-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8opZH4ff8ab3xQBk8QNUNILdFfK5T6lSsIH5d4az3AoOL87D1uhfEwyx90fdkFv 9WOL9pw7ySQ76kepNYUu8w== 0000950168-96-000071.txt : 19960122 0000950168-96-000071.hdr.sgml : 19960122 ACCESSION NUMBER: 0000950168-96-000071 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19960119 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS INSTITUTIONAL RESERVES CENTRAL INDEX KEY: 0000859750 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-33144 FILM NUMBER: 96505673 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06030 FILM NUMBER: 96505674 BUSINESS ADDRESS: STREET 1: ONE NATIONSBANK PLZ CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003425734 MAIL ADDRESS: STREET 1: ONE NATIONSBANK PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: CAPITOL MUTUAL FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SEI CAPITOL FUNDS DATE OF NAME CHANGE: 19900318 485APOS 1 NATIONS FUND 485APOS 41604 As filed with the Securities and Exchange Commission on January 19, 1996 Registration No. 33-33144; 811-6030 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Post-Effective Amendment No. 17 [X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 18 [X] (Check appropriate box or boxes) ------------------------ THE CAPITOL MUTUAL FUNDS (Exact Name of Registrant as specified in Charter) 111 Center Street Little Rock, Arkansas 72201 (Address of Principal Executive Offices, including Zip Code) -------------------------- Registrant's Telephone Number, including Area Code: (800) 321-7854 Richard H. Blank, Jr. c/o Stephens Inc. 111 Center Street Little Rock, Arkansas 72201 (Name and Address of Agent for Service) With copies to: Robert M. Kurucza, Esq. Carl Frischling, Esq. Marco E. Adelfio, Esq. Kramer, Levin, Naftalis, Morrison & Foerster Nessen, Kamin & Frankel 2000 Pennsylvania Ave., N.W., Suite 5500 919 Third Avenue Washington, D.C. 20006 New York, New York 10022 It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to Rule 485(b); or [ ] on __________ pursuant to Rule 485(b), or [X] 60 days after filing pursuant to Rule 485(a), or [ ] on ___________ pursuant to Rule 485(a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. No filing fee is required under the Securities Act of 1933 because an indefinite number of shares of beneficial interest in the Registrant, without par value, has previously been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended. The Registrant filed on June 26, 1995, the notice required by Rule 24f-2 for its fiscal year ended April 30, 1995 (File No. 33-33144; 811-6030). This filing is being made in order to add a Distribution Plan to the Market Class Shares of each Portfolio of the Trust. THE CAPITOL MUTUAL FUNDS CROSS REFERENCE SHEET
N-1A Item No. Location PART A - Cash Reserves, Treasury Reserves, Government Reserves and Municipal Reserves - -- Market Class Shares Item 1. Cover Page...................................................... Cover Page Item 2. Synopsis........................................................ Expenses Summary Item 3. Condensed Financial Information................................. Financial Highlights Item 4. General Description of Registrant............................... The Trust; Investment Objective and Policies; General Investment Policies; Investment Limitations; Fundamental Policies Item 5. Management of the Fund.......................................... Trustees of the Trust; The Adviser; The Administrator and Co-Administrator Item 5A. Management's Discussion of Fund Performance.................... * Item 6. Capital Stock and Other Securities.............................. Voting Rights; Dividends; Taxes Item 7. Purchase of Securities Being Offered............................ Purchase and Redemption of Shares; Distribution Plan; Shareholder Servicing Plan Item 8. Redemption or Repurchase........................................ Purchase and Redemption of Shares Item 9. Pending Legal Proceedings....................................... * PART B - All Portfolios Item 10. Cover Page..................................................... Cover Page - -------------------------------- * Not Applicable 1 Item 11. Table of Contents.............................................. Table of Contents Item 12. General Information and History................................ The Trust Item 13. Investment Objectives and Policies............................. Description of Permitted Investments; Investment Limitations; Securities Lending Item 14. Management of the Fund......................................... Trustees and Officers Item 15. Control Persons and Principal Holders of Securities............ 5% Shareholders Item 16. Investment Advisory and Other Services............................ The Adviser; The Administrator and Co-Administrator; Distribution and Shareholder Servicing Plans; and Custodian and Transfer Agent Item 17. Brokerage Allocation and Other Practices....................... Portfolio Transactions Item 18. Capital Stock and Other Securities............................. Description of Shares Item 19. Underwriters................................................... Distribution and Shareholder Servicing Plans Item 20. Calculation of Performance Data................................ Performance Information Item 21. Financial Statements........................................... Experts and Financial Information
2 (A redherring appears on the left-hand side of this page, rotated 90 degrees. Text is as follows:) Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JANUARY 19, 1996 Prospectus Nations Institutional Reserves (formerly known as The Capitol Mutual Funds) (the "Trust") is an open-end management investment company which seeks to provide a convenient and economical means of investing in one or more professionally managed portfolios. The Trust's portfolios offer multiple classes of shares; this Prospectus relates to the Market Class Shares of the following diversified money market portfolios (each, a "Portfolio"): Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves. The Trust's Market Class Shares are offered through Servicing Agents (as defined below) to individuals and institutions that can meet the $250,000 minimum initial investment requirement in Market Class Shares. It is a fundamental policy of each Portfolio to use its best efforts to maintain a constant net asset value of $1.00 per share. An investment in a Portfolio is neither insured nor guaranteed by the U.S. Government. There is no assurance that each Portfolio will be able to maintain a stable net asset value of $1.00 per share. This Prospectus sets forth concisely the information about the Trust that a prospective investor should know before investing. Investors are advised to read this Prospectus and retain it for future reference. A Statement of Additional Information ("SAI") dated August 31, 1995 as supplemented on March , 1996 has been filed with the Securities and Exchange Commission ("SEC") and is available without charge by writing or calling the Trust at the address or telephone number indicated in the column to the right. The SAI is incorporated into this Prospectus by reference. NationsBanc Advisors, Inc. ("NBAI") is the investment adviser to the Funds, TradeStreet Investment Associates, Inc. ("TradeStreet") is sub-investment adviser to the Funds. As used herein the "Adviser" shall mean NBAI and/or TradeStreet as the context may require. SHARES OF THE TRUST ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE PORTFOLIOS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE CERTAIN OTHER SERVICES TO THE TRUST, FOR WHICH THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR THE TRUST. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Nations Cash Reserves Nations Treasury Reserves Nations Government Reserves Nations Municipal Reserves Market Class Shares March , 1996 For purchase, redemption and performance information call: 1-800-321-7854 or write: Nations Institutional Reserves c/o Stephens Inc. One NationsBank Plaza 39th Floor Charlotte, NC 28255 NATIONS FUND Table Of Contents Expenses Summary 3 Financial Highlights 5 The Trust 5 Investment Objectives and Policies 5 General Investment Policies 8 Investment Limitations 9 Fundamental Policies 9 The Adviser 10 The Administrator and Co-Administrator 11 The Distributor 12 Distribution Plan 12 Shareholder Servicing Plan 13 Trustees of the Trust 14 Purchase and Redemption of Shares 14 Voting Rights 15 Dividends 15 Performance 15 Taxes 16 Independent Accountants, Custodian and Transfer Agent 17 Description of Permitted Investments 18 Appendix 21 No person has been authorized to give any information or to make any representations not contained in this Prospectus, or in the SAI incorporated herein by reference, in connection with the offering made by this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Trust or its distributor. This Prospectus does not constitute an offering by the Trust or by the distributor in any jurisdiction in which such offering may not lawfully be made. 2 Expenses Summary Expenses are one of several factors to consider when investing in the Portfolios. The following table summarizes operating expenses for Market Class Shares of the Portfolios. There are no transaction fees imposed upon the purchase or redemption of shares. The Examples show the cumulative expenses attributable to a hypothetical $1,000 investment in Market Class Shares of the Portfolios over specified periods. Annual Operating Expenses (as a percentage of average net assets)
Nations Nations Nations Nations Cash Treasury Government Municipal Reserves Reserves Reserves Reserves Advisory Fees1 .04% .06% .05% .05% Rule 12b-1 Fees1 .10% .10% 10% .10% Shareholder Servicing Fees1 .20% .20% .20% .15% Other Expenses .16% .14% .15% .15% Total Operating Expenses1 .50% .50% .50% .45%
1 The Adviser, administrator and co-administrator of the Trust have agreed voluntarily to waive a portion or all of their fees and to reimburse certain expenses of the Portfolios, and the advisory fees and other expenses shown reflect the voluntary waivers. The adviser, administrator and co-administrator of the Trust each reserves the right to terminate its waiver or reimbursement at any time in its sole discretion. Absent these waivers, the Advisory Fees, Rule 12b-1 Fees, Shareholder Servicing Fees and Total Operating Expenses for Nations Cash Reserves would be .30%, .20%, .25% and .91% of average net assets, respectively; for Nations Treasury Reserves would be .30%, .20%, .25% and .89% of average net assets, respectively; for Nations Government Reserves would be .30%, .20%, .25% and .90% of average net assets, respectively; and for Nations Municipal Reserves would be .30%, .20%, .25% and .90% of average net assets, respectively. Additional operating expense information may be found under "The Adviser," "The Administrator and Co-Administrator" and "The Distributor." 3 Examples: An investor would pay the following expenses on a $1,000 investment in Market Class Shares of the indicated Portfolio assuming (1) a 5% annual return and (2) redemption at the end of each time period. 1 Year 3 Years Nations Cash Reserves $5 $16 Nations Treasury Reserves $5 $16 Nations Government Reserves $5 $16 Nations Municipal Reserves $5 $14 The examples should not be considered as a representation of past or future expenses and actual expenses may be greater or less than those shown. The purpose of this table is to assist an investor in understanding the various costs and expenses that may be directly or indirectly borne by investors in the Trust. Certain figures contained in the above tables are based on amounts incurred during each Portfolio's most recent fiscal year and have been adjusted as necessary to reflect current service provider fees and/or reimbursements. If current fee waivers and/or reimbursements are discontinued, the amounts contained in the "Examples" above may increase. The information set forth in the foregoing table and examples relates only to the Market Class Shares. The Trust also offers the Capital Class, Liquidity Class and Adviser Class (formerly Class A, Class B and Class C Shares, respectively) of the Portfolios. The "Other Expenses" figures contained in the above table are based on estimated amounts for the Portfolios' current fiscal year. There is no assurance that any fee waivers and reimbursements will continue at their present level beyond the current fiscal year. Long-term shareholders in a Portfolio could pay more in sales charges than the economic equivalent of the maximum front-end sales charges applicable to mutual funds sold by members of the National Association of Securities Dealers, Inc. For more complete descriptions of the Portfolios' operating expenses, see "The Adviser," "The Administrator and Co-Administrator" and "The Distributor." 4 Financial Highlights Financial information is not provided in connection with Market Class Shares of the Portfolios because such shares were not offered during the Trust's most recent fiscal year. Financial information in connection with Capital Class and Liquidity Class Shares of the Portfolios is incorporated by reference in the SAI, which is available upon request. Price Waterhouse LLP is the independent accountant to the Trust. Shareholders will receive unaudited semi-annual reports describing the Portfolios' investment operations and annual financial statements audited by the Trust's independent accountant. The Trust The Capitol Mutual Funds, doing business as Nations Institutional Reserves, is an open-end management investment company established as a Massachusetts business trust under a Declaration of Trust dated January 22, 1990. The Trust is a member of the Nations Fund Family which consists of Nations Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and the Trust. The Declaration of Trust permits the Trust to offer separate series of units of beneficial interest ("shares") and different classes of each series. Each Portfolio is a series of the Trust. Except for differences between classes of a Portfolio pertaining to distribution and shareholder servicing arrangements, each share of each Portfolio represents an equal proportionate interest in that Portfolio. This Prospectus relates to the Market Class Shares of the Trust's Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves Portfolios. NBAI is the investment adviser and TradeStreet is the sub-investment adviser for each Portfolio. Information regarding the Capital Class, Liquidity Class and Adviser Class Shares of the Portfolios is contained in separate prospectuses that may be obtained from the Trust's distributor. To obtain additional information regarding the Portfolios' other classes of shares which may be available to you, contact Nations Fund at 1-800-321-7854. Investment Objectives And Policies Each Portfolio seeks to comply with regulations of the SEC applicable to money market funds. These regulations impose certain quality, maturity and diversification restraints on investments by a Portfolio. Under these regulations, each Portfolio will maintain a dollar-weighted average portfolio maturity of 90 days or less and will acquire only eligible securities maturing in 397 days or less. For further information regarding these restraints, see "Description of Permitted Investments." Nations Cash Reserves The investment objective of this Portfolio is to preserve principal value and maintain a high degree of liquidity while providing current income. There is no assurance that the investment objective will be met. The Portfolio will invest in obligations denominated in U.S. dollars consisting of: (i) commercial paper rated at least A-1 by Standard & Poor's Corporation ("S&P"), Prime-1 by 5 Moody's Investors Service, Inc. ("Moody's"), F-1 by Fitch Investors Services, Inc. ("Fitch"), Duff 1 by Duff & Phelps Credit Rating Co. ("D&P"), A1 by IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA") or TBW-1 by Thomson BankWatch, Inc. ("BankWatch") at the time of investment, or, if not rated, determined by the Adviser to be of comparable quality; (ii) obligations (including certificates of deposit, time deposits, and bankers' acceptances) of thrift institutions, U.S. commercial banks (including foreign branches of such banks), and U.S. and London branches of foreign banks, provided that such institutions (or, in the case of a branch, the parent institution) have total assets of $1 billion or more as shown on their last published financial statements at the time of investment; (iii) short-term corporate obligations of issuers of commercial paper whose commercial paper is eligible for purchase by the Portfolio; (iv) instruments eligible for acquisition by Nations Government Reserves (see below); and (v) repurchase agreements and reverse repurchase agreements involving any of the foregoing obligations. The Portfolio also may invest in guaranteed investment contracts and in securities issued by other investment companies, consistent with its investment objective and policies. The purchase of unrated securities is subject to the approval or ratification of the Trustees. The high quality short-term obligations that may be purchased by the Portfolio include instruments issued by trusts, including pass-through certificates representing participations in, or debt instruments backed by, the securities and other assets owned by the trust. Certain of the obligations in which the Portfolio may invest may be variable or floating rate instruments, may involve a demand feature and may include variable amount master demand notes. In addition, the Portfolio may write and purchase put options on a limited basis. Except for temporary defensive purposes, the Portfolio will concentrate its investments in obligations issued by the banking industry, consisting of U.S. dollar denominated obligations of U.S. banks, foreign branches of U.S. banks, and London and U.S. branches of foreign banks. Concentration in this context means the investment of more than twenty-five percent of the Portfolio's assets in such obligations. For temporary defensive purposes during periods when the Adviser believes that market conditions warrant, the Portfolio may invest up to 100% of its assets in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, repurchase agreements and cash. Nations Treasury Reserves The investment objective of this Portfolio is to preserve principal value and maintain a high degree of liquidity while providing current income. There is no assurance that the investment objective will be met. The Portfolio will invest in direct obligations issued by the U.S. Treasury, separately traded component parts of such obligations transferable through the federal book-entry system (known as Separately Traded Registered Interest and Principal Securities or "STRIPS"), and repurchase agreements and reverse repurchase agreements involving such obligations. The Portfolio also may invest in securities issued by other investment companies, consistent with its investment objective and policies. The dealers selected for the Portfolio must meet criteria established by S&P. Nations Government Reserves The investment objective of this Portfolio is to preserve principal value and maintain a high degree of liquidity while providing current income. There is no assurance that the investment objective will be met. The Portfolio will invest exclusively in instruments eligible for acquisition by Nations Trea- 6 sury Reserves and in obligations issued or guaranteed as to principal and interest by the agencies and instrumentalities of the U.S. Government and repurchase agreements and reverse repurchase agreements involving such obligations. Nations Municipal Reserves The Portfolio's investment objective is to preserve principal value and maintain a high degree of liquidity while providing current income exempt from Federal income taxes. There is no assurance that this objective will be met. The Portfolio will invest in U.S. dollar denominated municipal securities of issuers located in all fifty states, the District of Columbia, Puerto Rico and other U.S. territories and possessions. At least 80% of the Portfolio's total assets will be invested in securities the interest on which is exempt from Federal income taxes, based on opinions from bond counsel for the issuers. Municipal notes in which the Portfolio may invest consist of general obligation notes, tax anticipation notes, revenue anticipation notes, bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes. The Portfolio's investments in any of the notes described above will be limited to those obligations (i) where both principal and interest are backed by the full faith and credit of the United States, (ii) which are rated MIG-1 or VMIG-1 at the time of investment by Moody's, (iii) which are rated SP-1 at the time of investment by S&P, or (iv) which, if not rated, are of comparable quality in the judgment of the Adviser to obligations rated MIG-1, VMIG-1 or SP-1. The Portfolio also may invest in securities issued by other investment companies, consistent with its investment objective and policies. Municipal bonds in which the Portfolio may invest must be rated in one of the two highest short-term rating categories by S&P or Moody's at the time of investment or, if unrated, must be deemed by the Adviser to have essentially the same characteristics and quality as bonds having the above ratings. The Portfolio may purchase industrial development and pollution control bonds if the interest paid is exempt from Federal income tax. The interest on such bonds, however, may be treated as a specific tax preference item under the Federal alternative minimum tax. In addition, the payment of the principal and interest on such bonds may be dependent solely on the ability of the facility's user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. The Portfolio may purchase municipal lease obligations, including certificates of participation in municipal leases. The Portfolio may acquire municipal lease obligations that may be assigned by the lessee to another party provided the obligation continues to provide tax-exempt interest. The Portfolio will not purchase municipal lease obligations to the extent it holds municipal lease obligations and illiquid securities in an amount exceeding 10% of its total assets unless the Adviser determines that the municipal lease obligations are liquid pursuant to guidelines established by the Board of Trustees of the Trust. Pursuant to these guidelines, the Adviser, in making this liquidity determination, will consider, among other factors, the strength and nature of the secondary market for such obligations, the prospect for its future marketability and whether such obligations are rated. The Portfolio expects that it will only purchase rated municipal lease obligations. In addition, the Portfolio may purchase participation interests in other municipal securities (such as industrial development bonds). The Portfolio's investments in tax-exempt commercial paper will be limited to obligations which are rated at least A-1 by S&P or Prime-1 by Moody's at the time of investment or which are of equivalent quality as determined by the Adviser. 7 For a description of the above ratings, see the "Appendix." The Portfolio may invest in short-term securities, in commitments to purchase such securities on a "when-issued" basis (approximately 5% to 50% of the Portfolio's total assets), and reserves the right to engage in "put" transactions on a daily, weekly or monthly basis. Securities purchased on a "when-issued" basis are subject to settlement within 45 days of the purchase date. The interest rate realized on these securities is fixed as of the purchase date and no interest accrues to the Portfolio before settlement. These securities are subject to market fluctuation due to changes in market interest rates. The Portfolio will only commit to purchase a security on a when-issued basis with the intention of actually acquiring the security and will segregate sufficient liquid assets to meet its purchase obligation. A "put" feature permits the Portfolio to sell a security at a fixed price prior to maturity. The underlying municipal securities subject to a put may be sold at any time at the market rates. However, unless the put was an integral part of the security as originally issued, it may not be marketable or assignable. Therefore, the put would only have value to the Portfolio. In certain cases a premium may be paid for put features. A premium paid will have the effect of reducing the yield otherwise payable on the underlying security. The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Portfolio to meet redemptions and remain as fully invested as possible in municipal securities. The Portfolio will limit its put transactions to institutions which the Adviser believes present minimal credit risk, pursuant to guidelines adopted by the Trust's Board of Trustees. The Adviser has discretion to invest up to 20% of the Portfolio's assets in taxable money market instruments (consisting of obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities and repurchase agreements) and municipal securities of the type described above, which are subject to the alternative minimum tax. However, the Portfolio generally intends to be fully invested in federally tax-exempt securities. General Investment Policies For a description of the Portfolios' permitted investments see "Description of Permitted Investments" and for further information about ratings see the "Appendix." Each Portfolio except Nations Municipal Reserves may lend the securities in which it is invested pursuant to agreements requiring that the loan be continuously secured by cash, securities of the U.S. Government or its agencies or any combination of cash and such securities. The Portfolio will continue to receive interest on the securities loaned while simultaneously earning interest on the investment of cash collateral in U.S. Government securities. Collateral is marked to market daily to provide a level at least equal to the market value of the securities loaned. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will only be made to borrowers deemed by the Adviser to be of good standing and when, in the judgment of the Adviser, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any guaranty by the U.S. Government, its agencies or instrumentalities of the securities in which any Portfolio invests guarantees only the payment of principal and interest on the guaranteed security and does not guaran- 8 tee the yield or value of that security or the yield or value of shares of that Portfolio. Investment Limitations Each Portfolio may not: 1. Purchase securities of any issuer (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) if as a result more than 5% of the total assets of the Portfolio would be invested in the securities of such issuer. This restriction applies to 75% of each Portfolio's assets. 2. Purchase any securities which would cause more than 25% of the total assets of the Portfolio to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply (a) with respect to Nations Cash Reserves, to investments in the banking industry as described above; (b) with respect to Nations Cash Reserves, Nations Treasury Reserves and Nations Government Reserves, to investments in obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities; and (c) with respect to Nations Municipal Reserves, to investments in tax-exempt securities issued by governments or political subdivisions of governments. 3. Make loans, except that (a) a Portfolio may purchase or hold debt instruments in accordance with its investment objective and policies; (b) a Portfolio may enter into repurchase agreements and non-negotiable time deposits, provided that repurchase agreements and non-negotiable time deposits maturing in more than seven days, restricted securities and other securities which are not readily marketable do not exceed, in the aggregate, 10% of the Portfolio's total assets; and (c) each Portfolio except Nations Municipal Reserves may engage in securities lending as described in this Prospectus and in the SAI. The foregoing percentages will apply at the time of the purchase of a security. Additional investment limitations are set forth in the SAI. Fundamental Policies The investment objective of each Portfolio and the investment limitations described above are fundamental policies of each Portfolio. It is also a fundamental policy of each Portfolio to seek to maintain a constant net asset value of $1.00 per share. There is no assurance that the Portfolios will be able to maintain a constant net asset value of $1.00 per share. Fundamental policies cannot be changed with respect to a Portfolio without the consent of the holders of a majority of that Portfolio's outstanding shares. The term "majority of the outstanding shares" means the vote of (i) 67% or more of a Portfolio's shares present at a meeting, if the holders of more than 50% of the outstanding shares of the Portfolio are present or represented by proxy, or (ii) more than 50% of the Portfolio's outstanding shares, whichever is less. 9 The Adviser NationsBanc Advisors, Inc. serves as investment adviser to the Portfolios. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a wholly owned banking subsidiary of Nationsbank Corporation, a bank holding company organized as a North Carolina corporation. NBAI has its principal offices at One NationsBank Plaza, Charlotte, North Carolina 28255. TradeStreet Investment Associates Inc., with principal offices at One NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment adviser to the Portfolios. TradeStreet is a wholly owned subsidiary of NationsBank, which in turn is a wholly owned banking subsidiary of NationsBank Corporation, a bank holding company organized as a North Carolina corporation. TradeStreet provides trust and banking services to individuals, corporations, and institutions, both nationally and internationally, including investment management, estate and trust administration, financial planning, corporate trust and agency, and personal and corporate banking. Subject to the general supervision of the Trust's Board of Trustees and in accordance with each Portfolio's investment policies, the Adviser formulates guidelines and lists of approved investments for each Portfolio, makes decisions with respect to and places orders for that Portfolio's purchases and sales of portfolio securities and maintains records relating to such purchases and sales. With respect to Nations Municipal Reserves, the Adviser is authorized to allocate purchase and sale orders for portfolio securities to certain financial institutions including, in the case of agency transactions, financial institutions which are affiliated with NationsBank or which have sold shares in the Portfolio, if the Adviser believes the quality of the transaction and the commission are comparable to what they would be with other qualified brokerage firms. From time to time, to the extent consistent with its investment objective, policies and restrictions, each Portfolio may invest in securities of companies with which NationsBank has a lending relationship. The Trust and the Adviser have adopted codes of ethics which contain policies on personal securities transactions by "access persons," including portfolio managers and investment analysts. These policies substantially comply in all material respects with the recommendations set forth in the May 9, 1994 Report of the Advisory Group on Personal Investing of the Investment Company Institute. Morrison & Foerster LLP, counsel to the Trust and special counsel to NationsBank, has advised the Trust and NationsBank that subsidiaries of NationsBank may perform the services contemplated by the Investment Advisory Agreement without violation of the Glass-Steagall Act or other applicable banking laws or regulations. Such counsel has pointed out, however, that there are no controlling judicial or administrative interpretations or decisions and that future judicial or administrative interpretations of, or decisions relating to, present federal or state statutes, including the Glass-Steagall Act, and regulations relating to the permissible activities of banks and their subsidiaries or affiliates, as well as future changes in such statutes, regulations and judicial or administrative decisions or interpretations, could prevent such subsidiaries of NationsBank from continuing to perform, in whole or in part, such services. If such subsidiaries of NationsBank were prohibited from performing any such services, it is expected that the Board of Trustees of the Trust would recommend to each Portfolio's shareholders that they 10 approve a new advisory agreement with another entity or entities qualified to perform such services. For the services provided and expenses assumed pursuant to the Investment Advisory Agreement, NBAI is entitled to a fee, calculated daily and paid monthly, at an annual rate of 0.30% of the average daily net assets of each Portfolio. For services provided and the expenses assumed pursuant to a sub-advisory agreement, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid monthly, at the annual rates of 0.033% of the average daily net assets of each Portfolio. NBAI, TradeStreet and the administrator and the co-administrator of the Portfolios have voluntarily agreed to waive their fees proportionately (and reimburse the Portfolios for certain expenses) in order to limit the total annualized operating expenses of Market Class Shares (exclusive of Rule 12b-1 fees and Shareholder Serviccing Fees) of the Portfolios (as a percentage of average daily net assets) to 0.20%. NBAI, TradeStreet, the administrator and the co-administrator each reserves the right, in its sole discretion, to terminate this voluntary fee waiver at any time. Shareholders will be notified in advance if and when the waiver is terminated. For the fiscal year ended April 30, 1995, the Portfolios paid NationsBank under a prior Advisory Agreement, advisory fees, after waivers, at the indicated rate of average net assets: Nations Cash Reserves--0.11%; Nations Treasury Reserves--0.04%; Nations Government Reserves--0.13%; and Nations Municipal Reserves--0.07%. The Administrator and Co-Administrator Stephens Inc. ("Stephens"), with principal offices at 111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of the Trust pursuant to an Administration Agreement. Pursuant to the terms of the Administration Agreement, Stephens provides various administrative and corporate secretarial services to the Portfolios, including providing general oversight of other service providers, office space, utilities and various legal and administrative services in connection with the satisfaction of various regulatory requirements applicable to the Portfolios. The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of First Data Corporation with principal offices at One Exchange Place, Boston, Massachusetts 02109, serves as the co-administrator of the Portfolios pursuant to a Co-Administration Agreement. Under the Co-Administration Agreement, TSSG provides various administrative and accounting services to the Portfolios, including performing calculations necessary to determine net asset values and dividends, preparing tax returns and financial statements and maintaining the portfolio records and certain general accounting records for the Portfolios. For the services rendered pursuant to the Administration and Co-Administration Agreements, Stephens and TSSG are entitled to receive a combined fee at the annual rate of up to 0.10% of each Portfolio's average daily net assets. For the fiscal year ended April 30, 1995, the Portfolios paid their administrator a fee, after waivers, at the indicated rate of average net assets: Nations Cash Reserves--0.06%; Nations Treasury Reserves--0.06%; Nations Government Reserves--0.06%; and Nations Municipal Reserves--0.06%. In addition, the Trust pays its other operating expenses, including audit and legal expenses, expenses of preparing prospectuses, proxy solici- 11 tation material and reports to shareholders, costs of custodial and transfer agency services and registering shares under Federal and state securities laws and insurance expenses and pays additional expenses including litigation and other extraordinary expenses, brokerage costs, interest charges, taxes and organization expenses. The Distributor Shares of the Portfolios are sold on a continuous basis by Stephens, as the Portfolios' sponsor and distributor. Stephens is a registered broker-dealer with principal offices at 111 Center Street, Little Rock, Arkansas 72201. The Trust has entered into a distribution agreement with Stephens which provides that Stephens has the exclusive right to distribute shares of the Portfolios. In addition to Market Class Shares, the Portfolios also offer Capital Class, Liquidity Class and Adviser Class Shares. Capital Class Shares, which do not bear distribution or shareholder servicing fees, are offered only to NationsBank, its affiliates and correspondents, for the investment of funds for which they act in a fiduciary capacity. Liquidity Class Shares are offered to institutional investors which meet the $500,000 minimum initial investment requirement and to NationsBank and its affiliates and correspondents, for the investment of their own funds or funds for which they act in a fiduciary, agency or custodial capacity. Liquidity Class Shares of the Portfolios bear aggregate distribution and shareholder servicing fees of up to 0.60% of the class's average daily net assets. Adviser Class Shares are offered to institutional investors having a corporate cash management arrangement with a bank, broker/dealer or other financial institution that has entered into a shareholder servicing agreement with the Trust. Adviser Class Shares also bear shareholder servicing fees of up to 0.25% of the class's average net assets. A salesperson and any other person or entity entitled to receive compensation for selling or servicing Portfolio shares may receive different compensation with respect to one particular class of shares over another in a Portfolio. Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a Distribution Plan (the "Plan") with respect to the Market Class Shares of each Portfolio. Pursuant to the Plan, each Portfolio may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of the Portfolio's Market Class Shares. Payments under the Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trust's Board of Trustees, provided that the annual rate may not exceed .20% of the average daily net asset value of each Portfolio's Market Class Shares. Notwithstanding anything contained in the Plan to the contrary, no Portfolio shall be obligated to make any payments under the Plan that exceed the maximum amounts payable under Article III, Section 26 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. Certain state securities laws may require those financial institutions providing distribution services to register as dealers pursuant to state law. The fees payable under the Plan are used primarily to compensate or reimburse Stephens for distribution services provided by it, and related expenses incurred, in connection with Market 12 Class Shares, including payments by Stephens to compensate or reimburse banks, broker/dealers or other financial institutions that have entered into Sales Support Agreements with Stephens ("Selling Agents"), for sales support services provided, and related expenses incurred, by such Selling Agents. Payments under the Plan may be made with respect to: (i) preparation, printing and distribution of prospectuses, sales literature and advertising materials by Stephens or, as applicable, Selling Agents, attributable to distribution or sales support activities, respectively; (ii) commissions, incentive compensation or other compensation to, and expenses of, account executives or other employees of Stephens or Selling Agents, attributable to distribution or sales support activities, respectively; (iii) overhead and other office expenses of Stephens or Selling Agents, attributable to distribution or sales support activities, respectively; (iv) opportunity costs relating to the foregoing (which may be calculated as a carrying charge on Stephens' or Selling Agent's unreimbursed expenses incurred in connection with distribution or sales support activities, respectively); and (v) any other costs and expenses relating to distribution or sales support activities. The overhead and other office expenses referenced above may include, without limitation, (i) the expenses of operating Stephens' or Selling Agents' offices in connection with the sale of Portfolio shares, including lease costs, the salaries and employee benefit costs of administrative, operations and support personnel, utility costs, communication costs and the costs of stationery and supplies, (ii) the costs of client sales seminars and travel related to distribution and sales support activities, and (iii) other expenses relating to distribution and sales support activities. Shareholder Servicing Plan The Trustees have approved a Shareholder Servicing Plan (the "Servicing Plan") with respect to Market Class Shares of the Portfolios. Pursuant to the Servicing Plan, the Trust, on behalf of each Portfolio, may enter into shareholder servicing agreements ("Servicing Agreements") with banks, broker/dealers and other financial institutions, including certain affiliates of NationsBank ("Servicing Agents"). Under the Servicing Agreements, the Servicing Agents will provide various shareholder support services to their customers that are the owners of Market Class Shares, including general shareholder liaison services; processing purchase, exchange and redemption requests from customers and placing orders with Stephens or the transfer agent; processing dividend and distribution payments from the Portfolios on behalf of customers; providing information periodically to customers showing their position in Market Class Shares; arranging for bank wires; and providing such other similar services as may reasonably be requested. The Servicing Plan authorizes the Trust to pay the Servicing Agents a fee, calculated daily and paid monthly, at a rate set from time to time by the Board of Trustees, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Portfolios' Market Class Shares. The Trust understands that Servicing Agents may charge fees to their Customers who are the owners of Market Class Shares for additional services provided in connection with their Customers' accounts. These fees would be in addition to any amounts which may be received by Servicing Agents under their Servicing Agreements with the Trust. The Servicing Agreements require Servicing Agents to disclose to their Customers any compensation payable to the Servicing Agents by the Trust and any other compen- 13 sation payable by Customers in connection with the investment of their assets in Market Class Shares. Customers should read this Prospectus in light of the terms governing their accounts with their Servicing Agents. The Trust may suspend or reduce payments under the Servicing Plan at any time, and payments are subject to the continuation of the Servicing Plan described above and the terms of the Servicing Agreements. See the SAI for more details on the Servicing Plan. Trustees of the Trust The management and affairs of the Trust are supervised by the Trustees under the laws of the Commonwealth of Massachusetts. The Trustees have approved contracts under which, as described above, certain companies provide essential management services to the Trust. Further information regarding individual Trustees may be found in the SAI. Purchase and Redemption of Shares Market Class Shares are offered through Servicing Agents to individual and institutional investors. The minimum initial investment in Market Class Shares is $250,000. Purchases and redemptions may be effected on days on which the New York Stock Exchange (the "Exchange") is open for business (a "Business Day"). Purchases will be effected only when federal funds are available for investment on the Business Day the purchase order is received by Stephens or the Transfer Agent (as defined below). A purchase order must be received by Stephens or the Transfer Agent by 3:00 p.m., Eastern time (12 noon, Eastern time, with respect to Nations Municipal Reserves). A purchase order received after such time will not be accepted; notice thereof will be given to the institution placing the order and any funds received will be returned promptly to the sending institution. If federal funds are not available by the close of regular trading on the Exchange (currently 4:00 p.m., Eastern time), the order will be canceled. The purchase price is the net asset value per share next determined after acceptance of the order by Stephens or the Transfer Agent. The net asset value of shares is calculated as of 3:00 p.m., Eastern time (1:00 p.m., Eastern time, with respect to the Nations Municipal Reserves), on each Business Day. The assets of the Portfolios are valued based upon the amortized cost method. Although the Portfolios seek to maintain a net asset value per share of $1.00, there can be no assurance that the net asset value per share will not vary. Redemption orders must be received on a Business Day before 3:00 p.m., Eastern time (12 noon, Eastern time, with respect to Nations Municipal Reserves), and payment will normally be wired the same day. The Trust reserves the right to wire redemption proceeds within three Business Days after receiving a redemption order if, in the judgment of NationsBank, an earlier payment could adversely impact a Portfolio. Redemption orders will not be accepted by Stephens or the Transfer Agent after 3:00 p.m., Eastern time (12 noon, Eastern time, with respect to Nations Municipal Reserves), for execution on that Business Day. The redemption price is the net asset value per share next determined after acceptance of the redemption order by Stephens or the Transfer Agent. Redeemed 14 shares are not entitled to dividends declared on the day the redemption order is effective. Neither the Transfer Agent nor the Trust will be responsible for any loss, liability, cost or expense for acting upon wire instructions or upon telephone instructions that it reasonably believes to be genuine. The Trust and the Transfer Agent will each employ reasonable procedures to confirm that instructions communicated by telephone are genuine, including requiring a form of personal identification prior to acting upon instructions received by telephone. The Trust or Transfer Agent may be liable for losses resulting from fraudulent or unauthorized instructions if it does not employ these procedures. In addition, the Trust reserves the right to record all telephone conversations. Voting Rights Each share held entitles the Shareholder of record to one vote. As a Massachusetts business trust, the Trust is not required to hold annual meetings but approval will be sought for certain changes in the operation of the Trust and for the election of Trustees under certain circumstances. In addition, a Trustee may be removed by the remaining Trustees or by Shareholders