N-30D 1 g78794nv30d.txt NATIONS FUND TRUST (GOV'T AND CORPORATE) Nations Short-Term Income Fund Nations Short-Intermediate Government Fund Nations Government Securities Fund Nations Intermediate Bond Fund GOVERNMENT & CORPORATE Nations Bond Fund -------------------------------- Semiannual report for the period Nations Strategic ended September 30, 2002 Income Fund Nations High Yield Bond 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 six-month period ended September 30, 2002, echoed stock investors' weariness of recurrent bear market battles. We now know this current economic slump, which many attributed to the events of September 11, 2001, was actually well underway beginning in March of 2001. The three major stock market indices -- the Dow Jones Industrial Average, Standard & Poor's 500 Composite Stock Price Index and Nasdaq Composite Index(1)-- posted remarkably poor returns for the period. Bonds, represented by the Lehman Aggregate Bond Index(2), however, produced slightly positive returns for the same period. HISTORICAL PERSPECTIVE While equity markets suffered a dismal six months, today's economy is vastly different from the Great Depression and the severe bear market of 1973 and 1974. The Depression was marked by 25% unemployment, significant price declines and a contracting money supply, while the mid-70s saw high inflation due to the oil embargo and lofty interest rates. In contrast, today unemployment, inflation and interest rates are low and the money supply is increasing. We feel these conditions may provide a stimulus for future economic growth. The Federal Reserve Board (the Fed) left interest rates unchanged during the period, stating in August that they felt demand is growing at a moderate pace. Policymakers, however, alluded to the risk of a possible attack against Iraq as weighing on the economy -- a risk that has supplanted that of corporate governance and accounting irregularities that were issues facing the markets and economy earlier in the summer. These geopolitical and military risks have caused the Fed to continue to assess the risks to the economy as weakness as opposed to inflation. THINK BEFORE YOU REACT History has shown us that patient investors have generally been rewarded by the long-term performance of the stock markets despite the occasional severe market volatility. We believe investors with a three- to five-year investment time horizon or longer should be invested in the market, but with a diversified portfolio. We believe that a carefully selected portfolio of stocks and bonds is a sensible way to reduce some of the risk associated with investing. Market declines like we have experienced recently are never easy to live through. As painful as these drops can be in the short term, they often create tremendous opportunity, setting the stage for tomorrow's gains. By reacting to frightening headlines and selling-off investments, investors may be selling at market lows, in addition to missing out on potential gains when the markets recover. We encourage you to partner with your investment professional to review your financial goals not just during volatile times, but on a more regular 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, broker 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. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRESIDENTS' MESSAGE CONTINUED... OUR NEAR-TERM OUTLOOK We believe, in the short run, it is reasonable to think that the market will continue to be volatile. The threat of war with Iraq continues to weigh on the market. A prolonged military conflict in the Middle East extending over several months could further undermine business and consumer confidence. Domestically, bankruptcies, accounting scandals and the subsequent arrest and indictments of members of senior management of a number of well-known companies, of course, compound the market's lack of confidence. Investors need to be patient until unrealistic earnings projections have been corrected, the Iraqi situation is resolved and the economy regains its momentum. QUESTIONS OR COMMENTS Should you have any questions or comments on your semiannual 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 as well as 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 September 30, 2002 P.S. On November 6, 2002, the Fed lowered the federal funds rate by 50 basis points to 1.25%. TABLE OF CONTENTS FINANCIAL STATEMENTS Statements of net assets Nations Short-Term Income Fund 3 Nations Short-Intermediate Government Fund 9 Nations Government Securities Fund 12 Nations Intermediate Bond Fund 15 Nations Bond Fund 16 Nations Strategic Income Fund 25 Nations High Yield Bond Fund 30 Statements of operations 32 Statements of changes in net assets 34 Schedules of capital stock activity 38 Financial highlights 46 Notes to financial statements 60 Statements of net assets -- Nations Master Investment Trust 75 Nations Intermediate Bond Master Portfolio 75 Nations High Yield Bond Master Portfolio 81 Statements of operations 90 Statements of changes in net assets 91 Financial highlights 91 Notes to financial statements 92
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.] NATIONS FUNDS Nations Short-Term Income Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 14.1% ASSET-BACKED -- AUTO LOANS -- 6.4% $ 2,500 Americredit Automobile Receivables Trust, Series 2001-B, Class A4, 5.370% 06/12/08##......................................... $ 2,642 4,000 BankBoston RV Asset Backed Trust, Series 1997-1, Class A9, 6.630% 08/15/10##......................................... 4,154 5,000 BMW Vehicle Lease Trust, Series 2000-A, Class A4, 6.670% 10/25/03##......................................... 5,153 1,310 Capital Auto Receivables Asset Trust, Series 2002-2, Class CTFS, 4.180% 10/15/07........................................... 1,346 3,000 Capital One Auto Finance Trust, Series 2002-A, Class A3, 4.030% 08/15/06........................................... 3,101 1,650 First Security Auto Owner Trust, Series 2000-1, Class B, 7.700% 12/17/07........................................... 1,757 1,725 Ford Credit Auto Owner Trust, Series 2002-B, Class B, 5.180% 10/16/06........................................... 1,832 4,000 Ford Credit Auto Owner Trust, Series 2002-C, Class A4, 3.790% 09/15/06........................................... 4,127 2,270 Honda Auto Receivables Owner Trust, Series 2000-1, Class A4, 6.670% 01/16/06........................................... 2,379 4,000 Household Automotive Trust, Series 2002-2, Class A3, 2.850% 03/19/07........................................... 4,046 1,500 MMCA Automobile Trust, Series 2001-1, Class A4, 5.340% 12/15/05........................................... 1,573 1,269 MMCA Automobile Trust, Series 2001-2, Class B, 5.750% 06/15/07........................................... 1,320 2,398 Nissan Auto Receivables Owner Trust, Series 2000-C, Class A3, 6.720% 08/16/04........................................... 2,441 3,000 Nissan Auto Receivables Owner Trust, Series 2002-C, Class A4, 3.330% 01/15/08........................................... 3,044 3,000 Onyx Acceptance Auto Trust, Series 2002-A, Class A3, 3.750% 04/15/06........................................... 3,074 1,515 Premier Auto Trust, Series 1999-1, Class A4, 5.820% 10/08/03........................................... 1,525 2,000 Union Acceptance Corporation, Series 1999-A, Class A5, 5.870% 09/08/06........................................... 2,065 2,000 USAA Auto Owner Trust, Series 2001-2, Class A4, 3.910% 04/16/07........................................... 2,061
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ASSET-BACKED -- AUTO LOANS -- (CONTINUED) $ 5,000 World Omni Auto Receivables Trust, Series 2001-B, Class A3, 3.790% 11/20/05........................................... $ 5,118 ---------- 52,758 ---------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 3.4% 2,500 American Express Credit Account Master Trust, Series 1999-1, Class A, 5.600% 11/15/06##......................................... 2,639 1,000 American Express Credit Account Master Trust, Series 1999-1, Class B, 5.850% 11/15/06##......................................... 1,043 2,000 Capital One Master Trust, Series 2001-7A, Class A, 3.850% 08/15/07........................................... 2,062 1,500 Chase Credit Card Master Trust, Series 1996-4, Class B, 2.170%** 07/15/06......................................... 1,501 3,000 Citibank Credit Card Master Trust I, Series 1998-3, Class B, 5.950% 02/07/05##......................................... 3,043 5,000 Discover Card Master Trust I, Series 1998-6, Class A, 5.850% 01/17/06##......................................... 5,157 4,500 First USA Credit Card Master Trust, Series 1998-9, Class A, 5.280% 09/18/06##......................................... 4,686 3,500 Fleet Credit Card Master Trust, Series 1999-A, Class A1, 6.000% 11/15/05........................................... 3,547 1,750 MBNA Master Credit Card Trust, Series 1998-C, Class C, 6.350% 11/15/05........................................... 1,795 3,145 MBNA Master Credit Card Trust, Series 1998-J, Class A, 5.250% 02/15/06........................................... 3,246 ---------- 28,719 ---------- ASSET-BACKED -- HOME EQUITY LOANS -- 2.1% 5,714 EQCC Home Equity Loan Trust, Series 1998-1, Class A4F, 6.459% 03/15/21##......................................... 5,817 3,000 Fannie Mae Whole Loan, Series 2001-W1, Class AF3, 5.690% 06/25/29##......................................... 3,070 542 First Plus Home Loan Trust, Series 1998-2, Class M1, 7.220% 05/10/24........................................... 588 3,000 GMAC Mortgage Corporation Loan Trust, Series 2000-HE3, Class A4, 7.720% 12/25/31##......................................... 3,050 2,579 Residential Asset Securities Corporation, Series 2002-KS2, Class AI1, 1.954%** 11/25/17......................................... 2,577
SEE NOTES TO FINANCIAL STATEMENTS. 3 NATIONS FUNDS Nations Short-Term Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ASSET-BACKED -- HOME EQUITY LOANS -- (CONTINUED) $ 699 Saxon Asset Securities Trust, Series 1998-1, Class MF1, 7.050% 12/25/27........................................... $ 740 1,792 UCFC Home Equity Loan, Series 1997-B, Class A6, 6.900% 10/15/28........................................... 1,895 ---------- 17,737 ---------- ASSET-BACKED -- OTHER -- 2.2% 433 Augusta Funding Ltd. IV, Class A1, 6.250% 11/15/02@.......................................... 435 2,000 CIT Equipment Collateral, Series 2002-VT1, Class A4, 4.670% 12/21/09........................................... 2,073 1,442 CIT Equipment Collateral, Series 2002-VT1, Class B, 3.970% 12/21/09........................................... 1,457 6,825 Connecticut RRB Special Purpose Trust CL&P-1, Series 2001-1, Class A2, 5.360% 03/30/07........................................... 7,173 3,330 First Sierra Receivables, Series 1999-1, Class A4, 5.730% 09/15/04........................................... 3,388 3,638 PSE&G Transition Funding LLC, Series 2001-1, Class A2, 5.740% 03/15/07........................................... 3,811 ---------- 18,337 ---------- TOTAL ASSET-BACKED SECURITIES (Cost $115,039)........................................... 117,551 ---------- CORPORATE BONDS AND NOTES -- 25.9% AEROSPACE AND DEFENSE -- 0.3% 2,250 Lockheed Martin Corporation, 6.750% 03/15/03........................................... 2,291 ---------- AUTOMOTIVE -- 1.6% 756 Delphi Automotive Systems Corporation, 6.125% 05/01/04##......................................... 787 500 Ford Motor Credit Company, 7.250% 01/15/03(a)........................................ 500 4,000 Ford Motor Credit Company, 6.700% 07/16/04##......................................... 4,009 510 General Motors Acceptance Corporation, 5.480% 12/16/02........................................... 511 3,000 General Motors Acceptance Corporation, 5.950% 03/14/03##......................................... 3,013 400 General Motors Acceptance Corporation, 6.125% 09/15/06........................................... 401
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- AUTOMOTIVE -- (CONTINUED) $ 3,000 PACCAR Financial Corporation, 5.830% 03/14/03........................................... $ 3,042 1,030 Toyota Motor Credit Corporation, 5.625% 11/13/03........................................... 1,069 ---------- 13,332 ---------- BEVERAGES -- 0.0%+ 300 Pepsico Inc., 4.500% 09/15/04........................................... 312 ---------- BROADCASTING AND CABLE -- 1.1% 2,200 Cox Communications, Inc., 6.500% 11/15/02##......................................... 2,191 3,000 Turner Broadcasting System, Inc., 7.400% 02/01/04........................................... 3,011 4,000 Viacom Inc., 6.750% 01/15/03........................................... 4,044 ---------- 9,246 ---------- CHEMICALS -- BASIC -- 0.3% 2,500 Dow Chemical Company, 5.250% 05/14/04##......................................... 2,561 ---------- CHEMICALS -- SPECIALTY -- 0.1% 1,100 Praxair, Inc., 6.750% 03/01/03........................................... 1,121 ---------- COMMERCIAL BANKING -- 3.6% 2,000 BB&T Corporation, 7.050% 05/23/03........................................... 2,062 2,865 First Union Corporation, 6.625% 06/15/04........................................... 3,062 2,500 First USA Bank, N.A., 7.650% 08/01/03........................................... 2,612 5,125 Golden State Holdings, Escrow Corporation, 7.000% 08/01/03##......................................... 5,268 169 Mellon Funding Corporation, 6.000% 03/01/04........................................... 178 2,000 PNC Funding Corporation, 6.875% 03/01/03........................................... 2,031 4,000 Popular, Inc., MTN, 6.375% 09/15/03........................................... 4,117 1,520 SunTrust Banks, Inc., 6.125% 02/15/04........................................... 1,598 3,125 U.S. Bank, N.A., 5.625% 11/30/05........................................... 3,377 5,000 Wells Fargo & Company, 5.750% 02/01/03##......................................... 5,065 305 Wells Fargo Financial, Inc., 7.200% 04/01/04........................................... 326 ---------- 29,696 ---------- CONGLOMERATES -- 0.7% 5,500 Waste Management, Inc., 7.700% 10/01/02........................................... 5,500 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 4 NATIONS FUNDS Nations Short-Term Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- CONSUMER CREDIT AND MORTGAGES -- 0.7% $ 2,144 Countrywide Home Loans, Inc., Series J, 5.250% 06/15/04##......................................... $ 2,223 3,250 Washington Mutual Inc., 8.250% 10/01/02##......................................... 3,250 ---------- 5,473 ---------- DEPARTMENT AND DISCOUNT STORES -- 0.5% 4,000 Federated Department Stores, Inc., 8.500% 06/15/03##......................................... 4,146 ---------- DIVERSIFIED MANUFACTURING -- 0.2% 1,500 Bayer Corporation, 6.500% 10/01/02@.......................................... 1,500 ---------- ELECTRIC POWER -- NON NUCLEAR -- 0.2% 2,000 Cinergy Corporation, 6.250% 09/01/04##......................................... 2,066 ---------- ELECTRIC POWER -- NUCLEAR -- 1.7% 2,000 American Electric Power Company, Inc., 5.500% 05/15/03##......................................... 1,996 2,300 Carolina Power & Light, 5.875% 01/15/04........................................... 2,378 3,200 Dominion Resources, Inc., 6.000% 01/31/03##......................................... 3,227 3,000 Energy East Corporation, 6.750% 10/15/02........................................... 3,004 3,100 Pennsylvania Power Company, 6.375% 09/01/04........................................... 3,178 ---------- 13,783 ---------- ENERGY -- MISCELLANEOUS -- 0.3% 2,700 TXU Gas Company, 7.625% 10/15/02........................................... 2,703 ---------- EXPLORATION AND PRODUCTION -- 0.6% 2,565 Amereda Hess Corporation, 5.300% 08/15/04##......................................... 2,682 2,500 Union Pacific Resources Group Inc., 6.500% 05/15/05##......................................... 2,721 ---------- 5,403 ---------- FINANCE -- MISCELLANEOUS -- 1.4% 1,000 American General Finance Corporation, 5.900% 01/15/03##......................................... 1,009 3,000 Associates Corporation of North America, 5.500% 02/15/04##......................................... 3,134 3,000 Caterpillar Financial Services Corporation, 6.875% 08/01/04........................................... 3,228
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- FINANCE -- MISCELLANEOUS -- (CONTINUED) $ 4,000 General Electric Capital Corporation, MTN, 4.250% 01/28/05##......................................... $ 4,140 325 General Electric Capital Corporation, Series A, 6.750% 09/11/03........................................... 339 ---------- 11,850 ---------- FOOD AND DRUG STORES -- 0.4% 3,000 Safeway Inc., 6.850% 09/15/04(a)........................................ 3,225 ---------- FOOD PRODUCTS -- 1.1% 1,000 ConAgra Foods, Inc., 5.500% 10/15/02##......................................... 1,001 3,000 Kellogg Company, 5.500% 04/01/03##......................................... 3,044 2,075 Tyson Foods, Inc., Class A, 6.625% 10/01/04........................................... 2,205 2,550 Unilever Capital Corporation, 6.875% 11/01/05........................................... 2,859 ---------- 9,109 ---------- HEALTH SERVICES -- 0.3% 2,100 American Home Products Corporation, 5.875% 03/15/04##......................................... 2,173 ---------- HOUSEHOLD PRODUCTS -- 0.4% 250 Procter & Gamble Company, 5.250% 09/15/03........................................... 258 3,300 The Gillette Company, 3.750% 12/01/04@##........................................ 3,394 ---------- 3,652 ---------- INSURANCE -- 1.6% 5,000 Aon Corporation, 7.400% 10/01/02##......................................... 5,001 245 Marsh & McLennan Companies, Inc., 6.625% 06/15/04........................................... 261 4,000 Monumental Global Funding II, 6.950% 10/01/03@##........................................ 4,155 2,000 New York Life Insurance Company, 6.400% 12/15/03@.......................................... 2,083 1,450 Prudential Financial, 6.875% 04/15/03@.......................................... 1,481 ---------- 12,981 ---------- INTEGRATED OIL -- 1.7% 2,000 Conoco Inc., 2.630%** 10/15/02##....................................... 2,000 3,500 Phillips Petroleum Company, 6.650% 03/01/03........................................... 3,561 4,000 Union Oil Company of California, 6.375% 02/01/04........................................... 4,188 2,000 USX Corporation, 7.200% 02/15/04........................................... 2,121 2,000 Valero Energy Corporation, 6.750% 12/15/02@.......................................... 2,001 ---------- 13,871 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 5 NATIONS FUNDS Nations Short-Term Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- INVESTMENT SERVICES -- 3.0% $ 5,000 Bear Stearns Company, Inc., 6.125% 02/01/03........................................... $ 5,054 4,000 Goldman Sachs Group LP, 7.125% 03/01/03@##........................................ 4,089 3,000 Lehman Brothers Holdings Inc., 6.625% 04/01/04........................................... 3,168 2,500 Merrill Lynch & Company, Inc., MTN, 5.880% 01/15/04##......................................... 2,602 295 Merrill Lynch & Company, Series B, 6.180% 04/20/04........................................... 309 250 Morgan Stanley Dean Witter and Company, 5.625% 01/20/04........................................... 259 4,000 Morgan Stanley Dean Witter and Company, Series C 7.375% 04/15/03##......................................... 4,106 5,000 Salomon, Inc., 6.750% 02/15/03........................................... 5,087 ---------- 24,674 ---------- MEDICAL DEVICES AND SUPPLIES -- 0.3% 2,120 Abbott Laboratories, 5.125% 07/01/04##......................................... 2,229 ---------- METALS AND MINING -- 0.2% 1,700 Alcoa Inc., 7.250% 08/01/05##......................................... 1,907 ---------- NATURAL GAS DISTRIBUTION -- 0.3% 2,000 KeySpan Corporation, 7.250% 11/15/05........................................... 2,230 ---------- PAPER AND FOREST PRODUCTS -- 0.3% 2,259 International Paper Company, 8.000% 07/08/03........................................... 2,346 ---------- PUBLISHING AND ADVERTISING -- 0.6% 4,000 Gannett Company, Inc., 4.950% 04/01/05##......................................... 4,230 1,000 Reed Elsevier Capital Inc., 7.000% 05/15/05........................................... 1,096 ---------- 5,326 ---------- RAILROADS, TRUCKING AND SHIPPING -- 0.8% 3,114 FedEx Corporation, 6.625% 02/12/04........................................... 3,262 3,500 Illinois Central Railroad Company, 6.750% 05/15/03##......................................... 3,586 ---------- 6,848 ---------- REAL ESTATE -- 0.4% 3,500 EOP Operating LP, 6.625% 02/15/05##......................................... 3,733 ----------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.3% $ 2,124 Health Care Property Investors, Inc., 7.480% 04/05/04........................................... $ 2,276 ---------- RESTAURANTS -- 0.0%+ 250 McDonald's Corporation, 5.150% 07/01/04........................................... 262 ---------- SPECIALTY STORES -- 0.0%+ 250 Home Depot Inc., 6.500% 09/15/04........................................... 271 ---------- TELECOMMUNICATIONS SERVICES -- 0.9% 4,000 New York Telephone Company, 6.500% 03/01/05........................................... 4,247 3,000 Pacific Bell, 6.250% 03/01/05........................................... 3,215 ---------- 7,462 ---------- TOTAL CORPORATE BONDS AND NOTES (Cost $211,021)........................................... 215,558 ---------- FOREIGN BONDS AND NOTES -- 2.5% 3,000 BP Capital Markets plc, 4.000% 04/29/05........................................... 3,121 2,479 Hanson Overseas B.V., 7.375% 01/15/03##......................................... 2,512 1,313 Hanson Overseas B.V., 6.750% 09/15/05........................................... 1,433 250 Hydro Quebec, 7.375% 02/01/03........................................... 255 1,840 Korea Development Bank, 7.125% 04/22/04........................................... 1,964 3,000 Province of New Brunswick, 7.625% 06/29/04##......................................... 3,281 3,368 Quebec (Province of), 5.500% 04/11/06........................................... 3,672 4,000 Republic Of Italy, 7.250% 02/07/05........................................... 4,443 ---------- TOTAL FOREIGN BONDS AND NOTES (Cost $20,147)............................................ 20,681 ---------- MORTGAGE-BACKED SECURITIES -- 1.4% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.1% 1,140 Credit Suisse First Boston, Series 2001, 5.570%** 12/05/13##....................................... 1,132 ---------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 0.7% 5,000 6.875% 01/15/05........................................... 5,516 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 6 NATIONS FUNDS Nations Short-Term Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 0.1% $ 740 6.000% 11/01/03-11/01/04##................................ $ 757 144 6.500% 08/01/04........................................... 148 296 7.500% 11/01/09........................................... 311 ---------- 1,216 ---------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 0.5% 3,718 5.375% 04/20/22##......................................... 3,844 ---------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $11,511)............................................ 11,708 ---------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 12.9% FEDERAL FARM CREDIT BANK (FFCB) -- 0.1% 100 5.125% 01/29/04........................................... 104 350 3.875% 02/01/05(a)........................................ 363 ---------- 467 ---------- FEDERAL HOME LOAN BANK (FHLB) -- 9.5% 1,000 5.500% 01/21/03........................................... 1,012 100 5.000% 02/14/03........................................... 101 1,450 4.125% 08/15/03........................................... 1,482 250 5.575% 09/02/03........................................... 259 75,000 3.375% 06/15/04##......................................... 76,744 ---------- 79,598 ---------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 2.0% 1,045 6.775% 11/01/03........................................... 1,076 1,000 5.000% 05/15/04(a)........................................ 1,049 275 4.500% 08/15/04(a)........................................ 287 13,000 7.000% 07/15/05##......................................... 14,598 ---------- 17,010 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 1.3% 10,000 5.625% 05/14/04##......................................... 10,598 ---------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $106,537)........................................... 107,673 ---------- U.S. TREASURY OBLIGATIONS -- 38.9% U.S. TREASURY NOTES -- 34.2% 60,800 6.250% 02/15/03(a)........................................ 61,862 92,500 3.875% 07/31/03(a)........................................ 94,360 98,125 5.250% 08/15/03(a)........................................ 101,353 15,000 3.250% 05/31/04........................................... 15,395 375 2.875% 06/30/04(a)........................................ 383
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- U.S. TREASURY NOTES -- (CONTINUED) $ 4,050 6.750% 05/15/05(a)........................................ $ 4,547 6,000 6.500% 08/15/05(a)........................................ 6,753 ---------- 284,653 ---------- U.S. TREASURY STRIPS -- 4.7% 40,000 Interest only, 1.660%*** 08/15/04(a)..................................... 38,781 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $321,197)........................................... 323,434 ---------- SHARES (000) --------- INVESTMENT COMPANIES -- 31.0% (Cost $258,284) 258,284 Nations Cash Reserves, Capital Class Shares#................ 258,284 ---------- TOTAL INVESTMENTS (Cost $1,043,736*).............................. 126.7% 1,054,889 ---------- OTHER ASSETS AND LIABILITIES (NET)................ (26.7)% Receivable for Fund shares sold............................. $ 4,630 Dividends receivable........................................ 35 Interest receivable......................................... 7,811 Receivable for variation margin............................. 487 Unrealized depreciation on swap contracts................... (46) Collateral on securities loaned............................. (225,437) Payable for Fund shares redeemed............................ (1,771) Investment advisory fee payable............................. (134) Administration fee payable.................................. (147) Shareholder servicing and distribution fees payable......... (70) Distributions payable....................................... (1,611) Payable for investment securities purchased................. (5,811) Accrued Trustees' fees and expenses......................... (56) Accrued expenses and other liabilities...................... (195) ---------- TOTAL OTHER ASSETS AND LIABILITIES (NET).................... (222,315) ---------- NET ASSETS........................................ 100.0% $ 832,574 ========== NET ASSETS CONSIST OF: Accumulated net realized gain on investments sold, futures contracts and swaps....................................... $ 335 Net unrealized appreciation of investments, futures contracts and swaps....................................... 13,228 Paid-in capital............................................. 819,011 ---------- NET ASSETS.................................................. $ 832,574 ==========
SEE NOTES TO FINANCIAL STATEMENTS. 7 NATIONS FUNDS Nations Short-Term Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
VALUE -------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($651,344,097 / 64,633,461 shares outstanding)............ $10.08 ========== INVESTOR A SHARES: Net asset value and redemption price per share ($123,076,569 / 12,195,239 shares outstanding)............ $10.09 ========== Maximum sales charge........................................ 1.00% Maximum offering price per share............................ $10.19 INVESTOR B SHARES: Net asset value and offering price per share& ($2,455,242 / 243,465 shares outstanding)................. $10.08 ========== INVESTOR C SHARES: Net asset value and offering price per share& ($55,697,940 / 5,522,016 shares outstanding).............. $10.09 ==========
--------------- * Federal income tax information (see Note 12). ** Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at September 30, 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. & The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. + Amount represents less than 0.1%. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (see Note 11). The portion that represents cash collateral is $225,437. ## All or a portion of security segregated as collateral for futures and swap contracts. (a) All or a portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $195,442 and $219,939, respectively. ABBREVIATIONS: MTN -- Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS. 8 NATIONS FUNDS Nations Short-Intermediate Government Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 4.5% ASSET-BACKED -- AUTO LOANS -- 2.3% $ 5,470 Capital Auto Receivables Asset Trust, Series 2001-2, Class A4, 5.000% 12/15/06##........................................... $ 5,738 934 Dealer Auto Receivables Trust, Series 2000-1, Class A3, 7.070% 05/17/04............................................. 943 1,304 MMCA Automobile Trust, Series 2000-1, Class A3, 7.000% 06/15/04............................................. 1,317 5,000 Onyx Acceptance Auto Trust, Series 2002-A, Class A3, 3.750% 04/15/06##........................................... 5,123 --------- 13,121 --------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 0.3% 1,150 Chase Credit Card Master Trust, Series 1996-4, Class B, 2.170%** 07/15/06##......................................... 1,151 280 Conesco Finance, Series 2001-A, Class IA2, 5.940% 03/15/32##........................................... 282 --------- 1,433 --------- ASSET-BACKED -- HOME EQUITY LOANS -- 1.8% 285 Chase Funding Mortgage Loan Asset-Backed, Series 2001-2, Class 1A1, 1.924%** 04/25/16........................................... 285 2,959 First Alliance Mortgage Loan Trust, Series 1996-2, Class A3, 8.225% 09/20/27##........................................... 2,956 764 GMAC Mortgage Corporation Loan Trust, Series 2002-HE2, Class A1, 1.944%** 06/25/27##......................................... 763 1,315 Indymac Home Equity Loan Asset-Backed Trust, Series 2002-A, Class AF1, 2.014%** 05/25/17##......................................... 1,313 1,927 Oakwood Mortgage Investors Inc., Series 2002-B, Class A1, 2.050%** 05/15/13........................................... 1,925 1,783 Residential Asset Mortgage Products, Inc., Series 2002-RS1, Class AI1, 2.014%** 08/25/20........................................... 1,784 1,032 Residential Asset Securities Corporation, Series 2002-KS2, Class AI1, 1.954%** 11/25/17........................................... 1,031 --------- 10,057 --------- ASSET-BACKED -- OTHER -- 0.1% 449 Ikon Receivables LLC, Series 1999-1, Class A3, 5.990% 05/15/05............................................. 449 --------- TOTAL ASSET-BACKED SECURITIES (Cost $24,875).............................................. 25,060 ---------
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES -- 22.7% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.2% $ 19,088 Merrill Lynch Mortgage Investors, Inc., Series 1998-C3, Class IO, 1.103%** 12/15/30........................................... $ 825 4,435 PNC Mortgage Acceptance Corporation, Series 2001-C1, Class A1, 5.910% 03/12/34##........................................... 4,792 1,132 Salomon Brothers Mortgage Securities VII, Series 2002-CDCA, Class A1, 2.103%** 11/15/13@##........................................ 1,131 --------- 6,748 --------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 12.6% 21,500 3.750% 04/15/04(a).......................................... 22,100 13,500 6.875% 01/15/05............................................. 14,895 27,600 6.625% 09/15/09##........................................... 32,310 --------- 69,305 --------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 7.0% 29,900 5.000% 01/15/07(a).......................................... 32,255 600 6.625% 11/15/10(a).......................................... 700 2,316 9.000% 04/01/16##........................................... 2,526 3,192 8.500% 04/01/17##........................................... 3,458 --------- 38,939 --------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 1.9% 5,715 5.375% 04/20/22##........................................... 5,907 4,507 4.500%** 06/20/29##......................................... 4,636 --------- 10,543 --------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $118,545)............................................. 125,535 --------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 11.7% FEDERAL HOME LOAN BANK (FHLB) -- 2.7% 4,100 3.375% 06/15/04............................................. 4,195 9,500 5.750% 05/15/12............................................. 10,549 --------- 14,744 --------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 1.5% 701 6.775% 11/01/03##........................................... 722 6,600 5.750% 01/15/12(a).......................................... 7,327 --------- 8,049 --------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 7.5% 37,100 7.000% 07/15/05(a).......................................... 41,629 --------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $60,771).............................................. 64,422 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 9 NATIONS FUNDS Nations Short-Intermediate Government Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 46.8% U.S. TREASURY NOTES -- 41.4% $ 87,800 6.250% 02/15/03##(a)........................................ $ 89,332 38,500 3.875% 07/31/03##(a)........................................ 39,274 6,690 3.000% 02/29/04(a).......................................... 6,824 19,700 3.250% 05/31/04............................................. 20,219 3,950 6.500% 08/15/05(a).......................................... 4,446 10,840 5.875% 11/15/05(a).......................................... 12,081 2,910 5.625% 02/15/06............................................. 3,238 4,360 4.625% 05/15/06(a).......................................... 4,719 4,370 6.875% 05/15/06(a).......................................... 5,066 3,900 7.000% 07/15/06(a).......................................... 4,557 4,695 6.500% 10/15/06(a).......................................... 5,435 7,650 3.500% 11/15/06(a).......................................... 7,975 13,460 6.250% 02/15/07(a).......................................... 15,562 8,000 5.750% 08/15/10(a).......................................... 9,298 --------- 228,026 --------- U.S. TREASURY STRIPS -- 5.4% 2,000 Interest only, 3.890%*** 05/15/11.......................................... 1,437 27,475 Principal only, 1.770%*** 11/15/04##(a)..................................... 26,466 3,000 TIGR Receipts, 4.050%*** 05/15/12(a)....................................... 2,040 --------- 29,943 --------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $251,755)............................................. 257,969 --------- SHARES (000) --------- INVESTMENT COMPANIES -- 49.5% (Cost $273,006) 273,006 Nations Cash Reserves, Capital Class Shares#.................. 273,006 ---------
VALUE (000) --------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $728,952*).................................. 135.2% $ 745,992 --------- OTHER ASSETS AND LIABILITIES (NET)................................. (35.2)% Receivable for Fund shares sold............................... $ 3,951 Dividends receivable.......................................... 100 Interest receivable........................................... 4,781 Receivable for variation margin............................... 542 Unrealized appreciation on swap contracts..................... 2,142 Collateral on securities loaned............................... (201,742) Payable for Fund shares redeemed.............................. (2,354) Investment advisory fee payable............................... (135) Administration fee payable.................................... (99) Shareholder servicing and distribution fees payable........... (41) Due to custodian.............................................. (4) Distributions payable......................................... (1,133) Accrued Trustees' fees and expenses........................... (75) Accrued expenses and other liabilities........................ (259) --------- TOTAL OTHER ASSETS AND LIABILITIES (NET)........................................... (194,326) --------- NET ASSETS.......................................... 100.0% $ 551,666 ========= NET ASSETS CONSIST OF: Accumulated net realized gain on investments sold, futures contracts and swaps......................................... $ 9,497 Net unrealized appreciation of investments, futures contracts and swaps................................................... 21,510 Paid-in capital............................................... 520,659 --------- NET ASSETS.................................................... $ 551,666 =========
SEE NOTES TO FINANCIAL STATEMENTS. 10 NATIONS FUNDS Nations Short-Intermediate Government Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
VALUE --------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($465,694,807 / 104,580,455 shares outstanding)............. $4.45 ========= PRIMARY B SHARES: Net asset value, offering and redemption price per share ($159,161 / 35,754 shares outstanding)...................... $4.45 ========= INVESTOR A SHARES: Net asset value and redemption price per share ($45,870,087 / 10,307,839 shares outstanding).............................. $4.45 ========= Maximum sales charge.......................................... 3.25% Maximum offering price per share.............................. $4.60 INVESTOR B SHARES: Net asset value and offering price per share+ ($30,619,123 / 6,875,842 shares outstanding)............................... $4.45 ========= INVESTOR C SHARES: Net asset value and offering price per share+ ($9,322,900 / 2,096,601 shares outstanding)............................... $4.45 =========
--------------- * Federal income tax information (see Note 12). ** Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at September 30, 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. & 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. A portion of this amount represents cash collateral received from securities lending activity (see Note 11). The portion that represents cash collateral is $201,742. ##All or a portion of security segregated as collateral for futures and swap contracts. (a)All or portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $180,062 and $196,398, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 11 NATIONS FUNDS Nations Government Securities Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 5.7% ASSET-BACKED -- AUTO LOANS -- 2.2% $ 2,700 Capital Auto Receivables Asset Trust, Series 2001-2, Class A4, 5.000% 12/15/06##........................................... $ 2,833 550 Dealer Auto Receivables Trust, Series 2000-1, Class A3, 7.070% 05/17/04............................................. 555 745 MMCA Automobile Trust, Series 2000-1, Class A3, 7.000% 06/15/04##........................................... 752 2,000 Onyx Acceptance Auto Trust, Series 2002-A, Class A3, 3.750% 04/15/06##........................................... 2,049 -------- 6,189 -------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 0.2% 700 Chase Credit Card Master Trust, Series 1996-4, Class B, 2.170%** 07/15/06##......................................... 701 -------- ASSET-BACKED -- HOME EQUITY LOANS -- 2.8% 175 Chase Funding Mortgage Loan Asset-Backed, Series 2001-2, Class 1A1, 1.924%** 04/25/16........................................... 175 1,892 First Alliance Mortgage Loan Trust, Series 1996-2, Class A3, 8.225% 09/20/27............................................. 1,892 1,273 GMAC Mortgage Corporation Loan Trust, Series 2002-HE2, Class A1, 1.944%** 06/25/27##......................................... 1,272 765 Indymac Home Equity Loan Asset-Backed Trust, Series 2002-A, Class AF1, 2.014%** 05/25/17##......................................... 764 1,128 Oakwood Mortgage Investors Inc., Series 2002-B, Class A1, 2.050%** 05/15/13##......................................... 1,126 1,019 Residential Asset Mortgage Products, Inc., Series 2002-RS1, Class AI1, 2.014%** 08/25/20##......................................... 1,019 1,719 Residential Asset Securities Corporation, Series 2002-KS2, Class AI1, 1.954%** 11/25/17##......................................... 1,718 -------- 7,966 -------- ASSET-BACKED -- OTHER -- 0.5% 976 Export Funding Trust, Series 1995-A, Class A, 8.210% 12/29/06##........................................... 1,093
