -------- DIVERSIFIED ELECTRONICS -- 4.3% 27,338 Analogic Corporation..................................... 1,137 34,228 Harman International Industries, Inc. ................... 1,689 -------- 2,826 -------- FINANCE -- MISCELLANEOUS -- 2.8% 29,106 Capital One Financial Corporation(a)..................... 1,858 -------- HEALTH SERVICES -- 9.5% 34,824 Tenet Healthcare Corporation!!........................... 2,334 51,156 UnitedHealth Group Inc. ................................. 3,909 -------- 6,243 -------- HEAVY MACHINERY -- 2.1% 60,638 Agco Corporation(a)...................................... 1,384 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- HOUSING AND FURNISHING -- 12.1% 36,815 Aaon, Inc.!!............................................. $ 998 37,946 D.R. Horton, Inc.!!(a)................................... 1,431 33,598 Furniture Brands International, Inc.!!................... 1,225 27,322 Lennar Corporation(a).................................... 1,442 49,267 M.D.C. Holdings, Inc. ................................... 2,127 29,084 WCI Communities, Inc.!!.................................. 710 -------- 7,933 -------- INVESTMENT SERVICES -- 2.8% 29,054 Lehman Brothers Holdings Inc. ........................... 1,878 -------- LODGING AND RECREATION -- 6.5% 49,995 Four Seasons Hotels Inc.(a).............................. 2,663 44,484 MGM Mirage Inc.!!........................................ 1,612 -------- 4,275 -------- MEDICAL DEVICES AND SUPPLIES -- 1.9% 14,516 InterMune Inc.!!(a)...................................... 436 12,096 Johnson & Johnson........................................ 786 -------- 1,222 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 2.1% 12,130 L-3 Communications Holdings, Inc.!!(a)................... 1,359 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.6% 6,358 FedEx Corporation!!...................................... 369 -------- SOFTWARE -- 7.7% 36,012 Kronos Inc.!!............................................ 1,692 26,908 Microsoft Corporation!!.................................. 1,623 54,318 Siebel Systems, Inc.!!................................... 1,771 -------- 5,086 -------- SPECIALTY STORES -- 3.8% 39,406 Lowe's Companies, Inc. .................................. 1,714 23,146 Tiffany & Company........................................ 823 -------- 2,537 -------- TOTAL COMMON STOCKS (Cost $53,576)......................................... 60,936 -------- PREFERRED STOCKS -- 4.5% (Cost $2,868) AUTOMOTIVE -- 4.5% 6,586 Porsche AG............................................... 2,993 -------- PRINCIPAL AMOUNT (000) - --------- SHORT TERM INVESTMENTS -- 0.9% (Cost $600) FEDERAL HOME LOAN BANK (FHLB) -- 0.9% $ 600 Discount note 04/01/02................................... 600 --------
SEE NOTES TO FINANCIAL STATEMENTS. 131 NATIONS FUNDS Nations Marsico 21st Century Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
SHARES VALUE (000) (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 19.5% (Cost $12,882) 12,882 Nations Cash Reserves, Capital Class Shares#............. $ 12,882 -------- TOTAL INVESTMENTS (Cost $69,926*)................................. 117.4% 77,411 -------- OTHER ASSETS AND LIABLITIES (NET)................. (17.4)% Cash..................................................... $ 7 Receivable for investment securities sold................ 2,154 Receivable for Fund shares sold.......................... 157 Dividends receivable..................................... 20 Interest receivable...................................... 1 Collateral on securities loaned.......................... (12,842) Payable for Fund shares redeemed......................... (131) Investment advisory fee payable.......................... (42) Administration fee payable............................... (13) Shareholder servicing and distribution fees payable...... (44) Payable for investment securities purchased.............. (621) Accrued Trustees' fees and expenses...................... (27) Accrued expenses and other liabilities................... (86) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (11,467) -------- NET ASSETS........................................ 100.0% $ 65,944 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments............. $(37,861) Net unrealized appreciation of investments............... 7,485 Paid-in capital.......................................... 96,320 -------- NET ASSETS............................................... $ 65,944 ======== VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($3,356,048 / 472,559 shares outstanding).............. $7.10 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($14,740,992 / 2,086,715 shares outstanding)........... $7.06 ----- ----- 5.75% Maximum sales charge..................................... $7.50 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($43,187,043 / 6,205,037 shares outstanding)........... $6.96 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($4,660,228 / 669,614 shares outstanding).............. $6.96 ----- -----
- --------------- *Federal income tax information (see Note 9). !! 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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $11,275 and $12,481, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $12,842. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 132 NATIONS FUNDS Nations Small Company Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - --------------------------------------------------------------------------------- COMMON STOCKS -- 88.2% AEROSPACE AND DEFENSE -- 0.7% 136,823 Triumph Group, Inc.!!.................................... $ 5,363 --------- AIRLINES -- 1.3% 389,224 SkyWest, Inc. ........................................... 9,703 --------- APPAREL AND TEXTILES -- 1.3% 158,634 Columbia Sportswear Company!!(a)......................... 5,322 389,843 Vans, Inc.!!............................................. 4,565 --------- 9,887 --------- BEVERAGES -- 1.2% 164,311 Constellation Brands, Inc.!!............................. 9,031 --------- BROADCASTING AND CABLE -- 1.4% 173,916 Entercom Communications Corporation!!(a)....................................... 9,543 32,926 Salem Communications Corporation!!....................... 780 --------- 10,323 --------- CHEMICALS -- SPECIALTY -- 1.2% 335,941 Agrium Inc. ............................................. 3,534 78,640 OM Group, Inc. .......................................... 5,686 --------- 9,220 --------- COMMERCIAL BANKING -- 3.9% 308,123 City National Corporation(a)............................. 16,210 99,494 F.N.B. Corporation....................................... 2,915 363,942 National Commerce Financial Corporation(a)............... 10,118 --------- 29,243 --------- COMMERCIAL SERVICES -- 3.7% 243,453 Catalina Marketing Corporation!!(a)...................... 8,885 493,619 Encompass Services Corporation!!......................... 874 269,937 Iron Mountain Inc.!!(a).................................. 8,562 77,000 Manhattan Associates, Inc.!!............................. 2,934 89,708 Pegasus Solutions Inc.!!................................. 1,660 360,327 Trammell Crow Company!!.................................. 5,225 --------- 28,140 --------- COMPUTER SERVICES -- 1.2% 399,609 Tier Technologies, Inc., Class B!!....................... 7,053 133,675 Virage Logic Corporation!!............................... 2,036 --------- 9,089 --------- COMPUTERS AND OFFICE EQUIPMENT -- 2.1% 245,311 Avocent Corporation!!.................................... 6,572 251,020 Plexus Corporation!!..................................... 5,924 54,152 Zebra Technologies Corporation, Class A!!.............................................. 2,929 --------- 15,425 --------- CONSUMER SERVICES -- 0.5% 75,253 Rent-A-Center, Inc.!!.................................... 3,845 ---------
VALUE SHARES (000) - --------------------------------------------------------------------------------- DIVERSIFIED ELECTRONICS -- 2.9% 712,721 Aeroflex, Inc.!!......................................... $ 9,165 358,339 Anaren Microwave, Inc.!!................................. 5,207 145,535 Dionex Corporation!!..................................... 3,541 244,791 Sypris Solutions, Inc.!!................................. 3,679 --------- 21,592 --------- DIVERSIFIED MANUFACTURING -- 2.1% 131,621 Actuant Corporation, Class A!!........................... 5,679 112,659 AstroPower, Inc.!!(a).................................... 4,705 332,761 DDi Corporation!!........................................ 2,838 154,392 Delta and Pine Land Company.............................. 2,929 --------- 16,151 --------- EDUCATION -- 2.2% 324,835 Career Education Corporation!!(a)........................ 12,864 94,476 Education Management Corporation!!....................... 3,984 --------- 16,848 --------- ENERGY -- MISCELLANEOUS -- 1.7% 397,682 Kinder Morgan Energy Partners, LP........................ 13,124 --------- FINANCE -- MISCELLANEOUS -- 4.3% 270,266 Affiliated Managers Group, Inc.!!(a)..................... 19,413 233,863 Boston Private Financial Holdings, Inc. ................. 6,256 120,156 Investment Technology Group, Inc.!!...................... 6,337 --------- 32,006 --------- FOOD AND DRUG STORES -- 0.8% 284,332 Fleming Companies, Inc.(a)............................... 6,369 --------- HEALTH SERVICES -- 8.4% 84,073 Centene Corporation!!.................................... 1,925 138,077 Neurocrine Biosciences, Inc.!!........................... 5,605 526,726 Orthodontic Centers of America, Inc.!!(a).............................................. 14,542 435,309 Province Healthcare Company!!(a)......................... 13,830 306,456 Triad Hospitals, Inc.!!(a)............................... 10,536 151,011 Unilab Corporation!!..................................... 3,713 725,826 US Oncology, Inc.!!...................................... 6,395 451,607 VCA Antech, Inc.!!....................................... 6,097 --------- 62,643 --------- HOUSING AND FURNISHING -- 0.6% 119,066 Ethan Allen Interiors Inc.(a)............................ 4,532 --------- INSURANCE -- 2.7% 211,494 Delphi Financial Group, Inc., Class A.................... 8,293 123,948 IPC Holdings, Ltd. ...................................... 4,033 223,088 The Phoenix Companies, Inc.!!............................ 4,283 83,005 Triad Guaranty Inc.!!.................................... 3,608 --------- 20,217 --------- INTEGRATED OIL -- 0.2% 76,756 Remington Oil & Gas Corporation!!........................ 1,547 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 133 NATIONS FUNDS Nations Small Company Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - --------------------------------------------------------------------------------- LODGING AND RECREATION -- 3.0% 177,253 Ameristar Casinos, Inc.!!(a)............................. $ 4,871 555,840 Shuffle Master, Inc.!!................................... 11,483 386,297 Station Casinos, Inc.!!(a)............................... 6,432 --------- 22,786 --------- MEDICAL DEVICES AND SUPPLIES -- 5.4% 188,072 Cooper Companies, Inc.(a)................................ 8,915 149,636 Datascope Corporation.................................... 4,392 608,178 Endocare, Inc.!!(a)...................................... 11,987 117,303 Enzon, Inc.!!(a)......................................... 5,195 207,679 Exact Sciences Corporation!!(a).......................... 2,021 102,716 Vital Signs Inc. ........................................ 3,788 200,048 Wright Medical Group, Inc.!!............................. 4,019 --------- 40,317 --------- METALS AND MINING -- 0.5% 104,737 Mueller Industries, Inc.!!............................... 3,665 --------- NATURAL GAS DISTRIBUTION -- 0.7% 210,610 Energen Corporation...................................... 5,571 --------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 5.2% 476,640 AudioCodes Ltd.!!(a)..................................... 1,621 857,881 C-COR.Net Corporation!!(a)............................... 15,441 1,000,000 Hypercom Corporation(b)@................................. 5,315 47,989 Plantronics, Inc.!!...................................... 1,004 954,904 Proxim Corporation, Class A!!(a)......................... 2,292 571,656 REMEC, Inc.!!............................................ 5,288 314,316 Spectrian Corporation!!(a)............................... 4,501 138,767 Tollgrade Communications, Inc.!!......................... 3,401 --------- 38,863 --------- OILFIELD SERVICES -- 2.6% 96,656 Atwood Oceanics, Inc.!!.................................. 4,437 135,840 Patterson-UTI Energy, Inc.!!............................. 4,040 109,438 Precision Drilling Corporation!!......................... 3,498 436,090 Pride International, Inc.!!.............................. 6,933 43,801 W-H Energy Services, Inc.!!.............................. 946 --------- 19,854 --------- PHARMACEUTICALS -- 8.1% 371,502 Allos Therapeutics Inc.!!................................ 2,582 438,480 Alpharma Inc., Class A(a)................................ 6,270 235,204 Array BioPharma Inc.!!................................... 3,046 67,350 Cephalon, Inc.!!(a)...................................... 4,243 108,800 Enzo Biochem, Inc.!!(a).................................. 2,204 72,805 Human Genome Sciences, Inc.!!(a)......................... 1,586 211,184 Introgen Therapeutics, Inc.!!............................ 995 448,865 Martek Biosciences Corporation!!(a)...................... 14,130 114,302 Medicis Pharmaceutical Corporation, Class A!!............ 6,344 107,975 OSI Pharmaceuticals, Inc.!!.............................. 4,227 312,831 Shire Pharmaceuticals Group plc, ADR!!................... 7,342 294,654 Vical, Inc.!!............................................ 2,726 369,776 Women First Healthcare, Inc.!!@ ......................... 3,657 56,535 Women First Healthcare, Inc.!!........................... 559 --------- 59,911 ---------
VALUE SHARES (000) - --------------------------------------------------------------------------------- RAILROADS, TRUCKING AND SHIPPING -- 1.6% 53,923 Heartland Express, Inc.!!................................ $ 1,076 216,560 Knight Transportation, Inc.!!............................ 4,579 246,517 RailAmerica, Inc. ....................................... 2,593 328,690 RailAmerica, Inc.@ ...................................... 3,458 --------- 11,706 --------- RESTAURANTS -- 2.6% 146,751 CEC Entertainment Inc.!!(a).............................. 6,780 220,142 Jack in the Box Inc.!!................................... 6,527 249,842 RARE Hospitality International, Inc.!!................... 6,351 --------- 19,658 --------- SEMICONDUCTORS -- 4.3% 239,744 Alpha Industries, Inc.!!(a).............................. 3,656 221,035 Camtek Ltd.!!............................................ 438 144,460 Cymer, Inc.!!(a)......................................... 7,174 122,630 LTX Corporation!!(a)..................................... 3,334 438,228 Oak Technology, Inc.!!................................... 6,521 171,946 PRI Automation, Inc.!!................................... 4,008 467,783 Sipex Corporation!!(a)................................... 5,192 189,493 TriQuint Semiconductor, Inc.!!(a)........................ 2,276 --------- 32,599 --------- SOFTWARE -- 4.9% 421,498 Dendrite International, Inc.!!........................... 4,510 307,461 Hyperion Solutions Corporation!!......................... 8,305 347,268 Interwoven, Inc.!!....................................... 1,736 310,857 Lawson Software, Inc.!!.................................. 3,730 75,681 Macrovision Corporation!!................................ 2,017 102,339 OTG Software, Inc.!!(a).................................. 883 125,971 Precise Software Solutions Ltd.!!........................ 2,934 86,528 ProsoftTraining.com@..................................... 116 442,642 TTI Team Telecom International Ltd.!!.................... 12,704 --------- 36,935 --------- SPECIALTY STORES -- 3.5% 200,458 American Eagle Outfitters, Inc.!!........................ 4,965 608,564 Cato Corporation......................................... 13,559 265,851 Too Inc.!!............................................... 7,840 --------- 26,364 --------- TELECOMMUNICATIONS SERVICES -- 1.4% 318,815 AirGate PCS, Inc.!!(a)................................... 4,463 293,438 Alvarion Ltd.!!.......................................... 734 120,495 Commonwealth Telephone Enterprises, Inc.!!............... 4,609 266,568 Gilat Satellite Networks Ltd.!!(a)....................... 925 --------- 10,731 --------- TOTAL COMMON STOCKS (Cost $555,585)........................................ 663,258 --------- WARRANTS -- 0.1% (Cost $0++) 25,000 Martek Biosciences Corporation(b)@....................... 520 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 134 NATIONS FUNDS Nations Small Company Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
SHARES VALUE (000) (000) - --------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 39.5% 200 iShares Russell 2000 Growth Index Fund(a)................ $ 11,302 272 iShares Russell 2000 Index Fund(a)....................... 27,258 258,569 Nations Cash Reserves, Capital Class Shares#............. 258,569 --------- TOTAL INVESTMENT COMPANIES (Cost $296,870)........................................ 297,129 --------- TOTAL INVESTMENTS (Cost $852,455*)................................ 127.8% 960,907 --------- OTHER ASSETS AND LIABILITIES (NET)................ (27.8)% Cash..................................................... $ 1 Receivable for investment securities sold................ 2,720 Receivable for Fund shares sold.......................... 3,957 Dividends receivable..................................... 148 Interest receivable...................................... 56 Collateral on securities loaned.......................... (203,136) Payable for Fund shares redeemed......................... (220) Investment advisory fee payable.......................... (513) Administration fee payable............................... (140) Shareholder servicing and distribution fees payable...... (49) Payable for investment securities purchased.............. (11,546) Accrued Trustees' fees and expenses...................... (44) Accrued expenses and other liabilities................... (207) --------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (208,973) --------- NET ASSETS........................................ 100.0% $ 751,934 ========= NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold........ $ (42,601) Net unrealized appreciation of investments............... 108,452 Paid-in capital.......................................... 686,083 --------- NET ASSETS............................................... $ 751,934 ========= VALUE - --------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($572,819,926 / 38,008,935 shares outstanding)......... $15.07 ------ ------ INVESTOR A SHARES: Net asset value and redemption price per share ($157,758,718 / 10,631,505 shares outstanding)......... $14.84 ------ ------ 5.75% Maximum sales charge..................................... $15.74 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($17,484,164 / 1,227,233 shares outstanding)........... $14.25 ------ ------ INVESTOR C SHARES: Net asset value and offering price per share+ ($3,871,298 / 267,987 shares outstanding).............. $14.45 ------ ------
- --------------- *Federal income tax information (see Note 9). @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. ++Amount represents less than $500. (a) All or a portion of security was on loan at March 31, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $164,996 and $194,252, respectively. (b) Fair valued security. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $203,136. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 135 NATIONS FUNDS Nations Financial Services Fund STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 90.7% COMMERCIAL BANKING -- 22.6% 6,000 Charter One Financial, Inc. ............................. $ 187 6,100 Citigroup Inc. .......................................... 302 3,000 Commerce Bancorp, Inc. .................................. 135 6,000 Compass Bancshares, Inc. ................................ 185 1,750 Fifth Third Bancorp...................................... 118 3,800 Mellon Financial Corporation............................. 147 2,500 TCF Financial Corporation................................ 132 3,000 Wells Fargo & Company.................................... 148 -------- 1,354 -------- COMPUTER SERVICES -- 9.0% 7,275 Concord EFS, Inc.!!(a)................................... 242 4,950 Jack Henry & Associates, Inc. ........................... 110 5,500 Sungard Data Systems, Inc.!!............................. 181 -------- 533 -------- CONSUMER CREDIT AND MORTGAGES -- 19.8% 8,000 AmeriCredit Corporation!!(a)............................. 303 1,425 Fannie Mae............................................... 114 1,400 Freddie Mac.............................................. 89 4,000 Household International, Inc. ........................... 227 7,000 MBNA Corporation......................................... 270 1,775 USA Education Inc. ...................................... 174 -------- 1,177 -------- FINANCE -- MISCELLANEOUS -- 4.7% 1,400 MGIC Investment Corporation.............................. 96 6,000 Synovus Financial Corporation............................ 183 -------- 279 -------- HEALTH SERVICES -- 0.9% 725 UnitedHealth Group Inc. ................................. 55 -------- INSURANCE -- 13.0% 5,000 AFLAC, Inc. ............................................. 148 1,500 Ambac Financial Group, Inc. ............................. 89 3,800 American International Group, Inc. ...................... 273 2,500 PartnerRe Ltd. .......................................... 137 4,000 Reinsurance Group of America, Inc. ...................... 125 -------- 772 -------- INVESTMENT SERVICES -- 20.7% 1,800 Bear Stearns Companies Inc............................... 113 3,000 Eaton Vance Corporation.................................. 120 3,000 Federated Investors Inc. ................................ 97 1,800 Goldman Sachs Group, Inc. ............................... 162
VALUE SHARES (000) - -------------------------------------------------------------------------------- INVESTMENT SERVICES -- (CONTINUED) 3,200 Legg Mason, Inc. ........................................ $ 170 3,875 Merrill Lynch & Company, Inc. ........................... 215 3,775 Morgan Stanley Dean Witter & Company..................... 216 4,500 Waddell & Reed Financial, Inc., Class A.................. 137 -------- 1,230 -------- TOTAL COMMON STOCKS (Cost $4,994).......................................... 5,400 -------- SHARES (000) - --------- INVESTMENT COMPANIES -- 20.9% 3 iShares Dow Jones U.S. Financial Sector Index Fund(a).... 240 3 iShares Dow Jones U.S. Financial Services Index Fund..... 238 766 Nations Cash Reserves, Capital Class Shares#............. 767 -------- TOTAL INVESTMENT COMPANIES (Cost $1,225).......................................... 1,245 -------- TOTAL INVESTMENTS (Cost $6,219*).................................. 111.6% 6,645 -------- OTHER ASSETS AND LIABLITIES (NET)................. (11.6)% Cash..................................................... $ 1 Dividends receivable..................................... 4 Collateral on securities loaned.......................... (643) Investment advisory fee payable.......................... (4) Administration fee payable............................... (6) Accrued Trustees' fees and expenses...................... (8) Accrued expenses and other liabilities................... (36) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (692) -------- NET ASSETS........................................ 100% $ 5,953 ======== NET ASSETS CONSIST OF: Accumulated net realized loss on investments............. $ (204) Net unrealized appreciation of investments............... 426 Paid-in capital.......................................... 5,731 -------- NET ASSETS............................................... $ 5,953 ========
SEE NOTES TO FINANCIAL STATEMENTS. 136 NATIONS FUNDS Nations Financial Services Fund STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE - -------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($5,333,203 / 514,711 shares outstanding).............. $10.36 ----- ----- INVESTOR A SHARES: Net asset value and redemption price per share ($306,586 / 29,644 shares outstanding)................. $10.34 ----- ----- 5.75% Maximum sales charge..................................... $10.97 Maximum offering price per share......................... INVESTOR B SHARES: Net asset value and offering price per share& ($268,200 / 26,103 shares outstanding)................. $10.27 ----- ----- INVESTOR C SHARES: Net asset value and offering price per share& ($45,344 / 4,404 shares outstanding)................... $10.30 ----- -----
- --------------- *Federal income tax information (see Note 9). !! 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, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $444 and $627, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 8). The portion that represents cash collateral is $643. SEE NOTES TO FINANCIAL STATEMENTS. 137 NATIONS FUNDS STATEMENTS OF OPERATIONS For the year ended March 31, 2002
