Government & Corporate Bond Funds

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Nations Funds Notes to financial statements (continued) (unaudited) monthly fee at the maximum annual rate of 0.18% of its arrangements with BNY. The Funds could have invested average daily net assets. For the period beginning a portion of the assets utilized in connection with the August 1, 2002 and until July 31, 2003, Stephens has expense offset arrangements in an income producing asset agreed to waive 0.05% of its co-administration fees for if they had not entered into such arrangements. 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. 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. 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 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: 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): Front End Sales Charge (000) Contingent Deferred Sales Charge (000) Short-Term Income ******************************** 0.10% Fund Investor A Investor A Investor B Investor C Government Securities ***************************** 0.10%* Short-Term Income ** $ 43 $44 $ — $22 Strategic Income ********************************** 0.10% Short-Intermediate Government ****** 89 — 26 2 * 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. Government Securities Intermediate Bond *** Bond ************** Strategic Income **** High Yield Bond **** 121 53 32 110 261 24 12 4 — 5 54 12 15 30 122 —* 4 3 1 12 In addition, during the six months ended September 30, 2002 and until July 31, 2003, BA Advisors and/or the * Amount represents less than $500. sub-advisers and/or Stephens have agreed to reimburse No officer, director or employee of Bank of America, BA expenses and/or waive their fees to the extent that the Advisors or BACAP, or any affiliate thereof, receives any total expenses (excluding shareholder servicing and compensation from Funds Trust for serving as Trustee or distribution fees), as a percentage of the respective Officer of Funds Trust. Fund’s average daily net assets, exceed the following annual rates: Funds Trust’s eligible Trustees may participate in a non- Fund Annual rate qualified deferred compensation plan which may be terminated at any time. All benefits provided under this Intermediate Bond Fund ************************ High Yield Bond Fund ************************* 0.81% 0.93% plan are unfunded and any payments to plan participants are paid solely out of the Funds’ assets. Income earned 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. 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, BNY serves as the custodian of Funds Trust’s assets. For which was terminated on January 1, 2002. Funds Trust’s the six months ended September 30, 2002, expenses of eligible Trustees had the option of a rollover into the the Funds were reduced by $4,208 under expense offset 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. Board of Trustees/Directors, and are charged as expenses The liability for the retirement plan is included in of each Fund directly to the applicable share class. A ‘‘Accrued Trustees’ fees and expenses’’ in the Statement substantial portion of the expenses incurred pursuant to of net assets. these plans is paid to affiliates of Bank of America and BA Advisors. Certain Funds have made daily investments of cash balances in the Nations Cash Reserves, another portfolio For the six months ended September 30, 2002, the annual of Funds Trust, pursuant to an exemptive order received rates in effect and plan limits, as a percentage of average from the Securities and Exchange Commission. The daily net assets, were as follows: income earned by each Fund from such investments is Current rate included in its Statement of operations as ‘‘Dividend (after fee Plan waivers) limit 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 Primary B Shareholder Administration Plan: Short-Intermediate Government ******* Investor A Combined Distribution and 0.50%* 0.60% Exchange Commission. Bond Fund has invested in Shareholder Servicing Plan ********* 0.25%** 0.25% 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 Investor B and Investor C Shareholder Servicing Plans ******************* Investor B and Investor C Distribution Plans **************************** 0.25% 0.75% 0.25% 0.75% is included in its Statement of operations as ‘‘Dividend income from affiliated funds’’. * 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 A significant portion of each Fund’s Primary A Shares annual rate of 0.10%. represents investments by fiduciary accounts over which Bank of America has either sole or joint investment discretion. ** Short-Term Income Fund pays its shareholder servicing fees under a separate servicing plan. 4. Purchases and sales of securities 3. Shareholder servicing and distribution plans The aggregate cost of purchases and proceeds from sales Funds Trust has adopted shareholder servicing plans and of securities, excluding long-term U.S. government distribution plans for the Investor B and Investor C securities and short-term investments, for the six months Shares of each Fund and a combined distribution and ended September 30, 2002 were as follows: shareholder servicing plan for the Investor A Shares of each Fund. In addition, Funds Trust has adopted a Purchases (000) Sales (000) shareholder administration plan for Primary B Shares of Short-Intermediate Government Fund. The shareholder Short-Term Income **************** Short-Intermediate Government ****** $ 79,175 8,610 $ 25,335 24,249 servicing plans permit the Funds to compensate or Government Securities ************* 5,115 7,191 reimburse servicing agents for shareholder services provided by the servicing agents. The administration plan Bond**************************** Strategic Income ****************** 439,841 11,207 480,353 13,031 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 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 Rule 12b-1 under the 1940 Act, permit the Funds to (000) (000) 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 Short-Term Income************* Short-Intermediate Government*** Government Securities ********** Bond ************************ $ 461,471 338,206 224,390 5,193,773 $ 268,429 272,307 185,698 5,030,897 average daily net assets, set from time to time by the Strategic Income *************** 166,849 167,083 65
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Presidents’ message Dear Sharehol
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Table of contents Financial stateme
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Nations Funds Nations Short-Term In
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