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ASSET-BACKED -- OTHER -- (CONTINUED) $ 271 Ikon Receivables LLC, Series 1999-1, Class A3, 5.990% 05/15/05##........................................... $ 271 -------- 1,364 -------- TOTAL ASSET-BACKED SECURITIES (Cost $16,030).............................................. 16,220 -------- MORTGAGE-BACKED SECURITIES -- 22.7% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.0% 11,447 Merrill Lynch Mortgage Investors, Inc., Series 1998-C3, Class IO, 1.103%** 12/15/30........................................... 495 3,646 PNC Mortgage Acceptance Corporation, Series 2001-C1, Class A1, 5.910% 03/12/34##........................................... 3,940 676 Salomon Brothers Mortgage Securities VII, Series 2002-CDCA, Class A1, 2.103%** 11/15/13@.......................................... 676 30,805 Vendee Mortgage Trust, Series 1998-1, Class 2, Interest only, 0.450%** 09/15/27##......................................... 335 30,561 Vendee Mortgage Trust, Series 1998-3, Class 1, Interest only, 0.310%** 03/15/29##......................................... 245 -------- 5,691 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 9.1% 13,800 3.750% 04/15/04##........................................... 14,185 203 10.000% 05/01/05............................................ 216 60 8.500% 01/01/06##........................................... 63 93 8.000% 08/01/07............................................. 98 137 8.500% 02/01/08-06/01/17.................................... 147 18 7.500% 08/01/08............................................. 19 185 9.000% 05/01/09-12/01/16.................................... 200 8,000 6.625% 09/15/09............................................. 9,365 57 8.000% 09/01/09##........................................... 60 25 8.000% 05/01/17##........................................... 27 13 9.500% 04/01/18##........................................... 14 21 10.000% 09/01/18##.......................................... 24 505 9.500% 01/01/19-01/01/29.................................... 556 11 9.500% 06/01/20##........................................... 13 645 8.500% 09/01/20##........................................... 697 47 9.500% 06/01/21##........................................... 52 -------- 25,736 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 8.1% 59 7.000% 07/01/03##........................................... 60 355 10.000% 10/01/06##.......................................... 364 11,815 5.000% 01/15/07##(a)........................................ 12,746 29 8.250% 04/01/09##........................................... 31 60 7.500% 06/01/09............................................. 63 39 8.000% 06/01/09............................................. 42 120 8.500% 12/01/11-02/01/17##.................................. 128 5,087 6.565% 07/01/16............................................. 5,883
SEE NOTES TO FINANCIAL STATEMENTS. 12 NATIONS FUNDS Nations Government Securities Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- (CONTINUED) $ 40 9.000% 12/01/16##........................................... $ 42 286 10.000% 04/01/20............................................ 326 486 9.500% 04/01/20............................................. 539 6 8.500% 07/01/21............................................. 6 1,520 9.500% 07/15/21#............................................ 1,710 550 9.500% 08/01/21............................................. 612 330 9.000% 09/01/24............................................. 365 91 4.454%** 08/01/36........................................... 93 -------- 23,010 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 3.5% 170 10.500% 03/15/03-04/15/21##................................. 198 7 9.500% 10/15/03-01/15/04.................................... 7 135 10.000% 11/15/03-03/15/21##................................. 151 50 9.5000% 03/15/04-04/20/06##................................. 52 3 9.500% 05/15/04............................................. 3 5 9.500% 06/15/05............................................. 5 6 9.500% 02/15/06............................................. 7 14 9.000% 06/15/07##........................................... 15 1,698 7.500% 09/15/07-12/15/25##.................................. 1,812 131 7.000% 02/15/09-06/15/23##.................................. 138 1,006 8.500% 10/15/09-02/20/29##.................................. 1,101 214 6.000% 12/15/10##........................................... 227 24 13.000% 01/15/11-04/15/11##................................. 28 1,917 8.000% 11/15/14-07/15/29##.................................. 2,075 42 11.000% 11/15/15-10/20/20##................................. 49 3,719 6.500% 04/15/29-01/15/31##.................................. 3,882 -------- 9,750 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $60,637).............................................. 64,187 -------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 13.3% FEDERAL HOME LOAN BANK (FHLB) -- 0.6% 1,500 5.750% 05/15/12##........................................... 1,666 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 3.1% 390 6.775% 11/01/03##........................................... 402 7,450 5.750% 01/15/12##........................................... 8,271 -------- 8,673 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 9.6% 17,600 7.000% 07/15/05##........................................... 19,748 6,300 6.625% 11/15/30##........................................... 7,399 -------- 27,147 -------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $34,795).............................................. 37,486 --------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 30.1% U.S. TREASURY NOTES -- 23.1% $15,000 6.250% 02/15/03##........................................... $ 15,262 6,900 3.875% 07/31/03(a).......................................... 7,039 17,600 5.750% 08/15/03##........................................... 18,255 16,000 2.750% 09/30/03##........................................... 16,206 6,000 5.875% 11/15/04(a).......................................... 6,515 1,600 5.750% 08/15/10(a).......................................... 1,860 -------- 65,137 -------- U.S. TREASURY STRIPS -- 7.0% 1,000 Interest only, 3.890%*** 05/15/11.......................................... 719 14,575 Principal only, 2.050%*** 08/15/05##........................................ 13,745 2,100 Principal only, 5.200%*** 11/15/21(a)....................................... 787 16,565 Principal only, 5.170%*** 11/15/27(a)....................................... 4,595 -------- 19,846 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $83,462).............................................. 84,983 -------- SHORT TERM INVESTMENTS -- 14.1 FEDERAL HOME LOAN BANK (FHLB) -- 7.1% 10,000 Discount note 10/09/02...................................... 9,996 10,000 Discount note 10/25/02...................................... 9,989 -------- 19,985 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 3.5% 10,000 Discount note 10/22/02(a)................................... 9,989 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 3.5% 10,000 Discount note 10/28/02...................................... 9,987 -------- TOTAL SHORT TERM INVESTMENTS (Cost $39,963).............................................. 39,961 --------
SEE NOTES TO FINANCIAL STATEMENTS. 13 NATIONS FUNDS Nations Government Securities Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
SHARES VALUE (000) (000) -------------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 25.0% (Cost $70,540) 70,540 Nations Cash Reserves, Capital Class Shares#.................. $ 70,540 -------- TOTAL INVESTMENTS (Cost $305,427*).................................. 110.9% 313,377 -------- OTHER ASSETS AND LIABILITIES (NET).................. (10.9)% Receivable for investment securities sold..................... $ 6,866 Receivable for Fund shares sold............................... 230 Dividends receivable.......................................... 73 Interest receivable........................................... 2,042 Receivable for variation margin............................... 474 Unrealized appreciation on swap contracts..................... 1,227 Collateral on securities loaned............................... (40,393) Payable for Fund shares redeemed.............................. (544) Investment advisory fee payable............................... (92) Administration fee payable.................................... (39) Shareholder servicing and distribution fees payable........... (64) Due to custodian.............................................. (2) Distributions payable......................................... (442) Accrued Trustees' fees and expenses........................... (74) Accrued expenses and other liabilities........................ (155) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)...................... (30,893) -------- NET ASSETS.......................................... 100.0% $282,484 ======== NET ASSETS CONSIST OF: Distributions in excess of net investment income.............. $ (394) Accumulated net realized loss on investments sold, futures contracts and swaps......................................... (7,417) Net unrealized appreciation of investments, futures contracts and swaps................................................... 11,427 Paid-in capital............................................... 278,868 -------- NET ASSETS.................................................... $282,484 ========
VALUE -------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($159,946,260 / 14,936,251 shares outstanding).............. $10.71 ======== INVESTOR A SHARES: Net asset value and redemption price per share ($57,450,509 / 5,372,492 shares outstanding)................ $10.69 ======== Maximum sales charge.......................................... 4.75% Maximum offering price per share.............................. $11.22 INVESTOR B SHARES: Net asset value and offering price per share& ($62,036,581 / 5,792,812 shares outstanding)................ $10.71 ======== INVESTOR C SHARES: Net asset value and offering price per share& ($3,050,362 / 285,685 shares outstanding)................... $10.68 ========
--------------- * Federal income tax information (see Note 12). ** Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. *** Zero coupon security. The rate shown reflects the yield to maturity at September 30, 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. & 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. A portion of this amount represents cash collateral received from securities lending activity (see Note 11). The portion that represents cash collateral is $40,393. ## All or a portion of security segregated as collateral for futures and swap contracts. (a) All or a portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $23,103 and $34,199, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 14 NATIONS FUNDS Nations Intermediate Bond Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
VALUE (000) --------------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 116.6% Investment in Nations Master Investment Trust, Intermediate Bond Master Portfolio*...................................... $ 863,715 --------- TOTAL INVESTMENTS................................... 116.6% 863,715 --------- OTHER ASSETS AND LIABILITIES (NET).................. (16.6)% Receivable for Fund shares sold............................... $ 4,439 Payable for Fund shares redeemed.............................. (127,372) Administration fee payable.................................... (120) Shareholder servicing and distribution fees payable........... (21) Accrued Trustees' fees and expenses........................... (53) Accrued expenses and other liabilities........................ (55) --------- TOTAL OTHER ASSETS AND LIABILITIES (NET)...................... (123,182) --------- NET ASSETS.......................................... 100.0% $ 740,533 ========= NET ASSETS CONSIST OF: Undistributed net investment income........................... $ 478 Accumulated net realized gain on investments sold............. 5,795 Net unrealized appreciation of investments.................... 21,744 Paid-in capital............................................... 712,516 --------- NET ASSETS.................................................... $ 740,533 ========= VALUE --------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($678,552,654 / 68,119,249 shares outstanding).............. $9.96 ========= INVESTOR A SHARES: Net asset value and redemption price per share ($46,233,814 / 4,625,933 shares outstanding)................ $9.99 ========= Maximum sales charge.......................................... 3.25% Maximum offering price per share.............................. $10.33 INVESTOR B SHARES: Net asset value and offering price per share& ($11,282,451 / 1,134,283 shares outstanding)................ $9.95 ========= INVESTOR C SHARES: Net asset value and offering price per share& ($4,464,195 / 404,644 shares outstanding)................... $11.03 =========
--------------- *The financial statements of the Intermediate Bond Master Portfolio, including its portfolio of investments, are included elsewhere within this report and should be read in conjunction with the Intermediate Bond 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. 15 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 8.5% ASSET-BACKED -- AUTO LOANS -- 1.5% $ 2,505 Americredit Automobile Receivables Trust, Series 2001-B, Class A4, 5.370% 06/12/08##........................................... $ 2,647 4,725 Capital Auto Receivables Asset Trust, Series 2002-2, Class CTFS, 4.180% 10/15/07##........................................... 4,856 3,643 Daimler Chrysler Auto Trust, Series 2000-B, Class A3, 7.530% 05/08/04##........................................... 3,676 14,547 Distribution Financial Services RV Trust, Series 1999-1, Class A4, 5.840% 10/17/11##....................................... 14,872 3,350 First Security Auto Owner Trust, Series 2000-1, Class B, 7.700% 12/17/07##................... 3,567 6,610 Ford Credit Auto Owner Trust, Series 2002-B, Class B, 5.180% 10/16/06##................... 7,019 1,491 MMCA Automobile Trust, Series 2000-1, Class A3, 7.000% 06/15/04##.................. 1,505 700 MMCA Automobile Trust, Series 2001-1, Class A4, 5.340% 12/15/05##........................................... 734 877 MMCA Automobile Trust, Series 2001-2, Class B, 5.750% 06/15/07##........................................... 912 ----------- 39,788 ----------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 2.2% 12,000 American Express Credit Account Master Trust, Series 1998-1, Class B, 2.070%** 01/17/06##......................................... 12,001 5,750 Chase Credit Card Master Trust, Series 1996-4, Class B, 2.170%** 07/15/06##......................................... 5,755 4,000 Chase Credit Card Master Trust, Series 2000-2, Class B, 2.110%** 07/15/05##......................................... 4,000 2,165 Chase Credit Card Master Trust, Series 2002-2, Class C, 2.500%** 07/15/05##......................................... 2,164 8,474 Discover Card Master Trust I, Series 1998-3, Class B, 2.110%** 09/16/05##......................................... 8,474 2,500 Discover Card Master Trust I, Series 2001-4, Class A, 1.910%** 10/16/06##......................................... 2,501 1,500 MBNA Master Credit Card Trust, Series 1999-K, Class C, 2.770%** 03/15/05##......................................... 1,500
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- (CONTINUED) $ 4,000 Standard Credit Card Master Trust, Series B, 6.150% 10/07/04##........................................... $ 4,144 19,675 World Financial Network Credit Card Master Trust, Series 1996-B, Class A, 6.950% 04/15/06##........................................... 20,318 ----------- 60,857 ----------- ASSET-BACKED -- HOME EQUITY LOANS -- 4.2% 2,222 Block Mortgage Finance Inc., Series 1997-2, Class A6, 2.024%** 05/25/27##......................................... 2,217 684 Bombardier Capital Mortgage Securitization, Series 1998-A, Class A3, 6.230% 04/15/28##........................................... 683 2,052 Conseco Finance, Series 2001-D, Class A1A, 2.070%** 11/15/32##......................................... 2,053 1,530 Contimortgage Home Equity Loan Trust, Series 1996-4, Class A9, 6.880% 01/15/28##........................................... 1,558 96 EQCC Home Equity Loan Trust, Series 1999-3, A2F, 6.887% 07/25/13##........................................... 96 17,700 Fannie Mae Whole Loan, Series 2001-W1, Class AF3, 5.690% 06/25/29##........................................... 18,112 5,908 First Alliance Mortgage Loan Trust, Series 1994-2, Class A1, 7.625% 07/25/25##........................................... 6,143 1,906 First Plus Home Loan Trust, Series 1998-2, Class M1, 7.220% 05/10/24##........................................... 2,065 10,692 GMAC Mortgage Corporation Loan Trust, Series 2002-HE2, Class A1, 1.944%** 06/25/27##......................................... 10,688 2,580 Green Tree Home Equity Loan Trust, Series 1999-D, Class A3, 7.300% 08/15/18##........................................... 2,610 6,360 Indymac Home Equity Loan Asset-Backed Trust, Series 2002-A, Class AF1, 2.014%** 05/25/17##......................................... 6,353 9,906 Oakwood Mortgage Investors Inc., Series 2002-B, Class A1, 2.050%** 05/15/13##......................................... 9,896 2,803 Residential Asset Mortgage Products, Inc., Series 2002-RS1, Class AI1, 2.014%** 08/25/20##......................................... 2,803 2,339 Residential Asset Securities Corporation, Series 1999-KS1, Class AI4, 6.280% 08/25/25##........................................... 2,360
SEE NOTES TO FINANCIAL STATEMENTS. 16 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- ASSET-BACKED -- HOME EQUITY LOANS -- (CONTINUED) $ 14,441 Residential Asset Securities Corporation, Series 2002-KS2, Class AI1, 1.954%** 11/25/17##......................................... $ 14,430 28,984 Residential Asset Securities Corporation, Series 2002-KS4, Class AI1 1.934%** 04/25/17##......................................... 28,948 1,361 Residential Funding Mortgage Securities II, Series 2001-HS3, Class AI1, 1.994%** 08/25/12##......................................... 1,361 781 Residential Funding Mortgage Securities, Series 1999-HS2, Class AI4, 6.340% 07/25/29##........................................... 781 2,145 Saxon Asset Securities Trust, Series 1998-1, Class MF1, 7.050% 12/25/27##........................................... 2,271 ----------- 115,428 ----------- ASSET-BACKED -- OTHER -- 0.6% 14,880 CIT Equipment Collateral, Series 2002-VT1, Class A4, 4.670% 12/21/09##........................................... 15,420 2,277 Ikon Receivables LLC, Series 1999-1, Class A3, 5.990% 05/15/05##........................................... 2,277 ----------- 17,697 ----------- TOTAL ASSET-BACKED SECURITIES (Cost $231,277)............................................. 233,770 ----------- CORPORATE BONDS AND NOTES -- 31.4% AEROSPACE AND DEFENSE -- 0.4% 9,421 Boeing Capital Corporation, 5.650% 05/15/06##........................................... 9,922 1,171 Northrop Grumman Corporation, 7.125% 02/15/11##........................................... 1,340 ----------- 11,262 ----------- AIRLINES -- 0.6% 6,435 American Airlines, Series 2001-2, Class A-2, 7.858% 10/01/11(a)##........................................ 6,791 10,100 U.S. Airways, Inc., Series 2002-G, 8.020% 02/05/19##........................................... 10,545 ----------- 17,336 ----------- AUTOMOTIVE -- 3.0% 4,898 Delphi Automotive Systems Corporation, 6.125% 05/01/04##........................................... 5,096 21,866 Ford Motor Company, 7.450% 07/16/31##........................................... 17,711
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- AUTOMOTIVE -- (CONTINUED) $ 4,766 Ford Motor Credit Company, 5.800% 01/12/09##........................................... $ 4,262 13,079 Ford Motor Credit Company, 7.375% 10/28/09##........................................... 12,530 1,588 Ford Motor Credit Company, 7.375% 02/01/11##........................................... 1,497 5,555 General Motors Acceptance Corporation, 6.125% 09/15/06(a)##........................................ 5,563 6,177 General Motors Acceptance Corporation, 6.150% 04/05/07##........................................... 6,251 7,234 General Motors Acceptance Corporation, 6.875% 09/15/11##........................................... 7,077 10,359 General Motors Acceptance Corporation, 8.000% 11/01/31##........................................... 10,041 1,060 Rent-a-Center Inc., Series D, 11.000% 08/15/08##.......................................... 1,126 6,966 Toyota Motor Credit Corporation, 5.625% 11/13/03##........................................... 7,231 ----------- 78,385 ----------- BROADCASTING AND CABLE -- 1.2% 934 ABC Family Worldwide Inc., 10.250% 11/01/07............................................ 971 5,889 AOL Time Warner Inc., 6.150% 05/01/07(a)##........................................ 5,438 10,567 AOL Time Warner Inc., 7.625% 04/15/31##........................................... 8,769 3,908 Comcast Cable Communications, 7.125% 06/15/13............................................. 3,636 2,910 Insight Communications Company, (0.000)% due 02/15/11 12.250% beginning 02/15/06##................................ 1,033 166 News America Inc., 6.625% 01/09/08............................................. 173 4,525 Time Warner Inc., 8.110% 08/15/06(a)##........................................ 4,402 4,200 Viacom Inc., Class B, 6.625% 05/15/11##........................................... 4,660 3,702 Viacom Inc., Class B, 7.875% 07/30/30##........................................... 4,455 ----------- 33,537 ----------- BUILDING MATERIALS -- 0.1% 2,278 American Standard Inc., 7.125% 02/15/03##........................................... 2,289 1,000 American Standard Inc., 7.375% 04/15/05##........................................... 1,020 537 Nortek, Inc., Series B, 9.875% 06/15/11##........................................... 521 ----------- 3,830 -----------
SEE NOTES TO FINANCIAL STATEMENTS. 17 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- CHEMICALS -- BASIC -- 0.4% $ 2,438 Lyondell Chemical Company, Series B, 9.875% 05/01/07##........................................... $ 2,255 4,144 The Dow Chemical Company, 6.125% 02/01/11(a)##........................................ 4,384 3,481 The Dow Chemical Company, 7.375% 11/01/29##........................................... 3,796 ----------- 10,435 ----------- CHEMICALS -- SPECIALTY -- 1.1% 7,280 IMC Global Inc., 6.500% 08/01/03##........................................... 7,264 890 IMC Global Inc., Series B, 10.875% 06/01/08............................................ 967 2,372 Methanex Corporation, 8.750% 08/15/12............................................. 2,455 1,989 Praxair, Inc., 4.750% 07/15/07##........................................... 2,110 3,569 Praxair, Inc., 6.500% 03/01/08##........................................... 4,024 8,683 Solutia Inc., 6.500% 10/15/02##........................................... 8,662 2,898 Solutia Inc., 11.250% 07/15/09@........................................... 2,666 2,348 Solutia Inc., 6.720% 10/15/37(a).......................................... 1,902 ----------- 30,050 ----------- COMMERCIAL BANKING -- 4.4% 14,291 Bank One Corporation, 6.000% 08/01/08##........................................... 15,869 46 BB&T Corporation, 7.050% 05/23/03............................................. 47 11,133 Citigroup Inc., 7.250% 10/01/10##........................................... 12,691 1,349 Citigroup Inc., 6.000% 02/21/12(a)##........................................ 1,460 6,555 FleetBoston Financial Corporation, 7.250% 09/15/05##........................................... 7,242 4,694 Golden West Financial Corporation, 4.750% 10/01/12##........................................... 4,720 519 J.P. Morgan Chase & Company, 7.250% 06/01/07............................................. 586 7,894 J.P. Morgan Chase & Company, 5.250% 05/30/07##........................................... 8,282 2,861 Mellon Funding Corporation, 4.875% 06/15/07##........................................... 3,053 2,167 Mellon Funding Corporation, 6.700% 03/01/08............................................. 2,452 2,931 PNC Funding Corporation, 7.000% 09/01/04##........................................... 3,135 5,639 PNC Funding Corporation, 5.750% 08/01/06##........................................... 5,977 6,188 Popular North America Inc., Series E, 6.125% 10/15/06##........................................... 6,680 193 Regions Financial Corporation, 6.375% 05/15/12............................................. 217
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- COMMERCIAL BANKING -- (CONTINUED) $ 2,705 Regions Financial Corporation, 7.750% 09/15/24##........................................... $ 3,232 1,398 State Street Corporation, 7.650% 06/15/10(a).......................................... 1,671 241 SunTrust Banks, Inc., 5.050% 07/01/07............................................. 258 8,066 US Bank N.A., Minnesota, 6.375% 08/01/11##........................................... 9,090 11,033 Wachovia Corporation, 4.950% 11/01/06##........................................... 11,774 921 Washington Mutual, Inc., 7.500% 08/15/06##........................................... 1,042 6,381 Washington Mutual, Inc., 5.625% 01/15/07##........................................... 6,840 2,738 Washington Mutual, Series 2000-1, Class A1, 2.104%** 06/25/24##......................................... 2,737 498 Wells Fargo and Company, 5.900% 05/21/06............................................. 544 7,169 Wells Fargo Financial, Inc., 4.875% 06/12/07##........................................... 7,589 ----------- 117,188 ----------- COMMERCIAL SERVICES -- 0.2% 3,433 Allied Waste North America, Inc., Series B, 10.000% 08/01/09##.......................................... 3,193 3,042 Coinmach Corporation, 9.000% 02/01/10##........................................... 3,141 ----------- 6,334 ----------- COMPUTER SERVICES -- 0.0%+ 750 Seagate Tech HDD Holding, 8.000% 05/15/09@##.......................................... 698 ----------- COMPUTERS AND OFFICE EQUIPMENT -- 0.2% 2,037 International Business Machines Corporation, 6.500% 01/15/28##........................................... 2,129 3,962 Pitney Bowes Inc., 4.625% 10/01/12##........................................... 3,960 ----------- 6,089 ----------- CONGLOMERATES -- 0.2% 5,006 Waste Management, Inc., 7.375% 08/01/10##........................................... 5,254 ----------- CONSUMER CREDIT AND MORTGAGES -- 0.5% 12,746 Countrywide Home Loans, Inc., Series J, 5.500% 08/01/06##........................................... 13,389 ----------- DEPARTMENT AND DISCOUNT STORES -- 0.6% 5,441 Sears Roebuck Acceptance Corporation, 6.750% 08/15/11##........................................... 5,806 131 Target Corporation, 5.375% 06/15/09............................................. 142
SEE NOTES TO FINANCIAL STATEMENTS. 18 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- DEPARTMENT AND DISCOUNT STORES -- (CONTINUED) $ 3,112 Target Corporation, 5.875% 03/01/12##........................................... $ 3,452 7,354 Wal-Mart Stores, Inc., 5.450% 08/01/06##........................................... 8,067 80 Wal-Mart Stores, Inc., 4.375% 07/12/07............................................. 84 ----------- 17,551 ----------- DIVERSIFIED ELECTRONICS -- 0.1% 2,390 L-3 Communications Corporation, 7.625% 06/15/12@##.......................................... 2,474 ----------- DIVERSIFIED MANUFACTURING -- 0.2% 831 The Scotts Company, 8.625% 01/15/09@##.......................................... 864 3,670 The Scotts Company, Class A, 8.625% 01/15/09##........................................... 3,835 ----------- 4,699 ----------- ELECTRIC POWER -- NON NUCLEAR -- 0.8% 1,113 Calpine Corporation, 8.500% 02/15/11(a)##........................................ 456 5,261 Cinergy Corporation, 6.250% 09/01/04##........................................... 5,434 4,376 DPL Inc., 6.875% 09/01/11@##.......................................... 4,101 4,957 Oncor Electric Delivery, 7.000% 09/01/22@##.......................................... 5,031 1,439 Pepco Holdings Inc., 5.500% 08/15/07@............................................ 1,477 4,210 Pepco Holdings Inc., 6.450% 08/15/12@##.......................................... 4,363 ----------- 20,862 ----------- ELECTRIC POWER -- NUCLEAR -- 1.7% 4,156 American Electric Power Company, Inc., Series A, 6.125% 05/15/06##........................................... 4,128 249 Constellation Energy Group, Inc., 6.350% 04/01/07............................................. 258 5,780 Constellation Energy Group, Inc., 7.600% 04/01/32##........................................... 5,770 196 Consumers Energy Company, Series B, 6.200% 05/01/03............................................. 192 1,434 Duquesne Light Company, Series O, 6.700% 04/15/12##........................................... 1,605 365 Energy East Corporation, 6.750% 06/15/12##........................................... 406 10,625 Exelon Generation Company LLC, 6.950% 06/15/11............................................. 11,710 4,903 FirstEnergy Corporation, Series B, 6.450% 11/15/11##........................................... 4,611 86 PPL Electric Utilities, 6.250% 08/15/09............................................. 94
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- ELECTRIC POWER -- NUCLEAR -- (CONTINUED) $ 7,049 PSEG Power LLC, 6.875% 04/15/06##........................................... $ 7,092 4,322 Southern Company Capital Funding, Series A, 5.300% 02/01/07##........................................... 4,582 2,327 Southern Power Company, 6.250% 07/15/12@##.......................................... 2,549 3,516 Virginia Electric and Power Company, Series A, 5.375% 02/01/07##........................................... 3,777 ----------- 46,774 ----------- EXPLORATION AND PRODUCTION -- 0.4% 3,408 Anadarko Finance Company, Series B, 6.750% 05/01/11##........................................... 3,864 6,179 Anadarko Finance Company, Series B, 7.500% 05/01/31##........................................... 7,290 70 Union Pacific Resources Group Inc., 6.500% 05/15/05............................................. 76 ----------- 11,230 ----------- FINANCE -- MISCELLANEOUS -- 2.0% 5,308 Associates Corporation of North America, 6.950% 11/01/18##........................................... 5,815 5,290 Case Credit Corporation, 6.125% 02/15/03##........................................... 5,216 13,900 Caterpillar Finance Services Corporation, 5.950% 05/01/06##........................................... 15,251 505 Dana Credit Corporation, 7.250% 12/16/02@............................................ 501 955 General Electric Capital Corporation, Series A, 5.375% 03/15/07............................................. 1,024 585 General Electric Capital Corporation, Series A, 4.625% 09/15/09............................................. 589 15,284 General Electric Capital Corporation, Series A, 6.750% 03/15/32##........................................... 16,393 8,996 Household Finance Corporation, 5.875% 02/01/09##........................................... 8,449 1,815 PCA LLC / PCA Finance Corporation, 11.875% 08/01/09@##......................................... 1,851 ----------- 55,089 ----------- FOOD AND DRUG STORES -- 0.3% 6,548 Fred Meyer, Inc., 7.450% 03/01/08##........................................... 7,528 ----------- FOOD PRODUCTS -- 1.6% 4,090 Burns Phillips Capital Property, Ltd., 9.750% 07/15/12@##.......................................... 4,059
SEE NOTES TO FINANCIAL STATEMENTS. 19 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- FOOD PRODUCTS -- (CONTINUED) $ 1,071 Del Monte Corporation, Series B, 9.250% 05/15/11##........................................... $ 1,071 7,783 Kellogg Company, Series B, 6.000% 04/01/06##........................................... 8,477 2,568 Kraft Foods Inc., 5.250% 06/01/07(a)##........................................ 2,779 1,149 Nabisco Inc., 6.125%** 02/01/33##......................................... 1,163 9,156 Sara Lee Corporation, 6.250% 09/15/11##........................................... 10,328 2,556 Tyson Foods Inc., Class A, 7.250% 10/01/06##........................................... 2,837 4,443 Unilever Capital Corporation, 6.875% 11/01/05##........................................... 4,981 7,534 Unilever Capital Corporation, 7.125% 11/01/10##........................................... 8,969 ----------- 44,664 ----------- HEALTH SERVICES -- 0.5% 4,112 Cardinal Health, Inc., 6.750% 02/15/11##........................................... 4,702 161 Cintas Corporation, 5.125% 06/01/07@............................................ 173 950 PacifiCare Health Systems, Inc., Class A, 10.750% 06/01/09............................................ 938 6,769 Wellpoint Health Networks Inc., 6.375% 06/15/06##........................................... 7,389 1,005 Wellpoint Health Networks Inc., 6.375% 01/15/12##........................................... 1,108 ----------- 14,310 ----------- HOUSEHOLD PRODUCTS -- 0.1% 2,292 Proctor & Gamble Company, 4.750% 06/15/07(a)##........................................ 2,461 ----------- HOUSING AND FURNISHING -- 0.2% 1,711 Beazer Homes USA, Inc., 8.625% 05/15/11............................................. 1,720 700 Beazer Homes USA, Inc., 8.375% 04/15/12##........................................... 700 2,262 The Ryland Group, Inc., 8.000% 08/15/06##........................................... 2,262 ----------- 4,682 ----------- INSURANCE -- 0.7% 162 Allstate Financial Global Funding, 7.125% 09/26/05@............................................ 181 105 American International Group, Inc., 5.850% 08/01/08@............................................ 116 6,261 Principal Life Global, 6.250% 02/15/12@##.......................................... 6,739 11,657 Prudential Funding LLC, 6.600% 05/15/08@##.......................................... 12,797 ----------- 19,833 -----------
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- INTEGRATED OIL -- 1.0% $ 202 Amerada Hess Corporation, 6.650% 08/15/11............................................. $ 227 3,201 Amerada Hess Corporation, 7.875% 10/01/29##........................................... 3,844 5,760 Conoco Funding Company, 6.350% 10/15/11##........................................... 6,472 10,000 Conoco Inc., 2.630%** 10/15/02##......................................... 10,003 473 PEMEX Master Trust, 7.875% 02/01/09@............................................ 475 7,413 PEMEX Master Trust, 8.625% 02/01/22@#........................................... 7,098 ----------- 28,119 ----------- INVESTMENT SERVICES -- 2.0% 6,076 Bear Stearns Companies, Inc., 7.800% 08/15/07##........................................... 7,080 4,609 Credit Suisse First Boston USA, Inc., 5.875% 08/01/06##........................................... 4,908 7,162 Credit Suisse First Boston USA, Inc., 6.125% 11/15/11##........................................... 7,460 4,434 Goldman Sachs Group Inc., 6.875% 01/15/11##........................................... 4,923 1,362 Goldman Sachs Group, Inc., 5.700% 09/01/12............................................. 1,407 4,530 Lehman Brothers Holdings Inc., 7.000% 02/01/08##........................................... 5,047 5,640 Merrill Lynch & Company, Inc., 6.000% 02/17/09(a)##........................................ 5,989 5,826 Morgan Stanley Dean Witter & Company, 6.100% 04/15/06##........................................... 6,270 10,461 Morgan Stanley Dean Witter & Company, 6.750% 04/15/11##........................................... 11,467 376 Salomon Smith Barney Holdings Inc., 6.500% 02/15/08............................................. 419 ----------- 54,970 ----------- LODGING AND RECREATION -- 0.0%+ 809 John Q. Hammons Hotels, Series B, 8.875% 05/15/12(a).......................................... 779 ----------- MEDICAL DEVICES AND SUPPLIES -- 0.0%+ 1,059 Advanced Medical Optics, Inc., 9.250% 07/15/10............................................. 1,038 17 Bristol-Myers Squibb Company, 4.750% 10/01/06##........................................... 18 ----------- 1,056 -----------
SEE NOTES TO FINANCIAL STATEMENTS. 20 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- METALS AND MINING -- 0.4% $ 4,846 Alcoa Inc., 7.375% 08/01/10##........................................... $ 5,768 2,575 Compass Minerals Group, Inc., 10.000% 08/15/11##.......................................... 2,730 1,365 Earle M. Jorgensen Company, 9.750% 06/01/12............................................. 1,331 ----------- 9,829 ----------- NATURAL GAS PIPELINES -- 0.4% 199 EL Paso Corporation, 7.000% 05/15/11............................................. 131 3,952 EL Paso Corporation, 7.800% 08/01/31##........................................... 2,490 8,333 Kinder Morgan, Inc., 6.650% 03/01/05##........................................... 8,840 ----------- 11,461 ----------- OIL REFINING AND MARKETING -- 0.3% 7,682 USX Corporation, 6.650% 02/01/06##........................................... 8,382 ----------- PACKAGING AND CONTAINERS -- 0.3% 2,218 Owens-Brockway Glass Containers, 8.875% 02/15/09##........................................... 2,229 2,187 Riverwood International Corporation, 10.625% 08/01/07##.......................................... 2,247 3,376 Riverwood International Corporation, 10.875% 04/01/08(a)......................................... 3,410 ----------- 7,886 ----------- PAPER AND FOREST PRODUCTS -- 0.7% 3,577 Ainsworth Lumber Company Ltd., 12.500% 07/15/07##.......................................... 3,675 1,895 Appleton Papers Inc., Series B, 12.500% 12/15/08##.......................................... 1,952 1,367 FiberMark, Inc., 10.750% 04/15/11(a)##....................................... 1,319 3,637 International Paper Company, 8.000% 07/08/03##........................................... 3,778 1,469 Louisiana-Pacific Corporation, 8.500% 08/15/05##........................................... 1,476 4,789 Louisiana-Pacific Corporation, 10.875% 11/15/08@##......................................... 4,981 1,270 Tembec Industries Inc., 8.500% 02/01/11##........................................... 1,276 ----------- 18,457 ----------- PHARMACEUTICALS -- 0.5% 307 Eli Lilly and Company, 6.000% 03/15/12............................................. 343 1,040 Pharmacia Corporation, 6.600% 12/01/28............................................. 1,179 10,876 Wyeth, 6.250% 03/15/06##........................................... 11,638 ----------- 13,160 -----------
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- PUBLISHING AND ADVERTISING -- 0.3% $ 3,195 Gannett Company, Inc., 6.375% 04/01/12##........................................... $ 3,657 5,133 News America Holdings, 8.150% 10/17/36##........................................... 5,063 ----------- 8,720 ----------- RAILROADS, TRUCKING AND SHIPPING -- 0.7% 5,340 Burlington Northern Santa Fe Corporation, 6.750% 07/15/11(a)##........................................ 6,076 13,181 FedEx Corporation, 6.625% 02/12/04##........................................... 13,809 ----------- 19,885 ----------- REAL ESTATE -- 0.4% 600 Corrections Corporation of America, 9.875% 05/01/09@##.......................................... 620 5,605 EOP Operating LP, 7.000% 07/15/11##........................................... 6,180 2,061 Standard Pacific Corporation, 9.250% 04/15/12##........................................... 1,948 3,628 Tech Olypmic USA, Inc. 10.375% 07/01/12@##......................................... 3,320 ----------- 12,068 ----------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.2% 2,464 Health Care Property Investors, Inc., 7.480% 04/05/04##........................................... 2,640 2,311 Health Care Property Investors, Inc., 6.450% 06/25/12##........................................... 2,437 ----------- 5,077 ----------- SOFTWARE -- 0.0%+ 600 Veritas DGC Inc., 9.750% 10/15/03............................................. 594 ----------- TELECOMMUNICATIONS SERVICES -- 2.2% 38 BellSouth Corporation, 5.000% 10/15/06............................................. 40 5,592 BellSouth Telecommunications Inc., 6.375% 06/01/28##........................................... 5,569 244 Cingular Wireless, 6.500% 12/15/11............................................. 235 3,246 Cingular Wireless, 7.125% 12/15/31##........................................... 2,840 7,622 Cox Communications, Inc., Class A, 7.750% 11/01/10(a)##........................................ 7,895 2,801 GTE North, Inc., Series H 5.650% 11/15/08##........................................... 2,851 3,422 Nextel Communications, Inc., Class A, 9.375% 11/15/09##........................................... 2,609 9,011 SBC Communications Inc., 6.250% 03/15/11##........................................... 9,777 1,009 Sprint Capital Corporation, 6.125% 11/15/08##........................................... 671