at a special meeting called upon written request of Shareholders owning at least 10% of the outstanding shares of the Trust. In the event that such a meeting is requested, the Trust will provide appropriate assistance and information to the Shareholders requesting the meeting. Dividends The net income of each Portfolio is determined and declared on each Business Day as a dividend to Shareholders of record as of 3:00 p.m., Eastern time (1:00 p.m., Eastern time, with respect to Nations Municipal Reserves), on that day. Dividends are paid by each Portfolio in additional shares of the same class, unless the Shareholder has elected to take such payment in cash, on the first Business Day of each month. Shareholders may change their election by providing written notice to the Transfer Agent at least 15 days prior to the change. The amount of dividends payable on Capital Class Shares will be more than the dividends payable on the Liquidity Class, Adviser Class and Market Class Shares because of the distribution and/or shareholder servicing expenses charged to Liquidity Class, Adviser Class and Market Class Shares. Performance From time to time the Portfolios may advertise their "current yield" and "effective compound yield." Such yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of a Portfolio refers to the income generated by an investment in the Portfolio over a stated seven-day period. This income is then "annualized," that is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is 15 calculated similarly but, when annualized, the income earned by an investment in the Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Nations Municipal Reserves also may advertise its "tax-equivalent yield," which is calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Portfolio's yield, assuming certain tax brackets for Shareholders. The yield of the Portfolios fluctuates, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in a Portfolio will actually yield in the future. Performance quotations will be computed separately for each class of a Portfolio's shares. Because of differences in the fees and expenses borne by Liquidity Class, Adviser Class and Market Class Shares, the net yield on such shares can be expected, at any given time, to be lower than the net yield on Capital Class Shares. Each Portfolio's annual report contains additional performance information and is available on request without charge from Stephens. In addition, a Portfolio from time to time may compare its performance to that of other mutual funds tracked by mutual fund rating services, of broad groups of comparable mutual funds or of unmanaged indices which may assume investment of dividends but generally do not reflect deductions for administrative and management costs. Taxes Each Portfolio is treated as a separate entity for Federal income tax purposes and is not combined with the Trust's other portfolios. Each Portfolio intends to qualify or to continue to qualify for the special tax treatment afforded regulated investment companies as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As long as a Portfolio qualifies for this special tax treatment, it will be relieved of Federal income tax on that part of its net investment income (including, for this purpose, net short-term capital gain) and net capital gain (the excess of net long-term capital gain over net short-term capital loss) that it distributed to Shareholders. Each Portfolio intends to distribute substantially all of its net investment income (including, for this purpose, net short-term capital gain) to Shareholders. Dividends declared by Nations Cash Reserves, Nations Treasury Reserves and Nations Government Reserves from net investment income will be taxable to Shareholders as ordinary income whether received in cash or in additional shares and will not qualify for the corporate dividends-received deduction. Nations Municipal Reserves may pay "exempt-interest dividends" to its Shareholders if, at the close of each quarter of its taxable year, at least 50% of the value of such Portfolio's assets consists of obligations the interest on which is excludable from gross income. Exempt-interest dividends constitute the portion of the aggregate dividends, as designated by the Portfolio, equal to the excess of the excludable interest over certain amounts disallowed as deductions. Exempt interest dividends are excludable from a Shareholder's gross income for Federal income tax purposes, but may have certain collateral Federal income tax consequences, as described in the SAI. Any dividends attributable to Nations Municipal Reserve's taxable income will be taxable to Shareholders as ordinary income whether received in cash or in additional shares to the extent of the Portfolio's earnings and profits and 16 will not qualify for the corporate dividends-received deduction. Any net capital gain will be distributed at least annually and will be taxed to Shareholders as long-term capital gain, regardless of how long a Shareholder has held shares. The Portfolios will make annual reports to Shareholders of the Federal income tax status of all distributions. Ordinarily, Shareholders will include in income all dividends declared by a Portfolio in the year those dividends are paid. However, dividends declared by a Portfolio in October, November or December of any year and payable to Shareholders of record on a date in any of those months will be deemed to have been paid by the Portfolio and received by the Shareholders on December 31st, if paid by the Portfolio during the following January. Income received on direct U.S. Government obligations is exempt from tax at the state level when received directly and may be exempt, depending on the state, when received by a Shareholder from a Portfolio provided certain conditions are satisfied. Interest received on repurchase agreements collateralized by U.S. Government obligations normally is not exempt from state taxation. Nations Cash Reserves, Nations Treasury Reserves and Nations Government Reserves will inform Shareholders annually of the percentage of income and distributions derived from direct U.S. Government obligations. Shareholders should consult their tax advisors to determine whether any portion of the income dividends received from a Portfolio is considered tax exempt in their particular states. Federal law requires the Trust to withhold 31% from any dividends (other than exempt-interest dividends) paid by the Trust and/or redemptions (including exchange redemptions) that occur in certain Shareholder accounts if the Shareholder has not properly furnished a certified correct Taxpayer Identification Number and has not certified that withholding does not apply, or if the Internal Revenue Service has notified the Trust that the Taxpayer Identification Number listed on a Shareholder account is incorrect according to its records, or that the Shareholder is subject to backup withholding. Amounts withheld are applied to the shareholder's Federal tax liability, and a refund may be obtained from the Internal Revenue Service if withholdings results in overpayment of taxes. Federal law also requires a Portfolio to withhold 30% or the applicable tax treaty rate from dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S. corporation shareholder accounts. The foregoing discussion is based on tax laws and regulations which were in effect as of the date of this Prospectus and summarizes only some of the important tax considerations generally affecting the Portfolios. It is not intended as a substitute for careful tax planning; investors should consult their tax advisors with respect to their specific tax situations. Further tax information is contained in the SAI. Independent Accountants, Custodian and Transfer Agent Price Waterhouse, LLP serves as the independent accountant to the Trust. NationsBank of Texas, N.A., serves as each Portfolio's custodian (the "Custodian"). The Custodian is located at 1401 Elm Street, Dallas, Texas 75202 and is a wholly owned subsidiary of NationsBank Corporation. In return for providing custodial services, the Custodian is entitled to receive, in addition to out-of-pocket expenses, 17 fees payable monthly (i) at the rate of 1.25% of 1% of the average daily net assets of each Portfolio, (ii) $10.00 per repurchase collateral transaction by the Portfolios, and (iii) $15.00 per purchase, sale and maturity transaction involving the Portfolios. TSSG serves as transfer agent (the "Transfer Agent") for each Portfolio's shares. The Transfer Agent is located at One Exchange Place, Boston, Massachusetts 02109. Description of Permitted Investments The following is a description of the permitted investments for the Portfolios: U.S. TREASURY OBLIGATIONS--bills, notes, and bonds issued by the U.S. Treasury and STRIPS. The Portfolios will not actively trade STRIPS. STRIPS are sold as zero coupon securities which means that they are sold at a substantial discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. This discount is accreted over the life of the security, and such accretion will constitute the income earned on the security for both accounting and tax purposes. Because of these features, STRIPS may be subject to greater interest rate volatility than interest paying U.S. Treasury Obligations. U.S. GOVERNMENT AGENCY SECURITIES--certain Federal agencies, such as the Government National Mortgage Association, have been established as instrumentalities of the U.S. Government to supervise and finance certain types of activities. Issues of certain of these agencies, while not direct obligations of the U.S. Government, are either backed by the full faith and credit of the United States or are guaranteed by the Treasury or supported by the issuing agencies' right to borrow from the Treasury. The issues of other agencies are supported only by the credit of the instrumentality (e.g., Federal National Mortgage Association or "FNMA"). BANKERS' ACCEPTANCES--a bill of exchange or time draft drawn on and accepted by a commercial bank. It is used by corporations to finance the shipment and storage of goods and to furnish dollar exchange. Maturities are generally six months or less. CERTIFICATES OF DEPOSIT--a negotiable interest-bearing instrument with a specific maturity. Certificates of deposit are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market, prior to maturity. TIME DEPOSITS--a non-negotiable receipt issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time: however, it cannot be traded in the secondary market. Time deposits with a withdrawal penalty are considered to be illiquid securities; therefore, each Portfolio will not invest more than 10% of its assets in such time deposits. COMMERCIAL PAPER--the term used to designate unsecured short-term promissory notes issued by corporations and other entities. Maturities on these issues vary from a few days to nine months. GUARANTEED INVESTMENT CONTRACTS --Guaranteed investment contracts ("GICs") are investment instruments issued by highly rated insurance companies. Pursuant to such contracts, a Portfolio may make cash contributions to a deposit fund of the insurance company's general or separate accounts. The insurance company then credits to a Portfolio guaranteed interest. The insurance company 18 may assess periodic charges against a GIC for expense and service costs allocable to it, and the charges will be deducted from the value of the deposit fund. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid from the general assets of the issuer. A Portfolio will only purchase GICs from issuers which, at the time of purchase, meet quality and credit standards established by NationsBank. Generally, GICs are not assignable or transferable without the permission of the issuing insurance companies, and an active secondary market in GICs does not currently exist. Also, a Portfolio may not receive the principal amount of a GIC from the insurance company on seven days' notice or less. Therefore, GICs are generally considered to be illiquid investments. OTHER INVESTMENT COMPANIES--A Portfolio may invest in securities issued by other investment companies to the extent such investments are consistent with the Portfolio's investment objective and policies and permissible under the 1940 Act. As a shareholder of another investment company, a Portfolio would bear, along with other shareholders, its pro rata portion of the other investment company's expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that a Portfolio bears directly in connection with its own operations. VARIABLE AND FLOATING RATE INSTRUMENTS--certain instruments issued, guaranteed or sponsored by the U.S. Government or its agencies, state and local government issuers, and certain debt instruments issued by domestic banks or corporations, may carry variable or floating rates of interest. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices, such as a Federal Reserve composite index. A variable rate demand instrument is an obligation with a variable or floating interest rate and an unconditional right of demand on the part of the holder to receive payment of unpaid principal and accrued interest. An instrument with a demand period exceeding seven days may be considered to be illiquid if there is no secondary market for such security. REPURCHASE AGREEMENTS--agreements by which a person obtains a security and simultaneously commits to return the security to the seller at an agreed upon price (including principal and interest) on an agreed upon date within a number of days from the date of purchase. A Portfolio may enter into repurchase agreements jointly with other Portfolios and with investment portfolios of the Nations Fund Family of mutual funds. REVERSE REPURCHASE AGREEMENTS--When a Portfolio invests in a reverse repurchase agreement, it sells a portfolio security to another party, such as a bank or broker-dealer, in return for cash, and agrees to buy the security back at a future date and price. Reverse repurchase agreements may be used to provide cash to satisfy unusually heavy redemption requests without having to sell portfolio securities, or for other temporary or emergency purposes. Generally, the effect of such a transaction is that the Portfolios can recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase agreement, while they will be able to keep the interest income associated with those portfolio securities. Such transactions are advantageous only if the interest cost to the Portfolios of the reverse repurchase transaction is less than the cost of obtaining the cash otherwise. At the time a Portfolio enters into a reverse repurchase agreement, it may establish a segregated account with its custodian bank in which it will maintain cash, U.S. Government securities or other liquid high grade debt obligations equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities the Portfolios are obli- 19 gated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Portfolios' use of proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Portfolios' obligation to repurchase the securities. Reverse repurchase agreements are speculative techniques involving leverage, and are subject to asset coverage requirements if the Portfolios do not establish and maintain a segregated account (as described above). Under the requirements of the 1940 Act, the Portfolios are required to maintain an asset coverage (including the proceeds of the borrowings) of at least 300% of all borrowings. Depending on market conditions, the Portfolios' asset coverage and other factors at the time of a reverse repurchase, the Portfolios may not establish a segregated account when the Adviser believes it is not in the best interests of the Portfolios to do so. In this case, such reverse repurchase agreements will be considered borrowings subject to the asset coverage described above. SECURITIES OF FOREIGN ISSUERS--Foreign investments involve risks that are different from investments in securities of U.S. issuers. These risks may include future unfavorable political and economic developments, possible withholding taxes, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest. Additionally, there may be less public information available about foreign issuers. Foreign branches of foreign banks are not regulated by U.S. banking authorities and generally are not bound by accounting, auditing and financial reporting standards comparable to U.S. banks. Nations Cash Reserves may invest in obligations of foreign branches of U.S. banks and U.S. and London branches of foreign banks. SHORT-TERM TRUST OBLIGATIONS--Nations Cash Reserves may invest in short-term obligations issued by special purpose trusts established to acquire specific issues of government or corporate securities. Such obligations entitle the Portfolio to a proportional fractional interest in payments received by the trust, either from the underlying securities owned by the trust or pursuant to other arrangements entered into by the trust. A trust may enter into a swap arrangement with a highly rated investment firm, pursuant to which the trust grants to the counterparty certain of its rights with respect to the securities owned by the trust in exchange for the obligation of the counterparty to make payments to the trust according to an established formula. The trust obligations purchased by the Portfolio must satisfy the quality and maturity requirements generally applicable to the Portfolio pursuant to Rule 2a-7 under the 1940 Act. Restraints on Investments by Money Market Funds Investments by the Portfolios are subject to limitations imposed under regulations adopted by the SEC. These regulations generally require money market funds to acquire only U.S. dollar denominated obligations maturing in 397 days or less and to maintain a dollar-weighted average portfolio maturity of 90 days or less. In addition, money market funds may acquire only obligations that present minimal credit risks and that are "eligible securities," which means they are (i) rated, at the time of investment, by at least two nationally recognized statistical rating organizations (or one if it is the only organization rating such obligation) in the highest short-term rating category or, if unrated, determined to be of comparable quality (a "first tier security"), or (ii) rated according to the foregoing criteria in the second highest short-term rating category or, if unrated, determined to be of comparable quality ("second tier security"). A security is not considered to be unrated if its issuer has outstanding obligations of comparable 20 priority and security that have a short-term rating. The Adviser will determine that an obligation presents minimal credit risks or that unrated instruments are of comparable quality in accordance with guidelines established by the Trustees. The Trustees also must approve or ratify the acquisition of unrated securities or securities rated by only one rating organization by Nations Cash Reserves, Nations Government Reserves and Nations Treasury Reserves. In addition, investments by Nations Cash Reserves, Nations Government Reserves and Nations Treasury Reserves in second tier securities are subject to the further constraints that (i) no more than 5% of a Portfolio's assets may be invested in such securities in the aggregate, and (ii) any investment in such securities of one issuer is limited to the greater of 1% of the Portfolio's total assets or $1 million. In addition, such Portfolios may only invest up to 25% of their total assets in the first tier securities of a single issuer for three business days. Appendix Description of Commercial Paper Ratings Commercial paper rated A by S&P is regarded by S&P as having the greatest capacity for timely payment. Issues rated A are further refined by use of the numbers 1+, 1, 2 and 3 to indicate the relative degree of safety. Issues rated A-1+ are those with an "overwhelming degree" of credit protection. Those rated A-1 reflect a "very strong" degree of safety regarding timely payment. Commercial paper issuers rated Prime-1 by Moody's are judged by Moody's to be of the highest quality on the basis of relative repayment capacity. Commercial paper rated F-1 by Fitch is considered to possess very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. Duff 1 is the highest rating assigned by D&P to commercial paper. D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest rating category. Duff 1+ indicates the highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is judged to be "outstanding, and safety is just below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are considered minor. Duff 1- indicates high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. Commercial paper rated A1 by IBCA is considered to be supported by the highest capacity for timely repayment. TBW-1 is the highest commercial paper rating assigned by BankWatch. It indicates a very high degree of likelihood that principal and interest will be paid on a timely basis. Description of Municipal Note Ratings Moody's highest rating for state and municipal and other short-term notes is MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing or both. 21 An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: (Bullet) Amortization schedule (the larger the final maturity relative to other maturities the more likely it will be treated as a note). (Bullet) Source of Payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note). Note rating symbols are as follows: SP-1 Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. 22 NATIONS INSTITUTIONAL RESERVES (formerly known as The Capitol Mutual Funds) Investment Adviser: NationsBanc Advisors, Inc. Sub-Investment Adviser: TradeStreet Investment Associates, Inc. Distributor and Administrator: Stephens Inc. Co-Administrator: The Shareholder Services Group, Inc. This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of Nations Institutional Reserves (formerly known as The Capitol Mutual Funds) (the "Trust") and should be read in conjunction with the Trust's prospectuses for Capital and Advisory Class Shares dated August 31, 1995, for Liquidity Class Shares dated August 31, 1995, as supplemented on January __, 1996 and for Market Class Shares dated March ___, 1996. Prospectuses may be obtained through the Distributor, Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201. TABLE OF CONTENTS The Trust.........................................................3 Description of Permitted Investments..............................3 The Adviser ......................................................8 The Administrator and Co-Administrator............................9 Counsel...........................................................11 Trustees and Officers.............................................11 Reporting.........................................................15 Investment Limitations............................................15 Securities Lending................................................18 Performance Information...........................................18 Purchase and Redemption of Shares.................................21 Distribution and Shareholder Servicing Plans......................22 Determination of Net Asset Value..................................27 Taxes.............................................................28 Portfolio Transactions............................................31 Custodian and Transfer Agent......................................32 Description of Shares.............................................32 Shareholder Liability.............................................33 1 Limitation of Trustees' Liability.................................33 5% Shareholders...................................................33 Experts and Financial Information.................................38 August 31, 1995 as supplemented on January 3, 1996 and March ____, 1996 2 THE TRUST The Capitol Mutual Funds, doing business as Nations Institutional Reserves, is an open-end management investment company established as a Massachusetts business trust under a Declaration of Trust dated January 22, 1990. The Declaration of Trust permits the Trust to offer separate series of units of beneficial interest ("shares"). Each share of each portfolio represents an equal proportionate interest in that portfolio. See "Description of Shares." This Statement of Additional Information ("SAI") relates to the Trust's Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves portfolios (the "Portfolios"). The Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves portfolios were formerly known as the Money Market Portfolio, Treasury Portfolio, Government Portfolio and Tax Free Money Market Portfolio, respectively. Prior to May 1, 1994, the Trust also offered shares in four other portfolios: the Equity Portfolio, Special Equity Portfolio, Fixed Income Portfolio and Maryland Tax Free Securities Portfolio. Pursuant to an Agreement and Plan of Reorganization between the Trust and Nations Fund Trust, another open-end management investment company, such portfolios transferred all of their assets to corresponding series of Nations Fund Trust in return for shares of the corresponding series of Nations Fund Trust and the assumption by such series of stated liabilities of the portfolios. The shares so received by such portfolios were distributed to the holders of shares in the portfolios and such portfolios were dissolved and liquidated. Accordingly, information concerning such portfolios is not provided in this SAI. DESCRIPTION OF PERMITTED INVESTMENTS Money Market Securities Direct obligations of the U.S. Government consist of bills, notes and bonds issued by the U.S. Treasury. Obligations issued by agencies of the U.S. Government, while not direct obligations of the U.S. Government, are either backed by the full faith and credit of the U.S. or are guaranteed by the U.S. Treasury or supported by the issuing agency's right to borrow from the U.S. Treasury. The obligations of U.S. commercial banks constitute certificates of deposit, time deposits and bankers' acceptances. Certificates of deposit are negotiable interest-bearing instruments with a specific maturity. Certificates of deposit are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market, prior to maturity. Time deposits are non-negotiable receipts issued by a bank in exchange for the deposit of funds. Time deposits earn a specified rate of interest over a definite period of time; however time deposits cannot be traded in the secondary market. Bankers' acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used by corporations to finance the shipment and storage of goods and furnish dollar exchanges. Maturities are generally six months or less. 3 The commercial paper which may be purchased includes variable amount master demand notes which may or may not be backed by bank letters of credit. These notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between the Trust, as lender, and the borrower. Such notes provide that the interest rate on the amount outstanding varies on a periodic basis (e.g. daily, weekly or monthly) depending upon a stated short-term interest rate index. Both the lender and the borrower may have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes. It is not generally contemplated that such instruments will be traded. Variable or floating rate instruments bear interest at a rate which varies with changes in market rates. The holder of an instrument with a demand feature may tender the instrument back to the issuer at par prior to maturity. A variable amount master demand note is issued pursuant to a written agreement between the issuer and the holder, its amount may be increased by the holder or decreased by the holder or issuer, it is payable on demand, and the rate of interest varies based upon an agreed formula. The quality of the underlying credit must, in the opinion of the Adviser (as defined below under the heading "The Adviser"), be equivalent to the ratings applicable to permitted investments for the Portfolio. The Adviser will monitor on an ongoing basis the earnings power, cash flow, and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. Pursuant to its investment policies, a Portfolio may invest in mortgage-backed securities issued or guaranteed by U.S. Government agencies such as the Government National Mortgage Association ("GNMA"), a wholly-owned U.S. Government corporation which guarantees the timely payment of principal and interest. The market value and interest yield of these instruments can vary due to market interest rate fluctuations and early prepayments of underlying mortgages. These securities represent ownership interests in a pool of federally insured mortgage loans. GNMA certificates represent ownership interests in underlying mortgages with a maximum maturity of 30 years. However, due to scheduled and unscheduled principal payments, GNMA certificates have a shorter average maturity and, therefore, less principal volatility than a comparable 30-year bond. Since prepayment rates vary widely, it is not possible to accurately predict the average maturity of a particular GNMA pool. The scheduled monthly interest and principal payments relating to mortgages in the pool will be "passed through" to investors. GNMA securities differ from conventional bonds in that principal is paid back to the certificate holders over the life of the loan rather than at maturity. As a result, there will be monthly scheduled payments of principal and interest. In addition, there may be unscheduled principal payments representing prepayments on the underlying mortgages. Although GNMA certificates may offer yields higher than those available from other types of U.S. Government securities, GNMA certificates may be less effective than other types of securities as a means of "locking in" attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, the value of a GNMA certificate likely will not rise as much as comparable debt securities due to the prepayment feature. In addition, these prepayments can cause the price of a GNMA certificate originally purchased at a premium to decline in price to its par value, which may result in a loss. Repurchase agreements are agreements by which a person (e.g., a Portfolio) obtains a security and simultaneously commits to return the security to the seller (a member bank of the Federal 4 Reserve System or recognized securities dealer) at an agreed upon price (including principal and interest) on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value of the underlying security. The repurchase agreements entered into by the Portfolios will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement (the Adviser, the Custodian or an agent of either such party monitors compliance with this requirement). Under all repurchase agreements entered into by the Portfolios, the Custodian or its agent must take possession of the underlying collateral. However, if the seller defaults, the Portfolios could realize a loss on the sale of the underlying security to the extent that the proceeds of sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, the Portfolios may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Portfolios are treated as an unsecured creditor and required to return the underlying security to the seller's estate. Repurchase agreements are a permissible investment for all Portfolios. Tax-exempt instruments which are permissible investments include floating rate notes. Investments in such floating rate instruments will normally involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate (such as the prime rate at a major commercial bank), and that the Portfolio can demand payment of the obligation at all times or at stipulated dates on short notice (not to exceed 30 days) at par plus accrued interest. Such obligations are frequently secured by letters of credit or other credit support arrangements provided by banks. The quality of the underlying credit or of the bank, as the case may be, must, in the Adviser's opinion be comparable to the long-term bond or commercial paper ratings discussed in the relevant Prospectus. The Adviser will monitor the earnings power, cash flow and liquidity ratios of the issuers of such instruments and the ability of an issuer of a demand instrument to pay principal and interest on demand. The Adviser may purchase other types of tax-exempt instruments as long as they are of a quality equivalent to the long-term bond or commercial paper ratings discussed in the relevant Prospectus, including municipal lease obligations and participation interests in municipal securities (such as industrial development bonds and municipal lease purchase payments). The Nations Municipal Reserves may engage in put transactions. The Adviser has the authority to purchase securities at a price which would result in a yield to maturity lower than that generally offered by the seller at the time of purchase when the Portfolio can simultaneously acquire the right to sell the securities back to the seller, the issuer, or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Portfolio to meet redemptions and remain as fully invested as possible in municipal securities. The right to put the 5 securities depends on the writer's ability to pay for the securities at the time the put is exercised. The Portfolio will limit its put transactions to institutions which the Adviser believes present minimum credit risks, and the Adviser will use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however, be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, the Portfolio would be a general creditor (i.e., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Portfolio and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Portfolio could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Portfolio. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Portfolio could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Portfolio, the Portfolio could, of course, sell the security. The maturity of the underlying security will generally be different from that of the put. There is no limit to the percentage of portfolio securities that the Portfolio may purchase subject to a put but the amount paid directly or indirectly for premiums on all puts outstanding will not exceed 2% of the value of the total assets of the Portfolio calculated immediately after any such put is acquired. For the purpose of determining the "maturity" of securities purchased subject to an option to put, and for the purpose of determining the average dollar-weighted maturity of the Portfolio including such securities the Trust will consider "maturity" to be the first date on which it has the right to demand payment from the writer of the put although the final maturity of the security is later than such date. Separately Traded Registered Interest and Principal Securities Each of the Portfolios may invest in Separately Traded Registered Interest and Principal Securities ("STRIPS") which are component parts of U.S. Treasury Securities traded through the Federal Book-Entry System. The Adviser will only purchase STRIPS that it determines are liquid or, if illiquid, do not violate each Portfolio's investment policy concerning investments in illiquid securities. Consistent with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), the Adviser will only purchase STRIPS for the Portfolios that have a remaining maturity of 397 days or less. In addition, the Portfolios will not actively trade STRIPS. 6 When-Issued Securities These securities involve the purchase of debt obligations on a when-issued basis, in which case delivery and payment normally take place within 45 days after the date of commitment to purchase. The Nations Municipal Reserves will only make commitments to purchase obligations on a when-issued basis with the intention of actually acquiring the securities, but may sell them before the settlement date. When-issued securities are subject to market fluctuation, and no interest accrues to the purchaser during the period between commitment and purchase. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing obligations on a when-issued basis is a form of leveraging and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself. In that case there could be an unrealized loss at the time of delivery. Segregated accounts will be established with the Custodian and will maintain liquid assets in an amount at least equal in value to the Nations Municipal Reserves' commitments to purchase when-issued securities. If the value of these assets declines, the Nations Municipal Reserves will place additional liquid assets in the account on a daily basis so that the value of the assets in the account is equal to the amount of such commitments. Foreign Securities The Nations Cash Reserves may invest in U.S. dollar denominated obligations of securities of foreign issuers. Portfolio investments may consist of obligations of foreign branches of U.S. banks and of foreign banks, including European Certificates of Deposit, European Time Deposits, Canadian Time Deposits and Yankee Certificates of Deposits, and investments in Canadian Commercial Paper, foreign securities and Europaper. Restricted Securities Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") absent an exemption from registration. Certain of the permitted investments of the Portfolios may be restricted securities and the Adviser may invest up to 15% of the total assets of a Portfolio in restricted securities provided it determines that at the time of investment such securities are not illiquid (generally, an illiquid security cannot be disposed of within seven days in the ordinary course of business at its full value), based on guidelines which are the responsibility of and are periodically reviewed by the Board of Trustees. Under these guidelines, the Adviser will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such restricted securities, the Adviser intends to purchase securities that are exempt from registration under Rule 144A promulgated under the 1933 Act. The Portfolios may purchase restricted securities that are illiquid subject to the Portfolio's investment limitations on the purchase of illiquid securities. 7 THE ADVISER Effective January 1, 1996, NationsBanc Advisors, Inc. ("NBAI") began serving as investment adviser to the Portfolios of the Trust, pursuant to an Investment Advisory Agreement dated January 1, 1996. Effective January 1, 1996, TradeStreet Investment Associates, Inc. ("TradeStreet") began serving as sub-investment adviser to the Portfolios of the Trust, pursuant to a Sub-Advisory Agreement dated January 1, 1996. As used herein, "Adviser" shall mean NBAI and/or TradeStreet as the context may require. The Investment Advisory Agreement provides that in the absence of willful misfeasance, bad faith, negligence or reckless disregard of obligations or duties thereunder on the part of NBAI or any of its officers, directors, employees or agents, NBAI shall not be subject to liability to the Trust or to any shareholder of the Trust for any act or omission in the course of, or connected with, rendering services thereunder or for any losses that may be sustained in the purchase, holding or sale of any security. The Investment Advisory Agreement shall become effective with respect to a Portfolio if and when approved by the Trustees of the Trust, and if so approved, shall thereafter continue from year to year, provided that such continuation of the Agreement is specifically approved at least annually by (a) (i) the Trust's Board of Trustees or (ii) the vote of "a majority of the outstanding voting securities" of a Portfolio (as defined in Section 2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority of the Trust's Trustees who are not parties to such Agreement or "interested persons" (as defined in the 1940 Act) of a party to such Agreement (other than as Trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose. The Investment Advisory Agreement will terminate automatically in the event of its assignment, and is terminable with respect to a Portfolio at any time without penalty by the Trust (by vote of the Board of Trustees or by vote of a majority of the outstanding voting securities of the Portfolio) or by NBAI on 60 days' written notice. The Sub-Advisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties thereunder on the part of TradeStreet or any of its officers, directors, employees or agents, TradeStreet shall not be subject to liability to NBAI or to the Trust for any act or omission in the course of, or connected with, rendering services thereunder or for any losses that may be sustained in the purchase, holding or sale of any security. The Sub-Advisory Agreement shall become effective with respect to each Portfolio as of its execution date and, unless sooner terminated, shall continue in full force and effect for one year, and may be continued with respect to each Portfolio thereafter, provided that the continuation of the Agreement is specifically approved at least annually by (a) (i) the Trust's Board of Trustees or (ii) the vote of "a majority of the outstanding voting securities" of a Portfolio (as defined in Section 2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority of the Trust's Trustees who are not parties to such Agreement or "interested persons" (as defined in the 1940 8 Act) of a party to such Agreement (other than as Trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose. The Sub-Advisory Agreement will terminate automatically in the event of its assignment, and is terminable with respect to a Portfolio at any time without penalty by the Trust (by vote of the Board of Trustees or by vote of a majority of the outstanding voting securities of the Portfolio), or by NBAI, or by TradeStreet on 60 days' written notice. From May 1, 1994 (the "Transition Date") to January 1, 1996, NationsBank, N.A. ("NationsBank") served as investment adviser to the Portfolios pursuant to an Investment Advisory Agreement dated May 1, 1994. Prior to the Transition Date, ASB Capital Management, Inc. served as investment adviser to the Portfolios pursuant to advisory agreements dated April 20, 1990 and October 1, 1993. For the fiscal years ended April 30, 1993, 1994 and 1995, the Portfolios paid advisory fees as follows:
Expenses Fees Fees Fees Reimbursd Fees Paid Waived Fees Paid Waived Fees Paid Waived by Adviser 1993 1993 1994 1994 1995 1995 1995* Nations Cash Reserves $266,475 $102,081 $346,549 $122,336 $489,346 $313,476 N/A Nations Treasury Reserves 0 174,445 271,241 853,421 982,941 840,932 N/A Nations Gov't. Reserves 75,143 55,257 717,571 124,273 434,684 248,859 N/A Nations Municipal Reserves 49,327 47,678 101,016 44,000 211,272 160,180 46,402
* No expenses were reimbursed for 1993 or 1994. ADMINISTRATOR AND CO-ADMINISTRATOR Effective on the Transition Date, Stephens Inc. (the "Administrator") began serving as administrator of the Trust and The Shareholder Services Group, Inc. (the "Co-Administrator" or "TSSG"), a wholly owned subsidiary of First Data Corporation, began serving as the co-administrator of the Trust. Prior to the Transition Date, SEI Financial Management Corporation served as sole administrator of the Trust. The Administrator and Co-Administrator serve under an administration agreement ("Administration Agreement") and co-administration agreement ("Co-Administration Agreement"), respectively. The Administrator receives, as compensation for its services 9 rendered under the Administration Agreement and as agent for the Co-Administrator for the services it provides under the Co-Administration Agreement, an administrative fee, computed daily and paid monthly, at the annual rate of up to 0.10% of the average daily net assets of each Portfolio. Pursuant to the Administration Agreement, the Administrator has agreed to, among other things, (i) maintain office facilities for the Portfolios, (ii) furnish statistical and research data, data processing, clerical, and internal executive and administrative services to the Trust, (iii) furnish corporate secretarial services to the Trust, including coordinating the preparation and distribution of materials for Board of Trustees meetings, (iv) coordinate the provision of legal advice to the Trust with respect to regulatory matters, (v) coordinate the preparation of reports to the Trust's shareholders and the Securities and Exchange Commission ("SEC"), including annual and semi-annual reports, (vi) coordinate the provision of services to the Trust by the Co-Administrator, the Transfer Agent and the Custodian, and (vii) generally assist in all aspects of the Trust's operations. Additionally, the Administrator is authorized to receive, as agent for the Co-Administrator, the fees payable to the Co-Administrator by the Trust for its services rendered under the Co-Administration Agreement. The Administrator bears all expenses incurred in connection with the performance of its services. Pursuant to the Co-Administration Agreement, the Co-Administrator has agreed to, among other things, (i) provide accounting and bookkeeping services for the Portfolios, (ii) compute each Portfolio's net asset value and net income, (iii) accumulate information required for the Trust's reports to shareholders and the SEC, (iv) prepare and file the Trust's federal and state tax returns, (v) perform monthly compliance testing for the Trust, and (vi) prepare and furnish the Trust monthly broker security transaction summaries and transaction listings and performance information. The Co-Administrator bears all expenses incurred in connection with the performance of its services. The Administration Agreement and the Co-Administration Agreement may be terminated by a vote of a majority of the Board of Trustees, or by the Administrator or Co-Administrator, respectively, on 60 days' written notice without penalty. The Administration Agreement and Co-Administration Agreement are not assignable without the written consent of the other party. Furthermore, the Administration Agreement and the Co-Administration Agreement provide that the Administrator and Co-Administrator, respectively, shall not be liable to the Trust or its shareholders except in the case of the Administrator's or Co-Administrator's, respectively, willful misfeasance, bad faith, gross negligence or reckless disregard of duty. For the fiscal years ended April 30, 1993, 1994 and 1995 the Portfolios paid administrative fees as follows: 10
Fees Fees Fees Fees Paid Waived Fees Paid Waived Fees Paid Waived 1993 1993 1994 1994 1995 1995 Nations Cash Reserves $110,208 $ 51,040 $132,621 $ 47,375 $163,115 $ 62,214 Nations Treasury Reserves 0 81,346 104,745 327,406 327,647 129,132 Nations Government Reserves 33,431 27,629 273,815 48,921 144,895 59,241 Nations Municipal Reserves 28,929 23,838 39,030 16,766 70,424 25,622
COUNSEL Morrison & Foerster LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500, Washington, D.C. 20006-1812. TRUSTEES AND OFFICERS The management and affairs of the Trust are supervised by the Trustees under the laws governing business trusts in the Commonwealth of Massachusetts. The Trustees and the officers of the Trust and their principal occupations for the last five years are set forth below.