CONVERTIBLE ASSET SECURITIES ALLOCATION --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 15,701 $ 9,010 Dividends (Net of foreign withholding taxes of $0, $6, $7, $0, $--*, $15, $0, and $0, respectively).................. 9,741 3,017 Dividend income from affiliated funds....................... 657 702 Securities lending.......................................... -- 46 Allocated from Portfolio: Interest+................................................... -- -- Dividends (Net of foreign withholding taxes of $0, $0, $0, $0, $0, $0, $0, and $11, respectively)+................... -- -- Dividend income from affiliated funds+...................... -- -- Securities lending+......................................... -- -- Expenses+................................................... -- -- -------------- -------------- Total investment income/(loss).......................... 26,099 12,775 -------------- -------------- EXPENSES: Investment advisory fee..................................... 3,447 2,612 Administration fee.......................................... 1,220 924 Transfer agent fees......................................... 193 139 Custodian fees.............................................. 35 40 Legal and audit fees........................................ 111 121 Registration and filing fees................................ 90 56 Trustees'/Directors' fees and expenses...................... 29 29 Interest expense............................................ --* -- Printing expense............................................ 160 209 Other....................................................... 29 19 -------------- -------------- Subtotal................................................ 5,314 4,149 Shareholder servicing and distribution fees: Investor A Shares......................................... 784 582 Investor B Shares......................................... 714 1,284 Investor C Shares......................................... 147 37 -------------- -------------- Total expenses.......................................... 6,959 6,052 Fees waived by investment advisor and/or administrator...... -- -- Fees reduced by credits allowed by the custodian............ (7) (4) -------------- -------------- Net expenses............................................ 6,952 6,048 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 19,147 6,727 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... (32,879) (9,727) Written options........................................... -- -- Futures contracts......................................... -- (649) Foreign currency transactions............................. -- -- Allocated from Portfolio: Security transactions+.................................... -- -- Foreign currency transactions+............................ -- -- -------------- -------------- Net realized gain/(loss) on investments..................... (32,879) (10,376) -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities (Note 10)...................................... 34,804 (1,920) Futures contracts......................................... -- (381) Securities allocated from Portfolio (Note 10)+............ -- -- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... 34,804 (2,301) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... 1,925 (12,677) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 21,072 $ (5,950) ============== ==============
- --------------- *Amount represents less than $500. ** See Note 10 -- Bank Plan Redemption-In-Kind. +Allocated from Growth & Income Master Portfolio. (a) Classic Value commenced operations on April 16, 2001. (b) LargeCap Value commenced operations on November 20, 2001. (c) MidCap Value commenced operations on November 20, 2001. SEE NOTES TO FINANCIAL STATEMENTS. 138 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
EQUITY CLASSIC LARGECAP MIDCAP GROWTH & INCOME VALUE(A) VALUE(B) VALUE VALUE(C) INCOME - ------------------------------------------------------------------------------------------------------- $ 545 $ -- $ 2 $ 10 $ 3 $ -- 5,666 2,736 45 16,695 203 -- 110 252 4 618 21 -- 39 32 -- 195 -- -- -- -- -- -- -- 501 -- -- -- -- -- 3,038 -- -- -- -- -- 19 -- -- -- -- -- 83 -- -- -- -- -- (4,251) -------------- -------------- -------------- -------------- -------------- -------------- 6,360 3,020 51 17,518 227 (610) -------------- -------------- -------------- -------------- -------------- -------------- 1,518 932 17 5,788 91 -- 580 329 6 2,048 28 634 77 43 1 281 1 385 24 13 --* 66 1 -- 107 63 66 107 66 65 52 40 31 38 17 28 28 18 7 29 6 29 11 -- -- -- -- -- 84 48 38 105 36 162 8 5 --* 14 --* 13 -------------- -------------- -------------- -------------- -------------- -------------- 2,489 1,491 166 8,476 246 1,316 57 16 --* 150 --* 428 382 138 --* 840 --* 2,184 25 185 --* 78 --* 304 -------------- -------------- -------------- -------------- -------------- -------------- 2,953 1,830 166 9,544 246 4,232 (28) -- (138) -- (94) -- (1) (4) --* (5) --* -- -------------- -------------- -------------- -------------- -------------- -------------- 2,924 1,826 28 9,539 152 4,232 -------------- -------------- -------------- -------------- -------------- -------------- 3,436 1,194 23 7,979 75 (4,842) -------------- -------------- -------------- -------------- -------------- -------------- 19,713 12,986 29 42,471** 417 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (77,347) -- -- -- -- -- (16) -------------- -------------- -------------- -------------- -------------- -------------- 19,713 12,986 29 42,471 417 (77,363) -------------- -------------- -------------- -------------- -------------- -------------- (9,407) 20,237 416 (10,147) 6,099 -- -- -- -- -- -- -- -- -- -- -- -- 75,622 -------------- -------------- -------------- -------------- -------------- -------------- (9,407) 20,237 416 (10,147) 6,099 75,622 -------------- -------------- -------------- -------------- -------------- -------------- 10,306 33,223 445 32,324 6,516 (1,741) -------------- -------------- -------------- -------------- -------------- -------------- $ 13,742 $ 34,417 $ 468 $ 40,303 $ 6,591 $ (6,583) ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 139 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED) For the year ended March 31, 2002
BLUE STRATEGIC CHIP GROWTH --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ -- $ -- Dividends (Net of foreign withholding taxes of $0, $21, $1, $0, $0, $0, $8, $6 and $0, respectively).................. -- 11,854 Dividend income from affiliated funds....................... -- 1,794 Securities lending.......................................... -- 155 Allocated from Portfolio: Interest+................................................... 61 -- Dividends (Net of foreign withholding taxes of $22, $0, $0, $0, $14, $0, $0, $0 and $0, respectively)+................ 9,052 -- Dividend income from affiliated funds+...................... 452 -- Securities lending+......................................... 88 -- Expenses+................................................... (5,211) -- -------------- -------------- Total investment income/(loss).......................... 4,442 13,803 -------------- -------------- EXPENSES: Investment advisory fee..................................... -- 7,864 Administration fee.......................................... 1,306 2,783 Transfer agent fees......................................... 292 353 Custodian fees.............................................. -- 80 Legal and audit fees........................................ 81 111 Registration and filing fees................................ 39 75 Trustees'/Directors' fees and expenses...................... 29 29 Interest expense............................................ -- -- Printing expense............................................ 214 78 Other....................................................... 19 29 -------------- -------------- Subtotal................................................ 1,980 11,402 Shareholder servicing and distribution fees: Investor A Shares......................................... 1,428 64 Investor B Shares......................................... 742 70 Investor C Shares......................................... 177 24 -------------- -------------- Total expenses.......................................... 4,327 11,560 Fees waived by investment advisor and/or administrator...... -- -- Fees reduced by credits allowed by the custodian............ -- (3) -------------- -------------- Net expenses............................................ 4,327 11,557 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 115 2,246 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... -- (112,990) Written options........................................... -- -- Futures contracts......................................... -- -- Foreign currency transactions............................. -- -- Allocated from Portfolio: Security transactions+.................................... (53,917) -- Foreign currency transactions+............................ -- -- -------------- -------------- Net realized gain/(loss) on investments..................... (53,917) (112,990) -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities (Note 10)...................................... -- 109,777 Futures contracts......................................... -- -- Securities allocated from Portfolio (Note 10)+............ 26,275 -- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... 26,275 109,777 -------------- -------------- Net realized and unrealized gain/(loss) on investments...... (27,642) (3,213) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (27,527) $ (967) ============== ==============
- --------------- *Amount represents less than $500. ** See Note 10 -- Bank Plan Redemption-In-Kind. +Allocated from Blue Chip Master Portfolio and Focused Equities Master Portfolio, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 140 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED)
CAPITAL AGGRESSIVE FOCUSED MIDCAP 21ST SMALL FINANCIAL GROWTH GROWTH EQUITIES GROWTH CENTURY COMPANY SERVICES - ------------------------------------------------------------------------------------------------------------------------ $ -- $ -- $ -- $ -- $ 88 $ -- $ 2 3,967 518 -- 1,328 359 2,678 58 401 130 -- 2,181 6 1,825 11 90 25 -- 377 16 452 2 -- -- 3,113 -- -- -- -- -- -- 9,756 -- -- -- -- -- -- 143 -- -- -- -- -- -- 323 -- -- -- -- -- -- (14,741) -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- -------------- 4,458 673 (1,406) 3,886 469 4,955 73 -------------- -------------- -------------- -------------- -------------- -------------- -------------- 3,396 760 -- 4,339 552 6,654 40 1,202 269 2,230 1,535 169 1,701 12 161 38 1,405 217 39 223 2 36 13 -- 57 7 54 2 111 112 64 115 57 111 75 37 37 13 61 47 75 8 28 28 29 29 29 29 18 1 --* -- 1 --* -- -- 78 79 495 96 104 125 40 11 3 38 19 4 14 1 -------------- -------------- -------------- -------------- -------------- -------------- -------------- 5,061 1,339 4,274 6,469 1,008 8,986 198 78 45 1,210 56 42 374 --* 416 134 6,971 447 466 141 1 35 5 1,926 31 55 31 --* -------------- -------------- -------------- -------------- -------------- -------------- -------------- 5,590 1,523 14,381 7,003 1,571 9,532 199 -- -- -- -- -- (483) (128) * (3) -- (12) (1) (2) (1) -------------- -------------- -------------- -------------- -------------- -------------- -------------- 5,590 1,520 14,381 6,991 1,570 9,047 70 -------------- -------------- -------------- -------------- -------------- -------------- -------------- (1,132) (847) (15,787) (3,105) (1,101) (4,092) 3 -------------- -------------- -------------- -------------- -------------- -------------- -------------- (3,694)** (34,784)** -- (43,669)** (10,022) (10,588)** (204) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 3 -- -- -- -- (257,234) -- -- -- -- -- -- (63) -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- -------------- (3,694) (34,784) (257,297) (43,669) (10,019) (10,588) (204) -------------- -------------- -------------- -------------- -------------- -------------- -------------- (2,066) 24,946 -- (40,763) 10,766 83,151 426 -- -- -- -- -- -- -- -- -- 309,781 -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- -------------- (2,066) 24,946 309,781 (40,763) 10,766 83,151 426 -------------- -------------- -------------- -------------- -------------- -------------- -------------- (5,760) (9,838) 52,484 (84,432) 747 72,563 222 -------------- -------------- -------------- -------------- -------------- -------------- -------------- $ (6,892) $ (10,685) $ 36,697 $ (87,537) $ (354) $ 68,471 $ 225 ============== ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 141 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
CONVERTIBLE SECURITIES ASSET ALLOCATION --------------------------------- -------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/02 3/31/01 3/31/02 3/31/01 ---------------------------------------------------------------------- (IN THOUSANDS) Net investment income/(loss)........................ $ 19,147 $ 11,372 $ 6,727 $ 8,225 Net realized gain/(loss) on investments............. (32,879) 12,906 (10,376) (3,626) Net realized gain/(loss) on investments allocated from Portfolio+................................... -- -- -- -- Net change in unrealized appreciation/(depreciation) of investments.................................... 34,804 (60,106) (2,301) (45,092) Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio+.......... -- -- -- -- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations........................................ 21,072 (35,828) (5,950) (40,493) Distributions to shareholders from net investment income: Primary A Shares.................................. (5,011) (1,035) (854) (436) Investor A Shares................................. (10,164) (10,397) (4,085) (4,946) Investor B Shares................................. (1,912) (679) (1,486) (1,703) Investor C Shares................................. (398) (149) (41) (39) Seafirst Shares**................................. -- -- -- (1,266) Distributions to shareholders from net realized gain on investments: Primary A Shares.................................. (282) (4,012) (21) (798) Investor A Shares................................. (956) (69,310) (365) (8,723) Investor B Shares................................. (176) (3,888) (166) (6,200) Investor C Shares................................. (34) (947) (4) (134) Seafirst Shares**................................. -- -- -- (7,245) Net increase/(decrease) in net assets from Fund share transactions................................ 215,625 179,935 53,397 (5,074) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets............... 217,764 53,690 40,425 (77,057) NET ASSETS: Beginning of period................................. 451,074 397,384 351,644 428,701 -------------- -------------- -------------- -------------- End of period....................................... $ 668,838 $ 451,074 $ 392,069 $ 351,644 ============== ============== ============== ============== Undistributed net investment income/(loss)/(distributions in excess of net investment income) at end of period............... $ 1,659 $ (3) $ 494 $ 233 ============== ============== ============== ==============
- --------------- * Amount represents less than $500. **Seafirst Shares converted into Investor A Shares on June 23, 2000. (a)Classic Value commenced operations on April 16, 2001. (b)LargeCap Value commenced operations on November 20, 2001. (c)MidCap Value commenced operations on November 20, 2001. SEE NOTES TO FINANCIAL STATEMENTS. 142 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
EQUITY INCOME CLASSIC VALUE LARGECAP VALUE VALUE MIDCAP VALUE - ----------------------------------- -------------- -------------- ------------------------------- -------------- YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED 3/31/02 3/31/01 3/31/02(A) 3/31/02(B) 3/31/02 3/31/01 3/31/02(C) - ------------------------------------------------------------------------------------------------------------------------ $ 3,436 $ 4,859 $ 1,194 $ 23 $ 7,979 $ 15,284 $ 75 19,713 25,883 12,986 29 42,471 270,594 417 -- -- -- -- -- -- -- (9,407) (130,290) 20,237 416 (10,147) (301,954) 6,099 -- -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- -------------- 13,742 (99,548) 34,417 468 40,303 (16,076) 6,591 (2,724) (4,453) (663) (16) (6,690) (14,824) (279) (315) (219) (26) --* (413) (865) (1) (274) (107) (4) --* (187) (489) (1) (18) (6) (5) --* (18) (42) -- -- -- -- -- -- -- -- (6,837) (21,098) (1,106) -- (69,242) (264,210) -- (1,236) (1,347) (59) -- (5,561) (18,874) -- (1,921) (2,793) (144) -- (7,789) (25,721) -- (117) (166) (193) -- (734) (2,211) -- -- -- -- -- -- -- -- (269,192) 8,302 336,999 17,996 (302,611) (163,608) 93,768 -------------- -------------- -------------- -------------- -------------- -------------- -------------- (268,892) (121,435) 369,216 18,448 (352,942) (506,920) 100,078 387,944 509,379 -- -- 1,011,950 1,518,870 -- -------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 119,052 $ 387,944 $ 369,216 $ 18,448 $ 659,008 $ 1,011,950 $ 100,078 ============== ============== ============== ============== ============== ============== ============== $ -- $ -- $ 496 $ 7 $ 521 $ -- $ -- ============== ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 143 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GROWTH & INCOME BLUE CHIP --------------------------------- -------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/02 3/31/01 3/31/02 3/31/01 ---------------------------------------------------------------------- (IN THOUSANDS) Net investment income/(loss)........................ $ (4,842) $ (3,954) $ 115 $ (746) Net realized gain/(loss) on investments............. -- -- -- -- Net realized gain/(loss) on investments allocated from Portfolio+................................... (77,363) (51,334) (53,917) (6,956) Net change in unrealized appreciation/(depreciation) of investments.................................... -- -- -- -- Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio+.......... 75,622 (164,423) 26,275 (220,399) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations........................................ (6,583) (219,711) (27,527) (228,101) Distributions to shareholders from net investment income: Primary A Shares.................................. -- -- (5) (19) Investor A Shares................................. -- -- -- (47) Investor B Shares................................. -- -- -- --* Investor C Shares................................. -- -- -- --* Seafirst Shares**................................. -- -- -- -- Distributions to shareholders from net realized gain on investments: Primary A Shares.................................. -- (865) -- (2,580) Investor A Shares................................. -- (1,389) -- (33,654) Investor B Shares................................. -- (2,398) -- (6,124) Investor C Shares................................. -- (290) -- (1,352) Seafirst Shares**................................. -- -- -- (30,470) Net increase/(decrease) in net assets from Fund share transactions................................ 8,144 111,917 (58,619) 54,974 -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets............... 1,561 (112,736) (86,151) (247,373) NET ASSETS: Beginning of period................................. 516,543 629,279 745,737 993,110 -------------- -------------- -------------- -------------- End of period....................................... $ 518,104 $ 516,543 $ 659,586 $ 745,737 ============== ============== ============== ============== Undistributed net investment income/(loss)/(distributions in excess of net investment income) at end of period............... $ (8) $ -- $ 110 $ (4) ============== ============== ============== ==============
- --------------- * 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. 144 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 3/31/02 3/31/01 3/31/02 3/31/01 3/31/02 3/31/01 - ------------------------------------------------------------------------------------------------------- $ 2,246 $ (1,228) $ (1,132) $ (3,176) $ (847) $ (1,957) (112,990) (84,919) (3,694) 150,683 (34,784) 27,539 -- -- -- -- -- -- 109,777 (279,463) (2,066) (423,082) 24,946 (148,812) -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- (967) (365,610) (6,892) (275,575) (10,685) (123,230) (1,543) (560) -- -- -- -- (23) -- -- -- -- -- --* -- -- -- -- -- --* -- -- -- -- -- -- -- -- -- -- -- -- (1,357) (15,951) (132,800) -- (27,096) -- (10) (1,040) (9,887) -- (4,937) -- (8) (1,528) (13,119) -- (4,000) -- (3) (110) (895) -- (137) -- -- -- -- -- -- 67,490 698,100 (213,683) 86,769 (104,465) (106,263) -------------- -------------- -------------- -------------- -------------- -------------- 64,957 330,552 (239,204) (345,507) (115,150) (265,663) 1,202,818 872,266 613,346 958,853 151,356 417,019 -------------- -------------- -------------- -------------- -------------- -------------- $ 1,267,775 $ 1,202,818 $ 374,142 $ 613,346 $ 36,206 $ 151,356 ============== ============== ============== ============== ============== ============== $ 680 $ -- $ -- $ -- $ -- $ -- ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 145 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOCUSED EQUITIES MIDCAP GROWTH --------------------------------- -------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/02 3/31/01 3/31/02 3/31/01 ---------------------------------------------------------------------- (IN THOUSANDS) Net investment income/(loss)........................ $ (15,787) $ (14,883) $ (3,105) $ (1,528) Net realized gain/(loss) on investments............. -- -- (43,669) 44,773 Net realized gain/(loss) on investments allocated from Portfolio+................................... (257,297) (257,149) -- -- Net change in unrealized appreciation/(depreciation) of investments.................................... -- -- (40,763) (136,460) Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio+.......... 309,781 (573,763) -- -- -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations........................................ 36,697 (845,795) (87,537) (93,215) Distributions to shareholders from net investment income: Primary A 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) -- (49,056) Investor A Shares................................. -- (2,722) -- (4,105) Investor B Shares................................. -- (3,996) -- (10,018) Investor C Shares................................. -- (1,029) -- (640) Seafirst Shares**................................. -- -- -- -- Net increase/(decrease) in net assets from Fund share transactions................................ (105,304) 377,702 263,384 252,305 -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets............... (68,607) (477,098) 175,847 95,271 NET ASSETS: Beginning of period................................. 1,791,162 2,268,260 452,197 356,926 -------------- -------------- -------------- -------------- End of period....................................... $ 1,722,555 $ 1,791,162 $ 628,044 $ 452,197 ============== ============== ============== ============== Undistributed net investment income/(loss)/(distributions in excess of net investment income) at end of period............... $ -- $ -- $ -- $ -- ============== ============== ============== ==============
- --------------- * Amount represents less than $500. **Seafirst Shares converted into Investor A Shares on June 23, 2000. + Allocated from Focused Equities Master Portfolio. (a)21st Century commenced operations on April 10, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 146 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FINANCIAL 21ST CENTURY SMALL COMPANY SERVICES - ----------------------------------- ------------------------------- -------------- YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/02 3/31/01(A) 3/31/02 3/31/01 3/31/02 - -------------------------------------------------------------------------------------- $ (1,101) $ (1,094) $ (4,092) $ (5,167) $ 3 (10,019) (27,841) (10,588) 49,901 (204) -- -- -- -- -- 10,766 (3,281) 83,151 (342,864) 426 -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- (354) (32,216) 68,471 (298,130) 225 -- -- -- -- (6) -- -- -- -- --* -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (70,449) -- -- -- -- (22,843) -- -- -- -- (1,589) -- -- -- -- (406) -- -- -- -- -- -- (15,993) 114,507 45,203 121,000 5,734 -------------- -------------- -------------- -------------- -------------- (16,347) 82,291 113,674 (272,417) 5,953 82,291 -- 638,260 910,677 -- -------------- -------------- -------------- -------------- -------------- $ 65,944 $ 82,291 $ 751,934 $ 638,260 $ 5,953 ============== ============== ============== ============== ============== $ -- $ -- $ -- $ -- $ -- ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 147 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
CONVERTIBLE SECURITIES YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- ------------------ SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 26,494 $ 418,389 4,303 $ 74,930 Issued as reinvestment of dividends....................... 36 579 56 979 Redeemed.................................................. (16,504) (261,491) (263) (4,739) ------- --------- ------ -------- Net increase/(decrease)................................... 10,026 $ 157,477 4,096 $ 71,170 ======= ========= ====== ======== INVESTOR A SHARES: Sold...................................................... 3,821 $ 60,434 1,877 $ 34,026 Issued as reinvestment of dividends....................... 640 10,143 4,124 74,335 Redeemed.................................................. (4,057) (63,947) (2,979) (54,653) ------- --------- ------ -------- Net increase/(decrease)................................... 404 $ 6,630 3,022 $ 53,708 ======= ========= ====== ======== INVESTOR B SHARES: Sold...................................................... 3,260 $ 51,688 2,606 $ 46,115 Issued as reinvestment of dividends....................... 114 1,791 241 4,250 Redeemed.................................................. (806) (12,510) (227) (3,928) ------- --------- ------ -------- Net increase/(decrease)................................... 2,568 $ 40,969 2,620 $ 46,437 ======= ========= ====== ======== INVESTOR C SHARES: Sold...................................................... 847 $ 13,519 486 $ 8,810 Issued as reinvestment of dividends....................... 19 307 52 935 Redeemed.................................................. (208) (3,277) (64) (1,125) ------- --------- ------ -------- Net increase/(decrease)................................... 658 $ 10,549 474 $ 8,620 ======= ========= ====== ======== Total net increase/(decrease)............................. 13,656 $ 215,625 10,212 $179,935 ======= ========= ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 148 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