SEE NOTES TO FINANCIAL STATEMENTS. 21 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- (CONTINUED) $ 2,651 Sprint Capital Corporation, 8.375% 03/15/12##........................................... $ 1,882 4,052 Sprint Capital Corporation, 6.900% 05/01/19##........................................... 2,369 238 Verizon Florida Inc., 6.125% 01/15/13............................................. 240 3,074 Verizon Global Funding Corporation, 7.750% 12/01/30##........................................... 3,069 7,387 Verizon New England Inc., 6.500% 09/15/11##........................................... 7,688 10,177 Verizon Pennsylvania, Series A, 5.650% 11/15/11##........................................... 9,993 40 Vodafone Group plc, 7.625% 02/15/05............................................. 44 ----------- 57,772 ----------- TOBACCO -- 0.5% 2,014 DIMON Inc., Series B, 9.625% 10/15/11##........................................... 2,107 11,274 R.J. Reynolds Tobacco Holdings, Inc., 7.375% 05/15/03##........................................... 11,516 ----------- 13,623 ----------- TOTAL CORPORATE BONDS AND NOTES (Cost $836,837)............................................. 857,782 ----------- FOREIGN BONDS AND NOTES -- 2.9% 28,665 AT&T Canada Inc., (0.000)% due 06/15/08 9.950% beginning 06/15/03##................................. 3,010 3,074 Canadian National Railway Company, 6.900% 07/15/28##........................................... 3,472 2,723 Compagnie Generale De Geophysique SA, 10.625% 11/15/07##.......................................... 2,543 9,900 Corp Andina de Fomento, 8.875% 06/01/05##........................................... 11,028 5,857 Government of Canada, 5.250% 11/05/08##........................................... 6,419 3,687 Hanson Overseas B.V., 6.750% 09/15/05##........................................... 4,023 5,991 Hellenic Republic, 6.950% 03/04/08(a)##........................................ 7,009 479 Korea Development Bank, 7.250% 05/15/06(a).......................................... 539 433 Methanex Corporation, 7.750% 08/15/05............................................. 429 66 Ontario (Province of), 7.000% 08/04/05............................................. 74 734 Pemex Finance Ltd., 5.720% 11/15/03............................................. 757 353 Quebec (Province of), 6.125% 01/22/11............................................. 399 6,781 Quebec (Province of), 7.500% 09/15/29##........................................... 8,732
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- FOREIGN BONDS AND NOTES -- (CONTINUED) $ 5,300 Republic of Argentina, Series 2031, 12.000% 06/19/31##.......................................... $ 981 9,127 Republic of Italy, 6.000% 02/22/11##........................................... 10,452 5,599 Republic of Italy, 6.875% 09/27/23##........................................... 6,784 6,173 Republic of Korea, 8.875% 04/15/08##........................................... 7,747 5,187 United Mexican States, 8.375% 01/14/11(a)##........................................ 5,472 ----------- TOTAL FOREIGN BONDS AND NOTES (Cost $97,328).............................................. 79,870 ----------- MORTGAGE-BACKED SECURITIES -- 34.8% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.9% 4,050 Credit Suisse First Boston, Series 2001, 5.570%** 12/05/13##......................................... 4,022 88 Criimi Mae CMBS Corporation, Series 1998-1, Class A1, 5.697% 06/20/30@##.......................................... 89 12,277 Fannie Mae Strip, Series 319, Class 2, 6.500% 02/01/32##........................................... 1,794 70,661 GMAC Commercial Mortgage Securities Inc., Series 1997-C1, Class X, 1.629%** 07/15/27##......................................... 4,469 84,778 JP Morgan Commercial Mortgage Finance Corporation, Series 1997-C4, Class X, Interest only, 1.275%** 12/26/28##......................................... 3,425 97,019 Merrill Lynch Mortgage Investors, Inc., Series 1998-C3, Class IO, 1.103%** 12/15/30##......................................... 4,194 5,796 Salomon Brothers Mortgage Securities VII, Series 2002-CDCA, Class A1, 2.103%** 11/15/13@.............. 5,794 ----------- 23,787 ----------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 0.2% 12 9.000% 01/01/05##........................................... 12 2,300 6.875% 01/15/05##........................................... 2,539 183 8.000% 11/01/09-04/01/10##.................................. 195 515 6.000% 06/15/11##........................................... 582 942 8.500% 11/01/26##........................................... 1,011 ----------- 4,339 -----------
SEE NOTES TO FINANCIAL STATEMENTS. 22 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 26.9% $ 666 7.000% 12/01/02-07/01/03##.................................. $ 669 254 8.250% 03/25/06##........................................... 269 1,106 6.000% 09/01/16##........................................... 1,150 152,500 6.000% 03/01/17(b).......................................... 158,315 280 10.000% 09/01/18##.......................................... 322 3,204 7.500% 06/15/22##........................................... 3,435 421,900 6.500% 02/01/32(b).......................................... 437,063 129,000 7.000% 02/01/32-05/01/32(b)................................. 134,684 217 4.454%** 08/01/36##......................................... 223 ----------- 736,130 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 6.8% 742 8.500% 12/15/05-02/15/25##.................................. 812 2,909 8.000% 11/15/07-05/15/17##.................................. 3,066 25 9.500% 06/15/09-09/15/09.................................... 27 23 13.000% 01/15/11-02/15/11................................... 28 16,189 7.000% 10/01/11-01/15/30##.................................. 17,022 15,369 7.500% 12/15/23-07/20/28##.................................. 16,361 13,210 6.500% 01/15/31##........................................... 13,778 129,000 7.000% 11/01/32(b).......................................... 135,410 ----------- 186,504 ----------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $949,398)............................................. 950,760 ----------- MUNICIPAL BONDS AND NOTES -- 1.1% (Cost $29,007) 27,785 Washington State, GO Refunding, Series 2002R, (MBIA Insured), 4.000% 01/01/12............................................. 28,941 ----------- CONTRACTS --------- -PURCHASED OPTIONS -- 0.5% 2,500(d) Call option Polish Government Bond Strike price 81.925 Expire 10/07/02............................................. 6,227 5,000(d) Call option Polish Government Bond Strike price 86.400 Expire 10/15/02............................................. 7,231 32(c)(e) Call option on Interest Rate Swap, expiring on 12/09/02. If exercised, JP Morgan pays fixed (4.66%) and receives 3 month Euro LIBOR. Swap expires 12/11/12........................... 429 ----------- TOTAL PURCHASED OPTIONS (Cost $13,073).............................................. 13,887 -----------
PRINCIPAL AMOUNT VALUE (000) (000) ---------------------------------------------------------------------------------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 1.6% FEDERAL HOME LOAN BANK (FHLB) -- 0.0%+ $ 500 3.375% 06/15/04##........................................... $ 512 ----------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 0.3% 8,400 5.750% 01/15/12##........................................... 9,325 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 1.3% 19,100 5.625% 05/14/04##........................................... 20,241 9,800 7.000% 07/15/05##........................................... 10,996 1,385 6.625% 11/15/30##........................................... 1,627 ----------- 32,864 ----------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $41,052).............................................. 42,701 ----------- U.S. TREASURY OBLIGATIONS -- 9.1% U.S. TREASURY NOTES -- 5.7% 5,000 3.875% 07/31/03##........................................... 5,101 109,000 5.250% 08/15/03##........................................... 112,585 38,300 3.250% 05/31/04##........................................... 39,308 ----------- 156,994 ----------- U.S. TREASURY STRIPS -- 3.4% 4,730 Interest only, 3.890%*** 05/15/11.......................................... 3,399 66,500 Principal only, 2.050%*** 08/15/05(a)##..................................... 62,716 13,235 Principal only, 5.200%*** 11/15/21(a)##..................................... 4,959 53,120 Principal only, 5.170%*** 11/15/27(a)....................................... 14,735 9,000 TIGR Receipts, 4.050%*** 05/15/12(a)##..................................... 6,119 ----------- 91,928 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $244,130)............................................. 248,922 ----------- SHARES (000) --------- INVESTMENT COMPANIES -- 43.7% 13,069 International Bond Portfolio@@................................ 135,529 1,038,836 Nations Cash Reserves, Capital Class Shares#.................. 1,038,836 1,621 Nations Convertible Securities Fund, Primary Class A Shares@@.................................................... 21,699 ----------- TOTAL INVESTMENT COMPANIES (Cost $1,195,387)........................................... 1,196,064 -----------
SEE NOTES TO FINANCIAL STATEMENTS. 23 NATIONS FUNDS Nations Bond Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
VALUE (000) ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $3,637,489*)................................ 133.6% $ 3,652,697 ----------- CONTRACTS --------- WRITTEN OPTIONS -- 0.0%+ (Premium ($639)) (30)(c) Call option on Interest Rate Swap, expiring on 12/09/02. If exercised, JP Morgan pays 3 month LIBOR and receives fixed (4.54%). Swap expires 12/11/12.............................. (474) ----------- OTHER ASSETS AND LIABILITIES (NET).................. (33.6)% Cash.......................................................... $ 632 Unrealized appreciation on forward foreign exchange contracts................................................... 11,881 Receivable for investment securities sold..................... 751,191 Receivable for Fund shares sold............................... 103,222 Dividends receivable.......................................... 1,669 Interest receivable........................................... 22,776 Receivable for variation margin............................... 1,728 Unrealized appreciation on swap contracts..................... 57 Unrealized depreciation on forward foreign exchange contracts................................................... (13,553) Collateral on securities loaned............................... (60,878) Payable for Fund shares redeemed.............................. (30,301) Investment advisory fee payable............................... (867) Administration fee payable.................................... (481) Shareholder servicing and distribution fees payable........... (27) Distributions payable......................................... (6,887) Payable for investment securities purchased................... (1,696,563) Accrued Trustees' fees and expenses........................... (94) Accrued expenses and other liabilities........................ (1,070) ----------- TOTAL OTHER ASSETS AND LIABILITIES (NET)...................... (917,565) ----------- NET ASSETS.......................................... 100.0% $ 2,734,658 =========== NET ASSETS CONSIST OF: Undistributed net investment income...................................................... $ 2,766 Accumulated net realized gain on investments sold, futures contracts, swaps, options and currency contracts............ 39,570 Net unrealized appreciation of investments, futures contracts, swaps, options and currency contracts....................... 20,524 Paid-in capital............................................... 2,671,798 ----------- NET ASSETS.................................................... $ 2,734,658 ===========
VALUE ---------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($2,667,961,134 / 266,027,486 shares outstanding)........... $10.03 =========== INVESTOR A SHARES: Net asset value and redemption price per share ($44,582,247 / 4,448,684 shares outstanding)................ $10.02 =========== Maximum sales charge.......................................... 3.25% Maximum offering price per share.............................. $10.36 INVESTOR B SHARES: Net asset value and offering price per share&($19,771,740 / 1,972,270 shares outstanding)................................................ $10.02 =========== INVESTOR C SHARES: Net asset value and offering price per share& ($2,342,683 / 233,749 shares outstanding)................... $10.02 ===========
--------------- * Federal income tax information (see Note 12). ** Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. *** Zero coupon security. The rate shown reflects the yield to maturity at September 30, 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. @@ Mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. & The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. + Amount represents less than 0.1%. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (see Note 11). The portion that represents cash collateral is $60,878. ## All or a portion of security segregated as collateral for futures, swap contracts and TBA. (a) All or a portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $56,532 and $56,400, respectively. (b) TBA -- Securities purchased on a forward commitment basis. (c) 1 contract = $1,000,000. (d) Principal amount denominated in Polish Zloty. (e) Principal amount denominated in Euro. SEE NOTES TO FINANCIAL STATEMENTS. 24 NATIONS FUNDS Nations Strategic Income Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 1.4% ASSET-BACKED -- AUTO LOANS -- 0.8% $ 750 Americredit Automobile Receivables Trust, Series 2001-B, Class A4, 5.370% 06/12/08##........................................... $ 794 145 Capital Auto Receivables Asset Trust, Series 2002-2, Class CTFS, 4.180% 10/15/07##........................................... 149 200 Ford Credit Auto Owner Trust, Series 2002-B, Class B, 5.180% 10/16/06##........................................... 212 400 MMCA Automobile Trust, Series 2001-1, Class A4, 5.340% 12/15/05##........................................... 419 -------- 1,574 -------- ASSET-BACKED -- HOME EQUITY LOANS -- 0.4% 800 Fannie Mae Whole Loan, Series 2001-W1, Class AF3, 5.690% 06/25/29##........................................... 818 59 First Plus Home Loan Trust, Series 1998-2, Class M1, 7.220% 05/10/24##........................................... 64 -------- 882 -------- ASSET-BACKED -- OTHER -- 0.2% 420 CIT Equipment Collateral, Series 2002-VT1, Class A4, 4.670% 12/21/09##........................................... 435 -------- TOTAL ASSET-BACKED SECURITIES (Cost $2,774)............................................... 2,891 -------- CORPORATE BONDS AND NOTES -- 9.7% AEROSPACE AND DEFENSE -- 0.1% 219 Boeing Capital Corporation, 5.650% 05/15/06##........................................... 231 30 Northrop Grumman Corporation, 7.125% 02/15/11##........................................... 34 -------- 265 -------- AIRLINES -- 0.3% 161 American Airlines, Series 2001-2, Class A-2, 7.858% 10/01/11##........................................... 170 400 U.S. Airways, Inc., Series 2002-G, 8.020% 02/05/19##........................................... 418 -------- 588 -------- AUTOMOTIVE -- 0.9% 124 Delphi Automotive Systems Corporation, 6.125% 05/01/04##........................................... 129 526 Ford Motor Company, 7.450% 07/16/31##........................................... 425 164 Ford Motor Credit Company, 5.800% 01/12/09##........................................... 147 196 Ford Motor Credit Company, 7.375% 10/28/09##........................................... 188
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- AUTOMOTIVE -- (CONTINUED) $ 55 Ford Motor Credit Company, 7.375% 02/01/11##........................................... $ 52 41 General Motors Acceptance Corporation, 6.125% 09/15/06##........................................... 41 133 General Motors Acceptance Corporation, 6.150% 04/05/07##........................................... 135 130 General Motors Acceptance Corporation, 6.875% 09/15/11##........................................... 127 244 General Motors Acceptance Corporation, 8.000% 11/01/31##........................................... 237 400 Toyota Motor Credit Corporation, 5.625% 11/13/03##........................................... 415 -------- 1,896 -------- BROADCASTING AND CABLE -- 0.4% 143 AOL Time Warner Inc., 6.150% 05/01/07##........................................... 132 280 AOL Time Warner Inc., 7.625% 04/15/31##........................................... 232 105 Comcast Cable Communications, 7.125% 06/15/13##........................................... 98 121 Time Warner Inc., 8.110% 08/15/06##........................................... 118 105 Viacom Inc., Class B, 6.625% 05/15/11##........................................... 117 105 Viacom Inc., Class B, 7.875% 07/30/30##........................................... 126 -------- 823 -------- CHEMICALS -- BASIC -- 0.1% 107 The Dow Chemical Company, 6.125% 02/01/11##........................................... 113 98 The Dow Chemical Company, 7.375% 11/01/29##........................................... 107 -------- 220 -------- CHEMICALS -- SPECIALTY -- 0.1% 49 Praxair, Inc., 4.750% 07/15/07##........................................... 52 82 Praxair, Inc., 6.500% 03/01/08##........................................... 92 -------- 144 -------- COMMERCIAL BANKING -- 1.4% 304 Bank One Corporation, 6.000% 08/01/08##........................................... 337 265 Citigroup Inc., 7.250% 10/01/10##........................................... 301 13 Citigroup Inc., 6.000% 02/21/12##........................................... 14 143 FleetBoston Financial Corporation, 7.250% 09/15/05##........................................... 158 114 Golden West Financial Corporation, 4.750% 10/01/12............................................. 115 198 J.P. Morgan Chase & Company, 5.250% 05/30/07##........................................... 208 70 Mellon Funding Corporation, 4.875% 06/15/07##........................................... 75 40 Mellon Funding Corporation, 6.700% 03/01/08............................................. 45
SEE NOTES TO FINANCIAL STATEMENTS. 25 NATIONS FUNDS Nations Strategic Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- COMMERCIAL BANKING -- (CONTINUED) $ 179 PNC Funding Corporation, 7.000% 09/01/04##........................................... $ 191 156 PNC Funding Corporation, 5.750% 08/01/06##........................................... 165 180 Popular North America Inc., Series E, 6.125% 10/15/06##........................................... 194 70 Regions Financial Corporation, 7.750% 09/15/24##........................................... 84 200 US Bank N.A., Minnesota, 6.375% 08/01/11##........................................... 225 280 Wachovia Corporation, 4.950% 11/01/06##........................................... 299 181 Washington Mutual, Inc., 7.500% 08/15/06##........................................... 205 63 Washington Mutual, Inc., 5.625% 01/15/07##........................................... 68 186 Wells Fargo Financial, Inc., 4.875% 06/12/07##........................................... 197 -------- 2,881 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.1% 53 International Business Machines Corporation, 6.500% 01/15/28##........................................... 55 93 Pitney Bowes Inc., 4.625% 10/01/12##........................................... 93 -------- 148 -------- CONGLOMERATES -- 0.1% 125 Waste Management, Inc., 7.375% 08/01/10##........................................... 131 -------- CONSUMER CREDIT AND MORTGAGES -- 0.2% 342 Countrywide Home Loans, Inc., Series J, 5.500% 08/01/06##........................................... 359 -------- DEPARTMENT AND DISCOUNT STORES -- 0.2% 120 Sears Roebuck Acceptance Corporation, 6.750% 08/15/11##........................................... 128 76 Target Corporation, 5.875% 03/01/12##........................................... 84 182 Wal-Mart Stores, Inc., 5.450% 08/01/06##........................................... 200 -------- 412 -------- ELECTRIC POWER -- NON NUCLEAR -- 0.1% 144 Cinergy Corporation, 6.250% 09/01/04##........................................... 149 127 DPL Inc., 6.875% 09/01/11@##.......................................... 119 -------- 268 -------- ELECTRIC POWER -- NUCLEAR -- 0.7% 99 American Electric Power Company, Inc., Series A, 6.125% 05/15/06##........................................... 98 145 Constellation Energy Group, Inc., 7.600% 04/01/32##........................................... 145
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ELECTRIC POWER -- NUCLEAR -- (CONTINUED) $ 390 Consumers Energy Company, Series B, 6.200% 05/01/03##........................................... $ 382 36 Duquesne Light Company, Series O, 6.700% 04/15/12##........................................... 40 23 Energy East Corporation, 6.750% 06/15/12##........................................... 26 253 Exelon Generation Company LLC, 6.950% 06/15/11##........................................... 278 134 FirstEnergy Corporation, Series B, 6.450% 11/15/11##........................................... 126 171 PSEG Power LLC, 6.875% 04/15/06##........................................... 172 110 Southern Company Capital Funding, Series A, 5.300% 02/01/07##........................................... 117 58 Southern Power Company, 6.250% 07/15/12@##.......................................... 64 90 Virginia Electric and Power Company, Series A, 5.375% 02/01/07##........................................... 97 -------- 1,545 -------- EXPLORATION AND PRODUCTION -- 0.1% 69 Anadarko Finance Company, Series B, 6.750% 05/01/11##........................................... 78 162 Anadarko Finance Company, Series B, 7.500% 05/01/31##........................................... 191 -------- 269 -------- FINANCE -- MISCELLANEOUS -- 1.0% 137 Associates Corporation of North America, 6.950% 11/01/18##........................................... 150 348 Caterpillar Finance Services Corporation, 5.950% 05/01/06##........................................... 382 331 General Electric Capital Corporation, Series A, 6.750% 03/15/32##........................................... 355 237 Household Finance Corporation, 5.875% 02/01/09##........................................... 223 406 Kern River Funding Corporation, 6.676% 07/31/16@##.......................................... 443 400 Monumental Global Funding II, 6.050% 01/19/06@##.......................................... 435 -------- 1,988 -------- FOOD AND DRUG STORES -- 0.1% 155 Fred Meyer, Inc., 7.450% 03/01/08##........................................... 178 -------- FOOD PRODUCTS -- 0.5% 179 Kellogg Company, Series B, 6.000% 04/01/06##........................................... 195 63 Kraft Foods Inc., 5.250% 06/01/07##........................................... 68 227 Sara Lee Corporation, 6.250% 09/15/11##........................................... 256 61 Tyson Foods Inc., Class A, 7.250% 10/01/06##........................................... 68
SEE NOTES TO FINANCIAL STATEMENTS. 26 NATIONS FUNDS Nations Strategic Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- FOOD PRODUCTS -- (CONTINUED) $ 100 Unilever Capital Corporation, 6.875% 11/01/05##........................................... $ 112 204 Unilever Capital Corporation, 7.125% 11/01/10##........................................... 243 -------- 942 -------- HEALTH SERVICES -- 0.1% 180 Wellpoint Health Networks Inc., 6.375% 06/15/06##........................................... 197 22 Wellpoint Health Networks Inc., 6.375% 01/15/12##........................................... 24 -------- 221 -------- HEAVY MACHINERY -- 0.2% 400 Caterpillar Inc., 7.300% 05/01/31##........................................... 489 -------- HOUSEHOLD PRODUCTS -- 0.0%+ 63 Proctor & Gamble Company, 4.750% 06/15/07##........................................... 68 -------- INSURANCE -- 0.5% 600 American International Group, Inc., 5.850% 08/01/08@##.......................................... 663 132 Principal Life Global, 6.250% 02/15/12@............................................ 142 230 Prudential Funding LLC, 6.600% 05/15/08@##.......................................... 252 -------- 1,057 -------- INTEGRATED OIL -- 0.2% 88 Amerada Hess Corporation, 7.875% 10/01/29##........................................... 106 155 Conoco Funding Company, 6.350% 10/15/11##........................................... 174 197 PEMEX Master Trust, 8.625% 02/01/22@##.......................................... 188 -------- 468 -------- INVESTMENT SERVICES -- 0.6% 140 Bear Stearns Companies, Inc., 7.800% 08/15/07##........................................... 163 110 Credit Suisse First Boston USA, Inc., 5.875% 08/01/06##........................................... 117 144 Credit Suisse First Boston USA, Inc., 6.125% 11/15/11##........................................... 150 107 Goldman Sachs Group Inc., 6.875% 01/15/11##........................................... 119 22 Goldman Sachs Group, Inc., 5.700% 09/01/12............................................. 23 83 Lehman Brothers Holdings Inc., 7.000% 02/01/08##........................................... 92 106 Merrill Lynch & Company, Inc., 6.000% 02/17/09##........................................... 113 107 Morgan Stanley Dean Witter & Company, 6.100% 04/15/06##........................................... 115 235 Morgan Stanley Dean Witter & Company, 6.750% 04/15/11##........................................... 258 -------- 1,150 --------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- METALS AND MINING -- 0.1% $ 131 Alcoa Inc., 7.375% 08/01/10##........................................... $ 156 -------- NATURAL GAS PIPELINES -- 0.1% 111 EL Paso Corporation, 7.800% 08/01/31##........................................... 70 207 Kinder Morgan, Inc., 6.650% 03/01/05##........................................... 220 -------- 290 -------- OIL REFINING AND MARKETING -- 0.1% 187 USX Corporation, 6.650% 02/01/06##........................................... 204 -------- PAPER AND FOREST PRODUCTS -- 0.0%+ 98 International Paper Company, 8.000% 07/08/03##........................................... 102 -------- PHARMACEUTICALS -- 0.2% 302 Wyeth, 6.250% 03/15/06##........................................... 323 -------- PUBLISHING AND ADVERTISING -- 0.1% 78 Gannett Company, Inc., 6.375% 04/01/12##........................................... 89 124 News America Holdings, 8.150% 10/17/36............................................. 123 -------- 212 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.2% 141 Burlington Northern Santa Fe Corporation, 6.750% 07/15/11##........................................... 160 330 FedEx Corporation, 6.625% 02/12/04##........................................... 346 -------- 506 -------- REAL ESTATE -- 0.1% 147 EOP Operating LP, 7.000% 07/15/11##........................................... 162 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.1% 61 Health Care Property Investors, Inc., 7.480% 04/05/04##........................................... 66 58 Health Care Property Investors, Inc., 6.450% 06/25/12##........................................... 61 -------- 127 -------- TELECOMMUNICATIONS SERVICES -- 0.6% 147 BellSouth Telecommunications Inc., 6.375% 06/01/28##........................................... 146 90 Cingular Wireless, 7.125% 12/15/31##........................................... 79 191 Cox Communications, Inc., Class A, 7.750% 11/01/10##........................................... 198 80 GTE North, Inc., Series H, 5.650% 11/15/08............................................. 81
SEE NOTES TO FINANCIAL STATEMENTS. 27 NATIONS FUNDS Nations Strategic Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- (CONTINUED) $ 207 SBC Communications Inc., 6.250% 03/15/11##........................................... $ 225 27 Sprint Capital Corporation, 6.125% 11/15/08##........................................... 18 55 Sprint Capital Corporation, 8.375% 03/15/12##........................................... 39 115 Sprint Capital Corporation, 6.900% 05/01/19............................................. 67 87 Verizon Global Funding Corporation, 7.750% 12/01/30##........................................... 87 194 Verizon New England Inc., 6.500% 09/15/11##........................................... 202 182 Verizon Pennsylvania, Series A, 5.650% 11/15/11##........................................... 179 -------- 1,321 -------- TOBACCO -- 0.1% 294 R.J. Reynolds Tobacco Holdings, Inc., 7.375% 05/15/03##........................................... 300 -------- TOTAL CORPORATE BONDS AND NOTES (Cost $19,484).................................... 20,213 -------- FOREIGN BONDS AND NOTES -- 0.9% 500 AT&T Canada Inc., (0.000)% due 06/15/08 9.950% beginning 06/15/03................................... 53 258 Corp Andina de Fomento, 8.875% 06/01/05##........................................... 287 159 Government of Canada, 5.250% 11/05/08##........................................... 174 95 Hanson Overseas B.V., 6.750% 09/15/05##........................................... 104 137 Hellenic Republic, 6.950% 03/04/08##........................................... 160 178 Quebec in (Province), 7.500% 09/15/29##........................................... 229 238 Republic of Italy, 6.000% 02/22/11##........................................... 273 159 Republic of Italy, 6.875% 09/27/23##........................................... 193 147 Republic of Korea, 8.875% 04/15/08##........................................... 184 119 United Mexican States, 8.375% 01/14/11##........................................... 126 -------- TOTAL FOREIGN BONDS AND NOTES (Cost $2,064)............................................... 1,783 --------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- MORTGAGE-BACKED SECURITIES -- 11.3% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.1% $ 120 Credit Suisse First Boston, Series 2001, 5.570%** 12/05/13##......................................... $ 119 299 Fannie Mae Strip, Series 319, Class 2, 6.500% 02/01/32............................................. 44 2,952 Merrill Lynch Mortgage Investors, Inc., Series 1998-C3, Class IO, 1.103%** 12/15/30##......................................... 128 -------- 291 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 8.8% 3,275 6.000% 03/01/17(b).......................................... 3,400 11,200 6.500% 02/01/32(b).......................................... 11,602 3,100 7.000% 05/01/32(b).......................................... 3,237 -------- 18,239 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 2.4% 672 6.500% 01/15/31............................................. 701 4,100 7.000% 11/01/32(b).......................................... 4,303 -------- 5,004 -------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $23,455).............................................. 23,534 -------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 2.6% FEDERAL HOME LOAN BANK (FHLB) -- 0.9% 1,760 3.375% 06/15/04##........................................... 1,801 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 1.2% 390 4.875% 03/15/07##........................................... 420 1,855 5.750% 01/15/12##........................................... 2,059 -------- 2,479 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 0.5% 1,000 7.000% 07/15/05##(a)........................................ 1,122 -------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $5,152)............................................... 5,402 -------- U.S. TREASURY OBLIGATIONS -- 2.6% U.S. TREASURY NOTES -- 1.1% 2,135 5.750% 08/15/03(a).......................................... 2,215 -------- U.S. TREASURY STRIPS -- 1.5% 2,500 Interest only, 2.640%*** 05/15/07.......................................... 2,215 150 Principal only, 2.050%*** 08/15/05.......................................... 141
SEE NOTES TO FINANCIAL STATEMENTS. 28 NATIONS FUNDS Nations Strategic Income Fund STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- U.S. TREASURY STRIPS -- (CONTINUED) $ 575 Principal only, 5.200%*** 11/15/21(a)....................................... $ 215 1,220 Principal only, 5.170%*** 11/15/27##(a)..................................... 338 475 TIGR Receipts, 4.050%*** 05/15/12(a)....................................... 323 -------- 3,232 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $5,368)............................................... 5,447 -------- SHARES (000) ------- INVESTMENT COMPANIES -- 84.3% 7,839 High Yield Portfolio@@........................................ 68,434 7,456 International Bond Portfolio@@................................ 77,321 30,537 Nations Cash Reserves, Capital Class Shares#.................. 30,537 -------- TOTAL INVESTMENT COMPANIES (Cost $184,170)............................................. 176,292 -------- TOTAL INVESTMENTS (Cost $242,467*).................................. 112.8% 235,562 -------- OTHER ASSETS AND LIABILITIES (NET)................................. (12.8)% Cash.......................................................... $ 1 Receivable for investment securities sold..................... 183 Receivable for Fund shares sold............................... 301 Dividends receivable.......................................... 772 Interest receivable........................................... 520 Receivable for variation margin............................... 20 Unrealized depreciation on swap contracts..................... (4) Collateral on securities loaned............................... (4,294) Payable for Fund shares redeemed.............................. (649) Investment advisory fee payable............................... (69) Administration fee payable.................................... (38) Shareholder servicing and distribution fees payable........... (43) Distributions payable......................................... (595) Payable for investment securities purchased................................................... (22,492) Accrued Trustees' fees and expenses........................... (57) Accrued expenses and other liabilities........................ (256) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)........................................... (26,700) -------- NET ASSETS.......................................... 100.0% $208,862 ======== NET ASSETS CONSIST OF: Undistributed net investment income........................... $ 421 Accumulated net realized loss on investments sold, futures contracts, options, currency contracts and swaps....................... (18,979) Net unrealized depreciation of investments, futures contracts, currency contracts and swaps................................ (6,860) Paid-in capital............................................... 234,280 -------- NET ASSETS.................................................... $208,862 ========
VALUE -------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($135,924,826 / 14,217,938 shares outstanding).............. $9.56 ======== INVESTOR A SHARES: Net asset value and redemption price per share ($27,807,016 / 2,911,661 shares outstanding)................ $9.55 ======== Maximum sales charge.......................................... 4.75% Maximum offering price per share.............................. $10.03 INVESTOR B SHARES: Net asset value and offering price per share& ($42,431,237 / 4,439,743 shares outstanding)................ $9.56 ======== INVESTOR C SHARES: Net asset value and offering price per share& ($2,698,970 / 282,626 shares outstanding)................... $9.55 ========
--------------- * Federal income tax information (see Note 12). ** Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at September 30, 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. @@ Mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. & The redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. + Amount represents less than 0.1%. # Money market mutual fund registered under the Investment Company Act of 1940, as amended, and sub-advised by Banc of America Capital Management, LLC. A portion of this amount represents cash collateral received from securities lending activity (see Note 11). The portion that represents cash collateral is $4,294. ## All or a portion of security segregated as collateral for futures, swap contracts and TBA. (a) All or a portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $4,110 and $4,194, respectively. (b) TBA -- Securities purchased on a forward commitment basis. SEE NOTES TO FINANCIAL STATEMENTS. 29 NATIONS FUNDS Nations High Yield Bond Fund STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
VALUE (000) -------------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 100.5% Investment in Nations Master Investment Trust, High Yield Bond Master Portfolio*........................................... $356,977 -------- TOTAL INVESTMENTS................................... 100.5% 356,977 -------- OTHER ASSETS AND LIABILITIES (NET)................................. (0.5)% Receivable for Fund shares sold............................... $ 1,831 Payable for Fund shares redeemed.............................. (3,449) Administration fee payable.................................... (53) Shareholder servicing and distribution fees payable........... (81) Accrued Trustees' fees and expenses........................... (39) Accrued expenses and other liabilities........................ (136) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)........................................... (1,927) -------- NET ASSETS.......................................... 100.0% $355,050 ======== NET ASSETS CONSIST OF: Undistributed net investment income........................... $ 762 Accumulated net realized loss on investments sold............. (1,782) Net unrealized depreciation of investments.................... (60,601) Paid-in capital............................................... 416,671 -------- NET ASSETS.................................................... $355,050 ========
VALUE -------------------------------------------------------------------------------------- PRIMARY A SHARES: Net asset value, offering and redemption price per share ($227,752,331 / 29,657,341 shares outstanding).............. $7.68 ======== INVESTOR A SHARES: Net asset value and redemption price per share ($40,306,694 / 5,288,706 shares outstanding)................ $7.62 ======== Maximum sales charge.......................................... 4.75% Maximum offering price per share.............................. $8.00 INVESTOR B SHARES: Net asset value and offering price per share& ($70,502,732 / 9,252,063 shares outstanding)................ $7.62 ======== INVESTOR C SHARES: Net asset value and offering price per share& ($16,488,411 / 2,171,035 shares outstanding)................ $7.59 ========
--------------- *The financial statements of the High Yield Bond Master Portfolio, including its portfolio of investments, are included elsewhere within this report and should be read in conjunction with the High Yield Bond 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. 30 [This page intentionally left blank] 31 NATIONS FUNDS STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