Position Principal Occupation During Past 5 Years Name and Address With Trust and Other Affiliations Edmund L. Benson, III, 58 Trustee Director, President and Treasurer, 728 East Main Street Saunders & Benson, Inc. (insurance agency). Suite 400 Richmond, VA 23219 James Ermer, 52 Trustee November, 1986, Director, National Mine CSX Corporation Service; since October 1985, Senior Vice One James Center President - Finance, CSX Corporation 901 East Cary Street (transportation and natural resources Richmond, VA 23219 company); Director, Lawyers Title Corporation. 11 William H. Grigg, 62 Trustee Since April 1994, Chairman and Chief Duke Power Company Executive Officer; November 1991 to April 422 South Church Street 1994; Vice Chairman; April 1988 to PB04G November 1991, Executive Vice Charlotte, NC 28242-0001 President-Customer Group; before April 1988, Executive Vice President-Finance & Administration, Duke Power Co.; Director, Duke Power Co.; Director, Hatteras Income Securities, Inc. Thomas F. Keller, 63 Trustee R.J. Reynolds Industries Professor of Fuqua School of Business Business Administration and Dean, Fuqua Duke University School of Business, Duke University; Durham, NC 27706 Director, LADD Furniture, Inc., Hatteras Income Securities, Inc. (investment company); Wendy's International, Mentor Growth Fund, and Cambridge Trust. Carl E. Mundy, Jr., 60 Trustee Commandant, United States Marine Corps, 9308 Ludgate Drive from July 1991 to July 1995, Commanding Alexandria, VA 23309 General, Marine Forces Atlantic, from June 1990 to June 1991 A. Max Walker*, 73 Trustee and President Financial consultant; Director and 6215 Riverwood Drive, N.W. Chairman, Hatteras Income Securities, Inc. Atlanta, GA 30328 (investment company). Formerly, President, A. Max Walker, Inc. Charles B. Walker, 56 Trustee Since February 1989, Director, Executive Ethyl Corporation Vice President, Chief Financial Officer 330 South Fourth Street and Treasurer, March 1984-February 1989, P.O. Box 2189 Vice President and Treasurer, Ethyl Richmond, VA 23217 Corporation (chemicals, plastics, and aluminum manufacturing); Director, R.F.& P. Railroad; Trustee, Paragon Portfolio (another registered investment company). 12 Thomas S. Word, Jr.*, 57 Trustee Partner of the law firm McGuire Woods McGuire Woods Battle & Boothe Battle & Boothe, Richmond, Virginia. One James Center Richmond, VA 23219 Richard H. Blank, Jr., 39 Secretary Associate of Financial Services Group of Stephens Inc. Stephens Inc.; Director of Stephens Sports 111 Center Street Management, Inc.; Director of Capo Inc. Little Rock, AR 72201 Richard H. Rose, 40 Treasurer Senior Vice President and Assistant The Shareholder Services Group, Inc. Treasurer, The Boston Company Advisors, One Exchange Place Inc. since February 1988. Formerly, Boston, MA 02109 Senior Audit Manager with Peat, Marwick Main & Company. Joseph C. Viselli, 31 Assistant Treasurer Assistant Vice President, The Boston The Shareholder Services Group, Inc. Company Advisors, Inc. since April 1992. One Exchange Place Formerly, Senior Accountant with Price Boston, MA 02109 Waterhouse and Accountant with Fidelity Investments Michael W. Nolte, 34 Assistant Secretary Associate of Financial Services Group of Stephens Inc. Stephens Inc. 111 Center Street Little Rock, AR 72201 Louise P. Newcomb, 42 Assistant Secretary Corporate Syndicate Associate, Stephens Stephens Inc. Inc. 111 Center Street Little Rock, AR 72201 James E. Banks, 39 Assistant Secretary Attorney, Stephens Inc.; Associate Stephens Inc. Corporate Counsel, Federated Investors; 111 Center Street Staff Attorney, Securities and Exchange Little Rock, AR 72201 Commission
- -------------------- * A. Max Walker and Thomas S. Word, Jr. are considered "interested persons" of the Trust for purposes of the 1940 Act. 13 Remuneration of Trustees
Total Compensation from Aggregate Registrant Nations Fund Compensation and Fund Nations Fund Deferred Name of Person from Complex Paid Retirement Compensation Position (1) Registrant (2) to Directors(3) Plan Plan Edmund L. Benson, III, Trustee $7,000 $36,500 N/A $4,606.14 James Ermer 7,000 36,500 N/A N/A Trustee William H. Grigg 7,000 36,500 N/A 9,212.28 Trustee Thomas F. Keller 7,000 36,500 N/A 9,212.28 Trustee A. Max Walker 9,000 42,500 N/A N/A Chairman of the Board Charles B. Walker 7,000 36,500 N/A N/A Trustee Thomas S. Word 7,000 36,500 N/A 9,212.28 Trustee Carl E. Mundy, Jr. 7,000 N/A N/A N/A Trustee
(1) All Trustees receive reimbursements for expenses related to their attendance at meetings of the Board of Trustees. Officers of the Trust receive no direct remuneration in such capacity from the Trust. (2) For current fiscal year and includes estimated future payments. Each Trustee receives (i) an annual retainer of $1,000 ($3,000 for the Chairman of the Board) plus $500 for each Fund of the Trust, plus (ii) a fee of $1,000 for attendance at each board meeting attended. 14 (3) Messrs. Grigg, Keller and A.M. Walker receive compensation from eight investment companies, including Nations Fund, Inc. (the "Company") and Nations Fund Trust (the "Trust"), that are deemed to be part of the Nations Fund "fund complex," as that term is defined under Rule 14a-101 of the Securities Exchange Act of 1934, as amended. Messrs. Benson, Ermer, C. Walker, Mundy and Word receive compensation from four investment companies, including the Company and the Trust, deemed to be part of the Nations Fund complex. Mr. Rose serves as Treasurer to certain other investment companies for which The Shareholder Services Group, Inc. or its affiliates serve as sponsor, distributor, administrator and/or investment adviser. Each Trustee of the Trust is also a Director of Nations Fund, Inc., Nations Fund Portfolios, Inc. and a Trustee of Nations Fund Trust, separate registered investment companies that are part of the Nations Fund family of funds. Richard H. Blank, Jr., Richard H. Rose, Joseph C. Viselli, Michael W. Nolte, Louise P. Newcomb and James E. Banks also are officers of Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations Fund Trust. William H. Grigg, Thomas F. Keller and A. Max Walker are also on the Boards of Directors for the Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and The Managed Balanced Target Maturity Fund, Inc. closed-end management investment companies. Currently, each Trustee receives $1,000 in compensation for attendance at each Board of Trustees meeting. For the fiscal year ended April 30, 1995, the Trust paid its Trustees $29,796, as compensation and as reimbursement for expenses related to attendance at Board of Trustees meetings. Mr. Mundy was not a Trustee of the Trust during the fiscal year ended April 30, 1995 and therefore received no compensation. The Trustees and officers of the Trust own less than 1% of the outstanding shares of the Trust. REPORTING The Trust issues unaudited financial information semi-annually and audited financial statements annually. The Trust furnishes proxy statements and other shareholder reports to Shareholders of record. INVESTMENT LIMITATIONS Fundamental Investment Limitations: A Portfolio may not: 1. Acquire more than 10% of the voting securities of any one issuer. 2. Invest in companies for the purpose of exercising control. 15 3. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. Any borrowing will be done from a bank and to the extent that such borrowing exceeds 5% of the value of the Portfolio's assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Portfolio shall, within three days thereafter or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. This borrowing provision is included solely to facilitate the orderly sale of portfolio securities to accommodate heavy redemption requests if they should occur and is not for investment purposes. All borrowings will be repaid before making additional investments and any interest paid on such borrowings will reduce income. 4. Make loans, except that (a) a Portfolio may purchase or hold debt instruments in accordance with its investment objective and policies; (b) may enter into repurchase agreement and non-negotiable time deposits, provided that repurchase agreements and non-negotiable time deposits maturing in more than seven days, restricted securities and other securities which are not readily marketable are not to exceed, in the aggregate, 10% of the Portfolio's total assets and (c) the Portfolios (except the Nations Municipal Reserves) may engage in securities lending as described in each prospectus and in this SAI. 5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings permitted by (3) above in aggregate amounts not to exceed 10% of total assets taken at current value at the time of the incurrence of such loan, except as permitted with respect to securities lending. 6. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts. 7. Make short sales of securities, maintain a short position or purchase securities on margin, except that the Trust may obtain short-term credits as necessary for the clearance of security transactions. 8. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a Portfolio security. 9. Purchase securities of other investment companies except as permitted by the 1940 Act and the rules and regulations thereunder and may only purchase securities of other money market funds. Under these rules and regulations, the Portfolios are prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Portfolios own more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the Portfolio's total assets; or securities (other than treasury stock) issued by all investment companies represent more than 10% of the total assets of the Portfolio. These investment companies typically incur fees that are separate from those fees incurred directly by the Portfolio. A Portfolio's purchase of such 16 investment company securities results in the layering of expenses, such that Shareholders would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees. It is the position of the Securities and Exchange Commission's Staff that certain nongovernmental issues of CMOs and REMICS constitute investment companies pursuant to the 1940 Act and either (a) investments in such instruments are subject to the limitations set forth above or (b) the issuers of such instruments have received orders from the SEC exempting such instruments from the definition of investment company. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. 11. Purchase or retain securities of an issuer if, to the knowledge of the Trust, an officer, trustee, partner or director of the Trust or Adviser of the Trust owns beneficially more than 1/2 of 1% of the shares or securities of such issuer and all such officers, trustees, partners and directors owning more than 1/2 of 1% of such shares or securities together own more than 5% of such shares or securities. 12. Invest in interest in oil, gas or other mineral exploration or development programs and oil, gas or mineral leases. 13. Write or purchase puts, calls or combinations thereof, except that the Nations Cash Reserves and Nations Treasury Reserves may write covered call options with respect to any or all parts of that Portfolio's securities and purchase put options if that Portfolio owns the security covered by the put option at the time of purchase, and that premiums paid on all put options outstanding do not exceed 2% of its total assets. Such Portfolios may sell options previously purchased and enter into closing transactions with respect to covered call and put options. Such Portfolios may also write call options and purchase put options on stock indices and enter into closing transactions with respect to such options. The Nations Cash Reserves and Nations Treasury Reserves will not invest more than 5% of their total assets in puts, calls or combinations thereof. 14. Invest in warrants valued at lower of cost or market exceeding 5% of the Portfolio's net assets. Included in that amount but not to exceed 2% of the Portfolio's net assets, may be warrants not listed on the New York Stock Exchange or American Stock Exchange. Non-Fundamental Investment Limitations: 1. The Nations Treasury Reserves may not write covered call options or purchase put options as long as the Portfolio invests exclusively in U.S. Treasury obligations, separately traded component parts of such obligations transferable through the Federal book-entry system, and repurchase agreements involving such obligations. 17 The foregoing percentages will apply at the time of the purchase of a security and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of a purchase of such security. SECURITIES LENDING All of the Portfolios, except the Nations Municipal Reserves, may engage in securities lending, provided that the aggregate amount of all outstanding securities loans for the Portfolio will not exceed one-third of the value of the Portfolio's total assets taken at fair market value. A Portfolio will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. government securities. However, a Portfolio will normally pay lending fees to such broker-dealers and related expenses from the interest earned on investment collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. The Portfolio will vote the securities while collateral is outstanding. Any loan may be terminated by either party upon reasonable notice to the other party. PERFORMANCE INFORMATION From time to time the Portfolios advertise their "current yield" and "effective compound yield." Both yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Portfolios refers to the income generated by an investment in a Portfolio over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Portfolio is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The current yield of the Portfolios will be calculated daily based upon the seven days ending on the date of calculation ("base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Portfolios is determined by computing the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = [(Base Period Return + 1) 18 365/7)]- 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. The yield of these Portfolios fluctuates, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Portfolio will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments the Portfolio invests in, changes in interest rates on money market instruments, changes in the expenses of the Portfolio and other factors. The "tax equivalent yield" of Nations Municipal Reserves is calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Portfolio's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that a = interest exempt from federal income tax earned during the Period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: TAX-EQUIVALENT YIELD = ( E ) + t 1 - p E = tax-exempt yield p = stated income tax rate t = taxable yield Yields are one basis upon which investors may compare the Portfolios with other money market funds; however, yield of other money market funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. The Nations Cash Reserves may quote actual return performance in advertising and other types of literature compared to indices or averages of alternative financial products available to prospective investors. The performance comparisons may include the average return of various bank instruments, some of which may carry certain return guarantees offered by leading banks and thrifts, as monitored by the Bank Rate Monitor, and those of corporate and government security prices indices of various durations prepared by Shearson Lehman Brothers and Salomon Brothers, Inc. These indices are not managed for any investment goal. The Portfolios also may use comparative performance information computed by and available from certain industry and general market research and publications, such as Lipper Analytical Services, Inc. Statistical and performance information compiled and maintained by CDA Technologies, Inc. and Interactive Data Corporation may also be used. CDA is a performance evaluation service that maintains a statistical data base of performance, as reported by a diverse universe of independently-managed mutual funds. Interactive Data Corporation is a statistical access service 19 that maintains a data base of various industry indicators, such as historical and current price/earning information and individual stock and fixed income price and return information. Current interest rate and yield information on governmental debt obligations of various durations, as reported weekly by the Federal Reserve (Bulletin H.15), may also be used. Also current rate information on municipal debt obligations or various durations, as reported daily by the Bond Buyer, may also be used. The Bond Buyer is published daily and is an industry accepted source for current municipal bond market information. Comparative information on the Consumer Price Index may also be included. This index, as prepared by the U.S. Bureau of Labor Statistics, is the most commonly used measure of inflation. It indicates the cost fluctuations of a representative group of consumer goods. It does not represent a return on investment. For the 7-day period ended April 30, 1995, the yield of each Portfolio was as follows:
Effective Yield Yield Tax Effective Without Without Equivalent Yield Yield Fee Waivers Fee Waivers Yield Nations Cash Reserves Capital Class 6.05% 6.22% 5.84% 6.01% N/A Liquidity Class 5.90% 6.06% 5.69% 5.85% N/A Adviser Class 5.80% 5.96% 5.59% 5.75% N/A Nations Treasury Reserves Capital Class 5.86% 6.02% 5.58% 5.74% N/A Liquidity Class 5.71% 5.86% 5.43% 5.58% N/A Adviser Class 5.60% 5.75% 5.32% 5.47% N/A Nations Government Reserves Capital Class 5.95% 6.11% 5.75% 5.91% N/A Liquidity Class 5.70% 5.85% 5.50% 5.65% N/A Adviser Class 5.60% 5.75% 5.40% 5.55% N/A Nations Municipal Reserves Capital Class 4.33% 4.42% 4.06% 4.15% N/A Liquidity Class 4.18% 4.26% 3.91% 3.99% N/A Adviser Class 4.08% 4.16% 3.81% 3.89% N/A
20 Market Class Shares of the Portfolios were not offered during the period ended April 30, 1995. The yield of the Liquidity Class, Adviser Class and Market Class Shares of each Portfolio will normally be lower than the yield of the Capital Class Shares because Liquidity Class, Adviser Class and Market Class Shares are subject to distribution and/or shareholder servicing expenses not charged to Capital Class Shares. PURCHASE AND REDEMPTION OF SHARES Purchases and redemptions may be effected on days on which the New York Stock Exchange (the "Exchange") is open for business (a "Business Day"). Purchases will be effected only when federal funds are available for investment on the Business Day the purchase order is received by the Distributor or the Transfer Agent. A purchase order must be received by the Distributor or the Transfer Agent by 3:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to Nations Municipal Reserves). A purchase order received after such time will not be accepted; notice thereof will be given to the institution placing the order and any funds received will be returned promptly to the sending institution. If federal funds are not available by the close of regular trading on the Exchange (currently 4:00 p.m., Eastern time), the order will be canceled. The purchase price is the net asset value per share next determined after acceptance of the order by the Distributor or the Transfer Agent. Redemption orders must be received on a Business Day before 3:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to Nations Municipal Reserves), and payment will normally be wired the same day. The Trust reserves the right to wire redemption proceeds within five Business Days after receiving a redemption order if, in the judgment of the NationsBank, an earlier payment could adversely impact a Portfolio. Redemption orders will not be accepted by the Distributor or the Transfer Agent after 3:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to Nations Municipal Reserves) for execution on that Business Day. The redemption price is the net asset value per share next determined after acceptance of the redemption order by the Distributor or the Transfer Agent. The Trust is required to redeem for cash all full and fractional shares of the Trust. The redemption price is the net asset value per share of each Portfolio next determined after receipt by the Distributor of the redemption order. The Trust reserves the right to reject a purchase order when the Distributor determines that it is not in the best interest of the Trust and/or Shareholder(s) to accept such purchase order. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period during which trading on the Exchange is restricted, or during the existence of an emergency (as determined by the SEC by rule or regulation) as a result of which disposal or valuation of the portfolio securities is not reasonably practicable, or for such other periods as the SEC has by order permitted. The Trust also reserves the right to suspend sales of shares of a Portfolio for any period during which the Exchange, NationsBank, the Distributor, the Administrator, the Co-Administrator, and/or the Custodian are not open for business. 21 DISTRIBUTION AND SHAREHOLDER SERVICING PLANS Liquidity Class Shares and Market Class Shares The Trust has adopted a distribution plan (the "Liquidity Class Plan") for Liquidity Class Shares and a distribution plan (the "Market Class Plan") for Market Class Shares of the Portfolios (collectively, the "Distribution Plans") in accordance the provisions of Rule 12b-1 under the 1940 Act which regulates circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares. Continuance of each of the Distribution Plans must be approved annually by a majority of the Trustees of the Trust and by a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the plan or in any agreements thereunder (the "Qualified Trustees"). Each Distribution Plan requires that quarterly written reports of amounts spent under such Distribution Plan and the purposes of such expenditures be furnished to and reviewed by the Trustees. The Liquidity Class Plan may not be amended to increase materially the amount which may be spent thereunder without approval by a majority of the outstanding Liquidity Class Shares of the Trust. The Market Class Plan may not be amended to increase materially the amount which may be spent thereunder without approval by a majority of the outstanding Market Class Shares of the Trust. All material amendments of a Distribution Plan will require approval by a majority of the Trustees and of the Qualified Trustees. Liquidity Class Shares of each Portfolio bear the costs of their distribution fees as provided in a budget approved annually and reviewed quarterly by the Trustees of the Trust, including those Trustees who are not interested persons and have no financial interest in the Liquidity Class Plan or any related agreements. The budget will be in an amount not to exceed .30% of the average daily net assets of Liquidity Class Shares of each Portfolio and the Distributor will be reimbursed only for its actual expenses incurred during a fiscal year. The Distributor will also receive an additional fee of up to .30% of the average daily net assets of Liquidity Class Shares of each Portfolio (.35% with respect to the Treasury Reserves) which the Distributor can use to compensate certain financial institutions which provide administrative and/or distribution related services to Liquidity Class shareholders. These services may include establishing and maintaining customer accounts and records; aggregating and processing purchase and redemption requests from customers; placing net purchase and redemption orders with the Distributor or transfer agent; automatically investing customer account cash balances; providing periodic statements to customers; arranging for wires; answering customer inquiries concerning their investments; assisting customers in changing dividend options, account designations, and addresses; performing sub-accounting functions; processing dividend payments from a Trust on behalf of customers; and forwarding shareholder communications from the Trust (such as proxies, shareholder reports, and dividend distribution, and tax notices) to these customers with respect to investments in the Trust. It is possible that an institution may offer different classes of Shares to its customers and thus receive different compensation with respect to different classes of Shares. 22 Pursuant to the Market Class Plan, a Portfolio may compensate or reimburse the Distributor for any activities or expenses primarily intended to result in the sale of a Portfolio's Market Class Shares, including for sales related services provided by banks, broker/dealers or other financial institutions that have entered into a Sales Support Agreement relating to the Market Class Shares with the Distributor ("Selling Agents"). Payments under a Portfolio's Market Class Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Board of Trustees provided that the annual rate may not exceed 0.20% of the average daily net asset value of each Portfolio's Market Class Shares. The fees payable under the Market Class Plan are used primarily to compensate or reimburse the Distributor for distribution services provided by it, and related expenses incurred, including payments by the Distributor to compensate or reimburse Selling Agents, for sales support services provided, and related expenses incurred, by such Selling Agents. Payments under the Market Class Plan may be made with respect to preparation, printing and distribution of prospectuses, sales literature and advertising materials by the Distributor or, as applicable, Selling Agents, attributable to distribution or sales support activities, respectively, commissions, incentive compensation or other compensation to, and expenses of, account executives or other employees of the Distributor or Selling Agents, attributable to distribution or sales support activities, respectively; overhead and other office expenses of the Distributor relating to the foregoing (which may be calculated as a carrying charge in the Distributor's or Selling Agents' unreimbursed expenses), incurred in connection with distribution or sales support activities. The overhead and other office expenses referenced above may include, without limitation, (i) the expenses of operating the Distributor's or Selling Agents' offices in connection with the sale of Portfolio shares, including lease costs, the salaries and employee benefit costs of administrative, operations and support personnel, utility costs, communication costs and the costs of stationery and supplies, (ii) the costs of client sales seminars and travel related to distribution and sales support activities, and (iii) other expenses relating to distribution and sales support activities. In addition, the Trustees have approved a Shareholder Servicing Plan with respect to Liquidity Class Shares and Market Class Shares of the Portfolios (the "Servicing Plans"). Pursuant to the Servicing Plans, a Portfolio may compensate or reimburse banks, broker/dealers or other financial institutions that have entered into a Shareholder Servicing Agreement with the Trust ("Servicing Agents") for certain activities or expenses of the Servicing Agents in connection with shareholder services that are provided by the Servicing Agents. The Servicing Plan adopted on behalf of the Liquidity Class Shares provides that payments under the Servicing Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Board of Trustees, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Liquidity Class Shares of each Portfolio. The Servicing Plan adopted on behalf of the Market Class Shares permits the Trust to pay Servicing Agents a fee not exceeding 0.25% of the average daily net asset value of the Market Class Shares beneficially owned by the Servicing Agents' clients. The fees payable under the Servicing Plans are used primarily to compensate or reimburse Servicing Agents for shareholder services provided, and related expenses incurred, by such Servicing Agents. The shareholder services provided by Servicing Agents under the Servicing 23 Plans may include: (i) aggregating and processing purchase and redemption requests for shares from customers and transmitting promptly net purchase and redemption orders to the Distributor or transfer agent; (ii) providing customers with a service that invests the assets of their accounts in shares pursuant to specific or pre-authorized instructions; (iii) processing dividend and distribution payments from the Trust on behalf of customers; (iv) providing information periodically to customers showing their positions in shares; (v) arranging for bank wires; (vi) responding to customers' inquiries concerning their investment in shares; (vii) providing sub-accounting with respect to shares beneficially owned by customers or providing the information to the Trust necessary for sub-accounting; (viii) if required by law, forwarding shareholder communications from the Trust (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers; (ix) forwarding to customers proxy statements and proxies containing any proposals regarding the Servicing Plans or related agreements; (x) providing general shareholder liaison services; and (xi) providing such other similar services as the Trust may reasonably request to the extent such Servicing Agents are permitted to do so under applicable statutes, rules or regulations. The fees payable under the Liquidity Class Plan and Liquidity Class Servicing Plan (together, the "Liquidity Class Plans") are treated by the Portfolios as an expense in the year they are accrued. At any given time, a Selling Agent and/or Servicing Agent may incur expenses in connection with services provided pursuant to its agreements with the Distributor and/or the Trust under the Liquidity Class Plans which exceed the total of the payments made to the Selling Agents and/or Servicing Agents by the Distributor or the Trust and reimbursed by the Portfolios pursuant to the Liquidity Class Plans. Any such excess expenses may be recovered in future years, so long as the Liquidity Class Plans are in effect. Because there is no requirement under the Liquidity Class Plans that the Distributor be paid or the Selling Agents and Servicing Agents be compensated or reimbursed for all their expenses or any requirement that the Liquidity Class Plans be continued from year to year, such excess amount, if any, does not constitute a liability to a Portfolio, or the Distributor, or the Trust. Although there is no legal obligation for the Portfolio to pay expenses incurred by the Distributor, a Selling Agent or a Servicing Agent in excess of payments previously made to the Distributor under the Liquidity Class Plans if for any reason the Liquidity Class Plans are terminated, the Trustees will consider at that time the manner in which to treat such expenses. For the fiscal year ended April 30, 1995, the distribution expenses incurred by the Liquidity Class Shares of the Portfolios were as follows: Nations Cash Reserves - $13,206; Nations Treasury Reserves - $9,486; Nations Municipal Reserves - $3,609; and Nations Government Reserves - $58,948. Such distribution expenses for each Portfolio were attributable to the cost of marketing the Portfolios. No expenses were incurred under the Liquidity Class Servicing Plan during the fiscal year ended April 30, 1995. Each of the Shareholder Servicing Plan with respect to the Market Class Shares and the Market Class Plan (collectively, the "Plans") will continue in effect only so long as such continuance is approved at least annually by (i) a majority of the Board of Trustees, and (ii) a majority of the Qualified Trustees, pursuant to a vote cast in person at a meeting called for the purpose of voting on the Plan. Each Plan may not be amended to increase materially the amount which may be 24 spent thereunder without approval of a majority of the outstanding Shares of such Portfolio. All material amendments to a Plan require the approval of a majority of the Board of Trustees and the Qualified Trustees. The Plans require that quarterly written reports of the amounts spent under the Plans and the purposes of such expenditures be furnished to, and reviewed by, the Trustees. Adviser Class Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Shareholder Servicing Plan for the Adviser Class Shares of each Portfolio (the "Adviser Class Servicing Plan"). Under the Adviser Class Servicing Plan, the Trust may enter into Shareholder Servicing Agreements with broker/dealers, banks and other financial institutions ("Servicing Agents") pursuant to which the Servicing Agents will provide shareholder support services to their customers who beneficially own Adviser Class Shares in the Portfolios. The Adviser Class Servicing Plan permits the Trust to pay Servicing Agents a fee not exceeding 0.25% of the average daily net asset value of the Adviser Class Shares beneficially owned by the Servicing Agents' clients. The shareholder support services provided by Servicing Agents under the Adviser Class Servicing Plan may include: (i) aggregating and processing purchase and redemption requests for such Adviser Class Shares from customers and transmitting promptly net purchase and redemption orders to the Distributor or transfer agent; (ii) providing customers with a service that invests the assets of their accounts in such Adviser Class Shares pursuant to specific or pre-authorized instructions; (iii) processing dividend and distribution payments from the Trust on behalf of customers; (iv) providing information periodically to customers showing their positions in such Adviser Class Shares; (v) arranging for bank wires; (vi) responding to customers' inquiries concerning their investment in such Adviser Class Shares; (vii) providing sub-accounting with respect to such Adviser Class Shares beneficially owned by customers or the information necessary for sub-accounting; (viii) if required by law, forwarding shareholder communications (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers; (ix) forwarding to customers proxy statements and proxies containing any proposals regarding the Adviser Class Servicing Plan or related agreements; (x) general shareholder liaison services; and (xi) providing such other similar services as the Trust reasonably request to the extent the Servicing Agents are permitted to do so under applicable statutes, rules or regulations. The Adviser Class Servicing Plan also provides that to the extent any portion of the fees payable under such Plan is deemed to be for services primarily intended to result in the sale of Portfolio shares, such fees are deemed approved and may be paid pursuant to the Servicing Plan and in accordance with Rule 12b-1 under the 1940 Act. For the fiscal year ended April 30, 1995 the Portfolios paid 12b-1 fees to Stephens and shareholder servicing fees to NationsBank for Liquidity Class Shares and Adviser Class Shares in the following amounts: 25
Funds Stephens NationsBank Total Nations Cash Reserves Liquidity Class $13,206.00 $ 0.00 $13,206.00 Nations Cash Reserves Adviser Class 0.00 56,057.00 56,057.00 Nations Government Reserves Liquidity Class 58,948.00 0.00 58,948.00 Nations Government Reserves Adviser Class 0.00 157,228.00 157,228.00 Nations Treasury Reserves Liquidity Class 9,486.00 0.00 9,486.00 Nations Treasury Reserves Adviser Class 0.00 68,443.00 68,443.00 Nations Municipal Reserves Liquidity Class 3,609.00 0.00 3,609.00 Nations Municipal Reserves Adviser Class 0.00 81,350.00 81,350.00
The Adviser Class Servicing Plan will continue in effect only so long as such continuance is approved at least annually by (i) a majority of the Board of Trustees, and (ii) a majority of the Qualified Trustees, pursuant to a vote cast in person at a meeting called for the purpose of voting on the Adviser Class Servicing Plan. The Adviser Class Servicing Plan may not be amended to increase materially the amount which may be spent thereunder without approval of a majority of the outstanding Adviser Class Shares of such Portfolio. All material amendments to the Adviser Class Servicing Plan require the approval of a majority of the Board of Trustees and the Qualified Trustees. The Adviser Class Servicing Plan requires that quarterly written reports of the amounts spent under the Adviser Class Servicing Plan and the purposes of such expenditures be furnished to, and reviewed by, the Trustees. 26 DETERMINATION OF NET ASSET VALUE The net asset value per share of the Portfolios will be determined as of 2:00 p.m., Eastern time (1:00 p.m., Eastern time, with respect to the Nations Municipal Reserves), on each day the Exchange is open for business. Net asset value per share of each Portfolio is calculated by adding the value of its securities and other assets, subtracting its liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method pursuant to Rule 2a-7 under the 1940 Act, which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by this method, is higher or lower than the price each Portfolio would receive if it sold the instrument. During periods of declining interest rates, the daily yield of each Portfolio may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by each Portfolio resulted in a lower aggregate portfolio value on a particular day, a prospective investor in each Portfolio would be able to obtain a somewhat higher yield than would result from investment in a company utilizing solely market values, and existing investors in each Portfolio would experience a lower yield. The converse would apply in a period of rising interest rates. The Portfolios use of amortized cost and the maintenance of the Portfolios net asset value at $1.00 are permitted by regulations promulgated by the SEC under the 1940 Act, provided that certain conditions are met. The Trust will maintain a dollar-weighted average maturity in the Portfolios of 90 days or less, will not purchase any instrument having a remaining maturity of more than 397 days, and will limit its investments to those U.S. dollar-denominated instruments which are permitted investments under SEC regulations. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Portfolios. Such procedures include the determination of the extent of deviation, if any, of the Portfolios current net asset value per share calculated using available market quotations from the Portfolios amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Portfolios incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Portfolios 27 in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Portfolio must annually distribute at least 90% of its investment company taxable income. TAXES The following is only a summary of certain tax considerations generally affecting a Portfolio and its Shareholders, and is not intended as a substitute for careful tax planning. Shareholders are urged to consult their tax advisors with specific reference to their own tax situations, including their state and local tax liabilities. Federal Income Tax The following discussion of federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder as in effect on the date of this SAI. New legislation, certain administrative changes or court decisions may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein. As of the date of this Statement of Additional Information, the maximum marginal federal individual stated tax rate applicable to ordinary income is 39.6% (effective rates may be higher for some individuals due to phase out of exemptions and elimination of deductions); the maximum individual tax rate applicable to net capital gains is 28%; and the maximum corporate tax rate applicable to ordinary income and net capital gains is 35% (except that corporations which have taxable income in excess of $100,000 for a taxable year will be required to pay an additional amount of income tax of up to $11,750 and corporations which have taxable income in excess of $15,000,000 for a taxable year will be required to pay an additional amount of income tax of up to $100,000). In addition, the alternative minimum tax rate for noncorporate taxpayers is 26% on taxable excess (alternative minimum taxable income, less the applicable exemption amount) up to $175,000. The alternative minimum tax rate on taxable excess exceeding $175,000 is 28%. The corporate alternative minimum tax rate is 20%. It is the policy of each of the Trust's Portfolios to qualify for the favorable tax treatment accorded a regulated investment company ("RIC") as defined under Subchapter M of the Code. By following such policy, each of the Trust's Portfolios expects to eliminate or reduce to a nominal amount the federal taxes to which such Portfolio may be subject. In order to qualify for treatment as a RIC under the Code, each Portfolio must distribute annually to its Shareholders at least the sum of 90% of its net interest income excludable from gross income plus 90% of its investment company taxable income (generally, net investment income plus net short-term capital gain) ("Distribution Requirement") and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of the Portfolio's gross income each taxable year must be derived from dividends, interest, payments with respect to securities 28 loans, and gains from the sale or other disposition of stock or securities, or certain other income, (ii) the Portfolio must derive less than 30% of its gross income each taxable year from the sale or other disposition of stocks or securities held for less than three months; (iii) at the close of each quarter of the Portfolio's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RICs and other securities, with such other securities limited, in respect to any one issuer, to an amount that does not exceed 5% of the value of the Portfolio's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iv) at the close of each quarter of the Portfolio's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. Government securities or the securities of other RICs) of any one issuer. Notwithstanding the Distribution Requirement described above, which only requires a Portfolio to distribute at least 90% of its annual investment company taxable income and does not require any minimum distribution of net capital gain (the excess of net long-term capital gain over net short-term capital loss), a Portfolio will be subject to a nondeductible 4% Federal excise tax to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and substantially all of its capital gain net income for the one-year period ending on October 31 of that year, plus certain other amounts. Additional Considerations for Nations Municipal Reserves: As noted in the Prospectuses for the Nations Municipal Reserves, exempt interest dividends by such Portfolio are excludable from a Shareholder's gross income for regular Federal income tax purposes. Exempt-interest dividends may nevertheless be subject to the alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of the Code or the environmental tax (the "Environmental Tax") imposed by Section 59A of the Code. The Alternative Minimum Tax is imposed at the maximum marginal rate of 28% in the case of non-corporate taxpayers and at the rate of 20% in the case of corporate taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The Environmental Tax is imposed at the rate of 0.12% and applies only to corporate taxpayers. The Alternative Minimum Tax and the Environmental Tax may be imposed in two circumstances. First, exempt-interest dividends derived from certain "private activity bonds" issued after August 7, 1986, will generally be an item of tax preference (and therefore potentially subject to the Alternative Minimum Tax for both corporate and non-corporate taxpayers and the Environmental Tax for corporate taxpayers). Second, in the case of exempt-interest dividends received by corporate Shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporation's alternative minimum taxable income for purposes of determining the Alternative Minimum Tax and the Environmental Tax. Any gain or loss recognized on a sale or redemption of Shares of the Portfolio by a Shareholder who is not a dealer in securities will generally be treated as a long-term capital gain or loss if the shares have been held for more than twelve months and otherwise will be generally treated as a 29 short-term capital gain or loss. Any loss recognized by a Shareholder upon the sale or redemption of units of the Portfolio held for six months or less, however, will be disallowed to the extent of any exempt-interest dividends received by the Shareholder with respect to such shares. If shares on which a net capital gain distribution has been received are subsequently sold or redeemed and such shares have been held for six months or less, any loss recognized will be treated as a long term capital loss to the extent of the long-term capital gain distribution. Interest on indebtedness incurred by Shareholders to purchase or carry shares of the Portfolio will not be deductible for Federal income tax purposes. The deduction otherwise allowable to property and casualty insurance companies for "losses incurred" will be reduced by an amount equal to a portion of exempt-interest dividends received or accrued during any taxable year. Foreign corporations engaged in a trade or business in the United States will be subject to a "branch profits tax" on their "dividend equivalent amount" for the taxable year, which will include exempt-interest dividends. Certain Subchapter S corporations may also be subject to taxes on their "passive investment income," which could include exempt-interest dividends. Up to one-half of the Social Security benefits or railroad retirement benefits received by an individual during any taxable year will be included in the gross income of such individual if the individual's "modified adjusted gross income" (which includes exempt-interest dividends) plus one-half of the Social Security benefits or railroad retirement benefits received by such individual during that taxable year exceeds the base amount described in Section 86 of the Code. The Portfolio may not be an appropriate investment for persons (including corporations and other business entities) who are "substantial users" (or persons related to such users) of facilities financed by industrial development or private activity bonds. A "substantial user" is defined generally to include certain persons who regularly use a facility in their trade or business. Such entities or persons should consult their tax advisors before purchasing shares of the Portfolio. Issuers of bonds purchased by the Portfolio (or the beneficiary of such bonds) may have made certain representations or covenants in connection with the issuance of such bonds to satisfy certain requirements of the Code that must be satisfied subsequent to the issuance of such bonds. Investors should be aware that exempt-interest dividends derived from such bonds may become subject to Federal income taxation retroactively to the date thereof if such representations are determined to have been inaccurate or if the issuer of such bonds (or the beneficiary of such bonds) fails to comply with such covenants. State Taxes A Portfolio is not liable for any income or franchise tax in Massachusetts if it qualifies as a RIC for Federal income tax purposes. Distributions by the Portfolios to Shareholders and the ownership of shares may be subject to state and local taxes. Therefore, shareholders are urged to consult with their tax advisors concerning the application of state and local taxes to investments in the Portfolios, which may differ from the Federal income tax consequences. Depending upon applicable state and local law, Shareholders of the Nations Municipal Reserves may be exempt from state and local taxes on distributions of tax-exempt interest income derived 30 from obligations of the state and/or municipalities in which they reside, but Shareholders of that Portfolio may be subject to tax on income derived from obligations of other jurisdictions. The Portfolio will make periodic reports to Shareholders of the source of distributions on a state-by-state basis. Shareholders are urged to consult with their tax advisors regarding whether, and under what conditions such exemption is available. PORTFOLIO TRANSACTIONS The Trust has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Subject to policies established by the Trustees, the Adviser is responsible for placing the orders to execute transactions for the Portfolios. In placing orders, it is the policy of the Trust to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Adviser generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Portfolios invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, the Adviser will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. The Trust does not expect to use one particular dealer, but subject to the Trust's policy of seeking the best net results, dealers who provide supplemental investment research to the Adviser may receive orders for transactions by the Trust. Information so received will be in addition to and not in lieu of the services required to be performed by the Adviser under the Investment Advisory Agreement, and the expenses of the Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. The Portfolios may execute brokerage or other agency transactions through affiliated persons for a commission, in conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules of the SEC. These rules require that commissions paid to the affiliated person by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other remuneration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to such affiliated persons and will review these procedures periodically. 