ASSET ALLOCATION YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 ------------------ -------------------- SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 74 $ 1,500 84 $ 1,988 Issued in exchange for assets of Boatmen's Trust Company Balanced Investment Fund (Note 10)...................... -- -- 595 13,617 Issued in exchange for Primary A Shares of Nations Balanced Assets Fund (Note 10).......................... 1,518 32,586 -- -- Issued as reinvestment of dividends....................... 10 195 38 851 Redeemed.................................................. (213) (4,256) (723) (17,027) ------ -------- ------- --------- Net increase/(decrease)................................... 1,389 $ 30,025 (6) $ (571) ====== ======== ======= ========= INVESTOR A SHARES: Sold...................................................... 570 $ 11,588 8,718 $ 203,704 Issued in exchange for Investor A Shares of Nations Balanced Assets Fund (Note 10).......................... 701 15,029 -- -- Issued as reinvestment of dividends....................... 218 4,346 592 13,217 Redeemed.................................................. (1,661) (33,660) (1,339) (30,373) ------ -------- ------- --------- Net increase/(decrease)................................... (172) $ (2,697) 7,971 $ 186,548 ====== ======== ======= ========= INVESTOR B SHARES: Sold...................................................... 424 $ 8,536 713 $ 16,349 Issued in exchange for Investor B Shares of Nations Balanced Assets Fund (Note 10).......................... 1,944 41,435 -- -- Issued as reinvestment of dividends....................... 74 1,475 306 6,828 Redeemed.................................................. (1,314) (26,259) (856) (19,326) ------ -------- ------- --------- Net increase/(decrease)................................... 1,128 $ 25,187 163 $ 3,851 ====== ======== ======= ========= INVESTOR C SHARES: Sold...................................................... 45 $ 921 42 $ 963 Issued in exchange for Investor C Shares of Nations Balanced Assets Fund (Note 10).......................... 90 1,912 -- -- Issued as reinvestment of dividends....................... 2 41 7 164 Redeemed.................................................. (100) (1,992) (19) (440) ------ -------- ------- --------- Net increase/(decrease)................................... 37 $ 882 30 $ 687 ====== ======== ======= ========= SEAFIRST SHARES:** Sold...................................................... -- $ -- 3 $ (1,244) Issued as reinvestment of dividends....................... -- -- 511 8,511 Redeemed.................................................. -- -- (11,904) (202,856) ------ -------- ------- --------- Net increase/(decrease)................................... -- $ -- (11,390) $(195,589) ====== ======== ======= ========= Total net increase/(decrease)............................. 2,382 $ 53,397 (3,232) $ (5,074) ====== ======== ======= =========
- --------------- **Seafirst Shares converted into Investors A Shares on June 23, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 149 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
EQUITY INCOME YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 746 $ 6,576 4,627 $ 46,558 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....................... 36 307 67 693 Redeemed.................................................. (30,511) (267,637) (19,102) (205,163) ------- --------- ------- --------- Net increase/(decrease)................................... (29,729) $(260,754) 2,357 $ 30,193 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 920 $ 8,284 2,329 $ 25,364 Issued as reinvestment of dividends....................... 144 1,217 134 1,369 Redeemed.................................................. (1,045) (9,087) (2,914) (31,664) ------- --------- ------- --------- Net increase/(decrease)................................... 19 $ 414 (451) $ (4,931) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 56 $ 493 76 $ 802 Issued as reinvestment of dividends....................... 246 2,058 264 2,696 Redeemed.................................................. (1,263) (11,015) (1,855) (19,717) ------- --------- ------- --------- Net increase/(decrease)................................... (961) $ (8,464) (1,515) $ (16,219) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 16 $ 140 18 $ 194 Issued as reinvestment of dividends....................... 15 123 16 163 Redeemed.................................................. (73) (651) (100) (1,098) ------- --------- ------- --------- Net increase/(decrease)................................... (42) $ (388) (66) $ (741) ======= ========= ======= ========= Total net increase/(decrease)............................. (30,713) $(269,192) 325 $ 8,302 ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 150 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
CLASSIC VALUE PERIOD ENDED MARCH 31, 2002 ------------------ SHARES DOLLARS ------------------ (IN THOUSANDS) PRIMARY A SHARES:+ Sold...................................................... 24,229 $267,418 Issued as reinvestment of dividends....................... 18 197 Redeemed.................................................. (1,497) (16,863) ------ -------- Net increase/(decrease)................................... 22,750 $250,752 ====== ======== INVESTOR A SHARES:+ Sold...................................................... 1,678 $ 18,594 Issued as reinvestment of dividends....................... 6 67 Redeemed.................................................. (264) (2,886) ------ -------- Net increase/(decrease)................................... 1,420 $ 15,775 ====== ======== INVESTOR B SHARES:+ Sold...................................................... 3,198 $ 35,160 Issued as reinvestment of dividends....................... 12 126 Redeemed.................................................. (166) (1,816) ------ -------- Net increase/(decrease)................................... 3,044 $ 33,470 ====== ======== INVESTOR C SHARES:+ Sold...................................................... 3,500 $ 37,993 Issued as reinvestment of dividends....................... 14 147 Redeemed.................................................. (104) (1,138) ------ -------- Net increase/(decrease)................................... 3,410 $ 37,002 ====== ======== Total net increase/(decrease)............................. 30,624 $336,999 ====== ========
- --------------- + Classic Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on April 16, 2001. SEE NOTES TO FINANCIAL STATEMENTS. 151 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
LARGECAP VALUE PERIOD ENDED MARCH 31, 2002 ----------------- SHARES DOLLARS ----------------- (IN THOUSANDS) PRIMARY A SHARES:+ Sold...................................................... 1,672 $17,450 Issued as reinvestment of dividends....................... 1 8 Redeemed.................................................. (7) (68) ----- ------- Net increase/(decrease)................................... 1,666 $17,390 ===== ======= INVESTOR A SHARES:+ Sold...................................................... 30 $ 304 Issued as reinvestment of dividends....................... --* --* Redeemed.................................................. -- -- ----- ------- Net increase/(decrease)................................... 30 $ 304 ===== ======= INVESTOR B SHARES:+ Sold...................................................... 27 $ 282 Issued as reinvestment of dividends....................... --* --* Redeemed.................................................. --* --* ----- ------- Net increase/(decrease)................................... 27 $ 282 ===== ======= INVESTOR C SHARES:+ Sold...................................................... 2 $ 20 Issued as reinvestment of dividends....................... --* --* Redeemed.................................................. -- -- ----- ------- Net increase/(decrease)................................... 2 $ 20 ===== ======= Total net increase/(decrease)............................. 1,725 $17,996 ===== =======
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. + LargeCap Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on November 20, 2001. SEE NOTES TO FINANCIAL STATEMENTS. 152 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
VALUE YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 14,640 $ 161,844 13,724 $ 187,454 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....................... 4,255 51,786 10,399 140,495 Redeemed.................................................. (44,169) (502,697) (47,130) (650,863) ------- --------- ------- --------- Net increase/(decrease)................................... (25,274) $(289,067) (11,284) $(155,503) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 1,256 $ 14,612 2,029 $ 28,207 Issued as reinvestment of dividends....................... 422 5,137 1,270 17,208 Redeemed.................................................. (2,140) (24,523) (3,772) (52,575) ------- --------- ------- --------- Net increase/(decrease)................................... (462) $ (4,774) (473) $ (7,160) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 583 $ 6,590 461 $ 6,099 Issued as reinvestment of dividends....................... 624 7,463 1,878 24,984 Redeemed.................................................. (2,000) (22,285) (2,419) (32,995) ------- --------- ------- --------- Net increase/(decrease)................................... (793) $ (8,232) (80) $ (1,912) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 118 $ 1,343 105 $ 1,395 Issued as reinvestment of dividends....................... 60 719 165 2,187 Redeemed.................................................. (234) (2,600) (199) (2,615) ------- --------- ------- --------- Net increase/(decrease)................................... (56) $ (538) 71 $ 967 ======= ========= ======= ========= Total net increase/(decrease)............................. (26,585) $(302,611) (11,766) $(163,608) ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 153 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MIDCAP VALUE PERIOD ENDED MARCH 31, 2002 ----------------- SHARES DOLLARS ----------------- (IN THOUSANDS) PRIMARY A SHARES:+ Sold...................................................... 8,827 $93,588 Issued as reinvestment of dividends....................... 8 85 Redeemed.................................................. (95) (1,040) ----- ------- Net increase/(decrease)................................... 8,740 $92,633 ===== ======= INVESTOR A SHARES:+ Sold...................................................... 50 $ 540 Issued as reinvestment of dividends....................... --* 1 Redeemed.................................................. --* --* ----- ------- Net increase/(decrease)................................... 50 $ 541 ===== ======= INVESTOR B SHARES:+ Sold...................................................... 47 $ 507 Issued as reinvestment of dividends....................... --* 1 Redeemed.................................................. --* (5) ----- ------- Net increase/(decrease)................................... 47 $ 503 ===== ======= INVESTOR C SHARES:+ Sold...................................................... 8 $ 91 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. -- -- ----- ------- Net increase/(decrease)................................... 8 $ 91 ===== ======= Total net increase/(decrease)............................. 8,845 $93,768 ===== =======
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. + MidCap Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on November 20, 2001. SEE NOTES TO FINANCIAL STATEMENTS. 154 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
GROWTH & INCOME YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,241 $ 18,532 3,718 $ 68,304 Issued as reinvestment of dividends....................... -- -- 22 394 Redeemed.................................................. (2,670) (38,838) (3,568) (64,897) ------ -------- ------ -------- Net increase/(decrease)................................... (1,429) $(20,306) 172 $ 3,801 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 8,784 $124,273 7,578 $138,255 Issued as reinvestment of dividends....................... -- -- 63 1,161 Redeemed.................................................. (5,006) (71,687) (4,748) (85,066) ------ -------- ------ -------- Net increase/(decrease)................................... 3,778 $ 52,586 2,893 $ 54,350 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 1,606 $ 22,575 4,479 $ 82,747 Issued as reinvestment of dividends....................... -- -- 123 2,210 Redeemed.................................................. (3,416) (46,801) (2,475) (42,741) ------ -------- ------ -------- Net increase/(decrease)................................... (1,810) $(24,226) 2,127 $ 42,216 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 666 $ 9,283 1,144 $ 20,876 Issued as reinvestment of dividends....................... -- -- 13 244 Redeemed.................................................. (659) (9,193) (566) (9,570) ------ -------- ------ -------- Net increase/(decrease)................................... 7 $ 90 591 $ 11,550 ====== ======== ====== ======== Total net increase/(decrease)............................. 546 $ 8,144 5,783 $111,917 ====== ======== ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 155 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
BLUE CHIP YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 ------------------ -------------------- SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,510 $ 40,919 1,128 $ 35,311 Issued as reinvestment of dividends....................... --* 1 37 1,238 Redeemed.................................................. (1,432) (37,212) (281) (9,285) ------ -------- ------- --------- Net increase/(decrease)................................... 78 $ 3,708 884 $ 27,264 ====== ======== ======= ========= INVESTOR A SHARES: Sold...................................................... 822 $ 21,356 14,386 $ 491,446 Issued as reinvestment of dividends....................... -- -- 945 31,343 Redeemed.................................................. (3,098) (80,125) (3,114) (100,615) ------ -------- ------- --------- Net increase/(decrease)................................... (2,276) $(58,769) 12,217 $ 422,174 ====== ======== ======= ========= INVESTOR B SHARES: Sold...................................................... 430 $ 11,248 1,189 $ 39,252 Issued as reinvestment of dividends....................... -- -- 177 5,811 Redeemed.................................................. (628) (15,703) (504) (15,554) ------ -------- ------- --------- Net increase/(decrease)................................... (198) $ (4,455) 862 $ 29,509 ====== ======== ======= ========= INVESTOR C SHARES: Sold...................................................... 203 $ 5,144 256 $ 8,277 Issued as reinvestment of dividends....................... -- -- 41 1,336 Redeemed.................................................. (169) (4,247) (105) (3,215) ------ -------- ------- --------- Net increase/(decrease)................................... 34 $ 897 192 $ 6,398 ====== ======== ======= ========= SEAFIRST SHARES:** Sold...................................................... -- $ -- 45 $ 1,381 Issued as reinvestment of dividends....................... -- -- 1,047 30,470 Redeemed.................................................. -- -- (15,610) (462,222) ------ -------- ------- --------- Net increase/(decrease)................................... -- $ -- (14,518) $(430,371) ====== ======== ======= ========= Total net increase/(decrease)............................. (2,362) $(58,619) (363) $ 54,974 ====== ======== ======= =========
- --------------- * Amount represents less than 500 shares and/or $500, as applicable. ** Seafirst Shares converted into Investor A Shares on June 23, 2000. SEE NOTES TO FINANCIAL STATEMENTS. 156 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
STRATEGIC GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 37,365 $ 460,120 41,452 $ 624,841 Issued in exchange for assets of BCA Diversified Stock Fund (Note 10).......................................... -- -- 19,506 307,415 Issued as reinvestment of dividends....................... 2 19 9 135 Redeemed.................................................. (32,601) (411,062) (16,684) (250,071) ------- --------- ------- --------- Net increase/(decrease)................................... 4,766 $ 49,077 44,283 $ 682,320 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 2,960 $ 37,687 1,733 $ 26,456 Issued as reinvestment of dividends....................... 1 12 1 9 Redeemed.................................................. (1,744) (21,580) (1,102) (15,994) ------- --------- ------- --------- Net increase/(decrease)................................... 1,217 $ 16,119 632 $ 10,471 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 257 $ 3,119 343 $ 5,403 Issued as reinvestment of dividends....................... --* --* 1 8 Redeemed.................................................. (115) (1,387) (86) (1,266) ------- --------- ------- --------- Net increase/(decrease)................................... 142 $ 1,732 258 $ 4,145 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 73 $ 900 100 $ 1,518 Issued as reinvestment of dividends....................... --* --* --* 3 Redeemed.................................................. (28) (338) (27) (357) ------- --------- ------- --------- Net increase/(decrease)................................... 45 $ 562 73 $ 1,164 ======= ========= ======= ========= Total net increase/(decrease)............................. 6,170 $ 67,490 45,246 $ 698,100 ======= ========= ======= =========
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. SEE NOTES TO FINANCIAL STATEMENTS. 157 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
CAPITAL GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 9,641 $ 75,399 24,361 $ 279,518 Issued as reinvestment of dividends....................... 628 5,857 4,523 50,458 Redeemed.................................................. (35,516) (290,110) (20,791) (246,813) ------- --------- ------- --------- Net increase/(decrease)................................... (25,247) $(208,854) 8,093 $ 83,163 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 1,741 $ 13,680 8,560 $ 112,054 Issued as reinvestment of dividends....................... 99 906 755 8,291 Redeemed.................................................. (2,036) (16,042) (9,611) (123,107) ------- --------- ------- --------- Net increase/(decrease)................................... (196) $ (1,456) (296) $ (2,762) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 369 $ 2,634 433 $ 4,873 Issued as reinvestment of dividends....................... 174 1,460 1,236 12,568 Redeemed.................................................. (1,229) (8,913) (1,155) (11,999) ------- --------- ------- --------- Net increase/(decrease)................................... (686) $ (4,819) 514 $ 5,442 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 294 $ 2,086 49 $ 588 Issued as reinvestment of dividends....................... 12 100 79 814 Redeemed.................................................. (102) (740) (45) (476) ------- --------- ------- --------- Net increase/(decrease)................................... 204 $ 1,446 83 $ 926 ======= ========= ======= ========= Total net increase/(decrease)............................. (25,925) $(213,683) 8,394 $ 86,769 ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 158 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
AGGRESSIVE GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- ------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 239 $ 2,666 433 $ 8,044 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 Redeemed.................................................. (10,102) (97,885) (8,196) (154,852) ------- --------- ------ --------- Net increase/(decrease)................................... (9,863) $ (95,219) (4,869) $ (96,241) ======= ========= ====== ========= INVESTOR A SHARES: Sold...................................................... 606 $ 5,900 1,366 $ 25,038 Issued as reinvestment of dividends....................... -- -- 303 4,592 Redeemed.................................................. (1,187) (11,381) (1,861) (33,329) ------- --------- ------ --------- Net increase/(decrease)................................... (581) $ (5,481) (192) $ (3,699) ======= ========= ====== ========= INVESTOR B SHARES: Sold...................................................... 35 $ 333 43 $ 711 Issued as reinvestment of dividends....................... -- -- 268 3,827 Redeemed.................................................. (449) (4,039) (648) (10,539) ------- --------- ------ --------- Net increase/(decrease)................................... (414) $ (3,706) (337) $ (6,001) ======= ========= ====== ========= INVESTOR C SHARES: Sold...................................................... 9 $ 76 5 $ 75 Issued as reinvestment of dividends....................... -- -- 9 133 Redeemed.................................................. (15) (135) (31) (530) ------- --------- ------ --------- Net increase/(decrease)................................... (6) $ (59) (17) $ (322) ======= ========= ====== ========= Total net increase/(decrease)............................. (10,864) $(104,465) (5,415) $(106,263) ======= ========= ====== =========
SEE NOTES TO FINANCIAL STATEMENTS. 159 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
FOCUSED EQUITIES YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 5,380 $ 81,909 23,979 $ 481,030 Issued as reinvestment of dividends....................... -- -- 31 612 Redeemed.................................................. (6,627) (100,672) (15,395) (296,319) ------- --------- ------- --------- Net increase/(decrease)................................... (1,247) $ (18,763) 8,615 $ 185,323 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 10,257 $ 156,397 17,843 $ 349,226 Issued as reinvestment of dividends....................... --* --* 131 2,551 Redeemed.................................................. (10,156) (152,458) (16,475) (305,968) ------- --------- ------- --------- Net increase/(decrease)................................... 101 $ 3,939 1,499 $ 45,809 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 3,687 $ 55,115 11,165 $ 218,887 Issued as reinvestment of dividends....................... --* --* 193 3,708 Redeemed.................................................. (8,766) (127,689) (7,024) (127,737) ------- --------- ------- --------- Net increase/(decrease)................................... (5,079) $ (72,574) 4,334 $ 94,858 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 2,082 $ 31,291 5,140 $ 100,905 Issued as reinvestment of dividends....................... -- -- 49 940 Redeemed.................................................. (3,336) (49,197) (2,736) (50,133) ------- --------- ------- --------- Net increase/(decrease)................................... (1,254) $ (17,906) 2,453 $ 51,712 ======= ========= ======= ========= Total net increase/(decrease)............................. (7,479) $(105,304) 16,901 $ 377,702 ======= ========= ======= =========
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. SEE NOTES TO FINANCIAL STATEMENTS. 160 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
MIDCAP GROWTH YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- ------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 44,038 $ 629,113 15,842 $ 267,234 Issued as reinvestment of dividends....................... -- -- 1,824 33,238 Redeemed.................................................. (29,130) (390,347) (3,722) (69,296) ------- --------- ------ --------- Net increase/(decrease)................................... 14,908 $ 238,766 13,944 $ 231,176 ======= ========= ====== ========= INVESTOR A SHARES: Sold...................................................... 5,425 $ 69,948 8,527 $ 160,482 Issued as reinvestment of dividends....................... -- -- 200 3,531 Redeemed.................................................. (4,071) (52,029) (8,597) (161,868) ------- --------- ------ --------- Net increase/(decrease)................................... 1,354 $ 17,919 130 $ 2,145 ======= ========= ====== ========= INVESTOR B SHARES: Sold...................................................... 1,419 $ 17,481 922 $ 15,604 Issued as reinvestment of dividends....................... -- -- 593 9,608 Redeemed.................................................. (915) (10,940) (510) (8,365) ------- --------- ------ --------- Net increase/(decrease)................................... 504 $ 6,541 1,005 $ 16,847 ======= ========= ====== ========= INVESTOR C SHARES: Sold...................................................... 177 $ 2,163 188 $ 3,217 Issued as reinvestment of dividends....................... -- -- 35 574 Redeemed.................................................. (167) (2,005) (100) (1,654) ------- --------- ------ --------- Net increase/(decrease)................................... 10 $ 158 123 $ 2,137 ======= ========= ====== ========= Total net increase/(decrease)............................. 16,776 $ 263,384 15,202 $ 252,305 ======= ========= ====== =========