SHORT- SHORT-TERM INTERMEDIATE INCOME GOVERNMENT --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 13,960 $ 8,889 Dividends................................................... -- -- Dividend income from affiliated funds....................... 272 586 Securities lending.......................................... 78 75 Allocated from Portfolio: Interest+................................................... -- -- Dividends (Net of foreign withholding taxes of $0, $0, $0, $0, $0, $0 and $7, respectively)+......................... -- -- Dividend income from affiliated funds+...................... -- -- Securities lending+......................................... -- -- Expenses+................................................... -- -- -------------- -------------- Total investment income................................. 14,310 9,550 -------------- -------------- EXPENSES: Investment advisory fee..................................... 1,093 729 Administration fee.......................................... 801 535 Transfer agent fees......................................... 103 90 Custodian fees.............................................. 17 21 Legal and audit fees........................................ 72 71 Registration and filing fees................................ 58 70 Trustees' fees and expenses................................. 7 8 Printing expense............................................ 26 24 Other....................................................... 19 11 -------------- -------------- Subtotal................................................ 2,196 1,559 Shareholder servicing and distribution fees: Primary B Shares.......................................... -- --* Investor A Shares......................................... 135 54 Investor B Shares......................................... 12 113 Investor C Shares......................................... 241 38 -------------- -------------- Total expenses.......................................... 2,584 1,764 Fees waived by investment advisor, administrator and/or distributor............................................... (364) --* Fees reduced by credits allowed by the custodian............ (1) --* -------------- -------------- Net expenses............................................ 2,219 1,764 -------------- -------------- NET INVESTMENT INCOME/(LOSS)................................ 12,091 7,786 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... (498) 3,339 Swap contracts............................................ -- (29) Written options........................................... -- -- Futures contracts......................................... 5,966 7,409 Foreign currency transactions............................. -- -- Allocated from Portfolio: Security transactions allocated from Portfolio+........... -- -- Foreign currency transactions+.............................. -- -- -------------- -------------- Net realized gain/(loss) on investments..................... 5,468 10,719 -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities (Note 13)...................................... 9,394 16,398 Securities allocated from Portfolio (Note 13)+............ -- -- Swap contracts............................................ (46) 1,651 Written options........................................... -- -- Futures contracts......................................... 3,623 4,478 Foreign currency transactions............................. -- -- -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... 12,971 22,527 -------------- -------------- Net realized and unrealized gain/(loss) on investments...... 18,439 33,246 -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 30,530 $ 41,032 ============== ==============
--------------- *Amount represents less than $500. + Allocated from Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 32 NATIONS FUNDS STATEMENTS OF OPERATIONS (CONTINUED) (UNAUDITED)
GOVERNMENT INTERMEDIATE STRATEGIC HIGH YIELD SECURITIES BOND BOND INCOME BOND -------------------------------------------------------------------------------------- $ 5,087 $ -- $ 49,492 $ 1,226 $ -- -- -- 2,807 4,914 -- 480 -- 7,443 233 -- 18 -- 44 3 -- -- 10,085 -- -- 17,502 -- -- -- -- 382 -- 344 -- -- 281 -- 55 -- -- 61 -- (1,124) -- -- (1,098) -------------- -------------- -------------- -------------- -------------- 5,585 9,360 59,786 6,376 17,128 -------------- -------------- -------------- -------------- -------------- 669 -- 4,824 539 -- 306 412 2,658 237 316 47 39 383 37 50 16 -- 82 14 -- 68 37 84 66 63 33 71 61 57 31 7 14 7 7 14 18 19 51 32 16 17 6 56 10 19 -------------- -------------- -------------- -------------- -------------- 1,181 598 8,206 999 509 -- -- -- -- -- 72 68 52 34 54 274 44 91 219 363 11 17 12 13 90 -------------- -------------- -------------- -------------- -------------- 1,538 727 8,361 1,265 1,016 (182) -- (40) (108) -- --* -- (3) --* -- -------------- -------------- -------------- -------------- -------------- 1,356 727 8,318 1,157 1,016 -------------- -------------- -------------- -------------- -------------- 4,229 8,633 51,468 5,219 16,112 -------------- -------------- -------------- -------------- -------------- 937 -- 8,089 1,111 -- -- -- 18,136 -- -- -- -- -- -- -- 8,212 -- 7,505 309 -- -- -- 135 -- -- -- 8,060 -- -- (1,473) -- -- -- -- (173) -------------- -------------- -------------- -------------- -------------- 9,149 8,060 33,865 1,420 (1,646) -------------- -------------- -------------- -------------- -------------- 9,611 -- 48,028 (2,614) -- -- 20,749 -- -- (51,594) 912 -- 3,702 (4) -- -- -- 165 -- -- 5,261 -- 13,993 67 -- -- -- (3,090) -- -- -------------- -------------- -------------- -------------- -------------- 15,784 20,749 62,798 (2,551) (51,594) -------------- -------------- -------------- -------------- -------------- 24,933 28,809 96,663 (1,131) (53,240) -------------- -------------- -------------- -------------- -------------- $ 29,162 $ 37,442 $ 148,131 $ 4,088 $ (37,128) ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 33 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
SHORT-TERM INCOME --------------------------------- SIX MONTHS ENDED 9/30/02 YEAR ENDED (UNAUDITED) 3/31/02 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 12,091 $ 21,915 Net realized gain/(loss) on investments..................... 5,468 4,788 Net change in unrealized appreciation/(depreciation) of investments............................................... 12,971 (6,490) -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 30,530 20,213 Distributions to shareholders from net investment income: Primary A Shares.......................................... (9,772) (19,342) Primary B Shares.......................................... -- -- Investor A Shares......................................... (1,709) (2,012) Investor B Shares......................................... (31) (98) Investor C Shares......................................... (579) (463) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... -- -- Primary B Shares.......................................... -- -- Investor A Shares......................................... -- -- Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Net increase/(decrease) in net assets from Fund share transactions.............................................. 179,199 266,820 -------------- -------------- Net increase/(decrease) in net assets....................... 197,638 265,118 NET ASSETS: Beginning of period......................................... 634,936 369,818 -------------- -------------- End of period............................................... $ 832,574 $ 634,936 ============== ============== Undistributed net investment income/(loss)/(distributions in excess of net investment income) at end of period......... $ -- $ -- ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 34 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SHORT-INTERMEDIATE GOVERNMENT GOVERNMENT SECURITIES ----------------------------------------- ------------------------------------- SIX MONTHS SIX MONTHS ENDED ENDED 9/30/02 YEAR ENDED 9/30/02 YEAR ENDED (UNAUDITED) 3/31/02 (UNAUDITED) 3/31/02 --------------------------------------------------------------------------------------- $ 7,786 $ 23,668 $ 4,229 $ 11,990 10,719 18,036 9,149 8,227 22,527 (14,504) 15,784 (9,107) -------------- -------------- -------------- -------------- 41,032 27,200 29,162 11,110 (6,789) (21,398) (2,698) (8,056) (2) (5) -- -- (655) (1,783) (880) (2,458) (255) (371) (624) (1,401) (85) (111) (27) (74) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 61,511 (97,107) (17,048) 35,286 -------------- -------------- -------------- -------------- 94,757 (93,575) 7,885 34,407 456,909 550,484 274,599 240,192 -------------- -------------- -------------- -------------- $ 551,666 $ 456,909 $ 282,484 $ 274,599 ============== ============== ============== ============== -- $ $ -- $ (394) $ (394) ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 35 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERMEDIATE BOND --------------------------------- SIX MONTHS ENDED 9/30/02 YEAR ENDED (UNAUDITED) 3/31/02 --------------------------------- (IN THOUSANDS) Net investment income/(loss)................................ $ 8,633 $ 7,491 Net realized gain/(loss) on investments..................... -- -- Net realized gain/(loss) on investments allocated from Portfolio+................................................ 8,060 (222) Net change in unrealized appreciation/(depreciation) of investments............................................... -- -- Net change in unrealized appreciation/(depreciation) of investments allocated from Portfolio+..................... 20,749 (5,096) -------------- -------------- Net increase/(decrease) in net assets resulting from operations................................................ 37,442 2,173 Distributions to shareholders from net investment income: Primary A Shares.......................................... (7,319) (4,301) Primary B Shares.......................................... -- -- Investor A Shares......................................... (854) (2,957) Investor B Shares......................................... (117) (139) Investor C Shares......................................... (37) (52) Distributions to shareholders from net realized gain on investments: Primary A Shares.......................................... -- -- Primary B Shares.......................................... -- -- Investor A Shares......................................... -- -- Investor B Shares......................................... -- -- Investor C Shares......................................... -- -- Net increase/(decrease) in net assets from Fund share transactions.............................................. 382,644 218,168 -------------- -------------- Net increase/(decrease) in net assets....................... 411,759 212,892 NET ASSETS: Beginning of period......................................... 328,774 115,882 -------------- -------------- End of period............................................... $ 740,533 $ 328,774 ============== ============== Undistributed net investment income/(loss)/(distributions in excess of net investment income) at end of period......... $ 478 $ 172 ============== ==============
--------------- + Allocated from Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 36 NATIONS FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
BOND STRATEGIC INCOME HIGH YIELD BOND ----------------------------------- ------------------------------- ------------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED 9/30/02 YEAR ENDED 9/30/02 YEAR ENDED 9/30/02 YEAR ENDED (UNAUDITED) 3/31/02 (UNAUDITED) 3/31/02 (UNAUDITED) 3/31/02 ------------------------------------------------------------------------------------------------------- $ 51,468 $ 129,695 $ 5,219 $ 12,370 $ 16,112 $ 17,047 33,865 39,831 1,420 1,738 -- -- -- -- -- -- (1,646) 1,213 62,798 (66,547) (2,551) (7,783) -- -- -- -- -- -- (51,594) (6,728) -------------- -------------- -------------- -------------- -------------- -------------- 148,131 102,979 4,088 6,325 (37,128) 11,532 (50,080) (128,531) (3,612) (9,041) (9,717) (11,689) -- -- -- -- -- -- (845) (2,500) (658) (1,597) (1,775) (1,624) (296) (530) (898) (2,460) (2,886) (3,444) (39) (80) (51) (86) (715) (556) (1,514) -- -- -- -- (650) -- -- -- -- -- -- (26) -- -- -- -- (97) (12) -- -- -- -- (233) (2) -- -- -- -- (39) 322,528 (23,763) (7,790) (34,115) 101,549 219,000 -------------- -------------- -------------- -------------- -------------- -------------- 417,845 (52,425) (8,921) (40,974) 49,328 212,200 2,316,813 2,369,238 217,783 258,757 305,722 93,522 -------------- -------------- -------------- -------------- -------------- -------------- $ 2,734,658 $ 2,316,813 $ 208,862 $ 217,783 $ 355,050 $ 305,722 ============== ============== ============== ============== ============== ============== $ 2,766 $ 2,558 $ 421 $ 421 $ 762 $ (257) ============== ============== ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 37 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY
SHORT-TERM INCOME SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 23,173 $ 230,958 30,951 $ 306,405 Issued in exchange for net assets of Bank of America Short-Term Bond Fund (Note 13).......................... 1,246 12,475 -- -- Issued as reinvestment of dividends....................... 81 806 146 1,438 Redeemed.................................................. (10,100) (100,696) (17,472) (172,544) ------- --------- ------- --------- Net increase/(decrease)................................... 14,400 $ 143,543 13,625 $ 135,299 ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 8,270 $ 82,399 12,696 $ 125,866 Issued as reinvestment of dividends....................... 114 1,141 173 1,718 Redeemed.................................................. (6,302) (62,714) (3,536) (35,084) ------- --------- ------- --------- Net increase/(decrease)................................... 2,082 $ 20,826 9,333 $ 92,500 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... -- $ -- 7 $ 71 Issued as reinvestment of dividends....................... 3 27 9 85 Redeemed.................................................. (15) (147) (17) (165) ------- --------- ------- --------- Net increase/(decrease)................................... (12) $ (120) (1) $ (9) ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 2,352 $ 23,440 4,495 $ 44,577 Issued as reinvestment of dividends....................... 41 408 36 354 Redeemed.................................................. (892) (8,898) (595) (5,901) ------- --------- ------- --------- Net increase/(decrease)................................... 1,501 $ 14,950 3,936 $ 39,030 ======= ========= ======= ========= Total net increase/(decrease)............................. 17,971 $ 179,199 26,893 $ 266,820 ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 38 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
SHORT-INTERMEDIATE GOVERNMENT SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 ------------------- -------------------- SHARES DOLLARS SHARES DOLLARS --------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 16,002 $ 69,013 40,021 $ 168,268 Issued in exchange for net assets of Bank of America Short-Term Government Fund (Note 13).................... 13,459 58,682 -- -- Issued as reinvestment of dividends....................... 43 186 66 275 Redeemed.................................................. (18,791) (81,001) (66,010) (278,359) ------- -------- ------- --------- Net increase/(decrease)................................... 10,713 $ 46,880 (25,923) $(109,816) ======= ======== ======= ========= PRIMARY B SHARES: Sold...................................................... -- $ -- -- $ -- Issued as reinvestment of dividends....................... --* 2 1 6 Redeemed.................................................. -- -- -- -- ------- -------- ------- --------- Net increase/(decrease)................................... --* $ 2 1 $ 6 ======= ======== ======= ========= INVESTOR A SHARES: Sold...................................................... 5,183 $ 22,311 12,325 $ 51,443 Issued as reinvestment of dividends....................... 97 420 262 1,097 Redeemed.................................................. (5,056) (21,688) (13,175) (54,988) ------- -------- ------- --------- Net increase/(decrease)................................... 224 $ 1,043 (588) $ (2,448) ======= ======== ======= ========= INVESTOR B SHARES: Sold...................................................... 3,421 $ 14,809 3,228 $ 13,587 Issued as reinvestment of dividends....................... 43 186 61 257 Redeemed.................................................. (788) (3,398) (1,066) (4,465) ------- -------- ------- --------- Net increase/(decrease)................................... 2,676 $ 11,597 2,223 $ 9,379 ======= ======== ======= ========= INVESTOR C SHARES: Sold...................................................... 813 $ 3,532 1,698 $ 7,092 Issued as reinvestment of dividends....................... 15 64 22 93 Redeemed.................................................. (373) (1,607) (339) (1,413) ------- -------- ------- --------- Net increase/(decrease)................................... 455 $ 1,989 1,381 $ 5,772 ======= ======== ======= ========= Total net increase/(decrease)............................. 14,068 $ 61,511 (22,906) $ (97,107) ======= ======== ======= =========
--------------- *Amount represents less than 500 shares and/or $500, as applicable. SEE NOTES TO FINANCIAL STATEMENTS. 39 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
GOVERNMENT SECURITIES SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 ------------------ -------------------- SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 2,774 $ 28,158 12,885 $ 128,421 Issued in exchange for Primary A Shares of Nations U.S. Government Bond Fund (Note 13).......................... -- -- 5,428 52,977 Issued as reinvestment of dividends....................... 4 41 18 182 Redeemed.................................................. (5,064) (51,494) (16,691) (166,581) ------ -------- ------- --------- Net increase/(decrease)................................... (2,286) $(23,295) 1,640 $ 14,999 ====== ======== ======= ========= INVESTOR A SHARES: Sold...................................................... 8,490 $ 85,376 17,645 $ 175,244 Issued in exchange for Investor A Shares of Nations U.S. Government Bond Fund (Note 13).......................... -- -- 826 8,053 Issued as reinvestment of dividends....................... 59 607 164 1,626 Redeemed.................................................. (8,717) (87,873) (18,943) (188,163) ------ -------- ------- --------- Net increase/(decrease)................................... (168) $ (1,890) (308) $ (3,240) ====== ======== ======= ========= INVESTOR B SHARES: Sold...................................................... 1,313 $ 13,468 2,125 $ 21,209 Issued in exchange for Investor B Shares of Nations U.S. Government Bond Fund (Note 13).......................... -- -- 1,173 11,447 Issued as reinvestment of dividends....................... 49 500 111 1,099 Redeemed.................................................. (636) (6,472) (1,132) (11,229) ------ -------- ------- --------- Net increase/(decrease)................................... 726 $ 7,496 2,277 $ 22,526 ====== ======== ======= ========= INVESTOR C SHARES: Sold...................................................... 181 $ 1,847 395 $ 3,920 Issued in exchange for Investor C Shares of Nations U.S. Government Bond Fund (Note 13).......................... -- -- 95 920 Issued as reinvestment of dividends....................... 2 18 5 51 Redeemed.................................................. (122) (1,224) (393) (3,890) ------ -------- ------- --------- Net increase/(decrease)................................... 61 $ 641 102 $ 1,001 ====== ======== ======= ========= Total net increase/(decrease)............................. (1,667) $(17,048) 3,711 $ 35,286 ====== ======== ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 40 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
INTERMEDIATE BOND SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 -------------------- ------------------ SHARES DOLLARS SHARES DOLLARS -------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 19,041 $ 129,366 25,831 $247,227 Issued in exchange for net assets of Bank of America Intermediate Bond Fund (Note 13)........................ 39,156 439,200 -- -- Issued as reinvestment of dividends....................... 6 56 7 65 Redeemed.................................................. (17,831) (176,391) (3,466) (33,029) ------- --------- ------ -------- Net increase/(decrease)................................... 40,372 $ 392,231 22,372 $214,263 ======= ========= ====== ======== INVESTOR A SHARES: Sold...................................................... 1,865 $ 18,096 3,587 $ 34,481 Issued as reinvestment of dividends....................... 67 648 179 1,714 Redeemed.................................................. (3,473) (33,769) (4,159) (39,960) ------- --------- ------ -------- Net increase/(decrease)................................... (1,541) $ (15,025) (393) $ (3,765) ======= ========= ====== ======== INVESTOR B SHARES: Sold...................................................... 573 $ 5,555 702 $ 6,722 Issued as reinvestment of dividends....................... 10 93 12 113 Redeemed.................................................. (195) (1,881) (104) (992) ------- --------- ------ -------- Net increase/(decrease)................................... 388 $ 3,767 610 $ 5,843 ======= ========= ====== ======== INVESTOR C SHARES: Sold...................................................... 211 $ 2,251 194 $ 2,054 Issued as reinvestment of dividends....................... 2 21 2 23 Redeemed.................................................. (57) (601) (24) (250) ------- --------- ------ -------- Net increase/(decrease)................................... 156 $ 1,671 172 $ 1,827 ======= ========= ====== ======== Total net increase/(decrease)............................. 39,375 $ 382,644 22,761 $218,168 ======= ========= ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 41 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
BOND SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 -------------------- -------------------- SHARES DOLLARS SHARES DOLLARS ---------------------------------------------- (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 31,492 $ 311,745 56,303 $ 551,000 Issued in exchange for net assets of: Bank of America Charitable Bond Fund (Note 13).......... 22,207 217,846 -- -- Bank of America Bond Fund (Note 13)..................... 10,952 107,442 -- -- Issued as reinvestment of dividends....................... 535 5,271 1,177 11,540 Redeemed.................................................. (32,882) (323,912) (62,339) (611,501) ------- --------- ------- --------- Net increase/(decrease)................................... 32,304 $ 318,392 (4,859) $ (48,961) ======= ========= ======= ========= INVESTOR A SHARES: Sold...................................................... 3,082 $ 30,260 9,251 $ 90,523 Issued as reinvestment of dividends....................... 46 455 116 1,139 Redeemed.................................................. (2,916) (28,654) (7,913) (77,736) ------- --------- ------- --------- Net increase/(decrease)................................... 212 $ 2,061 1,454 $ 13,926 ======= ========= ======= ========= INVESTOR B SHARES: Sold...................................................... 446 $ 4,390 1,242 $ 12,189 Issued as reinvestment of dividends....................... 25 251 45 438 Redeemed.................................................. (247) (2,433) (253) (2,483) ------- --------- ------- --------- Net increase/(decrease)................................... 224 $ 2,208 1,034 $ 10,144 ======= ========= ======= ========= INVESTOR C SHARES: Sold...................................................... 65 $ 635 266 $ 2,623 Issued as reinvestment of dividends....................... 3 27 6 60 Redeemed.................................................. (81) (795) (159) (1,555) ------- --------- ------- --------- Net increase/(decrease)................................... (13) $ (133) 113 $ 1,128 ======= ========= ======= ========= Total net increase/(decrease)............................. 32,727 $ 322,528 (2,258) $ (23,763) ======= ========= ======= =========
SEE NOTES TO FINANCIAL STATEMENTS. 42 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
STRATEGIC INCOME SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 2,139 $ 20,479 3,877 $ 37,864 Issued as reinvestment of dividends....................... 13 120 25 248 Redeemed.................................................. (2,846) (27,212) (6,975) (68,083) ------ -------- ------ -------- Net increase/(decrease)................................... (694) $ (6,613) (3,073) $(29,971) ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 582 $ 5,564 404 $ 3,938 Issued as reinvestment of dividends....................... 39 377 87 846 Redeemed.................................................. (474) (4,527) (670) (6,551) ------ -------- ------ -------- Net increase/(decrease)................................... 147 $ 1,414 (179) $ (1,767) ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 375 $ 3,585 691 $ 6,753 Issued as reinvestment of dividends....................... 61 583 166 1,616 Redeemed.................................................. (781) (7,474) (1,154) (11,268) ------ -------- ------ -------- Net increase/(decrease)................................... (345) $ (3,306) (297) $ (2,899) ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 135 $ 1,297 88 $ 854 Issued as reinvestment of dividends....................... 4 39 8 78 Redeemed.................................................. (64) (621) (42) (410) ------ -------- ------ -------- Net increase/(decrease)................................... 75 $ 715 54 $ 522 ====== ======== ====== ======== Total net increase/(decrease)............................. (817) $ (7,790) (3,495) $(34,115) ====== ======== ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 43 NATIONS FUNDS SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
HIGH YIELD BOND SIX MONTHS ENDED SEPTEMBER 30, 2002 YEAR ENDED (UNAUDITED) MARCH 31, 2002 ------------------ ------------------ SHARES DOLLARS SHARES DOLLARS ------------------------------------------ (IN THOUSANDS) PRIMARY A SHARES: Sold...................................................... 11,935 $100,187 19,447 $174,045 Issued as reinvestment of dividends....................... 118 971 251 2,226 Redeemed.................................................. (4,377) (36,123) (4,319) (37,701) ------ -------- ------ -------- Net increase/(decrease)................................... 7,676 $ 65,035 15,379 $138,570 ====== ======== ====== ======== INVESTOR A SHARES: Sold...................................................... 6,075 $ 51,838 3,667 $ 32,600 Issued as reinvestment of dividends....................... 140 1,141 148 1,295 Redeemed.................................................. (4,510) (37,728) (1,136) (10,188) ------ -------- ------ -------- Net increase/(decrease)................................... 1,705 $ 15,251 2,679 $ 23,707 ====== ======== ====== ======== INVESTOR B SHARES: Sold...................................................... 2,863 $ 24,511 5,271 $ 46,714 Issued as reinvestment of dividends....................... 217 1,777 257 2,257 Redeemed.................................................. (1,109) (9,054) (648) (5,706) ------ -------- ------ -------- Net increase/(decrease)................................... 1,971 $ 17,234 4,880 $ 43,265 ====== ======== ====== ======== INVESTOR C SHARES: Sold...................................................... 1,005 $ 8,644 1,591 $ 14,007 Issued as reinvestment of dividends....................... 47 383 36 318 Redeemed.................................................. (615) (4,998) (99) (867) ------ -------- ------ -------- Net increase/(decrease)................................... 437 $ 4,029 1,528 $ 13,458 ====== ======== ====== ======== Total net increase/(decrease)............................. 11,789 $101,549 24,466 $219,000 ====== ======== ====== ========
SEE NOTES TO FINANCIAL STATEMENTS. 44 [This page intentionally left blank] 45 NATIONS FUNDS FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- SHORT-TERM INCOME PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $9.82 $0.17 $ 0.26 $0.43 $(0.17) Year ended 3/31/2002#..................... 9.80 0.48 0.02 0.50 (0.48) Year ended 3/31/2001...................... 9.51 0.58 0.29 0.87 (0.58) Year ended 3/31/2000...................... 9.79 0.56 (0.28) 0.28 (0.56) Year ended 3/31/1999...................... 9.77 0.56 0.02 0.58 (0.56) Year ended 3/31/1998...................... 9.68 0.56 0.09 0.65 (0.56) INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $9.83 $0.16 $ 0.26 $0.42 $(0.16) Year ended 3/31/2002#..................... 9.81 0.45 0.02 0.47 (0.45) Year ended 3/31/2001...................... 9.51 0.56 0.30 0.86 (0.56) Year ended 3/31/2000...................... 9.79 0.54 (0.28) 0.26 (0.54) Year ended 3/31/1999...................... 9.77 0.54 0.02 0.56 (0.54) Year ended 3/31/1998...................... 9.68 0.54 0.09 0.63 (0.54) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $9.83 $0.12 $ 0.25 $0.37 $(0.12) Year ended 3/31/2002#..................... 9.80 0.38 0.03 0.41 (0.38) Year ended 3/31/2001...................... 9.51 0.48 0.29 0.77 (0.48) Year ended 3/31/2000...................... 9.79 0.51 (0.28) 0.23 (0.51) Year ended 3/31/1999...................... 9.77 0.52 0.02 0.54 (0.52) Year ended 3/31/1998...................... 9.68 0.53 0.09 0.62 (0.53) INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $9.83 $0.12 $ 0.26 $0.38 $(0.12) Year ended 3/31/2002#..................... 9.80 0.38 0.03 0.41 (0.38) Year ended 3/31/2001...................... 9.51 0.48 0.29 0.77 (0.48) Year ended 3/31/2000...................... 9.79 0.47 (0.28) 0.19 (0.47) Year ended 3/31/1999...................... 9.77 0.52 0.02 0.54 (0.52) Year ended 3/31/1998...................... 9.68 0.53 0.09 0.62 (0.53) NET ASSET VALUE END OF PERIOD ------------- SHORT-TERM INCOME PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $10.08 Year ended 3/31/2002#..................... 9.82 Year ended 3/31/2001...................... 9.80 Year ended 3/31/2000...................... 9.51 Year ended 3/31/1999...................... 9.79 Year ended 3/31/1998...................... 9.77 INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $10.09 Year ended 3/31/2002#..................... 9.83 Year ended 3/31/2001...................... 9.81 Year ended 3/31/2000...................... 9.51 Year ended 3/31/1999...................... 9.79 Year ended 3/31/1998...................... 9.77 INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $10.08 Year ended 3/31/2002#..................... 9.83 Year ended 3/31/2001...................... 9.80 Year ended 3/31/2000...................... 9.51 Year ended 3/31/1999...................... 9.79 Year ended 3/31/1998...................... 9.77 INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $10.09 Year ended 3/31/2002#..................... 9.83 Year ended 3/31/2001...................... 9.80 Year ended 3/31/2000...................... 9.51 Year ended 3/31/1999...................... 9.79 Year ended 3/31/1998...................... 9.77
--------------- + 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. (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. 46 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------- 4.44% $651,344 0.50%+(a) 1.72%+ 43% 0.60%+(a) 5.19 493,457 0.52(a) 4.79 80 0.62(a) 9.44 358,812 0.51(a) 6.04 42 0.61(a) 3.00 398,620 0.50(a) 5.86 62 0.63(a) 6.07 397,467 0.50(a) 5.70 64 0.80(a) 6.89 331,961 0.56(a)(b) 5.75 66 0.86(a) 4.30% $123,077 0.75%+(a) 1.47%+ 43% 0.85%+(a) 4.91 99,453 0.77(a) 4.54 80 0.87(a) 9.28 7,658 0.76(a) 5.79 42 0.86(a) 2.76 11,831 0.73(a) 5.63 62 0.88(a) 5.85 14,652 0.70(a) 5.50 64 1.05(a) 6.67 13,688 0.76(a)(b) 5.55 66 1.06(a) 3.81% $ 2,455 1.50%+(a) 0.72%+ 43% 1.60%+(a) 4.25 2,511 1.52(a) 3.79 80 1.62(a) 8.36 2,515 1.51(a) 5.04 42 1.61(a) 2.40 2,914 1.05(a) 5.31 62 1.63(a) 5.70 5,825 0.85(a) 5.35 64 1.80(a) 6.51 4,602 0.91(a)(b) 5.40 66 1.21(a) 3.90% $ 55,698 1.50%+(a) 0.72%+ 43% 1.60%+(a) 4.23 39,515 1.52(a) 3.79 80 1.62(a) 8.37 833 1.51(a) 5.04 42 1.61(a) 1.97 987 1.50(a) 4.86 62 1.63(a) 5.64 1,744 1.01(a) 5.19 64 1.80(a) 6.51 2,992 0.91(a)(b) 5.40 66 1.21(a)
SEE NOTES TO FINANCIAL STATEMENTS. 47 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- SHORT-INTERMEDIATE GOVERNMENT PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $4.16 $0.07 $ 0.29 $0.36 $(0.07) Year ended 3/31/2002#..................... 4.15 0.18 0.01 0.19 (0.18) Year ended 3/31/2001...................... 3.94 0.23 0.21 0.44 (0.23) Year ended 3/31/2000...................... 4.10 0.22 (0.16) 0.06 (0.22) Year ended 3/31/1999...................... 4.12 0.22 (0.02) 0.20 (0.22) Year ended 3/31/1998...................... 3.99 0.23 0.13 0.36 (0.23) PRIMARY B SHARES Six months ended 9/30/2002# (unaudited)... $4.16 $0.06 $ 0.29 $0.35 $(0.06) Year ended 3/31/2002#..................... 4.15 0.16 0.01 0.17 (0.16) Year ended 3/31/2001...................... 3.94 0.21 0.21 0.42 (0.21) Year ended 3/31/2000...................... 4.10 0.21 (0.16) 0.05 (0.21) Year ended 3/31/1999#..................... 4.12 0.21 (0.02) 0.19 (0.21) Year ended 3/31/1998...................... 3.99 0.21 0.13 0.34 (0.21) INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $4.16 $0.06 $ 0.29 $0.35 $(0.06) Year ended 3/31/2002#..................... 4.15 0.17 0.01 0.18 (0.17) Year ended 3/31/2001...................... 3.94 0.22 0.21 0.43 (0.22) Year ended 3/31/2000...................... 4.10 0.22 (0.16) 0.06 (0.22) Year ended 3/31/1999...................... 4.12 0.21 (0.02) 0.19 (0.21) Year ended 3/31/1998...................... 3.99 0.22 0.13 0.35 (0.22) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $4.16 $0.05 $ 0.29 $0.34 $(0.05) Year ended 3/31/2002#..................... 4.15 0.13 0.01 0.14 (0.13) Year ended 3/31/2001...................... 3.94 0.19 0.21 0.40 (0.19) Year ended 3/31/2000...................... 4.10 0.19 (0.16) 0.03 (0.19) Year ended 3/31/1999...................... 4.12 0.19 (0.02) 0.17 (0.19) Year ended 3/31/1998...................... 3.99 0.20 0.13 0.33 (0.20) INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $4.15 $0.05 $ 0.30 $0.35 $(0.05) Year ended 3/31/2002#..................... 4.14 0.12 0.01 0.13 (0.12) Year ended 3/31/2001...................... 3.93 0.19 0.21 0.40 (0.19) Year ended 3/31/2000...................... 4.09 0.19 (0.16) 0.03 (0.19) Year ended 3/31/1999...................... 4.12 0.19 (0.03) 0.16 (0.19) Year ended 3/31/1998...................... 3.99 0.20 0.13 0.33 (0.20) NET ASSET VALUE END OF PERIOD ------------- SHORT-INTERMEDIATE GOVERNMENT PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $4.45 Year ended 3/31/2002#..................... 4.16 Year ended 3/31/2001...................... 4.15 Year ended 3/31/2000...................... 3.94 Year ended 3/31/1999...................... 4.10 Year ended 3/31/1998...................... 4.12 PRIMARY B SHARES Six months ended 9/30/2002# (unaudited)... $4.45 Year ended 3/31/2002#..................... 4.16 Year ended 3/31/2001...................... 4.15 Year ended 3/31/2000...................... 3.94 Year ended 3/31/1999#..................... 4.10 Year ended 3/31/1998...................... 4.12 INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $4.45 Year ended 3/31/2002#..................... 4.16 Year ended 3/31/2001...................... 4.15 Year ended 3/31/2000...................... 3.94 Year ended 3/31/1999...................... 4.10 Year ended 3/31/1998...................... 4.12 INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $4.45 Year ended 3/31/2002#..................... 4.16 Year ended 3/31/2001...................... 4.15 Year ended 3/31/2000...................... 3.94 Year ended 3/31/1999...................... 4.10 Year ended 3/31/1998...................... 4.12 INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $4.45 Year ended 3/31/2002#..................... 4.15 Year ended 3/31/2001...................... 4.14 Year ended 3/31/2000...................... 3.93 Year ended 3/31/1999...................... 4.09 Year ended 3/31/1998...................... 4.12
--------------- + 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. (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. 48 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------- 8.75% $465,695 0.64%+(a) 3.29%+ 73% 0.64%+(a) 4.68 390,543 0.62(a) 4.35 486 0.62(a) 11.56 496,821 0.59(a) 5.77 108 0.59(a) 1.63 497,392 0.60(a) 5.59 177 0.65(a) 4.97 589,092 0.58(a) 5.36 242 0.78(a) 9.11 663,833 0.61 5.53 538 0.81 8.48% $ 159 1.14%+(a) 2.79%+ 73% 1.14%+(a) 4.16 147 1.12(a) 3.85 486 1.22(a) 11.01 141 1.09(a) 5.27 108 1.19(a) 1.23 200 0.99(a) 5.20 177 1.25(a) 4.61 273 0.93(a) 5.01 242 1.38(a) 8.74 261 0.96 5.18 538 1.16 8.61% $ 45,870 0.89%+(a) 3.04%+ 73% 0.89%+(a) 4.42 41,926 0.87(a) 4.10 486 0.87(a) 11.31 44,244 0.82(a) 5.54 108 0.84(a) 1.43 45,341 0.80(a) 5.39 177 0.90(a) 4.76 44,793 0.78(a) 5.16 242 1.03(a) 8.89 49,478 0.81 5.33 538 1.01 8.21% $ 30,619 1.64%+(a) 2.29%+ 73% 1.64%+(a) 3.64 17,474 1.62(a) 3.35 486 1.62(a) 10.46 8,199 1.59(a) 4.77 108 1.59(a) 0.70 8,400 1.51(a) 4.68 177 1.65(a) 4.14 9,591 1.38(a) 4.56 242 1.78(a) 8.35 9,815 1.34 4.80 538 1.54 8.47% $ 9,323 1.64%+(a) 2.29%+ 73% 1.64%+(a) 3.63 6,820 1.62(a) 3.35 486 1.62(a) 10.49 1,079 1.59(a) 4.77 108 1.59(a) 0.74 661 1.54(a) 4.65 177 1.65(a) 4.05 1,190 1.34(a) 4.60 242 1.78(a) 8.45 1,808 1.31 4.83 538 1.51
SEE NOTES TO FINANCIAL STATEMENTS. 49 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- GOVERNMENT SECURITIES PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $9.79 $0.17 $ 0.92 $ 1.09 $(0.17) Year ended 3/31/2002#..................... 9.87 0.44 (0.08) 0.36 (0.44) Year ended 3/31/2001...................... 9.38 0.60 0.48 1.08 (0.59) Year ended 3/31/2000...................... 9.86 0.58 (0.48) 0.10 (0.58) Year ended 3/31/1999#..................... 9.90 0.58 (0.05) 0.53 (0.57) Year ended 3/31/1998...................... 9.39 0.55 0.51 1.06 (0.55) INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $9.78 $0.16 $ 0.91 $ 1.07 $(0.16) Year ended 3/31/2002#..................... 9.86 0.42 (0.08) 0.34 (0.42) Year ended 3/31/2001...................... 9.37 0.57 0.49 1.06 (0.57) Year ended 3/31/2000...................... 9.86 0.57 (0.50) 0.07 (0.56) Year ended 3/31/1999#..................... 9.90 0.56 (0.05) 0.51 (0.55) Year ended 3/31/1998...................... 9.39 0.52 0.51 1.03 (0.52) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $9.79 $0.12 $ 0.92 $ 1.04 $(0.12) Year ended 3/31/2002#..................... 9.87 0.34 (0.08) 0.26 (0.34) Year ended 3/31/2001...................... 9.38 0.50 0.49 0.99 (0.50) Year ended 3/31/2000...................... 9.86 0.49 (0.48) 0.01 (0.49) Year ended 3/31/1999#..................... 9.90 0.49 (0.04) 0.45 (0.49) Year ended 3/31/1998...................... 9.39 0.47 0.51 0.98 (0.47) INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $9.76 $0.12 $ 0.92 $ 1.04 $(0.12) Year ended 3/31/2002#..................... 9.84 0.34 (0.08) 0.26 (0.34) Year ended 3/31/2001...................... 9.34 0.52 0.48 1.00 (0.50) Year ended 3/31/2000...................... 9.86 0.49 (0.52) (0.03) (0.49) Year ended 3/31/1999#..................... 9.90 0.49 (0.04) 0.45 (0.49) Year ended 3/31/1998...................... 9.39 0.48 0.51 0.99 (0.48) NET ASSET VALUE END OF PERIOD ------------- GOVERNMENT SECURITIES PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $10.71 Year ended 3/31/2002#..................... 9.79 Year ended 3/31/2001...................... 9.87 Year ended 3/31/2000...................... 9.38 Year ended 3/31/1999#..................... 9.86 Year ended 3/31/1998...................... 9.90 INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $10.69 Year ended 3/31/2002#..................... 9.78 Year ended 3/31/2001...................... 9.86 Year ended 3/31/2000...................... 9.37 Year ended 3/31/1999#..................... 9.86 Year ended 3/31/1998...................... 9.90 INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $10.71 Year ended 3/31/2002#..................... 9.79 Year ended 3/31/2001...................... 9.87 Year ended 3/31/2000...................... 9.38 Year ended 3/31/1999#..................... 9.86 Year ended 3/31/1998...................... 9.90 INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $10.68 Year ended 3/31/2002#..................... 9.76 Year ended 3/31/2001...................... 9.84 Year ended 3/31/2000...................... 9.34 Year ended 3/31/1999#..................... 9.86 Year ended 3/31/1998...................... 9.90
