INTRODUCTION

1. This securities class action is brought on behalf of all persons who purchased shares in the Nations Funds family of funds from May 3, 2001 through July 3, 2003, inclusive (the "Class Period").
   
   
2. During the Class Period, defendants issued false and misleading statements in Nations Funds' registration statements and prospectuses in violation of federal securities laws. These offering documents misrepresented and failed to disclose that defendants were allowing at least one hedge fund to surreptitiously engage in late trading and in market "timing," in violation of stated internal policy and the law.

   A.     Late Trading

3. The daily price of mutual fund shares is calculated generally as of 4:00 p.m. EST, when the New York market closes. The price, known as the Net Asset Value, or "NAV," generally reflects the closing prices of the securities that comprise a given fund's portfolio, plus the value of any cash that the fund manager maintains for the fund. Orders to buy, sell or exchange mutual fund shares placed at or before 4:00 p.m. EST on a given day received that day's NAV. Conversely, orders placed at 4:01 p.m. EST or thereafter are supposed to be priced using the following day's NAV. This is known as "forward pricing."
   
   
4. Because of "forward pricing," which became law in 1968, mutual fund investors do not know the exact price at which their mutual fund orders will be executed at the time they place their orders, as NAVs are calculated after the market closes. Forward pricing ensures fairness because those who bought the fund during the day, for example before a positive announcement came out after 4:00 p.m., will enjoy a gain. Those who bought after the announcement are not supposed to share in the profit, as their purchase order should receive the NAV set at the end of the next day, when the market will have digested the news and reflected its impact in higher prices for the stock held by the fund and therefore a higher NAV for the fund.
   
   
5. Someone who is allowed to engage in late trading, i.e., after 4:00 p.m., will enjoy a significant trading edge because he can wait until after the market closes for significant news, and then buy or sell the fund at the old NAV that does not reflect the impact of the new information. When the market responds to the news the next day, the late trader would be able to realize an arbitrage profit based solely on the privilege of trading on the old NAV.
   
   
6. As alleged in a September 3, 2003 complaint filed in the Supreme Court of the State of New York by New York's Attorney General (the "Attorney General Complaint"), Bank of America allowed Canary Capital Partners, LLC and Canary Investment Management, LLC (collectively, "Canary") to engage in late trading.
   
   
7. Bank of America Capital Management, LLC, the manager for the Nations Funds family, is a wholly-owned subsidiary of Bank of America NA. In turn, Bank of America NA is a wholly-owned subsidiary of Bank of America Corporation. These entities controlled the Nations Funds Trust. Unless otherwise indicated, Bank of America Corporation, Bank of America NA, Bank of America Capital Management LLC, and Nations Funds Trust will hereinafter be collectively referred to as "Bank of America".
   
   
8. Bank of America allowed Canary to place orders after 4:00 p.m. so that Canary could illegally and in violation of Bank of America's policies receive that day's price (as opposed to the next day's price, which the order would have received had it been processed lawfully), to the detriment of plaintiff and members of the Class.
   
   
9. By allowing Canary to engage in market trading at the old NAV price, Canary enjoyed a significant arbitrage profit that came from profit that would otherwise have gone completely to the fund's investors. When it redeemed its shares and claimed its profit, the mutual fund manager either had to sell stock or use cash on hand - stock and cash that used to belong to the fund's investors - to give Canary its gain.
   
   
10. As alleged in the Attorney General Complaint, Bank of America installed special computer equipment in Canary's office that allowed it to buy and sell Bank of America's own mutual funds, the Nations Funds, and hundreds of other mutual funds at the 4:00 p.m. price until 6:30 p.m. EST. In return, Canary agreed to leave millions of dollars in Bank of America bond funds on a long-term basis. By doing so, Bank of America enjoyed a profit, as its fees were based on a percentage of the assets in the fund, and the more assets in the family of funds, the more money it made. Moreover, the long-term investments made by Canary assured a steady flow of fees to Bank of America.
    
    
11. Despite the fact that Bank of America was allowing Canary to engage in late trading, Bank of America failed to disclose this to its investors and, instead, repeatedly asserted in its registration statements and prospectuses that trading was not allowed after the market closed.
    
    
12. As a result of defendants' conduct, plaintiff and members of the Class suffered damages.

    B.    Timing

13. According to the Attorney General Complaint, Bank of America also allowed Canary to "time" mutual funds by allowing it to engage in short-term, "in and out" trading of mutual fund shares, despite the fact that its mutual fund registration statement and prospectus state that the funds would protect its investors from market timers, and that "timing" of mutual funds was acknowledged to hurt long-term shareholders.
    
