Government & Corporate Bond Funds

Nations Funds
Notes to financial statements (continued) (unaudited)
BA Advisors is entitled to receive an advisory fee, No officer, director or employee of Bank of America, BA
calculated daily and payable monthly, based on the Advisors or BACAP, or any affiliate thereof, receives any
following annual rates multiplied by the average daily net compensation from the Master Trust for serving as a
assets of each Master Portfolio: Trustee or Officer of the Master Trust.
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’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
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-
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.
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 subadministrator
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-
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’’.
administration services. 3. Purchases and sales of securities
BNY serves as the custodian of the Master Trust’s assets. The aggregate cost of purchases and proceeds from sales
For the six months ended September 30, 2002, expenses of securities, excluding long-term U.S. government
of the Master Portfolios were reduced by $2,012 under securities and short-term investments, for the six months
expense offset arrangements with BNY. The Master ended September 30, 2002 were as follows:
Portfolios could have invested a portion of the assets Purchases Sales
utilized in connection with the expense offset
(000) (000)
arrangements in an income producing asset if they had Intermediate Bond Master Portfolio**** $ 69,151 $103,928
not entered into such arrangements. High Yield Bond Master Portfolio ***** 210,891 98,651
95