--------------- + 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. (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. 50 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF NET ASSETS OPERATING NET INVESTMENT OPERATING END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO TOTAL PERIOD AVERAGE NET TO AVERAGE TURNOVER AVERAGE RETURN++ (000) ASSETS NET ASSETS RATE NET ASSETS ------------------------------------------------------------------------------------- 11.21% $159,946 0.72%+(a) 3.30%+ 89% 0.85%+(a) 3.70 168,621 0.73(a) 4.44 522 0.86(a) 11.97 153,799 0.75(a) 6.21 183 0.86(a) 1.12 108,798 0.78(b) 6.17 348 0.90 5.41 119,659 0.73(a) 5.70 600 0.84(a) 11.65 75,796 0.85(a)(b) 5.63 303 0.99(a) 10.98% $ 57,451 0.97%+(a) 3.05%+ 89% 1.10%+(a) 3.45 54,167 0.98(a) 4.19 522 1.11(a) 11.70 57,641 1.00(a) 5.96 183 1.11(a) 0.80 57,485 1.03(b) 5.92 348 1.15 5.16 19,167 0.98(a) 5.45 600 1.09(a) 11.37 8,509 1.10(a)(b) 5.38 303 1.24(a) 10.66% $ 62,037 1.72%+(a) 2.30%+ 89% 1.85%+(a) 2.67 49,611 1.73(a) 3.44 522 1.86(a) 10.86 27,544 1.75(a) 5.21 183 1.86(a) 0.22 26,988 1.72(b) 5.23 348 1.90 4.53 30,109 1.58(a) 4.85 600 1.84(a) 10.78 32,391 1.63(a)(b) 4.85 303 1.77(a) 10.69% $ 3,050 1.72%+(a) 2.30%+ 89% 1.85%+(a) 2.68 2,200 1.73(a) 3.44 522 1.86(a) 11.03 1,213 1.75(a) 5.21 183 1.86(a) (0.22) 238 1.78(b) 5.17 348 1.90 4.52 213 1.59(a) 4.84 600 1.84(a) 10.84 735 1.58(a)(b) 4.90 303 1.72(a)
SEE NOTES TO FINANCIAL STATEMENTS. 51 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- INTERMEDIATE BOND PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ 9.41 $0.17 $ 0.55 $ 0.72 $(0.17) Year ended 3/31/2002#..................... 9.52 0.49 (0.11) 0.38 (0.49) Year ended 3/31/2001#..................... 9.13 0.58 0.39 0.97 (0.58) Period ended 3/31/2000**.................. 9.52 0.49 (0.37) 0.12 (0.51) INVESTOR A SHARES* Six months ended 9/30/2002# (unaudited)... $ 9.43 $0.16 $ 0.56 $ 0.72 $(0.16) Year ended 3/31/2002#..................... 9.55 0.47 (0.12) 0.35 (0.47) Year ended 3/31/2001#..................... 9.15 0.56 0.40 0.96 (0.56) Period ended 3/31/2000.................... 9.50 0.46 (0.34) 0.12 (0.47) Period ended 5/14/1999.................... 9.52 0.10 (0.04) 0.06 (0.08) Year ended 2/28/1999...................... 9.69 0.50 (0.03) 0.47 (0.53) Year ended 2/28/1998...................... 9.54 0.49 0.20 0.69 (0.51) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ 9.39 $0.13 $ 0.56 $ 0.69 $(0.13) Year ended 3/31/2002#..................... 9.51 0.40 (0.12) 0.28 (0.40) Year ended 3/31/2001#..................... 9.13 0.47 0.42 0.89 (0.51) Period ended 3/31/2000**.................. 9.52 0.22 (0.36) (0.14) (0.25) INVESTOR C SHARES* Six months ended 9/30/2002# (unaudited)... $10.39 $0.11 $ 0.64 $ 0.75 $(0.11) Year ended 3/31/2002#..................... 10.47 0.39 (0.08) 0.31 (0.39) Year ended 3/31/2001#..................... 9.32 0.47 1.09 1.56 (0.41) Period ended 3/31/2000.................... 9.56 0.34 (0.23) 0.11 (0.35) Period ended 5/14/1999.................... 9.59 0.09 (0.04) 0.05 (0.08) Year ended 2/28/1999...................... 9.72 0.46 -- 0.46 (0.48) Year ended 2/28/1998...................... 9.54 0.44 0.19 0.63 (0.42) DISTRIBUTIONS FROM NET REALIZED GAINS -------------- INTERMEDIATE BOND PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Period ended 3/31/2000**.................. -- INVESTOR A SHARES* Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Period ended 3/31/2000.................... -- Period ended 5/14/1999.................... -- Year ended 2/28/1999...................... (0.11) Year ended 2/28/1998...................... (0.03) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Period ended 3/31/2000**.................. -- INVESTOR C SHARES* Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Period ended 3/31/2000.................... -- Period ended 5/14/1999.................... -- Year ended 2/28/1999...................... (0.11) Year ended 2/28/1998...................... (0.03)
--------------- + 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 Intermediate Bond Fund A, and K Shares, which were reorganized into the Intermediate Bond Investor A 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. **Intermediate Bond Primary A and Investor B Shares commenced operations on May 21, 1999 and October 20, 1999. # Per share net investment income has been calculated using the monthly average shares method. SEE NOTES TO FINANCIAL STATEMENTS. 52 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) EXPENSES TO AND VALUE TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE DISTRIBUTIONS END OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS NET ASSETS --------------------------------------------------------------------------------------------------------- $(0.17) $ 9.96 7.73% $678,553 0.71%+ 3.60%+ 0.71%+ (0.49) 9.41 4.04 261,018 0.78 4.80 0.86 (0.58) 9.52 11.04 51,178 0.78 6.31 0.81 (0.51) 9.13 1.29 18,365 0.81+ 6.08+ 1.05+ $(0.16) $ 9.99 7.69% $ 46,234 0.96%+ 3.35%+ 0.96%+ (0.47) 9.43 3.66 58,167 1.03 4.55 1.11 (0.56) 9.55 10.88 62,617 1.03 6.06 1.06 (0.47) 9.15 1.34 45,207 1.06+ 5.83+ 1.30+ (0.08) 9.50 0.66 61,412 1.09+ 4.90+ 1.12+ (0.64) 9.52 4.89 63,404 0.90 5.14 0.90 (0.54) 9.69 7.40 41,875 0.90 5.50 1.21 $(0.13) $ 9.95 7.23% $ 11,282 1.71%+ 2.60%+ 1.71%+ (0.40) 9.39 2.94 7,003 1.78 3.80 1.86 (0.51) 9.51 9.99 1,290 1.78 5.31 1.81 (0.25) 9.13 1.33 256 1.81+ 5.08+ 2.05+ $(0.11) $11.03 7.27% $ 4,464 1.71%+ 2.60%+ 1.71%+ (0.39) 10.39 2.94 2,586 1.78 3.80 1.86 (0.41) 10.47 17.06 797 1.78 5.31 1.81 (0.35) 9.32 1.18 15 1.81+ 5.08+ 2.05+ (0.08) 9.56 0.47 469 1.57+ 4.42+ 1.84+ (0.59) 9.59 4.76 495 1.39 4.67 1.65 (0.45) 9.72 6.80 513 1.39 4.99 1.73
SEE NOTES TO FINANCIAL STATEMENTS. 53 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- BOND PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ 9.66 $0.21 $ 0.38 $ 0.59 $(0.21) Year ended 3/31/2002#..................... 9.78 0.54 (0.12) 0.42 (0.54) Year ended 3/31/2001...................... 9.37 0.62 0.41 1.03 (0.62) Year ended 3/31/2000...................... 9.93 0.59 (0.52) 0.07 (0.59) Year ended 3/31/1999...................... 10.03 0.59 (0.04) 0.55 (0.59) Year ended 3/31/1998...................... 9.62 0.58 0.41 0.99 (0.58) INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $ 9.65 $0.20 $ 0.38 $ 0.58 $(0.20) Year ended 3/31/2002#..................... 9.78 0.51 (0.13) 0.38 (0.51) Year ended 3/31/2001...................... 9.37 0.60 0.41 1.01 (0.60) Year ended 3/31/2000...................... 9.93 0.57 (0.52) 0.05 (0.57) Year ended 3/31/1999...................... 10.03 0.57 (0.04) 0.53 (0.57) Year ended 3/31/1998...................... 9.62 0.56 0.41 0.97 (0.56) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ 9.66 $0.16 $ 0.37 $ 0.53 $(0.16) Year ended 3/31/2002#..................... 9.78 0.44 (0.12) 0.32 (0.44) Year ended 3/31/2001...................... 9.37 0.52 0.41 0.93 (0.52) Year ended 3/31/2000...................... 9.93 0.50 (0.52) (0.02) (0.50) Year ended 3/31/1999...................... 10.03 0.51 (0.04) 0.47 (0.51) Year ended 3/31/1998...................... 9.62 0.51 0.41 0.92 (0.51) INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $ 9.65 $0.16 $ 0.38 $ 0.54 $(0.16) Year ended 3/31/2002#..................... 9.78 0.44 (0.13) 0.31 (0.44) Year ended 3/31/2001...................... 9.37 0.52 0.41 0.93 (0.52) Year ended 3/31/2000...................... 9.93 0.48 (0.52) (0.04) (0.48) Year ended 3/31/1999...................... 10.03 0.51 (0.04) 0.47 (0.51) Year ended 3/31/1998...................... 9.62 0.52 0.41 0.93 (0.52) DISTRIBUTIONS FROM NET REALIZED GAINS -------------- BOND PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $(0.01) Year ended 3/31/2002#..................... -- Year ended 3/31/2001...................... -- Year ended 3/31/2000...................... (0.04) Year ended 3/31/1999...................... (0.06) Year ended 3/31/1998...................... -- INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $(0.01) Year ended 3/31/2002#..................... -- Year ended 3/31/2001...................... -- Year ended 3/31/2000...................... (0.04) Year ended 3/31/1999...................... (0.06) Year ended 3/31/1998...................... -- INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $(0.01) Year ended 3/31/2002#..................... -- Year ended 3/31/2001...................... -- Year ended 3/31/2000...................... (0.04) Year ended 3/31/1999...................... (0.06) Year ended 3/31/1998...................... -- INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $(0.01) Year ended 3/31/2002#..................... -- Year ended 3/31/2001...................... -- Year ended 3/31/2000...................... (0.04) Year ended 3/31/1999...................... (0.06) Year ended 3/31/1998...................... --
--------------- + 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. (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. 54 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO AND VALUE TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS END OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS RATE NET ASSETS --------------------------------------------------------------------------------------------------------------------- $(0.22) $10.03 6.14% $2,667,961 0.67%+(a) 4.27%+ 223% 0.68%+(a) (0.54) 9.66 4.33 2,256,647 0.68(a)(b) 5.41 314 0.68(a) (0.62) 9.78 11.39 2,333,703 0.67(a) 6.53 120 0.67(a) (0.63) 9.37 0.97 1,793,913 0.67 6.20 63 0.69 (0.65) 9.93 5.61 1,798,155 0.68(a) 5.86 107 0.78(a) (0.58) 10.03 10.53 1,681,990 0.72(a)(b) 5.86 244 0.83(a) $(0.21) $10.02 6.02% $ 44,582 0.92%+(a) 4.02%+ 223% 0.93%+(a) (0.51) 9.65 3.96 40,902 0.93(a)(b) 5.16 314 0.93(a) (0.60) 9.78 11.11 27,220 0.92(a) 6.28 120 0.92(a) (0.61) 9.37 0.74 23,420 0.90 5.97 63 0.94 (0.63) 9.93 5.40 32,119 0.88(a) 5.66 107 1.03(a) (0.56) 10.03 10.30 26,054 0.92(a)(b) 5.66 244 1.03(a) $(0.17) $10.02 5.61% $ 19,772 1.67%+(a) 3.27%+ 223% 1.68%+(a) (0.44) 9.66 3.29 16,877 1.68(a)(b) 4.41 314 1.68(a) (0.52) 9.78 10.29 6,994 1.67(a) 5.53 120 1.67(a) (0.54) 9.37 0.05 5,637 1.59 5.28 63 1.69 (0.57) 9.93 4.76 5,440 1.48(a) 5.06 107 1.78(a) (0.51) 10.03 9.73 2,662 1.47(a)(b) 5.11 244 1.58(a) $(0.17) $10.02 5.62% $ 2,343 1.67%+(a) 3.27%+ 223% 1.68%+(a) (0.44) 9.65 3.18 2,387 1.68(a)(b) 4.41 314 1.68(a) (0.52) 9.78 10.28 1,321 1.67(a) 5.53 120 1.67(a) (0.52) 9.37 (0.24) 934 1.67 5.20 63 1.69 (0.57) 9.93 4.90 1,137 1.40(a) 5.14 107 1.78(a) (0.52) 10.03 9.87 943 1.42(a)(b) 5.16 244 1.53(a)
SEE NOTES TO FINANCIAL STATEMENTS. 55 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- STRATEGIC INCOME PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ 9.61 $0.24 $(0.05) $ 0.19 $(0.24) Year ended 3/31/2002#..................... 9.89 0.60 (0.28) 0.32 (0.60) Year ended 3/31/2001#..................... 9.53 0.66 0.35 1.01 (0.65) Year ended 3/31/2000...................... 10.31 0.68 (0.78) (0.10) (0.68) Year ended 3/31/1999#..................... 10.55 0.66 (0.14) 0.52 (0.66) Year ended 3/31/1998...................... 10.11 0.65 0.44 1.09 (0.65) INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $ 9.60 $0.23 $(0.05) $ 0.18 $(0.23) Year ended 3/31/2002#..................... 9.88 0.57 (0.28) 0.29 (0.57) Year ended 3/31/2001#..................... 9.52 0.63 0.36 0.99 (0.63) Year ended 3/31/2000...................... 10.31 0.65 (0.79) (0.14) (0.65) Year ended 3/31/1999#..................... 10.55 0.63 (0.14) 0.49 (0.63) Year ended 3/31/1998...................... 10.11 0.63 0.44 1.07 (0.63) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ 9.61 $0.20 $(0.05) $ 0.15 $(0.20) Year ended 3/31/2002#..................... 9.89 0.50 (0.28) 0.22 (0.50) Year ended 3/31/2001#..................... 9.52 0.56 0.37 0.93 (0.56) Year ended 3/31/2000...................... 10.31 0.59 (0.79) (0.20) (0.59) Year ended 3/31/1999#..................... 10.55 0.57 (0.14) 0.43 (0.57) Year ended 3/31/1998...................... 10.11 0.57 0.44 1.01 (0.57) INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $ 9.60 $0.20 $(0.05) $ 0.15 $(0.20) Year ended 3/31/2002#..................... 9.88 0.50 (0.28) 0.22 (0.50) Year ended 3/31/2001#..................... 9.52 0.56 0.36 0.92 (0.56) Year ended 3/31/2000...................... 10.31 0.58 (0.79) (0.21) (0.58) Year ended 3/31/1999#..................... 10.55 0.57 (0.14) 0.43 (0.57) Year ended 3/31/1998...................... 10.11 0.58 0.44 1.02 (0.58) DISTRIBUTIONS FROM NET REALIZED GAINS -------------- STRATEGIC INCOME PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Year ended 3/31/2000...................... (0.00)## Year ended 3/31/1999#..................... (0.10) Year ended 3/31/1998...................... -- INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Year ended 3/31/2000...................... (0.00)## Year ended 3/31/1999#..................... (0.10) Year ended 3/31/1998...................... -- INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Year ended 3/31/2000...................... (0.00)## Year ended 3/31/1999#..................... (0.10) Year ended 3/31/1998...................... -- INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... -- Year ended 3/31/2001#..................... -- Year ended 3/31/2000...................... (0.00)## Year ended 3/31/1999#..................... (0.10) Year ended 3/31/1998...................... --
--------------- + 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 expenses ratio, with and without waivers and/or expense reimbursements, was less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. 56 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO AND VALUE TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE DISTRIBUTIONS END OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS RATE NET ASSETS --------------------------------------------------------------------------------------------------------------------- $(0.24) $ 9.56 2.05% $135,925 0.83%+(a) 5.09%+ 84% 0.93%+(a) (0.60) 9.61 3.30 143,283 0.81(a) 5.76 199 0.91(a) (0.65) 9.89 11.06 177,877 0.72 6.76 238 0.84 (0.68) 9.53 (0.95) 118,458 0.71(a) 6.80 107 0.90(a) (0.76) 10.31 5.00 317,937 0.70(a) 6.27 94 0.80(a) (0.65) 10.55 11.07 263,840 0.73(a) 6.27 203 0.83(a) $(0.23) $ 9.55 1.92% $ 27,807 1.08%+(a) 4.84%+ 84% 1.18%+(a) (0.57) 9.60 3.05 26,543 1.06(a) 5.51 199 1.16(a) (0.63) 9.88 10.80 29,102 0.97 6.51 238 1.09 (0.65) 9.52 (1.30) 30,870 0.96(a) 6.55 107 1.15(a) (0.73) 10.31 4.74 12,954 0.95(a) 6.02 94 1.05(a) (0.63) 10.55 10.80 11,946 0.98(a) 6.02 203 1.08(a) $(0.20) $ 9.56 1.54% $ 42,431 1.83%+(a) 4.09%+ 84% 1.93%+(a) (0.50) 9.61 2.28 45,960 1.81(a) 4.76 199 1.91(a) (0.56) 9.89 10.08 50,251 1.72 5.76 238 1.84 (0.59) 9.52 (1.98) 55,946 1.65(a) 5.86 107 1.90(a) (0.67) 10.31 4.11 67,651 1.55(a) 5.42 94 1.80(a) (0.57) 10.55 10.18 65,248 1.55(a) 5.45 203 1.65(a) $(0.20) $ 9.55 1.53% $ 2,699 1.83%+(a) 4.09%+ 84% 1.93%+(a) (0.50) 9.60 2.28 1,997 1.81(a) 4.76 199 1.91(a) (0.56) 9.88 9.98 1,527 1.72 5.76 238 1.84 (0.58) 9.52 (2.04) 1,202 1.71(a) 5.80 107 1.90(a) (0.67) 10.31 4.09 1,474 1.56(a) 5.41 94 1.80(a) (0.58) 10.55 10.27 2,090 1.46(a) 5.54 203 1.56(a)
SEE NOTES TO FINANCIAL STATEMENTS. 57 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED) For a share outstanding throughout each period.
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS VALUE NET AND UNREALIZED (DECREASE) IN FROM NET BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME ------------------------------------------------------------------------- HIGH YIELD BOND PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ 8.86 $0.40 $(1.21) $(0.81) $(0.37) Year ended 3/31/2002#..................... 9.27 0.86 (0.34) 0.52 (0.88) Year ended 3/31/2001#..................... 9.90 0.96 (0.54) 0.42 (1.05) Period ended 3/31/2000*#.................. 10.00 0.09 (0.11) (0.02) (0.08) INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $ 8.80 $0.39 $(1.21) $(0.82) $(0.36) Year ended 3/31/2002#..................... 9.22 0.80 (0.32) 0.48 (0.85) Year ended 3/31/2001#..................... 9.88 0.96 (0.58) 0.38 (1.04) Period ended 3/31/2000*#.................. 10.00 0.08 (0.12) (0.04) (0.08) INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ 8.80 $0.36 $(1.21) $(0.85) $(0.33) Year ended 3/31/2002#..................... 9.21 0.76 (0.33) 0.43 (0.79) Year ended 3/31/2001#..................... 9.88 0.92 (0.62) 0.30 (0.97) Period ended 3/31/2000**#................. 10.00 0.07 (0.12) (0.05) (0.07) INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $ 8.77 $0.36 $(1.21) $(0.85) $(0.33) Year ended 3/31/2002#..................... 9.19 0.76 (0.34) 0.42 (0.79) Year ended 3/31/2001#..................... 9.87 0.90 (0.61) 0.29 (0.97) Period ended 3/31/2000***#................ 10.02 0.04 (0.12) (0.08) (0.07) DISTRIBUTIONS FROM NET REALIZED GAINS -------------- HIGH YIELD BOND PRIMARY A SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... (0.05) Year ended 3/31/2001#..................... -- Period ended 3/31/2000*#.................. -- INVESTOR A SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... (0.05) Year ended 3/31/2001#..................... -- Period ended 3/31/2000*#.................. -- INVESTOR B SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... (0.05) Year ended 3/31/2001#..................... -- Period ended 3/31/2000**#................. -- INVESTOR C SHARES Six months ended 9/30/2002# (unaudited)... $ -- Year ended 3/31/2002#..................... (0.05) Year ended 3/31/2001#..................... -- Period ended 3/31/2000***#................ --
--------------- + 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. * High Yield Bond Primary A and Investor A Shares commenced operations on February 14, 2000. ** High Yield Bond Investor B Shares commenced operations on February 17, 2000. ***High Yield Bond Investor C Shares commenced operations on March 8, 2000. # Per share net investment income has been calculated using the monthly average shares method. SEE NOTES TO FINANCIAL STATEMENTS. 58 NATIONS FUNDS FINANCIAL HIGHLIGHTS (CONTINUED)
WITHOUT WAIVERS AND/OR EXPENSE REIMBURSEMENTS --------------- RATIO OF RATIO OF RATIO OF TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING DIVIDENDS NET ASSET END OF EXPENSES INCOME/(LOSS) EXPENSES TO AND VALUE TOTAL PERIOD TO AVERAGE TO AVERAGE AVERAGE DISTRIBUTIONS END OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS NET ASSETS --------------------------------------------------------------------------------------------------------- $(0.37) $7.68 (9.38)% $227,752 0.92%+ 9.46%+ 0.92%+ (0.93) 8.86 6.05 194,867 0.93 9.75 1.00 (1.05) 9.27 4.51 61,181 0.93 10.97 1.45 (0.08) 9.90 (0.12) 9,394 0.93+ 7.03+ 12.66+ $(0.36) $7.62 (9.56)% $ 40,307 1.17%+ 9.21%+ 1.17%+ (0.90) 8.80 5.69 31,551 1.18 9.50 1.25 (1.04) 9.22 3.99 8,344 1.18 10.72 1.70 (0.08) 9.88 (0.33) 371 1.18+ 6.78+ 12.91+ $(0.33) $7.62 (9.89)% $ 70,503 1.92%+ 8.46%+ 1.92%+ (0.84) 8.80 5.06 64,091 1.93 8.75 2.00 (0.97) 9.21 3.29 22,106 1.93 9.97 2.45 (0.07) 9.88 (0.47) 3,426 1.93+ 6.03+ 13.66+ $(0.33) $7.59 (9.81)% $ 16,488 1.92%+ 8.46%+ 1.92%+ (0.84) 8.77 4.96 15,213 1.93 8.75 2.00 (0.97) 9.19 3.20 1,891 1.93 9.97 2.45 (0.07) 9.87 (0.76) 59 1.93+ 6.03+ 13.66+
SEE NOTES TO FINANCIAL STATEMENTS. 59 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Nations Funds Trust ("Funds Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. At September 30, 2002, Funds Trust offered sixty-one separate portfolios. These financial statements pertain only to the following U.S. government and corporate bond portfolios of Funds Trust: Short-Term Income Fund, Short-Intermediate Government Fund, Government Securities Fund, Intermediate Bond Fund, Bond Fund, Strategic Income Fund and High Yield Bond Fund (each a "Fund" and collectively, the "Funds"). Financial statements for the other portfolios of Funds Trust are presented under separate cover. The Funds currently offer four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares. In addition, Short-Intermediate Government Fund also offers Primary B Shares. Shareholders of a Fund have equal voting rights on matters affecting all shareholders of the Fund. In addition, each class of shares of a Fund has exclusive voting rights on matters that relate solely to that class and separate voting rights on matters in which the interests of one class differ from the interests of any other class. Intermediate Bond Fund and High Yield Bond Fund (the "Feeder Funds") seek to achieve their investment objectives by investing substantially all of their assets in Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio, respectively (the "Master Portfolios"), each a series of Nations Master Investment Trust (the "Master Trust"), another open-end management investment company in the Nations Funds family. The Master Portfolios each have the same investment objective as that of its corresponding Feeder Fund. The values of the Feeder Funds' investments in the respective Master Portfolios included in the Statements of net assets reflect the Feeder Funds' proportionate beneficial interests in the net assets of the respective Master Portfolios (96.8% for Intermediate Bond Master Portfolio and 92.7% for High Yield Bond Master Portfolio at September 30, 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 and managed by Banc of America Advisors, LLC ("BA Advisors"), whose financial statements are not presented here, also invest in the Master Portfolios. 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 are generally valued using prices provided by a pricing service or based upon broker-dealer quotations. Certain prices provided by broker-dealers or the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities. Certain securities may be valued based upon quotes provided by one or more principal market makers. Securities, including options and futures contracts, traded on a recognized exchange or on NASDAQ are valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities which are primarily traded on foreign securities exchanges are valued at the last available closing values on their respective exchanges where primarily traded, or at the mean between the closing bid and ask prices if no sales are recorded. 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 as determined by the applicable Nations Funds' prospectus. The valuation of each Feeder Fund's investment in its corresponding Master Portfolio is based on the reported net asset value of that Master Portfolio. The Master Portfolios use valuation policies consistent with those described above. Futures contracts: The Short-Term Income, Short-Intermediate Government, Government Securities, Bond and Strategic Income Funds may invest in futures contracts for the purposes of hedging against changes in values of the Fund's securities or changes in the prevailing levels of interest rates or currency exchange rates or to 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 60 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) securities equal to a specified percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by "marking-to-market" on a daily basis to reflect the changes in market value of the contract. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into. Risks of investments in futures contracts include the possible adverse movement of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts, that a change in the value of the contract may not correlate with a change in the value of the underlying securities, or that the counterparty to a contract may default on its obligation to perform. Options: The Funds may purchase and write call and put options on non-U.S. stock index and interest rate futures contracts. A Fund may use such options on futures contracts in connection with its hedging strategies in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures, and to seek to enhance return. The Funds may write covered call options and put options on securities in which they are permitted to invest from time to time in seeking to attain each Fund's objective. Call options written by a Fund give the holder the right to buy the underlying securities from the Fund at a stated exercise price; put options give the holder the right to sell the underlying security to the Fund at a stated price. In the case of put options, a Fund is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Funds may also write combinations of covered puts and calls on the same underlying security. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Funds typically receive a premium from writing a put or call option, which would increase the Funds' return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, a Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received. A Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received from a simultaneous or subsequent sale of a different put option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Fund. Foreign currency transactions: The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of a Fund and the amounts actually received. The effects of changes in foreign currency exchange rates on securities are not separately identified in the Statements of operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on securities. 61 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Forward foreign currency transactions: Generally, each Fund may enter into forward currency exchange contracts only under two circumstances: (i) when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, to "lock in" the U.S. exchange rate of the transaction, with such period being a short-dated contract covering the period between transaction date and settlement date; or (ii) when the investment adviser or sub-adviser believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by a Fund as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or offset. Forward foreign currency contracts will be used primarily to protect the Funds from adverse currency movements and will generally not be entered into for terms greater than one year. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of a Fund's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency contract would limit the risk of loss due to a decline in the value of a particular currency; however, it also would limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Statements of net assets. In addition, the Funds could be exposed to risks if counterparties to the contracts are unable to meet the terms of their contracts. The counterparty risk exposure is, therefore, closely monitored and contracts are only executed with high credit quality financial institutions. Swaps: The Funds may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with its investment objective and policies. Swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest or total return throughout the lives of the agreements. The interest to be paid or received on interest rate swaps is included in interest income. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of net assets. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Fund's basis in the swap and the proceeds from (or cost of ) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. If there is a default by the counterparty to a swap contract, a Fund will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Fund will succeed in pursuing contractual remedies. A Fund thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The creditworthiness of the swap contract counterparties is closely monitored in order to minimize this risk. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of net assets. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it instructs its custodian to segregate assets with a current value at least equal to the amount of its when-issued or delayed- delivery purchase commitments. Stripped securities: Stripped mortgage-backed securities are derivative multi-class mortgage securities structured so that one class receives most, if not all, of the principal from the underlying mortgage assets, while the other class receives most, if not all, of the interest and the remainder of the principal. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recoup its initial investment in an interest-only security. The market value of these securities consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligation. Securities transactions and investment income: Securities transactions are recorded on trade date. 62 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 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. The Feeder Funds record their share of the investment income and realized and unrealized gains and losses reported by the Master Portfolios on a daily basis. The investment income and realized and unrealized gains and losses are allocated daily to investors in the Master Portfolios based upon the relative value of their investments in the Master Portfolios. Dividends and distributions to shareholders: It is the policy of each Fund (except Intermediate Bond and High Yield Bond) to declare dividends from net investment income daily and to pay such dividends monthly. Intermediate Bond and High Yield Bond Funds declare and pay dividends monthly. The Funds may declare and pay distribution of net investment income more frequently. Each Fund will distribute net realized capital gains (including net short-term capital gains) at least annually after the fiscal year in which the capital gains were earned, unless offset by any available capital loss carryforward. 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 Funds Trust are allocated to the Funds based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Fund or class of shares are charged to such Fund or class. The Feeder Funds record their share of the expenses reported by the Master Portfolios on a daily basis. The expenses are allocated daily to investors in the Master Portfolios based upon the relative value of the Feeder Funds' investments in the Master Portfolios. 2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS Funds Trust has entered into an investment advisory agreement (the "Investment Advisory Agreement") 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 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 Fund:
ANNUAL RATE ----------- Short-Term Income, Short-Intermediate....... 0.30% Government Bond............................. 0.40% Strategic Income............................ 0.50%
FEES ON AVERAGE FEES ON AVERAGE FEES ON AVERAGE DAILY NET ASSETS DAILY NET ASSETS DAILY NET ASSETS BETWEEN $200 EXCEEDING $250 UP TO $200 MILLION AND $250 MILLION MILLION -------------------------------------------------------- Government Securities......... 0.50% 0.45% 0.40%
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). 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 maximum annual rate of 0.15% of each 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 Funds Trust. Under the co-administration agreement, Stephens and BA Advisors are currently entitled to receive a combined fee, computed daily and paid monthly, at the maximum annual rate of 0.22% of the average daily net assets of all Funds except for Intermediate Bond Fund, which pays a monthly fee at the maximum annual rate of 0.17% of its average daily net assets and High Yield Bond Fund, which pays a 63 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) monthly fee at the maximum annual rate of 0.18% of its average daily net assets. For the period beginning August 1, 2002 and until July 31, 2003, Stephens has agreed to waive 0.05% of its co-administration fees for Government Securities Fund. The Bank of New York ("BNY") serves as sub-administrator of Funds Trust pursuant to an agreement with BA Advisors. For the six months ended September 30, 2002, Stephens and BA Advisors earned 0.08% and 0.10%, 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 six months ended September 30, 2002 and until July 31, 2003, BA Advisors has agreed to waive its advisory fees for the Funds set forth below (as a percentage of the Funds' average daily net assets): Short-Term Income................................ 0.10% Government Securities............................ 0.10%* Strategic Income................................. 0.10%
--------------- *Contractual advisory fees are based on asset breakpoints causing this percentage to fluctuate, as the advisory waiver is subject to change in order to maintain a maximum advisory fee of 0.40% of Government Securities' average daily net assets. The advisory fee waiver presented reflects the maximum advisory fee waiver. In addition, during the six months ended September 30, 2002 and until July 31, 2003, BA Advisors and/or the sub-advisers and/or Stephens have agreed to reimburse expenses and/or waive their fees to the extent that the 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:
FUND ANNUAL RATE ---------------------------------------------------------- Intermediate Bond Fund....................... 0.81% High Yield Bond Fund......................... 0.93%
BA Advisors is entitled to recover from Intermediate Bond Fund any fees waived or expenses reimbursed by BA Advisors 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 September 30, 2002, for Intermediate Bond Fund no fees were recoverable by BA Advisors pursuant to this arrangement. BNY serves as the custodian of Funds Trust's assets. For the six months ended September 30, 2002, expenses of the Funds were reduced by $4,208 under expense offset arrangements with BNY. The Funds could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if they had not entered into such arrangements. PFPC Inc. ("PFPC") serves as the transfer agent for the Funds' shares. Bank of America serves as the sub-transfer agent for the Primary A and Primary B Shares of the Funds. For the six months ended September 30, 2002, Bank of America earned approximately $18,574 for providing such services. Stephens serves as distributor of the Funds' shares. For the six months ended September 30, 2002, the Funds were informed that the distributor received the following:
CONTINGENT FRONT END DEFERRED SALES SALES CHARGE CHARGE (000) (000) FUND INVESTOR A INVESTOR A INVESTOR B INVESTOR C ------------------------------------------------------------------------ Short-Term Income.... $ 43 $44 $ -- $22 Short-Intermediate Government......... 89 -- 26 2 Government Securities......... 121 24 54 --* Intermediate Bond.... 53 12 12 4 Bond................. 32 4 15 3 Strategic Income..... 110 -- 30 1 High Yield Bond...... 261 5 122 12
--------------- *Amount represents less than $500. No officer, director or employee of Bank of America, BA Advisors or BACAP, or any affiliate thereof, receives any compensation from Funds Trust for serving as Trustee or Officer of Funds Trust. Funds Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Funds' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, another portfolio of Funds Trust. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statement of net assets. Funds Trust previously offered a retirement plan to the Trustees, which was terminated on January 1, 2002. Funds Trust's eligible Trustees had the option of a rollover into the deferred compensation plan on January 1, 2002 or a lump 64 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) sum distribution, including interest, on January 1, 2003. The liability for the retirement plan is included in "Accrued Trustees' fees and expenses" in the Statement of net assets. Certain Funds have made daily investments of cash balances in the Nations Cash Reserves, another portfolio of Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Fund from such investments is included in its Statement of operations as "Dividend income from affiliated funds". Certain Funds have invested in portfolios contained within the various Nations Trusts, pursuant to an exemptive order received from the Securities and Exchange Commission. Bond Fund has invested in Convertible Securities Fund and International Bond Portfolio, portfolios of Funds Trust and Master Trust, respectively. Strategic Income has invested in High Yield Portfolio and International Bond Portfolio, portfolios of Master Trust. The income earned from such investments is included 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 Funds Trust has adopted shareholder servicing plans and distribution plans for the Investor B and Investor C Shares of each Fund and a combined distribution and shareholder servicing plan for the Investor A Shares of each Fund. In addition, Funds Trust has adopted a shareholder administration plan for Primary B Shares of Short-Intermediate Government Fund. The shareholder servicing plans permit the Funds to compensate or reimburse servicing agents for shareholder services provided by the servicing agents. The administration plan permits the Short-Intermediate Government Fund to compensate institutions for shareholder administration services provided to their customers that own Primary B Shares. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940 Act, permit the Funds to compensate or reimburse the distributor and/or selling agents for activities or expenses primarily intended to result in the sale of the applicable classes' shares. Payments are made at an annual rate, 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 six months ended September 30, 2002, the annual rates in effect and plan limits, as a percentage of average daily net assets, were as follows:
CURRENT RATE (AFTER FEE PLAN WAIVERS) LIMIT --------------------- PRIMARY B SHAREHOLDER ADMINISTRATION PLAN: Short-Intermediate Government..... 0.50%* 0.60% 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%
--------------- * During the six months ended September 30, 2002 and until July 31, 2003, BA Advisors has agreed to waive Primary B Shareholder Administration fees as a percentage of the Short-Intermediate Government Fund's average daily net assets at an annual rate of 0.10%. **Short-Term Income Fund pays its shareholder servicing fees under a separate servicing plan. 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 six months ended September 30, 2002 were as follows:
PURCHASES SALES (000) (000) -------------------- Short-Term Income................ $ 79,175 $ 25,335 Short-Intermediate Government.... 8,610 24,249 Government Securities............ 5,115 7,191 Bond............................. 439,841 480,353 Strategic Income................. 11,207 13,031
The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the six months ended September 30, 2002 were as follows:
PURCHASES SALES (000) (000) ----------------------- Short-Term Income............. $ 461,471 $ 268,429 Short-Intermediate Government.................. 338,206 272,307 Government Securities......... 224,390 185,698 Bond.......................... 5,193,773 5,030,897 Strategic Income.............. 166,849 167,083