31 During its fiscal years ended April 30, 1995, 1994 and 1993, the Trust paid $0, $0 and $182,593 in aggregate brokerage commissions. During the period ended April 30, 1995, certain Portfolios acquired securities of companies which are either among the Trust's "regular brokers or dealers" or parents of its "regular brokers or dealers." "Regular brokers or dealers" are the ten brokers or dealers that, during the most recent fiscal year, (i) received the greatest dollar amounts of brokerage commissions from the Trust's portfolio transactions, (ii) engaged as principal in the largest dollar amounts of portfolio transactions of the Trust, or (iii) sold the largest dollar amount of the Trust's shares. At April 30, 1995, the Nations Cash Reserves held securities of such companies as follows: $7,903,680 of commercial paper of Bankers Trust New York Corporation. CUSTODIAN AND TRANSFER AGENT Effective May 1, 1994, NationsBank of Texas, N.A., began serving as custodian ("Custodian") for the securities and cash of each Portfolio. As custodian, NationsBank of Texas, N.A., maintains custody of the Portfolios' securities, cash and other property, delivers securities against payment upon sale and pays for securities against delivery upon purchase, makes payments on behalf of the Portfolios for payments of dividends, distributions and redemptions, endorses and collects on behalf of the Portfolios all checks, and receives all dividends and other distributions made on securities owned by the Portfolios. For such services, NationsBank of Texas, N.A., is entitled to receive, in addition to out-of-pocket expenses, fees, payable monthly (i) at the rate of 1.25% of 1% of the average daily net assets of the Portfolios' investments, (ii) $10.00 per repurchase collateral transaction by each Portfolio, and (iii) $15.00 per purchase, sale and maturity transaction involving each Portfolio. NationsBank of Texas, N.A. is a wholly owned subsidiary of NationsBank Corporation. Effective April 25, 1994, TSSG, which is located at One Exchange Place, Boston, Massachusetts 02109, began serving as transfer agent for the Portfolios. Under the transfer agency agreement, the transfer agent maintains the shareholder account records for the Trust, handles certain communications between shareholders and the Trust, and distributes dividends and distributions payable by the Trust to shareholders, and produces statements with respect to account activity for the Trust and its shareholders for these services. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares of the Portfolios and different classes of each Portfolio. Each Portfolio currently offers Capital Class Shares, Liquidity Class Shares, Adviser Class Shares and Market Class Shares. Except for differences between classes of a Portfolio pertaining to distribution arrangements, each share of a Portfolio represents an equal proportionate interest in that Portfolio with each other share. Shares are entitled upon liquidation to a pro rata share in the net assets of the Portfolios. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional portfolios or classes of shares. All consideration received by the 32 Trust for shares of any additional series and all assets in which such consideration is invested would belong to that Portfolio and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. Each Portfolio or class of a Portfolio will vote separately on matters pertaining solely to such Portfolio or class. Such matters include matters relating to a Portfolio's investment advisory agreement or a class' distribution plan. All Portfolios will vote as a whole on matters affecting all Portfolios such as the election of Trustees and the appointment of the Trust's independent accountants. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any Shareholder held personally liable for the obligations of the Trust. LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. 5% SHAREHOLDERS The following table sets forth certain information concerning each person who, to the Trust's knowledge, is a record owner of 5% or more of the Shares of a class of a Portfolio. Information is given as of January 8, 1996. 33 Percentage of Shares Name and Address Held of Record Only Nations Cash Reserves Liquidity Class Shares Hartsville Oil Mill Inc. 34.69% Attn: Dwain Watson P.O. Box 124 Darlington, SC 29532-0124 Duke Flour Daniel 29.49% Attn: Jackie Plemons 2300 Yorkmont Road P.O. Box 1011 Charlotte, NC 28201 Windsor Realty Fund -I LP 20.65% Attn: Danielle Mullen 600 Atlantic Avenue, Suite 2000 Boston, MA 02210 Southside Electric Cooperative Inc. 5.44% c/o Citizens Bank & Trust Attn: Bob Johnson P.O. Box 386 Blackstone, VA 23824 Adviser Class Shares Hare & Co., Bank of New York 56.93% Attn: STIF/Master Note One Wall Street, 5th Floor New York, NY 10286 Maryland National Bank 19.13% Attn: NationsBank SWP Disbursement 901 West Trade Street NC1-003-04-38 Charlotte, NC 28255 34 NationsBank SWP Disbursement/VA 17.03% 901 W. Trade Street NC1-003-04-38 Charlotte, NC 28255 NationsBank SWP Disbursement/DC 6.88% 901 W. Trade Street NC1-003-04-38 Charlotte, NC 28255 Nations Treasury Reserves Capital Class Shares VB NationsBank Corp. 5.34% Ms. Stacey Tucker NC1-007-22-01 Charlotte, NC 28255 UPS VEBA-Flexible & Healthcare 17.06% Attn: Chris Cesare, Investments 55 Glenlake Parkway, N.E. Atlanta, GA 30328 UPS Health & Welfare Plan 50.91% Attn: Chris Cesare, Investments 55 Glenlake Parkway, N.E. Atlanta, GA 30328 Liquidity Class Shares The Salvation Army T 45.88% Attn: John Griffen 615 Slater Lane P.O. Box 269 Alexandria, VA 22313 Army Times Publishing Co. 30.88% Profit Sharing Plan 6883 Commerce Drive Springfield, VA 22159 35 Army Times Publishing Co. 23.13% Pension Plan 6883 Commerce Drive Springfield, VA 22159 Adviser Class Shares Hare & Co., Bank of New York 74.31% Attn: STIF/Master Note One Wall Street, 5th Floor New York, NY 10286 Maryland National Bank 20.26% Attn: NationsBank SWP Disbursement NC1-003-04-38 901 W. Trade Street Charlotte, NC 28255 Nations Government Reserves Capital Class Shares Westinghouse Sav Riv 9.46% Co-Columbia Linda Taylor NC1-002-08-12 Charlotte, NC 28255 Westinghouse Sav Riv 17.04% Co-Pen-Adm Linda Taylor NC1-002-08-12 Charlotte, NC 28255 Westinghouse Sav Riv 6.46% Co-Strong Linda Taylor NC1-002-08-12 Charlotte, NC 28255 Westinghouse Sav Riv 5.95% Co-Putnam Linda Taylor NC1-002-08-12 Charlotte, NC 28255 36 Wing Corp. Theo Blue 1200 Smith Suite 2950 Houston, TX 77002 Liquidity Class Shares Stephens Inc. 100.00% Attn: Cindi Cole 111 Center Street Little Rock, AR 72201 Adviser Class Shares Maryland National Bank 93.88% Attn: NationsBank SWP Disbursement 901 West Trade Street NC1-003-04-38 Charlotte, NC 28255 Nations Municipal Reserves Capital Class Shares Mr. Paul Kilius 29.32% Director, Financial Operations Brunswick Corp. 1 N. Field Ct. Lake Forest, IL 60045-4811 Mr. Samuel L. Willard III 6.32% Unit 12E 2660 Peachtree Road, N.W. Atlanta, GA 30305 I/M Michael W. Lasky 16.46% David McClung P.O. Box 995 Baltimore, MD 21203 Liquidity Class Shares Advanced Management Incorporated 99.70% 7918 Jones Branch Drive 37 Suite 400 McLean, VA 22102 Adviser Class Shares NationsBank SWP Disbursement/VA 72.10% 901 W. Trade Street NC1-003-04-38 Charlotte, NC 28255 Maryland National Bank 29.90% Attn: NationsBank SWP Disbursement 901 W. Trade Street NC1-003-04-38 Charlotte, NC 28255 EXPERTS AND FINANCIAL INFORMATION The Trust's Financial Statements for the year ended April 30, 1995 appearing in the Trust's 1995 Annual Financial Report, and the report thereon of Price Waterhouse LLP, independent accountants, also appearing therein, are incorporated by reference in this SAI. The Financial Statements have been examined by Price Waterhouse LLP, as indicated in their report, with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said report. The Letter to Shareholders contained in the 1995 Annual Financial Report is not incorporated by reference and is not a part of the registration statement or this SAI. The Semi-Annual Report for the period ended October 31, 1995 is incorporated by reference in this SAI. 38 THE CAPITOL MUTUAL FUNDS PO BOX 9701 PROVIDENCE, RI 02940-9701 TOLL FREE 1-800-290-2224 [Logo] THE CAPITOL MUTUAL FUNDS Advised by NationsBank, N.A. (Carolinas) Annual Report April 30, 1995 Dear Shareholder: We are pleased to present The Capitol Mutual Funds (the "Capitol Funds") Annual Report for the one-year period ended April 30, 1995. As indicated below, each money market fund portfolio outperformed its appropriate benchmark as money market yields staged a turnaround from an industry-wide free-fall over the previous three years. ECONOMIC OVERVIEW Between February 1994 and February 1995, the Federal Reserve Board (the "Fed") raised its discount rate seven times--300 basis points, to 6%--in an effort to slow economic growth and contain inflation. Recent economic data has shown signs that the economy's growth is slowing, which has rein- forced the market's view that the Fed will not increase interest rates in the near term. In addition, foreign central banks have made record pur- chases of short-term Treasury securities in an effort to support the U.S. dollar in recent weeks. As a result of both of these events, the short- term yield curve is very flat. MARKET SUMMARY Floating rate instruments were used effectively over the course of the year to manage the Capitol Funds during this active interest rate environ- ment. The interest rates on these instruments are tied to various standard money market indices, such as the Prime Rate and Fed Funds. Consequently, these securities are considered "derivatives." They were used primarily as a defensive measure, which allowed the portfolios to maintain yield levels as interest rates increased. Floating rate instruments may also provide protection in a declining interest rate environment. Securities held by money market funds, including derivative securities, must meet credit quality standards as mandated by Rule 2a-7 under the In- vestment Company Act of 1940. Rule 2a-7 governs the maturity, quality and diversification characteristics of securities in which the Funds may in- vest. The Funds are prohibited from purchasing volatile or speculative de- rivatives that do not have price characteristics similar to typical money market securities. All money market instruments purchased by the Capitol Funds during this one-year period performed as expected and fully complied with the requirements of Rule 2a-7. THE CAPITOL MUTUAL FUNDS AND OTHER MUTUAL FUNDS ARE NOT FDIC INSURED AND ARE NOT OBLIGATIONS OF, ENDORSED BY, DEPOSITS IN, OR GUARANTEED BY NA- TIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK") OR ANY OF ITS AFFILIATES. IN- VESTMENTS IN MUTUAL FUNDS AND OTHER INVESTMENT PRODUCTS INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED. NATIONSBANK IS THE ADVISER TO THE CAPITOL MUTUAL FUNDS, FOR WHICH IT IS COMPENSATED. THE CAPITOL MUTUAL FUNDS DISTRIBUTOR: STEPHENS INC. STEPHENS INC., WHICH IS NOT AFFILIATED WITH NATIONSBANK, 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. THE CAPITOL MUTUAL FUNDS INVESTMENT ADVISER: NATIONSBANK CASH RESERVES Cash Reserves (formerly, Money Market Portfolio) is currently purchasing Fed Funds floating rate notes that offer potential yield enhancement over other short-term securities. This has been done without extending the weighted average maturity of the portfolio, which was 51 days as of April 30, 1995. The Fund intends to continue to add very high-quality, short- maturity issues to the portfolio. PIE CHART Pie chart showing sections using the following information: COMMERCIAL PAPER 17.2% CORPORATE OBLIGATIONS 19.5% MEDIUM TERM NOTE 2.7% REPURCHASE AGREEMENTS AND OTHER ASSETS AND LIABILITIES (NET) 48.3% MONEY MARKET FUNDS 9.5% STUDENT LOAN MARKETING ASSOCIATION 2.8%
Note: Percentages indicate investments as a percentage of total net as- sets. TREASURY RESERVES Treasury Reserves (formerly, Treasury Portfolio) has a weighted average maturity of 37 days. The Fund continues to purchase Treasury bills in the six month sector of the market and Treasury notes and bills in the one year sector. Approximately 65% of the Fund's assets are invested in over- night repurchase agreements which allow the Fund to closely track interest rates and handle the liquidity needs of shareholders. PIE CHART Pie chart showing sections using the following information: U.S. TREASURY BILLS 27.8% U.S. TREASURY NOTES 3.2% REPURCHASE AGREEMENTS AND OTHER ASSETS AND LIABILITIES (NET) 65.2% MONEY MARKET FUNDS 3.8%
Note: Percentages indicate investments as a percentage of total net as- sets. GOVERNMENT RESERVES Government Reserves (formerly, Government Portfolio), has a weighted aver- age maturity of 37 days. The Fund has purchased various types of floating rate agency notes to diversify the floater position of the Fund. This strategy has allowed the Fund to get the most yield in a flat or inverted yield curve environment with minimal impact to the Fund's weighted average maturity. The Fund invests in overnight repurchase agreements which allow the Fund to closely track interest rates and handle the liquidity needs of shareholders. PIE CHART Pie chart showing sections using the following information: MONEY MARKET FUND 4.5% STUDENT LOAN MARKETING ASSOCIATION 18.1% FEDERAL FARM CREDIT BANK 8.0% FEDERAL HOME LOAN BANK 12.0% FEDERAL HOME LOAN MORTGAGE CORPORATION 25.3% FEDERAL NATIONAL MORTGAGE ASSOCIATION 20.0% TENNESSEE VALLEY AUTHORITY DISCOUNT NOTE 3.0% REPURCHASE AGREEMENT AND OTHER ASSETS AND LIABILITIES (NET) 9.1%
Note: Percentages indicate investments as a percentage of total net as- sets. TAX FREE RESERVES Tax Free Reserves (formerly, Tax Free Money Market Portfolio) is currently driven by investor cash flows and limitations on the supply of newly is- sued municipal securities. Tax payments drained tax-exempt cash from the municipal market causing the yield curve to become inverted with overnight rates exceptionally high. Yields on the longer end of the curve held steady or declined due to a lack of new issues available for investment. As a result, the Fund maintained a higher degree of daily floating rate securities that caused the Fund's weighted average maturity to decline from 46 days as of April 30, 1994, to 38 days as of April 30, 1995. PIE CHART Pie chart showing sections using the following information: OTHER ASSETS AND LIABILITIES (NET) 0.5% MONEY MARKET FUNDS 1.3% MUNICIPAL BONDS AND NOTES 98.2%
Note: Percentages indicate investments as a percentage of total net as- sets. The attached financial report provides more specific information on your investments. Please review it carefully. We thank you for investing with the Capitol Funds and look forward to continuing to help you pursue your investment goals. Sincerely, /s/ A. Max Walker /s/ Mark H. Williamson A. Max Walker Mark H. Williamson President and Chairman of the Board Mutual Funds Group Executive, NationsBank, N.A. (Carolinas) April 30, 1995 Money market funds seek to maintain a stable net asset value of $1.00 per share. However, there is no assurance that money market funds will be able to maintain a stable net asset value of $1.00. Yields will fluctuate as market conditions change. This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. PORTFOLIO OF INVESTMENTS THE CAPITOL MUTUAL FUNDS April 30, 1995
Principal Maturity Value Amount CASH RESERVES Date (Note 1) COMMERCIAL PAPER -- 17.2% Bankers Trust N.Y. Corporation, $ 8,000,000 Discount note 07/12/95 $ 7,903,680 Barnett Banks, Inc., 8,000,000 Discount note 05/11/95 7,986,600 Falcon Asset Securitization Corporation, 7,450,000 Discount note 05/10/95 7,438,881 ORIX America, Inc., (Sanwa Bank LOC), 2,000,000 Discount note 05/09/95 1,997,356 Toshiba International Finance (U.K.) PLC, 6,000,000 Discount note 07/26/95 5,912,853 Total Commercial Paper (Cost $31,239,370) 31,239,370 CORPORATE OBLIGATIONS -- 19.5% Bear Stearns Companies Inc., 8,750,000 6.563%+ 06/15/95++ 8,752,382 Commercial Credit Company, 6,725,000 6.375% 01/01/96 6,672,399 Ford Motor Credit Company, 5,000,000 6.125% 12/01/95 4,969,964 General Motors Acceptance Corporation, 5,000,000 6.450%+ 07/17/95++ 5,001,121 International Lease Finance Corporation, 5,000,000 5.750% 01/15/96 4,941,213 Norwest Financial, Inc., 5,000,000 7.250% 11/01/95 5,019,160 Total Corporate Obligations (Cost $35,356,239) 35,356,239 MEDIUM TERM NOTE -- 2.7% (Cost $4,999,708) IBM Credit Corporation, 5,000,000 6.475% 04/04/96 4,999,708 U.S. GOVERNMENT AGENCY OBLIGATION -- 2.8% (Cost $5,000,000) Student Loan Marketing Association (SLMA) Note, 5,000,000 6.140%+ 05/02/95++ 5,000,000 REPURCHASE AGREEMENTS -- 48.4% Agreement with Lehman Government Securities, Inc., 44,000,000 5.940% dated 04/28/95 to be repurchased at $44,021,780 on 05/01/95, collater- alized by $42,720,000 U.S. Treasury Note, 7.375% due 11/15/97 (value $44,854,786) 44,000,000 Agreement with Merrill Lynch & Company, Inc., 44,000,000 5.930% dated 04/28/95 to be repurchased at $44,021,743 on 05/01/95, collater- alized by $38,216,000 U.S. Treasury Bonds, with various maturities and coupon rates (value $44,880,519) 44,000,000 Total Repurchase Agreements (Cost $88,000,000) 88,000,000 Shares MONEY MARKET FUNDS -- 9.5% 8,753,000 Dreyfus Cash Management Plus Fund 8,753,000 8,526,500 Fidelity Institutional Cash Variable Rate Fund 8,526,500 Total Money Market Funds (Cost $17,279,500) 17,279,500 TOTAL INVESTMENTS (Cost $181,874,817*) 100.1% 181,874,817 OTHER ASSETS AND LIABILITIES (NET) (0.1) (126,746) NET ASSETS 100.0% $181,748,071
* Aggregate cost for Federal tax purposes. + Floating Rate Note. The interest rate shown reflects the rate currently in effect. ++ Reset date. Abbreviation: LOC -- Letter of Credit See Notes to Financial Statements. PORTFOLIO OF INVESTMENTS THE CAPITOL MUTUAL FUNDS April 30, 1995
Principal Maturity Value Amount TREASURY RESERVES Date (Note 1) U.S. TREASURY OBLIGATIONS -- 31.0% U.S. TREASURY BILLS -- 27.8% $15,000,000 Discount note 05/04/95 $ 14,992,892 2,079,000 Discount note 05/11/95 2,075,760 5,000,000 Discount note 05/18/95 4,986,424 5,000,000 Discount note 06/01/95 4,974,726 5,000,000 Discount note 06/15/95 4,964,062 5,000,000 Discount note 07/20/95 4,933,278 5,000,000 Discount note 07/27/95 4,927,379 5,000,000 Discount note 08/10/95 4,914,150 5,000,000 Discount note 08/17/95 4,910,000 10,000,000 Discount note 08/24/95 9,810,569 5,000,000 Discount note 08/31/95 4,898,503 10,000,000 Discount note 10/19/95 9,721,888 5,000,000 Discount note 11/16/95 4,825,323 5,000,000 Discount note 02/08/96 4,772,028 85,706,982 U.S. TREASURY NOTES -- 3.2% 5,000,000 4.250% 11/30/95 4,948,138 5,000,000 4.250% 12/31/95 4,925,698 9,873,836 Total U.S. Treasury Obligations (Cost $95,580,818) 95,580,818 REPURCHASE AGREEMENTS -- 65.6% Agreement with Bankers Trust Securities Corporation, 75,000,000 5.930% dated 04/28/95 to be repurchased at $75,037,063 on 05/01/95, collater- alized by $77,656,000 U.S. Treasury Bill, zero coupon due 07/27/95 (value $76,530,764) 75,000,000 Agreement with CS First Boston Corporation, 2,210,000 5.930% dated 04/28/95 to be repurchased at $2,211,092 on 05/01/95, collateral- ized by $1,800,000 U.S. Treasury Bonds, 11.125% due 08/15/03 (value $2,255,414) 2,210,000 Agreement with Deutsche Bank Financial Inc., 12,000,000 5.920% dated 04/28/95 to be repurchased at $12,005,920 on 05/01/95, collater- alized by $12,204,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $12,240,186) 12,000,000 Agreement with Lehman Government Securities, Inc. 14,000,000 5.940% dated 04/28/95 to be repurchased at $14,006,930 on 05/01/95, collater- alized by $14,721,000 U.S. Treasury Notes, with various maturities and coupon rates (value $14,281,714) 14,000,000 Agreement with Merrill Lynch & Company, Inc., 75,000,000 5.930% dated 04/28/95 to be repurchased at $75,037,063 on 05/01/95, collater- alized by $63,348,000 U.S. Treasury Bonds, with various maturities and coupon rates (value $76,502,885) 75,000,000 Agreement with Morgan (J.P.) & Company, Inc., 14,000,000 5.920% dated 04/28/95 to be repurchased at $14,006,907 on 05/01/95, collater- alized by $14,705,000 U.S. Treasury Bills, zero coupon with various maturities (value $14,280,805) 14,000,000 Agreement with Smith Barney Shearson & Company, 10,000,000 6.000% dated 04/05/95 to be repurchased at $10,048,333 on 05/04/95, collater- alized by $9,050,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $10,200,181) 10,000,000 Total Repurchase Agreements (Cost $202,210,000) 202,210,000 Shares MONEY MARKET FUNDS -- 3.8% 3,588,000 AIM Treasury Fund 3,588,000 4,243,000 Dreyfus Treasury Cash Management Fund 4,243,000 3,669,000 Fidelity Institutional Cash Portfolio Fund 3,669,000 Total Money Market Funds (Cost $11,500,000) 11,500,000 TOTAL INVESTMENTS (Cost $309,290,818*) 100.4% 309,290,818 OTHER ASSETS AND LIABILITIES (NET) (0.4) (1,161,191) NET ASSETS 100.0% $308,129,627
* Aggregate cost for Federal tax purposes. See Notes to Financial Statements. PORTFOLIO OF INVESTMENTS THE CAPITOL MUTUAL FUNDS April 30, 1995
Principal Maturity Value Amount GOVERNMENT RESERVES Date (Note 1) U.S. GOVERNMENT AGENCY OBLIGATIONS -- 86.4% FEDERAL FARM CREDIT BANK (FFCB) -- 3.0% $ 3,000,000 Discount note 10/16/95 $ 2,917,260 FEDERAL FARM CREDIT BANK (FFCB) NOTE -- 5.0% 5,000,000 6.200%+ 05/01/95++ 5,000,000 FEDERAL HOME LOAN BANK (FHLB) -- 12.0% 2,125,000 Discount note 05/30/95 2,114,746 4,350,000 Discount note 06/19/95 4,315,245 2,155,000 Discount note 08/17/95 2,116,210 3,440,000 Discount note 09/18/95 3,360,670 11,906,871 FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 25.3% 3,000,000 Discount note 05/02/95 2,999,501 3,000,000 Discount note 05/05/95 2,998,007 2,265,000 Discount note 05/18/95 2,258,625 3,000,000 Discount note 05/22/95 2,989,727 3,000,000 Discount note 05/25/95 2,988,160 3,000,000 Discount note 06/12/95 2,978,965 1,895,000 Discount note 07/05/95 1,874,847 3,000,000 Discount note 07/07/95 2,966,947 3,000,000 Discount note 07/20/95 2,960,800 25,015,579 FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 20.0% 4,000,000 Discount note 05/03/95 3,998,667 3,000,000 Discount note 05/15/95 2,993,117 3,000,000 Discount note 05/31/95 2,985,125 3,000,000 Discount note 06/01/95 2,984,603 3,000,000 Discount note 06/23/95 2,973,809 4,000,000 Discount note 07/24/95 3,944,093 19,879,414 STUDENT LOAN MARKETING ASSOCIATION (SLMA) NOTES -- 18.1% 5,000,000 5.920%+ 05/02/95++ 5,000,000 8,000,000 5.920%+ 05/02/95++ 8,000,000 5,000,000 5.315% 06/30/95 5,000,000 18,000,000 TENNESSEE VALLEY AUTHORITY -- 3.0% 3,000,000 Discount note 05/12/95 2,994,546 Total U.S. Government Agency Obligations (Cost $85,713,670) 85,713,670 REPURCHASE AGREEMENT -- 9.4% (Cost $9,295,000) 9,295,000 Agreement with CS First Boston Corporation, 5.930% dated 04/28/95 to be repurchased at $9,299,593 on 05/01/95, collateral- ized by $7,269,000 U.S. Treasury Bonds, 13.125% due 05/15/01 (value $9,484,625) 9,295,000 Shares MONEY MARKET FUND -- 4.5% (Cost $4,504,000) 4,504,000 Dreyfus Treasury Prime Cash Management Fund 4,504,000 TOTAL INVESTMENTS (Cost $99,512,670*) 100.3% 99,512,670 OTHER ASSETS AND LIABILITIES (NET) (0.3) (262,247) NET ASSETS 100.0% $99,250,423
* Aggregate cost for Federal tax purposes. + Floating rate note. The interest rate shown reflects the rate currently in effect. ++ Reset date. See Notes to Financial Statements. PORTFOLIO OF INVESTMENTS THE CAPITOL MUTUAL FUNDS April 30, 1995
Principal Value Amount TAX FREE RESERVES (Note 1) MUNICIPAL BONDS AND NOTES -- 98.2% ALABAMA -- 6.4% Birmingham, Alabama, Medical Clinic Board Revenue, Health, Hospital, Nursing Home Improvements, (University of Alabama Health Services), (Morgan (J.P.) & Co. (Delaware) LOC), $ 2,000,000 5.100% due 12/01/26+ $ 2,000,000 Homewood, Alabama, Education Building Authority, Educational Facilities, (Sam- ford University), Series C, (AmSouth Bank (Birmingham) LOC), 1,300,000 4.750% due 12/01/13++ 1,300,000 McIntosh, Alabama, Industrial Development Board, Pollution Control Revenue, (Ciba-Geigy Corporation Project), Series A, (Swiss Bank LOC), 1,000,000 4.650% due 12/01/03++ 1,000,000 Opelika, Alabama, Industrial Development Board, Industrial Development Revenue, (Flowers Baking Company Project), (Trust Company Bank LOC), 2,000,000 4.750% due 12/01/99++ 2,000,000 6,300,000 ALASKA -- 2.0% Valdez, Alaska, Marine Term Revenue, (Arco Transportation Project), Series B, 1,900,000 4.750% due 05/01/31++ 1,900,000 CALIFORNIA -- 3.7% California Higher Education Loan Authority, Series C, AMT, (Student Loan Mar- keting Association LOC), 500,000 4.000% due 07/01/95+++ 500,000 Kern (County of), California, Board of Education, TRAN, 2,000,000 4.250% due 06/30/95 2,001,742 San Diego, California, Industrial Development Revenue, (Kaiser Aerospace and Electrical), Series A, AMT, (ABN-Amro Bank LOC), 1,200,000 4.650% due 10/01/07++ 1,200,000 3,701,742 COLORADO -- 8.4% Clear Creek (County of), Colorado, Financing Pool, Anticipation Warrants, (Na- tional Westminster Bank LOC), 1,030,000 4.600% due 06/01/98++ 1,030,000 Colorado (State of), Health Facilities Authority Revenue, (Goodwill Indus- tries), (Bank One LOC), 2,000,000 4.800% due 12/01/04++ 2,000,000 Northglenn, Colorado, Industrial Development Revenue, (Castle Gardens Retire- ment), (Swiss Bank LOC), 3,100,000 4.700% due 01/01/09++ 3,100,000 Pitkin (County of), Colorado, Industrial Development Revenue, (Aspen Skiing Company Project), Series B, AMT, (First National Bank (Chicago) LOC), 2,200,000 5.300% due 04/01/14+ 2,200,000 8,330,000 DISTRICT OF COLUMBIA -- 1.5% District of Columbia, Hospital Revenue, (Columbia Women's Hospital), Series A, (Mitsubishi Bank Ltd. LOC), 1,500,000 4.500% due 07/01/20++ 1,500,000 FLORIDA -- 10.1% Dade (County of), Florida, Industrial Development Revenue, (Dade Solid Waste -- Montenay Project), AMT, (Banque Paribas LOC), 960,000 4.800% due 12/01/10++ 960,000 Florida (State of), Housing Finance Agency, Multi-family Housing Revenue, (Blairstone), (Citibank (New York) LOC), 1,000,000 4.700% due 12/01/07++ 1,000,000 Hillsborough (County of), Florida, Industrial Development Revenue, (Seaboard Tampa), AMT, (Barclays Bank PLC LOC), 2,000,000 4.750% due 12/01/16++ 2,000,000 Orange (County of), Florida, Health Facilities Authority Revenue, (Mayflower Retirement Community), (Rabobank Nederland LOC), 1,000,000 4.750% due 03/01/18++ 1,000,000 Sunshine State Governmental Financing Committee, (Union Bank of Switzerland, National Westminster Bank and Morgan Guaranty Trust LOC), 5,000,000 4.000% due 06/23/95+++ 5,000,000 9,960,000 GEORGIA -- 4.1% Burke (County of), Georgia, Industrial Development Authority, Pollution Control Revenue, (Oglethorpe Power Corporation Project), Series A, (Credit Suisse (New York) LOC), 3,000,000 4.100% due 05/16/95+++ 3,000,000 DeKalb (County of), Georgia, Housing Authority, Multi-family Housing Revenue, (Terrace Club Project), Series A, (AmSouth Bank LOC), 1,000,000 4.800% due 11/01/15++ 1,000,000 4,000,000 ILLINOIS -- 6.0% Burbank, Illinois, Industrial Development Revenue, (Service Merchandise, Inc. Project), (Canadian Imperial Bank of Commerce LOC), 400,000 4.100% due 09/15/24++ 400,000 Illinois (State of), Development Financial Authority, Industrial Development Revenue, (Randolph Pickle Corporation), (American National Bank and Trust (Chicago) LOC), 900,000 4.850% due 06/01/12++ 900,000 Illinois (State of), Education Facilities Authority Revenue, (Illinois College of Optometry Project), (Sumitomo Bank LOC), 1,100,000 4.300% due 01/01/18++ 1,100,000 Illinois (State of), Health Facilities Authority Revenue: (Evanston Hospital Corporation), Series B, 2,000,000 4.650% due 02/15/96+++ 2,000,000 (Resurrection Health Care Systems), 1,500,000 5.100% due 05/01/11+ 1,500,000 5,900,000 INDIANA -- 6.2% Indiana Bond Bank, (Advance Funding Program), Notes A-3, 4,000,000 4.123% due 01/10/96++ 4,000,000 Indianapolis, Indiana, Multi-family Housing Revenue, (Canal Square Project), (Societe Generale LOC), 1,300,000 4.600% due 12/01/15++ 1,300,000 Portage, Indiana, Economic Development Revenue, (Health Quest Realty), Series 94, (Bank One LOC), 855,000 4.800% due 09/01/03++ 855,000 6,155,000 KANSAS -- 1.4% Wichita, Kansas, Health System Revenue, (CSJ Health System Wichita), (Sumitomo Bank Ltd. LOC), 1,400,000 4.750% due 10/01/02++ 1,400,000 LOUISIANA -- 2.3% Calcasieu Parish, Louisiana, Industrial Development Board, Pollution Control Revenue, (Citgo Petroleum Corporation): Environmental Revenue, AMT, (Banque National de Paris LOC), 2,000,000 5.100% due 12/01/24+ 2,000,000 Pollution Control Revenue, (Westdeutsche Landesbank Girozentrate LOC), 200,000 4.750% due 08/01/04++ 200,000 2,200,000 MARYLAND -- 1.6% Baltimore (City of), Maryland, Economic Development Revenue, (Rock Tennessee Converting Facility), (Trust Company Bank LOC), 1,355,000 4.850% due 09/01/97++ 1,355,000 Montgomery (County of), Maryland, Industrial Development Revenue, (Information Systems and Networks Corporation), (Pittsburgh National Bank LOC), 200,000 4.000% due 4/01/14++ 200,000 1,555,000 MICHIGAN -- 2.4% Jackson (County of), Michigan, Economic Development Corporation, Economic Development Revenue, (Sealed Power Corporation), (National Bank of Detroit LOC), 1,000,000 4.150% due 10/01/19++ 1,000,000 Michigan (State of), Building Authority, (Canadian Imperial Bank of Commerce LOC), 1,340,000 4.250% due 05/31/95+++ 1,340,000 2,340,000 MINNESOTA -- 3.5% Minneapolis, Minnesota, Community Development Agency Revenue, (Arena Acquisi- tion Project), Series A, (First Bank LOC), 3,000,000 4.700% due 10/01/24++ 3,000,000 Minneapolis, Minnesota, Hospital Revenue, (Childrens Medical Center Project), Series A, (Morgan Guaranty Trust Company of N.Y. LOC), 500,000 5.100% due 02/01/21+ 500,000 3,500,000 MISSOURI -- 2.1% Missouri (State of), Health and Education Facilities Authority, Educational Fa- cilities Revenue, (St. Louis University), 2,100,000 5.000% due 12/01/05+ 2,100,000 NEW JERSEY -- 3.5% Jersey City, New Jersey, BAN, GO, 2,000,000 5.250% due 11/17/95 2,005,703 New Jersey (State of), Economic Development Authority, First Mortgage Gross Revenue, (Franciscan Oaks Project), Series B, (Bank of Scotland LOC), 1,500,000 4.250% due 12/01/97++ 1,500,000 3,505,703 NEW MEXICO -- 0.6% New Mexico Educational Assistance Foundation, Student Loan Revenue, Series B, AMT, (AMBAC Insured), (Internationale Nederlanden Bank SBPA), 600,000 4.700% due 04/01/05++ 600,000 NEW YORK -- 1.0% Erie (County of), New York, Revenue Anticipation Notes, GO, (Union Bank of Switzerland LOC), 1,000,000 4.750% due 08/15/95 1,002,094 NORTH CAROLINA -- 1.3% North Carolina Medical Care Community, (Duke University Hospital), Series B, 1,300,000 4.650% due 06/01/15++ 1,300,000 OHIO -- 1.4% Centerville, Ohio, Health Care Revenue, (Bethany Lutheran Village Project), (PNC Bank of Ohio LOC), 1,000,000 4.700% due 11/01/13++ 1,000,000 Warren (County of), Ohio, Industrial Development Revenue, (Pioneer Industrial Components Inc.), (Mitsubishi Bank (Chicago) LOC), 400,000 4.600% due 12/01/05++ 400,000 1,400,000 OREGON -- 1.0% Port of St. Helens, Oregon, Pollution Control Revenue, (Portland General Elec- tric Company), Series A, (Canadian Imperial Bank of Commerce LOC), 1,000,000 5.000% due 04/01/10+ 1,000,000 PENNSYLVANIA -- 3.9% Chester (County of), Pennsylvania, Industrial Development Revenue, (Keystone Foods Corporation), (Bank of Scotland LOC), 400,000 4.100% due 10/15/99++ 400,000 Commonwealth of Pennsylvania, Tax Anticipation Notes, 1st Series, 1,000,000 4.750% due 06/30/95 1,001,278 Montgomery (County of), Pennsylvania, Higher Education & Health Authority Hos- pital Revenue, (AMBAC Insured), 2,500,000 4.500% due 09/01/18++ 2,500,000 3,901,278 SOUTH CAROLINA -- 4.4% Cherokee (County of), South Carolina, Industrial Development Revenue, (Holmberg Electric Corporation Project), (Wachovia Bank & Trust LOC), 1,000,000 4.750% due 11/01/04++ 1,000,000 South Carolina Jobs -- Economic Development Authority, Industrial Development Revenue, (Specialty Equipment Companies), AMT, (Barclays Bank LOC), 3,400,000 4.950% due 11/01/10++ 3,400,000 4,400,000 TENNESSEE -- 4.0% Chattanooga, Tennessee, Industrial Development Board, (Seaboard Farms of Chat- tanooga), (Bank of Nova Scotia LOC), 2,000,000 4.625% due 06/01/04++ 2,000,000 Jefferson City, Tennessee, Industrial Development Board: (BA Property Project), AMT, (American National Bank and Trust (Chicago) LOC), 1,000,000 5.000% due 11/01/24++ 1,000,000 Economic Development Revenue, (Ball Corporation Project), (PNC Bank of Ohio LOC), 1,000,000 4.950% due 04/01/98++ 1,000,000 4,000,000 TEXAS -- 6.5% Austin (County of), Texas, Industrial Development Corporation, Industrial De- velopment Revenue, (Justin Industries Inc. Project), (Citibank (New York) LOC), 1,900,000 4.650% due 12/01/14++ 1,900,000 Austin, Texas, Utility System Revenue, Pre-refunded, 875,000 10.000% due 11/15/95 917,988 Galveston, Texas, Industrial Development Corporation, (Mitchell Interests), Se- ries A, AMT, (National Westminster PLC LOC), 1,100,000 4.850% due 09/01/13++ 1,100,000 North Central Texas, Health Facilities Development Corporation Revenue, (Meth- odist Hospitals of Dallas), Series B, (MBIA Insured), 600,000 5.000% due 10/01/15+ 600,000 San Antonio, Texas, Independent School District, Pre-refunded, 875,000 8.125% due 11/01/95 891,057 Trinity River, Texas, Industrial Development Authority, Industrial Development Revenue Bond, Series 1994, (Toys "R" Us), (Bankers Trust LOC), 1,000,000 4.500% due 07/01/95++ 1,000,000 6,409,045 UTAH -- 2.4% Salt Lake City, Utah, Industrial Development Revenue, (Technologies Inc. Project), AMT, (National Australia Bank LOC), 1,000,000 4.950% due 12/01/12++ 1,000,000 Utah (County of), Utah, Industrial Development Revenue, (McWare Inc. Project), (AmSouth Bank (Birmingham) LOC), 1,380,000 4.800% due 02/01/98++ 1,380,000 2,380,000 VERMONT -- 2.1% Vermont (State of), Education & Health Buildings, (VHA New England), Series F, (AMBAC Insured), 2,100,000 4.750% due 12/01/25++ 2,100,000 VIRGINIA -- 1.0% Virginia (State of), Housing Development Authority, Revenue Bonds, Series C, AMT, 1,030,000 4.400% due 07/12/95+++ 1,030,000 WEST VIRGINIA -- 1.2% Ohio (County of), West Virginia, Industrial Development Revenue, (Ohio Valley/Clarksburg Drug Company), (PNC Bank LOC), 1,200,000 4.450% due 12/01/01++ 1,200,000 WISCONSIN -- 1.0% Waukesha, Wisconsin, School District, TRAN, 1,000,000 4.750% due 10/24/95 1,001,847 WYOMING -- 1.2% Lincoln (County of), Wyoming, Pollution Control Revenue, (Exxon Project), Se- ries C, 1,200,000 5.050% due 11/01/14+ 1,200,000 Total Municipal Bonds and Notes (Cost $97,271,709) 97,271,709 Shares MONEY MARKET FUNDS -- 1.3% 75,000 AIM Tax-Exempt Fund 75,000 1,230,000 Fidelity Institutional Tax-Exempt Cash Management Fund 1,230,000 Total Money Market Funds (Cost $1,305,000) 1,305,000 TOTAL INVESTMENTS (Cost $98,576,709*) 99.5% 98,576,709 OTHER ASSETS AND LIABILITIES (NET) 0.5 490,107 NET ASSETS 100.0% $99,066,816
* Aggregate cost for Federal tax purposes. + Variable rate demand notes are payable upon not more than one business day's notice. The interest rate shown reflects the rate currently in effect. ++ Variable rate demand notes are payable upon not more than seven calen- dar days' notice. The interest rate shown reflects the rate currently in effect. +++ "Put" bonds and notes have demand features which mature within one year. The interest rate shown reflects the rate currently in effect. Abbreviations: AMBAC -- American Municipal Bond Assurance Corporation AMT -- Alternative Minimum Tax BAN -- Bond Anticipation Notes GO -- General Obligation Bonds LOC -- Letter of Credit MBIA -- Municipal Bond Investors Assurance SBPA -- Standby Bond Purchase Agreement TRAN -- Tax and Revenue Anticipation Notes See Notes to Financial Statements. STATEMENTS OF ASSETS AND LIABILITIES THE CAPITOL MUTUAL FUNDS April 30, 1995
CASH TREASURY GOVERNMENT TAX FREE RESERVES RESERVES RESERVES RESERVES Assets: Investments, at value (Cost $181,874,817, $309,290,818, $99,512,670 and $98,576,709, respectively) (Note 1) See accompanying schedules: Securities $ 93,874,817 $107,080,818 $90,217,670 $98,576,709 Repurchase Agreements 88,000,000 202,210,000 9,295,000 -- Total Investments 181,874,817 309,290,818 99,512,670 98,576,709 Cash 610 18 54 43,804 Interest receivable 652,573 298,176 188,440 690,941 Dividends receivable 68,860 53,560 20,350 8,127 Receivable from investment adviser (Note 2) 36,316 89,427 54,361 51,735 Prepaid expenses 48,674 92,934 14,811 69,018 Unamortized organization costs (Note 5) 5,213 8,341 -- 1,043 Total Assets 182,687,063 309,833,274 99,790,686 99,441,377 Liabilities: Investment advisory fee payable (Note 2) 8,954 16,600 5,073 5,308 Administration fee payable (Note 2) 10,708 19,852 6,066 6,349 Shareholder servicing and distribution fees payable (Note 3) 9,518 12,390 21,429 14,755 Transfer agent fee payable (Note 2) 5,521 5,641 3,961 3,675 Custodian fees payable (Note 2) 3,620 7,373 1,972 1,766 Dividends payable 875,491 1,609,570 473,839 332,753 Accrued Trustees' fees and expenses (Note 2) 1,000 1,500 1,000 1,000 Accrued expenses and other payables 24,180 30,721 26,923 8,955 Total Liabilities 938,992 1,703,647 540,263 374,561 Net Assets $181,748,071 $308,129,627 $99,250,423 $99,066,816
See Notes to Financial Statements. STATEMENTS OF ASSETS AND LIABILITIES (continued) THE CAPITOL MUTUAL FUNDS April 30, 1995
CASH TREASURY GOVERNMENT TAX FREE RESERVES RESERVES RESERVES RESERVES Net Assets consist of: Accumulated net realized loss on invest- ments sold $ (4,288) $ (12,579) $ (408) $ (1,152) Paid-in capital 181,752,359 308,142,206 99,250,831 99,067,968 $181,748,071 $308,129,627 $99,250,423 $99,066,816 Net Assets: Class A Shares $134,063,730 $251,693,215 $ 2,011 $32,353,089 Class B Shares $ 2,066 $ 674,173 $ 2,063 $ 2,591,038 Class C Shares $ 47,682,275 $ 55,762,239 $99,246,349 $64,122,689 Shares Outstanding: Class A Shares 134,066,893 251,704,182 2,011 32,353,465 Class B Shares 2,066 674,203 2,063 2,591,068 Class C Shares 47,683,400 55,764,669 99,247,546 64,123,435 Class A Shares: Net asset value, offering and redemption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00 Class B Shares: Net asset value, offering and redemption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00 Class C Shares: Net asset value, offering and redemption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00
See Notes to Financial Statements. STATEMENTS OF OPERATIONS THE CAPITOL MUTUAL FUNDS For the Year Ended April 30, 1995
CASH TREASURY GOVERNMENT TAX FREE RESERVES RESERVES RESERVES RESERVES Investment Income: Interest $8,203,983 $15,545,748 $6,505,219 $2,423,077 Dividends 351,059 789,024 146,290 93,953 Total Investment Income 8,555,042 16,334,772 6,651,509 2,517,030 Expenses: Investment advisory fee (Note 2) 489,346 982,941 434,684 211,272 Administration fee (Note 2) 163,115 327,647 144,895 70,424 Transfer agent fees (Note 2) 51,917 91,197 47,329 39,461 Custodian fees (Note 2) 44,115 78,303 29,649 16,188 Trustees' fees and expenses (Note 2) 7,999 12,961 4,931 3,905 Amortization of organization costs (Note 5) 12,512 12,512 -- 12,512 Other 84,915 117,707 113,491 62,148 Subtotal 853,919 1,623,268 774,979 415,910 Shareholder servicing and distribution fee (Note 3): Class B Shares 13,206 9,486 58,948 3,609 Class C Shares 56,057 68,443 157,228 81,350 Fees waived and/or expenses reimbursed by in- vestment adviser, administrators and/or transfer agent (Note 2) (384,690) (970,064) (320,151) (256,204) Total Expenses 538,492 731,133 671,004 244,665 Net Investment Income 8,016,550 15,603,639 5,980,505 2,272,365 Net Realized Gain/(Loss) on Investments (Note 1) 465 -- (408) -- Net Increase in Net Assets Resulting From Operations $8,017,015 $15,603,639 $5,980,097 $2,272,365
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS THE CAPITOL MUTUAL FUNDS Year Ended April 30, 1995
CASH TREASURY GOVERNMENT TAX FREE RESERVES RESERVES RESERVES RESERVES Net investment income $ 8,016,550 $ 15,603,639 $ 5,980,505 $ 2,272,365 Net realized gain/(loss) on investments sold during the year 465 -- (408) -- Net increase in net assets resulting from operations 8,017,015 15,603,639 5,980,097 2,272,365 Distributions to shareholders from net investment income: Class A Shares (6,283,716) (14,047,209) (117,060) (1,076,833) Class B Shares (527,606) (120,316) (2,762,795) (92,633) Class C Shares (1,205,320) (1,436,114) (3,100,650) (1,102,899) Net increase/(decrease) in net assets from Fund share transactions (Note 4): Class A 24,211,274 (86,813,062) (10,816,825) (3,345,368) Class B (69,785,073) (13,553,102) (259,835,082) (11,213,995) Class C 47,683,400 55,764,669 99,247,546 64,123,435 Net increase/(decrease) in net assets 2,109,974 (44,601,495) (171,404,769) 49,564,072 Net Assets: Beginning of year 179,638,097 352,731,122 270,655,192 49,502,744 End of year $181,748,071 $308,129,627 $ 99,250,423 $ 99,066,816
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS THE CAPITOL MUTUAL FUNDS Year Ended April 30, 1994
CASH TREASURY GOVERNMENT TAX FREE RESERVES RESERVES RESERVES RESERVES Net investment income $ 4,376,084 $ 11,164,691 $ 7,541,625 $ 935,597 Net realized loss on investments sold dur- ing the year (121) (12,579) -- (1,080) Net increase in net assets resulting from operations 4,375,963 11,152,112 7,541,625 934,517 Distributions to shareholders from net investment income: Class A Shares (2,987,057) (10,892,698) (247,988) (643,723) Class B Shares (1,389,027) (271,993) (7,293,637) (291,874) Net increase/(decrease) in net assets from Fund share transactions (Note 4): Class A 54,112,776 (80,126,677) 3,422,706 9,553,911 Class B 50,375,857 10,858,745 110,583,540 3,039,324 Net increase/(decrease) in net assets 104,488,512 (69,280,511) 114,006,246 12,592,155 Net Assets: Beginning of year 75,149,585 422,011,633 156,648,946 36,910,589 End of year (including undistributed net investment income/(distributions in ex- cess of net investment income) of $92, $(439), $103 and $(491), respectively) $179,638,097 $352,731,122 $270,655,192 $49,502,744
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class A Share outstanding throughout each year.