    
14. "Timing" is the short-term darting in and out of a fund's shares, hoping to exploit a price inefficiency in the fund's NAV. For example, it can be done with U.S. funds holding foreign securities in which trading ends long before the NAV is set at the end of the U.S. trading day. Any pricing movement developments after the foreign markets close may not be reflected in the NAV, which enables market timers to buy or sell the shares at a "stale" price, and that then allows them to benefit from price movements in the foreign markets the following day.
    
    
15. Effective timing allows traders to capture an arbitrage profit. The arbitrage profit from timing comes dollar-for-dollar out of the pockets of the fund's investors, as the timer steps in at the last moment and takes part of the investors' upside when the market goes up, so the next day's NAV is reduced for those who are still in the fund. If the timer sell short, the arbitrage has the effect of making the next day's NAV lower than it would otherwise have been, thus magnifying the losses that investors experience in a declining market.
    
    
16. Timing also harms mutual fund investors because the trades necessitated by timer redemptions can lead to realization of taxable capital gains at an undesireable time, or may result in managers having to sell stock into a falling market. While some fund managers may keep cash on hand to pay out the timer's profits without having to sell stock, it can reduce the overall performance of the fund by requiring the fund manager to keep certain amount of the funds' assets in cash at all times, thus depriving the investors of the advantages of being fully invested in a rising market.
    
    
17. By allowing market timing by Canary, and misrepresenting that investors in Nations Funds family of funds were being protected from market timing, defendants caused damages to plaintiff and members of the Class.

    JURISDICTION AND VENUE
    
    

18. The claims alleged herein arise under Sections 11, 12 and 15 of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 20 of the Securities Exchange Act of 1934 (the "Exchange Act").
    
    
19. The jurisdiction of this Court is based on Section 27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. §1331 (federal question jurisdiction).
    
    
20. Venue is proper in this judicial district pursuant to Section 27 of the Exchange Act. Many of the acts and transactions giving rise to the violations of law complained of herein, including the preparation and dissemination to the investing public of materially false and misleading information, occurred in this judicial district.
    
    
21. In connection with the acts, transactions and conduct alleged herein, defendants used the means and instrumentalities of interstate commerce, including the United States mails, interstate telephone communications and the facilities of a national securities exchange and market.
    THE PARTIES

22. Plaintiff purchased shares in the Nations Funds family of mutual funds during the period between May 3, 2001 through July 3, 2003, inclusive (the "Class Period"), as set forth in the accompanying Certification, and has been damaged as a result of defendants' conduct as alleged herein.
    
    
23. Defendant Bank of America Corporation is a financial services holding company organized as a Delaware corporation.
    
    
24. Defendant Bank of America NA is a wholly-owned banking subsidiary of Bank of America Corporation.
    
    
25. Banc of America Capital Management, LLC ("BACAP") is a wholly-owned subsidiary of Bank of America NA. BACAP is the manager for the Nations Funds family, which encompasses numerous mutual funds. BACAP, as investment adviser to the Funds, is responsible for the overall management and supervision of the investment management of each fund and it selects and manages the investments of the Funds for which no sub-adviser is employed. While each mutual fund is its own company, as a practical matter the management company runs it. The portfolio managers who make the investment decisions for the funds and the executives to whom they report are all employees of the management company, not the mutual funds themselves. The management company owes fiduciaries duties to each fund and each investor.
    
    
26. Defendant Nations Funds Trust is the registered investment company in the Nations Fund Family. The Nations Fund Family has more than 70 distinct investment portfolios and total assets in excess of $150 billion.
    
    
27. Defendant Robert H. Gordon was the co-president of Banc of America Capital Management LLC during the Class Period.
    

    CLASS ACTION ALLEGATIONS

28. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons who purchased the Nations Funds family of funds during the Class Period and who were damaged thereby. Excluded from the Class are Canary, the defendants, their officers and directors, employees, affiliates, legal representatives, heirs, predecessors, successors and assigns, and any entity in which the defendants have a controlling interest or of which a defendant is a parent or subsidiary.
    
    
29. The members of the Class are located in geographically diverse areas and are so numerous that joinder of all members is impractical. Millions of shares from the Nations Funds family of funds have been sold. While the exact number of Class members is unknown to the plaintiff at this time and can only be ascertained through appropriate discovery, plaintiff believes there are thousands of members of the Class who hold shares in the Nations Funds' family of funds.
    
    
30. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

    (a) Whether defendants engaged in acts or conduct in violation of the federal securities laws as alleged herein;

    (b) Whether defendants had a duty to disclose certain information;

    (c) Whether defendants acted negligently, knowingly or recklessly in making materially false and misleading statements or in failing to correct such statements upon learning that they were materially false and misleading during the Class Period; and

    (d) Whether members of the Class have sustained damages and, if so, the proper measure of damages.