65 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 5. FUTURES CONTRACTS At September 30, 2002, the following Funds had futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE APPRECIATION/ NUMBER OF WHEN OPENED OF CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) --------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INCOME FUND: Antenna Hungaria Share Future (long position) expiring December 2002(a)....................................... 1,005 $ 213,860 $ 215,981 $ 2,121 ======= SHORT-INTERMEDIATE GOVERNMENT FUND: 90 Day Euro Futures (long position) expiring March 2003(a).................................................. 84 20,603 20,684 81 90 Day Euro Futures (long position) expiring June 2004(a).................................................. 253 61,117 61,362 245 90 Day Euro Futures (long position) expiring December 2002(a).................................................. 168 41,258 41,374 116 Abbey National plc Universal Stock Share Futures (long position) expiring December 2002(a).................... 80 8,835 9,143 308 Antenna Hungaria Share Future (long position) expiring December 2002(a)....................................... 220 46,798 47,279 481 U.S. 10 year Treasury Note Futures (long position) expiring December 2002(a).............................. 622 70,370 72,093 1,723 90 Day Euro Futures (short position) expiring June 2003(a).................................................. (337) (82,444) (82,847) (403) 90 Day Euro Futures (short position) expiring September 2003(a).................................................. (168) (40,945) (41,168) (223) ------- Total net unrealized appreciation...................... $ 2,328 ======= GOVERNMENT SECURITIES FUND: 90 Day Euro Futures (long position) expiring March 2003(a).................................................. 44 10,792 10,834 42 90 Day Euro Futures (long position) expiring June 2004(a).................................................. 131 31,645 31,772 127 90 Day Euro Futures (long position) expiring December 2002(a).................................................. 88 21,611 21,672 61 Antenna Hungaria Share Future (long position) expiring December 2002(a)....................................... 80 17,018 17,193 175 U.S. 10 year Treasury Note Futures (long position) expiring December 2002(a).............................. 578 65,323 66,994 1,671 U.S. 20 year Treasury Bond Futures (long position) expiring December 2002(a).............................. 342 38,177 39,073 896 90 Day Euro Futures (short position) expiring June 2003(a).................................................. (174) (42,568) (42,776) (208) 90 Day Euro Futures (short position) expiring September 2003(a).................................................. (88) (21,447) (21,564) (117) Abbey National plc Universal Stock Share Futures (short position) expiring December 2002(a).................... (179) (20,059) (20,456) (397) ------- Total net unrealized appreciation...................... $ 2,250 ======= BOND FUND: 90 Day Euro Futures (long position) expiring March 2003(a).................................................. 406 99,582 99,973 391 90 Day Euro Futures (long position) expiring June 2004(a).................................................. 1,218 294,230 295,411 1,181 90 Day Euro Futures (long position) expiring December 2002(a).................................................. 811 199,168 199,729 561 Abbey National plc Universal Stock Share Futures (long position) expiring December 2002(a).................... 127 14,305 14,514 209 Antenna Hungaria Share Future (long position) expiring December 2002(a)....................................... 535 113,805 114,975 1,170 U.S. 10 year Treasury Note Futures (long position) expiring December 2002(a).............................. 1,355 153,136 157,053 3,917 U.S. 20 year Treasury Bond Futures (long position) expiring December 2002(a).............................. 962 107,549 109,909 2,360 90 Day Euro Futures (short position) expiring June 2003(a).................................................. (1,625) (397,543) (399,486) (1,943) 90 Day Euro Futures (short position) expiring September 2003(a).................................................. (811) (197,656) (198,736) (1,080) ------- Total net unrealized appreciation...................... $ 6,766 ======= STRATEGIC INCOME FUND: 90 Day Euro Futures (long position) expiring March 2003(a).................................................. 10 2,452 2,462 10 90 Day Euro Futures (long position) expiring June 2004(a).................................................. 31 7,489 7,519 30 90 Day Euro Futures (long position) expiring December 2002(a).................................................. 21 5,158 5,172 14
66 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
UNREALIZED VALUE OF CONTRACT MARKET VALUE APPRECIATION/ NUMBER OF WHEN OPENED OF CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) --------------------------------------------------------------------------------------------------------------------------- Abbey National plc Universal Stock Share Futures (long position) expiring December 2002(a).................... 7 $ 795 $ 800 $ 5 Antenna Hungaria Share Future (long position) expiring December 2002(a)....................................... 4 851 860 9 U.S. 20 year Treasury Bond Futures (long position) expiring December 2002(a).............................. 22 2,456 2,514 58 90 Day Euro Futures (short position) expiring June 2003(a).................................................. (41) (10,030) (10,079) (49) 90 Day Euro Futures (short position) expiring September 2003(a).................................................. (21) (5,118) (5,146) (28) ------- Total net unrealized appreciation...................... $ 49 =======
--------------- (a)Securities have been segregated as collateral for the Fund's open futures contracts. 6. WRITTEN OPTIONS Written options for the Bond Fund for the six months ended September 30, 2002 aggregated the following:
PREMIUM NUMBER OF RECEIVED SUMMARY OF WRITTEN OPTIONS CONTRACTS (000) ----------------------------------------------------------------------------------- Outstanding at March 31, 2002............................... -- $ -- Contracts opened............................................ 30 (639) Contracts closed............................................ -- 0 Outstanding at September 30, 2002........................... 30 $(639) == =====
7. FORWARD FOREIGN CURRENCY CONTRACTS At September 30, 2002, Bond Fund had the following forward foreign currency contracts outstanding:
VALUE OF CONTRACT VALUE OF CONTRACT WHEN OPENED WHEN OPENED MARKET VALUE OF LOCAL (LOCAL CURRENCY) (US DOLLARS) CONTRACT (US DOLLARS) DESCRIPTION CURRENCY (000) (000) (000) ----------------------------------------------------------------------------------------------------------------------------- BOND: CONTRACTS TO BUY: Expiring December 19, 2002........ Australian Dollar 23,000 $ 12,230 $ 12,412 Expiring October 11, 2002......... British Pound Sterling 3,000 4,255 4,715 Expiring October 11, 2002......... British Pound Sterling 10,000 14,181 15,716 Expiring October 11, 2002......... British Pound Sterling 4,000 5,669 6,286 Expiring October 11, 2002......... British Pound Sterling 500 709 786 Expiring December 18, 2002........ British Pound Sterling 16,900 24,671 26,454 Expiring December 19, 2002........ British Pound Sterling 16,300 24,160 25,515 Expiring December 19, 2002........ British Pound Sterling 16,800 24,901 26,298 UNREALIZED APPRECIATION/ (DEPRECIATION) (US DOLLARS) DESCRIPTION (000) ---------------------------------- -------------- BOND: CONTRACTS TO BUY: Expiring December 19, 2002........ $ 182 Expiring October 11, 2002......... 460 Expiring October 11, 2002......... 1,535 Expiring October 11, 2002......... 617 Expiring October 11, 2002......... 77 Expiring December 18, 2002........ 1,783 Expiring December 19, 2002........ 1,355 Expiring December 19, 2002........ 1,397
67 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
VALUE OF CONTRACT VALUE OF CONTRACT WHEN OPENED WHEN OPENED MARKET VALUE OF LOCAL (LOCAL CURRENCY) (US DOLLARS) CONTRACT (US DOLLARS) DESCRIPTION CURRENCY (000) (000) (000) ----------------------------------------------------------------------------------------------------------------------------- Expiring December 19, 2002........ British Pound Sterling 16,300 24,159 25,515 Expiring October 11, 2002......... Japanese Yen 3,194,450 25,193 26,255 Expiring November 11, 2002........ Japanese Yen 2,845,675 23,000 23,423 Expiring November 11, 2002........ Japanese Yen 1,497,140 12,258 12,323 Expiring November 22, 2002........ Japanese Yen 2,966,525 24,622 24,431 Expiring December 19, 2002........ Japanese Yen 2,905,067 24,168 23,957 Expiring December 19, 2002........ Japanese Yen 3,012,002 25,058 24,839 Expiring December 19, 2002........ Japanese Yen 2,953,641 24,172 24,358 Expiring December 19, 2002........ Japanese Yen 2,994,180 24,910 24,692 Expiring December 19, 2002........ Japanese Yen 1,482,050 12,500 12,222 Expiring December 19, 2002........ Japanese Yen 1,472,400 12,500 12,142 Expiring December 20, 2002........ Japanese Yen 1,515,962 12,500 12,502 Expiring November 11, 2002........ Korean Won 15,000,000 12,313 12,178 Net unrealized appreciation....... CONTRACTS TO SELL: Expiring December 19, 2002........ Australian Dollar (23,000) (12,099) (12,413) Expiring December 12, 2002........ Euro (362) (353) (357) Expiring October 11, 2002......... British Pound Sterling (17,500) (25,193) (27,503) Expiring December 19, 2002........ British Pound Sterling (16,300) (24,169) (25,515) Expiring December 19, 2002........ British Pound Sterling (16,900) (25,058) (26,454) Expiring December 19, 2002........ British Pound Sterling (16,300) (24,172) (25,515) Expiring December 19, 2002........ British Pound Sterling (16,800) (24,910) (26,298) Expiring October 11, 2002......... Japanese Yen (552,030) (4,254) (4,537) Expiring October 11, 2002......... Japanese Yen (1,842,900) (14,181) (15,146) Expiring October 11, 2002......... Japanese Yen (736,040) (5,669) (6,049) Expiring October 11, 2002......... Japanese Yen (92,155) (709) (758) Expiring October 11, 2002......... Japanese Yen (2,894,251) (23,000) (23,823) Expiring November 11, 2002........ Japanese Yen (1,472,031) (12,313) (12,116) Expiring November 22, 2002........ Japanese Yen (1,474,675) (12,500) (12,145) Expiring November 22, 2002........ Japanese Yen (1,491,850) (12,500) (12,286) Expiring November 22, 2002........ Japanese Yen (25,109) (205) (206) Expiring December 18, 2002........ Japanese Yen (3,037,564) (24,672) (25,050) Expiring December 19, 2002........ Japanese Yen (2,953,641) (24,160) (24,358) Expiring December 19, 2002........ Japanese Yen (3,044,244) (24,901) (25,105) Expiring December 19, 2002........ Japanese Yen (2,905,067) (24,159) (23,957) Expiring December 19, 2002........ Japanese Yen (1,483,937) (12,500) (12,237) Expiring December 19, 2002........ Japanese Yen (1,507,187) (12,500) (12,429) Expiring December 20, 2002........ Japanese Yen (1,525,350) (12,500) (12,580) Expiring December 20, 2002........ Japanese Yen (1,538,456) (12,500) (12,688) Expiring December 20, 2002........ Japanese Yen (1,537,581) (12,500) (12,680) Expiring October 10, 2002......... Polish Zloty (24,925) (5,959) (6,013) Expiring October 18, 2002......... Polish Zloty (28,000) (6,685) (6,745) Expiring November 11, 2002........ Korean Won (15,000,000) (12,258) (12,178) Net unrealized depreciation....... Total net unrealized depreciation.................... UNREALIZED APPRECIATION/ (DEPRECIATION) (US DOLLARS) DESCRIPTION (000) ---------------------------------- -------------- Expiring December 19, 2002........ 1,356 Expiring October 11, 2002......... 1,062 Expiring November 11, 2002........ 423 Expiring November 11, 2002........ 65 Expiring November 22, 2002........ (191) Expiring December 19, 2002........ (211) Expiring December 19, 2002........ (219) Expiring December 19, 2002........ 186 Expiring December 19, 2002........ (218) Expiring December 19, 2002........ (278) Expiring December 19, 2002........ (358) Expiring December 20, 2002........ 2 Expiring November 11, 2002........ (135) -------- Net unrealized appreciation....... $ 8,890 -------- CONTRACTS TO SELL: Expiring December 19, 2002........ (314) Expiring December 12, 2002........ (4) Expiring October 11, 2002......... (2,310) Expiring December 19, 2002........ (1,346) Expiring December 19, 2002........ (1,396) Expiring December 19, 2002........ (1,343) Expiring December 19, 2002........ (1,388) Expiring October 11, 2002......... (283) Expiring October 11, 2002......... (965) Expiring October 11, 2002......... (380) Expiring October 11, 2002......... (49) Expiring October 11, 2002......... (823) Expiring November 11, 2002........ 197 Expiring November 22, 2002........ 355 Expiring November 22, 2002........ 214 Expiring November 22, 2002........ (1) Expiring December 18, 2002........ (378) Expiring December 19, 2002........ (198) Expiring December 19, 2002........ (204) Expiring December 19, 2002........ 202 Expiring December 19, 2002........ 263 Expiring December 19, 2002........ 71 Expiring December 20, 2002........ (80) Expiring December 20, 2002........ (188) Expiring December 20, 2002........ (180) Expiring October 10, 2002......... (54) Expiring October 18, 2002......... (60) Expiring November 11, 2002........ 80 -------- Net unrealized depreciation....... $(10,562) -------- Total net unrealized depreciation.................... $ (1,672) ========
68 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 8. SWAP CONTRACTS At September 30, 2002, the following Funds had swap contracts outstanding:
UNREALIZED NOTIONAL APPRECIATION AMOUNT FIXED RATE/TOTAL RETURN PAYMENTS FLOATING RATE/ TOTAL RETURN PAYMENTS (DEPRECIATION) DESCRIPTION (000) MADE BY THE FUND RECEIVED BY THE FUND (000) ----------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INCOME FUND: Contract with Morgan Stanley, effective July 31, 2002, expiring CMBS Aaa Index Floating II Total CMBS Aaa Index Spread Floating I October 31, 2002(a)...... $ 23,750 Return Total Return $ (46) ====== SHORT-INTERMEDIATE GOVERNMENT FUND: Contract with Lehman Brothers, effective May 1, 2001, expiring May 01, 2006(a).................. 14,000 3-month LIBOR 5.474% 1,293 Contract with Lehman Brothers, effective May 1, 2001, expiring May 01, 2004(a).................. 18,000 3-month LIBOR 5.074 878 Contract with Morgan Stanley, effective July 31, 2002, expiring CMBS Aaa Index Floating II Total CMBS Aaa Index Spread Floating I October 31, 2002(a)...... 15,000 Return Total Return (29) ------ Total net unrealized appreciation............... $2,142 ====== GOVERNMENT SECURITIES FUND: Contract with Lehman Brothers, effective May 1, 2001, expiring May 01, 2004(a).................. 18,000 3-month LIBOR 5.074 644 Contract with Lehman Brothers, effective May 1, 2001, expiring May 01, 2006(a).................. 14,000 3-month LIBOR 5.474 600 Contract with Morgan Stanley, effective July 31, 2002, expiring CMBS Aaa Index Floating II Total CMBS Aaa Index Spread Floating I October 31, 2002(a)...... 8,700 Return Total Return (17) ------ Total net unrealized appreciation............. $1,227 ====== BOND FUND: Contract with JP Morgan, effective December 9, 2002, expiring December 9,2012(a)................ $ 30,250 3-month Euro LIBOR 4.73 $ 371 Contract with Morgan Stanley, effective July 29, 2002, expiring July 29, 2032(a).............. 8,650 3-month LIBOR 5.810 965 Contract with Morgan Stanley, effective July 29, 2002, expiring July 29, 2012(a).............. 15,600 5.020% 3-month LIBOR (1,020) Contract with Morgan Stanley, effective July 31, 2002, expiring CMBS Aaa Index Floating II Total CMBS Aaa Index Spread Floating I October 31, 2002(a)...... 72,500 Return Total Return 3- month (141) Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 77,350 5.000 3-month Euro LIBOR (905) Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 77,350 4.88 3-month Euro LIBOR (685)
69 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
UNREALIZED NOTIONAL APPRECIATION AMOUNT FIXED RATE/TOTAL RETURN PAYMENTS FLOATING RATE/ TOTAL RETURN PAYMENTS (DEPRECIATION) DESCRIPTION (000) MADE BY THE FUND RECEIVED BY THE FUND (000) ----------------------------------------------------------------------------------------------------------------------------------- Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. $ 77,350 4.83% 3-month Euro LIBOR $ (679) Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 77,350 4.52 3-month Euro LIBOR (206) Contract with Salomon Smith Barney, effective December 9, 2002, expiring December 10, 2012(a).................. 30,250 3-month Euro LIBOR 4.74% 383 Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 736,650 3-month Krona LIBOR 5.50 549 Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 736,650 3-month Krona LIBOR 5.38 397 Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 736,650 3-month Krona LIBOR 5.39 410 Contract with Salomon Smith Barney, effective February 1, 2005, expiring February 1, 2007(a).................. 736,650 3-month Krona LIBOR 5.20 156 Contract with Salomon Smith Barney, effective September 9, 2002, expiring December 10, 2012(a).................. 30,000 4.62 3-month LIBOR (677) Contract with Salomon Smith Barney, effective December 9, 2002, expiring December 10, 2012(a).................. 30,000 4.61 3-month LIBOR (606) Contract with Salomon Smith Barney, effective January 31, 2002, expiring World Government Bond Index Solomon US Treasury Index Total November 30, 2003(a)..... 130,000 Total Return Return 1,745 ------ Total net unrealized appreciation............... $ 57 ====== STRATEGIC INCOME FUND: Contract with Morgan Stanley, effective July 31, 2002, expiring CMBS Aaa Index Floating II Total CMBS Aaa Index Spread Floating I October 31, 2002(a)...... 2,000 Return Total Return $ (4) ======
--------------- (a)Fair valued. 9. SHARES OF BENEFICIAL INTEREST As of September 30, 2002, an unlimited number of shares of beneficial interest without par value were authorized for Funds Trust. Funds Trust's Declarations of Trust authorizes the Board of Trustees to classify or reclassify any authorized but unissued shares into one or more additional classes or series of shares. See Schedules of capital stock activity. 70 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 10. LINES OF CREDIT Funds Trust participates with other Nations Funds in a $1 billion uncommitted line of credit provided by BNY under a line of credit agreement (the "Agreement"). Advances under the Agreement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest on borrowings is payable at a specified Federal Funds rate plus 0.50% on an annualized basis. Each participating Fund maintains a ratio of net assets (not including amounts borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement of no less than 4 to 1. At September 30, 2002, there were no loans outstanding under this Agreement. For the six months ended September 30, 2002, there were no borrowings by the Funds under the Agreement. 11. SECURITIES LENDING Under an agreement with BNY, the Funds can lend their securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash, in an amount at least equal to the market value of the securities loaned. The cash collateral received is invested in Nations Cash Reserves. A portion of the income generated by the investment of the collateral, net of any rebates paid by BNY to borrowers, is remitted to BNY as lending agent, and the remainder is paid to the Fund. Generally, in the event of counterparty default, the Fund has the right to use the collateral to offset losses incurred. There would be a potential loss to the Fund in the event the Fund is delayed or prevented from exercising its right to dispose of the collateral. The Fund bears the risk of loss with respect to the investment of collateral. At September 30, 2002, the following Funds had securities on loan:
MARKET MARKET VALUE OF VALUE LOANED SECURITIES OF COLLATERAL FUND (000) (000) ------------------------------------------------------------------ Short-Term Income.............. $219,939 $225,437 Short-Intermediate Government..................... 196,398 201,742 Government Securities.......... 34,199 40,393 Bond........................... 56,400 60,878 Strategic Income............... 4,194 4,294
12. INCOME TAXES Information on the tax components of capital is as follows:
NET TAX UNREALIZED APPRECIATION/ (DEPRECIATION) ON NET TAX UNREALIZED DERIVATIVES AND GROSS TAX GROSS TAX APPRECIATION/ FOREIGN CURRENCY COST OF INVESTMENTS UNREALIZED UNREALIZED (DEPRECIATION) ON AND NET OTHER FOR TAX PURPOSES APPRECIATION DEPRECIATION INVESTMENTS ASSETS FUND (000) (000) (000) (000) (000) --------------------------------------------------------------------------------------------------------------------------------- Short-Term Income............... $1,043,736 $11,393 $ (240) $11,153 $2,075 Short-Intermediate Government... 728,952 17,115 (75) 17,040 4,470 Government Securities........... 305,427 8,461 (511) 7,950 3,477 Intermediate Bond............... N/A* N/A* N/A* -- -- Bond............................ 3,637,489 64,064 (48,856) 15,208 5,316 Strategic Income................ 242,467 3,466 (10,371) (6,905) 45 High Yield...................... N/A* N/A* N/A* -- --
--------------- *See corresponding Master Portfolio for tax basis information. 71 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) At March 31, 2002, the following Funds had available for federal income tax purposes unused capital losses as follows:
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING IN 2003 IN 2005 IN 2007 IN 2008 IN 2009 IN 2010 FUND (000) (000) (000) (000) (000) (000) -------------------------------------------------------------------------------------------------------------------------- Short-Term Income................................... $ 651 $ 122 $ -- $ 2,435 $3,076 $ -- Short-Intermediate Government....................... -- -- -- 2,924 -- -- Government Securities............................... 2,220 2,304 2,883 -- -- -- Intermediate Bond................................... -- -- 1,126 504 52 74 Bond................................................ -- -- -- -- -- -- Strategic Income.................................... -- -- -- 11,355 3,544 1,942 High Yield.......................................... -- -- -- -- -- --
The capital loss carryforward for the Government Securities Fund is subject to certain limitations. During the year ended March 31, 2002, the following Funds utilized capital losses as follows:
CAPITAL LOSSES UTILIZED PORTFOLIO (000) --------------------------------------------------------------------------- Short-Term Income....................................... $ 2,998 Short-Intermediate Government........................... 15,842 Government Securities................................... 6,586 Bond.................................................... 20,301 Strategic Income........................................ 849
Under the current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended March 31, 2002, the following Funds elected to defer losses occurring between November 1, 2001 and March 31, 2002 under these rules, as follows:
CAPITAL LOSSES DEFERRED FUND (000) -------------------------------------------------------------------------- Short-Term Income....................................... $ 249 Government Securities................................... 1,010 Intermediate Bond....................................... 1,307 Strategic Income........................................ 3,466 High Yield Bond......................................... 183
Such deferred losses will be treated as arising on the first day of the fiscal year ending March 31, 2003. 13. REORGANIZATIONS FUND REORGANIZATION On June 8, 2001, the Government Securities Fund (the "Acquiring Fund"), acquired the assets and assumed the liabilities of the U.S. Government Bond 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) ---------------------------------------------------------------------------------- $73,397 $232,156 $305,553 $352
72 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) CHANGE OF REGISTERED INVESTMENT COMPANY On June 8, 2001, the Government Securities Fund, a newly established shell portfolio of Funds Trust (the "Successor Fund"), acquired the assets and liabilities of its predecessor fund, which was a series of the Company, pursuant to a plan of reorganization approved by each predecessor fund's shareholders. The predecessor fund had the same name, investment objective and principal investment strategies as the Successor Fund. The acquisition was accomplished by a tax-free exchange of shares of the Successor Fund in an amount equal to the value of the outstanding shares of the predecessor fund. The financial statements of the Successor Fund reflect the historical financial results of the predecessor fund prior to the reorganizations. CHANGE OF REGISTERED INVESTMENT COMPANY On May 10, 2002, each fund listed in the left column below (each a "Fund") reorganized into a newly created successor fund listed in the right column below, that is substantially identical to the existing Fund. The acquisition was accomplished by a tax-free exchange of shares of each Fund for shares of equal value of the newly created successor fund. The financial statements of the successor funds reflect the historical financial results of the Fund prior to the reorganization.
FUND REORGANIZED INTO A NEWLY CREATED SUCCESSOR FUND ------------------------------------------------------------------------------------ Short-Term Income Short-Term Income Short-Intermediate Government Short-Intermediate Government Intermediate Bond Intermediate Bond Bond Bond Strategic Income Strategic Income
CONVERSION OF COMMON TRUST FUNDS On August 16, 2002, certain Funds, as listed below (each an "Acquiring Fund"), acquired the net 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/(depreciation) as of the conversion date were as follows:
ACQUIRED TOTAL NET TOTAL NET FUND ASSETS OF TOTAL NET ASSETS OF UNREALIZED ACQUIRED ASSETS OF ACQUIRING FUND APPRECIATION/ ACQUIRED FUND ACQUIRING FUND AFTER CONVERSION (DEPRECIATION) ACQUIRING FUND FUND (000) (000) (000) (000) --------------------------------------------------------------------------------------------------------------------- Short-Term Income Bank of America Short-Term Bond Fund $ 12,475 $ 772,232 $ 784,707 $ 245 Short-Intermediate Government Bank of America Short-Term Government Fund 58,682 480,736 539,418 2,596 Intermediate Bond Bank of America Intermediate Bond Fund 439,200 428,904 868,104 4,570 Bond Bank of America Charitable Bond Fund 217,846 2,314,670 2,532,516 (1,082) Bond Bank of America Bond Fund 107,442 2,314,670 2,422,112 (66)
14. SUBSEQUENT EVENT On October 8, 2002, the Board of Trustees of each Fund approved the replacement of Stephens with BA Advisors as the exclusive distributor of the shares of the Funds. In addition, on November 21, 2002, the Board of Trustees approved the termination of Stephens as the co-administrator with BA Advisors (which will result in BA Advisors being the sole administrator to the Funds) and approved the assumption by BACAP of BA Advisors' role as the primary investment adviser to the Funds. The transition in service providers is expected to occur on or about January 1, 2003. It is also anticipated that BA Advisors will change its name to BACAP Distributors, LLC on or about January 1, 2003. 73 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio and Nations High Yield Bond Master Portfolio Semi-annual Report SEPTEMBER 30, 2002 (UNAUDITED) The following pages should be read in conjunction with Nations Intermediate Bond and Nations High Yield Bond Funds' Semi-annual Report. 74 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 2.3% ASSET-BACKED -- AUTO LOANS -- 1.0% $ 4,000 Americredit Automobile Receivables Trust, Series 2001-B, Class A4, 5.370% 06/12/08##........................................... $ 4,228 734 Capital Auto Receivables Asset Trust, Series 2002-2, Class CTFS, 4.180% 10/15/07##........................................... 754 1,015 Ford Credit Auto Owner Trust, Series 2002-B, Class B, 5.180% 10/16/06............................................. 1,078 2,800 MMCA Automobile Trust, Series 2001-1, Class A4, 5.340% 12/15/05##........................................... 2,936 --------- 8,996 --------- ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 0.2% 1,715 First Chicago Master Trust II, Series 1995-0, Class A, 2.050%** 02/15/04##......................................... 1,715 --------- ASSET-BACKED -- HOME EQUITY LOANS -- 0.8% 6,900 Fannie Mae Whole Loan, Series 2001-W1, Class AF3, 5.690% 06/25/29##........................................... 7,060 293 First Plus Home Loan Trust, Series 1998-2, Class M1, 7.220% 05/10/24............................................. 318 --------- 7,378 --------- ASSET-BACKED -- OTHER -- 0.3% 2,400 CIT Equipment Collateral, Series 2002-VT1, Class A4, 4.670% 12/21/09##........................................... 2,487 --------- TOTAL ASSET-BACKED SECURITIES (Cost $19,861).............................................. 20,576 --------- CORPORATE BONDS AND NOTES -- 28.9% AEROSPACE AND DEFENSE -- 0.3% 2,442 Boeing Capital Corporation, 5.650% 05/15/06##........................................... 2,572 303 Northrop Grumman Corporation, 7.125% 02/15/11............................................. 347 --------- 2,919 --------- AIRLINES -- 0.5% 1,694 American Airlines, Series 2001-2, Class A-2, 7.858% 10/01/11##........................................... 1,788 2,580 U.S. Airways, Inc., Series 2002-G, 8.020% 02/05/19##........................................... 2,693 --------- 4,481 --------- AUTOMOTIVE -- 3.2% 1,347 Delphi Automotive Systems Corporation, 6.125% 05/01/04............................................. 1,401
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- AUTOMOTIVE -- (CONTINUED) $ 3,258 Ford Motor Credit Company, 5.800% 01/12/09##........................................... $ 2,913 10,674 Ford Motor Credit Company, 7.375% 10/28/09##........................................... 10,227 1,708 Ford Motor Credit Company, 7.375% 02/01/11............................................. 1,610 1,243 General Motors Acceptance Corporation, 6.125% 09/15/06............................................. 1,245 1,778 General Motors Acceptance Corporation, 6.150% 04/05/07##........................................... 1,799 9,059 General Motors Acceptance Corporation, 6.875% 09/15/11##........................................... 8,863 559 Toyota Motor Credit Corporation, 5.625% 11/13/03............................................. 580 --------- 28,638 --------- BROADCASTING AND CABLE -- 1.0% 1,937 AOL Time Warner Inc., 6.150% 05/01/07##........................................... 1,789 1,030 Comcast Cable Communications, 7.125% 06/15/13............................................. 958 1,020 News America Inc., 6.625% 01/09/08............................................. 1,064 3,237 Time Warner Inc., 8.110% 08/15/06##........................................... 3,149 2,171 Viacom Inc., Class B, 6.625% 05/15/11............................................. 2,409 --------- 9,369 --------- CHEMICALS -- BASIC -- 0.3% 2,225 The Dow Chemical Company, 6.125% 02/01/11##........................................... 2,354 --------- CHEMICALS -- SPECIALTY -- 0.2% 705 Praxair, Inc., 4.750% 07/15/07............................................. 748 755 Praxair, Inc., 6.500% 03/01/08............................................. 851 --------- 1,599 --------- COMMERCIAL BANKING -- 5.3% 5,171 Bank One Corporation, 6.000% 08/01/08##........................................... 5,743 279 BB&T Corporation, 7.050% 05/23/03............................................. 288 5,532 Citigroup Inc., 7.250% 10/01/10##........................................... 6,307 2,810 Citigroup Inc., 6.000% 02/21/12(a).......................................... 3,040 2,179 FleetBoston Financial Corporation, 7.250% 09/15/05##........................................... 2,407 1,292 Golden West Financial Corporation, 4.750% 10/01/12............................................. 1,299 3,186 J.P. Morgan Chase & Company, 7.250% 06/01/07##........................................... 3,595 566 J.P. Morgan Chase & Company, 5.250% 05/30/07............................................. 594 1,028 Mellon Funding Corporation, 4.875% 06/15/07............................................. 1,097
SEE NOTES TO FINANCIAL STATEMENTS. 75 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- COMMERCIAL BANKING -- (CONTINUED) $ 900 Mellon Funding Corporation, 6.700% 03/01/08............................................. $ 1,018 1,717 PNC Funding Corporation, 7.000% 09/01/04............................................. 1,837 1,565 PNC Funding Corporation, 5.750% 08/01/06............................................. 1,659 1,541 Popular North America Inc., Series E, 6.125% 10/15/06............................................. 1,663 1,188 Regions Financial Corporation, 6.375% 05/15/12............................................. 1,334 910 State Street Corporation, 7.650% 06/15/10............................................. 1,088 1,477 SunTrust Banks, Inc., 5.050% 07/01/07............................................. 1,584 2,402 US Bank N.A., Minnesota, 6.375% 08/01/11##........................................... 2,707 4,265 Wachovia Corporation, 4.950% 11/01/06............................................. 4,551 1,776 Washington Mutual, Inc., 7.500% 08/15/06##........................................... 2,009 609 Washington Mutual, Inc., 5.625% 01/15/07............................................. 653 3,058 Wells Fargo and Company, 5.900% 05/21/06............................................. 3,341 --------- 47,814 --------- COMPUTERS AND OFFICE EQUIPMENT -- 0.1% 1,091 Pitney Bowes Inc., 4.625% 10/01/12............................................. 1,091 --------- CONGLOMERATES -- 0.2% 1,563 Waste Management, Inc., 7.375% 08/01/10............................................. 1,640 --------- CONSUMER CREDIT AND MORTGAGES -- 0.5% 3,831 Countrywide Home Loans, Inc., Series J, 5.500% 08/01/06##........................................... 4,024 --------- DEPARTMENT AND DISCOUNT STORES -- 0.8% 1,751 Sears Roebuck Acceptance Corporation, 6.750% 08/15/11##........................................... 1,868 802 Target Corporation, 5.375% 06/15/09............................................. 869 796 Target Corporation, 5.875% 03/01/12............................................. 883 2,932 Wal-Mart Stores, Inc., 5.450% 08/01/06............................................. 3,217 490 Wal-Mart Stores, Inc., 4.375% 07/12/07............................................. 517 --------- 7,354 ---------
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- ELECTRIC POWER -- NON NUCLEAR -- 0.5% $ 1,521 Cinergy Corporation, 6.250% 09/01/04............................................. $ 1,571 1,635 DPL Inc., 6.875% 09/01/11@............................................ 1,532 1,531 Pepco Holdings Inc., 5.500% 08/15/07@............................................ 1,572 --------- 4,675 --------- ELECTRIC POWER -- NUCLEAR -- 1.7% 1,392 American Electric Power Company, Inc., Series A, 6.125% 05/15/06##........................................... 1,383 381 Appalachian Power Company, 4.800% 06/15/05##........................................... 382 1,529 Constellation Energy Group, Inc., 6.350% 04/01/07............................................. 1,584 1,204 Consumers Energy Company, Series B, 6.200% 05/01/03##........................................... 1,181 365 Duquesne Light Company, Series O, 6.700% 04/15/12............................................. 408 241 Energy East Corporation, 6.750% 06/15/12............................................. 268 2,841 Exelon Generation Company LLC, 6.950% 06/15/11............................................. 3,132 1,155 FirstEnergy Corporation, Series B, 6.450% 11/15/11............................................. 1,086 531 PPL Electric Utilities, 6.250% 08/15/09............................................. 578 2,138 PSEG Power LLC, 6.875% 04/15/06##........................................... 2,152 1,018 Southern Company Capital Funding, Series A, 5.300% 02/01/07............................................. 1,079 616 Southern Power Company, 6.250% 07/15/12@............................................ 675 974 Virginia Electric and Power Company, Series A, 5.375% 02/01/07............................................. 1,046 --------- 14,954 --------- EXPLORATION AND PRODUCTION -- 0.2% 1,447 Anadarko Finance Company, Series B, 6.750% 05/01/11##........................................... 1,641 433 Union Pacific Resources Group Inc., 6.500% 05/15/05##........................................... 471 --------- 2,112 --------- FINANCE -- MISCELLANEOUS -- 1.9% 3,612 Caterpillar Finance Services Corporation, 5.950% 05/01/06##........................................... 3,963 5,863 General Electric Capital Corporation, Series A, 5.375% 03/15/07(a).......................................... 6,284
SEE NOTES TO FINANCIAL STATEMENTS. 76 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- FINANCE -- MISCELLANEOUS -- (CONTINUED) $3,595 General Electric Capital Corporation, Series A, 4.625% 09/15/09............................................. $ 3,621 3,269 Household Finance Corporation, 5.875% 02/01/09##........................................... 3,070 --------- 16,938 --------- FOOD AND DRUG STORES -- 0.2% 1,819 Fred Meyer, Inc., 7.450% 03/01/08##........................................... 2,091 --------- FOOD PRODUCTS -- 2.0% 3,519 Kellogg Company, Series B, 6.000% 04/01/06##........................................... 3,832 1,101 Kraft Foods Inc., 5.250% 06/01/07............................................. 1,192 3,647 Nabisco Inc., 6.125%** 02/01/33##......................................... 3,691 2,601 Sara Lee Corporation, 6.250% 09/15/11............................................. 2,934 685 Tyson Foods Inc., Class A, 7.250% 10/01/06............................................. 760 1,228 Unilever Capital Corporation, 6.875% 11/01/05............................................. 1,377 3,056 Unilever Capital Corporation, 7.125% 11/01/10............................................. 3,638 --------- 17,424 --------- HEALTH SERVICES -- 0.8% 2,931 Cardinal Health, Inc., 6.750% 02/15/11##........................................... 3,352 986 Cintas Corporation, 5.125% 06/01/07@............................................ 1,062 1,698 Wellpoint Health Networks Inc., 6.375% 06/15/06............................................. 1,853 519 Wellpoint Health Networks Inc., 6.375% 01/15/12............................................. 572 --------- 6,839 --------- HOUSEHOLD PRODUCTS -- 0.1% 1,220 Proctor & Gamble Company, 4.750% 06/15/07............................................. 1,310 --------- INSURANCE -- 0.7% 998 Allstate Financial Global Funding, 7.125% 09/26/05@............................................ 1,117 645 American International Group, Inc., 5.850% 08/01/08@............................................ 712 1,470 Principal Life Global, 6.250% 02/15/12@............................................ 1,582 2,799 Prudential Funding LLC, 6.600% 05/15/08@............................................ 3,073 --------- 6,484 ---------
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- INTEGRATED OIL -- 0.8% $ 1,244 Amerada Hess Corporation, 6.650% 08/15/11##........................................... $ 1,398 2,242 Conoco Funding Company, 6.350% 10/15/11............................................. 2,519 2,904 PEMEX Master Trust, 7.875% 02/01/09@............................................ 2,919 --------- 6,836 --------- INVESTMENT SERVICES -- 2.6% 2,155 Bear Stearns Companies, Inc., 7.800% 08/15/07##........................................... 2,511 1,121 Credit Suisse First Boston USA, Inc., 5.875% 08/01/06(a).......................................... 1,194 1,948 Credit Suisse First Boston USA, Inc., 6.125% 11/15/11............................................. 2,029 2,502 Goldman Sachs Group Inc., 6.875% 01/15/11............................................. 2,778 654 Goldman Sachs Group, Inc., 5.700% 09/01/12............................................. 676 2,490 Lehman Brothers Holdings Inc., 7.000% 02/01/08............................................. 2,774 1,582 Merrill Lynch & Company, Inc., 6.000% 02/17/09##........................................... 1,680 1,557 Morgan Stanley Dean Witter & Company, 6.100% 04/15/06............................................. 1,676 5,040 Morgan Stanley Dean Witter & Company, 6.750% 04/15/11##........................................... 5,524 2,307 Salomon Smith Barney Holdings Inc., 6.500% 02/15/08............................................. 2,569 --------- 23,411 --------- METALS AND MINING -- 0.2% 1,393 Alcoa Inc., 7.375% 08/01/10##........................................... 1,658 --------- NATURAL GAS PIPELINES -- 0.3% 1,224 El Paso Corporation, 7.000% 05/15/11(a).......................................... 808 1,759 Kinder Morgan, Inc., 6.650% 03/01/05##........................................... 1,866 --------- 2,674 --------- OIL REFINING AND MARKETING -- 0.2% 1,970 USX Corporation, 6.650% 02/01/06............................................. 2,150 --------- PAPER AND FOREST PRODUCTS -- 0.1% 1,057 International Paper Company, 8.000% 07/08/03............................................. 1,098 --------- PHARMACEUTICALS -- 0.7% 1,884 Eli Lilly and Company, 6.000% 03/15/12............................................. 2,106 3,617 Wyeth, 6.250% 03/15/06##........................................... 3,870 --------- 5,976 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 77 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- PUBLISHING AND ADVERTISING -- 0.1% $ 804 Gannett Company, Inc., 6.375% 04/01/12............................................. $ 920 --------- RAILROADS, TRUCKING AND SHIPPING -- 0.6% 1,398 Burlington Northern Santa Fe Corporation, 6.750% 07/15/11##........................................... 1,591 3,394 FedEx Corporation, 6.625% 02/12/04............................................. 3,555 --------- 5,146 --------- REAL ESTATE -- 0.2% 1,583 EOP Operating LP, 7.000% 07/15/11............................................. 1,746 --------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.2% 654 Health Care Property Investors, Inc., 7.480% 04/05/04............................................. 701 612 Health Care Property Investors, Inc., 6.450% 06/25/12............................................. 645 --------- 1,346 --------- TELECOMMUNICATIONS SERVICES -- 2.0% 234 BellSouth Corporation, 5.000% 10/15/06##........................................... 245 1,502 Cingular Wireless, 6.500% 12/15/11............................................. 1,446 1,755 Cox Communications, Inc., Class A, 7.750% 11/01/10##........................................... 1,818 3,559 SBC Communications Inc., 6.250% 03/15/11##........................................... 3,861 697 Sprint Capital Corporation, 6.125% 11/15/08............................................. 464 2,017 Sprint Capital Corporation, 8.375% 03/15/12(a).......................................... 1,432 1,465 Verizon Florida Inc., 6.125% 01/15/13............................................. 1,477 3,900 Verizon New England Inc., 6.500% 09/15/11............................................. 4,058 2,415 Verizon Pennsylvania, Series A, 5.650% 11/15/11............................................. 2,371 245 Vodafone Group plc, 7.625% 02/15/05............................................. 267 --------- 17,439 --------- TOBACCO -- 0.4% 3,140 R.J. Reynolds Tobacco Holdings, Inc., 7.375% 05/15/03............................................. 3,207 --------- TOTAL CORPORATE BONDS AND NOTES (Cost $246,895)............................................. 257,717 --------- FOREIGN BONDS AND NOTES -- 2.8% 6,495 AT&T Canada Inc., (0.000)% due 06/15/08 9.950% beginning 06/15/03##................................. 682