CASH RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class A Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0480 0.0283 0.0315 0.0492 0.0392 Dividends from net investment income (0.0480) (0.0283) (0.0315) (0.0492) (0.0392) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 4.91% 2.87% 3.19% 5.03% 7.35%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 134,064 $ 109,852 $ 55,739 $ 100,943 $ 19,387 Ratio of operating expenses to average net assets 0.29% 0.45% 0.45% 0.45% 0.45%+ Ratio of net investment income to average net assets 4.96% 2.83% 3.15% 4.61% 7.04%+ Ratio of operating expenses to average net assets without waiv- ers 0.52% 0.56% 0.59% 0.74% 0.79%+ Ratio of net investment income to average net assets without waiv- ers 4.73% 2.72% 3.01% 4.32% 6.70%+ Net investment income per share without waivers $ 0.0458 $ 0.0272 $ 0.0298 $ 0.0455 $ 0.0373
* The Cash Reserves Class A Shares commenced operations on October 10, 1990. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class B Share outstanding throughout each year.
CASH RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class B Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0471 0.0273 0.0305 0.0482 0.0197 Dividends from net investment income (0.0471) (0.0273) (0.0305) (0.0482) (0.0197) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 4.81% 2.77% 3.09% 4.92% 6.44%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 2 $ 69,786 $ 19,411 $ 4,776 $ 10,361 Ratio of operating expenses to average net assets 0.38% 0.55% 0.55% 0.55% 0.55%+ Ratio of net investment income to average net assets 4.87% 2.74% 2.96% 4.94% 6.41%+ Ratio of operating expenses to average net assets without waiv- ers 0.61% 0.65% 0.68% 0.85% 0.87%+ Ratio of net investment income to average net assets without waiv- ers 4.64% 2.64% 2.82% 4.64% 6.09%+ Net investment income per share without waivers $ 0.0448 $ 0.0262 $ 0.0287 $ 0.0447 $ 0.0186
* The Cash Reserves Class B Shares commenced operations on January 9, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class C Share outstanding throughout the period.
CASH RESERVES PERIOD ENDED 04/30/95* Class C Shares: Net asset value, beginning of period $ 1.00 Net investment income 0.0316 Dividends from net investment income (0.0316) Net asset value, end of period $ 1.00 Total Return++ 3.20% Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 47,682 Ratio of operating expenses to average net assets 0.54%+ Ratio of net investment income to average net assets 4.71%+ Ratio of operating expenses to average net assets without waivers 0.77%+ Ratio of net investment income to average net assets without waivers 4.48%+ Net investment income per share without waivers $ 0.0300
* The Cash Reserves Class C Shares commenced operations on September 22, 1994. + Annualized. ++ Total return represents aggregate total return for the period indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class A Share outstanding throughout each year.
TREASURY RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class A Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income 0.0480 0.0298 0.0323 0.0481 0.0176 Net realized gain on investments -- -- 0.0001 0.0003 -- Total from investment operations 0.0480 0.0298 0.0324 0.0484 0.0176 Less Distributions: Dividends from net investment in- come (0.0480) (0.0298) (0.0323) (0.0481) (0.0176) Distributions from net realized gains -- -- (0.0001) (0.0003) -- Total distributions (0.0480) (0.0298) (0.0324) (0.0484) (0.0176) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 4.91% 3.02% 3.29% 4.92% 5.89%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 251,694 $ 338,504 $ 418,644 $ 19,587 $ 4,519 Ratio of operating expenses to average net assets 0.20% 0.20% 0.20% 0.26% 0.45%+ Ratio of net investment income to average net assets 4.79% 2.99% 2.99% 4.39% 5.85%+ Ratio of operating expenses to average net assets without waiv- ers 0.50% 0.52% 0.72% 1.06% 0.94%+ Ratio of net investment income to average net assets without waiv- ers 4.50% 2.67% 2.48% 3.59% 5.36%+ Net investment income per share without waivers $ 0.0451 $ 0.0267 $ 0.0251 $ 0.0368 $ 0.0161
* The Treasury Reserves Class A Shares commenced operations on January 11, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class B Share outstanding throughout each year.
TREASURY RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class B Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income 0.0462 0.0263 0.0288 0.0454 0.0173 Net realized gain on investments -- -- 0.0001 0.0003 -- Total from investment operations 0.0462 0.0263 0.0289 0.0457 0.0173 Less Distributions: Dividends from net investment in- come (0.0462) (0.0263) (0.0288) (0.0454) (0.0173) Distributions from net realized gains -- -- (0.0001) (0.0003) -- Total distributions (0.0462) (0.0263) (0.0289) (0.0457) (0.0173) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 4.71% 2.67% 2.93% 4.64% 5.79%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 674 $ 14,227 $ 3,369 $ 2,807 $ 2,891 Ratio of operating expenses to average net assets 0.49% 0.55% 0.55% 0.52% 0.55%+ Ratio of net investment income to average net assets 4.50% 2.67% 2.89% 4.62% 5.75%+ Ratio of operating expenses to average net assets without waiv- ers 0.79% 0.87% 1.07% 1.32% 1.04%+ Ratio of net investment income to average net assets without waiv- ers 4.21% 2.35% 2.37% 3.82% 5.26%+ Net investment income per share without waivers $ 0.0431 $ 0.0232 $ 0.0213 $ 0.0349 $ 0.0160
* The Treasury Reserves Class B Shares commenced operations on January 11, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class C Share outstanding throughout the period.
TREASURY RESERVES PERIOD ENDED 04/30/95* Class C Shares: Net asset value, beginning of period $ 1.00 Net investment income 0.0308 Dividends from net investment income (0.0308) Net asset value, end of period $ 1.00 Total Return++ 3.11% Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 55,762 Ratio of operating expenses to average net assets 0.45%+ Ratio of net investment income to average net assets 4.54%+ Ratio of operating expenses to average net assets without waivers 0.75%+ Ratio of net investment income to average net assets without waivers 4.25%+ Net investment income per share without waivers $ 0.0288
* The Treasury Reserves Class C Shares commenced operations on September 22, 1994. + Annualized. ++ Total return represents aggregate total return for the period indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class A Share outstanding throughout each year.
GOVERNMENT RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class A Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income 0.0463 0.0278 0.0312 0.0343 0.0168 Net realized gain on investments -- -- -- 0.0023 -- Total from investment operations 0.0463 0.0278 0.0312 0.0366 0.0168 Less Distributions: Dividends from net investment in- come (0.0463) (0.0278) (0.0312) (0.0343) (0.0168) Distributions from net realized gains -- -- -- (0.0023) -- Total distributions (0.0463) (0.0278) (0.0312) (0.0366) (0.0168) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 4.72% 2.82% 3.15% 3.71% 5.57%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 2 $ 10,819 $ 7,396 $ 1,800 $ 295 Ratio of operating expenses to average net assets 0.32% 0.45% 0.45% 0.45% 0.45%+ Ratio of net investment income to average net assets 4.35% 2.78% 3.07% 4.24% 5.89%+ Ratio of operating expenses to average net assets without waiv- ers 0.54% 0.51% 0.64% 0.76% 0.80%+ Ratio of net investment income to average net assets without waivers 4.13% 2.72% 2.88% 3.93% 5.54%+ Net investment income per share without waivers $ 0.0439 $ 0.0272 $ 0.0288 $ 0.0313 $ 0.0158
* The Government Reserves Class A Shares commenced operations on January 17, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class B Share outstanding throughout each year.
GOVERNMENT RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class B Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income 0.0453 0.0268 0.0302 0.0461 0.0176 Net realized gain on investments -- -- -- 0.0023 -- Total from investment operations 0.0453 0.0268 0.0302 0.0484 0.0176 Less Distributions: Dividends from net investment in- come (0.0453) (0.0268) (0.0302) (0.0461) (0.0176) Distributions from net realized gains -- -- -- (0.0023) -- Total distributions (0.0453) (0.0268) (0.0302) (0.0484) (0.0176) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 4.59% 2.71% 3.05% 4.70% 6.04%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 2 $ 259,836 $ 149,252 $ 12,486 $ 5,589 Ratio of operating expenses to average net assets 0.40% 0.55% 0.55% 0.55% 0.55%+ Ratio of net investment income to average net assets 4.27% 2.68% 2.71% 4.46% 5.86%+ Ratio of operating expenses to average net assets without waiv- ers 0.62% 0.61% 0.74% 0.86% 0.94%+ Ratio of net investment income to average net assets without waiv- ers 4.05% 2.62% 2.52% 4.18% 5.47%+ Net investment income per share without waivers $ 0.0430 $ 0.0262 $ 0.0274 $ 0.0422 $ 0.0170
* The Government Reserves Class B Shares commenced operations on January 11, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class C Share outstanding throughout the period.
GOVERNMENT RESERVES PERIOD ENDED 04/30/95* Class C Shares: Net asset value, beginning of period $ 1.00 Net investment income 0.0299 Dividends from net investment income (0.0299) Net asset value, end of period $ 1.00 Total Return++ 3.04% Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 99,246 Ratio of operating expenses to average net assets 0.57%+ Ratio of net investment income to average net assets 4.10%+ Ratio of operating expenses to average net assets without waivers 0.79%+ Ratio of net investment income to average net assets without waivers 3.88%+ Net investment income per share without waivers $ 0.0283
* The Government Reserves Class C Shares commenced operations on Septem- ber 22, 1994. + Annualized. ++ Total return represents aggregate total return for the period indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class A Share outstanding throughout each year.
TAX FREE RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class A Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0313 0.0198 0.0231 0.0356 0.0245 Dividends from net investment income (0.0313) (0.0198) (0.0231) (0.0356) (0.0245) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 3.19% 2.00% 2.34% 3.62% 4.62%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 32,353 $ 35,698 $ 26,145 $ 18,150 $ 5,064 Ratio of operating expenses to av- erage net assets 0.23% 0.45% 0.45% 0.45% 0.45%+ Ratio of net investment income to average net assets 3.36% 1.98% 2.27% 3.38% 4.70%+ Ratio of operating expenses to av- erage net assets without waivers and/or expenses reimbursed 0.59% 0.58% 0.66% 0.89% 0.99%+ Ratio of net investment income to average net assets without waiv- ers and/or expenses reimbursed 2.99% 1.85% 2.05% 2.94% 4.16%+ Net investment income per share without waivers and/or expenses reimbursed $ 0.0279 $ 0.0186 $ 0.0203 $ 0.0296 $ 0.0216
* The Tax Free Reserves Class A Shares commenced operations on October 23, 1990. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class B Share outstanding throughout each year.
TAX FREE RESERVES YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Class B Shares: Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0304 0.0188 0.0221 0.0346 0.0478 Dividends from net investment income (0.0304) (0.0188) (0.0221) (0.0346) (0.0478) Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 3.09% 1.90% 2.24% 3.52% 4.60%+ Ratios to average net assets/ sup- plemental data: Net assets, end of year (000's) $ 2,591 $ 13,805 $ 10,766 $ 11,473 $ 8,927 Ratio of operating expenses to av- erage net assets 0.33% 0.55% 0.55% 0.55% 0.55%+ Ratio of net investment income to average net assets 3.26% 1.86% 2.21% 3.36% 5.22%+ Ratio of operating expenses to av- erage net assets without waivers and/or expenses reimbursed 0.69% 0.67% 0.76% 0.99% 0.81%+ Ratio of net investment income to average net assets without waiv- ers and/or expenses reimbursed 2.89% 1.74% 2.00% 2.92% 4.96%+ Net investment income per share without waivers and/or expenses reimbursed $ 0.0270 $ 0.0176 $ 0.0192 $ 0.0285 $ 0.0455
* The Tax Free Reserves Class B Shares commenced operations on June 1, 1990. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS For a Class C Share outstanding throughout the period.
TAX FREE RESERVES PERIOD ENDED 04/30/95* Class C Shares: Net asset value, beginning of period $ 1.00 Net investment income 0.0199 Dividends from net investment income (0.0199) Net asset value, end of period $ 1.00 Total Return++ 2.02% Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 64,123 Ratio of operating expenses to average net assets 0.48%+ Ratio of net investment income to average net assets 3.11%+ Ratio of operating expenses to average net assets without waivers and/or ex- penses reimbursed 0.84%+ Ratio of net investment income to average net assets without waivers and/or expenses reimbursed 2.74%+ Net investment income per share without waivers and/or expenses reimbursed $ 0.0176
* The Tax Free Reserves Class C Shares commenced operations on September 22, 1994. + Annualized. ++ Total return represents aggregate total return for the period indi- cated. See Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS CAPITOL MUTUAL FUNDS 1. Significant Accounting Policies. THE CAPITOL MUTUAL FUNDS (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end manage- ment investment company. As of the date of this report, the Trust cur- rently offers four portfolios: Cash Reserves (formerly, Money Market Port- folio), Treasury Reserves (formerly, Treasury Portfolio), Government Re- serves (formerly, Government Portfolio) and Tax Free Reserves (formerly, Tax Free Money Market Portfolio) (collectively the "Portfolios"). The Portfolios currently offer three classes of shares: Class A, Class B and Class C Shares. The Board of Trustees has authorized the issuance of Class D Shares. As of April 30, 1995, no Class D Shares have been sold. Matters affecting each class will be voted on exclusively by their shareholders. The following is a summary of significant accounting policies followed by the Portfolios in the preparation of their financial statements. Securities Valuation--The portfolio securities of each Portfolio are valued on the basis of amortized cost, which approximates market value. Amortized cost valuation involves valuing an instrument at its cost initially and thereafter assuming a constant amortization to ma- turity of any discount or premium, as long as the effect of fluctuat- ing interest rates on the market value of the instrument is not sig- nificant. Repurchase Agreements--Each Portfolio may engage in repurchase agree- ment transactions. Under the terms of a typical repurchase agreement, the Portfolio takes possession of an underlying debt obligation sub- ject to an obligation of the seller to repurchase, and the Portfolio to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Portfolio's holding period. This ar- rangement results in a fixed rate of return that is not subject to market fluctuations during the Portfolio's holding period. The value of the collateral is at least equal at all times to the total amount of the repurchase obligations, including interest. In the event of counterparty default, the Portfolio has the right to use the collat- eral to offset losses incurred. There is potential loss to the Portfo- lio in the event the Portfolio is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Portfolio seeks to assert its rights. Unless per- mitted by the Securities and Exchange Commission, the Portfolio will not enter into repurchase agreements with the investment adviser, the distributor or any of their affiliates. The Portfolio's investment ad- viser, acting under the supervision of the Board of Trustees, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Portfolio enters into repurchase agreements to evaluate potential risks. Securities Transactions and Investment Income-- Securities transac- tions are accounted for on a trade date basis. Realized gains and losses are computed on the specific identification of the securities sold. Interest income, adjusted for amortization of discounts and pre- miums on investments ratably to maturity, is earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Each Portfolio's investment income and real- ized gains and losses are allocated among the classes based upon the relative net assets of each class. Dividends and Distributions to Shareholders--It is the policy of the Portfolios to declare dividends daily from net investment income and to pay such dividends monthly. The Portfolios will distribute net re- alized short-term capital gains, unless offset by any available capi- tal loss carryforward, annually after the fiscal year in which earned or more frequently to maintain a net asset value of $1.00 per share. Additional distributions of net investment income and capital gains may be made at the discretion of the Board of Trustees in order to avoid application of the 4% non-deductible Federal excise tax. Income distributions and capital gain distributions on a Portfolio level are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to timing differences and differing characterization of distributions made by the Portfolio. Reclassifications are made to each Portfolio's capital accounts to re- flect income and gains available for distribution (or available capi- tal loss carryovers) under federal income tax regulations. Reclassifications for the year ended April 30, 1995 were as follows:
INCREASE/ (DECREASE) IN INCREASE IN (DECREASE) UNDISTRIBUTED ACCUMULATED IN PAID-IN NET INVESTMENT REALIZED CAPITAL INCOME GAIN/(LOSS) Treasury Reserves $(439) $ 439 -- Government Reserves (686) (103) $789 Tax Free Reserves (491) 491 --
Federal Income Taxes--Each Portfolio intends to qualify as a regulated investment company by complying with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and by distributing substantially all of its earnings to its shareholders. Therefore, no Federal income or excise tax provision is required. Expenses--General expenses of the Trust are allocated to the Portfo- lios based upon relative net assets. Operating expenses directly at- tributable to a class of shares are charged to that class' operations. Expenses of each Portfolio not directly attributable to the operations of any class of shares are prorated among the classes to which the ex- pense relates based on the relative average net assets of each class. 2. Investment Advisory Fee, Administrative Fee and Related Party Transac- tions. The Trust has entered into an Investment Advisory Agreement with Nations- Bank, N.A. (Carolinas), a successor to NationsBank of North Carolina, N.A., ("NationsBank"), a wholly owned subsidiary of NationsBank Corpora- tion, with respect to each Portfolio. Under the terms of this agreement, NationsBank is entitled to a fee equal to 0.30%, on an annualized basis, of the average daily net assets of each Portfolio. Stephens Inc. ("Stephens") serves as the Trust's administrator pursuant to an Administration Agreement. The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of First Data Corporation, Inc., serves as the Trust's co-administrator pursuant to a Co-Administration Agreement. Under the Administration and Co-Administration Agreements, the administrator and the co-administrator are entitled to receive a combined fee, computed daily and paid monthly, at the annual rate of 0.10%, on an annualized basis, of the average daily net assets of the Trust on a com- bined basis. For the year ended April 30, 1995, the administrator earned $70,608 (after fee waivers) for its services. The investment adviser, administrator, co-administrator and transfer agent may, from time to time, reduce their fees (either voluntarily or pursuant to applicable state limitations). For the year ended April 30, 1995, the investment adviser, administrator and/or co-administrator and/or transfer agent voluntarily waived fees and reimbursed expenses as follows:
FEES FEES FEES WAIVED BY WAIVED BY EXPENSES WAIVED ADMINISTRATOR/ TRANSFER REIMBURSED BY ADVISER CO-ADMINISTRATOR AGENT BY ADVISER Cash Reserves $313,476 $ 62,214 $ 9,000 -- Treasury Reserves 840,932 129,132 -- -- Government Reserves 248,859 59,241 12,051 -- Tax Free Reserves 160,180 25,622 24,000 $46,402
No officer, director or employee of NationsBank, Stephens or TSSG, or any affiliate thereof, receives any compensation from the Trust for serving as Trustee or officer of the Trust. The Trust pays each Trustee an annual fee of $1,000 ($3,000 for the Chairman of the Board), plus $500 per Fund and an additional $1,000 for each board meeting attended. The Trust also reim- burses expenses incurred by the Trustees in attending such meetings. Eligible Trustees may participate in nonqualified deferred compensation and retirement plans which may be terminated at any time. All benefits provided under these plans are unfunded and any payments to plan partici- pants are paid solely out of each Portfolio's assets. Pending SEC ap- proval, income earned on each plan participant's deferral account will be tied to the rate of return of the eligible mutual funds offered by Nations Funds selected by the participants or, if no funds are selected, to the rate of return of the Nations Treasury Fund. Until SEC approval is re- ceived, the rate of return will be tied to the yield on 90-day U.S. Trea- sury Bills. NationsBank of Texas, N.A. acts as the Portfolios' custodian. For the year ended April 30, 1995, NationsBank of Texas, N.A. earned $168,255 for its services as custodian. TSSG serves as transfer agent for the Portfolios. Stephens acts as the distributor of the Portfolios' shares. 3. Shareholder Servicing and Distribution Plans. The Trust has adopted a distribution plan ("Class B Plan") pursuant to Rule 12b-1 under the 1940 Act for the Class B Shares of the Portfolios. Under the Class B Plan, the Trust may reimburse Stephens, up to 0.30% of the average daily net assets of the Class B Shares, for actual expenses incurred by Stephens in connection with the distribution of Class B Shares of the Portfolios. Currently, the Trust is not reimbursing Stephens for any portion of such expenses. Unreimbursed expenses incurred by Stephens in a given year may not be recovered by Stephens in subsequent years. In addition to the reimbursement fee, the Class B Plan permits the Trust to pay Stephens an annual fee of up to 0.30% of the average daily net as- sets of the Class B Shares of the Cash Reserves, Government Reserves, and Tax Free Reserves and 0.35% of the average daily net assets of the Class B Shares of the Treasury Reserves. Stephens may use this fee to compensate certain financial institutions that provide administrative and/or distri- bution services to Class B shareholders. The Trustees of the Trust have currently set this fee at an annual rate of 0.15% of the average daily net assets of the Class B Shares of each Portfolio. For the year ended April 30, 1995, the following amounts were incurred pursuant to the above plan:
CLASS B PLAN Cash Reserves $13,206 Treasury Reserves 9,486 Government Reserves 58,948 Tax Free Reserves 3,609
The Trust also has adopted a shareholder servicing plan ("Class C Servic- ing Plan") for the Class C Shares of the Portfolios. Under the Class C Servicing Plan, a Portfolio may pay servicing agents that have entered into a shareholder servicing agreement with the Trust for certain share- holder support services that are provided by the servicing agents to hold- ers of Class C Shares. Payments under the Class C Servicing Plan are ac- crued daily and paid monthly at a rate that will not exceed 0.25%, on an annualized basis, of the average daily net assets of the Class C Shares of the Portfolios. Fees paid pursuant to the Class C Servicing Plan are charged as expenses of Class C Shares of a Portfolio as accrued. For the year ended April 30, 1995, the Portfolios incurred the following amounts pursuant to the above plan:
CLASS C SERVICING PLAN Cash Reserves $ 56,057 Treasury Reserves 68,443 Government Reserves 157,228 Tax Free Reserves 81,350
A substantial portion of the fees paid, pursuant to the Plans described above, are paid to affiliates of NationsBank. The chart below shows the effective rates, expressed as a percentage of average daily net assets, paid by the Funds under the shareholder servic- ing and distribution plans for the year ended April 30, 1995:
CLASS B CLASS C PLAN SERVICING PLAN Cash Reserves 0.09% 0.25% Treasury Reserves 0.29 0.25 Government Reserves 0.08 0.25 Tax Free Reserves 0.10 0.25
4. Shares of Beneficial Interest. As of April 30, 1995, an unlimited number of shares without par value were authorized for the Trust. The Trust's Declaration 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. Since the Portfolios have sold and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales and redemptions is the same as the amounts shown below for such transactions. Changes in capital stock for each Portfolio were as follows:
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 CASH RESERVES: Class A Shares: Sold $ 223,577,458 $ 619,311,981 Issued as rein- vestment of div- idends 21,277 -- Redeemed (199,387,461) (565,199,205) Net increase $ 24,211,274 $ 54,112,776
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 Class B Shares: Sold $ 60,277,929 $ 564,295,059 Issued as rein- vestment of div- idends 66 -- Redeemed (130,063,068) (513,919,202) Net increase/ (decrease) $ (69,785,073) $ 50,375,857
PERIOD ENDED APRIL 30, 1995* Class C Shares: Sold $ 167,716,490 Issued as rein- vestment of div- idends 65 Redeemed (120,033,155) Net increase $ 47,683,400
* The Cash Reserves Class C Shares commenced operations on September 22, 1994.
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 TREASURY RESERVES: Class A Shares: Sold $ 1,677,277,600 $ 3,144,192,232 Redeemed (1,764,090,662) (3,224,318,909) Net decrease $ (86,813,062) $ (80,126,677)
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 Class B Shares: Sold $ 17,013,126 $ 60,755,777 Issued as rein- vestment of div- idends 11,987 -- Redeemed (30,578,215) (49,897,032) Net increase/ (decrease) $(13,553,102) $ 10,858,745
PERIOD ENDED APRIL 30, 1995* Class C Shares: Sold $152,926,823 Issued as rein- vestment of div- idends 63 Redeemed (97,162,217) Net increase $ 55,764,669
* The Treasury Reserves Class C Shares commenced operations on September 22, 1994.
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 GOVERNMENT RESERVES: Class A Shares: Sold $ 4,497,797 $ 61,383,728 Issued as rein- vestment of div- idends 53 -- Redeemed (15,314,675) (57,961,022) Net increase/ (decrease) $(10,816,825) $ 3,422,706
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 Class B Shares: Sold $ 243,816,794 $ 1,757,859,717 Issued as rein- vestment of div- idends 424 7,065 Redeemed (503,652,300) (1,647,283,242) Net increase/ (decrease) $(259,835,082) $ 110,583,540
PERIOD ENDED APRIL 30, 1995* Class C Shares: Sold $ 328,245,819 Issued as rein- vestment of div- idends 21 Redeemed (228,998,294) Net increase $ 99,247,546
* The Government Reserves Class C Shares commenced operations on September 22, 1994.