31. Plaintiff's claims are typical of the claims of the members of the Class as plaintiff and members of the Class sustained damages arising out of defendants' wrongful conduct in violation of federal law as complained of herein.
    
    
32. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class.
    
    
33. A class action is superior to other available methods for the fair and efficient adjudication of this controversy since joinder of all members of the Class is impractical. Furthermore, because the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for the Class members individually to redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.

    SUBSTANTIVE ALLEGATIONS

34. According to the Attorney General Complaint, starting in 2001, Bank of America (1) set Canary up with a state-of-the-art electronic late trading platform, allowing it to trade late in the hundreds of mutual funds that the bank offers to its customers, (2) gave Canary permission to time its own mutual fund family, the "Nations Funds," (3) provided Canary with approximately $300 million of credit to finance this late trading and timing, and (4) sold Canary the derivative short positions it needed to time the funds as the market dropped. None of these facts were disclosed in the Nations Funds registration statements and prospectuses.

    1.    Establishment of the Relationship

35. The relationship between Bank of America and Canary commenced in April 2001 when Theodore C. Sihpol, III, who worked in the Banc of America Securities ("BAS") high-net worth group in midtown Manhattan, visited Edward J. Stern, the Managing Principal of Canary at his office in Secaucus, New Jersey.
    
    
36. During the meeting, Stern outlined Canary's approach to timing mutual funds and results it had achieved in doing so. He asked if Canary would be allowed to time the Nations Funds family, and proposed that Bank of America could both lend Canary the money to do so and provide clearing services for the timed trades. Sihpol agreed to check with the Bank of America and get back to Canary.
    
    
37. After making some inquiries within the Bank of America and speaking with Stern on the telephone, Sihpol asked Stern to come to the bank's New York headquarters and explain his proposal in person to a larger group that included representatives from the BAS clearing business. At this meeting, which took place in late April, 2001, Stern and two of Canary's traders explained their strategy to the Bank of America group again, discussed their credit needs, and presented a list of the Nations Funds they would most like to time.
    
    
38. When the conversation turned to clearing, the representatives of the BAS clearing business offered to set up Canary with direct access to the bank's clearing function through their electronic ADP system. Using technology that was proprietary to BAS, Canary would be able to enter its trades directly into Canary's computers in New Jersey after the market closed until 6:30 p.m. New York time, without having to speak to a Bank of America representative. The representatives of the bank's clearing business mentioned this late trading capability as an additional selling point for ADP.
    
    
39. The meeting was a success. The parties agreed to go forward, subject to final approval of the list of Nations Funds to be timed. Sihpol prepared a memorandum summarizing the Canary/Stern relationship and their efforts thus far to implement Canary's mutual fund trading strategy. This memo, dated April 16, 2001, was sent to Charles D. Bryceland, his superior in the high-net worth brokerage business at BAS, and to a BAS compliance officer. Among other things, the memo notes that:

    • Canary uses a proprietary strategy involving market timing through daily mutual fund trading;

    • (a) the "immediate objective" was to implement Canary's "proprietary market-timing trading strategy, through the use of [BAS'] mutual fund clearing operations," (b) initially it was contemplated that Bank of America would permit Canary to time $20 million to $30 million in Nations Funds, and (c) Canary would make a "sticky" asset investment of the same amount of money in Nations bond funds;

    • (a) initially Canary would execute its mutual find timing trades by calling the trades into Sihpol, (b) later, however, Canary would be provided a direct link to BAS' proprietary mutual fund clearing system, and (c) the BAS clearing department had approved installation of the "direct link;" and

    • other potential business Bank of America could pursue with Canary and the Stern family included a potential $100 to $200 million line of credit to facilitate Canary's trade operations and a $25 million to $30 million opportunity for the BAS' derivatives desk to assist Canary in shorting the stocks owned by the mutual funds Canary was timing.

    Sihpol acknowledged that Canary's requests were "a bit unorthodox," but stated that Canary "made it clear they are not only willing to play by the guidelines we agree on, but also pay [Bank of America] for the value we can add."

40. Bryceland, Sihpol's branch manager, favored the market timing relationship with Canary and would later commend the diligence of Sihpol and his team to some of the most senior Bank of America executives. The BAS compliance representative initially questioned the propriety of giving a client "direct access" to BAS' mutual fund clearing capabilities. Apparently the compliance officer's concerns were satisfied when Sihpol informed him that other Bank of America employees "felt the business was worthwhile and an appropriate use of [Bank of America's] resources."
    