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- FOREIGN BONDS AND NOTES -- (CONTINUED) $ 3,104 Corp Andina de Fomento, 8.875% 06/01/05##........................................... $ 3,458 1,693 Government of Canada, 5.250% 11/05/08##........................................... 1,855 1,151 Hanson Overseas B.V., 6.750% 09/15/05............................................. 1,256 1,486 Hellenic Republic, 6.950% 03/04/08............................................. 1,739 2,942 Korea Development Bank, 7.250% 05/15/06............................................. 3,309 404 Ontario (Province of), 7.000% 08/04/05##........................................... 453 2,383 Pemex Finance Ltd., 5.720% 11/15/03##........................................... 2,455 2,166 Quebec (Province of), 6.125% 01/22/11(a).......................................... 2,446 4,491 Republic of Italy, 6.000% 02/22/11............................................. 5,144 1,664 United Mexican States, 8.375% 01/14/11(a).......................................... 1,756 --------- TOTAL FOREIGN BONDS AND NOTES (Cost $27,959).............................................. 24,553 --------- MORTGAGE-BACKED SECURITIES -- 5.8% COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.3% 650 Credit Suisse First Boston, Series 2001, 5.570%** 12/05/13........................................... 647 265 Criimi Mae CMBS Corporation, Series 1998-1, Class A1, 5.697% 06/20/30@##.......................................... 267 6,769 JP Morgan Commercial Mortgage Finance Corporation, Series 1997-C4, Class X, Interest only, 1.275%** 12/26/28##......................................... 273 14,834 Merrill Lynch Mortgage Investors, Inc., Series 1998-C3, Class IO, 1.103%** 12/15/30........................................... 641 35,755 Vendee Mortgage Trust, Series 1998-1, Class 2, Interest only, 0.450%** 09/15/27........................................... 389 37,960 Vendee Mortgage Trust, Series 1998-3, Class 1, Interest only, 0.310%** 03/15/29........................................... 304 --------- 2,521 --------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 3.8% 25,000 3.750% 04/15/04##........................................... 25,697 7,000 6.875% 01/15/05(a).......................................... 7,723 410 6.000% 06/15/11##........................................... 464 --------- 33,884 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 78 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 1.6% $12,800 5.000% 01/15/07(a).......................................... $ 13,808 723 4.454%** 08/01/36##......................................... 745 --------- 14,553 --------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 0.1% 665 7.000% 05/15/12............................................. 710 122 11.500% 06/15/13 - 10/15/15................................. 144 188 10.000% 05/15/16 - 08/15/18##............................... 216 50 9.500% 09/15/16 - 12/15/20.................................. 56 --------- 1,126 --------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $51,077).............................................. 52,084 --------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 14.7% FEDERAL HOME LOAN BANK (FHLB) -- 0.7% 5,000 3.375% 06/15/04##........................................... 5,116 675 5.750% 05/15/12##........................................... 750 --------- 5,866 --------- FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 7.6% 49,565 7.000% 07/15/05(a).......................................... 55,654 10,700 5.750% 01/15/12##........................................... 11,879 --------- 67,533 --------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 6.4% 15,000 5.625% 05/14/04##........................................... 15,896 20,700 7.000% 07/15/05##........................................... 23,227 16,825 5.250% 04/15/07(a)##........................................ 18,345 --------- 57,468 --------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $125,746)............................................. 130,867 ---------
PRINCIPAL AMOUNT VALUE (000) (000) --------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS -- 29.3% U.S. TREASURY NOTES -- 25.2% $41,900 6.250% 02/15/03(a).......................................... $ 42,632 20,900 3.875% 07/31/03(a).......................................... 21,320 2,100 4.250% 11/15/03(a).......................................... 2,164 15,300 3.250% 12/31/03(a).......................................... 15,625 39,500 5.875% 02/15/04(a).......................................... 41,821 30,600 3.000% 02/29/04(a).......................................... 31,212 3,550 3.375% 04/30/04(a).......................................... 3,647 22,500 3.250% 05/31/04(a).......................................... 23,092 19,000 6.500% 08/15/05(a).......................................... 21,386 17,000 6.625% 05/15/07(a).......................................... 20,018 2,000 10.375% 11/15/12............................................ 2,708 --------- 225,625 --------- U.S. TREASURY STRIPS -- 4.1% 25,235 Interest only, 2.640%*** 05/15/07.......................................... 22,354 9,790 Interest only, 3.890%*** 05/15/11.......................................... 7,035 11,500 TIGR Receipts, 4.050%*** 05/15/12.......................................... 7,819 --------- 37,208 --------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $257,079)............................................. 262,833 ---------
SEE NOTES TO FINANCIAL STATEMENTS. 79 NATIONS MASTER INVESTMENT TRUST Nations Intermediate Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
SHARES VALUE (000) (000) --------------------------------------------------------------------------------------- INVESTMENT COMPANIES -- 28.1% (Cost $250,651) 250,651 Nations Cash Reserves, Capital Class Shares#.................. $ 250,651 --------- TOTAL INVESTMENTS (Cost $979,268*).................................. 111.9% 999,281 --------- OTHER ASSETS AND LIABILITIES (NET).................. (11.9)% Cash.......................................................... $ 123,167 Receivable for investment securities sold..................... 71,601 Dividends receivable.......................................... 78 Interest receivable........................................... 9,863 Receivable for variation margin............................... 591 Unrealized depreciation on swap contracts..................... (26) Collateral on securities loaned............................... (185,450) Investment advisory fee payable............................... (292) Administration fee payable.................................... (36) Due to custodian.............................................. (123,179) Payable for investment securities purchased................... (2,723) Accrued Trustees' fees and expenses........................... (32) Accrued expenses and other liabilities........................ (26) --------- TOTAL OTHER ASSETS AND LIABILITIES (NET)...................... (106,464) --------- NET ASSETS.......................................... 100.0% $ 892,817 =========
--------------- * Federal Income Tax Information: Net unrealized appreciation of $20,013 on investment securities was comprised of gross appreciation of $28,724 and depreciation of $8,711 for federal income tax purposes. At September 30, 2002, the aggregate cost for federal income tax purposes was $979,268. **Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at September 30, 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. # 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 (see Note 8). The portion that represents cash collateral is $185,450. ##All or a portion of security segregated as collateral for futures and swap contracts. (a)All or a portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $142,687 and $175,233, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 80 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS SEPTEMBER 30, 2002 (UNAUDITED)
VALUE SHARES (000) -------------------------------------------------------------------------------------- COMMON STOCKS -- 2.0% BROADCASTING AND CABLE -- 0.0%+ 139,100 Adelphia Communications Corporation, Class A!!(a)............. $ 17 12,210 Charter Communications, Inc., Class A!!(a).................... 23 -------- 40 -------- FOOD PRODUCTS -- 0.1% 25,294 Chiquita Brands International, Inc.!!......................... 391 -------- HEALTH SERVICES -- 0.5% 80,010 Apria Healthcare Group Inc.!!................................. 1,885 -------- LODGING AND RECREATION -- 0.1% 13,345 Pinnacle Entertainment, Inc.!!................................ 97 17,233 United Artists, Bank Debt(f)(g)............................... 233 -------- 330 -------- METALS AND MINING -- 0.2% 3,178 Joy Global Inc.!!............................................. 26 91,510 Placer Dome Inc.(a)........................................... 836 -------- 862 -------- PACKAGING AND CONTAINERS -- 0.2% 62,100 Owens-Illinois, Inc.!!........................................ 703 -------- PAPER AND FOREST PRODUCTS -- 0.2% 115,300 Abitibi-Consolidated Inc. .................................... 781 -------- PHARMACEUTICALS -- 0.0%+ 1,158 Genesis Health Ventures, Inc.!!(g)............................ 19 -------- STEEL -- 0.1% 158,576 Algoma Steel Inc.!!........................................... 545 -------- TELECOMMUNICATIONS SERVICES -- 0.6% 36,200 BellSouth Corporation......................................... 665 46,794 Call-Net Enterprises, Inc., Class B!!......................... 16 6,617 ICO Global Communications Holdings LTD.(g).................... 6 127,971 Minorplanet Systems USA, Inc.!!............................... 107 35,600 SBC Communications Inc. ...................................... 716 27,775 Verizon Communications Inc. .................................. 761 -------- 2,271 -------- TOTAL COMMON STOCKS (Cost $10,533).............................................. 7,827 -------- PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- CONVERTIBLE BONDS AND NOTES -- 6.2% BROADCASTING AND CABLE -- 0.1% $ 3,720 Adelphia Communications Corporation, Class A, 6.000% 02/15/06(a)(b)....................................... $ 260 -------- COMPUTER SERVICES -- 0.2% 1,565 Cnet, Inc., 5.000% 03/01/06............................................. 892 -------- COMPUTERS AND OFFICE EQUIPMENT -- 0.2% 1,135 Quantum Corporation - DLT & Storage Systems, 7.000% 08/01/04............................................. 874 -------- CONSTRUCTION -- 0.2% 1,505 Shaw Group Inc., 3.564%*** 05/01/21.......................................... 768 -------- FINANCE -- MISCELLANEOUS -- 0.3% 1,850 Providian Financial Corporation, 3.250% 08/15/05(a).......................................... 1,186 -------- HEALTH SERVICES -- 0.6% 740 CuraGen Corporation, 6.000% 02/02/07............................................. 472 795 Incyte Genomics, Inc., 5.500% 02/01/07(a).......................................... 532 1,910 QuadraMed Corporation, 5.250% 05/01/05(a).......................................... 1,231 -------- 2,235 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.2% 1,970 CIENA Corporation, 3.750% 02/01/08............................................. 1,128 1,070 Comverse Technology, Inc., 1.500% 12/01/05(a).......................................... 867 2,705 Juniper Networks, Inc., 4.750% 03/15/07............................................. 1,839 1,275 Riverstone Networks, Inc., 3.750% 12/01/06@............................................ 698 -------- 4,532 -------- OILFIELD SERVICES -- 0.4% 1,695 Parker Drilling Company, 5.500% 08/01/04(a).......................................... 1,513 -------- PHARMACEUTICALS -- 0.5% 2,490 Vertex Pharmaceuticals, Inc., 5.000% 09/19/07............................................. 1,818 --------
SEE NOTES TO FINANCIAL STATEMENTS. 81 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- SEMICONDUCTORS -- 1.4% $ 5,160 LSI Logic Corporation, 4.000% 02/15/05(a).......................................... $ 4,316 1,380 PMC-Sierra, Inc., 3.750% 08/15/06(a).......................................... 926 740 Vitesse Semiconductor Corporation, 4.000% 03/15/05(a).......................................... 532 -------- 5,774 -------- STEEL -- 0.1% 499 Algoma Steel Inc., 1.000% 12/31/30(b).......................................... 261 -------- TELECOMMUNICATIONS SERVICES -- 1.0% 4,405 At Home Corporation, 4.750% 12/15/06(b)(c)....................................... 881 4,645 Cox Communications, Inc., Class A, 0.426% 04/19/20............................................. 1,927 1,260 PTEK Holdings, Inc., 5.750% 07/01/04............................................. 1,084 -------- 3,892 -------- TOTAL CONVERTIBLE BONDS AND NOTES (Cost $28,287).............................................. 24,005 -------- SHARES --------- CONVERTIBLE PREFERRED STOCKS -- 0.5% AEROSPACE AND DEFENSE -- 0.2% 21,120 Titan Capital Trust........................................... 744 -------- NATURAL GAS DISTRIBUTION -- 0.3% 66,795 El Paso Energy Capital Trust I................................ 1,202 -------- TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,281)............................................... 1,946 -------- PRINCIPAL AMOUNT (000) --------- CORPORATE BONDS AND NOTES -- 76.1% AEROSPACE AND DEFENSE -- 0.1% $ 515 Sequa Corporation, Series B, 8.875% 04/01/08............................................. 448 -------- AIRLINES -- 1.8% 1,581 American Airlines, Inc., 7.377% 05/23/19............................................. 1,274 715 Delta Air Lines, Inc., 9.250% 03/15/22............................................. 422 435 Delta Air Lines, Inc., 10.375% 12/15/22............................................ 252 4,779 Delta Air Lines, Inc., 8.300% 12/15/29............................................. 2,629 330 Delta Air Lines, Inc., Series C, 6.650% 03/15/04............................................. 241 340 Northwest Airlines Inc., 8.375% 03/15/04............................................. 221
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- AIRLINES -- (CONTINUED) $ 1,990 Northwest Airlines Inc., 9.875% 03/15/07(a).......................................... $ 975 325 Northwest Airlines Inc., 8.970% 01/02/15............................................. 307 705 Northwest Airlines Inc., Series 2001, Class C, 7.626% 04/01/10............................................. 532 -------- 6,853 -------- AUTOMOTIVE -- 0.4% 3,170 Hayes Lemmerz International, Inc., Series B, 9.125% 07/15/07(b).......................................... 143 2,120 Hayes Lemmerz International, Inc., Series B, 8.250% 12/15/08(b).......................................... 95 1,720 Mark IV Industries, Inc., 7.500% 09/01/07............................................. 1,393 -------- 1,631 -------- BROADCASTING AND CABLE -- 10.0% 1,385 Adelphia Communications Corporation, Class A, 10.250% 11/01/06(a)(b)...................................... 499 2,075 Adelphia Communications Corporation, Class A, 10.250% 06/15/11(a)(b)...................................... 757 205 Adelphia Communications Corporation, Series B, Class A, 9.250% 11/01/02(b).......................................... 74 2,680 Belo Corporation, Class A, 8.000% 11/01/08............................................. 2,949 785 British Sky Broadcasting Group plc, 7.300% 10/15/06............................................. 773 1,260 British Sky Broadcasting Group plc, 6.875% 02/23/09............................................. 1,216 1,000 Cablevision SA, 12.500% 03/02/03@(a)(b)..................................... 150 2,185 Cablevision SA, 13.750% 04/30/07(b)......................................... 328 755 Cablevision SA, 13.750% 05/01/09(b)......................................... 113 1,365 CanWest Media Inc., 10.625% 05/15/11(a)......................................... 1,423 1,045 Charter Communications Holdings LLC, 8.625% 04/01/09(a).......................................... 643 1,360 Charter Communications Holdings LLC, 10.250% 01/15/10............................................ 843 200 Charter Communications Holdings LLC, 10.000% 05/15/11............................................ 122 3,225 Charter Communications Holdings LLC, (0.000)% due 01/15/10 11.750% beginning 01/15/05.................................. 1,338 270 Comcast Cable Communications, Inc., 8.125% 05/01/04............................................. 270 395 Comcast Cable Communications, Inc., 6.200% 11/15/08............................................. 371 1,675 Comcast Cable Communications, Inc., 6.750% 01/30/11(a).......................................... 1,558
SEE NOTES TO FINANCIAL STATEMENTS. 82 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- BROADCASTING AND CABLE -- (CONTINUED) $ 2,810 Comcast UK Cable Partners Ltd., Class A, 11.200% 11/15/07............................................ $ 2,280 835 Continental Cablevision, Inc., 9.000% 09/01/08............................................. 810 2,355 Frontiervision Operating Partners L.P., 11.000% 10/15/06(a)(b)...................................... 1,802 2,025 Frontiervision Operating Partners L.P., 11.875% 09/15/07(a)(b)...................................... 1,083 1,135 Frontiervision Operating Partners L.P., Series B, 11.875% 09/15/07(b)......................................... 607 570 Hollinger Participation Trust, 12.125% 11/15/10@(d)........................................ 496 1,485 Liberty Media Corporation, 8.500% 07/15/29............................................. 1,506 405 Liberty Media Corporation, Class A, 8.250% 02/01/30............................................. 400 580 LIN Television Corporation, 8.000% 01/15/08............................................. 600 310 News America Inc., 7.250% 05/18/18............................................. 290 480 NTL Communications Corporation, Series B, 11.500% 10/01/08(b)......................................... 67 685 NTL Communications Corporation, Series B, 11.875% 10/01/10(a)(b)...................................... 92 5,105 Paxon Communications Corporation, (0.000)% due 01/15/09 12.250% beginning 01/15/06.................................. 2,246 135 Paxson Communications Corporation, 10.750% 07/15/08............................................ 107 2,275 Radio Unica Corporation, 11.750% 08/01/06............................................ 1,160 2,595 Rogers Cable Inc., 11.000% 12/01/15............................................ 2,673 780 Sinclair Broadcast Group, Inc., Class A, 8.750% 12/15/07............................................. 800 3,535 Time Warner Entertainment Company, 8.375% 03/15/23............................................. 3,316 915 Time Warner Entertainment Company, 8.375%1 07/15/33............................................ 849 2,260 Time Warner Inc., 6.625% 05/15/29............................................. 1,715 845 TV Azteca, SA de CV, Series B, 10.500% 02/15/07............................................ 786 1,410 UIH Australia/Pacific Inc., Series B, 14.000% 05/15/06(b)......................................... 4 505 United Pan-Europe Communications N.V., Class A, 10.875% 08/01/09(b)......................................... 24 205 United Pan-Europe Communications N.V., Class A, (0.000)% due 02/01/10 13.750% beginning 02/01/05(b)............................... 7 515 United Pan-Europe Communications N.V., Series B, 11.500% 02/01/10(b)......................................... 24
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- BROADCASTING AND CABLE -- (CONTINUED) $ 3,195 United Pan-Europe Communications N.V., Series B, (0.000)% due 08/01/09 12.500% beginning 08/01/04.................................. $ 112 1,025 United Pan-Europe Communications N.V., Series B, (0.000)% due 11/01/09 13.375% beginning 11/01/04(a)............................... 36 1,035 Young Broadcasting Inc., 8.500% 12/15/08............................................. 1,038 -------- 38,357 -------- CHEMICALS -- BASIC -- 1.4% 1,775 Huntsman International LLC, 9.875% 03/01/09@(a)......................................... 1,775 3,720 Terra Capital Inc., 12.875% 10/15/08............................................ 3,701 -------- 5,476 -------- CHEMICALS -- SPECIALTY -- 1.7% 2,150 Acetex Corporation, 10.875% 08/01/09(a)......................................... 2,258 340 General Chemical Industrial Products, 10.625% 05/01/09(a)......................................... 252 65 Marsulex Inc., 9.625% 07/01/08............................................. 65 1,615 Millennium America Inc., 7.625% 11/15/26............................................. 1,308 2,790 Sovereign Specialty Chemicals, Inc., 11.875% 03/15/10............................................ 2,653 -------- 6,536 -------- COMMERCIAL BANKING -- 0.0%+ 117 Golden State Holdings, Escrow Corporation, 7.125% 08/01/05............................................. 127 -------- COMMERCIAL SERVICES -- 0.9% 1,860 Protection One, Inc., 7.375% 08/15/05............................................. 1,628 1,885 Synagro Technologies, Inc., 9.500% 04/01/09(a).......................................... 1,950 -------- 3,578 -------- COMPUTERS AND OFFICE EQUIPMENT -- 1.4% 870 Unisys Corporation, 7.250% 01/15/05............................................. 835 450 Xerox Bank Debt Fund Term Loan A, 6.420%** 10/22/02(g)(h)..................................... 379 150 Xerox Bank Debt Fund Term Loan B, 5.930%** 10/22/02(g)(h)..................................... 142 450 Xerox Bank Debt Funded Revolver, 6.310%** 10/22/02(g)(h)..................................... 333 3,215 Xerox Corporation, 5.500% 11/15/03(a).......................................... 2,765
SEE NOTES TO FINANCIAL STATEMENTS. 83 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- COMPUTERS AND OFFICE EQUIPMENT -- (CONTINUED) $ 105 Xerox Corporation, 5.250% 12/15/03............................................. $ 89 1,230 Xerox Corporation, 9.750% 01/15/09@(a)......................................... 966 -------- 5,509 -------- CONSTRUCTION -- 0.4% 1,880 URS Corporation, 11.500% 09/15/09@........................................... 1,711 -------- CONSUMER SERVICES -- 1.1% 2,935 Alderwoods Group, Inc., 11.000% 01/02/07............................................ 2,921 1,165 Alderwoods Group, Inc., 12.250% 01/02/09............................................ 1,118 145 Jafra Cosmetics International, Inc., 11.750% 05/01/08............................................ 150 -------- 4,189 -------- DEPARTMENT AND DISCOUNT STORES -- 0.1% 940 Kmart Corporation, 8.540% 01/02/15(b)(c)....................................... 353 -------- DIVERSIFIED ELECTRONICS -- 0.3% 2,175 Knowles Electronics Inc., 13.125% 10/15/09(a)......................................... 1,251 -------- DIVERSIFIED MANUFACTURING -- 1.6% 1,605 Collins & Aikman Floor Cover, 9.750% 02/15/10@(a)......................................... 1,629 1,535 Dresser, Inc., 9.375% 04/15/11............................................. 1,489 1,575 Foamex L.P., 10.750% 04/01/09@........................................... 1,418 1,205 Neenah Foundry Corporation, Series D, 11.125% 05/01/07............................................ 494 1,540 Neenah Foundry Corporation, Series B, 11.125% 05/01/07............................................ 631 800 Neenah Foundry Corporation, Series F, 11.125% 05/01/07............................................ 328 -------- 5,989 -------- ELECTRIC POWER -- NON NUCLEAR -- 6.0% 235 AES Corporation, 8.750% 06/15/08............................................. 118 3,285 AES Corporation, 9.500% 06/01/09(a).......................................... 1,708 440 AES Drax Holdings Ltd., Series B, 10.410% 12/31/20............................................ 308 1,705 AES Eastern Energy, Series 1999-A, 9.000% 01/02/17............................................. 1,694 1,175 AES Eastern Energy, Series 1999-B, 9.670% 01/02/29............................................. 1,128 1,952 Caithness Coso Funding Corporation, Series B, 9.050% 12/15/09............................................. 1,874
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- ELECTRIC POWER -- NON NUCLEAR -- (CONTINUED) $ 4,814 Cedar Brakes II LLC, 9.875% 09/01/13............................................. $ 3,532 1,090 Consumers Energy Company, 6.250% 09/15/06............................................. 1,034 462 ESI Tractebel Acquisition Corporation, Series B, 7.990% 12/30/11............................................. 421 410 Mirant Americas Generation LLC, 8.500% 10/01/21............................................. 195 1,705 Mirant Americas Generation LLC, 9.125% 05/01/31............................................. 818 2,795 Pacific Gas and Electric Company Bank Debt A, 8.000%** 12/30/06(g)(h)..................................... 2,662 6,925 PG&E National Energy Group, 10.375% 05/16/11............................................ 1,870 294 Salton Sea Funding, Series B, 7.370% 05/30/05............................................. 274 1,410 Tiverton/Rumford Power Association, 9.000% 07/15/18@............................................ 973 375 Westar Energy, Inc., 6.250% 08/15/03............................................. 369 945 Westar Energy, Inc., 6.875% 08/01/04............................................. 916 1,770 Westar Energy, Inc., 7.875% 05/01/07(a).......................................... 1,776 375 Western Resources, Inc., 7.125% 08/01/09............................................. 334 440 Western Resources, Inc., 7.650% 04/15/23............................................. 388 970 Xcel Energy, Inc., 7.000% 12/01/10............................................. 766 -------- 23,158 -------- ELECTRICAL EQUIPMENT -- 0.5% 1,450 Thomas & Betts Corporation, 8.250% 01/15/04............................................. 1,424 465 Thomas & Betts Corporation, 6.625% 05/07/08............................................. 434 -------- 1,858 -------- ENERGY -- MISCELLANEOUS -- 0.6% 900 AmeriGas Partners, LP, 8.875% 05/20/11............................................. 927 1,430 Continental Resources, Inc., 10.250% 08/01/08............................................ 1,244 -------- 2,171 -------- EXPLORATION AND PRODUCTION -- 4.8% 915 Baytex Energy Ltd., 10.500% 02/15/11(a)......................................... 942 1,885 Compton Petroleum Corporation, 9.900% 05/15/09@............................................ 1,923 1,800 Comstock Resources, Inc., 11.250% 05/01/07............................................ 1,872 2,815 Encore Acquisition Company, 8.375% 06/15/12@(a)......................................... 2,843 2,000 Energy Corporation of America, Series A, 9.500% 05/15/07............................................. 1,308
SEE NOTES TO FINANCIAL STATEMENTS. 84 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- EXPLORATION AND PRODUCTION -- (CONTINUED) $ 1,960 Plains Exploration & Production Company, 8.750% 07/01/12@............................................ $ 1,960 1,030 Stone Energy Corporation, 8.250% 12/15/11............................................. 1,056 1,695 Vintage Petroleum, Inc., 7.875% 05/15/11............................................. 1,610 4,050 Vintage Petroleum, Inc., 8.250% 05/01/12(a).......................................... 4,130 825 Westport Resources Corporation, 8.875% 09/15/07............................................. 846 -------- 18,490 -------- FINANCE -- MISCELLANEOUS -- 0.4% 4,430 The FINOVA Group Inc., 7.500% 11/15/09............................................. 1,351 -------- FOOD PRODUCTS -- 1.4% 176 Chiquita Brands International, Inc., 10.560% 03/15/09............................................ 181 1,425 Herbalife International, Inc., 11.750% 07/15/10@........................................... 1,297 4,195 Swift & Company, 10.125% 10/01/09@........................................... 3,891 -------- 5,369 -------- HEALTH SERVICES -- 3.4% 2,880 Express Scripts, Inc., 9.625% 06/15/09............................................. 3,067 285 Fountain View Inc., Series B, 11.250% 04/15/08(b)......................................... 171 210 Harborside Healthcare, (0.000)% due 08/01/07 12.000% beginning 08/01/04(g)............................... 111 2,485 HCA Inc., 7.500% 11/15/95............................................. 2,270 980 Manor Care, Inc., 7.500% 06/15/06............................................. 1,011 1,525 Manor Care, Inc., 8.000% 03/01/08............................................. 1,556 1,075 Team Health Inc., Series B, 12.000% 03/15/09............................................ 1,158 3,253 Unilab Finance Corporation, 12.750% 10/01/09............................................ 3,757 -------- 13,101 -------- HEAVY MACHINERY -- 0.8% 240 Thermadyne Bank Debt Funded Revolver, 4.750%** 05/22/04(g)(h)..................................... 219 1,488 Thermadyne Bank Debt Term A, 4.750%** 05/22/04(g)(h)..................................... 1,353 843 Thermadyne Bank Debt Term B, 4.820%** 05/22/05(g)(h)..................................... 764 843 Thermadyne Bank Debt Term C, 5.070%** 05/22/06(g)(h)..................................... 764 65 Thermadyne Manufacturing LLC, 9.875% 06/01/08(b)(c)....................................... 18 -------- 3,118 --------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- LODGING AND RECREATION -- 5.8% $ 700 Bally Total Fitness Holding Corporation, Series D, 9.875% 10/15/07............................................. $ 643 1,060 Hilton Hotels Corporation, 7.625% 05/15/08............................................. 1,084 395 Hilton Hotels Corporation, 8.250% 02/15/11(a).......................................... 412 210 Hilton Hotels Corporation, 7.500% 12/15/17............................................. 198 205 Hollywood Casino Corporation, 13.000% 08/01/06............................................ 219 3,230 ITT Corporation, 7.375% 11/15/15............................................. 2,987 1,015 ITT Corporation, 7.750% 11/15/25............................................. 929 1,085 Jacobs Entertainment, 11.875% 02/01/09@........................................... 1,120 720 Mandalay Resort Group, 9.500% 08/01/08............................................. 781 315 Park Place Entertainment Corporation, 8.875% 09/15/08............................................. 331 1,600 Park Place Entertainment Corporation, 8.125% 05/15/11............................................. 1,632 1,695 Pinnacle Entertainment, Inc., Series B, 9.500% 08/01/07............................................. 1,509 2,725 Trump Atlantic City Associates, 11.250% 05/01/06............................................ 2,017 678 United Artists Theatre Circuit Inc., 9.300% 07/01/15............................................. 600 2,150 Vail Resorts, Inc., 8.750% 05/15/09............................................. 2,193 590 Vail Resorts, Inc., 8.750% 05/15/09............................................. 602 4,220 Venetian Casino Resort LLC, 11.000% 06/15/10@........................................... 4,135 920 Wheeling Island Gaming Inc., 10.125% 12/15/09............................................ 938 -------- 22,330 -------- MEDICAL DEVICES AND SUPPLIES -- 2.3% 2,950 Alaris Medical Systems, Inc., 9.750% 12/01/06(a).......................................... 2,825 1,387 Alaris Medical Systems, Inc., (0.000)% due 08/01/08 11.125% beginning 08/01/03.................................. 1,137 2,939 DJ Orthopedics LLC, 12.625% 06/15/09............................................ 2,851 2,135 Per-Se Technologies, Inc., Series B, 9.500% 02/15/05............................................. 2,012 -------- 8,825 -------- METALS AND MINING -- 0.7% 810 Commonwealth Industries, Inc., 10.750% 10/01/06............................................ 802 245 Ormet Corporation, 11.000% 08/15/08@(b)........................................ 145 1,775 UCAR Finance Inc., 10.250% 02/15/12............................................ 1,686 -------- 2,633 --------
SEE NOTES TO FINANCIAL STATEMENTS. 85 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- NATURAL GAS PIPELINES -- 1.1% $ 230 El Paso Corporation, 6.950% 12/15/07............................................. $ 152 1,600 EL Paso Corporation, 7.800% 08/01/31............................................. 1,007 850 Northern Natural Gas, 6.750% 09/15/08@............................................ 876 940 Northwest Pipeline Corporation, 6.625% 12/01/07............................................. 827 450 Texas Gas Transmission Corporation, 8.625% 04/01/04............................................. 446 615 Transcontinental Gas Pipeline, 8.875% 07/15/12@(a)......................................... 584 500 Transcontinental Gas Pipeline, 7.250% 12/01/26............................................. 385 -------- 4,277 -------- NETWORKING AND TELECOMMUNICATIONS EQUIPMENT -- 1.7% 1,860 Avaya Inc., 11.125% 04/01/09(a)......................................... 1,172 1,985 IPC Acquisition Corporation, 11.500% 12/15/09............................................ 1,687 1,095 Lucent Technologies Inc., 7.250% 07/15/06(a).......................................... 427 805 Lucent Technologies Inc., 6.500% 01/15/28............................................. 237 4,955 Lucent Technologies Inc., 6.450% 03/15/29............................................. 1,462 1,230 Marconi Corporation plc, 7.750% 09/15/10(a)(b)....................................... 135 3,705 Marconi Corporation plc, 8.375% 09/15/30(a)(b)....................................... 408 365 Nortel Networks Corporation, 6.000% 09/01/03............................................. 237 2,600 Nortel Networks Ltd., 6.125% 02/15/06(a).......................................... 897 -------- 6,662 -------- OILFIELD SERVICES -- 2.0% 1,640 Grant Prideco, Inc., Series B, 9.625% 12/01/07............................................. 1,706 2,255 Halliburton Company, 8.750% 02/15/21............................................. 2,007 2,575 Halliburton Company, MTN, 6.000% 08/01/06............................................. 2,317 1,620 Parker Drilling Company, Series D, 9.750% 11/15/06............................................. 1,523 -------- 7,553 -------- PACKAGING AND CONTAINERS -- 1.3% 1,790 Owens Corning Bank Debt, 0.000% 06/26/03(b)(g)(h).................................... 1,047 1,485 Owens-Brockway Glass Containers, 8.875% 02/15/09(a).......................................... 1,492 745 Owens-Illinois, Inc., 7.150% 05/15/05............................................. 682 2,060 Owens-Illinois, Inc., 7.800% 05/15/18............................................. 1,607 -------- 4,828 --------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 2.4% $ 3,035 Doman Industries Ltd., Class A, 12.000% 07/01/04............................................ $ 2,762 935 Georgia-Pacific Corporation, 9.875% 11/01/21............................................. 759 2,780 Georgia-Pacific Corporation, 9.625% 03/15/22............................................. 2,224 1,390 Georgia-Pacific Corporation, 9.500% 05/15/22............................................. 1,077 1,170 Pope And Talbot, Inc., 8.375% 06/01/13@............................................ 1,018 1,395 Pope and Talbot, Inc., 8.375% 06/01/13............................................. 1,243 -------- 9,083 -------- PHARMACEUTICALS -- 0.9% 3,405 Caremark Rx, Inc., 7.375% 10/01/06............................................. 3,388 190 McKesson Finance of Canada, 6.550% 11/01/02@............................................ 190 -------- 3,578 -------- PUBLISHING AND ADVERTISING -- 2.9% 2,720 American Color Graphics, 12.750% 08/01/05............................................ 2,669 1,785 Garden State Newspapers, Inc., Series B, 8.750% 10/01/09............................................. 1,763 910 Houghton Mifflin Company, 7.200% 03/15/11............................................. 774 1,250 Key3Media Group, Inc., 11.250% 06/15/11(a)......................................... 138 1,335 Phoenix Color Corporation, 10.375% 02/01/09............................................ 1,068 510 Quebecor Media Inc., 11.125% 07/15/11............................................ 408 1,640 Quebecor Media Inc., (0.000)% due 07/15/11 13.750% beginning 07/01/06.................................. 738 3,670 TDL Infomedia Holdings Ltd., (0.000)% due 10/15/10 15.500% beginning 10/15/04.................................. 2,935 115 TS/F Communications Corporation, Series B, 10.375% 11/01/07............................................ 119 1,041 Ziff Davis Media Inc., 12.000% 08/12/09@........................................... 416 -------- 11,028 -------- RAILROADS, TRUCKING AND SHIPPING -- 0.2% 326 Ermis Maritime Holdings Ltd., 12.500% 12/31/04(d)(f)(g)................................... 277 4 Pegasus Promissory Note, 0.000% 01/01/99(b)(f)(g).................................... 0++ 230 Sea Containers Ltd., Series B, 10.750% 10/15/06............................................ 200 230 Sea Containers Ltd., Series B, 7.875% 02/15/08............................................. 166 -------- 643 --------
SEE NOTES TO FINANCIAL STATEMENTS. 86 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- REAL ESTATE -- 1.6% $ 900 BF Saul, Series B, 9.750% 04/01/08............................................. $ 891 2,730 CB Richard Ellis Services Inc., 11.250% 06/15/11............................................ 2,416 650 DR Structured Finance Corporation, Series 94K2, 9.350% 08/15/19............................................. 273 154 DR Structured Finance Corporation, Series A-1, 7.600% 08/15/07............................................. 72 655 DR Structured Finance Corporation, Series A-2, 8.375% 08/15/15............................................. 288 1,180 DR Structured Finance Corporation, Series A-2, 7.430% 08/15/18............................................. 543 245 DR Structured Finance Corporation, Series A-3, 8.550% 08/15/19............................................. 110 610 LNR Property Corporation, 10.500% 01/15/09............................................ 622 1,045 LNR Property Corporation, Series B, 9.375% 03/15/08............................................. 1,035 -------- 6,250 -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 2.6% 190 Capstar Hotel Company, 8.750% 08/15/07............................................. 152 230 Crescent Real Estate Equities LP, 7.500% 09/15/07............................................. 216 4,470 Crescent Real Estate Equities LP, 9.250% 04/15/09@(a)......................................... 4,447 930 Healthcare Realty Trust, Inc., 8.125% 05/01/11............................................. 1,028 1,685 MeriStar Hospitality Corporation, 9.000% 01/15/08............................................. 1,525 1,535 OMEGA Healthcare Investors, Inc., 6.950% 08/01/07............................................. 1,327 1,310 Senior Housing Properties Trust, 8.625% 01/15/12............................................. 1,294 -------- 9,989 -------- SEMICONDUCTORS -- 0.3% 1,885 ON Semiconductor Corporation, 12.000% 05/15/08@(a)........................................ 1,169 -------- SOFTWARE -- 0.7% 2,835 Computer Associates International, Inc., Series B, 6.250% 04/15/03............................................. 2,792 -------- SPECIALTY STORES -- 1.8% 2,630 The Gap, Inc., 5.625% 05/01/03............................................. 2,617 4,700 The Gap, Inc., 6.900% 09/15/07(a).......................................... 4,136 -------- 6,753 --------