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 TAX FREE RESERVES: Class A Shares: Sold $ 48,532,498 $ 98,515,148 Redeemed (51,877,866) (88,961,237) Net increase/ (decrease) $ (3,345,368) $ 9,553,911
YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, 1995 1994 Class B Shares: Sold $ 31,268,170 $ 79,491,015 Issued as rein- vestment of div- idends 21,817 2,127 Redeemed (42,503,982) (76,453,818) Net increase/ (decrease) $(11,213,995) $ 3,039,324
PERIOD ENDED APRIL 30, 1995* Class C Shares: Sold $ 237,647,735 Issued as rein- vestment of div- idends 40 Redeemed (173,524,340) Net increase $ 64,123,435
* The Tax Free Reserves Class C Shares commenced operations on September 22, 1994. 5. Organization Costs. Expenses incurred in connection with the organization of each of the Port- folios, including the fees and expenses of registering and qualifying its shares for distribution under Federal and state securities regulations, are being amortized on a straight-line basis over a period of five years from commencement of operations of each Portfolio, respectively. In the event any of the initial shares of a Portfolio are redeemed by any holder thereof during the amortization period, the proceeds of such redemptions will be reduced by an amount equal to the pro-rata portion of unamortized deferred organizational expenses in the same proportion as the number of shares being redeemed bears to the number of initial shares of each Port- folio outstanding at the time of such redemption. 6. Concentration of Credit. The Portfolios invest primarily in money market instruments maturing in one year or less whose ratings are within the highest ratings categories by a nationally recognized statistical rating agency or, if not rated, are believed by the Advisor to be of comparable quality. The ability of the issuers of the securities held by the Portfolios to meet their obligations may be affected by economic and political developments in a specific in- dustry, state or region. 7. Capital Loss Carryforward. As of April 30, 1995, the Portfolios had available for Federal income tax purposes unused capital losses as follows:
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING IN 1998 IN 1999 IN 2000 IN 2001 IN 2002 IN 2003 Cash Reserves -- $270 $2,594 $850 $ 574 -- Treasury Reserves -- -- -- -- 9,255 $3,324 Government Reserves -- -- -- -- -- 408 Tax Free Reserves $72 -- -- -- -- 1,080
REPORT OF INDEPENDENT ACCOUNTANTS THE CAPITOL MUTUAL FUNDS To the Shareholders and Trustees of The Capitol Mutual Funds: In our opinion, the accompanying statements of assets and liabilities, in- cluding the schedules of investments, and the related statements of opera- tions and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Cash Reserves (formerly, Money Market Portfolio), Treasury Reserves (formerly, Treasury Portfolio), Government Reserves (formerly, Government Portfolio) and Tax Free Reserves (formerly, Tax Free Money Market Portfolio) (each a series of The Capitol Mutual Funds, hereafter referred to as the "Trust") at April 30, 1995, the results of each of their operations for the year then ended, the changes in each of their net assets and the financial high- lights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain rea- sonable assurance about whether the financial statements are free of mate- rial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, as- sessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 1995, by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts June 20, 1995 Dear Shareholder: We are pleased to present this Semiannual Report for Nations Institutional Reserves, formerly known as The Capitol Mutual Funds. The Nations Institu- tional Reserves consists of Nations Cash Reserves, Nations Treasury Re- serves, Nations Government Reserves and Nations Municipal Reserves. We have renamed the Funds to better reflect their suitability as premier short-term institutional investment vehicles. For the six-month period ended October 31, 1995, the Funds continued to provide a high level of performance relative to competitive funds within the industry. Combined assets reached $1.4 billion by the end of the reporting period. ECONOMIC SUMMARY Following the wave of monetary tightening in 1994 and 1995, yields on in- stitutional money market funds reached their highest levels in over three years. The impact of these high short-term rates was a relatively flat yield curve. The spread between the Lehman Long-Term Treasury Index and the 90-day U.S. Treasury Bill ("T-Bill") as of the beginning of the re- porting period was only 171 basis points. By mid-summer, however, infla- tionary pressures eased and the Federal Reserve Board lowered rates by 25 basis points to help ward off any possibility of recession. This monetary adjustment resulted in lower money market yields. The 90-day T-Bill yield dropped from 5.69% to 5.32% and, the 30-day yield for the IBC/Donoghue First Tier Institutional Average fell from 5.83% to 5.50% for the period.* PORTFOLIO OVERVIEW The Nations Institutional Reserves portfolios were positioned to maintain competitive yields during the changing interest rate environment. The 30- day yields as of October 31, 1995 for Nations Cash Reserves, Nations Trea- sury Reserves, Nations Government Reserves and Nations Municipal Reserves ranked among the top 10 yields in their respective IBC/Donoghue catego- ries.** Given the competitive nature of the institutional money market sector, this was no small achievement. Weighted average maturities across the portfolios were longer than during the previous six-month period, ranging from 54 to 82 days. The extension of maturities combined with ef- fective security selection were the drivers that kept yields consistently higher relative to the money market fund industry as a whole. SIX-MONTH PERFORMANCE OF 7-DAY YIELDS FOR NATIONS CASH RESERVES -- CAPITAL SHARES*** [ ] Nations Cash Reserves--Capital Shares [ ] IBC/Donoghue's First Tier Inst-only Average*
CASH INSTITUTIONAL RESERVES A FIRST TIER April 6.04 5.85 May 6.06 5.83 June 6.05 5.79 July 5.84 5.66 August 5.80 5.57 September 5.87 5.54 October 5.74 5.52 * IBC/Donoghue is an independent monitor of money market fund perfor- mance. ** Nations Cash Reserves: IBC/Donoghue First Tier Institutional Only (110 funds); Nations Treasury Reserves and Nations Government Re- serves: IBC/Donoghue Government Only Institutional Only (149 funds); Nations Municipal Reserves: IBC/Donoghue Tax Free Institutional Only (60 funds). *** Performance for other classes will vary.
30-DAY YIELDS**** as of October 31, 1995 (unaudited)
CAPITAL LIQUIDITY ADVISER IBC/DONOGHUE PEER SHARES SHARES SHARES GROUP AVERAGES***** Nations Cash Reserves 5.74% 5.59% 5.49% 1st Tier-Inst-only 5.50% Nations Treasury Reserves 5.62% 5.47% 5.37% Government-Inst-only 5.35% Nations Government Reserves 5.65% 5.45% 5.35% Tax Free-Inst-only 3.48% Nations Municipal Reserves 3.66% 3.51% 3.41%
CURRENT 7-DAY YIELDS**** as of October 31, 1995 (unaudited)
CAPITAL LIQUIDITY ADVISER SHARES SHARES SHARES Nations Cash Reserves 5.74% 5.59% 5.49% Nations Treasury Reserves 5.62% 5.47% 5.37% Nations Government Reserves 5.59% 5.44% 5.34% Nations Municipal Reserves 3.78% 3.63% 3.53%
The attached financial report provides more specific information on your portfolio investments. Please review it carefully. We thank you for choos- ing Nations Institutional Reserves to pursue your short-term investment needs. Sincerely, /s/ A. Max Walker A. Max Walker President and Chairman of the Board October 31, 1995 **** The 30-day and 7-day net annualized yields are based on the average net income per share for the thirty days ended October 31, 1995, and the seven days ended on October 31, 1995, respectively, and the of- fering price on that date. The 30- day yield is compounded and annu- alized. The yields quoted include the effects of voluntary expense waivers by the Portfolios' investment adviser. If these waivers were not in effect, yields would have been lower. ***** Source: Money Market Insight, a monthly publication of IBC/Dono- ghue, Inc. IBC/Donoghue is an independent money market performance monitor. Money market funds seek to maintain a stable net asset value of $1.00 per share. However, there is no assurance the money market funds will be able to maintain a stable net asset value of $1.00. Yields will fluctuate as market conditions change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. NOT MAY LOSE VALUE FDIC- NO BANK GUARANTEE INSURED Nations Institutional Reserves Distributor: Stephens Inc. Stephens Inc., which is not affiliated with NationsBank, N.A., is not a bank and securi- ties offered by it are not guaranteed by any bank or insured by the FDIC. Stephens Inc., member NYSE-SIPC. STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES October 31, 1995 (unaudited)
PRINCIPAL MATURITY VALUE AMOUNT NATIONS CASH RESERVES DATE (NOTE 1) CERTIFICATES OF DEPOSIT -- EURO -- 0.7% (Cost $5,000,333) Mitsubishi Bank Ltd., $ 5,000,000 5.860% 01/31/96 $ 5,000,333 COMMERCIAL PAPER -- 30.4% American Home Products Corpora- tion, 30,000,000 Discount note# 02/06/96 29,539,250 Countrywide Funding Corporation, 30,000,000 Discount note 11/28/95 29,870,175 Finova Capital Corporation, 9,000,000 Discount note 11/13/95 8,982,750 Newell Company, 30,000,000 Discount note# 11/15/95 29,932,800 Quaker Oats Corporation: 18,000,000 Discount note 11/10/95 17,974,035 12,000,000 Discount note 11/14/95 11,974,997 Sheffield Receivables Corpora- tion, 30,000,000 Discount note 11/01/95 30,000,000 Sumitomo Corporation of America, 20,000,000 Discount note 03/25/96 19,540,833 Tri-Lateral Capital (U.S.A.) Inc., 25,000,000 Discount note# 01/22/96 24,655,486 Total Commercial Paper (Cost $202,470,326) 202,470,326 CORPORATE OBLIGATIONS -- 13.3% Chrysler Financial Corporation, 5,000,000 6.000% 06/03/96 4,998,243 CIT Group Holdings, 7,000,000 8.875% 06/15/96 7,121,124 Commercial Credit Corporation, 6,725,000 6.375% 01/01/96 6,711,904 CS First Boston Inc., 25,000,000 5.910%+ 11/02/95++ 25,000,000 Ford Motor Credit Company, 5,000,000 6.125% 12/01/95 4,995,789 General Motors Acceptance Corpo- ration, 25,000,000 5.850%+ 11/01/95++ 24,992,869 General Motors Acceptance Corpo- ration, $ 5,000,000 6.138%+ 01/16/96++ $ 5,000,328 International Lease Finance Cor- poration, 5,000,000 5.750% 01/15/96 4,982,977 Norwest Financial Inc., 5,000,000 7.250% 11/01/95 5,000,000 Total Corporate Obligations (Cost $88,803,234) 88,803,234 MEDIUM TERM NOTES -- 5.3% IBM Credit Corporation, 5,000,000 6.475% 04/04/96 4,999,867 Merrill Lynch & Company, 30,000,000 5.900% 10/30/96 30,000,000 Total Medium Term Notes (Cost $34,999,867) 34,999,867 PROMISSORY NOTE -- 4.5% (Cost $30,000,000) Goldman Sachs Group, Limited Partnership,** 30,000,000 5.875% 04/16/96 30,000,000 U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.8% Federal National Mortgage Asso- ciation (FNMA), Convertible Note, 20,000,000 5.813% 10/04/96 19,994,239 Student Loan Marketing Associa- tion (SLMA) Note, 5,000,000 5.680%+ 11/07/95++ 5,000,000 Total U.S. Government Agency Obligations (Cost $24,994,239) 24,994,239 U.S. TREASURY OBLIGATION -- 0.8% (Cost $5,075,159) U.S. Treasury Note, 5,000,000 7.875% 07/31/96 5,075,159 REPURCHASE AGREEMENTS -- 43.6% 145,000,000 Agreement with Lehman Brothers, Inc., 5.880% dated 10/31/95 to be repurchased at $145,023,683 on 11/01/95, collateralized by $131,190,000 U.S. Treasury Bonds, with vari- ous maturities and coupon rates (value $147,813,448) 145,000,000 145,000,000 Agreement with Merrill Lynch Government Secu- rities Inc., 5.880% dated 10/31/95 to be repurchased at $145,023,683 on 11/01/95, collateralized by $143,935,000 U.S. Treasury Note, 6.250% due 8/31/00 (value $147,900,285) 145,000,000 Total Repurchase Agreements (Cost $290,000,000) 290,000,000 Value Shares Note MONEY MARKET FUNDS -- 1.3% 8,611,000 Dreyfus Cash Management Plus Fund $ 8,611,000 264,500 Fidelity Institutional Cash Variable Rate Fund 264,500 Total Money Market Funds (Cost $8,875,500) 8,875,500 TOTAL INVESTMENTS (Cost $690,218,658*) 103.7 % 690,218,658 OTHER ASSETS AND LIABILITIES (NET) (3.7)% Due from investment adviser 64,504 Other assets 2,326,230 Payable for investment securities purchased (25,000,000) Dividends payable (2,031,261) Administration fee payable (19,489) Shareholder servicing and distribution fees payable (13,470) Custodian fees payable (3,322) Accrued Trustees' fees and expenses (2,525) Accrued expenses and other payables (75,006) TOTAL OTHER ASSETS AND LIABILITIES (NET) (24,754,339) NET ASSETS 100.0 % $665,464,319 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE Capital Shares (formerly Class A Shares): ($594,116,432 / 594,120,261 shares outstand- ing) $ 1.00 Liquidity Shares (formerly Class B Shares): ($11,630,747 / 11,630,822 shares outstand- ing) $ 1.00 Adviser Shares (formerly Class C Shares): ($59,717,140 / 59,717,524 shares outstand- ing) $ 1.00 * Aggregate cost for Federal tax purposes. ** Restricted Security. + Floating Rate Note. The interest rate shown reflects the rate currently in effect. ++ Reset date. # Securities are not registered under the Securities Act of 1933. These securi- ties may be resold in transactions exempt from registration to qualified in- stitutional buyers. AT OCTOBER 31, 1995 NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold $ (4,288) Paid-in capital 665,468,607 TOTAL NET ASSETS $665,464,319
See Notes to Financial Statements. STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES October 31, 1995 (unaudited)
PRINCIPAL MATURITY VALUE AMOUNT NATIONS TREASURY RESERVES DATE (NOTE 1) U.S. TREASURY OBLIGATIONS -- 34.2% U.S. TREASURY BILLS -- 26.2% $ 5,000,000 Discount note# 11/02/95 $ 4,999,233 5,000,000 Discount note# 11/09/95 4,994,222 35,000,000 Discount note# 11/16/95 34,921,452 5,000,000 Discount note# 12/07/95 4,972,400 5,000,000 Discount note# 01/11/96 4,947,440 5,000,000 Discount note# 02/08/96 4,920,250 30,000,000 Discount note# 04/04/96 29,310,430 5,000,000 Discount note# 05/02/96 4,866,817 5,000,000 Discount note# 07/25/96 4,798,267 5,000,000 Discount note 08/22/96 4,777,521 15,000,000 Discount note# 08/22/96 14,332,562 15,000,000 Discount note 10/17/96 14,224,388 132,064,982 U. S. TREASURY NOTES -- 8.0% 5,000,000 4.250%# 11/30/95 4,992,939 5,000,000 4.250% 12/31/95 4,981,729 5,000,000 4.625%# 02/15/96 4,981,875 5,000,000 4.625% 02/29/96 4,977,602 5,000,000 5.875% 05/31/96 4,997,855 5,000,000 7.875% 07/31/96 5,075,159 10,000,000 6.500% 09/30/96 10,075,950 40,083,109 Total U.S. Treasury Obligations (Cost $172,148,091) 172,148,091 REPURCHASE AGREEMENTS -- FIXED RATE -- 81.0% 123,202,000 Agreement with CS First Boston Corporation, Interest is payable monthly. The agreement is terminable by the Portfolio daily. The final maturity date of the agreement is 07/01/96, collateralized by $186,523,308 U.S. Treasury Obligations, with various ma- turities (value $125,666,042)## 123,202,000 25,000,000 Agreement with Deutsche Bank Financial Inc., 5.875% dated 10/31/95 to be repurchased at $25,004,080 on 11/01/95, collateralized by $22,497,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $25,500,857) 25,000,000 $ 25,000,000 Agreement with Goldman Sachs & Company, 5.880% dated 10/31/95 to be repurchased at $25,004,083 on 11/01/95, collateralized by $19,514,000 U.S. Treasury Bonds, 8.875% due 02/15/19 (value $25,500,247) $ 25,000,000 25,000,000 Agreement with HSBC Securities, 5.880% dated 10/31/95 to be repurchased at $25,004,083 on 11/01/95, collateralized by $24,720,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $25,500,310) 25,000,000 10,000,000 Agreement with Lehman Government Securities, Inc., 5.700% dated 10/17/95 to be repurchased at $10,031,667 on 11/06/95, collateralized by $8,815,000 U.S. Treasury Bonds, 7.500% due 11/15/16 (value $10,196,655) 10,000,000 25,000,000 Agreement with Merrill Lynch & Company, Inc., 5.880% dated 10/31/95 to be repurchased at $25,004,083 on 11/01/95, collateralized by $24,820,000 U.S. Treasury Note, 6.250% due 08/31/00 (value $25,503,769) 25,000,000 25,000,000 Agreement with Morgan (J.P.) & Company, Inc., 5.875% dated 10/31/95 to be repurchased at $25,004,080 on 11/01/95, collateralized by $90,027,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $25,500,121) 25,000,000 25,000,000 Agreement with Smith Barney & Company, 5.880% dated 10/31/95 to be repurchased at $25,004,083 on 11/01/95, collateralized by $24,072,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $25,500,357) 25,000,000 125,000,000 Agreement with UBS Securities, Inc., 5.880% dated 10/31/95 to be repurchased at $125,020,417 on 11/01/95, collateralized by $125,174,000 U.S. Treasury Obligations, with various maturities and coupon rates (value $127,500,447) 125,000,000 Total Repurchase Agreements -- Fixed Rate (Cost $408,202,000) 408,202,000 REPURCHASE AGREEMENTS -- TERM -- 6.9% 10,000,000 Agreement with Lehman Government Securities, Inc., 5.855%+, terminable by the Portfolio within seven calendar days, with a final maturity date of 11/02/95. Interest receivable as of 10/31/95 was $41,297, collateralized by $8,815,000 U.S. Treasury Bond, 7.500% due 11/15/16 (value $10,196,655) 10,000,000 25,000,000 Agreement with Morgan Stanley Group Inc.,** 5.700%, dated 10/20/95, to be repurchased on 11/17/95. Interest receivable as of 10/31/95 was $47,500, collateralized by $26,360,000 U.S. Treasury Note, 4.750% due 10/31/98 (value $25,626,669) 25,000,000 Total Repurchase Agreements -- Term (Cost $35,000,000) 35,000,000 Shares MONEY MARKET FUNDS -- 2.6% 3,058,000 AIM Treasury Fund $ 3,058,000 5,662,000 Dreyfus Treasury Cash Management Fund 5,662,000 4,233,000 Fidelity Institutional Cash Portfolio Fund 4,233,000 Total Money Market Funds (Cost $12,953,000) 12,953,000 TOTAL INVESTMENTS (Cost $628,303,091*) 124.7 % 628,303,091 OTHER ASSETS AND LIABILITIES (NET) (24.7)% Due from investment adviser 130,064 Other assets 801,252 Payable for reverse repurchase agreement (123,202,000) Dividends payable (2,030,977) Administration fee payable (19,393) Shareholder servicing and distribution fees payable (12,035) Custodian fees payable (10,529) Accrued Trustees' fees and expenses (3,185) Accrued expenses and other payables (52,365) TOTAL OTHER ASSETS AND LIABILITIES (NET) (124,399,168) NET ASSETS 100.0 % $ 503,903,923 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE Capital Shares (formerly Class A Shares): ($446,256,877 / 446,268,767 shares outstand- ing) $ 1.00 Liquidity Shares (formerly Class B Shares): ($1,720,490 / 1,720,536 shares outstanding) $ 1.00 Adviser Shares (formerly Class C Shares): ($55,926,556 / 55,928,047 shares outstand- ing) $ 1.00 * Aggregate cost for Federal tax purposes. ** Restricted Security. + Rate resets daily. The interest rate shown reflects the rate currently in effect. # Denotes securities subject to repurchase under reverse repurchase agreement as of October 31, 1995. ## Securities segregated as collateral for reverse repurchase agreement. AT OCTOBER 31, 1995 NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold $ (12,579) Paid-in capital 503,916,502 TOTAL NET ASSETS $ 503,903,923
See Notes to Financial Statements. STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES October 31, 1995 (unaudited)
PRINCIPAL MATURITY VALUE AMOUNT NATIONS GOVERNMENT RESERVES DATE (NOTE 1) U.S. GOVERNMENT AGENCY OBLIGA- TIONS -- 83.9% FEDERAL FARM CREDIT BANK (FFCB) -- 3.2% $5,000,000 Discount Note 11/28/95 $ 4,978,663 FEDERAL FARM CREDIT BANK (FFCB) NOTES -- 8.4% 5,000,000 5.950%+ 11/01/95++ 5,000,000 6,000,000 6.1375%+ 11/28/95 6,000,825 2,000,000 5.750% 08/01/96 1,998,911 12,999,736 FEDERAL HOME LOAN BANK (FHLB) NOTES -- 11.7% 5,000,000 5.760%+ 11/01/95++ 4,998,629 3,000,000 5.705% 06/10/96 2,994,658 5,000,000 6.000% 08/07/96 5,000,000 5,000,000 5.870% 10/25/96 5,000,000 17,993,287 FEDERAL HOME LOAN MORTGAGE COR- PORATION (FHLMC) -- 11.5% 5,000,000 Discount note 01/05/96 4,951,250 5,000,000 Discount note 01/16/96 4,941,311 3,000,000 Discount note 01/29/96 2,958,689 5,000,000 Discount note 02/05/96 4,926,267 17,777,517 FEDERAL NATIONAL MORTGAGE ASSO- CIATION (FNMA) -- 27.7% 3,390,000 Discount note 11/01/95 3,390,000 3,000,000 Discount note 12/12/95 2,980,935 3,000,000 Discount note 12/27/95 2,974,100 4,000,000 Discount note 01/17/96 3,952,773 3,000,000 Discount note 01/25/96 2,960,546 5,000,000 Discount note 02/02/96 4,928,183 3,000,000 Discount note 02/20/96 2,948,570 3,000,000 Discount note 03/01/96 2,944,542 5,000,000 Discount note 03/11/96 4,899,930 5,000,000 Discount note 03/13/96 4,898,403 3,000,000 Discount note 03/22/96 2,934,325 3,000,000 Discount note 08/26/96 2,862,958 42,675,265 FEDERAL NATIONAL MORTGAGE ASSO- CIATION (FNMA) NOTE -- 3.3% $ 5,000,000 5.8125%+ 12/27/95++ $ 5,000,000 STUDENT LOAN MARKETING ASSOCIA- TION (SLMA) NOTES -- 18.1% 20,000,000 5.620%+ 11/07/95++ 19,941,317 8,000,000 5.640%+ 11/07/95++ 8,000,000 27,941,317 Total U.S. Government Agency Obligations (Cost $129,365,785) 129,365,785 REPURCHASE AGREEMENTS -- 14.0% 11,662,000 Agreement with CS First Boston Corporation, 5.900% dated 10/31/95 to be repurchased at $11,663,911 on 11/01/95, collateralized by $7,731,000 U.S. Treasury Bonds, 11.250% due 2/15/15 (value $11,896,982) 11,662,000 10,000,000 Agreement with Lehman Government Securities, Inc., 5.880% dated 10/31/95 to be repurchased at $10,001,633 on 11/01/95, collateralized by $8,815,000 U.S. Treasury Bonds, 7.500% due 11/15/16 (value $10,196,655) 10,000,000 Total Repurchase Agreements (Cost $21,662,000) 21,662,000 Shares MONEY MARKET FUND -- 2.2% (Cost $3,386,000) 3,386,000 Dreyfus Treasury Prime Cash Management Fund 3,386,000 TOTAL INVESTMENTS (Cost $154,413,785*) 100.1 % 154,413,785 OTHER ASSETS AND LIABILITIES (NET) (0.1)% Due from investment adviser 32,495 Other assets 483,845 Dividends payable (584,556) Shareholder servicing and distribution fees payable (21,428) Administration fee payable (5,758) Custodian fees payable (1,833) Accrued Trustees' fees and expenses (923) Accrued expenses and other payables (24,962) TOTAL OTHER ASSETS AND LIABILITIES (NET) (123,120) NET ASSETS 100.0 % $154,290,665 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE Capital Shares (formerly Class A Shares): ($40,558,812 / 40,559,830 shares outstand- ing) $ 1.00 Liquidity Shares (formerly Class B Shares): ($2,121 / 2,121 shares outstanding) $ 1.00 Adviser Shares (formerly Class C Shares): ($113,729,732 / 113,732,586 shares outstand- ing) $ 1.00 * Aggregate cost for Federal tax purposes. + Floating rate note. The interest rate shown reflects the rate currently in effect. ++ Reset date. AT OCTOBER 31, 1995 NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold $ (3,083) Paid-in capital 154,293,748 TOTAL NET ASSETS $154,290,665
See Notes to Financial Statements. STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES October 31, 1995 (unaudited)
PRINCIPAL VALUE AMOUNT NATIONS MUNICIPAL RESERVES (NOTE 1) MUNICIPAL BONDS AND NOTES -- 100.1% ALABAMA -- 4.2% Homewood, Alabama, Education Building Authority, Educational Facilities, (Samford Univer- sity), Series C, (AmSouth Bank (Birmingham) LOC), $1,300,000 4.100% due 12/01/13++ $1,300,000 McIntosh, Alabama, Industrial Development Board, Pollution Control Revenue, (Ciba-Geigy Corporation Project), Series A, (Swiss Bank LOC), 1,000,000 3.900% due 12/01/03++ 1,000,000 Opelika, Alabama, Industrial De- velopment Board, Industrial De- velopment Revenue, (Flowers Baking Company Project), (Trust Company Bank LOC), 2,000,000 3.950% due 12/01/99++ 2,000,000 4,300,000 ALASKA -- 1.8% Valdez, Alaska, Marine Terminal Revenue, (Arco Transportation Project), Series B, 1,900,000 4.000% due 05/01/31++ 1,900,000 ARKANSAS -- 0.9% Fayetteville, Arkansas, Public Facilities Board Revenue, (Charter Vista Hospital Project), (Mitsubishi Bank Ltd. LOC), 934,000 3.950% due 03/01/07++ 934,000 CALIFORNIA -- 4.6% Contra Costa (County of), Cali- fornia, TRAN, 1,000,000 4.500% due 07/03/96 1,005,486 San Bernardino (County of), Cal- ifornia, TRAN, GO, (Toronto Dominion Bank and Bank of Nova Scotia LOC), 2,500,000 4.500% due 07/05/96 2,508,923 San Diego, California, Indus- trial Development Revenue, (Kaiser Aerospace and Electri- cal Project), Series A, AMT, (ABN-Amro Bank LOC), 1,200,000 4.050% due 10/01/07++ 1,200,000 4,714,409 COLORADO -- 3.6% Clear Creek (County of), Colo- rado, Financing Pool, Anticipa- tion Warrants, (National West- minster Bank PLC LOC), 180,000 3.950% due 06/01/98++ 180,000 Colorado (State of), Health Fa- cilities Authority Revenue, (Goodwill Industries), (Banc One LOC), 2,000,000 4.000% due 12/01/04++ 2,000,000 Colorado (State of), Student Ob- ligation Board Authority Reve- nue, Series A, AMT, (Student Loan Marketing Association LOC), $1,545,000 4.000% due 09/01/24++ $1,545,000 3,725,000 DISTRICT OF COLUMBIA -- 1.4% District of Columbia, Hospital Revenue, (Columbia Women's Hos- pital), Series A, (Mitsubishi Bank Ltd. LOC), 1,500,000 4.200% due 07/01/20++ 1,500,000 FLORIDA -- 8.0% Alachua (County of), Florida, Health Facilities Revenue, (North Florida Retirement Vil- lage Project), (Kredietbank N.V. LOC), 1,800,000 3.850% due 01/01/21++ 1,800,000 Dade (County of), Florida, In- dustrial Development Revenue, (Dade Solid Waste -- Montenay Project), AMT, (Banque Paribas LOC), 960,000 4.150% due 12/01/10++ 960,000 Florida (State of), Housing Fi- nance Agency, Multi-family Housing Revenue, (Blairstone Project), (Citibank (New York) LOC), 1,000,000 4.000% due 12/01/07++ 1,000,000 Gulf Breeze, Florida, Local Gov- ernment Loan Program, Series B, (FGIC Insured), (SBPA), (Credit Locale de France), 1,555,000 4.000% due 12/01/15++ 1,555,000 Hillsborough (County of), Flor- ida, Industrial Development Revenue, (Seaboard Tampa Project), AMT, (Barclays Bank PLC LOC), 2,000,000 3.950% due 12/01/16++ 2,000,000 Orange (County of), Florida, Health Facilities Authority Revenue, (Mayflower Retirement Community Project), (Rabobank Nederland LOC), 1,000,000 4.000% due 03/01/18++ 1,000,000 8,315,000 GEORGIA -- 6.8% De Kalb (County of), Georgia, Housing Authority, Multi-family Housing Revenue: (Stone Mill Run Apartment Project), Series A, AMT, (First Tennessee Bank LOC), 4,000,000 4.000% due 08/01/27++ 4,000,000 (Terrace Club Project), Series A , (AmSouth Bank LOC), 1,000,000 4.200% due 11/01/15++ 1,000,000 Smyrna, Georgia, Multi-family Housing Authority Revenue, (Hills of Post Village Project), (FNMA Collateral Agreement), $2,000,000 3.850% due 06/01/25++ $2,000,000 7,000,000 ILLINOIS -- 9.0% Burbank, Illinois, Industrial Development Revenue, (Service Merchandise, Inc. Project), (Canadian Imperial Bank of Commerce LOC), 400,000 3.800% due 09/15/24+++ 400,000 Chicago, Illinois, O'Hare Inter- national Airport, Industrial Revenue, Airport and Marina Improvements, (American Air- lines Project), (Westdeutsche Landesbank Girozentrate LOC), 400,000 4.000% due 12/01/17+ 400,000 Illinois (State of), Development Financial Authority, Industrial Development Revenue, (Randolph Pickle Corporation Project), (American National Bank and Trust (Chicago) LOC), 900,000 4.200% due 06/01/12++ 900,000 Illinois (State of), Education Facilities Authority Revenue, (Northwestern University), (SBPA), (First National Bank of Chicago), 1,400,000 3.950% due 12/01/25++ 1,400,000 Illinois (State of), Health Fa- cilities Authority Revenue: (Evanston Hospital Corporation Project), Series B, 2,000,000 4.650% due 02/15/96 2,000,000 (Hospital Sisters Services Project), Series E, (MBIA In- sured), (SBPA), (Morgan Guaranty), 1,700,000 3.850% due 12/01/14++ 1,700,000 Illinois (State of), Health Fa- cilities Authority Revenue, Health, Hospital & Nursing Home Improvements, (Streeter- ville Corporation Project), Se- ries B, (First National Bank (Chicago) LOC), 1,000,000 3.950% due 08/15/23++ 1,000,000 Lombard Village, Illinois, In- dustrial Project Revenue, B&H Partnership, (Comerica Bank LOC), 1,500,000 4.450% due 10/01/13++ 1,500,000 9,300,000 INDIANA -- 7.2% Greenwood, Indiana, Industrial Economic Development Revenue, (Health Quest Realty Project), (Banc One LOC), $1,355,000 4.000% due 09/01/05++ $1,355,000 Indiana Bond Bank, (Advance Funding Program), Notes A-3, (SBPA), (NBD Bank), 4,000,000 3.995% due 01/10/96++ 4,000,000 Indianapolis, Indiana, Multi- family Housing Revenue, (Canal Square Project), (Societe Gen- erale LOC), 1,300,000 3.850% due 12/01/15++ 1,300,000 Portage, Indiana, Economic De- velopment Revenue, (Health Quest Realty Project), Series 94, (Banc One LOC), 820,000 4.000% due 09/01/03++ 820,000 7,475,000 KENTUCKY -- 1.0% Jefferson County, Kentucky, In- dustrial Development Board, Economic Development Revenue, (Ball Corporation Project), (PNC Bank of Ohio LOC), 1,000,000 4.150% due 04/01/98++ 1,000,000 LOUISIANA -- 0.2% Calcasieu Parish, Louisiana, In- dustrial Development Board, Pollution Control Revenue, (Citgo Petroleum Corporation Project), (Westdeutsche Landes- bank Girozentrate LOC), 200,000 3.900% due 08/01/04++ 200,000 MAINE -- 1.9% Maine (State of), TAN, 2,000,000 4.500% due 06/28/96 2,009,488 MARYLAND -- 1.1% Baltimore (City of), Maryland, Economic Development Revenue, (Rock Tennessee Converting Fa- cility Project), (Trust Company Bank LOC), 955,000 4.100% due 09/01/97++ 955,000 Montgomery (County of), Mary- land, Industrial Development Revenue, (Information Systems and Networks Corporation Project), (Pittsburgh National Bank LOC), 200,000 3.750% due 04/01/14+++ 200,000 1,155,000 MICHIGAN -- 6.3% Jackson (County of), Michigan, Economic Development Corpora- tion, Economic Development Rev- enue, (Sealed Power Corporation Project), (National Bank of Detroit LOC), $1,000,000 3.850% due 10/01/19+++ $ 1,000,000 Michigan (State of), Building Authority, Series 1, (Canadian Imperial Bank of Commerce LOC), 4,000,000 3.850% due 11/16/95 4,000,000 Michigan (State of), Municipal Bond Authority Revenue Notes, Series B, 1,500,000 4.500% due 07/03/96 1,506,768 6,506,768 MISSOURI -- 2.0% Missouri (State of), Health and Educational Facilities Author- ity, Educational Facilities Revenue, (Washington Univer- sity), (SBPA), (Morgan Guar- anty), 2,100,000 3.900% due 09/01/09++ 2,100,000 NEW JERSEY -- 4.6% Jersey City, New Jersey, BAN, GO, 2,000,000 5.250% due 11/17/95 2,000,456 New Jersey (State of), Economic Development Authority, (Catho- lic Community Services Project), (First Fidelity LOC), 1,250,000 3.800% due 06/01/25++ 1,250,000 New Jersey (State of), Economic Development Authority, First Mortgage Gross Revenue, (Fran- ciscan Oaks Project), Series B, (Bank of Scotland LOC), 1,500,000 3.850% due 12/01/97++ 1,500,000 4,750,456 NEW MEXICO -- 0.6% New Mexico Educational Assis- tance Foundation, Student Loan Revenue, Series B, AMT, (AMBAC Insured), (Internationale Ned- erlanden Bank SBPA), 600,000 4.050% due 04/01/05++ 600,000 NORTH CAROLINA -- 1.3% North Carolina Medical Care Com- munity, (Duke University Hospi- tal), Series B, (SBPA), (First National Bank of Chicago), 1,300,000 3.900% due 06/01/15++ 1,300,000 OHIO -- 4.3% Centerville, Ohio, Health Care Revenue, (Bethany Lutheran Vil- lage Project), (PNC Bank of Ohio LOC), 1,000,000 4.000% due 11/01/13++ 1,000,000 Cuyhoga (County of), Ohio, In- dustrial Development Revenue Refunding, (Pleasant Lake Project), (Soci- ety National Bank), $1,000,000 4.000% due 05/01/11++ $ 1,000,000 Greene (County of), Ohio, Indus- trial Development Revenue, (AFC Stamping Project), AMT, (Society National Bank LOC), 1,000,000 4.150% due 09/01/16++ 1,000,000 Trumbull (County of), Ohio, In- dustrial Development Revenue, (ATD Corporation Project), AMT, (Society National Bank), 1,000,000 4.150% due 08/01/10++ 1,000,000 Warren (County of), Ohio, Indus- trial Development Revenue, (Pi- oneer Industrial Components Inc. Project), (Mitsubishi Bank (Chicago) LOC), 400,000 4.000% due 12/01/05++ 400,000 4,400,000 PENNSYLVANIA -- 2.7% Chester (County of), Pennsylva- nia, Industrial Development Revenue, (Keystone Foods Corpo- ration Project), (Bank of Scotland LOC), 400,000 3.850% due 10/15/99+++ 400,000 Montgomery (County of), Pennsyl- vania, Higher Education and Health Authority Hospital Reve- nue, (AMBAC Insured), (SBPA), (Swiss Bank), 2,400,000 3.850% due 09/01/18++ 2,400,000 2,800,000 SOUTH CAROLINA -- 1.0% Cherokee (County of), South Carolina, Industrial Develop- ment Revenue, (Holmberg Elec- tric Corporation Project), (Wachovia Bank & Trust LOC), 1,000,000 3.950% due 11/01/04++ 1,000,000 TENNESSEE -- 2.9% Chattanooga, Tennessee, Indus- trial Development Board, (Sea- board Farms of Chattanooga Project), (Bank of Nova Scotia LOC), 2,000,000 3.875% due 06/01/04++ 2,000,000 Jefferson City, Tennessee, In- dustrial Development Board, (BA Property Project), AMT, (Ameri- can National Bank and Trust (Chicago) LOC), 1,000,000 4.250% due 11/01/24++ 1,000,000 3,000,000 TEXAS -- 15.2% Austin (County of), Texas, In- dustrial Development Corpora- tion, Industrial Development Revenue, (Justin Industries Inc. Project), (Citibank (New York) LOC), 1,900,000 3.950% due 12/01/14++ 1,900,000 Austin, Texas, Utility System Revenue Refunding Bonds, Pre-refunded, $ 875,000 10.000% due 11/15/95 $ 894,302 El Paso, Texas, Housing Finance Corporation, (Viva Apartments Project), AMT, (General Elec- tric Capital Corporation LOC), 3,000,000 4.250% due 09/01/23# 3,000,000 Galveston, Texas, Industrial De- velopment Corporation, (Mitch- ell Interests Project), Series A, AMT, (National Westminster Bank PLC LOC), 1,100,000 4.050% due 09/01/13++ 1,100,000 Houston, Texas, Certificates of Obligation, Series B, 1,900,000 3.900% due 04/01/14++ 1,900,000 San Antonio, Texas, Independent School District, School Im- provement Bonds, GO, Pre- refunded, 875,000 8.125% due 11/01/95 875,000 Texas (State of), TRAN, Series A, 5,000,000 4.750% due 08/30/96 5,027,886 Trinity River, Texas, Industrial Development Authority, Indus- trial Development Revenue Bond, Series 1994, (Toys "R" Us Project), (Bankers Trust LOC), 1,000,000 3.875% due 11/01/14++ 1,000,000 15,697,188 UTAH -- 2.3% Salt Lake City, Utah, Industrial Development Revenue, (SPS Tech- nologies Inc. Project), AMT, (National Australia Bank LOC), 1,000,000 4.150% due 12/01/12++ 1,000,000 Utah (County of), Utah, Indus- trial Development Revenue, (McWare Inc. Project), (AmSouth Bank (Birmingham) LOC), 1,380,000 4.150% due 02/01/98++ 1,380,000 2,380,000 VERMONT -- 2.0% Vermont (State of), Education and Health Buildings, Finance Agency Revenue, (VHA New En- gland Project), Series F, (AMBAC Insured), (SBPA), (First National Bank of Chicago), 2,100,000 3.850% due 12/01/25++ 2,100,000 VIRGINIA -- 1.0% Botetourt (County of), Virginia, Industrial Development Author- ity, Industrial Development Revenue, (Emkay Holdings LLC Project), AMT, (State Street Bank & Trust Company LOC), $1,000,000 3.950% due 10/01/05++ $ 1,000,000 WASHINGTON -- 1.0% Washington (State of), Public Power Supply Systems, (Nuclear Project No. 3), Revenue Re- funding, 1,000,000 6.700% due 07/01/96 1,017,444 WEST VIRGINIA -- 1.2% Ohio (County of), West Virginia, Industrial Development Revenue, (Ohio Valley/Clarksburg Drug Company Project), (PNC Bank LOC), 1,200,000 4.100% due 12/01/01+++ 1,200,000 Total Municipal Bonds and Notes (Cost $103,379,753) 103,379,753 Shares MONEY MARKET FUNDS -- 0.4% 400,000 AIM Tax-Exempt Fund 400,000 Fidelity Institutional Tax- 30,000 Exempt Cash Management Fund 30,000 Total Money Market Funds (Cost $430,000) 430,000 TOTAL INVESTMENTS (Cost $103,809,753*) 100.5 % 103,809,753 OTHER ASSETS AND LIABILITIES (NET) (0.5)% Due from investment adviser 66,483 Other assets 860,895 Due to custodian (1,152,465) Dividends payable (301,552) Shareholder servicing and dis- tribution fees payable (13,977) Administration fee payable (4,661) Custodian fees payable (1,882) Accrued Trustees' fees and expenses (827) Accrued expenses and other payables (14,610) TOTAL OTHER ASSETS AND LIA- BILITIES (NET) (562,596) NET ASSETS 100.0 % $103,247,157 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE Capital Shares (formerly Class A Shares): ($34,981,801 / 34,982,197 shares outstanding) $ 1.00 Liquidity Shares (formerly Class B Shares): ($2,265,054 / 2,265,079 shares outstanding) $ 1.00 Adviser Shares (formerly Class C Shares): ($66,000,302 / 66,001,033 shares outstanding) $ 1.00 * Aggregate cost for Federal tax purposes. + Variable rate demand notes are payable upon not more than one business day's notice. The interest rate shown reflects the rate currently in effect. ++ Variable rate demand notes are payable upon not more than seven calendar days' notice. The interest rate shown reflects the rate currently in effect. +++ Variable rate demand notes are payable upon not more than thirty calendar days' notice. The interest rate shown reflects the rate currently in effect. # "Put" bonds and notes have demand features which may mature within one year. The interest rate shown re- flects the rate currently in effect. Abbreviations: AMBAC -- American Municipal Bond Assurance Corporation AMT -- Alternative Minimum Tax BAN -- Bond Anticipation Notes FGIC -- Federal Guaranty Insurance Corporation FNMA -- Federal National Mortgage Association GO -- General Obligation Bonds LOC -- Letter of Credit MBIA -- Municipal Bond Investors Assurance SBPA -- Standby Bond Purchase Agreement TAN -- Tax Anticipation Notes TRAN -- Tax and Revenue Anticipation Notes AT OCTOBER 31, 1995 NET ASSETS CONSIST OF: Accumulated net realized loss on investments sold $ (1,152) Paid-in capital 103,248,309 TOTAL NET ASSETS $103,247,157
See Notes to Financial Statements. STATEMENTS OF OPERATIONS NATIONS INSTITUTIONAL RESERVES For the Six Months Ended October 31, 1995 (unaudited)
NATIONS NATIONS NATIONS NATIONS CASH TREASURY GOVERNMENT MUNICIPAL RESERVES RESERVES RESERVES RESERVES Investment Income: Interest $ 6,655,240 $ 10,162,338 $ 3,105,568 $ 2,034,626 Dividends 264,527 459,060 86,495 50,142 Total Investment Income 6,919,767 10,621,398 3,192,063 2,084,768 Expenses: Investment advisory fee 341,139 535,424 162,308 158,702 Administration fee 113,713 178,475 54,103 52,901 Transfer agent fees 12,257 37,887 7,115 11,397 Custodian fees 21,584 54,601 9,453 10,356 Trustees' fees and expenses 5,366 8,844 2,079 2,051 Registration and filing fees 80,402 76,749 26,598 42,684 Legal and audit fees 26,701 41,159 5,761 16,949 Amortization of organization costs 4,248 8,341 -- 522 Other 2,961 9,325 775 145 Subtotal 608,371 950,805 268,192 295,707 Shareholder servicing and dis- tribution fee: Liquidity Shares 6,587 1,349 2 2,489 Adviser Shares 61,809 75,114 129,378 86,974 Fees waived and/or expenses reimbursed by investment ad- viser and administrator (380,168) (593,181) (158,984) (189,497) Total Expenses 296,599 434,087 238,588 195,673 Net Investment Income 6,623,168 10,187,311 2,953,475 1,889,095 Net Realized Loss on Invest- ments -- -- (2,675) -- Net Increase in Net Assets Resulting From Operations $ 6,623,168 $ 10,187,311 $ 2,950,800 $ 1,889,095
See Notes to Financial Statements. STATEMENT OF CASH FLOWS NATIONS INSTITUTIONAL RESERVES For the Six Months Ended October 31, 1995 (unaudited) NATIONS TREASURY RESERVES Cash flows from operating and investing activities: Investment income received $ 7,724,783 Payment of operating expenses (442,312) Net purchases of short-term investments (316,492,760) Cash used by operating and in- vesting activities $(309,210,289) Cash flows from financing activ- ities: Proceeds from shares sold 869,254,682 Payments on shares redeemed (673,530,060) Cash provided from reverse re- purchase agreements 123,202,000 Distributions paid* (9,716,230) Cash provided by financing ac- tivities 309,210,392 Increase in cash 103 Cash at beginning of period 18 Cash at end of Period $ 121 RECONCILIATION OF NET INCREASE IN NET ASSETS FROM OPERATIONS TO CASH PROVIDED BY OPERATING ACTIVITIES: Net increase in net assets re- sulting from operations $ 10,187,311 Increase in investments $(319,012,273) Increase in interest and divi- dends receivable (402,928) Decrease in other assets 3,429 Increase in accrued expenses 14,172 Cash used by operating activi- ties $(309,210,289) * Non cash activities include reinvestment of dividends of $49,674.