SEE NOTES TO FINANCIAL STATEMENTS. 161 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
21ST CENTURY YEAR ENDED PERIOD ENDED MARCH 31, 2002 MARCH 31, 2001 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES:+ Sold...................................................... 246 $ 1,719 1,161 $ 10,793 Issued as reinvestment of dividends....................... -- -- -- -- Redeemed.................................................. (588) (3,831) (347) (3,291) ------ -------- ------ -------- Net increase/(decrease)................................... (342) $ (2,112) 814 $ 7,502 ====== ======== ====== ======== INVESTOR A SHARES:+ Sold...................................................... 126 $ 877 3,791 $ 35,864 Issued as reinvestment of dividends....................... -- -- -- -- Redeemed.................................................. (859) (5,730) (972) (8,241) ------ -------- ------ -------- Net increase/(decrease)................................... (733) $ (4,853) 2,819 $ 27,623 ====== ======== ====== ======== INVESTOR B SHARES:+ Sold...................................................... 391 $ 2,683 8,142 $ 77,371 Issued as reinvestment of dividends....................... -- -- -- -- Redeemed.................................................. (1,473) (9,834) (854) (7,062) ------ -------- ------ -------- Net increase/(decrease)................................... (1,082) $ (7,151) 7,288 $ 70,309 ====== ======== ====== ======== INVESTOR C SHARES:+ Sold...................................................... 41 $ 282 1,128 $ 10,604 Issued as reinvestment of dividends....................... -- -- -- -- Redeemed.................................................. (319) (2,159) (180) (1,531) ------ -------- ------ -------- Net increase/(decrease)................................... (278) $ (1,877) 948 $ 9,073 ====== ======== ====== ======== Total net increase/(decrease)............................. (2,435) $(15,993) 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. 162 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SMALL COMPANY YEAR ENDED YEAR ENDED MARCH 31, 2002 MARCH 31, 2001 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 65,130 $ 926,484 30,059 $ 551,615 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 Redeemed.................................................. (61,974) (883,993) (31,324) (563,141) ------- --------- ------- --------- Net increase/(decrease)................................... 3,156 $ 42,491 6,263 $ 122,606 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 5,848 $ 82,756 27,263 $ 510,037 Issued as reinvestment of dividends....................... -- -- 1,211 21,153 Redeemed.................................................. (6,051) (85,378) (28,577) (538,591) ------- --------- ------- --------- Net increase/(decrease)................................... (203) $ (2,622) (103) $ (7,401) ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 533 $ 7,276 311 $ 5,648 Issued as reinvestment of dividends....................... -- -- 86 1,462 Redeemed.................................................. (204) (2,714) (130) (2,277) ------- --------- ------- --------- Net increase/(decrease)................................... 329 $ 4,562 267 $ 4,833 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 200 $ 2,775 78 $ 1,427 Issued as reinvestment of dividends....................... -- -- 22 386 Redeemed.................................................. (144) (2,003) (49) (851) ------- --------- ------- --------- Net increase/(decrease)................................... 56 $ 772 51 $ 962 ======= ========= ======= ========= Total net increase/(decrease)............................. 3,338 $ 45,203 6,478 $ 121,000 ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 163 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
FINANCIAL SERVICES YEAR ENDED MARCH 31, 2002 ------------------- SHARES DOLLARS ------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 1,015 $10,274 Issued as reinvestment of dividends....................... 1 6 Redeemed.................................................. (501) (5,131) ----- ------- Net increase/(decrease)................................... 515 $ 5,149 ===== ======= INVESTOR A SHARES: Sold...................................................... 30 $ 288 Issued as reinvestment of dividends....................... --* --* Redeemed.................................................. --* (1) ----- ------- Net increase/(decrease)................................... 30 $ 287 ===== ======= INVESTOR B SHARES: Sold...................................................... 27 $ 268 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. (1) (11) ----- ------- Net increase/(decrease)................................... 26 $ 257 ===== ======= INVESTOR C SHARES:+ Sold...................................................... 4 $ 41 Issued as reinvestment of dividends....................... -- -- Redeemed.................................................. -- -- ----- ------- Net increase/(decrease)................................... 4 $ 41 ===== ======= Total net increase/(decrease)............................. 575 $ 5,734 ===== =======
- --------------- *Amount represents less than 500 shares and/or $500, as applicable. + Financial Services Investor C Shares commenced operations on December 13, 2001. SEE NOTES TO FINANCIAL STATEMENTS. 164 [This page intentionally left blank] 165 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 3/31/2002#..................... $16.05 $0.59 $ -- $0.59 $(0.56) 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 3/31/2002#..................... $16.04 $0.59 $(0.04) $0.55 $(0.52) 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) INVESTOR B SHARES* Year ended 3/31/2002#..................... $15.92 $0.45 $(0.03) $0.42 $(0.41) 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 3/31/2002#..................... $16.08 $0.45 $(0.03) $0.42 $(0.41) 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)
- --------------- + 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, LLC. and its investment sub-adviser became Banc of America Capital Management, LLC. **Convertible Securities Primary A and Investor B Shares commenced operations on May 21, 1999 and July 15, 1998, 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. 166 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- $(0.05) $(0.61) $16.03 3.74% $236,202 1.00%(a)(b) 3.78% 50% 1.00%(a) (4.04) (4.64) 16.05 (7.59) 75,627 0.99(a)(b) 3.08 73 1.00(a) (1.41) (1.91) 22.18 35.21 13,688 0.97+(b) 2.21+ 65 0.98+ $(0.05) $(0.57) $16.02 3.48% $321,858 1.25%(a)(b) 3.53% 50% 1.25%(a) (4.04) (4.59) 16.04 (7.88) 315,857 1.24(a)(b) 2.86 73 1.25(a) (1.41) (1.86) 22.17 33.68 369,488 1.22+(b) 1.96+ 65 1.23+ -- (0.11) 18.31 6.25 352,000 1.30+ 3.07+ 16 1.32+ (0.18) (0.70) 17.34 4.64 356,000 1.15(a) 2.97 66 1.16(a) (2.95) (3.54) 17.28 21.54 391,000 1.10(a) 3.35 69 1.12(a) $(0.05) $(0.46) $15.88 2.68% $ 90,408 2.00%(a)(b) 2.78% 50% 2.00%(a) (4.04) (4.49) 15.92 (8.49) 49,763 1.99(a)(b) 2.08 73 2.00(a) (1.41) (1.77) 22.06 32.76 11,175 1.97+(b) 1.21+ 65 1.98+ -- (0.08) 18.27 6.10 4,000 2.06+ 2.34+ 16 2.08+ (0.18) (0.42) 17.30 0.44 3,000 1.96+(a) 2.14+ 66 1.97(a)+ $(0.05) $(0.46) $16.04 2.66% $ 20,370 2.00%(a)(b) 2.78% 50% 2.00%(a) (4.04) (4.48) 16.08 (8.50) 9,827 1.99(a)(b) 2.08 73 2.00(a) (1.41) (1.72) 22.23 32.81 3,033 1.97+(b) 1.21+ 65 1.98+ -- (0.09) 18.35 6.17 4,000 1.80+ 2.56+ 16 2.07+ (0.18) (0.58) 17.37 4.29 4,000 1.65(a) 2.45 66 1.91(a) (2.95) (3.43) 17.24 20.97 3,000 1.60 2.85 69 1.86
SEE NOTES TO FINANCIAL STATEMENTS. 167 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 ------------------------------------------------------------------------- ASSET ALLOCATION PRIMARY A SHARES Year ended 3/31/2002#..................... $20.32 $0.44 $(0.39) $ 0.05 $(0.41) Year ended 3/31/2001#..................... 24.35 0.57 (2.84) (2.27) (0.55) Period ended 3/31/2000***#................ 23.06 0.49 1.93 2.42 (0.41) INVESTOR A SHARES* Year ended 3/31/2002#..................... $20.32 $0.39 $(0.40) $(0.01) $(0.36) Year ended 3/31/2001#..................... 24.35 0.50 (2.82) (2.32) (0.50) Period ended 3/31/2000#................... 23.40 0.43 1.59 2.02 (0.35) 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) Year ended 2/28/1998...................... 19.40 0.52 3.72 4.24 (0.47) Year ended 2/28/1997**.................... 17.52 0.48 2.50 2.98 (0.46) INVESTOR B SHARES* Year ended 3/31/2002#..................... $20.22 $0.23 $(0.39) $(0.16) $(0.22) Year ended 3/31/2001#..................... 24.24 0.33 (2.81) (2.48) (0.33) Period ended 3/31/2000#................... 23.32 0.47 1.39 1.86 (0.22) 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) INVESTOR C SHARES* Year ended 3/31/2002#..................... $20.22 $0.24 $(0.38) $(0.14) $(0.21) Year ended 3/31/2001#..................... 24.27 0.33 (2.82) (2.49) (0.33) Period ended 3/31/2000#................... 23.33 0.42 1.43 1.85 (0.19) 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) Year ended 2/28/1998...................... 19.40 0.41 3.66 4.07 (0.36) Period ended 2/28/1997***................. 17.23 0.19 2.80 2.99 (0.18)
- --------------- + 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, LLC. and its investment sub-adviser became Banc of America Capital Management, LLC. **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. # 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. 168 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING FROM NET DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO REALIZED AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE GAINS DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- $(0.03) $(0.44) $19.93 0.26% $ 40,287 1.03%(a) 2.10% 226% 1.03%(a) (1.21) (1.76) 20.32 (9.83) 12,847 0.98(a)(b) 2.45 88 1.00(a) (0.72) (1.13) 24.35 10.88 15,532 0.95+(a)(b) 1.85+ 84 1.02+(a) $(0.03) $(0.39) $19.92 (0.05)% $223,579 1.28%(a) 1.85% 226% 1.28%(a) (1.21) (1.71) 20.32 (10.05) 231,520 1.23(a)(b) 2.20 88 1.25(a) (0.72) (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+ (1.49) (1.94) 22.50 14.72 72,000 0.94 2.64 114 0.94 (1.76) (2.23) 21.41 23.07 49,000 1.03 2.67 67 1.09 (0.64) (1.10) 19.40 17.64 35,000 1.25 2.59 116 1.94 $(0.03) $(0.25) $19.81 (0.77)% $124,983 2.03%(a) 1.10% 226% 2.03%(a) (1.21) (1.54) 20.22 (10.73) 104,745 1.98(a)(b) 1.45 88 2.00(a) (0.72) (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+ (1.49) (1.69) 22.45 4.59 6,000 1.74+ 1.92+ 114 1.74 $(0.03) $(0.24) $19.84 (0.78)% $ 3,220 2.03%(a) 1.10% 226% 2.03%(a) (1.21) (1.54) 20.24 (10.74) 2,532 1.98(a)(b) 1.45 88 2.00(a) (0.72) (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+ (1.49) (1.84) 22.45 14.23 2,000 1.44 2.14 114 1.69 (1.75) (2.11) 21.36 22.10 2,000 1.52 2.17 67 1.58 (0.64) (0.82) 19.40 17.69 1,000 1.94+ 2.31+ 116 3.26+
SEE NOTES TO FINANCIAL STATEMENTS. 169 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- EQUITY INCOME PRIMARY A SHARES Year ended 3/31/2002#..................... $ 8.74 $0.14 $ 0.43 $ 0.57 $(0.14) Year ended 3/31/2001...................... 11.57 0.11 (2.30) (2.19) (0.11) Year ended 3/31/2000...................... 11.36 0.15 0.36 0.51 (0.15) Year ended 3/31/1999#..................... 13.94 0.23 (1.45) (1.22) (0.23) Year ended 3/31/1998#..................... 12.30 0.29 3.79 4.08 (0.28) INVESTOR A SHARES Year ended 3/31/2002#..................... $ 8.72 $0.12 $ 0.42 $ 0.54 $(0.12) Year ended 3/31/2001...................... 11.52 0.09 (2.28) (2.19) (0.08) Year ended 3/31/2000...................... 11.31 0.12 0.36 0.48 (0.12) Year ended 3/31/1999#..................... 13.89 0.20 (1.45) (1.25) (0.20) Year ended 3/31/1998#..................... 12.26 0.26 3.77 4.03 (0.24) INVESTOR B SHARES Year ended 3/31/2002#..................... $ 8.70 $0.01 $ 0.47 $ 0.48 $(0.06) Year ended 3/31/2001...................... 11.51 0.00## (2.26) (2.26) (0.02) Year ended 3/31/2000...................... 11.31 0.03 0.36 0.39 (0.04) Year ended 3/31/1999#..................... 13.87 0.11 (1.45) (1.34) (0.09) Year ended 3/31/1998#..................... 12.25 0.17 3.77 3.94 (0.16) INVESTOR C SHARES Year ended 3/31/2002#..................... $ 8.82 $0.01 $ 0.47 $ 0.48 $(0.06) Year ended 3/31/2001...................... 11.66 0.00## (2.29) (2.29) (0.02) Year ended 3/31/2000...................... 11.45 0.03 0.37 0.40 (0.04) Year ended 3/31/1999#..................... 14.01 0.12 (1.44) (1.32) (0.11) Year ended 3/31/1998#..................... 12.35 0.18 3.83 4.01 (0.19) DISTRIBUTIONS FROM NET REALIZED GAINS ------------- EQUITY INCOME PRIMARY A SHARES Year ended 3/31/2002#..................... $(0.46) Year ended 3/31/2001...................... (0.53) Year ended 3/31/2000...................... (0.15) Year ended 3/31/1999#..................... (1.13) Year ended 3/31/1998#..................... (2.16) INVESTOR A SHARES Year ended 3/31/2002#..................... $(0.46) Year ended 3/31/2001...................... (0.53) Year ended 3/31/2000...................... (0.15) Year ended 3/31/1999#..................... (1.13) Year ended 3/31/1998#..................... (2.16) INVESTOR B SHARES Year ended 3/31/2002#..................... $(0.46) Year ended 3/31/2001...................... (0.53) Year ended 3/31/2000...................... (0.15) Year ended 3/31/1999#..................... (1.13) Year ended 3/31/1998#..................... (2.16) INVESTOR C SHARES Year ended 3/31/2002#..................... $(0.46) Year ended 3/31/2001...................... (0.53) Year ended 3/31/2000...................... (0.15) Year ended 3/31/1999#..................... (1.13) Year ended 3/31/1998#..................... (2.16)
- --------------- ++ 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. 170 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) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ------------------------------------------------------------------------------------------------------------------------------- $(0.60) $ 8.71 6.85% $ 60,969 0.98%(a)(b) 1.51% 92% 0.99%(a) (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) $(0.58) $ 8.68 6.53% $ 21,557 1.23%(a)(b) 1.26% 92% 1.24%(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) $(0.52) $ 8.66 5.85% $ 34,190 1.98%(a)(b) 0.51% 92% 1.99%(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) $(0.52) $ 8.78 5.77% $ 2,336 1.98%(a)(b) 0.51% 92% 1.99%(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)
SEE NOTES TO FINANCIAL STATEMENTS. 171 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 ------------------------------------------------------------------------- CLASSIC VALUE PRIMARY A SHARES* Period ended 3/31/2002#................... $10.00 $ 0.11 $2.10 $2.21 $(0.04) INVESTOR A SHARES* Period ended 3/31/2002#................... $10.00 $ 0.10 $2.09 $2.19 $(0.03) INVESTOR B SHARES* Period ended 3/31/2002#................... $10.00 $(0.00)## $2.10 $2.10 $(0.00)## INVESTOR C SHARES* Period ended 3/31/2002#................... $10.00 $ 0.01 $2.09 $2.10 $(0.00)## DISTRIBUTIONS FROM NET REALIZED GAINS ------------- CLASSIC VALUE PRIMARY A SHARES* Period ended 3/31/2002#................... $(0.10) INVESTOR A SHARES* Period ended 3/31/2002#................... $(0.10) INVESTOR B SHARES* Period ended 3/31/2002#................... $(0.10) INVESTOR C SHARES* Period ended 3/31/2002#................... $(0.10)
- --------------- * Classic Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on April 16, 2001. + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average 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% SEE NOTES TO FINANCIAL STATEMENTS. 172 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ------------------------------------------------------------------------------------------------------------------- $(0.14) $12.07 22.21% $274,661 1.04%+(a) 1.06%+ 42% 1.04%+(a) $(0.13) $12.06 22.00% $ 17,128 1.29%+(a) 0.81%+ 42% 1.29%+(a) $(0.10) $12.00 21.08% $ 36,511 2.04%+(a) 0.06%+ 42% 2.04%+(a) $(0.10) $12.00 21.08% $ 40,916 2.04%+(a) 0.06%+ 42% 2.04%+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 173 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 ------------------------------------------------------------------------- LARGECAP VALUE PRIMARY A SHARES* Period ended 3/31/2002#................... $10.00 $ 0.08 $0.63 $0.71 $(0.02) INVESTOR A SHARES* Period ended 3/31/2002#................... $10.00 $ 0.07 $0.63 $0.70 $(0.01) INVESTOR B SHARES* Period ended 3/31/2002#................... $10.00 $ 0.00## $0.67 $0.67 $(0.00)## INVESTOR C SHARES* Period ended 3/31/2002#................... $10.00 $ 0.00## $0.67 $0.67 $(0.00)##
- --------------- * LargeCap Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on November 20, 2001. + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average 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% SEE NOTES TO FINANCIAL STATEMENTS. 174 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSETS OPERATING INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO VALUE TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE END OF PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ------------------------------------------------------------------------------------------------- $10.69 7.08% $17,822 1.07%+(a) 0.88%+ 24% 6.31%+(a) $10.69 7.03% $ 315 1.32%+(a) 0.63%+ 24% 6.56%+(a) $10.67 6.74% $ 290 2.07%+(a) (0.12)%+ 24% 7.31%+(a) $10.67 6.74% $ 21 2.07%+(a) (0.12)%+ 24% 7.31%+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 175 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- VALUE PRIMARY A SHARES Year ended 3/31/2002#..................... $12.39 $ 0.12 $ 0.58 $ 0.70 $(0.10) 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) INVESTOR A SHARES Year ended 3/31/2002#..................... $12.38 $ 0.09 $ 0.58 $ 0.67 $(0.08) 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) 0.00 (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) INVESTOR B SHARES Year ended 3/31/2002#..................... $12.13 $ 0.00## $ 0.59 $ 0.59 $(0.03) 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) INVESTOR C SHARES Year ended 3/31/2002#..................... $12.13 $ 0.00## $ 0.58 $ 0.58 $(0.03) 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) DISTRIBUTIONS FROM NET REALIZED GAINS ------------- VALUE PRIMARY A SHARES Year ended 3/31/2002#..................... $(1.03) 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) INVESTOR A SHARES Year ended 3/31/2002#..................... $(1.03) 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) INVESTOR B SHARES Year ended 3/31/2002#..................... $(1.03) 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) INVESTOR C SHARES Year ended 3/31/2002#..................... $(1.03) 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)
- --------------- ++ 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. 176 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------------------------- $(1.13) $11.96 5.64% $513,206 0.95%(a)(b) 1.02% 135% 0.95%(a) (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) $(1.11) $11.94 5.33% $ 58,144 1.20%(a)(b) 0.77% 135% 1.20%(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) $(1.06) $11.66 4.66% $ 80,162 1.95%(a)(b) 0.02% 135% 1.95%(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) $(1.06) $11.65 4.58% $ 7,496 1.95%(a)(b) 0.02% 135% 1.95%(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)
SEE NOTES TO FINANCIAL STATEMENTS. 177 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 ------------------------------------------------------------------------- MIDCAP VALUE PRIMARY A SHARES* Period ended 3/31/2002#................... $10.00 $ 0.06 $1.30 $1.36 $(0.04) INVESTOR A SHARES* Period ended 3/31/2002#................... $10.00 $ 0.04 $1.30 $1.34 $(0.04) INVESTOR B SHARES* Period ended 3/31/2002#................... $10.00 $(0.04) $1.35 $1.31 $(0.02) INVESTOR C SHARES* Period ended 3/31/2002#................... $10.00 $(0.05) $1.36 $1.31 $(0.00)##
- --------------- * MidCap Value Primary A, Investor A, Investor B and Investor C Shares commenced operations on November 20, 2001. + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average 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% SEE NOTES TO FINANCIAL STATEMENTS. 178 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------- $11.32 13.63% $98,888 1.25%+(a) 0.64%+ 19% 2.03%+(a) $11.30 13.37% $ 573 1.50%+(a) 0.39%+ 19% 2.28%+(a) $11.29 13.14% $ 524 2.25%+(a) (0.36)%+ 19% 3.03%+(a) $11.31 13.10% $ 93 2.25%+(a) (0.36)%+ 19% 3.03%+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 179 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS -------------------------------------------------------------------------------- GROWTH & INCOME PRIMARY A SHARES Year ended 3/31/2002#..................... $14.91 $(0.06) $(0.06) $(0.12) $ -- Year ended 3/31/2001...................... 21.61 (0.01) (6.53) (6.54) (0.16) Year ended 3/31/2000...................... 14.91 (0.07) 6.81 6.74 (0.04) Year ended 3/31/1999#..................... 12.03 0.00## 2.89 2.89 (0.01) Period ended 3/31/1998*#.................. 10.00 0.01 2.02 2.03 -- INVESTOR A SHARES Year ended 3/31/2002#..................... $14.87 $(0.09) $(0.06) $(0.15) $ -- Year ended 3/31/2001...................... 21.62 (0.05) (6.54) (6.59) (0.16) Year ended 3/31/2000...................... 14.95 (0.11) 6.82 6.71 (0.04) Year ended 3/31/1999#..................... 12.02 (0.03) 2.97 2.94 (0.01) Period ended 3/31/1998*#.................. 10.00 0.00## 2.02 2.02 -- INVESTOR B SHARES Year ended 3/31/2002#..................... $14.55 $(0.20) $(0.06) $(0.26) $ -- Year ended 3/31/2001...................... 21.31 (0.18) (6.42) (6.60) (0.16) Year ended 3/31/2000...................... 14.85 (0.24) 6.74 6.50 (0.04) Year ended 3/31/1999#..................... 12.02 (0.12) 2.96 2.84 (0.01) Period ended 3/31/1998*#.................. 10.00 (0.02) 2.04 2.02 -- INVESTOR C SHARES Year ended 3/31/2002#..................... $14.57 $(0.20) $(0.06) $(0.26) $ -- Year ended 3/31/2001...................... 21.34 (0.17) (6.44) (6.61) (0.16) Year ended 3/31/2000...................... 14.86 (0.25) 6.77 6.52 (0.04) Year ended 3/31/1999#..................... 12.02 (0.12) 2.97 2.85 (0.01) Period ended 3/31/1998*#.................. 10.00 (0.02) 2.04 2.02 --
- --------------- + 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. 180 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSETS OPERATING INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO VALUE TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE END OF PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------- $14.79 (0.80)% $ 58,752 1.14% (0.39)% -- 1.14% 14.91 (30.42) 80,526 1.10 (0.03) -- 1.10 21.61 45.33 113,028 1.23(a) (0.37) 55%### 1.23(a) 14.91 24.05 52,229 1.25(a) 0.05 150 1.25(a) 12.03 20.30 2,517 1.09+(a) 0.38+ 22 1.97+(a) $14.72 (1.01)% $217,963 1.39% (0.64)% -- 1.39% 14.87 (30.63) 164,031 1.35 (0.28) -- 1.35 21.62 45.01 175,859 1.48(a) (0.62) 55%### 1.48(a) 14.95 24.38 43,392 1.50(a) (0.20) 150 1.50(a) 12.02 20.20 1,141 1.34+(a) 0.13+ 22 2.22+(a) $14.29 (1.79)% $209,503 2.14% (1.39)% -- 2.14% 14.55 (31.13) 239,621 2.10 (1.03) -- 2.10 21.31 43.90 305,607 2.23(a) (1.37) 55%### 2.23(a) 14.85 23.55 99,257 2.25(a) (0.95) 150 2.25(a) 12.02 20.20 7,907 2.09+(a) (0.62)+ 22 2.97+(a) $14.31 (1.78)% $ 31,886 2.14% (1.39)% -- 2.14% 14.57 (31.10) 32,365 2.10 (1.03) -- 2.10 21.34 43.93 34,785 2.23(a) (1.37) 55%### 2.23(a) 14.86 23.63 3,233 2.25(a) (0.95) 150 2.25(a) 12.02 20.20 518 2.09+(a) (0.62)+ 22 2.97+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 181 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 3/31/2002#..................... $26.61 $ 0.09 $(0.93) $(0.84) $(0.00)## 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 3/31/2002#..................... $26.47 $ 0.02 $(0.91) $(0.89) $ -- 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) INVESTOR B SHARES* Year ended 3/31/2002#..................... $25.95 $(0.17) $(0.90) $(1.07) $ -- 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 C SHARES* Year ended 3/31/2002#..................... $25.87 $(0.17) $(0.90) $(1.07) $ -- 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) DISTRIBUTIONS FROM NET REALIZED GAINS ------------- BLUE CHIP PRIMARY A SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.62) Period ended 3/31/2000**#................. (3.35) INVESTOR A SHARES* Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.62) Period ended 3/31/2000#................... (3.35) Period ended 5/14/1999.................... -- Year ended 2/28/1999...................... (1.72) Year ended 2/28/1998...................... (3.24) INVESTOR B SHARES* Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.62) Period ended 3/31/2000#................... (3.35) Period ended 5/14/1999.................... -- Period ended 2/28/1999**.................. (1.72) INVESTOR C SHARES* Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.62) Period ended 3/31/2000#................... (3.35) Period ended 5/14/1999.................... -- Year ended 2/28/1999...................... (1.72) Year ended 2/28/1998...................... (3.24)