    
41. On May 1, 2001, Canary sent Sihpol a letter confirming the Nations Funds he hoped to time and providing the dollar amounts of timing for each fund. Initially, Canary intended to time four funds - Nations Convertible, Nations International Equity, Nations Emerging Markets and Nations Small Cap - in an aggregate amount of $16.8 million. The short term trading was to average one "round turn" per week (i.e., one purchase and one sale of the mutual fund shares each week). After selling a fund, the proceeds of the sale were to be deposited into a Nations money market fund or short-term bond fund until such time that Canary decided to "redeploy" it for the next timing trade in the "approved" Nations funds.
    
    
42. The letter further confirmed the understanding reached with respect to manual, electronic and late trading, and BAS' intention to provide financing for it. Canary wrote:

    We plan on transacting our trades manually at first (via Fax), at a time of day that is a little bit earlier than [the BAS clearing representative] specified in our first meeting. As soon as we can work out our lending arrangement with the bank and begin transacting electronically via ADP, we will draw down leverage against the capital we have deployed in the Nations funds, effectively increasing our trading capital with your firm to $32 million. If all goes well, this capital should grow larger as we get a sense of what trades can and cannot be done via the Banc of America Securities Platform. We really would like to get going with ADP and begin trading electronically as soon as possible.

    Canary also confirmed one of Bank of America's rewards for allowing such timing activity - "sticky assets." The letter notes:

    It is also our intention to commit "permanent" capital to Nations funds in an amount equal to the dollars that...[a special purpose mutual fund timing vehicle affiliated with Canary] trades. For the time being, we have chosen to invest in Nations Short to Intermediate Government and Nations Short Term Income Fund....

43. Though Sihpol had obtained the go-ahead from clearing operations, his branch manager and the compliance department, he still needed the consent of Banc of America Capital Management, LLC ("BACAP"), the investment manager of the Nations Funds. Sihpol had kept Robert H. Gordon, then the co-President of BACAP, abreast of the negotiations with Stern from the beginning, and had obtained from him the list of Nations Funds from which Canary had made its selection of target funds. On May 3, 2001, Sihpol sent Gordon an e-mail, apparently attaching a copy of Canary's May 1, 2001 letter, in which he advised Gordon of the names of the trading vehicles Canary would be using for its timing trades and that a Canary affiliate would be "making the dollar for dollar investment in the two short-term government funds."
    
    
44. Sihpol also sought to enlist Gordon's assistance with Canary's proposed derivatives transactions involving the securities held in certain of the Nations mutual funds. In the same e-mail, Sihpol wrote:

    Additionally, if you could...let us know what the most efficient, proper way of getting the portfolio's positions and weightings to Cockatiel that would put us on track for a conversation with our derivatives desk.

    Thanks again for all your help....

    Ted

    That same day, Gordon forwarded Sihpol's e-mail and its attachment to various senior managers within BACAP as well as certain individual portfolio managers. Gordon wrote:

    I've spoken to a number of you about this day trading exception. The account is the Stern Family, a significant and growing GCIB/Bank relationship. Also, nice incentive of matching funds in the Short-Intmdt. Gov't Fund.... thanks, and let me know if there are any issues.

    Apparently, no one raised any issues. Indeed, after being notified in a subsequent e-mail from Sihpol that the $20 million in "sticky" assets promised by Canary had arrived, Gordon forwarded the e-mail to various BACAP personnel confirming that Canary was "an approved timer."

45. In addition, Gordon's e-mail granting a special market timing dispensation to Canary was forwarded to the BACAP "timing police" responsible for protecting the Nations Funds from market timers.

    2.    Late Trading

46. At first, Canary conducted its late trading with the Bank of America "manually." Prior to 4:00 p.m. New York time, Canary sent Sihpol or a member of his team a series of "proposed" mutual fund trades by e-mail or fax. Upon receipt, Sihpol or a member of his team filled out an order ticket, time stamped it, and set it to one side until that evening. Sometime after 4 p.m. New York time, Canary telephoned Sihpol or a member of his team to either confirm or cancel the "proposed" order. If confirmed, the order (with its pre-close time stamp) was sent by fax to Bank of America's mutual funds clearing department for processing, and received that day's NAV. If the order was cancelled, Sihpol or a member of his team would destroy the ticket.
    
    
47. This procedure violated not only the SEC's "forward pricing rule" and the bank's compliance manual, but was contrary to the Nations Funds registration statement and prospectus.
    