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- STEEL -- 0.7% $ 1,578 Algoma Steel Inc., 11.000% 12/31/09(b)......................................... $ 1,120 1,440 United States Steel LLC, 10.750% 08/01/08............................................ 1,419 -------- 2,539 -------- TELECOMMUNICATIONS SERVICES -- 7.8% 250 360networks Inc., 13.000% 05/01/08(b)......................................... 0++ 1,645 AirGate PCS, Inc., (0.000)% due 10/01//09 13.500% beginning 10/01/04(a)............................... 115 1,430 Alamosa Delaware Inc., 12.500% 02/01/11(a)......................................... 257 3,180 Alamosa Holdings, Inc., (0.000)% due 02/15/10 12.875% beginning 02/15/05.................................. 223 3,520 AT&T Wireless Services Inc., 8.125% 05/01/12............................................. 2,710 505 AT&T Wireless Services Inc., 8.750% 03/01/31............................................. 364 2,294 Call-Net Enterprises Inc., 10.625% 12/31/08(a)......................................... 585 1,145 COLO.COM, 13.875% 03/15/10@(b) (f).................................... 46 1,735 Dobson Communications Corporation, Class A, 10.875% 07/01/10(a)......................................... 1,188 3,880 Globix Corporation, 12.500% 02/01/10(b)(c)...................................... 698 583 GT Telecom Racers Notes Trust, Series A, 6.563%** 06/30/08(b)(g)..................................... 87 417 GT Telecom Racers Notes Trust, Series B, 6.563%** 02/03/03(b)(g)..................................... 63 180 IMPSAT Fiber Networks, Inc., 13.750% 02/15/05(b)......................................... 4 934 Loral Cyberstar Inc., 10.000% 07/15/06............................................ 364 6,080 Millicom International Cellular SA, 13.500% 06/01/06............................................ 1,642 5,140 NEON Communications Inc., 12.750% 08/15/08(a)(b)...................................... 360 2,995 Nextel International Inc., 13.000% 01/01/05............................................ 178 1,075 Nextel International Inc., 12.750% 08/01/10(b)......................................... 11 1,920 Nextel International Inc., (0.000)% due 04/15/08 12.125% beginning 04/15/03(b)............................... 19 165 Pagemart Nationwide, 15.000% 02/01/05(b)(c)(g)................................... 1 350 PSINet, Inc., 11.500% 11/01/08(b)(c)...................................... 35 1,210 PSINet, Inc., 11.000% 08/01/09(b)(c)...................................... 123 3,535 Qwest Capital Funding, Inc., 5.875% 08/03/04(a).......................................... 2,386 2,155 Qwest Capital Funding, Inc., 7.750% 08/15/06(a).......................................... 1,153
SEE NOTES TO FINANCIAL STATEMENTS. 87 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- (CONTINUED) $ 1,980 Qwest Capital Funding, Inc., 7.900% 08/15/10............................................. $ 891 510 Qwest Capital Funding, Inc., 6.500% 11/15/18............................................. 189 570 Qwest Capital Funding, Inc., 7.625% 08/03/21............................................. 222 340 Qwest Capital Funding, Inc., 6.875% 07/15/28............................................. 129 1,825 Qwest Corporation, 7.625% 06/09/03............................................. 1,752 3,380 Qwest Corporation, 7.200% 11/01/04............................................. 3,076 165 Qwest Corporation, 5.625% 11/15/08............................................. 125 1,950 Qwest Corporation, 8.875% 03/15/12@............................................ 1,697 160 Rogers Communications, Inc., 8.875% 07/15/07(a).......................................... 130 1,680 Sprint Capital Corporation, 5.700% 11/15/03............................................. 1,530 3,170 Sprint Capital Corporation, 5.875% 05/01/04(a).......................................... 2,740 575 Sprint Capital Corporation, 6.900% 05/01/19............................................. 336 2,195 Sprint Capital Corporation, 8.750% 03/15/32............................................. 1,470 736 Telesystem International Wireless Inc., 14.000% 12/30/03(a)......................................... 552 940 TELUS Corporation, 8.000% 06/01/11............................................. 719 2,145 TSI Telecommunication Services Inc., Series B, 12.750% 02/01/09............................................ 1,823 2,705 US Unwired Inc., Series B, (0.000)% due 11/01/09 13.375% beginning 11/01/04.................................. 135 -------- 30,128 -------- TOBACCO -- 0.2% 855 North Atlantic Trading Company, 11.000% 06/15/04............................................ 838 -------- TOTAL CORPORATE BONDS AND NOTES (Cost $341,412)............................................. 292,522 -------- FOREIGN BONDS AND NOTES -- 3.2% 5,660 Calpine Canada Energy Finance, 8.500% 05/01/08(a).......................................... 2,321 1,315 Grupo Transportacion Ferroviaria Mexicana, SA de CV, 11.750% 06/15/09............................................ 1,262 2,770 Grupo Transportacion Ferroviaria Mexicana, SA de CV, 12.500% 06/15/12@........................................... 2,687 900 Norske Skog Canada Ltd., 8.625% 06/15/11............................................. 855 1,080 Petroleum Geo-Services ASA, 6.250% 11/19/03............................................. 691
PRINCIPAL AMOUNT VALUE (000) (000) -------------------------------------------------------------------------------------- FOREIGN BONDS AND NOTES -- (CONTINUED) $ 395 Petroleum Geo-Services ASA, 7.500% 03/31/07(a).......................................... $ 190 60 Petroleum Geo-Services ASA, 6.625% 03/30/08(a).......................................... 28 3,035 Petroleum Geo-Services ASA, 7.125% 03/30/28............................................. 1,244 45 Petroleum Geo-Services ASA, 8.150% 07/15/29............................................. 18 1,735 Rogers Cantel Inc., 9.750% 06/01/16............................................. 1,154 1,045 Rogers Wireless Communications Inc., 9.625% 05/01/11............................................. 752 5,390 United Pan-Europe Communications N.V., Series B, 11.250% 02/01/10(b)......................................... 256 1,080 Xerox Capital (Europe) plc, 5.875% 05/15/04............................................. 848 -------- TOTAL FOREIGN BONDS AND NOTES (Cost $18,619).............................................. 12,306 -------- FOREIGN CONVERTIBLE BONDS AND NOTES -- 0.4% 580(e) Colt Telecom Group plc, 2.000% 03/29/06@............................................ 267 740(e) Colt Telecom Group plc, 2.000% 12/16/06@............................................ 329 2,410(e) Colt Telecom Group plc, 2.000% 04/03/07@............................................ 1,048 133(e) KPNQwest NV, 10.000% 03/15/12(b)(c)...................................... 0++ -------- TOTAL FOREIGN CONVERTIBLE BONDS AND NOTES (Cost $2,239)............................................... 1,644 -------- SHARES --------- PREFERRED STOCKS -- 1.1% BROADCASTING AND CABLE -- 0.4% 47,735 MediaOne Financing Trust...................................... 1,122 7,400 Paxon Communications Corporation!!(d)......................... 398 -------- 1,520 -------- PUBLISHING AND ADVERTISING -- 0.0%+ 328 Ziff Davis Holdings Inc., Series E@........................... 0++ -------- RAILROADS, TRUCKING AND SHIPPING -- 0.0%+ 6,170 Ermis Maritime Holding Ltd.!!(f)(g)........................... 0++ -------- REAL ESTATE INVESTMENT TRUSTS (REITS) -- 0.6% 23,400 Sovereign REIT@............................................... 2,527 --------
SEE NOTES TO FINANCIAL STATEMENTS. 88 NATIONS MASTER INVESTMENT TRUST Nations High Yield Bond Master Portfolio STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED)
VALUE SHARES (000) -------------------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES -- 0.1% 13,100 Rural Cellular Corporation, Series B!!(d)..................... $ 236 -------- TOTAL PREFERRED STOCKS (Cost $5,012)............................................... 4,283 -------- WARRANTS -- 0.0%+ 1,145 COLO.COM Expire 03/15/10!!@(f)....................................... 0++ 1,944 Genesis Health Ventures Expire 10/01/02!!(g)........................................ 0++ 5,803 Harborside Healthcare Corporation Expire 08/01/09!!(g)........................................ 3 1,663 ICO Global Communications Expire 05/16/06!!(g)........................................ 0++ 7,783 Loral Space & Communications Expire 01/15/07!!(g)........................................ 0++ 1,365 Ono Finance plc Expire 03/16/11!!@(g)....................................... 0++ 180 UbiquiTel Inc. Expire 04/15/10!!@(g)....................................... 0++ 60,280 Ziff Davis Holdings Inc. Expire 08/12/12!!@(g)....................................... 1 -------- TOTAL WARRANTS (Cost $236)................................................. 4 -------- SHARES (000) --------- INVESTMENT COMPANIES -- 24.2% (Cost $93,018) 93,018 Nations Cash Reserves, Capital Class Shares#.................. 93,018 --------
VALUE (000) -------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $502,637*).................................. 113.7% $437,555 -------- OTHER ASSETS AND LIABILITIES........................ (13.7)% Dividends receivable.......................................... $ 49 Interest receivable........................................... 9,117 Unrealized depreciation on forward foreign exchange contracts................................................... (2) Collateral on securities loaned............................... (60,621) Investment advisory fee payable............................... (176) Administration fee payable.................................... (16) Due to custodian.............................................. (193) Payable for investment securities purchased................... (825) Accrued Trustees' fees and expenses........................... (34) Accrued expenses and other liabilities........................ (51) -------- TOTAL OTHER ASSETS AND LIABILITIES (NET)...................... (52,752) -------- NET ASSETS.......................................... 100.0% $384,803 ========
--------------- * Federal Income Tax Information: Net unrealized depreciation of $65,082 on investment securities was comprised of gross appreciation of $8,375 and depreciation of $73,457 for federal income tax purposes. At September 30, 2002, the aggregate cost for federal income tax purposes was $502,637. ** Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. ***Zero coupon security. The rate shown reflects the yield to maturity at September 30, 2002. !! Non-income producing security. @ 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. + 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. A portion of this amount represents cash collateral received from securities lending activity (see Note 8). The portion that represents cash collateral is $60,621. (a) All or a portion of security was on loan at September 30, 2002. The aggregate cost and market value of securities on loan at September 30, 2002, is $68,465 and $55,813, respectively. (b) Issue in default. (c) Issuer in bankruptcy. (d) PIK ("Payment In Kind"). Interest or dividend payment is made with additional securities. (e) Principal amount denominated in Euro. (f) Fair valued security. (g) Restricted security. (h) Loan participation agreement. ABBREVIATIONS: MTN -- Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS. 89 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF OPERATIONS (UNAUDITED) For the six months ended September 30, 2002
INTERMEDIATE HIGH YIELD BOND BOND MASTER MASTER PORTFOLIO PORTFOLIO --------------------------------- (IN THOUSANDS) INVESTMENT INCOME: Interest.................................................... $ 10,674 $ 18,871 Dividends (Net of foreign withholding taxes of $0 and $0)... -- 416 Dividend income from affiliated funds....................... 365 303 Securities lending.......................................... 60 65 -------------- -------------- Total investment income................................. 11,099 19,655 -------------- -------------- EXPENSES: Investment advisory fee..................................... 1,026 1,045 Administration fee.......................................... 128 95 Custodian fees.............................................. 13 11 Legal and audit fees........................................ 15 17 Trustees' fees and expenses................................. 7 7 Interest expense............................................ --* -- Other....................................................... 2 10 -------------- -------------- Total expenses.......................................... 1,191 1,185 Fees reduced by credits allowed by the custodian............ (1) (1) -------------- -------------- Net expenses............................................ 1,190 1,184 -------------- -------------- NET INVESTMENT INCOME....................................... 9,909 18,471 -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) from: Security transactions..................................... 1,900 (1,577) Futures................................................... 6,648 -- Forward foreign exchange contracts, foreign currencies and other net assets........................................ -- (186) -------------- -------------- Net realized gain/(loss) on investments..................... 8,548 (1,763) -------------- -------------- Change in unrealized appreciation/(depreciation) of: Securities................................................ 22,786 (55,533) Futures................................................... 3,673 -- Swap Contracts............................................ (26) -- Forward foreign exchange contracts, foreign currencies and other net assets........................................ -- (15) -------------- -------------- Net change in unrealized appreciation/(depreciation) of investments............................................... 26,433 (55,548) -------------- -------------- Net realized and unrealized gain/(loss) on investments...... 34,981 (57,311) -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 44,890 $ (38,840) ============== ==============
--------------- *Amount represents less than $500. SEE NOTES TO FINANCIAL STATEMENTS. 90 NATIONS MASTER INVESTMENT TRUST STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE BOND HIGH YIELD BOND MASTER PORTFOLIO MASTER PORTFOLIO --------------------------------- --------------------------------- SIX MONTHS SIX MONTHS ENDED ENDED 9/30/02 YEAR ENDED 9/30/02 YEAR ENDED (UNAUDITED) 3/31/02 (UNAUDITED) 3/31/02 ----------------------------------------------------------------------- (IN THOUSANDS) Net investment income.............................. $ 9,909 $ 9,425 $ 18,471 $ 19,084 Net realized gain/(loss) on investments............ 8,548 (73) (1,763) 1,272 Net change in unrealized appreciation/(depreciation) of investments....... 26,433 (5,575) (55,548) (7,021) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations.................................. 44,890 3,777 (38,840) 13,335 Contributions...................................... 607,765 314,639 365,170 356,998 Withdrawals........................................ (115,672) (100,895) (267,735) (139,663) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets.............. 536,983 217,521 58,595 230,670 NET ASSETS: Beginning of period................................ 355,834 138,313 326,208 95,538 -------------- -------------- -------------- -------------- End of period...................................... $ 892,817 $ 355,834 $ 384,803 $ 326,208 ============== ============== ============== ==============
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 ------------------------------------------------------------------------- INTERMEDIATE BOND MASTER PORTFOLIO: Six months ended 9/30/2002 (unaudited)........... 7.98% 0.46%+(c)(d) 3.85%+ 68% 0.46%+(c)(d) Year ended 3/31/2002............................. 4.33 0.49(c)(d) 5.24 228 0.49(c)(d) Year ended 3/31/2001............................. -- 0.45(c) 6.61 118 0.46(c) Period ended 3/31/2000........................... -- 0.54+ 6.10+ 90 0.55+ Period ended 5/14/1999(a)........................ -- 0.38+ 5.61+ 19 0.42+ Year ended 2/28/1999(a).......................... -- 0.35 5.69 137 0.45 Year ended 2/28/1998(a).......................... -- 0.35 5.99 127 0.55 HIGH YIELD BOND MASTER PORTFOLIO: Six months ended 9/30/2002 (unaudited)........... (9.08)% 0.62%+(c) 9.73%+ 31% 0.62%+(c) Year ended 3/31/2002............................. 6.33 0.65(c)(d) 9.93 64 0.65(c)(d) Year ended 3/31/2001............................. -- 0.71 11.14 63 0.72 Period ended 3/31/2000(b)........................ -- 2.82+ 5.16+ 26 2.86+
--------------- +Annualized. (a) Represents financial information for the Pacific Horizon Intermediate Bond Portfolio, which was reorganized into Intermediate Bond Master Portfolio on May 21, 1999. (b) High Yield Bond Master Portfolio commenced operations on February 14, 2000. (c) 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%. (d) 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. 91 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 September 30, 2002, the Master Trust offered twelve separate portfolios. These financial statements pertain only to Intermediate Bond Master Portfolio and High Yield Bond 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 September 30, 2002: Intermediate Bond Master Portfolio: Nations Intermediate Bond Fund................ 96.8% Nations Intermediate Bond Fund (Offshore)..... 3.2% High Yield Bond Master Portfolio: Nations High Yield Bond Fund.................. 92.7% Nations High Yield Bond Fund (Offshore)....... 7.3%
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 are generally valued using prices provided by a pricing service or based upon broker-dealer quotations. Certain prices provided by broker-dealers or the pricing service may be based on a matrix pricing system, which considers such factors as security prices, yields and maturities. Certain securities may be valued based upon quotes provided by one or more principal market makers. Securities, including options and futures contracts, traded on a recognized exchange or on NASDAQ are valued at the last sale price on the exchange or market on which such securities are primarily traded. Securities which are primarily traded on foreign securities exchanges are valued at the last available closing values on their respective exchanges where primarily traded, or at the mean between the closing bid and ask prices if no sales are recorded. 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 as determined by the applicable Nations Funds' prospectus. Futures contracts: The Intermediate Bond Master Portfolio and High Yield Bond Master Portfolio may invest in futures contracts for the purposes of hedging against changes in values of the Portfolio's securities or changes in the prevailing levels of interest rates or currency exchange rates or to 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. Options: The Intermediate Bond Master Portfolio may purchase and write call and put options on non-U.S. stock index and interest rate futures contracts. A Master Portfolio may use such options on futures contracts in connection with its hedging strategies and for the purpose of yield enhancement in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures. The Master Portfolio may write covered call options and put options on securities in which it is permitted to invest from time to time in seeking to attain the Master Portfolio's objective. Call options written by a Master Portfolio give the holder the right to buy the underlying securities from the Master Portfolio at a stated exercise 92 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) price; put options give the holder the right to sell the underlying security to the Master Portfolio at a stated price. In the case of put options, a Master Portfolio is required to maintain in a separate account liquid assets with a value equal to or greater than the exercise price of the underlying securities. The Master Portfolio may also write combinations of covered puts and calls on the same underlying security. When the Portfolio purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Portfolio writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. The Master Portfolio typically receives a premium from writing a put or call option, which would increase the Master Portfolio's return in the event the option expires unexercised or is closed out at a profit. The amount of the premium would reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, a Master Portfolio limits its opportunity to profit from any increase in the market value of the underlying security for an exercise price higher than its then current market value, resulting in potential capital loss if the purchase price exceeds the market value plus the amount of the premium received. The Master Portfolio may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Master Portfolio will realize a profit or loss from such transaction in which it purchases an option having the same terms as the option written. The Master Portfolio will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received from a simultaneous or subsequent sale of a different put option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by a Master Portfolio. Foreign currency transactions: The books and records of the Master Portfolios are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of a Master Portfolio and the amounts actually received. The effects of changes in foreign currency exchange rates on securities are not separately identified in the Statements of operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on securities. Forward foreign currency transactions: Generally, a Master Portfolio may enter into forward currency exchange contracts only under two circumstances: (i) when a Master Portfolio enters into a contract for the purchase or sale of a security denominated in a foreign currency, to "lock in" the U.S. exchange rate of the transaction, with such period being a short-dated contract covering the period between transaction date and settlement date; or (ii) when the investment adviser or sub-adviser believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar. Forward foreign currency contracts are valued at the forward rate and are marked- to-market daily. The change in market value is recorded by a Master Portfolio as an unrealized gain or loss. When the contract is closed or offset with the same counterparty, a Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or offset. Forward foreign currency contracts will be used primarily to protect the Master Portfolios from adverse currency movements and will generally not be entered into for terms greater than one year. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of a Master Portfolio's investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency contract would limit the risk of loss due to a decline in the value of a particular currency; however, it also would limit any 93 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Statements of net assets. In addition, the Master Portfolios could be exposed to risks if counterparties to the contracts are unable to meet the terms of their contracts. The counterparty risk exposure is, therefore, closely monitored and contracts are only executed with high credit quality financial institutions. Swaps: The Portfolios may engage in swap transactions such as interest rate, total return, index or currency swaps, consistent with its investment objective and policies. Swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest, effective return, or total return throughout the lives of the agreements. The interest to be paid or received on swaps is included in interest income or interest expense. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of net assets. A realized gain or loss is recorded upon termination of swap agreements and is equal to the difference between the Master Portfolio's basis in the swap and the proceeds from (or cost of) the closing transaction. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. If there is a default by the counterparty to a swap contract, a Portfolio will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that the swap contract counterparties will be able to meet their obligations pursuant to the swap contracts or that, in the event of default, a Portfolio will succeed in pursuing contractual remedies. A Portfolio thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to the swap contracts. The creditworthiness of the swap contract counterparties is closely monitored in order to minimize this risk. The use of derivative instruments involves, to varying degrees, the elements of market risk in excess of the amount recognized in the Statement of net assets. When-issued/delayed delivery securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Master Portfolio enters into such transactions, it instructs the custodian to segregate assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Loan Participations: The High Yield Master Portfolio may invest in Loan Participations. When the Master Portfolio purchases a Loan Participation, the Master Portfolio typically enters into a contractual relationship with the lender or third party selling such Participations ("Selling Participant"), but not the Borrower. As a result, the Master Portfolio assumes the credit risk of the Borrower, the Selling Participant and any other persons interpositioned between the Master Portfolio and the Borrower ("Intermediate Participants"). The Master Portfolio may not directly benefit from the collateral supporting the Senior Loan in which it has purchased the Loan Participation. Securities transactions and investment income: Securities transactions are recorded on trade date. Realized gains and losses are computed based on the specific identification of securities sold. Interest income, adjusted for accretion of discounts and amortization of premiums, is earned from settlement date and recorded on an accrual basis. Dividend income is recorded on ex- dividend date. Federal income taxes: The Master Portfolios are treated as partnerships for federal income tax purposes and therefore are not subject to federal income tax. Each investor in the Master Portfolios will be subject to taxation on its allocated share of the Master Portfolio's ordinary income and capital gains. Expenses: General expenses of the Master Trust are allocated to the Master Portfolios based upon their relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Master Portfolio are charged to such Master Portfolio. 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, 94 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 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 ----------- Intermediate Bond Master Portfolio.......... 0.40% High Yield Bond Master Portfolio............ 0.55%
The Master Trust has, on behalf of the Intermediate Bond Master Portfolio, 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 maximum annual rate of 0.15% of the Master Portfolio's average daily net assets. The Master Trust has, on behalf of the High Yield Bond Master Portfolio, entered into a sub-advisory agreement with BA Advisors and MacKay Shields LLC ("MacKay Shields") pursuant to which MacKay Shields is entitled to receive a sub-advisory fee from BA Advisors at the maximum annual rate of 0.40% of the Master Portfolio's average daily net assets up to and including $100 million; 0.375% of the Master Portfolio's average daily net assets over $100 million and up to and including $200 million and 0.35% of the Master Portfolio's average daily net assets over $200 million. 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 each Master Portfolio's average daily net assets. The Bank of New York ("BNY") serves as sub-administrator of the Master Trust pursuant to an agreement with BA Advisors. For the six months ended September 30, 2002, BA Advisors earned 0.05% of each Master Portfolio's average daily net assets for its co-administration services. BNY serves as the custodian of the Master Trust's assets. For the six months ended September 30, 2002, expenses of the Master Portfolios were reduced by $2,012 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. No officer, director or employee of Bank of America, BA Advisors or BACAP, or any affiliate thereof, receives any compensation from the Master Trust for serving as a Trustee or Officer of the Master Trust. The Master Trust's eligible Trustees may participate in a non-qualified deferred compensation plan which may be terminated at any time. All benefits provided under this plan are unfunded and any payments to plan participants are paid solely out of the Master Portfolios' assets. Income earned on the plan participant's deferral account is based on the rate of return of the eligible mutual funds selected by the participants or, if no funds are selected, on the rate of return of Nations Treasury Reserves, a portfolio of Nations Funds Trust, another registered investment company in the Nations Funds family. The expense for the deferred compensation plan is included in "Trustees' fees and expenses" in the Statements of operations. The liability for the deferred compensation plan is included in "Accrued Trustees' fees and expenses" in the Statement of net assets. The Master Trust previously offered a retirement plan to the Trustees, which was terminated on January 1, 2002. 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 liability for the retirement plan is included in "Accrued Trustees' fees and expenses" in the Statement of net assets. The Master Portfolios have made daily investments of cash balances in the Nations Cash Reserves, a portfolio of Nations Funds Trust, pursuant to an exemptive order received from the Securities and Exchange Commission. The income earned by each Master Portfolio from such investments is included in its Statement of operations as "Dividend income from affiliated funds". 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 six months ended September 30, 2002 were as follows:
PURCHASES SALES (000) (000) -------------------- Intermediate Bond Master Portfolio....................... $ 69,151 $103,928 High Yield Bond Master Portfolio....................... 210,891 98,651
95 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) The aggregate cost of purchases and proceeds from sales of long-term U.S. government securities for the six months ended September 30, 2002 were as follows:
PURCHASES SALES (000) (000) -------------------- Intermediate Bond Master Portfolio....................... $265,729 $223,385 High Yield Master Portfolio....... 0 3,932
4. FUTURES CONTRACTS At September 30, 2002, the Intermediate Bond Master Portfolio had the following futures contracts open:
UNREALIZED VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/ NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION) DESCRIPTION CONTRACTS (000) (000) (000) ------------------------------------------------------------------------------------------------------------------------------ 90 Day Euro Futures (long position) expiring March 2003(a)................................................... 134 $ 32,867 $ 32,996 $ 129 90 Day Euro Futures (long position) expiring June 2004(a)... 402 97,110 97,500 390 90 Day Euro Futures (long position) expiring December 2002(a)................................................... 269 66,062 66,248 186 90 Day Euro Futures (short position) expiring June 2003(a)................................................... (536) (131,128) (131,769) (641) 90 Day Euro Futures (short position) expiring September 2003(a)................................................... (269) (65,560) (65,918) (358) Abbey National plc Universal Stock Share Futures (long position) expiring December 2002(a)....................... 357 39,426 40,798 1,372 Antenna Hungaria Share Future (long position) expiring December 2002(a).......................................... 198 42,118 42,551 433 U.S. 10 year Treasury Note Futures (long position) expiring December 2002(a).......................................... 391 44,189 45,319 1,130 ------ Total net unrealized appreciation........................... $2,641 ======
--------------- (a)Securities have been segregated as collateral for open futures contracts. 5. FORWARD FOREIGN CURRENCY CONTRACTS At September 30, 2002, the High Yield Bond Master Portfolio had the following forward foreign currency contract outstanding:
VALUE OF VALUE OF CONTRACT CONTRACT MARKET VALUE UNREALIZED WHEN OPENED WHEN OPENED OF CONTRACT DEPRECIATION LOCAL (LOCAL CURRENCY) (US DOLLARS) (US DOLLARS) (US DOLLARS) DESCRIPTION CURRENCY (000) (000) (000) (000) --------------------------------------------------------------------------------------------------------------------------------- CONTRACT TO SELL: Expiring March 11, 2003............................. Euro (377) $(368) $(370) $(2) ===
6. SWAP CONTRACTS At September 30, 2002, the Intermediate Bond Master Portfolio had the following swap contract outstanding:
FLOATING RATE/ FLOATING RATE/ FIXED RATE NOTIONAL FIXED RATE PAYMENTS UNREALIZED AMOUNT PAYMENTS MADE RECEIVED BY DEPRECIATION DESCRIPTION (000) BY THE FUND THE FUND (000) ----------------------------------------------------------------------------------------------------------------------- CMBS Aaa Index Floating II CMBS Aaa Index Contract with Morgan Stanley, effective July 31, 2002, Total Spread Floating I expiring October 31, 2002(a).......................... $13,200 Return Total Return $(26) ====
--------------- (a)Fair valued. 96 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 7. 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. For the six months ended September 30, 2002, borrowings by the Funds under the Agreement were as follows:
AVERAGE AMOUNT AVERAGE OUTSTANDING INTEREST FUND (000) RATE ------------------------------------------------------------- Intermediate Bond Master Portfolio... $4 2.30%
8. 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 September 30, 2002, the following Master Portfolios had securities on loan:
MARKET VALUE OF MARKET VALUE LOANED SECURITIES OF COLLATERAL (000) (000) --------------------------------- Intermediate Bond Master Portfolio................... $175,233 $185,450 High Yield Bond Master Portfolio................... 55,813 60,621
97 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 9. RESTRICTED SECURITIES Certain securities may be subject to legal restrictions and may be difficult to sell. No Fund will invest more than 10% of the value of its net assets in securities that are considered illiquid. The following securities are considered both illiquid and restricted as to resale at September 30, 2002 for the High Yield Bond Master Portfolio.
PRINCIPAL MARKET AMOUNT/ VALUE PERCENTAGE ACQUISITION SHARES COST 9/30/02 OF NET SECURITY DATE (000) (000) (000) ASSETS ----------------------------------------------------------------------------------------------------------------------- Ermis Maritime Holdings Ltd., 12.500% due 12/31/04(b)(c)........................................ 02/22/01 326 $ 293 $ 277 0.1% Ermis Maritime Holding Ltd. Preferred Stock(b).......... 03/09/01 6 0** 0** 0.0* Genesis Health Ventures, Inc. .......................... 10/18/01 1 32 19 0.0* Genesis Health Ventures Warrants........................ 10/18/01 2 12 0** 0.0* GT Telecom Racers Notes Trust, Series B, 6.563% due 02/03/03(a)(e)........................................ 01/12/01-01/31/02 417 383 63 0.0* GT Telecom Racers Notes Trust, Series A, 6.563% due 06/30/08(a)(e)........................................ 01/12/01-01/31/02 583 463 87 0.0* Harborside Healthcare Corporation, 0.000% due 08/01/07 12.000% beginning 08/01/04............................ 10/25/01 210 101 111 0.0* Harborside Healthcare Corporation Warrants.............. 05/09/01 6 9 3 0.0* ICO Global Communications Warrants...................... 11/07/00 2 0 0** 0.0* ICO Global Communications Holdings LTD.................. 01/11/02 6 61 6 0.0* Loral Space & Communications Warrants................... 01/02/02 8 0 0** 0.0* Ono Finance plc Warrants(d)............................. 07/17/01 1 181 0** 0.0* Owens Corning Bank Debt Funded Revolver, 0.000% due 06/26/02(a)(f)........................................ 08/15/01-06/04/02 1,790 1,205 1,047 0.3 Pagemart Nationwide, 15.000% due 02/01/05(a)(g)......... 03/01/02 165 161 1 0.0* Pacific Gas and Electric Company Bank Debt A, 8.000% due 12/30/06(e)(f)........................................ 01/29/02-02/08/02 2,795 2,784 2,662 0.7 Pegasus Promissory Note(a)(b)........................... 08/24/01 4 0** 0** 0.0* Thermadyne Holding Corporation: Bank Debt Funded Revolver, 4.750% due 05/22/04(e)(f)...................................... 07/10/01 240 215 219 0.1 Bank Debt Term A, 4.750% due 05/22/04(e)(f)........... 07/10/01 1,488 1,307 1,353 0.4 Bank Debt Term B, 4.820% due 05/22/05(e)(f)........... 01/28/02 843 744 764 0.2 Bank Debt Term C, 5.070% due 05/22/06(e)(f)........... 01/28/02 843 740 764 0.2 UbiquiTel Inc. Warrants(d).............................. 07/03/00-07/10/00 180 10 0** 0.0* United Artists Bank Debt(b)(f).......................... 02/01/01 17,233 16 233 0.1 Xerox Bank Debt Funded Revolver, 6.310% due 10/22/02(e)(f)........................................ 06/21/02 450 447 333 0.1 Xerox Bank Debt Fund Term Loan A, 6.420% due 10/22/02(e)(f)........................................ 06/21/02 450 447 379 0.1 Xerox Bank Debt Fund Term Loan B, 5.930% due 10/22/02(e)(f)........................................ 06/21/02 150 149 142 0.0* Ziff Davis Holdings Inc. Warrants....................... 08/15/02 60 0 1 0.0* ------ ------ --- TOTAL................................................... $9,760 $8,463 2.3% ====== ====== ===
--------------- * Amount represents less than 0.1%. ** Amount represents less than $500. (a) Issue in default. (b) Fair valued security. (c) PIK ("Payment in kind"). Interest or dividend payment is made with additional securities. (d) 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. (e) Variable rate note. The interest rate shown reflects the rate in effect at September 30, 2002. (f) Loan participation agreement. (g) Issuer in bankruptcy. 98 NATIONS FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 10. COMMITMENTS AND CONTINGENCIES As of September 30, 2002, the High Yield Bond Master Portfolio had unfunded loan commitments pursuant to the following loan agreements:
BORROWER: UNFUNDED COMMITMENT --------------------------------------------------------- Lucent Technologies, Inc. .......... $619 Owens Corning, Inc. ................ 68 Thermadyne Manufacturing, LLC....... 14
11. SUBSEQUENT EVENT On October 8, 2002, the Board of Trustees of each Master Portfolio approved the replacement of Stephens with BA Advisors as the exclusive placement agent of the interests of the Master Portfolios. In addition, on November 21, 2002, the Board of Trustees approved the termination of Stephens as the co-administrator with BA Advisors (which will result in BA Advisors being the sole administrator to the Master Portfolios) and approved the assumption by BACAP of BA Advisors' role as the primary investment adviser to the Master Portfolios. The transition in service providers is expected to occur on or about January 1, 2003. It is also anticipated that BA Advisors will change its name to BACAP Distributors, LLC on or about January 1, 2003. 99 [This page intentionally left blank.] [This page intentionally left blank.] 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 Cash Reserves Nations Money Market Reserves Nations Government Reserves Nations Treasury Reserves Nations Tax-Exempt Reserves 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) Nations Intermediate Municipal Bond Fund Nations State-Specific Intermediate Municipal Bond Funds (CA, 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 Fund Nations Capital Growth Fund Nations Strategic Growth Fund BLEND FUNDS Nations Asset Allocation Fund VALUE FUNDS Nations SmallCap Value Fund 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 *As of June 3, 2002, Nations International Value Fund was closed to new or additional investments except in limited circumstances. Please refer to the Fund's most recent prospectus for more information. FIXEDSAR (9/02)