- --------------- + 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, LLC. and its investment sub-adviser became Banc of America Capital Management, LLC. **Blue Chip Primary A and Investor B Shares commenced operations on May 21, 1999 and July 15, 1998. # 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. 182 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS NET ASSETS - ------------------------------------------------------------------------------------------------- $(0.00)## $25.77 (3.15)% $ 49,907 0.99% 0.34% 0.99% (2.63) 26.61 (23.09) 49,458 0.96 0.23 0.96 (3.38) 37.33 17.54 36,393 0.95+ 0.17+ 0.98+ $ -- $25.58 (3.36)% $524,910 1.24% 0.09% 1.24% (2.62) 26.47 (23.30) 603,622 1.21 (0.02) 1.21 (3.35) 37.24 14.10 394,071 1.20+ (0.08)+ 1.23+ -- 35.92 7.45 423,000 1.29+ (0.03)+ 1.33+ (1.82) 33.43 18.58 401,000 1.16 0.31 1.17 (3.39) 29.90 33.96 288,000 1.18 0.63 1.22 $ -- $24.88 (4.12)% $ 67,589 1.99% (0.66)% 1.99% (2.62) 25.95 (23.85) 75,623 1.96 (0.77) 1.96 (3.35) 36.80 13.37 75,538 1.95+ (0.83)+ 1.98+ -- 35.77 7.29 21,000 2.05+ (0.77)+ 2.09+ (1.73) 33.34 4.53 13,000 1.97+ (0.58)+ 1.99+ $ -- $24.80 (4.17)% $ 17,180 1.99% (0.66)% 1.99% (2.62) 25.87 (23.84) 17,034 1.96 (0.77) 1.96 (3.35) 36.71 13.35 17,123 1.95+ (0.83)+ 1.98+ -- 35.69 7.37 15,000 1.80+ (0.54)+ 2.08+ (1.72) 33.24 17.96 13,000 1.66 (0.22) 1.92 (3.28) 29.79 33.08 7,000 1.67 0.12 1.69
SEE NOTES TO FINANCIAL STATEMENTS. 183 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- STRATEGIC GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $12.47 $ 0.02 $(0.12) $(0.10) $(0.02) Year ended 3/31/2001...................... 17.03 (0.01) (4.51) (4.52) (0.01) Year ended 3/31/2000#..................... 13.86 (0.02) 3.39 3.37 -- Period ended 3/31/1999*#.................. 10.00 0.00## 3.87 3.87 -- INVESTOR A SHARES Year ended 3/31/2002#..................... $12.44 $(0.01) $(0.11) $(0.12) $(0.01) Year ended 3/31/2001...................... 16.98 (0.04) (4.47) (4.51) -- Period ended 3/31/2000**#................. 13.88 (0.03) 3.19 3.16 -- INVESTOR B SHARES Year ended 3/31/2002#..................... $12.29 $(0.10) $(0.12) $(0.22) $(0.00)## Year ended 3/31/2001...................... 16.90 (0.14) (4.44) (4.58) -- Period ended 3/31/2000**#................. 13.88 (0.10) 3.18 3.08 -- INVESTOR C SHARES Year ended 3/31/2002#..................... $12.30 $(0.10) $(0.12) $(0.22) $(0.00)## Year ended 3/31/2001...................... 16.92 (0.14) (4.45) (4.59) -- Period ended 3/31/2000**#................. 13.88 (0.10) 3.20 3.10 -- DISTRIBUTIONS FROM NET REALIZED GAINS ------------- STRATEGIC GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (0.03) Year ended 3/31/2000#..................... (0.20) Period ended 3/31/1999*#.................. (0.01) INVESTOR A SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (0.03) Period ended 3/31/2000**#................. (0.06) INVESTOR B SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (0.03) Period ended 3/31/2000**#................. (0.06) INVESTOR C SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (0.03) Period ended 3/31/2000**#................. (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. 184 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------- $(0.02) $12.35 (0.83)% $1,230,030 0.94%(a) 0.20% 71% 0.94%(a) (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) $(0.01) $12.31 (0.97)% $ 26,742 1.19%(a) (0.05)% 71% 1.19%(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+ $(0.00)## $12.07 (1.78)% $ 8,358 1.94%(a) (0.80)% 71% 1.94%(a) (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+ $(0.00)## $12.08 (1.78)% $ 2,645 1.94%(a) (0.80)% 71% 1.94%(a) (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. 185 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- CAPITAL GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $ 8.30 $(0.01) $(0.22) $(0.23) $ -- Year ended 3/31/2001...................... 14.59 (0.03) (3.90) (3.93) -- Year ended 3/31/2000...................... 12.05 (0.05) 3.47 3.42 -- Year ended 3/31/1999#..................... 13.30 0.00## 1.59 1.59 -- Year ended 3/31/1998#..................... 11.70 0.02 5.27 5.29 (0.01) INVESTOR A SHARES Year ended 3/31/2002#..................... $ 8.16 $(0.03) $(0.22) $(0.25) $ -- Year ended 3/31/2001...................... 14.43 (0.07) (3.84) (3.91) -- Year ended 3/31/2000...................... 11.97 (0.08) 3.42 3.34 -- Year ended 3/31/1999#..................... 13.26 (0.03) 1.58 1.55 -- Year ended 3/31/1998#..................... 11.67 (0.01) 5.28 5.27 -- INVESTOR B SHARES Year ended 3/31/2002#..................... $ 7.51 $(0.08) $(0.20) $(0.28) $ -- Year ended 3/31/2001...................... 13.58 (0.14) (3.57) (3.71) -- Year ended 3/31/2000...................... 11.39 (0.17) 3.24 3.07 -- Year ended 3/31/1999#..................... 12.83 (0.11) 1.51 1.40 -- Year ended 3/31/1998#..................... 11.47 (0.10) 5.14 5.04 -- INVESTOR C SHARES Year ended 3/31/2002#..................... $ 7.59 $(0.08) $(0.20) $(0.28) $ -- Year ended 3/31/2001...................... 13.70 (0.13) (3.62) (3.75) -- Year ended 3/31/2000...................... 11.48 (0.16) 3.26 3.10 -- Year ended 3/31/1999#..................... 12.92 (0.11) 1.51 1.40 -- Year ended 3/31/1998#..................... 11.50 (0.08) 5.18 5.10 -- DISTRIBUTIONS FROM NET REALIZED GAINS ------------- CAPITAL GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $(0.26) Year ended 3/31/2001...................... (2.36) Year ended 3/31/2000...................... (0.88) Year ended 3/31/1999#..................... (2.84) Year ended 3/31/1998#..................... (3.68) INVESTOR A SHARES Year ended 3/31/2002#..................... $(0.26) Year ended 3/31/2001...................... (2.36) Year ended 3/31/2000...................... (0.88) Year ended 3/31/1999#..................... (2.84) Year ended 3/31/1998#..................... (3.68) INVESTOR B SHARES Year ended 3/31/2002#..................... $(0.26) Year ended 3/31/2001...................... (2.36) Year ended 3/31/2000...................... (0.88) Year ended 3/31/1999#..................... (2.84) Year ended 3/31/1998#..................... (3.68) INVESTOR C SHARES Year ended 3/31/2002#..................... $(0.26) Year ended 3/31/2001...................... (2.36) Year ended 3/31/2000...................... (0.88) Year ended 3/31/1999#..................... (2.84) Year ended 3/31/1998#..................... (3.68)
- --------------- ++ 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. 186 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) TO PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------------------- $(0.26) $ 7.81 (3.31)% $302,843 0.97%(a)(b) (0.12)% 65% 0.97%(a) (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) $(0.26) $ 7.65 (3.62)% $ 28,994 1.22%(a)(b) (0.37)% 65% 1.22%(a) (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) $(0.26) $ 6.97 (4.35)% $ 37,767 1.97%(a)(b) (1.12)% 65% 1.97%(a) (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) $(0.26) $ 7.05 (4.31)% $ 4,538 1.97%(a)(b) (1.12)% 65% 1.97%(a) (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)
SEE NOTES TO FINANCIAL STATEMENTS. 187 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each year.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- AGGRESSIVE GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $10.23 $(0.06) $(1.03) $(1.09) $ -- Year ended 3/31/2001#..................... 20.61 (0.09) (7.89) (7.98) -- Year ended 3/31/2000#..................... 23.36 0.03 (0.03) -- (0.01) Year ended 3/31/1999...................... 22.17 0.02 3.22 3.24 (0.01)### Year ended 3/31/1998#..................... 18.47 0.08 7.88 7.96 (0.03) INVESTOR A SHARES Year ended 3/31/2002#..................... $10.11 $(0.08) $(1.00) $(1.08) $ -- Year ended 3/31/2001#..................... 20.43 (0.13) (7.79) (7.92) -- Year ended 3/31/2000#..................... 23.23 (0.02) (0.04) (0.06) -- Year ended 3/31/1999...................... 22.09 (0.03) 3.21 3.18 -- Year ended 3/31/1998#..................... 18.44 0.02 7.87 7.89 (0.01) INVESTOR B SHARES Year ended 3/31/2002#..................... $ 9.50 $(0.14) $(0.93) $(1.07) $ -- Year ended 3/31/2001#..................... 19.51 (0.25) (7.36) (7.61) -- Year ended 3/31/2000#..................... 22.47 (0.18) (0.04) (0.22) -- Year ended 3/31/1999...................... 21.57 (0.17) 3.11 2.94 -- Year ended 3/31/1998#..................... 18.20 (0.12) 7.72 7.60 -- INVESTOR C SHARES Year ended 3/31/2002#..................... $ 9.72 $(0.15) $(0.95) $(1.10) $ -- Year ended 3/31/2001#..................... 19.90 (0.25) (7.53) (7.78) -- Year ended 3/31/2000#..................... 22.86 (0.18) (0.04) (0.22) -- Year ended 3/31/1999...................... 21.92 (0.17) 3.15 2.98 -- Year ended 3/31/1998#..................... 18.41 (0.09) 7.83 7.74 -- DISTRIBUTIONS FROM NET REALIZED GAINS ------------- AGGRESSIVE GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.40) Year ended 3/31/2000#..................... (2.74) Year ended 3/31/1999...................... (2.04) Year ended 3/31/1998#..................... (4.23) INVESTOR A SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.40) Year ended 3/31/2000#..................... (2.74) Year ended 3/31/1999...................... (2.04) Year ended 3/31/1998#..................... (4.23) INVESTOR B SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.40) Year ended 3/31/2000#..................... (2.74) Year ended 3/31/1999...................... (2.04) Year ended 3/31/1998#..................... (4.23) INVESTOR C SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001#..................... (2.40) Year ended 3/31/2000#..................... (2.74) Year ended 3/31/1999...................... (2.04) Year ended 3/31/1998#..................... (4.23)
- --------------- ++ 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. 188 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------- $ -- $ 9.14 (10.65)% $ 10,873 1.14%(a)(b) (0.56)% 133% 1.15%(a)(b) (2.40) 10.23 (42.60) 113,052 1.00(a) (0.51) 135 1.00(a) (2.75) 20.61 (0.16) 328,219 0.98(a)(b) 0.15 79 0.98(a) (2.05) 23.36 15.74 412,176 0.97(a)(b) 0.12 72 0.97(a) (4.26) 22.17 48.65 132,504 0.98(a)(b) 0.37 79 0.98+(a) $ -- $ 9.03 (10.68)% $ 14,082 1.39%(a)(b) (0.81)% 133% 1.40%(a)(b) (2.40) 10.11 (42.68) 21,622 1.25(a) (0.76) 135 1.25(a) (2.74) 20.43 (0.41) 47,624 1.23(a)(b) (0.10) 79 1.23(a) (2.04) 23.23 15.49 67,356 1.22(a)(b) (0.13) 72 1.22(a) (4.24) 22.09 48.28 21,725 1.23(a)(b) 0.12 79 1.23(a) $ -- $ 8.43 (11.26)% $ 10,804 2.14%(a)(b) (1.56)% 133% 2.15%(a)(b) (2.40) 9.50 (43.13) 16,119 2.00(a) (1.51) 135 2.00(a) (2.74) 19.51 (1.19) 39,680 1.98(a)(b) (0.85) 79 1.98(a) (2.04) 22.47 14.69 50,797 1.97(a)(b) (0.88) 72 1.97(a) (4.23) 21.57 47.14 38,079 1.98(a)(b) (0.63) 79 1.98(a) $ -- $ 8.62 (11.32)% $ 447 2.14%(a)(b) (1.56)% 133% 2.15%(a)(b) (2.40) 9.72 (43.14) 563 2.00(a) (1.51) 135 2.00(a) (2.74) 19.90 (1.16) 1,496 1.98(a)(b) (0.85) 79 1.98(a) (2.04) 22.86 14.64 1,629 1.97(a)(b) (0.88) 72 1.97(a) (4.23) 21.92 47.38 1,199 1.81(a)(b) (0.46) 79 1.81(a)
SEE NOTES TO FINANCIAL STATEMENTS. 189 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DISTRIBUTIONS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE REALIZED OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS GAINS ---------------------------------------------------------------------------- FOCUSED EQUITIES PRIMARY A SHARES Year ended 3/31/2002#..................... $15.37 $(0.05) $ 0.55 $ 0.50 $ -- 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 3/31/2002#..................... $15.31 $(0.09) $ 0.55 $ 0.46 $ -- 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 3/31/2002#..................... $15.00 $(0.20) $ 0.53 $ 0.33 $ -- 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 3/31/2002#..................... $15.05 $(0.20) $ 0.53 $ 0.33 $ -- 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. 190 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - --------------------------------------------------------------------------------------------- $15.87 3.25% $ 346,435 1.11% (0.33)% -- 1.11% 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) $15.77 3.00% $ 507,590 1.36% (0.58)% -- 1.36% 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) $15.33 2.20% $ 679,688 2.11% (1.33)% -- 2.11% 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) $15.38 2.19% $ 188,842 2.11% (1.33)% -- 2.11% 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. 191 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 ---------------------------------------------------------------------------- MIDCAP GROWTH PRIMARY A SHARES Year ended 3/31/2002#..................... $14.63 $(0.05) $(1.37) $(1.42) $ -- 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) INVESTOR A SHARES Year ended 3/31/2002#..................... $14.14 $(0.09) $(1.32) $(1.41) $ -- 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) INVESTOR B SHARES Year ended 3/31/2002#..................... $12.87 $(0.17) $(1.19) $(1.36) $ -- 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) INVESTOR C SHARES Year ended 3/31/2002#..................... $12.95 $(0.17) $(1.21) $(1.38) $ -- 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)
- --------------- ++ 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. 192 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS RATIO OF --------------- RATIO OF OPERATING RATIO OF NET RATIO OF NET ASSET NET ASSETS OPERATING EXPENSES INCLUDING INVESTMENT OPERATING VALUE END OF EXPENSES TO INTEREST EXPENSE INCOME/(LOSS) PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TO AVERAGE TURNOVER AVERAGE PERIOD RETURN++ (000) ASSETS NET ASSETS NET ASSETS RATE NET ASSETS - ------------------------------------------------------------------------------------------------------------------ $13.21 (9.71)% $547,514 0.97%(a)(b) -- (0.39)% 39% 0.97%(a) 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) $12.73 (9.97)% $ 32,138 1.22%(a)(b) -- (0.64)% 39% 1.22%(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) $11.51 (10.57)% $ 45,368 1.97%(a)(b) -- (1.39)% 39% 1.97%(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) $11.57 (10.66)% $ 3,024 1.97%(a)(b) -- (1.39)% 39% 1.97%(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)
SEE NOTES TO FINANCIAL STATEMENTS. 193 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 Year ended 3/31/2002#..................... $ 6.99 $(0.05) $ 0.16 $ 0.11 Period ended 3/31/2001*................... 10.00 (0.03) (2.98) (3.01) INVESTOR A SHARES Year ended 3/31/2002#..................... $ 6.97 $(0.07) $ 0.16 $ 0.09 Period ended 3/31/2001*................... 10.00 (0.06) (2.97) (3.03) INVESTOR B SHARES Year ended 3/31/2002#..................... $ 6.92 $(0.12) $ 0.16 $ 0.04 Period ended 3/31/2001*................... 10.00 (0.11) (2.97) (3.08) INVESTOR C SHARES Year ended 3/31/2002#..................... $ 6.92 $(0.12) $ 0.16 $ 0.04 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. # 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%. SEE NOTES TO FINANCIAL STATEMENTS. 194 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - ---------------------------------------------------------------------------------------------- $7.10 1.57% $ 3,356 1.37%(a) (0.72)% 419% 1.37%(a) 6.99 (30.10) 5,686 1.35+ (0.41)+ 426 1.35+ $7.06 1.29% $14,741 1.62%(a) (0.97)% 419% 1.62%(a) 6.97 (30.30) 19,644 1.60+ (0.66)+ 426 1.60+ $6.96 0.58% $43,187 2.37%(a) (1.72)% 419% 2.37%(a) 6.92 (30.80) 50,404 2.35+ (1.41)+ 426 2.35+ $6.96 0.58% $ 4,660 2.37%(a) (1.72)% 419% 2.37%(a) 6.92 (30.80) 6,557 2.35+ (1.41)+ 426 2.35+
SEE NOTES TO FINANCIAL STATEMENTS. 195 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 ------------------------------------------------------------------------- SMALL COMPANY PRIMARY A SHARES* Year ended 3/31/2002#..................... $13.69 $(0.07) $ 1.45 $ 1.38 $ -- Year ended 3/31/2001...................... 22.66 (0.10) (6.67) (6.77) -- Year ended 3/31/2000#..................... 11.50 (0.10) 11.29 11.19 -- Year ended 3/31/1999#..................... 15.79 (0.05) (3.11) (3.16) -- Period ended 3/31/1998.................... 12.07 0.01 4.43 4.44 (0.01) Period ended 5/16/1997.................... 10.65 0.04 1.47 1.51 (0.04) INVESTOR A SHARES* Year ended 3/31/2002#..................... $13.52 $(0.10) $ 1.42 $ 1.32 $ -- Year ended 3/31/2001...................... 22.44 (0.14) (6.58) (6.72) -- Year ended 3/31/2000#..................... 11.43 (0.15) 11.19 11.04 -- Year ended 3/31/1999#..................... 15.74 (0.07) (3.11) (3.18) -- Period ended 3/31/1998.................... 12.05 (0.02) 4.42 4.40 -- Period ended 5/16/1997.................... 10.64 0.03 1.46 1.49 (0.03) INVESTOR B SHARES* Year ended 3/31/2002#..................... $13.08 $(0.20) $ 1.37 $ 1.17 $ -- Year ended 3/31/2001...................... 21.94 (0.23) (6.43) (6.66) -- Year ended 3/31/2000#..................... 11.23 (0.25) 10.99 10.74 -- Year ended 3/31/1999#..................... 15.59 (0.11) (3.12) (3.23) -- Period ended 3/31/1998.................... 12.03 (0.08) 4.35 4.27 -- Period ended 5/16/1997.................... 10.65 (0.03) 1.46 1.43 -- INVESTOR C SHARES Year ended 3/31/2002#..................... $13.26 $(0.20) $ 1.39 $ 1.19 $ -- Year ended 3/31/2001...................... 22.21 (0.25) (6.50) (6.75) -- Year ended 3/31/2000#..................... 11.38 (0.23) 11.09 10.86 -- Year ended 3/31/1999#..................... 15.74 (0.12) (3.11) (3.23) -- Period ended 3/31/1998**.................. 15.18 (0.08) 1.35 1.27 -- DISTRIBUTIONS FROM NET REALIZED GAINS ------------- SMALL COMPANY PRIMARY A SHARES* Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (2.20) Year ended 3/31/2000#..................... (0.03) Year ended 3/31/1999#..................... (1.13) Period ended 3/31/1998.................... (0.71) Period ended 5/16/1997.................... (0.05) INVESTOR A SHARES* Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (2.20) Year ended 3/31/2000#..................... (0.03) Year ended 3/31/1999#..................... (1.13) Period ended 3/31/1998.................... (0.71) Period ended 5/16/1997.................... (0.05) INVESTOR B SHARES* Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (2.20) Year ended 3/31/2000#..................... (0.03) Year ended 3/31/1999#..................... (1.13) Period ended 3/31/1998.................... (0.71) Period ended 5/16/1997.................... (0.05) INVESTOR C SHARES Year ended 3/31/2002#..................... $ -- Year ended 3/31/2001...................... (2.20) Year ended 3/31/2000#..................... (0.03) Year ended 3/31/1999#..................... (1.13) Period ended 3/31/1998**.................. (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 Banc of America Capital Management, LLC. ** 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. 196 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF NET RATIO OF TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT OPERATING DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------------------------- $ -- $15.07 10.08% $572,820 1.15%(a)(b) (0.48)% 35% 1.21%(a) (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+ $ -- $14.84 9.76% $157,759 1.40%(a)(b) (0.73)% 35% 1.46%(a) (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+ $ -- $14.25 8.94% $ 17,484 2.15%(a)(b) (1.48)% 35% 2.21%(a) (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+ $ -- $14.45 8.97% $ 3,871 2.15%(a)(b) (1.48)% 35% 2.21%(a) (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. 197 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 ------------------------------------------------------------------------- FINANCIAL SERVICES PRIMARY A SHARES Year ended 3/31/2002#..................... $10.00 $ 0.01 $0.36 $0.37 $(0.01) INVESTOR A SHARES Year ended 3/31/2002#..................... $10.00 $(0.03) $0.37 $0.34 $(0.00)## INVESTOR B SHARES Year ended 3/31/2002#..................... $10.00 $(0.11) $0.38 $0.27 $ -- INVESTOR C SHARES* Period ended 3/31/2002#................... $10.00 $(0.04) $0.34 $0.30 $ --
- --------------- * Financial Services Investor C Shares commenced operations on December 13, 2001. + Annualized. ++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. # Per share net investment income has been calculated using the monthly average 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%. SEE NOTES TO FINANCIAL STATEMENTS. 198 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING NET ASSET END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO VALUE TOTAL YEAR AVERAGE NET TO AVERAGE TURNOVER AVERAGE END OF PERIOD RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS - -------------------------------------------------------------------------------------------------- $10.36 3.71% $5,333 1.31%(a) 0.10% 89% 3.78%(a) $10.34 3.41% $ 307 1.56%(a) (0.15)% 89% 4.03%(a) $10.27 2.70% $ 268 2.31%(a) (1.10)% 89% 4.78%(a) $10.30 5.86% $ 45 2.31%+(a) (1.10)%+ 89% 4.78%+(a)
SEE NOTES TO FINANCIAL STATEMENTS. 199 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, 2002, the Trust offered thirty-three separate portfolios, the Company offered four separate portfolios, Reserves offered thirteen separate portfolios and Funds Trust offered eighteen separate portfolios. These financial statements pertain only to certain domestic stock portfolios of the Trust, the Company, Reserves and Funds Trust: Convertible Securities Fund, Asset Allocation Fund, Equity Income Fund, Classic Value Fund, LargeCap Value Fund, Value Fund, MidCap Value Fund, Growth & Income Fund, Blue Chip Fund, Strategic Growth Fund, Capital Growth Fund, Aggressive Growth Fund, Focused Equities Fund, MidCap Growth Fund, 21st Century Fund, Small Company Fund and Financial Services 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. 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 (98.1% for Growth & Income Master Portfolio, 95.0% for Blue Chip Master Portfolio and 98.6% for Focused Equities Master Portfolio at March 31, 2002). 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, LLC ("BA Advisors"), whose financial statements are not presented here, also invest in the Master Portfolios. 21st Century Fund operates 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 year ended March 31, 2002 represented substantially all of the beneficial interests in the 21st Century Master Portfolio, the financial statements for the 21st Century Fund reflect the consolidation of the 21st Century Master Portfolio. Separate 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, including futures contracts, 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. Investments in other Nations Funds are valued at their net asset value determined as of the close of the New York Stock Exchange on the valuation date. 200 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) The valuation of each Feeder Funds' investment in its corresponding Master Portfolio is based on the reported net asset value of that Master Portfolio. The Master Portfolios use valuation policies consistent with those described above. Futures contracts: All Funds may invest in futures contracts for the purposes of hedging against changes in values of the Fund's securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity market. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the statement of net assets. 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. Effective April 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies which requires the Funds to classify gains and losses realized on principal paydowns received on mortgage-backed securities, previously included in realized gain/loss, as part of interest income. The adoption of this accounting principle has no effect on the Funds' net asset value but changed the classification between interest income and realized gain/loss on the Statement of operations. The Statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change. The impact of the adoption of this principle is not 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, Asset Allocation, LargeCap Value, MidCap Value, Growth & Income, Blue Chip, Focused Equities, MidCap Growth and 21st Century Funds; Classic Value and Financial Services Funds declare and pay distributions annually; 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. Federal income tax: Each Fund intends to continue to qualify as a regulated investment company by complying with the applicable requirements of the Internal Revenue Code of 1986, 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 201 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 and Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreements") with BA Advisors, 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 BA Advisors provides investment advisory services to the Funds. Under the terms of the Investment Advisory Agreements, BA Advisors 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, Asset Allocation, Classic Value, LargeCap Value, Value, Strategic Growth, Capital Growth, Aggressive Growth, MidCap Growth....................... 0.65% MidCap Value, 21st Century, Financial Services.................................... 0.75% Small Company................................. 0.90%
FEES ON NET ASSETS FEES ON FEES ON UP TO NET ASSETS NET ASSETS $100 BETWEEN $100 EXCEEDING MILLION AND $250 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 BA Advisors and Banc of America Capital Management, LLC ("BACAP"), a wholly-owned subsidiary of Bank of America, pursuant to which BACAP is entitled to receive a sub-advisory fee from BA Advisors at the following maximum annual rate of each Fund's average daily net assets:
ANNUAL RATE ------ Equity Income................................. 0.20% Convertible Securities, Asset Allocation, LargeCap Value, Value, MidCap Value, Strategic Growth, Capital Growth, Aggressive Growth, MidCap Growth, Small Company, Financial Services.......................... 0.25%