    
48. The manual trading system was cumbersome, and Canary soon began using ADP, the "direct link." After Bank of America technicians installed it in Canary's offices in June of 2001, the link became the preferred route for Canary's late trading (although the manual procedure was still followed occasionally for certain orders and when Canary experienced technical problems). The link enabled Canary to trade late not just in the Nations Funds where it had negotiated capacity, but in the many other mutual fund families with which the bank had clearing agreements. When there was a significant market event after 4:00 p.m. EST but before the ADP trading window closed at 6:30 p.m., the NAVs of many of these funds would be stale and potentially ripe for arbitrage trading by Canary.
    
    
49. Sihpol and his team collected a fee of one percent of the Canary assets in Nations Funds and one half of one percent of the assets in other funds traded through the platform. Throughout 2001, 2002 and up until July 2003, Canary placed late orders for hundreds of mutual fund trades through ADP. Each evening, summaries of Canary's late trades were faxed to Sihpol's team, which used them to reconcile trading reports and then discarded them.

    3.    Financing Canary's Late Trading and Timing

50. Sihpol went to the Bank of America's private banking area to obtain additional financing for Canary's trading strategies. The executives who approved this financing knew that the money would be used to time the bank's own funds. Bank of America initially agreed to a $75 million line of credit, and later increased it to $100 and then $200 million. The collateral for these loans was Canary's mutual fund positions, so the bank's credit area tracked Canary's trading closely to make sure the bank was fully secured. Canary paid the bank a generous interest rate of LIBOR plus 1.25% for this loan.

    4.    Derivatives

51. Sihpol also sought and obtained approval for the BAS equity derivatives area to engage in the complex "equity basket" transactions that enabled Canary to sell mutual funds short and profit from falling markets. Sihpol facilitated establishing these "synthetic" short positions by obtaining from Gordon's group the precise makeup of the Nations Funds that Canary was interested in shorting. This information was then transferred to the bank's derivatives desk, which would then sell the stocks that the Nations Funds managers were buying in order to create a hedge. Sihpol helped Canary update these positions on a regular basis so that the positions tracked the changing portfolios of the Nations Funds. Canary paid the bank derivatives group commissions for the stock sales plus a generous financing spread.

    5.    The Canary Relationship Expands

52. Canary's timing activity in Nations Funds proceeded during 2001. In early 2002, however, Gordon raised an issue with Sihpol about an agreement the two had reached in December, 2001 to provide Canary with more timing capacity. This agreement was reflected in an e-mail sent to Bryceland, Sihpol's branch manager, in which Siphol wrote:

    Canary is currently OK to trade 1% (or approx. $5MM) of the Nation's International fund. When Rob [Gordon] and I spoke in December we agreed an increase to 2% would be acceptable provided it was accompanied by an amount of "sticky" assets to be determined later.

    When the time had come for Gordon to make good on this agreement, Sihpol sent an e-mail dated January 2, 2002:

    Rob-

    Happy New Year. We wanted to let you know Canary's line of credit with the bank has been increased to $100MM (from $75) and they are anticipating putting it to work with us over the next couple of weeks. Do you have any feel on when we could expand their space in [the International Fund] as we discussed last month? This is a top priority for them and have [sic] offered "sticky" assets in return for additional trading space.

    Thanks again for the help.

    Ted

53. Gordon disagreed. The agreement, according to Gordon, was only that he would consider approving an increase in Canary's timing capacity which was, in any event, contingent upon the fund sub-advisor's consent to the timing activity. Gordon then enlisted the assistance of a senior executive at Bank of America's private bank, with whom he had already discussed the issue. In an e-mail forwarding Sihpol's January 2^nd e-mail, Gordon wrote:

    . . . you and I talked briefly about this on the bus in Phoenix -- is this something that you want me to continue to make exceptions for (we don't as a general rule except market timers)? The corresponding balances they give us in the funds are nice but I wouldn't do it for that.

    Rob

54. This message was forwarded to another Bank of America executive with the note that the Canary relationship "is controversial within bacap" and requesting that she speak with Gordon and advise on a game plan. According to an e-mail from Bryceland, Sihpol's supervisor, the private bank's concern "was making sure we do additional business if we are giving them 100mm of our balance sheet?" Bryceland then scheduled a lunch meeting for the following day to discuss the Canary relationship and related issues with Gordon.
    
    
55. The next day, January 4, 2002, Sihpol sent an e-mail, at Bryceland's request, quantifying the past and future Canary relationship. In relevant part, Sihpol wrote:

    The commission generated as of 12/31/01 has totaled over $655,000 (not including any revenue generated from the LIBOR + 125 [basis points] $100MM line of credit from the bank- of which $70 MM is currently drawn). This means the revenues for AMG would total over $2,250,000 on an annualized basis. This number assumes zero growth over the next year and does not include the one time fees (initial mutual funds charges, loan closings, etc.) the account experienced this year. We are meeting with Eddie Stern on Monday to discuss dramatically expanding their derivative business and the addition of new capital to their trading accounts.