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS NATIONS INSTITUTIONAL RESERVES Six Months Ended October 31, 1995 (unaudited)
NATIONS NATIONS NATIONS NATIONS CASH TREASURY GOVERNMENT MUNICIPAL RESERVES RESERVES RESERVES RESERVES Net investment income $ 6,623,168 $ 10,187,311 $ 2,953,475 $ 1,889,095 Net realized loss on invest- ments sold during the pe- riod -- -- (2,675) -- Net increase in net assets resulting from operations 6,623,168 10,187,311 2,950,800 1,889,095 Distributions to sharehold- ers from net investment income: Capital Shares (4,956,085) (8,480,416) (117,132) (614,282) Liquidity Shares (251,162) (50,266) (58) (60,014) Adviser Shares (1,415,921) (1,656,629) (2,836,285) (1,214,799) Net increase/(decrease) in net assets from Fund share transactions: Capital Shares 460,053,368 194,564,585 40,557,819 2,628,732 Liquidity Shares 11,628,756 1,046,333 58 (325,989) Adviser Shares 12,034,124 163,378 14,485,040 1,877,598 Net increase in net assets 483,716,248 195,774,296 55,040,242 4,180,341 Net Assets: Beginning of period 181,748,071 308,129,627 99,250,423 99,066,816 End of period $ 665,464,319 $ 503,903,923 $ 154,290,665 $ 103,247,157
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS NATIONS INSTITUTIONAL RESERVES Year Ended April 30, 1995
NATIONS NATIONS NATIONS NATIONS CASH TREASURY GOVERNMENT MUNICIPAL RESERVES RESERVES RESERVES RESERVES Net investment income $ 8,016,550 $ 15,603,639 $ 5,980,505 $ 2,272,365 Net realized gain/(loss) on investments sold during the year 465 -- (408) -- Net increase in net assets resulting from operations 8,017,015 15,603,639 5,980,097 2,272,365 Distributions to sharehold- ers from net investment income: Capital Shares (6,283,716) (14,047,209) (117,060) (1,076,833) Liquidity Shares (527,606) (120,316) (2,762,795) (92,633) Adviser Shares (1,205,320) (1,436,114) (3,100,650) (1,102,899) Net increase/(decrease) in net assets from Fund share transactions (Note 4): Capital Shares 24,211,274 (86,813,062) (10,816,825) (3,345,368) Liquidity Shares (69,785,073) (13,553,102) (259,835,082) (11,213,995) Adviser Shares 47,683,400 55,764,669 99,247,546 64,123,435 Net increase/(decrease) in net assets 2,109,974 (44,601,495) (171,404,769) 49,564,072 Net Assets: Beginning of year 179,638,097 352,731,122 270,655,192 49,502,744 End of year $ 181,748,071 $ 308,129,627 $ 99,250,423 $ 99,066,816
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Capital Share outstanding throughout each period.
NATIONS CASH RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Capital Shares: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0298 0.0480 0.0283 0.0315 0.0492 0.0392 Dividends from net invest- ment income (0.0298) (0.0480) (0.0283) (0.0315) (0.0492) (0.0392) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 3.01% 4.91% 2.87% 3.19% 5.03% 7.35%+ Ratios to average net as- sets/supplemental data: Net assets, end of pe- riod (000's) $ 594,116 $ 134,064 $ 109,852 $ 55,739 $ 100,943 $ 19,387 Ratio of operating ex- penses to average net assets 0.20%+ 0.29% 0.45% 0.45% 0.45% 0.45%+ Ratio of net investment income to average net assets 5.87%+ 4.96% 2.83% 3.15% 4.61% 7.04%+ Ratio of operating ex- penses to average net assets without waivers 0.53%+ 0.52% 0.56% 0.59% 0.74% 0.79%+ Ratio of net investment income to average net assets without waivers 5.54%+ 4.73% 2.72% 3.01% 4.32% 6.70%+ Net investment income per share without waivers $ 0.0281 $ 0.0458 $ 0.0272 $ 0.0298 $ 0.0455 $ 0.0373 * The Nations Cash Reserves Capital Shares commenced operations on Octo- ber 10, 1990. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Liquidity Share outstanding throughout each period.
NATIONS CASH RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Liquidity Shares: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0290 0.0471 0.0273 0.0305 0.0482 0.0197 Dividends from net invest- ment income (0.0290) (0.0471) (0.0273) (0.0305) (0.0482) (0.0197) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 2.95% 4.81% 2.77% 3.09% 4.92% 6.44%+ Ratios to average net as- sets/supplemental data: Net assets, end of pe- riod (000's) $ 11,631 $ 2 $ 69,786 $ 19,411 $ 4,776 $ 10,361 Ratio of operating ex- penses to average net assets 0.35%+ 0.38% 0.55% 0.55% 0.55% 0.55%+ Ratio of net investment income to average net assets 5.72%+ 4.87% 2.74% 2.96% 4.94% 6.41%+ Ratio of operating ex- penses to average net assets without waivers 0.68%+ 0.61% 0.65% 0.68% 0.85% 0.87%+ Ratio of net investment income to average net assets without waivers 5.39%+ 4.64% 2.64% 2.82% 4.64% 6.09%+ Net investment income per share without waivers $ 0.0273 $ 0.0448 $ 0.0262 $ 0.0287 $ 0.0447 $ 0.0186 * The Nations Cash Reserves Liquidity Shares commenced operations on January 9, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For an Adviser Share outstanding throughout each period.
NATIONS CASH RESERVES SIX MONTHS ENDED PERIOD 10/31/95 ENDED (UNAUDITED) 04/30/95* Adviser Shares: Net asset value, beginning of period $ 1.00 $ 1.00 Net investment income 0.0285 0.0316 Dividends from net investment income (0.0285) (0.0316) Net asset value, end of period $ 1.00 $ 1.00 Total Return++ 2.88% 3.20% Ratios to average net assets/supplemen- tal data: Net assets, end of period (000's) $ 59,717 $ 47,682 Ratio of operating expenses to aver- age net assets 0.45%+ 0.54%+ Ratio of net investment income to av- erage net assets 5.62%+ 4.71%+ Ratio of operating expenses to aver- age net assets without waivers 0.78%+ 0.77%+ Ratio of net investment income to av- erage net assets without waivers 5.29%+ 4.48%+ Net investment income per share with- out waivers $ 0.0268 $ 0.0300 * The Nations Cash Reserves Adviser Shares commenced operations on Sep- tember 22, 1994. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Capital Share outstanding throughout each period.
NATIONS TREASURY RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Capital Shares: Net asset value, be- ginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from invest- ment operations: Net investment income 0.0290 0.0480 0.0298 0.0323 0.0481 0.0176 Net realized gain on investments -- -- -- 0.0001 0.0003 -- Total from investment operations 0.0290 0.0480 0.0298 0.0324 0.0484 0.0176 Less Distributions: Dividends from net investment income (0.0290) (0.0480) (0.0298) (0.0323) (0.0481) (0.0176) Distributions from net realized gains -- -- -- (0.0001) (0.0003) -- Total distribu- tions (0.0290) (0.0480) (0.0298) (0.0324) (0.0484) (0.0176) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 2.94% 4.91% 3.02% 3.29% 4.92% 5.89%+ Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 446,257 $ 251,694 $ 338,504 $ 418,644 $ 19,587 $ 4,519 Ratio of operating expenses to aver- age net assets 0.20%+ 0.20% 0.20% 0.20% 0.26% 0.45%+ Ratio of net invest- ment income to av- erage net assets 5.74%+ 4.79% 2.99% 2.99% 4.39% 5.85%+ Ratio of operating expenses to aver- age net assets without waivers 0.53%+ 0.50% 0.52% 0.72% 1.06% 0.94%+ Ratio of net invest- ment income to av- erage net assets without waivers 5.40%+ 4.50% 2.67% 2.48% 3.59% 5.36%+ Net investment in- come per share without waivers $ 0.0273 $ 0.0451 $ 0.0267 $ 0.0251 $ 0.0368 $ 0.0161 * The Nations Treasury Reserves Capital Shares commenced operations on January 11, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Liquidity Share outstanding throughout each period.
NATIONS TREASURY RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Liquidity Shares: Net asset value, be- ginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from invest- ment operations: Net investment in- come 0.0282 0.0462 0.0263 0.0288 0.0454 0.0173 Net realized gain on investments -- -- -- 0.0001 0.0003 -- Total from invest- ment operations 0.0282 0.0462 0.0263 0.0289 0.0457 0.0173 Less Distributions: Dividends from net investment income (0.0282) (0.0462) (0.0263) (0.0288) (0.0454) (0.0173) Distributions from net realized gains -- -- -- (0.0001) (0.0003) -- Total distribu- tions (0.0282) (0.0462) (0.0263) (0.0289) (0.0457) (0.0173) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 2.86% 4.71% 2.67% 2.93% 4.64% 5.79%+ Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 1,720 $ 674 $ 14,227 $ 3,369 $ 2,807 $ 2,891 Ratio of operating expenses to aver- age net assets 0.35%+ 0.49% 0.55% 0.55% 0.52% 0.55%+ Ratio of net invest- ment income to av- erage net assets 5.59%+ 4.50% 2.67% 2.89% 4.62% 5.75%+ Ratio of operating expenses to aver- age net assets without waivers 0.68%+ 0.79% 0.87% 1.07% 1.32% 1.04%+ Ratio of net invest- ment income to av- erage net assets without waivers 5.25%+ 4.21% 2.35% 2.37% 3.82% 5.26%+ Net investment in- come per share without waivers $ 0.0265 $ 0.0431 $ 0.0232 $ 0.0213 $ 0.0349 $ 0.0160 * The Nations Treasury Reserves Liquidity Shares commenced operations on January 11, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For an Adviser Share outstanding throughout each period.
NATIONS TREASURY RESERVES SIX MONTHS ENDED PERIOD 10/31/95 ENDED (UNAUDITED) 04/30/95* Adviser Shares: Net asset value, beginning of period $ 1.00 $ 1.00 Net investment income 0.0277 0.0308 Dividends from net investment income (0.0277) (0.0308) Net asset value, end of period $ 1.00 $ 1.00 Total Return++ 2.81% 3.11% Ratios to average net assets/supple- mental data: Net assets, end of period (000's) $ 55,927 $ 55,762 Ratio of operating expenses to av- erage net assets 0.45%+ 0.45%+ Ratio of net investment income to average net assets 5.49%+ 4.54%+ Ratio of operating expenses to av- erage net assets without waivers 0.78%+ 0.75%+ Ratio of net investment income to average net assets without waiv- ers 5.15%+ 4.25%+ Net investment income per share without waivers $ 0.0260 $ 0.0288 * The Nations Treasury Reserves Adviser Shares commenced operations on September 22, 1994. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Capital Share outstanding throughout each period.
NATIONS GOVERNMENT RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Capital Shares: Net asset value, be- ginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from invest- ment operations: Net investment in- come 0.0291 0.0463 0.0278 0.0312 0.0343 0.0168 Net realized gain on investments -- -- -- -- 0.0023 -- Total from invest- ment operations 0.0291 0.0463 0.0278 0.0312 0.0366 0.0168 Less Distributions: Dividends from net investment income (0.0291) (0.0463) (0.0278) (0.0312) (0.0343) (0.0168) Distributions from net realized gains -- -- -- -- (0.0023) -- Total distribu- tions (0.0291) (0.0463) (0.0278) (0.0312) (0.0366) (0.0168) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 2.95% 4.72% 2.82% 3.15% 3.71% 5.57%+ Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 40,559 $ 2 $ 10,819 $ 7,396 $ 1,800 $ 295 Ratio of operating expenses to aver- age net assets 0.20%+ 0.32% 0.45% 0.45% 0.45% 0.45%+ Ratio of net invest- ment income to av- erage net assets 5.68%+ 4.35% 2.78% 3.07% 4.24% 5.89%+ Ratio of operating expenses to aver- age net assets without waivers 0.49%+ 0.54% 0.51% 0.64% 0.76% 0.80%+ Ratio of net invest- ment income to av- erage net assets without waivers 5.39%+ 4.13% 2.72% 2.88% 3.93% 5.54%+ Net investment in- come per share without waivers $ 0.0276 $ 0.0439 $ 0.0272 $ 0.0288 $ 0.0313 $ 0.0158 * The Nations Government Reserves Capital Shares commenced operations on January 17, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Liquidity Share outstanding throughout each period.
NATIONS GOVERNMENT RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Liquidity Shares: Net asset value, be- ginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from invest- ment operations: Net investment in- come 0.0279 0.0453 0.0268 0.0302 0.0461 0.0176 Net realized gain on investments -- -- -- -- 0.0023 -- Total from invest- ment operations 0.0279 0.0453 0.0268 0.0302 0.0484 0.0176 Less Distributions: Dividends from net investment income (0.0279) (0.0453) (0.0268) (0.0302) (0.0461) (0.0176) Distributions from net realized gains -- -- -- -- (0.0023) -- Total distribu- tions (0.0279) (0.0453) (0.0268) (0.0302) (0.0484) (0.0176) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 2.82% 4.59% 2.71% 3.05% 4.70% 6.04%+ Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 2 $ 2 $ 259,836 $ 149,252 $ 12,486 $ 5,589 Ratio of operating expenses to aver- age net assets 0.35%+ 0.40% 0.55% 0.55% 0.55% 0.55%+ Ratio of net invest- ment income to av- erage net assets 5.53%+ 4.27% 2.68% 2.71% 4.46% 5.86%+ Ratio of operating expenses to aver- age net assets without waivers 0.64%+ 0.62% 0.61% 0.74% 0.86% 0.94%+ Ratio of net invest- ment income to av- erage net assets without waivers 5.24%+ 4.05% 2.62% 2.52% 4.18% 5.47%+ Net investment in- come per share without waivers $ 0.0264 $ 0.0430 $ 0.0262 $ 0.0274 $ 0.0422 $ 0.0170 * The Nations Government Reserves Liquidity Shares commenced operations on January 11, 1991. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For an Adviser Share outstanding throughout each period.
NATIONS GOVERNMENT RESERVES SIX MONTHS ENDED PERIOD 10/31/95 ENDED (UNAUDITED) 04/30/95* Adviser Shares: Net asset value, beginning of period $ 1.00 $ 1.00 Net investment income 0.0274 0.0299 Dividends from net investment income (0.0274) (0.0299) Net asset value, end of period $ 1.00 $ 1.00 Total Return++ 2.76% 3.04% Ratios to average net as- sets/supplemental data: Net assets, end of period (000's) $ 113,730 $ 99,246 Ratio of operating expenses to average net assets 0.45%+ 0.57%+ Ratio of net investment income to average net assets 5.43%+ 4.10%+ Ratio of operating expenses to average net assets without waivers 0.74%+ 0.79%+ Ratio of net investment income to average net assets without waivers 5.14%+ 3.88%+ Net investment income per share without waivers $ 0.0259 $ 0.0283 * The Nations Government Reserves Adviser Shares commenced operations on September 22, 1994. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Capital Share outstanding throughout each period.
NATIONS MUNICIPAL RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Capital Shares: Net asset value, be- ginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0188 0.0313 0.0198 0.0231 0.0356 0.0245 Dividends from net investment income (0.0188) (0.0313) (0.0198) (0.0231) (0.0356) (0.0245) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 1.90% 3.19% 2.00% 2.34% 3.62% 4.62%+ Ratios to average net assets/supplemental data: Net assets, end of period (000's) $ 34,982 $ 32,353 $ 35,698 $ 26,145 $ 18,150 $ 5,064 Ratio of operating expenses to aver- age net assets 0.20%+ 0.23% 0.45% 0.45% 0.45% 0.45%+ Ratio of net invest- ment income to av- erage net assets 3.73%+ 3.36% 1.98% 2.27% 3.38% 4.70%+ Ratio of operating expenses to aver- age net assets without waivers and/or expenses reimbursed 0.56%+ 0.59% 0.58% 0.66% 0.89% 0.99%+ Ratio of net invest- ment income to av- erage net assets without waivers and/or expenses reimbursed 3.37%+ 2.99% 1.85% 2.05% 2.94% 4.16%+ Net investment in- come per share without waivers and/or expenses reimbursed $ 0.0170 $ 0.0279 $ 0.0186 $ 0.0203 $ 0.0296 $ 0.0216 * The Nations Municipal Reserves Capital Shares commenced operations on October 23, 1990. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For a Liquidity Share outstanding throughout each period.
NATIONS MUNICIPAL RESERVES SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD 10/31/95 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 04/30/95 04/30/94 04/30/93 04/30/92 04/30/91* Liquidity Shares: Net asset value, be- ginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income 0.0181 0.0304 0.0188 0.0221 0.0346 0.0478 Dividends from net investment income (0.0181) (0.0304) (0.0188) (0.0221) (0.0346) (0.0478) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return++ 1.81% 3.09% 1.90% 2.24% 3.52% 4.60%+ Ratios to average net assets/ supplemental data: Net assets, end of period (000's) $ 2,265 $ 2,591 $ 13,805 $ 10,766 $ 11,473 $ 8,927 Ratio of operating expenses to aver- age net assets 0.35%+ 0.33% 0.55% 0.55% 0.55% 0.55%+ Ratio of net invest- ment income to av- erage net assets 3.58%+ 3.26% 1.86% 2.21% 3.36% 5.22%+ Ratio of operating expenses to aver- age net assets without waivers and/or expenses reimbursed 0.71%+ 0.69% 0.67% 0.76% 0.99% 0.81%+ Ratio of net invest- ment income to av- erage net assets without waivers and/or expenses reimbursed 3.22%+ 2.89% 1.74% 2.00% 2.92% 4.96%+ Net investment in- come per share without waivers and/or expenses reimbursed $ 0.0163 $ 0.0270 $ 0.0176 $ 0.0192 $ 0.0285 $ 0.0455 * The Nations Municipal Reserves Liquidity Shares commenced operations on June 1, 1990. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES For an Adviser Share outstanding throughout each period.
NATIONS MUNICIPAL RESERVES SIX MONTHS ENDED PERIOD 10/31/95 ENDED (UNAUDITED) 04/30/95* Adviser Shares: Net asset value, beginning of period $ 1.00 $ 1.00 Net investment income 0.0176 0.0199 Dividends from net investment income (0.0176) (0.0199) Net asset value, end of period $ 1.00 $ 1.00 Total Return++ 1.78% 2.02% Ratios to average net as- sets/supplemental data: Net assets, end of period (000's) $ 66,000 $ 64,123 Ratio of operating expenses to average net assets 0.45%+ 0.48%+ Ratio of net investment income to average net assets 3.48%+ 3.11%+ Ratio of operating expenses to average net assets without waivers and/or expenses reim- bursed 0.81%+ 0.84%+ Ratio of net investment income to average net assets without waivers and/or expenses reim- bursed 3.12%+ 2.74%+ Net investment income per share without waivers and/or expenses reimbursed $ 0.0158 $ 0.0176 * The Nations Municipal Reserves Adviser Shares commenced operations on September 22, 1994. + Annualized. ++ Total return represents aggregate total return for the periods indi- cated.
See Notes to Financial Statements. Notes to Financial Statement (unaudited) Nations Institutional Reserves 1. Significant Accounting Policies. NATIONS INSTITUTIONAL RESERVES (formerly known as The Capitol Mutual Funds) (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. As of the date of this report, the Trust currently offers four portfolios: Nations Cash Reserves (formerly, Cash Reserves), Nations Trea- sury Reserves (formerly, Treasury Reserves), Nations Government Reserves (formerly, Government Reserves) and Nations Municipal Reserves (formerly, Tax Free Reserves) (collectively the "Portfolios"). The Portfolios cur- rently offer three classes of shares: Capital Shares (formerly, Class A Shares), Liquidity Shares (formerly, Class B Shares) and Adviser Shares (formerly, Class C Shares). The Board of Trustees has authorized the issu- ance of Market Shares (formerly, Class D Shares). As of October 31, 1995, no Market Shares have been sold. Matters affecting each class will be voted on exclusively by their shareholders. The following is a summary of significant accounting policies followed by the Portfolios in the prepara- tion of their financial statements. Securities Valuation--The portfolio securities of each Portfolio are valued on the basis of amortized cost, which approximates market value. Amortized cost valuation involves valuing an instrument at its cost initially and thereafter assuming a constant amortization to maturity of any discount or premium, as long as the effect of fluctuating interest rates on the market value of the instrument is not significant. Repurchase Agreements--Each Portfolio may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the Portfolio takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Portfolio to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Portfolio's holding period. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the Portfolio's holding period. The value of the collateral is at least equal at all times to the total amount of the repurchase obligations, including interest. In the event of counterparty default, the Portfolio has the right to use the collateral to offset losses incurred. There is potential loss to the Portfolio in the event the Portfolio is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Portfolio seeks to assert its rights. Unless permitted by the Securities and Exchange Commission, the Portfolio will not enter into repurchase agreements with the investment adviser, the distributor or any of their affiliates. The Portfolio's investment adviser, acting under the supervision of the Board of Trustees, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Portfolio enters into repurchase agreements to evaluate potential risks. Reverse Repurchase Agreement--Nations Cash Reserves, Nations Treasury Reserves and Nations Government Reserves each may enter into reverse repurchase agreements with institutions that the Portfolio's investment adviser has determined are creditworthy. Under a reverse repurchase agreement, a Portfolio sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time a Portfolio enters into a reverse repurchase agreement, it establishes a segregated account with its custodian bank in which it will maintain cash, U.S. Government securities or other liquid high grade debt obligations equal in value to its obligations arising under the reverse repurchase agreement. Reverse repurchase agreements involve the risk that the market value of the securities purchased with the proceeds from the sale of securities received by the Portfolio may decline below the price of the securities the Portfolio is obligated to repurchase. Securities subject to repurchase under reverse repurchase agreements are designated in the Statement of Net Assets. At October 31, 1995, Nations Treasury Reserves had reverse repurchase agreements outstanding as follows: Maturity Amount $ 123,202,000 Maturity Date 07/01/96 Market Value of Assets Sold Under Agreements $123,037,887
The average daily balance of reverse repurchase agreements outstanding during the six months ended October 31, 1995 was $51,421,924. Nations Cash Reserves and Nations Government Reserves did not enter into any reverse repurchase agreements during the six months ended October 31, 1995. The proceeds received by Nations Treasury Reserves under the reverse repurchase agreements were reinvested in a tri-party repurchase agreement. Net fees earned during the year, representing the difference between interest rates on the reverse repurchase and repurchase agreements, amounted to $34,167 and have been included in interest income in the Statement of Operations. Securities Transactions and Investment Income--Securities transactions are accounted for on a trade date basis. Realized gains and losses are computed on the specific identification of the securities sold. Interest income, adjusted for amortization of discounts and premiums on investments to maturity, is earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Each Portfolio's investment income and realized gains and losses are allocated among the classes based upon the relative net assets of each class. Dividends and Distributions to Shareholders--It is the policy of the Portfolios to declare dividends daily from net investment income and to pay such dividends monthly. The Portfolios will distribute net realized short-term capital gains, unless offset by any available capital loss carryforward, annually after the fiscal year in which earned or more frequently to maintain a net asset value of $1.00 per share. Additional distributions of net investment income and capital gains may be made at the discretion of the Board of Trustees in order to avoid application of the 4% non-deductible Federal excise tax. Income distributions and capital gain distributions on a Portfolio level are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to timing differences and differing characterization of distributions made by the Portfolio as a whole. Federal Income Taxes--Each Portfolio intends to qualify as a regulated investment company by complying with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and by distributing substantially all of its earnings to its shareholders. Therefore, no Federal income or excise tax provision is required. Expenses--General expenses of the Trust are allocated to the Portfolios based upon relative net assets. Operating expenses directly attributable to a class of shares are charged to that class' operations. Expenses of each Portfolio not directly attributable to the operations of any class of shares are prorated among the classes to which the expense relates based on the relative average net assets of each class. 2. Investment Advisory Fee, Administrative Fee and Related Party Transac- tions. The Trust has entered into an Investment Advisory Agreement with Nations- Bank, N.A. (together with its predecessors "NationsBank"), a successor to NationsBank of North Carolina, N.A., an indirect wholly-owned subsidiary of NationsBank Corporation, with respect to each Portfolio. Under the terms of this agreement, NationsBank is entitled to a fee equal to 0.30%, on an annualized basis, of the average daily net assets of each Portfolio. Stephens Inc. ("Stephens") serves as the Trust's administrator pursuant to an Administration Agreement. The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of First Data Corporation, Inc., serves as the Trust's co-administrator pursuant to a Co-Administration Agreement. Under the Administration and Co-Administration Agreements, the administrator and the co-administrator are entitled to receive a combined fee, computed daily and paid monthly, at the annual rate of 0.10%, on an annualized basis, of the average daily net assets of the Trust on a com- bined basis. TSSG also serves as transfer agent for the Portfolios. For the six months ended October 31, 1995, Stephens earned $39,952 (after fee waivers) for its services. The investment adviser and administrator may, from time to time, reduce their fees (either voluntarily or pursuant to applicable state limita- tions). For the six months ended October 31, 1995, the investment adviser and administrator voluntarily waived fees and reimbursed expenses as fol- lows:
FEES FEES EXPENSES WAIVED WAIVED BY REIMBURSED BY ADVISER ADMINISTRATOR BY ADVISER Nations Cash Reserves $341,139 $ 39,029 -- Nations Treasury Reserves 535,424 57,757 -- Nations Government Reserves 141,608 17,376 -- Nations Municipal Reserves 158,702 16,702 $14,093
No officer, director or employee of NationsBank, Stephens or TSSG, or any affiliate thereof, receives any compensation from the Trust for serving as Trustee or officer of the Trust. The Trust pays each Trustee an annual fee of $1,000 ($3,000 for the Chairman of the Board), plus $500 per Portfolio and an additional $1,000 for each board meeting attended. The Trust also reimburses expenses incurred by the Trustees in attending such meetings. Eligible Trustees may participate in nonqualified deferred compensation and retirement plans which may be terminated at any time. All benefits provided under these plans are unfunded and any payments to plan partici- pants are paid solely out of each Portfolio's assets. Income earned on each plan participant's deferral account will be tied to the rate of return of the eligible mutual funds offered by Nations Funds selected by the participants or, if no funds are selected, to the rate of return of the Nations Treasury Fund, a fund of Nations Fund, Inc. NationsBank of Texas, N.A. acts as the Portfolios' custodian. For the six months ended October 31, 1995, NationsBank of Texas, N.A. earned $95,994 for its services as custodian. Stephens acts as the distributor of the Portfolios' shares. 3. Shareholder Servicing and Distribution Plans. The Trust has adopted a distribution plan ("Liquidity Shares Plan") pursu- ant to Rule 12b-1 under the 1940 Act for the Liquidity Shares of the Port- folios. Under the Liquidity Shares Plan, the Trust may reimburse Stephens up to 0.30% of the average daily net assets of the Liquidity Shares for actual expenses incurred by Stephens in connection with the distribution of Liquidity Shares of the Portfolios. Currently, the Trust is not reim- bursing Stephens for any portion of such expenses. Unreimbursed expenses incurred by Stephens in a given year may not be re- covered by Stephens in subsequent years. In addition, the Liquidity Shares Plan permits the Trust to pay Stephens an annual fee of up to 0.30% of the average daily net assets of the Li- quidity Shares of the Nations Cash Reserves, Nations Government Reserves, and Nations Municipal Reserves and 0.35% of the average daily net assets of the Liquidity Shares of the Nations Treasury Reserves. Stephens may use this fee to compensate certain financial institutions that provide admin- istrative and/or distribution services to Liquidity Shares shareholders. The Trustees of the Trust have currently set this fee at an annual rate of 0.15% of the average daily net assets of the Liquidity Shares of each Portfolio. For the six months ended October 31, 1995, the Portfolios incurred the following amounts pursuant to the above plan:
LIQUIDITY SHARES PLAN Nations Cash Reserves $ 6,587 Nations Treasury Reserves 1,349 Nations Government Reserves 2 Nations Municipal Reserves 2,489
The Trust also has adopted a shareholder servicing plan ("Adviser Shares Servicing Plan") for the Adviser Shares of the Portfolios. Under the Ad- viser Shares Servicing Plan, a Portfolio may pay servicing agents that have entered into a shareholder servicing agreement with the Trust for certain shareholder support services that are provided by the servicing agents to holders of Adviser Shares. Payments under the Adviser Shares Servicing Plan are accrued daily and paid monthly at a rate that will not exceed 0.25%, on an annualized basis, of the average daily net assets of the Adviser Shares of the Portfolios. Fees paid pursuant to the Adviser Shares Servicing Plan are charged as expenses of Adviser Shares of a Port- folio as accrued. For the six months ended October 31, 1995, the Portfolios incurred the following amounts pursuant to the above plan:
ADVISER SHARES SERVICING PLAN Nations Cash Reserves $ 61,809 Nations Treasury Reserves 75,114 Nations Government Reserves 129,378 Nations Municipal Reserves 86,974
A substantial portion of the fees paid, pursuant to the Plans described above, are paid to affiliates of NationsBank. The following chart shows the effective rates, expressed as a percentage of average daily net assets, paid by the Portfolios under the shareholder servicing and distribution plans for the six months ended October 31, 1995:
ADVISER SHARES LIQUIDITY SERVICING SHARES PLAN PLAN Nations Cash Reserves 0.15% 0.25% Nations Treasury Reserves 0.15 0.25 Nations Government Reserves 0.15 0.25 Nations Municipal Reserves 0.15 0.25
4. Shares of Beneficial Interest. As of October 31, 1995, an unlimited number of shares without par value were authorized for the Trust. The Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any authorized, but unis- sued, shares into one or more additional classes or series of shares. Since the Portfolios have sold and redeemed shares only at a constant net asset value of $1.00 per share, the number of shares represented by such sales and redemptions is the same as the amounts shown below for such transactions. Changes in capital stock for each Portfolio were as follows:
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 NATIONS CASH RESERVES: Capital Shares: Sold $493,400,903 $ 223,577,458 Issued as reinvestment of dividends 31,160 21,277 Redeemed (33,378,695) (199,387,461) Net increase $460,053,368 $ 24,211,274
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 Liquidity Shares: Sold $ 69,571,599 $ 60,277,929 Issued as reinvest ment of dividends 208,436 66 Redeemed (58,151,279) (130,063,068) Net increase/ (decrease) $ 11,628,756 $ (69,785,073)
SIX MONTHS ENDED PERIOD ENDED OCTOBER 31, APRIL 30, 1995 1995* NATIONS CASH RESERVES: (continued) Adviser Shares: Sold $ 132,871,480 $ 167,716,490 Issued as reinvestment of dividends 60 65 Redeemed (120,837,416) (120,033,155) Net increase $ 12,034,124 $ 47,683,400 * The Nations Cash Reserves Adviser Shares commenced operations on Septem- ber 22, 1994.