Prior to January 1, 2002, Chicago Equity Partners, LLC was the sub-advisor of the equity portion of the Asset Allocation Fund and received the same sub-advisory rate as above. Master Trust has, on behalf of the 21st Century Fund, entered into a sub-advisory agreement with BA Advisors 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 BA Advisors at the maximum annual rate of 0.45% of the Fund's average daily net assets. Funds Trust has, on behalf of the Classic Value Fund, entered into a sub-advisory agreement with BA Advisors and Brandes Investment Partners, L.P. ("Brandes") pursuant to which Brandes is entitled to receive a sub-advisory fee from BA Advisors at the maximum annual rate of 0.40% of the first $500 million of the Fund's average daily net assets and 0.35% over $500 million 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 BA Advisors serve as co-administrators of the Trust, the Company, Reserves and Funds Trust. Under the co-administration agreements, Stephens and BA Advisors 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 BA Advisors. For the year ended March 31, 2002, Stephens and BA Advisors earned 202 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 0.07% and 0.08%, respectively, of the Funds' average daily net assets for their co-administration services. BA Advisors and/or the sub-advisers and/or Stephens may, from time to time, reduce their fees payable by each Fund. During the year ended March 31, 2002 and until July 31, 2002, BA Advisors and/or the sub-advisers and/or Stephens have agreed to reimburse expenses and/or waive their fees to the extent that total expenses (excluding shareholder servicing and distribution fees), as a percentage of the respective Fund's average daily net assets, exceed the following annual rates:
ANNUAL FUND RATE - ------------------------------------------------------ Classic Value................................. 1.13% LargeCap Value................................ 1.07% MidCap Value.................................. 1.25% Small Company................................. 1.15% Financial Services............................ 1.30%
BA Advisors is entitled to recover from Classic Value Fund, LargeCap Value Fund, MidCap Value Fund and Financial Services Fund any fees waived or expenses reimbursed during the three year period following such waiver or reimbursement, to the extent that such recovery would not cause the affected fund to exceed the expense limitations in effect at the time of recovery. At March 31, 2002, the amounts potentially recoverable by BA Advisors pursuant to this arrangement are as follows:
POTENTIAL AMOUNT TO RECOVER WITHIN 3 YEARS FROM 3/31/02 --------------------- Classic Value......................... $ -- LargeCap Value........................ 137,580 MidCap Value.......................... 94,308 Financial Services.................... 128,543
BNY serves as the custodian of the Trust's, the Company's, Reserves' and Funds Trust's assets. For the year ended March 31, 2002, expenses of the Funds were reduced by $41,932 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 Shares of the Funds. For the year ended March 31, 2002, Bank of America earned approximately $67,334 for providing such services. Stephens also serves as distributor of the Funds' shares. For the year ended March 31, 2002, the Funds were informed that the distributor received $2,183,449 in front-end sales charges for sales of Investor A Shares and $3,438,109 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, 2002, 21st Century Master Portfolio paid commissions of $9,937 to certain affiliates of BA Advisors in connection with the execution of various portfolio transactions. No officer, director or employee of Bank of America, BA Advisors 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. Effective January 1, 2002, the retirement plan was terminated. The Trust's, the Company's, Reserves' and Funds Trust's eligible Trustees/Directors had the option of a rollover into the deferred compensation plan on January 1, 2002 or a lump sum distribution, including interest, on January 1, 2003. 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. The income earned by each Fund from such investments is included in its Statement of operations as "Dividend income from affiliated funds". Equity Income Fund invested in Convertible Securities Fund until July 29, 2001, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by the Fund for the period April 1, 2001 to July 29, 2001 from such investments is included 203 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) in its Statement of operations as "Dividend income from affiliated funds". 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. The shareholder servicing plans permit the Funds to compensate or reimburse servicing agents for shareholder services provided by the servicing agents. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940 Act, permit the Funds to compensate or reimburse the distributor and/or selling agents for activities or expenses primarily intended to result in the sale of the classes' shares. Payments are made at an annual rate, 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 BA Advisors. For the year ended March 31, 2002, the annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT PLAN RATE LIMIT ------------------ INVESTOR A COMBINED DISTRIBUTION AND SHAREHOLDER SERVICING PLAN... 0.25% 0.25% INVESTOR B AND INVESTOR C SHAREHOLDER SERVICING PLANS...... 0.25% 0.25% INVESTOR B AND INVESTOR C DISTRIBUTION PLANS............... 0.75% 0.75%
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, 2002 were as follows:
PURCHASES SALES (000) (000) ------------------------ Convertible Securities...... $ 483,216 $ 255,693 Asset Allocation............ 408,234 382,531 Equity Income............... 214,851 456,122 Classic Value............... 387,465 59,397 LargeCap Value.............. 18,974 1,614 Value....................... 1,162,812 1,524,298 MidCap Value................ 96,335 5,939 Strategic Growth............ 864,313 802,332 Capital Growth.............. 327,206 544,222 Aggressive Growth........... 146,824 247,690 MidCap Growth............... 684,978 349,419 21st Century................ 292,904 303,345 Small Company............... 399,517 382,541 Financial Services.......... 8,947 3,943
The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2002 were as follows:
PURCHASES SALES (000) (000) --------------------- Asset Allocation................ $526,954 $491,738 Equity Income................... 7,970 20,243 Value........................... 1,317 26,436 Strategic Growth................ 6,752 8,668 Capital Growth.................. 712 5,212 Aggressive Growth............... 1,327 840 21st Century.................... 1,417 541 Financial Services.............. 377 173
204 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. FUTURES CONTRACTS At March 31, 2002, the Asset Allocation Fund had the following futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) - ------------------------------------------------------------------------------------------------------------------------------ U.S. 5 year Treasury Note Futures (long position) expiring June 2002(a)................................................ 37 $3,862 $3,838 $ (24) U.S. Treasury Bond Futures (long position) expiring June 2002(a)..................................................... 93 9,509 9,129 (380) U.S. 10 year Treasury Note Futures (long position) expiring June 2002(a)................................................ 37 3,808 3,791 (17) U.S. 2 year Treasury Note Futures (long position) expiring June 2002(a)................................................ 45 9,407 9,297 (110) ----- Total net unrealized depreciation........................... $(531) =====
- --------------- (a)Securities have been segregated as collateral for open futures contracts. 6. SHARES OF BENEFICIAL INTEREST/CAPITAL STOCK As of March 31, 2002, 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 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 a $1 billion 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. For the year ended March 31, 2002, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING INTEREST FUND (000) RATE - ----------------------------------------------------------- Convertible Securities............ $ 6 3.37% Equity Income..................... 288 3.73 Capital Growth.................... 24 4.28 Aggressive Growth................. 4 2.29 MidCap Growth..................... 41 2.2 21st Century...................... 2 2.21
The average amount outstanding was calculated based on daily balances during the period. 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. 205 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) At March 31, 2002, the following Funds had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) - --------------------------------------------------------------- Asset Allocation........... $ 29,976 $ 31,278 Equity Income.............. 14,915 15,444 Classic Value.............. 71,249 73,636 Value...................... 169,405 176,156 Strategic Growth........... 177,727 207,456 Capital Growth............. 64,212 66,618 Aggressive Growth.......... 3,821 3,987 MidCap Growth.............. 267,952 278,045 21st Century............... 12,481 12,842 Small Company.............. 194,252 203,136 Financial Services......... 627 643
9. INCOME TAXES Information on the tax components of capital is as follows:
NET TAX UNDISTRIBUTED UNDISTRIBUTED COST OF UNREALIZED ORDINARY LONG-TERM INVESTMENTS GROSS TAX GROSS TAX APPRECIATION/ INCOME/ GAINS/ FOR TAX UNREALIZED UNREALIZED (DEPRECIATION) (ACCUMULATED (ACCUMULATED PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS ORDINARY LOSS) CAPITAL LOSS) FUND (000) (000) (000) (000) (000) (000) - --------------------------------------------------------------------------------------------------------------------------------- Convertible Securities............. $ 628,640 $ 63,288 $ (29,624) $ 33,664 $ 1,659 $ (37,334) Asset Allocation................... 449,008 34,521 (10,400) 24,121 494 (16,104) Equity Income...................... 126,970 11,951 (5,306) 6,645 -- (2,243) Classic Value...................... 431,016 30,303 (10,066) 20,237 11,671 -- LargeCap Value..................... 18,118 626 (216) 410 40 -- Value.............................. 750,649 85,959 (6,424) 79,535 521 10,104 MidCap Value....................... 97,874 6,612 (523) 6,089 219 -- Growth & Income.................... N/A* N/A* N/A* 71,650 (8) (132,674) Blue Chip.......................... N/A* N/A* N/A* 93,390 110 (72,598) Strategic Growth................... 1,345,291 177,679 (51,585) 126,094 680 (182,906) Capital Growth..................... 371,112 89,762 (11,902) 77,860 -- (39,619) Aggressive Growth.................. 41,849 4,648 (6,010) (1,362) -- (58,278) Focused Equities................... N/A* N/A* N/A* 242,597 -- (519,898) MidCap Growth...................... 905,218 108,167 (108,835) (668) -- (46,959) 21st Century....................... 70,069 7,848 (506) 7,342 -- (37,718) Small Company...................... 854,154 182,386 (75,633) 106,753 -- (40,902) Financial Services................. 6,221 505 (81) 424 -- (202)
- --------------- * See corresponding master portfolio for tax basis information. 206 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) At March 31, 2002, the following Funds had available for federal income tax purposes unused capital losses as follows:
EXPIRING IN EXPIRING IN 2009 2010 FUND (000) (000) - --------------------------------------------------------------------------------------- Convertible Securities...................................... -- $ 25,748 Asset Allocation............................................ -- 16,104 Growth & Income............................................. $ 32,075 81,928 Blue Chip................................................... -- 67,876 Strategic Growth............................................ 42,323 111,955 Capital Growth.............................................. -- 39,619 Aggressive Growth........................................... -- 51,528 Focused Equities............................................ 112,608 375,725 MidCap Growth............................................... -- 24,893 21st Century................................................ 12,771 24,223 Small Company............................................... -- 38,429 Financial Services.......................................... -- 100
Under the current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended March 31, 2002, the following Funds elected to defer losses occurring between November 1, 2001 and March 31, 2002 under these rules, as follows:
CAPITAL CURRENCY LOSSES DEFERRED LOSSES DEFERRED FUND (000) (000) - ----------------------------------------------------------------------------------------------- Convertible Securities...................................... $11,486 -- Equity Income............................................... 2,267 -- Growth & Income............................................. 18,671 $ 8 Blue Chip................................................... 4,722 -- Strategic Growth............................................ 28,628 -- Aggressive Growth........................................... 6,750 -- Focused Equities............................................ 31,565 -- MidCap Growth............................................... 22,066 -- 21st Century................................................ 724 -- Small Company............................................... 2,473 -- Financial Services.......................................... 102 --
Such deferred losses will be treated as arising on the first day of the fiscal year ending March 31, 2003. The tax composition of dividends (other than return of capital dividends for the year) was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAINS FUND (000) (000) - ------------------------------------------------------------------------------------------------- Convertible Securities................................ $17,484 $ 1,449 Asset Allocation...................................... 6,466 556 Equity Income......................................... 3,331 10,111 Classic Value......................................... 2,200 -- LargeCap Value........................................ 16 -- Value................................................. 14,342 76,292 MidCap Value.......................................... 281 -- Growth & Income....................................... -- -- Blue Chip............................................. 5 -- Strategic Growth...................................... 1,566 -- Capital Growth........................................ -- 18,629 Aggressive Growth..................................... -- -- Focused Equities...................................... -- -- MidCap Growth......................................... -- -- 21st Century.......................................... -- -- Small Company......................................... -- -- Financial Services.................................... 6 --
207 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 primarily to different book and tax accounting for paydowns, net operating losses, dividend reclassifications, currency gains and losses and use of the tax accounting practice known as equalization. 10. 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 Aggressive BCA Retail Trust Growth 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
FUND REORGANIZATION On June 8, 2001, the Asset Allocation Fund (the "Acquiring Fund"), acquired the assets and assumed the liabilities of the Balanced Assets 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:
TOTAL NET ASSETS TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND ACQUIRED FUND OF ACQUIRED FUND OF ACQUIRING FUND AFTER ACQUISITION UNREALIZED APPRECIATION (000) (000) (000) (000) - ---------------------------------------------------------------------------------- $90,962 $366,605 $457,567 $5,772
CHANGE OF REGISTERED INVESTMENT COMPANY On June 8, 2001, the Asset Allocation, Growth & Income and Focused Equities Funds, newly established shell portfolios of Funds Trust (the "Successor Funds"), acquired the assets and liabilities of their predecessor funds, which were series 208 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) of Reserves, 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. BANK PLAN REDEMPTION-IN-KIND On January 11, 2002, certain Separate Accounts, as listed in the left column below redeemed shares and acquired net assets from Primary A Shares of certain Nations Funds, listed in the second column below. The number and value of shares redeemed by each Nations Fund are included in the Schedules of capital stock activity. Shares redeemed, acquired net assets and realized gain/loss as of the conversion date were as follows:
SHARES TOTAL NET ASSETS REDEEMED/TRANSFERRED REDEEMED/TRANSFERRED REALIZED TO BANK PLAN TO BANK PLAN GAIN/LOSS BANK PLAN SEPARATE ACCOUNTS NATIONS FUND (000) (000) (000) - -------------------------------------------------------------------------------------------------------------- Value Separate Account Value 28,656 $324,384 $30,497 Capital Growth Separate Account Capital Growth 14,871 120,603 28,890 Aggressive Growth Separate Account Aggressive Growth 8,752 84,193 366 MidCap Growth Separate Account MidCap Growth 8,805 123,180 4,129 Small Company Separate Account Small Company 10,145 152,688 24,704
11. SUBSEQUENT EVENTS On October 10, 2001, the Board of Trustees/Directors of each fund listed in the left column below (each a "Fund") approved an Agreement and Plan of Reorganization (the "Reorganization") pursuant to which a successor fund to each fund shown in the right column (the "Acquiring Fund") will acquire all of the assets and liabilities of each corresponding Fund in exchange for shares of equal value of the Acquiring Fund. On March 27, 2002, shareholders of each Fund approved the Reorganization. The Reorganization occurred and each Fund ceased operations on May 10, 2002. The principal effect of this Reorganization was to transfer each Fund's investment into an investment in a corresponding Acquiring Fund with a substantially similar investment objective, principal investment strategies and investment risks.
FUND REORGANIZED INTO A NEWLY CREATED SUCCESSOR FUND - ------------------------------------------------------------------- Equity Income Convertible Securities Blue Chip Strategic Growth Aggressive Growth Capital Growth
On October 10, 2001, the Board of Trustees/Directors of each fund listed in the left column below (each a "Fund") approved its Reorganization into a newly created successor fund that is substantially identical to the existing Fund. On March 27, 2002, shareholders of each Fund approved the Reorganization. The Reorganization occurred on May 10, 2002. At that time, shares of each Fund were exchanged for shares of equal value of the newly created successor fund. The principal effect of this Reorganization was to redomicile the Fund in Delaware, under a Delaware business trust structure that management believes provides greater flexibility and efficiency in certain corporate and organizational matters.
FUND REORGANIZED INTO A NEWLY CREATED SUCCESSOR FUND - ------------------------------------------------------------------------- Convertible Securities Convertible Securities Strategic Growth Strategic Growth Capital Growth Capital Growth MidCap Growth MidCap Growth
On October 10, 2001, the Board of Trustees/Directors of each fund listed in the left column below (each a "Fund") approved its Reorganization into a newly created successor fund that is substantially identical to the existing Fund. On 209 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) March 27, 2002, shareholders of each Fund approved the Reorganization. The Reorganization occurred on May 17, 2002. At that time, shares of each Fund were exchanged for shares of equal value of the newly created successor fund. The principal effect of this Reorganization was to redomicile the Fund in Delaware, under a Delaware business trust structure that management believes provides greater flexibility and efficiency in certain corporate and organizational matters.
FUND REORGANIZED INTO A NEWLY CREATED SUCCESSOR FUND - ---------------------------------------------------------------- Value Value Small Company Small Company
On November 28, 2001, the Board of Trustees of Funds Trust approved a name change for Nations Marsico Growth & Income Fund. Effective May 10, 2002, the Fund became known as Nations Marsico Growth Fund. Additionally, the Fund no longer invests at least 25% of its assets in securities that are believed to have income potential. 210 NATIONS FUNDS REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS, DIRECTORS AND TRUSTEES OF NATIONS FUND TRUST, NATIONS RESERVES, NATIONS FUND, INC. AND NATIONS FUNDS TRUST 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 Asset Allocation Fund, Nations Equity Income Fund, Nations Value Fund, Nations Marsico Growth and 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 Small Company Fund, Nations Marsico 21st Century Fund, Nations Financial Services Fund, Nations Classic Value Fund, Nations LargeCap Value Fund and Nations MidCap Value Fund (constituting parts of Nations Fund Trust, Nations Reserves, Nations Fund, Inc. and Nations Funds Trust, hereafter collectively referred to as the "Funds") at March 31, 2002, 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, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. As discussed in Note 11, effective May 10, 2002, Nations Equity Income Fund, Nations Blue Chip Fund and Nations Aggressive Growth Fund completed reorganizations pursuant to which all of their assets were acquired and liabilities assumed in exchange for shares of equal value of the acquiring funds and ceased operations. PricewaterhouseCoopers LLP New York, New York May 17, 2002 211 NATIONS FUND TAX INFORMATION (UNAUDITED) For the fiscal year ended March 31, 2002, the amount of long-term capital gains designated by the Trust, the Company, Reserves and Funds Trust were as follows:
FUND TOTAL - ------------------------------------------------------------------------- Convertible Securities...................................... $ 1,448,729 Asset Allocation............................................ 555,332 Equity Income............................................... 16,828,835 LargeCap Value.............................................. 255 Value....................................................... 77,650,565 MidCap Value................................................ 466 Capital Growth.............................................. 18,626,406
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, 2002, the following percentages qualify for the dividend received deduction available to corporate shareholders: Convertible Securities...................................... 43.21% Asset Allocation............................................ 42.82% Equity Income............................................... 100.00% Classic Value............................................... 19.26% LargeCap Value.............................................. 59.53% Value....................................................... 100.00% MidCap Value................................................ 31.59% Blue Chip................................................... 100.00% Strategic Growth............................................ 100.00% Financial Services.......................................... 100.00%
212 NATIONS FUNDS FUND GOVERNANCE (UNAUDITED) The Boards of Trustees/Directors (the "Boards") of Nations Fund Trust, Nations Fund, Inc., Nations Reserves, Nations Funds Trust and Nations Master Investment Trust (the "Companies") oversee their funds to ensure that they are managed and operated in the interests of shareholders. This annual report may relate to Funds of one or more of the Companies. Please see the introduction for the Notes to financial statements for information about which Funds and which Companies are applicable to this annual report. A majority of the Trustees/Directors ("Board Members") are "independent," meaning that they have no affiliation with Bank of America, N.A., its affiliates, or the funds, apart from the personal investments that most Board Members have made in certain of the funds as private individuals. The Board Members bring distinguished backgrounds in government, business, academia and public service to their task of working with Company officers to establish the policies and oversee the activities of the funds. Although all Board Members are charged with the fiduciary duty of protecting shareholders interests when supervising and overseeing the management and operations of the Companies, the independent Board Members have particular responsibilities for assuring that the Companies are managed in the best interests of fund shareholders. The following table provides basic information about the Board Members and Officers of the Companies. The mailing address of each Board Member is c/o Nations Funds, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255. Each Board Member and Officer serves in identical capacities for each Company (except for Mr. Carmichael, who serves in an advisory capacity for certain Companies) and serves an indefinite term, subject to retirement from service as required (pursuant to each Company's retirement policy) at the end of the calendar year in which a Board Member turns 72, provided that any Board Member who served on any of the Boards as of February 22, 2001, and who reached the age of 72 no later than the end of that calendar year, may continue to serve until the end of the calendar year in which such Trustee reaches age 75 and may continue to serve for successive annual periods thereafter upon the vote of a majority of the other Board Members.