    Bryceland then forwarded Sihpol's "quantification" of the Canary relationship to still further senior members in the Bank of America hierarchy. Recipients included Richard DeMartini, the head of all of Bank of America's asset management businesses. Included with Sihpol's e-mail was Bryceland's praise for the individuals involved:

    Accolades go to:

    * Rob Gordon & BACAP for giving access to BACAP funds for market timing activities (initial business we booked and not normally accepted by BACAP)

    * [Private Bank executives] - Line of credit for 75 mm, now 100mm to provide leverage for derivative and market timing transactions in an expedited and extremely professional way

    * Ted Sihpol .... - for...appropriately drawing on the firms [sic] resources to establish [the Canary relationship]. It is always nice to enter a new year with a success like this. Thanks to all team members who have contributed to this profitable relationship and for thinking across divisional lines to make money for the firm.

56. After these e-mail briefings of the upper ranks of Bank of America management, Sihpol met with Canary as he indicated he would in the "quantification" e-mail. Apparently the controversy within BACAP continued, however, as Gordon had not yet approved Canary's request for additional timing capacity. Sihpol e-mailed the results of his Canary meeting to Gordon as follows:

    1. They are adding an additional $50MM to their trading accounts to be run at 50 [basis points]. This is part of $90MM worth of negotiated space they have been promised by another firm and wish to trade the space here. This will be followed by the additional 40MM as they use the $100MM line of credit.

    2. They agreed to try and increase their communication with us/the funds when increasing or decreasing the size of their trade in our (Nations) funds.

    3. They would like to see a term sheet on the principal protected note managed by Marsico as soon as one becomes available - and understand the value of participating in proprietary offerings.

    4. They [sic] fund would like to increase their business w/ [the derivatives area] - esp. the ability to trade the same contracts more frequently (weekly). The execution of our [derivatives] desk is the best they have on the street.

    5. Lastly, they would like to ask if we could grant them space (1-2%) in 3 additional Nations Funds. . . . While I know we continue to ask for space, the client continues to bring us new, outside, assets and continues to pay us generously on in-house, outside and derivative accounts. Thanks again for the help and anything you could do would be great....

Gordon forwarded Sihpol's status e-mail to DeMartini with the following message:

Rich -- Once we've gotten the Marsico Principal Protected Fund off the ground, we intend to ask Mr. Stern for a commitment of $20 million in return for the market timing commitments.

Rob

BACAP, however, was unable to launch the Marsico Principal Protected Fund into which the sticky money was to be deposited. Gordon nonetheless approved additional timing capacity, and Canary continued timing various Nations Funds throughout 2002 and into 2003.

1. As one of Bank of America's "timing police" stated in an internal email discussing another timers' approach to Nations Funds in search of timing capacity: Our stated policy for the Funds, and our representation to the Board, is that we do not allow market timing activity. A copy of this email was sent to Gordon on March 18, 2003. Five days later, Gordon approved further Canary timing in two additional Nations funds.

   6.    The End of the Canary Relationship

2. Ultimately, even BACAP's own employees questioned whether Canary's timing trading was detrimental to long-term shareholders. In a May 12, 2003 e-mail, a BACAP employee complained vociferously to the "timing police" about the damage a timer -- apparently Canary -- was doing to one of the Nations Funds:

   the PB has a client who trades $9 million in and out of the midcap index fund all the time. It wasn't so bad when he held his positions for a while, but now he's trading extremely short swings, sometimes with holding periods of only a day. The impact of this has been lessened since we have been getting notification in time to hedge at the close, but there is still a cost that's being borne by other fund shareholders. We would be happy to set up a futures trading account for this guy and handle his futures trades for him, but a mutual fund is not the right vehicle for this kind of trading.

   Notwithstanding these concerns, Canary continued to time the Nations Funds until early July, 2003, when Canary received a subpoena from the Attorney General's Office. At that point, Canary's timing of Nations Funds ceased. On July 3, 2003, a member of the BACAP "timing police" force sent the following e-mail to his colleague:

   This [attachment] is the [Canary] account in Small Company that came in on June 11 through Bear Stearns that Ted Sihpol indicated would be "sticky" money. They placed a full liquidation yesterday.

   The BACAP "timing police" noticed right away that Canary's "sticky assets" had left the bank.