NAME, AGE AND POSITION TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) DURING NUMBER OF FUNDS IN WITH THE COMPANIES LENGTH OF TIME SERVED THE PAST FIVE YEARS FUND COMPLEX OVERSEEN - -------------------------------------------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS William P. Carmichael Indefinite term; Senior Managing Director of The 41 (50 others in an Age: 58 Board Member since Succession Fund (a company formed advisory capacity Board Member (Nations 1999 to advise and buy family owned only) Funds Trust and Nations Master companies) from 1998 through Investment Trust only) April 2001. William H. Grigg Indefinite term; Retired; Chairman Emeritus since 95 Age: 69 Board Member since July 1997, Chairman and Chief Board Member 1991 Executive Officer through July 1997 -- Duke Power Co. Thomas F. Keller Indefinite term; R.J. Reynolds Industries 95 Age: 70 Board Member since Professor of Business Board Member 1991 Administration, Fuqua School of Business, Duke University, since July 1974; Dean, Fuqua School of Business Europe, Duke University, July 1999 through June 2001 Carl E. Mundy, Jr. Indefinite term; President and Chief Executive 91 Age: 66 Board Member since Officer -- USO from May 1996 to Board Member 1996 May 2000; Commandant -- United States Marine Corps from July 1991 to July 1995; Member, Board of Advisors to the Comptroller General of the United States; Chairman, Board of Trustees, Marine Corps University Foundation; Dr. Cornelius J. Pings Indefinite term; Retired; President, Association 91 Age: 73 Board Member since of American Universities through Board Member 1999 June 1998. NAME, AGE AND POSITION WITH THE COMPANIES OTHER DIRECTORSHIPS HELD - -------------------------------- --------------------------------- INDEPENDENT BOARD MEMBERS William P. Carmichael Director -- Cobra Electronics Age: 58 Corporation (electronic equipment Board Member (Nations manufacturer), Opta Food Funds Trust and Nations Master Ingredients, Inc. (food Investment Trust only) ingredients manufacturer) and Golden Rule Insurance Company since May, 1994; Board Member, Nations Funds Family (4 registered investment companies) William H. Grigg Director, The Shaw Group, Inc.; Age: 69 and Director and Vice Chairman, Board Member Aegis Insurance Services, Ltd. (a mutual fund insurance company in Bermuda); Board Member, Nations Funds Family (11 registered investment companies) Thomas F. Keller Director, Wendy's International, Age: 70 Inc. (restaurant operating and Board Member franchising); Director, Dimon, Inc. (tobacco); and Director, Biogen, Inc. (pharmaceutical biotechnology); Board Member, Nations Funds Family (11 registered investment companies) Carl E. Mundy, Jr. Director -- Shering-Plough Age: 66 (pharmaceuticals and health care Board Member products); General Dynamics Corporation (defense systems); Board Member, Nations Funds Family (7 registered investment companies) Dr. Cornelius J. Pings Director, Farmers Group, Inc. Age: 73 (insurance company); Board Board Member Member, Nations Funds Family (7 registered investment companies)
213 NATIONS FUNDS FUND GOVERNANCE (CONTINUED) (UNAUDITED)
NAME, AGE AND POSITION TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) DURING NUMBER OF FUNDS IN WITH THE COMPANIES LENGTH OF TIME SERVED THE PAST FIVE YEARS FUND COMPLEX OVERSEEN - -------------------------------------------------------------------------------------------------------------------- Charles B. Walker Indefinite term; Vice Chairman and Chief Financial 91 Age: 63 Board Member since Officer -- Albemarle Corporation Board Member 1985 (chemical manufacturing) INTERESTED BOARD MEMBERS(1) Edmund L. Benson, III Indefinite term; Director, President and 91 Age: 65 Board Member since Treasurer, Saunders & Benson, Board Member 1985 Inc. (insurance) James B. Sommers Indefinite term; Retired 91 Age: 63 Board Member since Board Member 1997 A. Max Walker Indefinite term; Independent Financial Consultant 95 Age: 80 Board Member since President, Chairman of the inception Boards and Board Member Thomas S. Word, Jr. Indefinite term; Partner -- McGuire, Woods, Battle 91 Age: 63 Board Member since & Boothe LLP (law firm) Board Member 1985 OTHER OFFICERS Richard H. Blank, Jr. Indefinite term; Senior Vice President since 1998, N/A Age: 44 Secretary since 1993 and Vice President from 1994 to Stephens Inc. and Treasurer since 1998 -- Mutual Fund Services, 111 Center Street 1998 Stephens Inc.; Secretary since Little Rock, AR 72201 September 1993 and Treasurer Secretary and Treasurer since November 1998 -- Nations Funds Family (7 other registered investment companies) NAME, AGE AND POSITION WITH THE COMPANIES OTHER DIRECTORSHIPS HELD - -------------------------------- --------------------------------- Charles B. Walker Director -- Ethyl Corporation Age: 63 (chemical manufacturing); Board Board Member Member, Nations Funds Family (7 registered investment companies) INTERESTED BOARD MEMBERS(1) Edmund L. Benson, III Director, Insurance Managers Inc. Age: 65 (insurance); Board Member, Board Member Nations Funds Family (7 registered investment companies) James B. Sommers Chairman -- Central Piedmont Age: 63 Community College Foundation; Board Member Director, Board of Commissioners, Charlotte/Mecklenberg Hospital Authority; Trustee, Central Piedmont Community College, Mint Museum of Art; Board Member, Nations Funds Family (7 registered investment companies) A. Max Walker President, Chairman and Board Age: 80 Member, Nations Funds Family (7 President, Chairman of the registered investment companies) Boards and Board Member Chairman and Board Member, Nations Funds Family (4 registered investment companies) Thomas S. Word, Jr. Director -- Vaughan-Bassett Age: 63 Furniture Company, Inc. Board Member (furniture); Board Member, Nations Funds Family (7 registered investment companies) OTHER OFFICERS Richard H. Blank, Jr. N/A Age: 44 Stephens Inc. 111 Center Street Little Rock, AR 72201 Secretary and Treasurer
- --------------- (1) Basis of Interestedness. Mr. Benson's step-son is an employee of Bank of America, the parent of BA Advisors. Mr. Sommers own securities of Bank of America Corporation, the parent holding company of BA Advisors. Mr. Word is affiliated with a law firm which provides services to Bank of America and certain of its affiliates. Mr. A. Max Walker is an Interested Board Member by virtue of the fact that he also serves as President of the Companies. More information about the Board Members is available in the Statement of Additional Information, which is available at no charge from Nations Funds. 214 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, 2002 The following pages should be read in conjunction with Nations Marsico Growth & Income, Nations Blue Chip and Nations Marsico Focused Equities Funds' Annual Report. 215 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth & Income Master Portfolio STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS -- 95.1% AEROSPACE AND DEFENSE -- 7.8% 101,992 Embraer Aircraft Corporation, ADR(a)..................... $ 2,058 192,855 General Dynamics Corporation............................. 18,119 364,218 Lockheed Martin Corporation.............................. 20,972 -------- 41,149 -------- AIRLINES -- 4.1% 188,480 Ryanair Holdings plc, ADR!!(a)........................... 5,656 139,818 SkyWest, Inc............................................. 3,486 650,017 Southwest Airlines Company............................... 12,578 -------- 21,720 -------- AUTOMOTIVE -- 6.7% 449,076 Bayerische Motoren Werke (BMW) AG!!...................... 17,903 285,274 General Motors Corporation(a)............................ 17,245 -------- 35,148 -------- BEVERAGES -- 4.6% 89,058 Anheuser-Busch Companies, Inc............................ 4,649 115,934 Heineken NV.............................................. 4,723 282,924 PepsiCo, Inc............................................. 14,571 -------- 23,943 -------- COMMERCIAL BANKING -- 5.1% 414,028 Citigroup Inc............................................ 20,503 191,702 Washington Mutual, Inc. ................................. 6,351 -------- 26,854 -------- COMMERCIAL SERVICES -- 1.4% 79,272 Omnicom Group Inc.(a).................................... 7,483 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.8% 151,242 Dell Computer Corporation!!.............................. 3,949 -------- CONSUMER CREDIT AND MORTGAGES -- 8.5% 198,676 Fannie Mae............................................... 15,870 292,744 USA Education Inc........................................ 28,631 -------- 44,501 -------- DEPARTMENT AND DISCOUNT STORES -- 4.6% 231,617 Costco Wholesale Corporation!!(a)........................ 9,223 242,138 Wal-Mart Stores, Inc..................................... 14,841 -------- 24,064 -------- FINANCE -- MISCELLANEOUS -- 0.7% 53,892 Capital One Financial Corporation(a)..................... 3,441 -------- FOOD PRODUCTS -- 3.9% 301,174 Kraft Foods, Inc......................................... 11,641 155,586 Unilever NV, NY Shares................................... 8,837 -------- 20,478 -------- HEALTH SERVICES -- 11.3% 81,874 Quest Diagnostics Inc.!!................................. 6,783 404,578 Tenet Healthcare Corporation!!........................... 27,114 341,930 UnitedHealth Group Inc................................... 26,130 -------- 60,027 --------
VALUE SHARES (000) - -------------------------------------------------------------------------------- HOUSING AND FURNISHING -- 2.8% 106,960 D.R. Horton, Inc.!!(a)................................... $ 4,032 116,724 Lennar Corporation(a).................................... 6,159 102,858 M.D.C. Holdings, Inc.(a)................................. 4,443 -------- 14,634 -------- INSURANCE -- 1.4% 375,358 Travelers Property Casualty Corporation, Class A!!....... 7,507 -------- INVESTMENT SERVICES -- 5.8% 100,218 Goldman Sachs Group, Inc.(a)............................. 9,045 279,838 Lehman Brothers Holdings Inc............................. 18,088 53,561 Northern Trust Corporation............................... 3,220 -------- 30,353 -------- LODGING AND RECREATION -- 2.9% 173,262 Four Seasons Hotels Inc.(a).............................. 9,231 169,360 MGM Mirage Inc.!!(a) 6,136 -------- 15,367 -------- MEDICAL DEVICES AND SUPPLIES -- 4.5% 72,258 Baxter International Inc................................. 4,301 54,634 InterMune Inc.!!(a)...................................... 1,643 272,662 Johnson & Johnson........................................ 17,709 -------- 23,653 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.0% 46,041 L-3 Communications Holdings, Inc.!!(a)................... 5,157 -------- RAILROADS, TRUCKING AND SHIPPING -- 2.0% 158,628 FedEx Corporation!!...................................... 9,216 21,084 Union Pacific Corporation................................ 1,310 -------- 10,526 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.4% 67,437 Equity Office Properties Trust........................... 2,022 -------- SOFTWARE -- 4.4% 249,259 Microsoft Corporation!!.................................. 15,033 242,284 Siebel Systems, Inc.!!(a)................................ 7,901 -------- 22,934 -------- SPECIALTY STORES -- 10.4% 155,126 Bed Bath & Beyond Inc.!!................................. 5,236 423,855 Home Depot, Inc.......................................... 20,603 306,806 Lowe's Companies, Inc.................................... 13,343 447,348 Tiffany & Company........................................ 15,903 -------- 55,085 -------- TOTAL COMMON STOCKS (Cost $426,785)........................................ 499,995 --------
SEE NOTES TO FINANCIAL STATEMENTS. 216 NATIONS MASTER INVESTMENT TRUST Nations Marsico Growth & Income Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
PRINCIPAL AMOUNT VALUE (000) (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................... $ 561 -------- SHARES - --------- PREFERRED STOCKS -- 1.2% (Cost $5,195) AUTOMOTIVE -- 1.2% 14,364 Porsche AG(a)............................................ 6,529 -------- PRINCIPAL AMOUNT (000) - --------- SHORT TERM INVESTMENTS -- 2.8% (Cost $14,900) FEDERAL HOME LOAN BANK (FHLB) -- 2.8% $14,900 Discount note 04/01/02................................... 14,899 -------- SHARES VALUE (000) (000) - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 14.5% (Cost $76,107) 76,107 Nations Cash Reserves, Capital Class Shares#.................................. $ 76,107 -------- TOTAL INVESTMENTS (Cost $523,524*)................................ 113.7% 598,091 -------- OTHER ASSETS AND LIABILITIES (NET)................ (13.7)% Cash..................................................... $ 266 Receivable for investment securities sold................ 6,671 Dividends receivable..................................... 205 Interest receivable...................................... 16 Collateral on securities loaned.......................... (76,010) Investment advisory fee payable.......................... (333) Administration fee payable............................... (44) Payable for investment securities purchased.............. (2,951) Accrued Trustees' fees and expenses...................... (30) Accrued expenses and other liabilities................... (44) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (72,254) -------- NET ASSETS........................................ 100.0% $525,837 ========
- --------------- *Federal Income Tax Information: Net unrealized appreciation of $73,531 on investment securities was comprised of gross appreciation of $80,253 and gross depreciation of $6,722 for federal income tax purposes. At March 31, 2002, the aggregate cost of securities for federal income tax purposes was $524,560. !! Non-income producing security. (a) All or a portion of security was on loan at March 31, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $68,950 and $73,840, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 5). The portion that represents cash collateral is $76,010. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 217 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - --------------------------------------------------------------------------------- COMMON STOCKS -- 99.1% AEROSPACE AND DEFENSE -- 3.6% 134,300 Boeing Company............................................ $ 6,480 37,650 General Dynamics Corporation.............................. 3,537 100,775 Lockheed Martin Corporation............................... 5,803 123,850 United Technologies Corporation........................... 9,189 -------- 25,009 -------- AIRLINES -- 0.7% 195,000 AMR Corporation!!......................................... 5,150 -------- APPAREL AND TEXTILES -- 0.2% 28,525 Nike, Inc., Class B(a).................................... 1,712 -------- AUTOMOTIVE -- 1.3% 35,525 General Motors Corporation(a)............................. 2,147 150,000 Lear Corporation!!........................................ 7,140 -------- 9,287 -------- BEVERAGES -- 2.9% 56,550 Anheuser-Busch Companies, Inc. ........................... 2,952 111,275 Coca-Cola Company......................................... 5,815 227,870 PepsiCo, Inc. ............................................ 11,735 -------- 20,502 -------- BROADCASTING AND CABLE -- 3.3% 357,650 AOL Time Warner Inc.!!.................................... 8,459 209,000 Cablevision Systems Corporation Class A!!(a).............. 7,106 36,300 Cox Communications, Inc., Class A!!(a).................... 1,366 121,200 Viacom Inc., Class B!!.................................... 5,862 -------- 22,793 -------- COMMERCIAL BANKING -- 3.9% 400,350 Citigroup Inc. ........................................... 19,825 191,475 Wachovia Corporation...................................... 7,100 -------- 26,925 -------- COMMERCIAL SERVICES -- 1.2% 156,625 Cendant Corporation!!(a).................................. 3,007 164,925 Interpublic Group of Companies, Inc.(a)................... 5,654 -------- 8,661 -------- COMPUTER SERVICES -- 3.1% 185,000 Automatic Data Processing, Inc. .......................... 10,779 322,000 Concord EFS, Inc.!!(a) ................................... 10,707 -------- 21,486 -------- COMPUTERS AND OFFICE EQUIPMENT -- 5.3% 313,350 Dell Computer Corporation!!............................... 8,182 474,107 EMC Corporation!!......................................... 5,651 179,175 International Business Machines Corporation............... 18,634 500,000 Sun Microsystems, Inc.!!.................................. 4,410 -------- 36,877 -------- CONSUMER CREDIT AND MORTGAGES -- 6.3% 121,750 Fannie Mae................................................ 9,725 228,100 Household International, Inc.(a).......................... 12,956
VALUE SHARES (000) - --------------------------------------------------------------------------------- CONSUMER CREDIT AND MORTGAGES -- (CONTINUED) 185,175 MBNA Corporation.......................................... $ 7,142 142,900 USA Education Inc. ....................................... 13,976 -------- 43,799 -------- DEPARTMENT AND DISCOUNT STORES -- 6.3% 50,325 Kohl's Corporation!!...................................... 3,581 233,725 Sears, Roebuck and Company................................ 11,983 200,000 Target Corporation........................................ 8,624 318,425 Wal-Mart Stores, Inc. .................................... 19,516 -------- 43,704 -------- DIVERSIFIED MANUFACTURING -- 4.5% 618,825 General Electric Company.................................. 23,175 210,000 Honeywell International Inc. ............................. 8,037 -------- 31,212 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.3% 39,625 Pinnacle West Capital Corporation......................... 1,797 -------- ELECTRIC POWER -- NUCLEAR -- 2.7% 58,800 American Electric Power Company, Inc.(a).................. 2,710 62,900 DTE Energy Company(a)..................................... 2,862 171,525 Duke Energy Corporation(a)................................ 6,484 35,150 FirstEnergy Corporation(a)................................ 1,215 88,250 FPL Group, Inc. .......................................... 5,255 -------- 18,526 -------- EXPLORATION AND PRODUCTION -- 0.5% 61,225 Anadarko Petroleum Corporation(a)......................... 3,456 -------- FOOD PRODUCTS -- 1.1% 76,800 ConAgra Foods, Inc. ...................................... 1,862 43,700 General Mills, Inc. ...................................... 2,135 50,425 Kellogg Company........................................... 1,693 34,000 Unilever NV, NY Shares.................................... 1,931 -------- 7,621 -------- HEALTH SERVICES -- 1.3% 58,025 Tenet Healthcare Corporation!!............................ 3,889 65,625 UnitedHealth Group Inc. .................................. 5,015 -------- 8,904 -------- HOUSEHOLD PRODUCTS -- 2.5% 44,575 Avon Products, Inc.(a).................................... 2,421 36,800 Kimberly-Clark Corporation................................ 2,379 121,500 Procter & Gamble Company.................................. 10,947 37,875 The Clorox Company(a)..................................... 1,652 -------- 17,399 -------- HOUSING AND FURNISHING -- 1.4% 35,925 Centex Corporation(a)..................................... 1,866 230,000 Masco Corporation(a)...................................... 6,313 17,325 Whirlpool Corporation..................................... 1,309 -------- 9,488 -------- INSURANCE -- 1.9% 183,474 American International Group, Inc. ....................... 13,236 --------
SEE NOTES TO FINANCIAL STATEMENTS. 218 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
VALUE SHARES (000) - --------------------------------------------------------------------------------- INTEGRATED OIL -- 6.3% 105,000 BP Amoco plc, ADR......................................... $ 5,576 121,709 ChevronTexaco Corporation................................. 10,987 467,304 Exxon Mobil Corporation................................... 20,481 133,300 Royal Dutch Petroleum Company............................. 7,241 -------- 44,285 -------- INVESTMENT SERVICES -- 2.3% 152,100 Merrill Lynch & Company, Inc. ............................ 8,424 131,625 Morgan Stanley Dean Witter & Company...................... 7,543 -------- 15,967 -------- LODGING AND RECREATION -- 2.3% 43,425 Harley-Davidson, Inc.(a).................................. 2,394 300,000 Starwood Hotels & Resorts Worldwide, Inc. ................ 11,283 36,600 Tricon Global Restaurants, Inc.!!......................... 2,151 -------- 15,828 -------- MEDICAL DEVICES AND SUPPLIES -- 5.5% 133,850 Abbott Laboratories....................................... 7,041 125,000 Baxter International Inc. ................................ 7,440 264,200 Johnson & Johnson(a)...................................... 17,159 142,525 Medtronic, Inc. .......................................... 6,444 -------- 38,084 -------- NATURAL GAS DISTRIBUTION -- 0.1% 15,142 El Paso Corporation....................................... 667 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.6% 472,600 Cisco Systems, Inc.!!..................................... 8,001 90,800 QUALCOMM Inc.!!........................................... 3,418 -------- 11,419 -------- PHARMACEUTICALS -- 10.0% 112,250 Amgen Inc.!!(a)........................................... 6,699 75,575 Eli Lilly and Company..................................... 5,759 141,150 Genentech, Inc.!!(a)...................................... 7,121 142,250 Merck & Company, Inc. .................................... 8,191 600,250 Pfizer Inc. .............................................. 23,855 237,000 Pharmacia Corporation..................................... 10,684 103,200 Schering-Plough Corporation............................... 3,230 66,675 Wyeth..................................................... 4,377 -------- 69,916 --------
VALUE SHARES (000) - --------------------------------------------------------------------------------- PUBLISHING AND ADVERTISING -- 1.0% 104,400 McGraw-Hill Companies, Inc. .............................. $ 7,125 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.7% 67,175 Canadian National Railway Company(a)...................... 3,357 26,875 FedEx Corporation!!....................................... 1,561 -------- 4,918 -------- SEMICONDUCTORS -- 2.3% 321,150 Intel Corporation......................................... 9,766 75,825 Linear Technology Corporation(a).......................... 3,353 83,650 Texas Instruments Inc. ................................... 2,769 -------- 15,888 -------- SOFTWARE -- 4.5% 439,600 Microsoft Corporation!!................................... 26,512 369,850 Oracle Corporation!!...................................... 4,734 -------- 31,246 -------- SPECIALTY STORES -- 3.7% 225,000 Circuit City Stores - Circuit City Group.................. 4,059 288,875 Home Depot, Inc. ......................................... 14,042 99,400 Lowe's Companies, Inc. ................................... 4,323 175,000 Staples, Inc.!!........................................... 3,495 -------- 25,919 -------- TELECOMMUNICATIONS SERVICES -- 3.1% 153,325 AT&T Corporation.......................................... 2,407 291,550 AT&T Wireless Services Inc.!!(a).......................... 2,609 270,076 SBC Communications Inc. .................................. 10,112 145,741 Verizon Communications Inc. .............................. 6,653 -------- 21,781 -------- TOBACCO -- 1.4% 180,475 Philip Morris Companies Inc. ............................. 9,506 -------- TOTAL COMMON STOCKS (Cost $586,880)......................................... 690,093 --------
SEE NOTES TO FINANCIAL STATEMENTS. 219 NATIONS MASTER INVESTMENT TRUST Nations Blue Chip Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
SHARES VALUE (000) (000) - --------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 14.2% (Cost $98,533) 98,533 Nations Cash Reserves, Capital Class Shares#.............. $ 98,533 -------- TOTAL INVESTMENTS (Cost $685,413*)................................ 113.3% 788,626 -------- OTHER ASSETS AND LIABILITIES (NET)................ (13.3)% Cash...................................................... $ 84 Dividends receivable...................................... 559 Interest receivable....................................... 6 Collateral on securities loaned........................... (83,453) Investment advisory fee payable........................... (387) Administration fee payable................................ (30) Payable for investment securities purchased............... (9,045) Accrued Trustees' fees and expenses....................... (32) Accrued expenses and other liabilities.................... (40) -------- Total other assets and liabilities (net).................. (92,338) -------- NET ASSETS........................................ 100.0% $696,288 ========