   FALSE AND MISLEADING STATEMENTS MADE

3. At no time during the Class Period did the Nations Funds disclose to shareholders (1) the agreements with Canary, (2) Canary's extensive market timing activities pursuant to these agreements, (3) the "sticky asset" deals, (4) the fact that Canary had access to a BAS trading platform that enabled Canary to trade late, or (5) the other financial services the Bank of America had provided Canary (and the revenues the Bank of America derived therefrom) in connection with Canary receiving timing capacity in the Nations Funds.
   
   
4. Indeed, while Bank of America was allowing Canary to engage in late trading, Bank of America failed to disclose this to Nations Funds' investors and, instead, in Nations Funds' registration statements and prospectuses represented that trading was not allowed after the market closed.
   
   
5. For example, the Nations Funds Primary A Shares prospectus dated August 1, 2001 states that orders received before the end of a business day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will receive that day's net asset value per share. Orders received after the end of a business day will receive the next business day's net asset value per share. This language appeared in numerous other Nations Funds prospectus, including ones filed on June 29, 2001, November 21, 2001, January 4, 2002, April 3, 2002, August 8, 2002 and August 30, 2002.
   
   
6. Likewise, the Nations Funds Registration Statement and Prospectus dated June 29, 2001 pertaining to various funds from the Nations Funds, states:

   A business day is any day that the New York Stock Exchange (NYSE) is open. A business day ends at the close of regular trading on the NYSE, usually at 4:00 p.m. Eastern time. If the NYSE closes early, the business day ends as of the time the NYSE closes.

   * * *

   How shares are priced

   All transactions are based on the price of the Fund's shares - or its net asset value per share. We calculate net asset value per share for each class of the Fund at the end of each business day. . . .

   How orders are processed

   Orders to buy, sell or exchange shares are processed on business days. Orders received by Stephens, PFPC or their agents before the end of a business day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will receive that day's net asset value per share. Orders received after the end of a business day will receive the next business day's net asset value per share. . . .

7. Furthermore, Bank of America allowed "timing" by Canary. However, its registration statements and prospectuses created the misleading impression that it was protecting investors against the negative effects of timing, and failed to disclose that Bank of America allowed for these arrangements with respect to Canary and possibly others. In fact, in 2002, while Canary's timing activity was in full swing, Nations Funds added language to the prospectus disclosing the harmful effect of market timing and reassuring shareholders that Nations Funds would protect them. For example, the August 1, 2002 Nations Funds prospectus for Primary A shares discloses the following:

   The interests of a Fund's long-term shareholders and its ability to manage investments may be adversely affected when its shares are repeatedly bought and sold in response to short-term market fluctuations -- also known as "market timing." The exchange privilege is not intended as a vehicle for market timing. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. When BA Advisors believes frequent trading would have a disruptive effect on a Fund's ability to manage its investments, a Fund may reject purchase orders and exchanges into a Fund by any person, group or account that is believed to be a market timer.

8. Bank of America, by serving Canary, received large fees for its investment advisory services, which were calculated as a percentage of the average daily net assets of each fund, while Canary made tens of millions through late trading and timing. However, as a result of defendants' wrongful conduct, plaintiff and members of the Class suffered damages.

   COUNT I
   For Violation of §11 of the 1933 Act Against All Defendants

9. Plaintiff repeats and realleges each of the foregoing paragraphs. This claim is not based on fraud.
   
   
10. Each of the defendants is liable under §11(a) because Nation Funds' Registration Statement, when it became effective, contained untrue statements of material fact or omitted to state material facts required to be stated therein or necessary to make the statements therein not misleading.
    
    
11. Plaintiff and other members of the Class purchased Nations Fund shares pursuant to false and misleading registration statements without knowledge of the untruths or omissions alleged herein, and sustained damages as a result. Plaintiff and the other members of the Class could not have reasonably discovered the nature of defendants' untruths and omissions.
    
    
12. Defendants directly or indirectly, used the means and instrumentalities of interstate commerce and the U.S. mails.
    
    
13. By reason of the foregoing, the defendants violated §11 of the 1933 Act and are liable to plaintiff and the other members of the Class, each of whom has been damaged by reason of such violations.
    
    

14. This action was brought within one year after the discovery of the untrue statements and omissions and less than three years after the issuance of false and misleading registration statements.

    
    COUNT II
    

    For Violation of Section 12(2) of The Securities Act Against All Defendants

15. Plaintiff repeats and realleges the foregoing paragraphs.
    
    
16. This Count is asserted by plaintiff against all defendants under and pursuant to Section 12(2) of the Securities Act. This claim is not based on fraud.
    
    
17. The defendants offered, sold, or solicited for financial gain all the shares sold pursuant to the prospectuses to plaintiff and the Class. The defendants' actions included actively taking part in encouraging prospective purchasers to buy shares of Nations Funds.
    
    
18. The prospectuses included untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
    
    
19. The defendants owed to the purchasers of Nations Fund securities, including plaintiff and other class members, the duty to make a reasonable and diligent investigation of the statements contained in the prospectuses, to insure that such statements were true and that there was no omission to state a material fact required to be stated in order to make the statements contained therein not misleading.
    
    
20. Plaintiff and the members of the Class did not know of any of the untruthful statements and omissions alleged and in the exercise of reasonable care could not have known of them.
    
    
21. By reason of the conduct alleged herein, the defendants violated § 12(2) of the Securities Act. As a direct and proximate result of the defendants' wrongful conduct, plaintiff and other purchasers of Nations Fund shares suffered damages.
    
    
22. This action was brought within one year after the discovery of the untrue statements and omissions and less than three years after the issuance of false and misleading prospectuses.

    COUNT III
    For Violations of §15 of the 1933 Act Against the Bank of America Corporation, Bank of America NA, Banc of America Capital Management and Robert H. Gordon

23. Plaintiff repeats and realleges the foregoing paragraphs. Plaintiff, for purposes of this claim, expressly disclaims any allegations of fraud.
    
    
24. Nations Funds issued the securities registered by the Registration Statement. This Claim is asserted against defendants Bank of America Corporation, Bank of America NA, Banc of America Capital Management and Robert H. Gordon by virtue of their direct and indirect control and domination of the Nations Funds Trust.
    COUNT IV
    For Violations of Sections 10(b) of the Exchange Act and Rule 10b-5 Against All Defendants

25. Plaintiff repeats and realleges each of the foregoing paragraphs.
    
    
26. During the Class Period, defendants knowingly and/or recklessly engaged in acts, transactions, practices, and courses of business which operated as a fraud upon plaintiff and other members of the Class, and made various untrue and deceptive statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading to plaintiff and other Class members.
    
    
27. Each of the defendants knew or recklessly disregarded the fact that the above acts and practices, misleading statements, and omissions would adversely affect the integrity of the market in shares in the Nations Funds family of funds.
    
    
28. Plaintiff and other members of the Class have suffered substantial damages as a result of the wrongs alleged herein.
    
    
29. By reason of the foregoing, defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.

    COUNT V
    For Violation of Section 20(a) of the Exchange Act
    Against Defendants Bank of America Corporation, Bank of America NA, Bank of America Capital Management and Robert H. Gordon

30. Plaintiff repeats and realleges each of the foregoing paragraphs. This Count is asserted against defendants Bank of America Corporation, Bank of America NA, Banc of America Capital Management, LLC, and Robert H. Gordon.
    
    
31. These defendants acted as controlling persons of Nations Funds Trust within the meaning of §20(a) of the Exchange Act as alleged herein. By reasons of their relationship with Nations Funds Trust, these defendants had the power and authority to cause the Company to engage in the wrongful conduct complained of herein.
    
    
32. These defendants were in a position to and did in fact control the operations of the Company, including but not limited to issuing the false and misleading statements complained of herein.
    
    
33. By reasons of the aforementioned wrongful conduct, these defendants are liable pursuant to §20(a) of the Exchange Act. As a direct and proximate result of their wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with purchasing the Company's securities during the Class Period.
    
    WHEREFORE, plaintiff on her own behalf and on behalf of the Class prays for judgment as follows:

    1. Declaring this action to be a proper class action maintainable pursuant to Rule 23 of the Federal Rules of Civil Procedure and plaintiff to be a proper class representative and her counsel lead counsel;

    2. Awarding plaintiff and the Class compensatory damages, together with appropriate prejudgment interest at the maximum rate allowable by law;

    3. Awarding plaintiff and the Class their costs and expenses for this litigation, including reasonable attorneys' fees and other disbursements; and

    4. Granting such other and further relief as this Court deems to be just and proper.

DATED: September 5, 2003 

Kevin J. Yourman (147159)
Jordan L. Lurie (130013)
Leigh A. Parker (170565)
WEISS & YOURMAN

By: _______________________
            Kevin J. Yourman
10940 Wilshire Blvd., 24th Floor
Los Angeles, CA 90024
Telephone: (310) 208-2800

Attorneys for Plaintiff

DEMAND FOR JURY TRIAL

        Plaintiff demands a trial by jury on all issues.

DATED: September 5, 2003 

Kevin J. Yourman (147159)
Jordan L. Lurie (130013)
Leigh A. Parker (170565)
WEISS & YOURMAN

By: _______________________
            Kevin J. Yourman
10940 Wilshire Blvd., 24th Floor
Los Angeles, CA 90024
Telephone: (310) 208-2800

Attorneys for Plaintiff