- --------------- *Federal Income Tax Information: Net unrealized appreciation of $99,905 on investment securities was comprised of gross appreciation of $120,210 and gross depreciation of $20,305 for federal income tax purposes. At March 31, 2002, the aggregate cost of securities for federal income tax purposes was $688,721. !! Non-income producing security. (a) All or a portion of security was on loan at March 31, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $75,606 and $80,749, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 5). The portion that represents cash collateral is $83,453. ABBREVIATION: ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS. 220 NATIONS MASTER INVESTMENT TRUST Nations Marsico Focused Equities Master Portfolio STATEMENT OF NET ASSETS MARCH 31, 2002
VALUE SHARES (000) - ---------------------------------------------------------------------------------- COMMON STOCKS -- 97.5% AEROSPACE AND DEFENSE -- 9.6% 635,877 General Dynamics Corporation............................. $ 59,741 1,872,110 Lockheed Martin Corporation.............................. 107,796 ---------- 167,537 ---------- AIRLINES -- 2.9% 2,603,854 Southwest Airlines Company(a)............................ 50,385 ---------- AUTOMOTIVE -- 9.9% 2,651,844 Bayerische Motoren Werke (BMW) AG!!(a).......................................... 105,722 1,100,348 General Motors Corporation(a)............................ 66,516 ---------- 172,238 ---------- BEVERAGES -- 4.5% 516,131 Anheuser-Busch Companies, Inc. .......................... 26,942 1,016,574 PepsiCo, Inc. ........................................... 52,354 ---------- 79,296 ---------- COMMERCIAL BANKING -- 4.5% 1,574,348 Citigroup Inc. .......................................... 77,962 ---------- COMPUTERS AND OFFICE EQUIPMENT -- 0.7% 497,570 Dell Computer Corporation!!.............................. 12,992 ---------- CONSUMER CREDIT AND MORTGAGES -- 8.2% 665,922 Fannie Mae............................................... 53,194 917,942 USA Education Inc. ...................................... 89,775 ---------- 142,969 ---------- DEPARTMENT AND DISCOUNT STORES -- 4.9% 763,684 Costco Wholesale Corporation!!(a)........................ 30,410 896,740 Wal-Mart Stores, Inc. ................................... 54,961 ---------- 85,371 ---------- HEALTH SERVICES -- 16.6% 428,146 Quest Diagnostics Inc.!!................................. 35,472 2,031,568 Tenet Healthcare Corporation!!(a)........................ 136,155 1,570,888 UnitedHealth Group Inc.(a)............................... 120,047 ---------- 291,674 ---------- HOUSING AND FURNISHING -- 1.4% 459,398 Lennar Corporation(a).................................... 24,238 ----------
VALUE SHARES (000) - ---------------------------------------------------------------------------------- INSURANCE -- 0.0%+ 19,000 Travelers Property Casualty Corporation, Class A!!....... $ 380 ---------- INVESTMENT SERVICES -- 7.4% 491,110 Goldman Sachs Group, Inc.(a)............................. 44,323 1,321,470 Lehman Brothers Holdings Inc.(a)......................... 85,419 ---------- 129,742 ---------- LODGING AND RECREATION -- 2.3% 761,471 Four Seasons Hotels Inc.(a).............................. 40,571 ---------- MEDICAL DEVICES AND SUPPLIES -- 5.6% 239,542 Baxter International Inc. ............................... 14,258 1,274,442 Johnson & Johnson........................................ 82,775 ---------- 97,033 ---------- RAILROADS, TRUCKING AND SHIPPING -- 1.4% 417,310 FedEx Corporation!!...................................... 24,246 ---------- SOFTWARE -- 5.0% 820,793 Microsoft Corporation!!.................................. 49,502 1,146,672 Siebel Systems, Inc.!!(a)................................ 37,393 ---------- 86,895 ---------- SPECIALTY STORES -- 12.6% 1,473,780 Home Depot, Inc. ........................................ 71,640 1,003,956 Lowe's Companies, Inc. .................................. 43,662 2,972,123 Tiffany & Company(a)..................................... 105,659 ---------- 220,961 ---------- TOTAL COMMON STOCKS (Cost $1,458,316)...................................... 1,704,490 ---------- PREFERRED STOCKS -- 1.4% (Cost $19,596) AUTOMOTIVE -- 1.4% 52,458 Porsche AG(a)............................................ 23,842 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 221 NATIONS MASTER INVESTMENT TRUST Nations Marsico Focused Equities Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2002
SHARES VALUE (000) (000) - ---------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 25.2% (Cost $440,901) 440,901 Nations Cash Reserves, Capital Class Shares#............. $ 440,901 ---------- TOTAL INVESTMENTS (Cost $1,918,813*).............................. 124.1% 2,169,233 ---------- OTHER ASSETS AND LIABILITIES (NET)................ (24.1)% Cash..................................................... $ 3,735 Receivable for investment securities sold................ 35,593 Dividends receivable..................................... 233 Interest receivable...................................... 44 Collateral on securities loaned.......................... (440,901) Investment advisory fee payable.......................... (1,099) Administration fee payable............................... (147) Payable for investment securities purchased.............. (19,052) Accrued Trustees' fees and expenses...................... (31) Accrued expenses and other liabilities................... (57) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (421,682) ---------- NET ASSETS........................................ 100.0% $1,747,551 ==========
- --------------- *Federal Income Tax Information: Net unrealized appreciation of $246,636 on investment securities was comprised of gross appreciation of $258,593 and gross depreciation of $11,957 for federal income tax purposes. At March 31, 2002, the aggregate cost of securities for federal income tax purposes was $1,922,597. !!Non-income producing security. +Amount represents less than 0.1%. (a)All or a portion of security was on loan at March 31, 2002. The aggregate cost and market value of securities on loan at March 31, 2002 is $407,767 and $421,931, respectively. #Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (Note 5). The portion that represents cash collateral is $440,901. SEE NOTES TO FINANCIAL STATEMENTS. 222 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF OPERATIONS For the year ended March 31, 2002
GROWTH & FOCUSED INCOME BLUE CHIP EQUITIES MASTER MASTER MASTER PORTFOLIO PORTFOLIO PORTFOLIO ---------------------------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $12, $23 and $14, respectively)........................................ $ 3,115 $ 9,500 $ 9,892 Dividend income from affiliated funds....................... 19 475 144 Interest.................................................... 514 64 3,153 Securities lending.......................................... 87 93 328 -------------- -------------- -------------- Total investment income................................. 3,735 10,132 13,517 -------------- -------------- -------------- EXPENSES: Investment advisory fee..................................... 3,755 4,955 13,056 Administration fee.......................................... 501 381 1,741 Custodian fees.............................................. 43 72 133 Legal and audit fees........................................ 30 30 28 Trustees' fees and expenses................................. 28 28 28 Interest expense............................................ --* --* --* Other....................................................... 5 5 9 -------------- -------------- -------------- Total expenses.......................................... 4,362 5,471 14,995 Fees reduced by credits allowed by the custodian............ (1) (1) (49) -------------- -------------- -------------- Net expenses............................................ 4,361 5,470 14,946 -------------- -------------- -------------- NET INVESTMENT INCOME....................................... (626) 4,662 (1,429) -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... (79,449) (51,566) (260,648) Futures contracts......................................... -- (2,823) -- Foreign currency and net other assets..................... (17) -- (63) -------------- -------------- -------------- Net realized gain/(loss) on investments..................... (79,466) (54,389) (260,711) Change in unrealized appreciation/(depreciation) of: Securities (Note 7)....................................... 77,647 25,167 314,554 Futures contracts......................................... -- 195 -- Foreign currency and net other assets..................... --* -- (4) -------------- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... 77,647 25,362 314,550 Net realized and unrealized gain/(loss) on investments...... (1,819) (29,027) 53,839 -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (2,445) $ (24,365) $ 52,410 ============== ============== ==============
- --------------- * Amount represents less than $500. SEE NOTES TO FINANCIAL STATEMENTS. 223 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS
GROWTH & INCOME FOCUSED EQUITIES MASTER PORTFOLIO BLUE CHIP MASTER PORTFOLIO MASTER PORTFOLIO ----------------------------- ----------------------------- ---------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 3/31/02 3/31/01 3/31/02 3/31/01 3/31/02 3/31/01 ------------------------------------------------------------------------------------------------ (IN THOUSANDS) Net investment income........ $ (626) $ 1,253 $ 4,662 $ 4,445 $ (1,429) $ 3,858 Net realized gain/(loss) on investments................ (79,466) (55,082) (54,389) (5,087) (260,711) (262,984) Net change in unrealized appreciation/(depreciation) of investments............. 77,647 (165,087) 25,362 (233,487) 314,550 (577,214) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations................. (2,445) (218,916) (24,365) (234,129) 52,410 (836,340) Contributions................ 185,042 336,334 86,776 139,235 389,119 1,235,706 Withdrawals.................. (186,810) (216,867) (148,373) (169,959) (506,240) (850,270) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets................. (4,213) (99,449) (85,962) (264,853) (64,711) (450,904) NET ASSETS: Beginning of period.......... 530,050 629,499 782,250 1,047,103 1,812,262 2,263,166 ------------ ------------ ------------ ------------ ------------ ------------ End of period................ $ 525,837 $ 530,050 $ 696,288 $ 782,250 $ 1,747,551 $ 1,812,262 ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. 224 NATIONS MASTER INVESTMENT TRUST FINANCIAL HIGHLIGHTS
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS -------------- RATIO OF RATIO OF NET RATIO OF OPERATING INVESTMENT OPERATING EXPENSES INCOME/ (LOSS) PORTFOLIO EXPENSES TO TOTAL TO AVERAGE TO AVERAGE TURNOVER AVERAGE RETURN@ NET ASSETS NET ASSETS RATE NET ASSETS ------------------------------------------------------------------ GROWTH & INCOME MASTER PORTFOLIO: Year ended 3/31/2002...................... (0.53)% 0.87%(d)(e) (0.13)% 114% 0.87%(d)(e) 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 3/31/2002...................... (2.88)% 0.72%(d)(e) 0.61% 86% 0.72%(d)(e) 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 3/31/2002...................... 3.50% 0.86%(d)(e) (0.08)% 129% 0.86%(d)(e) 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%. @ Total return for the Portfolio has been calculated based on the total return for the Feeder Fund adjusted for the applicable Feeder Fund expenses as set out in the Notes to financial statements. SEE NOTES TO FINANCIAL STATEMENTS. 225 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS Nations Master Investment Trust (the "Master Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. At March 31, 2002, the Master Trust offered eleven 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 Master Trust are presented under separate cover. The following investors were invested in the Master Portfolios at March 31, 2002: Growth & Income Master Portfolio: Nations Marsico Growth & Income Fund.......... 98.1% Nations Marsico Growth & Income Fund (Offshore).................................. 1.5% Banc of America Capital Management Funds I -- Growth & Income Fund........................ 0.4% Blue Chip Master Portfolio: Nations Blue Chip Fund........................ 95.0% Nations Blue Chip Fund (Offshore)............. 5.0% Focused Equities Master Portfolio: Nations Marsico Focused Equities Fund......... 98.6% Nations Marsico Focused Equities Fund (Offshore).................................. 1.0% 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, including futures contracts, 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. Investments in other Nations Funds are valued at their net asset value determined as of the close of the New York Stock Exchange on the valuation date. Futures contracts: All Master Portfolios may invest in futures contracts for the purposes of hedging against changes in values of the Portfolios' securities or changes in the prevailing levels of interest rates or currency exchange rates or to gain exposure to the equity market. Upon entering into a futures contract, a Master Portfolio is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Master Portfolio each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect changes in the market value of the contract. When the contract is closed, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the statement of net assets. 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 226 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) investor in the Master Portfolios will be subject to taxation on its allocated share of the Master Portfolio's ordinary income and capital gains. Expenses: General expenses of the Master Trust are allocated to the Master Portfolios based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Master Portfolio are charged to such Portfolio. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS The Master Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") with Banc of America Advisors, LLC ("BA Advisors"), 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 BA Advisors provides investment advisory services to the Master Portfolios. Under the terms of the Investment Advisory Agreement, BA Advisors 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 Master Trust has, on behalf of the Growth & Income and Focused Equities Master Portfolios, entered into a sub-advisory agreement with BA Advisors 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 BA Advisors at the maximum annual rate of 0.45% of each Master Portfolio's average daily net assets. Effective January 1, 2002, the Master Trust has, on behalf of the Blue Chip Master Portfolio, entered into a sub-advisory agreement with BA Advisors and Banc of America Capital Management, LLC ("BACAP"), pursuant to which BACAP is entitled to receive a sub-advisory fee from BA Advisors at the maximum annual rate of 0.25% of the Master Portfolio's average daily net assets. Prior to January 1, 2002, the Master Trust had, on behalf of the Blue Chip Master Portfolio, entered into a sub-advisory agreement with BA Advisors and Chicago Equity Partners, LLC ("Chicago Equity"), pursuant to which Chicago Equity was entitled to receive a sub-advisory fee from BA Advisors at the maximum annual rate of 0.25% of the Master Portfolio's average daily net assets. Stephens Inc. ("Stephens") and BA Advisors serve as co-administrators of the Master Trust. Under the co-administration agreements, Stephens and BA Advisors 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 Master Trust pursuant to an agreement with BA Advisors. For the year ended March 31, 2002, BA Advisors 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 Master Trust's assets. For the year ended March 31, 2002, expenses of the Master Portfolios were reduced by $50,530 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, 2002, Growth & Income Master Portfolio and Focused Equities Master Portfolio paid commissions of $74,933 and $332,812, respectively, to certain affiliates of BA Advisors in connection with the execution of various portfolio transactions. No officer, director or employee of Bank of America or BA Advisors, or any affiliate thereof, receives any compensation from the Master Trust for serving as a Trustee or Officer of the Master Trust. The Master Trust's eligible Trustees may participate in 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 227 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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. Effective January 1, 2002, the retirement plan was terminated. The Master Trust's eligible Trustees had the option of a rollover into the deferred compensation plan on January 1, 2002 or a lump sum distribution, including interest, on January 1, 2003. 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. The income earned by each Master Portfolio from such investments is included in its Statement of operations as "Dividend income from affiliated funds". 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, 2002 were as follows:
PURCHASES SALES (000) (000) ------------------------ Growth & Income Master Portfolio................. $ 554,603 $ 523,855 Blue Chip Master Portfolio................. 633,000 685,383 Focused Equities Master Portfolio................. 2,066,236 2,000,851
The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the year ended March 31, 2002 were as follows:
PURCHASES SALES (000) (000) --------------------- Growth & Income Master Portfolio..................... $ 42,965 $ 27,053 Blue Chip Master Portfolio...... 3,852 4,251 Focused Equities Master Portfolio..................... 109,343 120,901
4. LINES OF CREDIT The Master Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). 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, 2002, there were no loans outstanding under this Agreement. For the year ended March 31, 2002, borrowings by the Master Portfolios under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING INTEREST PORTFOLIO (000) RATE - --------------------------------------------------------- Growth & Income Master Portfolio..................... $ 1 5.01% Blue Chip Master Portfolio...... 18 2.52 Focused Equities Master Portfolio..................... 23 2.31
The average amount outstanding was calculated based on daily balances in the period. 5. 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, 2002, the following Master Portfolios had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL (000) (000) ---------------------------------- Growth & Income Master Portfolio.............. $ 73,840 $ 76,010 Blue Chip Master Portfolio.............. 80,749 83,453 Focused Equities Master Portfolio.............. 359,751 440,901
228 NATIONS MASTER INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. SUBSEQUENT EVENTS On October 10, 2001, the Board of Trustees of the Blue Chip Master Portfolio (the "Portfolio") approved an Agreement and Plan of Reorganization (the "Reorganization") into a newly created Strategic Growth Master Portfolio. On March 27, 2002, the interestholders of the Blue Chip Master Portfolio approved the Reorganization. The Reorganization occurred and the Portfolio ceased operations on May 10, 2002. The Strategic Growth Master Portfolio acquired all of the assets and liabilities of the Portfolio in exchange for interests of equal value in the newly created Strategic Growth Master Portfolio. The principal effect of this Reorganization was to transfer the Portfolio's investments into an investment portfolio with the objective, principal investment strategies and risks of the Strategic Growth Master Portfolio and its corresponding feeder fund, the Strategic Growth Fund. Prior to the Reorganization, Strategic Growth Fund was a stand-alone fund, which invested directly in securities. Blue Chip Fund was a feeder fund that invested its net assets in the Portfolio. As part of the Reorganization, Blue Chip Fund reorganized into Strategic Growth Fund and Strategic Growth Fund became a feeder fund that invests all of its net assets in Strategic Growth Master Portfolio. On November 28, 2001, the Board of Trustees approved a name change for Nations Marsico Growth & Income Master Portfolio. Effective May 10, 2002, the Portfolio became known as Nations Marsico Growth Master Portfolio. Additionally, the Portfolio no longer invests at least 25% of its assets in securities that are believed to have income potential. 229 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 financial highlights 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, (constituting part of Nations Master Investment Trust, hereafter referred to as the "Portfolios") at March 31, 2002, 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 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, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. As discussed in Note 6, effective May 10, 2002, Nations Blue Chip Master Portfolio completed a reorganization pursuant to which all of its assets were acquired and liabilities assumed in exchange for shares of equal value of the acquiring fund and ceased operations. PricewaterhouseCoopers LLP New York, New York May 17, 2002 230 THE NATIONS FUNDS FAMILY OF FUNDS Within each category, the funds are listed from aggressive to conservative. Lower risk/reward potential SPECIALTY FUNDS INDEX FUNDS Nations SmallCap Index Fund Nations MidCap Index Fund Nations LargeCap Index Fund Nations Managed Index Fund ASSET ALLOCATION PORTFOLIOS Nations LifeGoal Growth Portfolio Nations LifeGoal Balanced Growth Portfolio Nations LifeGoal Income and Growth Portfolio OTHER SPECIALTIES Nations Financial Services Fund Nations Convertible Securities Fund MONEY MARKET FUNDS Nations Prime Fund(1) Nations Cash Reserves Nations Money Market Reserves Nations Government Money Market Fund(2) Nations Government Reserves Nations Treasury Fund(3) Nations Treasury Reserves Nations Tax Exempt Fund(4) Nations Municipal Reserves Nations California Tax-Exempt Reserves Nations New York Tax-Exempt Reserves FIXED INCOME FUNDS TAXABLE INCOME FUNDS Nations High Yield Bond Fund Nations Strategic Income Fund Nations Bond Fund Nations Intermediate Bond Fund Nations Government Securities 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, MD, NC, SC, TN, TX, VA)(5) Nations Intermediate Municipal Bond Fund Nations State-Specific Intermediate Municipal Bond Funds (FL, GA, KS, MD, NC, SC, TN, TX, VA) Nations Short-Term Municipal Income Fund STOCK FUNDS GROWTH FUNDS Nations Small Company Fund Nations Marsico 21st Century Fund Nations MidCap Growth Fund Nations Marsico Focused Equities Fund Nations Marsico Growth & Income Fund(6) Nations Aggressive Growth Fund(7) Nations Capital Growth Fund Nations Strategic Growth Fund BLEND FUNDS Nations Blue Chip Fund(8) Nations Asset Allocation Fund Nations Equity Income Fund(9) VALUE FUNDS Nations MidCap Value Fund Nations Value Fund Nations LargeCap Value Fund Nations Classic Value Fund Higher reward/risk potential INTERNATIONAL/GLOBAL FUNDS Nations Emerging Markets Fund Nations Marsico International Opportunities Fund Nations International Equity Fund Nations International Value Fund Nations Global Value Fund 1 Effective May 10, 2002, the fund reorganized into Nations Cash Reserves. 2 Effective May 10, 2002, the fund reorganized into Nations Government Reserves. 3 Effective May 10, 2002, the fund reorganized into Nations Treasury Reserves. 4 Effective May 10, 2002, the fund reorganized into Nations Tax-Exempt Reserves. 5 Effective May 10, 2002, these funds, excluding CA and FL, reorganized into a corresponding intermediate municipal bond fund of the same state which has substantially similar investment objectives and principal investment strategies. 6 Effective May 10, 2002, the fund's name changed to Nations Marsico Growth Fund which better reflects the fund's investment objective and strategies. 7 Effective May 10, 2002, the fund reorganized into Nations Capital Growth Fund. 8 Effective May 10, 2002, the fund reorganized into Nations Strategic Growth Fund. 9 Effective May 10, 2002, the fund reorganized into Nations Convertible Securities Fund. 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