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 NATIONS TREASURY RESERVES: Capital Shares: Sold $ 773,104,964 $ 1,677,277,600 Redeemed (578,540,379) (1,764,090,662) Net increase/(decrease) $ 194,564,585 $ (86,813,062)
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 Liquidity Shares: Sold $ 2,050,465 $ 17,013,126 Issued as reinvestment of dividends 49,616 11,987 Redeemed (1,053,748) (30,578,215) Net increase/(decrease) $ 1,046,333 $ (13,553,102)
SIX MONTHS ENDED PERIOD ENDED OCTOBER 31, APRIL 30, 1995 1995* Adviser Shares: Sold $ 94,099,253 $ 152,926,823 Issued as reinvestment of dividends 58 63 Redeemed (93,935,933) (97,162,217) Net increase $ 163,378 $ 55,764,669 * The Nations Treasury Reserves Adviser Shares commenced operations on September 22, 1994.
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 NATIONS GOVERNMENT RESERVES: Capital Shares: Sold $ 59,202,777 $ 4,497,797 Issued as reinvestment of dividends 60 53 Redeemed (18,645,018) (15,314,675) Net increase/(decrease) $ 40,557,819 $ (10,816,825)
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 Liquidity Shares: Sold -- $ 243,816,794 Issued as reinvestment of dividends $ 58 424 Redeemed -- (503,652,300) Net increase/(decrease) $ 58 $(259,835,082)
SIX MONTHS ENDED PERIOD ENDED OCTOBER 31, APRIL 30, 1995 1995* Adviser Shares: Sold $ 165,425,713 $ 328,245,819 Issued as reinvestment of dividends 57 21 Redeemed (150,940,730) (228,998,294) Net increase $ 14,485,040 $ 99,247,546 * The Nations Government Reserves Adviser Shares commenced operations on September 22, 1994.
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 NATIONS MUNICIPAL RESERVES: Capital Shares: Sold $ 19,842,781 $ 48,532,498 Redeemed (17,214,049) (51,877,866) Net increase/(decrease) $ 2,628,732 $ (3,345,368)
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, 1995 1995 NATIONS MUNICIPAL RESERVES: (continued) Liquidity Shares: Sold $ 26,251,036 $ 31,268,170 Issued as reinvestment of dividends 50,838 21,817 Redeemed (26,627,863) (42,503,982) Net decrease $ (325,989) $ (11,213,995)
SIX MONTHS ENDED PERIOD ENDED OCTOBER 31, APRIL 30, 1995 1995* Adviser Shares: Sold $ 136,769,203 $ 237,647,735 Issued as reinvestment of dividends 37 40 Redeemed (134,891,642) (173,524,340) Net increase $ 1,877,598 $ 64,123,435 * The Nations Municipal Reserves Adviser Shares commenced operations on September 22, 1994.
5. Restricted Securities The following securities are illiquid and restricted as to resale and, ac- cordingly, are valued at fair value in good faith by or under the direc- tion of the Trust's Board of Trustees taking into consideration such fac- tors as the Board deems appropriate. The following table shows the acquisition date, the par value, value per unit, market value, the percentage of the Nations Cash Reserves total net assets that the security comprises as well as the aggregate cost of such security at October 31, 1995.
ACQUISITION VALUE 10/31/95 PERCENTAGE OF SECURITY DATE PAR VALUE PER UNIT VALUE NET ASSETS COST Goldman Sachs Group Limited Partner- ship, 5.875% 04/16/96 10/18/95 $30,000,000 $1.00 $30,000,000 4.51% $30,000,000
The following table shows the acquisition date, the par value, value per unit, market value, the percentage of the Nations Treasury Reserves total net assets that the security comprises as well as the aggregate cost of such security at October 31, 1995.
REPURCHASE ACQUISITION VALUE 10/31/95 PERCENTAGE OF AGREEMENT DATE PAR VALUE PER UNIT VALUE NET ASSETS COST Morgan Stanley Group Inc., 5.700% 11/17/95 10/20/95 $25,000,000 $1.00 $25,000,000 4.96% $25,000,000
Certain securities may be sold only pursuant to certain legal restric- tions, and may be difficult to sell. The Portfolios will not invest more than 10% of the value of their respective net assets in securities that are illiquid. 6. Organization Costs. Expenses incurred in connection with the organization of each of the Port- folios, including the fees and expenses of registering and qualifying its shares for distribution under Federal and state securities regulations, are being amortized on a straight-line basis over a period of five years from commencement of operations of each Portfolio, respectively. In the event any of the initial shares of a Portfolio are redeemed by any holder thereof during the amortization period, the proceeds of such redemptions will be reduced by an amount equal to the pro-rata portion of unamortized deferred organizational expenses in the same proportion as the number of shares being redeemed bears to the number of initial shares of each Port- folio outstanding at the time of such redemption. All such costs have been fully amortized for Nations Government Reserves. 7. Concentration of Credit. The Portfolios invest primarily in money market instruments maturing in one year or less whose ratings are within the highest ratings categories by a nationally recognized statistical rating agency or, if not rated, are believed by NationsBank to be of comparable quality. The ability of the issuers of the securities held by the Portfolios to meet their obligations may be affected by economic and political developments in a specific in- dustry, state or region. 8. Capital Loss Carryforward. As of April 30, 1995, the Portfolios had available for Federal income tax purposes unused capital losses as follows:
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING IN 1998 IN 1999 IN 2000 IN 2001 IN 2002 IN 2003 Nations Cash Reserves -- $270 $2,594 $850 $ 574 -- Nations Treasury Reserves -- -- -- -- 9,255 $ 3,324 Nations Govern- ment Reserves -- -- -- -- -- 408 Nations Munici- pal Re- serves $72 -- -- -- -- 1,080
9. Subsequent Event. As of November 1, 1995, TSSG will be known as First Data Investor Services Group, Inc. This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. October 31, 1995 Nations Institutional Reserves PO Box 34602 Charlotte, NC 28254-3584 Toll Free 1-800-290-2224 IRSAR1095 [Insert Logo] NATIONS INSTITUTIONAL RESERVES Nations Cash Reserves Nations Treasury Reserves Nations Government Reserves Nations Municipal Reserves SEMIANNUAL REPORT October 31, 1995 PART C. OTHER INFORMATION Item 24. Financial Statements and Exhibits: (a) Financial Statements Included in Part A: Per Share Income and Capital Changes Included in Part B: Audited Financial Statements, including: Portfolio of Investments for April 30, 1995 Statements of Assets and Liabilities for April 30, 1995 Statements of Operations for the year ended April 30, 1995 Statements of Changes in Net Assets for the years ended April 30, 1995 and April 30, 1994 Financial Highlights Notes to Financial Statements Report of Independent Accountants, dated June 20, 1995 Unaudited Financial Statements, including: Portfolio of Investments for October 31, 1995 Statements of Assets and Liabilities for October 31, 1995 Statements of Operations for the period ended October 31, 1995 Statements of Changes in Net Assets for the period ended October 31, 1995 Financial Highlights Notes to Financial Statements Included in Part C: Consent of Independent Accountants (b) Additional Exhibits
(1) Declaration of Trust Incorporated by Reference to Form N-1A filed January 22, 1990 (2) By-Laws Incorporated by Reference to Form N-1A filed January 22, 1990 (3) Not Applicable (4) Not Applicable (5)(a) Management Agreement Incorporated by Reference to Pre-Effective Amendment No. 1 (5)(b) Investment Advisory Agreement with ASB Capital Management, Inc. Incorporated by Reference to Pre-Effective Amendment No. 1 (5)(c) Investment Advisory Agreement with NationsBank, N.A. Incorporated by Reference to Post-Effective Amendment No. 10 (5)(d) Investment Advisory Agreement with Nationsbanc Advisors, Inc. is filed herewith (5)(e) Sub-Advisory Agreement with TradeStreet Investment Associates, Inc. is filed herewith (6)(a) Distribution Agreement with SEI Financial Services Company Incorporated by Reference to Pre-Effective Amendment No. 1 (6)(b) Distribution Agreement with Stephens, Inc. Incorporated by Reference to Post-Effective Amendment No. 10 (7) Not Applicable (8)(a) Custodian Agreement with Security Trust Company, N.A. Incorporated by Reference to Pre-Effective Amendment No. 1 (8)(b) Custody Agreement with NationsBank of Texas, N.A. Incorporated by Reference to Post-Effective Amendment No. 10 (9)(a) Administration Agreement with Stephens Inc. Incorporated by Reference to Post-Effective Amendment No. 10 (9)(b) Co-Administration Agreement with The Boston Company Advisors, Inc. Incorporated by Reference to Post-Effective Amendment No. 10 (9)(c) Transfer Agency Agreement with The Shareholder Services Group, Inc. to be filed by amendment (10) Opinion and Consent of Counsel is filed herewith (11) Consent of Independent Accountants is filed herewith (12) Not Applicable (13)Not Applicable (14)Not Applicable (15)(a) Distribution Plan for Liquidity Class Shares Incorporated by Reference to Pre-Effective Amendment No. 1 (15)(b) Shareholder Servicing Plan for Adviser Class Shares Incorporated by Reference to Post-Effective Amendment No. 10 (15)(c) Form of Shareholder Servicing Agreement for Adviser Class Shares Incorporated by Reference to Post-Effective Amendment No. 10 (15)(d) Shareholder Servicing Plan for Market Class Shares Incorporated by Reference to Post-Effective Amendment No. 12 (15)(e) Form of Shareholder Servicing Agreement for Market Class Shares Incorporated by Reference to Post-Effective Amendment No. 10 (15)(f) Distribution Plan for Market Class Shares Incorporated by Reference to Post-Effective Amendment No. 12 (15)(g) Form of Brokerage Agreement Incorporated by Reference to Post-Effective Amendment No. 11 (15)(h) Shareholder Servicing Plan for Liquidity Class Shares Incorporated by Reference to Post-Effective Amendment No. 14 (16) Performance Quotation Computation Incorporated by Reference to Post-Effective Amendment No. 6 (17) Not Applicable (18) Form of Plan entered into by Registrant pursuant to Rule 18f-3 under the Investment Company Act of 1940
Item 25. Persons Controlled by or under Common Control with Registrant Registrant is controlled by its Board of Trustees. Item 26. Number of Holders of Securities: As of January 8, 1996 Number of Title of Class Record Holders Shares of beneficial interest, without par value -- Nations Cash Reserves -- Capital Class 2,365 Nations Cash Reserves -- Liquidity Class 11 Nations Cash Reserves -- Adviser Class 5 Nations Cash Reserves -- Market Class 0 Nations Treasury Reserves -- Capital Class 160 Nations Treasury Reserves -- Liquidity Class 4 Nations Treasury Reserves -- Adviser Class 5 Nations Treasury Reserves -- Market Class 0 Nations Government Reserves -- Capital Class 176 Nations Government Reserves -- Liquidity Class 1 Nations Government Reserves -- Adviser Class 5 Nations Government Reserves -- Market Class 0 Nations Municipal Reserves -- Capital Class 185 Nations Municipal Reserves -- Liquidity Class 2 Nations Municipal Reserves -- Adviser Class 3 Nations Municipal Reserves -- Market Class 0 Item 27. Indemnification Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to the Registration Statement is incorporated by reference. Indemnification of Registrant's administrators, principal underwriter, custodian and transfer agent is provided for, respectively, in the: 1. Administration Agreement with Stephens Inc.; 2. Co-Administration Agreement with The Boston Company Advisors, Inc.; 3. Distribution Agreement with Stephens Inc.; 4. Custody Agreement with NationsBank of Texas, N.A.; and 5. Transfer Agency Agreement with First Data Investor Services Group, Inc. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by trustees, directors, officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, officers or controlling persons in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues. Item 28. Business and Other Connections of Investment Adviser: (a) To the knowledge of Registrant, none of the directors or officers of NationsBanc Advisors, Inc. ("NBAI"), the adviser to the Registrant's portfolios, or TradeStreet Investment Associates, Inc. ("TradeStreet") the sub-investment adviser, except those set forth below, is or has been, at any time during the past two calendar years, engaged in any other business, profession, vocation or employment of a substantial nature, except that certain directors and officers also hold various positions with, and engage in business for, the company that owns all the outstanding stock (other than directors' qualifying shares) of NBAI or TradeStreet, respectively, or other subsidiaries of NationsBank Corporation. Set forth below are the names and principal businesses of the directors and certain of the senior executive officers of NBAI and TradeStreet who are engaged in any other business, profession, vocation or employment of a substantial nature. (b) NBAI performs investment advisory services for the Registrant and certain other customers. NBAI is a wholly owned subsidiary of NationsBank, N.A. ("NationsBank"), which in turn is a wholly owned banking subsidiary of NationsBank Corporation. Information with respect to each director and officer of the investment adviser is incorporated by reference to Form ADV filed by NBAI with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940 (file no. 801-49874). TradeStreet performs sub-investment advisory services for the Registrant and certain other customers. TradeStreet is a wholly owned subsidiary of NationsBank, which in turn is a wholly owned banking subsidiary of NationsBank Corporation. Information with respect to each director and officer of the sub-investment adviser is incorporated by reference to Form filed by TradeStreet with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940 (file no. 801-50372). Item 29. Principal Underwriters: (a) Stephens Inc., distributor for the Registrant, does not presently act as investment adviser for any other registered investment companies, but does act as principal underwriter for Nations Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Overland Express Funds, Inc., Stagecoach Inc., Stagecoach Funds, Inc. and Stagecoach Trust and is the exclusive placement agent for Master Investment Trust, Managed Series Investment Trust, Life & Annuity Trust and Master Investment Portfolio, all of which are registered open-end management investment companies, and has acted as principal underwriter for the Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and the Managed Balanced Target Maturity Fund, Inc. closed-end management investment companies. (b) Information with respect to each director and officer of the principal underwriter is incorporated by reference to Form ADV filed by Stephens Inc. with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940 (file #501-15510). (c) Not applicable. Item 30. Location of Accounts and Records: (1) NationsBanc Advisors, Inc., One NationsBank Plaza, Charlotte, North Carolina 28255 (records relating to its function as Investment Adviser). (2) TradeStreet Investment Associates, Inc., One NationsBank Plaza, Charlotte, North Carolina 28255 (records relating to its function as Sub-Investment Adviser). (3) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201 (records relating to its functions as Distributor). (4) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201 (records relating to its functions as Administrator). (5) First Data Investor Services Group, Inc., One Exchange Place, 53 State Street, Boston, Massachusetts 02109 (records relating to its functions as Co-Administrator). (6) First Data Investor Services Group, Inc., One Exchange Place, Boston, Massachusetts 02109 (records relating to its function as Transfer Agent). (7) NationsBank of Texas, N.A., 1401 Elm Street, Dallas, Texas 75202 (records relating to its function as Custodian). Item 31. Management Services None Item 32. Undertakings (a) To call a meeting of Shareholders for the purpose of voting upon the question of the removal of a Trustee(s) when requested in writing to do so by the holders of at least 10% of Registrant's outstanding shares and in connection with each meeting to comply with the provision of Section 16(c) of the Investment Company Act of 1940 relating to Shareholder communications. (b) To furnish each prospective person to whom a prospectus will be delivered with a copy of the Registrant's latest annual report to shareholders, when such annual report is issued containing information called for by Item 5A of Form N-1A, upon request and without charge. NOTICE A copy of the Agreement and Declaration of Trust for The Capitol Mutual funds is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this Registration Statement has been executed on behalf of the Trust by an officer of the Trust as an officer and by its Trustees as trustees and not individually and the obligations of or arising out this Registration Statement are not binding upon any of the Trustees, officers, or Shareholders individually but are binding only upon the assets and property of the Trust. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Little Rock, State of Arkansas on the 17th day of January, 1996. NATIONS INSTITUTIONAL RESERVES By: * A. Max Walker President and Chairman of the Board of Trustees By:/s/ RICHARD H. BLANK, JR. Richard H. Blank, Jr. *Attorney-in-Fact Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
SIGNATURES TITLE DATE * President and Chairman January 17, 1996 - ---------------------------------- (A. Max Walker) of the Board of Trustees (Principal Executive Officer) * Treasurer January 17, 1996 - ---------------------------------- (Richard H. Rose) Vice President (Principal Financial and Accounting Officer) * Trustee January 17, 1996 - ---------------------------------- (Edmund L. Benson, III) * Trustee January 17, 1996 - ---------------------------------- (James Ermer) * Trustee January 17, 1996 - ---------------------------------- (William H. Grigg) * Trustee January 17, 1996 - ---------------------------------- (Thomas F. Keller) /s/ CARL E. MUNDY, JR. Trustee January 17, 1996 - ---------------------- (Carl E. Mundy, Jr.) * Trustee January 17, 1996 - ---------------------------------- (Charles B. Walker) * Trustee January 17, 1996 - ---------------------------------- (Thomas S. Word) /s/ RICHARD H. BLANK, JR. Richard H. Blank, Jr. *Attorney-in-Fact
EXHIBIT INDEX Exhibit Number Description EX-27.a Financial Data Schedules-Nations Cash Reserves EX-27.b Financial Data Schedules-Nations Treasury Reserves EX-27.c Financial Data Schedules-Nations Government Reserves EX-27.d Financial Data Schedules-Nations Municipal Reserves EX-99.B10 Opinion and Consent of Counsel EX-99.B11 Consent of Independent Accountants EX-99.B5(d) Investment Advisory Agreement with NBAI EX-99.B5(e) Sub-Advisory Agreement with TradeStreet EX-27 2 EXHIBIT 27.A1-011
6 011 NATIONS CASH RESERVES CAPITAL 6-MOS APR-30-1996 OCT-31-1995 690,218,658 690,218,658 1,466,272 0 924,462 692,609,392 25,000,000 0 2,145,073 27,145,073 0 594,120,261 594,120,261 134,066,893 0 0 (4,288) 0 0 594,116,432 264,527 6,655,240 0 296,599 6,623,168 0 0 6,623,168 0 (4,956,085) 0 0 493,400,903 (33,378,695) 31,160 483,716,248 0 0 0 (4,288) 341,139 0 676,767 167,931,417 1.00 0.030 0.000 (0.030) 0.000 0.000 1.00 0.20 0 0
EX-27 3 EXHIBIT 27.A2-012
6 012 NATIONS CASH RESERVES LIQUIDITY 6-MOS APR-30-1996 OCT-31-1995 690,218,658 690,218,658 1,466,272 0 924,462 692,609,392 25,000,000 0 2,145,073 27,145,073 0 11,630,822 11,630,822 2,066 0 0 (4,288) 0 0 11,630,747 264,527 6,655,240 0 296,599 6,623,168 0 0 6,623,168 0 (251,162) 0 0 69,571,599 (58,151,279) 208,436 483,716,248 0 0 0 (4,288) 341,139 0 676,767 8,780,915 1.00 0.029 0.000 (0.029) 0.000 0.000 1.00 0.35 0 0
EX-27 4 EXHIBIT 27.A3-013
6 013 NATIONS CASH RESERVES ADVISER 6-MOS APR-30-1996 OCT-31-1995 690,218,658 690,218,658 1,466,272 0 924,462 692,609,392 25,000,000 0 2,145,073 27,145,073 0 59,717,524 59,717,524 47,683,400 0 0 (4,288) 0 0 59,717,140 264,527 6,655,240 0 296,599 6,623,168 0 0 6,623,168 0 (1,415,921) 0 0 132,871,480 (120,837,416) 60 483,716,248 0 0 0 (4,288) 341,139 0 676,767 49,477,535 1.00 0.029 0.000 (0.029) 0.000 0.000 1.00 0.45 0 0
EX-27 5 EXHIBIT 27.B1-021
6 021 NATIONS TREASURY RESERVES CAPITAL 6-MOS APR-30-1996 OCT-31-1995 628,303,091 628,303,091 884,728 0 46,588 629,234,407 0 0 125,330,484 125,330,484 0 446,267,996 446,268,767 251,704,182 0 0 (12,579) 0 0 446,256,877 459,060 10,162,338 0 434,087 10,187,311 0 0 10,187,311 0 (8,480,416) 0 0 773,104,964 (578,540,379) 0 195,774,296 0 0 0 (12,579) 535,424 0 1,027,268 293,393,709 1.00 0.029 0.000 (0.029) 0.000 0.000 1.00 0.20 0 0
EX-27 6 EXHIBIT 27.B2-022
6 022 NATIONS TREASURY RESERVES LIQUIDITY 6-MOS APR-30-1996 OCT-31-1995 628,303,091 628,303,091 884,728 0 46,588 629,234,407 0 0 125,330,484 125,330,484 0 1,720,528 1,720,536 674,203 0 0 (12,579) 0 0 1,720,490 459,060 10,162,338 0 434,087 10,187,311 0 0 10,187,311 0 (50,266) 0 0 2,050,465 (1,053,748) 49,616 195,774,296 0 0 0 (12,579) 535,424 0 1,027,268 1,784,315 1.00 0.028 0.000 (0.028) 0.000 0.000 1.00 0.35 0 0
EX-27 7 EXHIBIT 27.B3-023
6 023 NATIONS TREASURY RESERVES ADVISER 6-MOS APR-30-1996 OCT-31-1995 628,303,091 628,303,091 884,728 0 46,588 629,234,407 0 0 125,330,484 125,330,484 0 55,927,978 55,928,047 55,764,669 0 0 (12,579) 0 0 55,926,556 459,060 10,162,338 0 434,087 10,187,311 0 0 10,187,311 0 (1,656,629) 0 0 94,099,253 (93,935,933) 58 195,774,296 0 0 0 (12,579) 535,424 0 1,027,268 59,831,094 1.00 0.028 0.000 (0.028) 0.000 0.000 1.00 0.45 0 0
EX-27 8 EXHIBIT 27.C1-031
6 031 NATIONS GOVT RESERVES CAPITAL 6-MOS APR-30-1996 OCT-31-1995 154,413,785 154,413,785 504,672 0 11,668 154,930,125 0 0 639,460 639,460 0 40,559,813 40,559,830 2,011 0 0 0 (3,083) 0 40,558,812 86,495 3,105,568 0 238,588 2,953,475 (2,675) 0 2,950,800 0 (117,132) 0 0 59,202,777 (18,645,018) 60 55,040,242 0 0 0 (408) 162,308 0 397,572 4,154,345 1.00 0.029 (0.000) (0.029) 0.000 0.000 1.00 0.20 0 0
EX-27 9 EXHIBIT 27.C2-032
6 032 NATIONS GOVT RESERVES LIQUIDITY 6-MOS APR-30-1996 OCT-31-1995 154,413,785 154,413,785 504,672 0 11,668 154,930,125 0 0 639,460 639,460 0 1,695 2,121 2,063 0 0 0 (3,083) 0 2,121 86,495 3,105,568 0 238,588 2,953,475 (2,675) 0 2,950,800 0 (58) 0 0 0 0 58 55,040,242 0 0 0 (408) 162,308 0 397,572 2,087 1.00 0.028 (0.000) (0.028) 0.000 0.000 1.00 0.35 0 0
EX-27 10 EXHIBIT 27.C3-033
6 033 NATIONS GOVT RESERVES ADVISER 6-MOS APR-30-1996 OCT-31-1995 154,413,785 154,413,785 504,672 0 11,668 154,930,125 0 0 639,460 639,460 0 113,732,240 113,732,586 99,247,546 0 0 0 (3,083) 0 113,729,732 86,495 3,105,568 0 238,588 2,953,475 (2,675) 0 2,950,800 0 (2,836,285) 0 0 165,425,713 (150,940,730) 57 55,040,242 0 0 0 (408) 162,308 0 397,572 103,460,750 1.00 0.027 (0.000) (0.027) 0.000 0.000 1.00 0.45 0 0
EX-27 11 EXHIBIT 27.D1-041
6 041 NATIONS MUNICIPAL RESERVES CAPITAL 6-MOS APR-30-1996 OCT-31-1995 103,809,753 103,809,753 892,348 0 35,030 104,737,131 0 0 1,489,974 1,489,974 0 34,982,197 34,982,197 32,353,465 0 0 (1,152) 0 0 34,981,801 50,142 2,034,626 0 195,673 1,889,095 0 0 1,889,095 0 (614,282) 0 0 19,842,781 (17,214,049) 0 4,180,341 0 0 0 (1,152) 158,702 0 385,170 32,630,868 1.00 0.019 0.000 (0.019) 0.000 0.000 1.00 0.20 0 0
EX-27 12 EXHIBIT 27.D2-042
6 042 NATIONS MUNICIPAL RESERVES LIQUIDITY 6-MOS APR-30-1996 OCT-31-1995 103,809,753 103,809,753 892,348 0 35,030 104,737,131 0 0 1,489,974 1,489,974 0 2,265,079 2,265,079 2,591,068 0 0 (1,152) 0 0 2,265,054 50,142 2,034,626 0 195,673 1,889,095 0 0 1,889,095 0 (60,014) 0 0 26,251,036 (26,627,863) 50,838 4,180,341 0 0 0 (1,152) 158,702 0 385,170 3,291,333 1.00 0.018 0.000 (0.018) 0.000 0.000 1.00 0.35 0 0
EX-27 13 EXHIBIT 27.D3-043
6 043 NATIONS MUNICIPAL RESERVES ADVISER 6-MOS APR-30-1996 OCT-31-1995 103,809,753 103,809,753 892,348 0 35,030 104,737,131 0 0 1,489,974 1,489,974 0 66,001,033 66,001,033 64,123,435 0 0 (1,152) 0 0 66,000,302 50,142 2,034,626 0 195,673 1,889,095 0 0 1,889,095 0 (1,214,799) 0 0 136,769,203 (134,891,642) 37 4,180,341 0 0 0 (1,152) 158,702 0 385,170 69,304,409 1.00 0.018 0.000 (0.018) 0.000 0.000 1.00 0.45 0 0
EX-99 14 EXHIBIT 99.B5(D) 99.B5(d) INVESTMENT ADVISORY AGREEMENT THIS AGREEMENT is made as of this 1st day of January, 1996, by and between Nations Institutional Reserves, formerly known as The Capitol Mutual Funds, a Massachusetts business trust (the "Trust"), consisting of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves; and NationsBanc Advisors, Inc., a North Carolina corporation (the "Adviser"), on behalf of those portfolios of the Trust now or hereafter identified on Schedule I hereto (each a "Fund" and, collectively, the "Funds"). RECITALS WHEREAS, the Trust is registered with the Securities and Exchange Commission ("Commission") under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end, series management investment company; and WHEREAS, the Adviser is registered with the Commission under the Investment Advisers Act of 1940, as amended (the "Advisers Act") as an investment adviser; and WHEREAS, the Trust and the Adviser desire to enter into an agreement to provide for investment advisory services to the Trust upon the terms and conditions hereinafter set forth; and WHEREAS, the Trust and the Adviser contemplate that certain duties of the Adviser under this Agreement will be delegated to one or more sub-investment adviser(s) (the "Sub-Adviser(s)") pursuant to separate sub-advisory agreement(s) (the "Sub-Advisory Agreement(s)"); NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Advisory Services. The Adviser shall act as investment adviser for the Funds and shall, in such capacity, manage and supervise the investment and reinvestment of the cash, securities or other properties comprising the Funds' assets, subject at all times to the policies and control of the Trust's Board of Trustees. The Adviser shall give the Funds the benefit of its best judgment, efforts and facilities in rendering its services as investment adviser. 2. Investment Analysis and Implementation. In carrying out its obligations under paragraph 1 hereof, the Adviser shall: (a) obtain and evaluate pertinent information about significant developments and economic, statistical and financial data, domestic, foreign or otherwise, whether affecting the economy generally or the Funds specifically, and whether concerning the individual issuers whose securities are included in the Funds or the activities in which such issuers engage, or with respect to securities which the Adviser considers desirable for inclusion in the Funds; (b) invest and reinvest, on an ongoing basis, assets held in the Funds in strict accordance with the investment policies of the Funds as set forth in the registration statement of the Trust with respect to the Funds, as the same may be amended from time to time; (c) in accordance with policies and procedures established by the Trust's Board of Trustees, select brokers and dealers to execute portfolio transactions for the Funds and select the markets on or in which the transactions will be executed; (d) vote, either in person or by general or limited proxy, or refrain from voting, any securities held in the Funds for any purposes; exercise or sell any subscription or conversion rights; consent to and join in or oppose any voting trusts, reorganizations, consolidations, mergers, foreclosures and liquidations and in connection therewith, deposit securities, and accept and hold other property received therefor; (e) determine on an ongoing basis the overall investment strategy with respect to the Funds, and ensure on an ongoing basis adherence to such strategy; (f) use the same skill and care in providing services to the Funds as it uses in providing services to fiduciary accounts for which it has investment responsibilities; (g) furnish the Trust's Board of Trustees with such periodic and special reports as the Board of Trustees may request; and (h) take, on behalf of the Funds, all actions which appear necessary to carry into effect such purchase and sale programs and supervisory functions set forth in this Paragraph 2. 3. Delegation of Responsibilities. Subject to the approval of the Trust's Board of Trustees and, if required, the shareholders of the Funds, the Adviser may, pursuant to the Sub-Advisory Agreement(s), delegate to the Sub-Adviser(s) those of its duties hereunder identified in the Sub-Advisory Agreement(s), provided that the Adviser shall continue to supervise and monitor the performance of the duties delegated to the Sub-Adviser(s) and any such delegation shall not relieve the Adviser of its duties and obligations under this Agreement. The Adviser shall be solely responsible for compensating the Sub-Adviser(s) for services rendered under the Sub-Advisory Agreement(s). 4. Control by Board of Trustees. Any investment activities undertaken by the Adviser pursuant to this Agreement, as well as any other activities undertaken by the Adviser on 2 behalf of the Funds, shall at all times be subject to any directives of the Trust's Board of Trustees. 5. Compliance with Applicable Requirements. In carrying out its obligations under this Agreement, the Adviser shall at all times conform to: (a) all applicable provisions of the 1940 Act, the Advisers Act and any rules and regulations adopted thereunder; (b) the provisions of the registration statement of the Trust, as the same may be amended from time to time; (c) the provisions of the Declaration of Trust of the Trust, as the same may be amended from time to time; (d) the provisions of the By-Laws of the Trust, as the same may be amended from time to time; and (e) any other applicable provisions of state or federal law. In addition, any code of ethics adopted by the Adviser pursuant to Rule 17j-1 under the 1940 Act shall include policies, prohibitions and procedures which substantially conform to the recommendations regarding personal investing approved by the Board of Governors of the Investment Company Institute on June 30, 1994, as such recommendations may be amended from time to time. 6. Broker-Dealer Relationships. The Adviser is responsible for the purchase and sale of securities for the Funds, broker-dealer selection, and negotiation of brokerage commission rates. The Adviser's primary consideration in effecting a security transaction will be to obtain the best price and execution. In selecting a broker-dealer to execute each particular transaction for a Fund, the Adviser will take the following into consideration: the best net price available, the reliability, integrity and financial condition of the broker-dealer; the size of and difficulty in executing the order; and the value of the expected contribution of the broker-dealer to the Fund on a continuing basis. Accordingly, the price to the Fund in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the portfolio execution services offered. Subject to such policies as the Trust's Board of Trustees may from time to time determine, the Adviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of having caused a Fund to pay a broker or dealer that provides brokerage and research services to the Adviser an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Adviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the overall responsibilities of the Adviser with respect to the Fund and to other clients of the 3 Adviser. The Adviser is further authorized to allocate the orders placed by it on behalf of the Funds to brokers and dealers who also provide research or statistical material, or other services to the Funds or to the Adviser. Such allocation shall be in such amounts and proportions as the Adviser shall determine and the Adviser will report on said allocations regularly to the Board of Trustees of the Trust indicating the brokers to whom such allocations have been made and the basis therefor. 7. Compensation. The Trust shall pay the Adviser as compensation for services rendered hereunder fees, payable monthly, at the annual rates indicated on Schedule I hereto, as such Schedule may be amended or supplemented from time to time. The average daily net asset value of the Funds shall be determined in the manner set forth in the Trust's Declaration of Trust and registration statement, as amended from time to time. 8. Expenses of the Funds. All of the ordinary business expenses incurred in the operations of the Funds and the offering of their shares shall be borne by the Funds unless specifically provided otherwise in this Agreement. These expenses borne by the Funds include, but are not limited to, brokerage commissions, taxes, legal, auditing, or governmental fees, the cost of preparing share certificates, custodian, transfer agent and shareholder service agent costs, expenses of issue, sale, redemption and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to directors and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Funds in connection with membership in investment company organizations and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders. 9. Expense Limitation. If, for any fiscal year, the total of all ordinary business expenses of a Fund, including all investment advisory fees, but excluding brokerage commissions, fees, taxes, interest and extraordinary expenses, such as litigation costs, would exceed the applicable expense limitations imposed by state securities regulations in any state in which the Funds' shares are qualified for sale, as such limitations may be raised or lowered from time to time, the aggregate of all such investment advisory fees shall be reduced by the amount of such excess. The amount of any such reduction to be borne by the Adviser shall be deducted from the monthly investment advisory fee otherwise payable to the Adviser during such fiscal year. If required pursuant to such state securities regulations, the Adviser will, not later than the last day of the first month of the next succeeding fiscal year, reimburse the Fund for any such annual operating expenses (after reduction of all investment advisory fees in excess of such limitation). For the purposes of this paragraph, the term "fiscal year" shall exclude the portion of the current fiscal year which shall have elapsed prior to the date hereof and shall include the portion of the current fiscal year which shall have elapsed at the date of termination of this Agreement. 10. Non-Exclusivity. The services of the Adviser to the Funds are not to be deemed to be exclusive, and the Adviser shall be free to render investment advisory and 4 administrative or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that officers or directors of the Adviser may serve as officers and trustees of the Trust, and that officers or trustees of the Trust may serve as officers or directors of the Adviser, to the extent that such services may be permitted by law, and that the officers and directors of the Adviser are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors or trustees of any other firm or trust, including other investment advisory companies. 11. Records. The Adviser shall, with respect to orders the Adviser places for the purchase and sale of portfolio securities of the Funds, maintain or arrange for the maintenance of the documents and records required pursuant to Rule 31a-1 under the 1940 Act as well as such records as the Funds' administrator reasonably requests to be maintained, including, but not limited to, trade tickets and confirmations for portfolio trades. All such records shall be maintained in a form acceptable to the Funds and in compliance with the provisions of Rule 31a-1. All such records will be the property of the Funds and will be available for inspection and use by the Funds. The Adviser will promptly notify the Funds' administrator if it experiences any difficulty in maintaining the records in an accurate and complete manner. 12. Term and Approval. This Agreement shall become effective with respect to a Fund if and when approved by the Trustees of the Trust, and if so approved, this Agreement shall thereafter continue from year to year, provided that the continuation of the Agreement is specifically approved at least annually; (a) (i) by the Trust's Board of Trustees or (ii) by the vote of "a majority of the outstanding voting securities" of a Fund (as defined in Section 2(a)(42) of the 1940 Act), and (b) by the affirmative vote of a majority of the Trust's Trustees who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as Trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose. 13. Termination. This Agreement may be terminated with respect to a Fund at any time, without the payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a majority of a Fund's outstanding voting securities, or by the Adviser, on sixty (60) days' written notice to the other party. The notice provided for herein may be waived by the party entitled to receipt thereof. This Agreement shall automatically terminate in the event of its assignment, the term "assignment" for purposes of this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act. 14. Liability of Adviser. In the absence of willful misfeasance, bad faith, negligence or reckless disregard of obligations or duties hereunder on the part of the Adviser or any of its officers, directors, employees or agents, the Adviser shall not be subject to liability to the Trust or to any shareholder of the Trust for any act or omission in the course of, or connected 5 with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 15. Indemnification. In the absence of willful misfeasance, bad faith, negligence or reckless disregard of duties hereunder on the part of the Adviser or any of its officers, directors, employees or agents, the Trust hereby agrees to indemnify and hold harmless the Adviser against all claims, actions, suits or proceedings at law or in equity whether brought by a private party or a governmental department, commission, board, bureau, agency or instrumentality of any kind, arising from the advertising, solicitation, sale, purchase or pledge of securities, whether of the Funds or other securities, undertaken by the Funds, their officers, directors, employees or affiliates, resulting from any violations of the securities laws, rules, regulations, statutes and codes, whether federal or of any state, by the Funds, their officers, directors, employees or affiliates. Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and nothing herein shall constitute a waiver or limitation of any rights which a Fund may have and which may not be waived under any applicable federal and state securities laws. 16. Notices. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to the other party at such address as such other party may designate for the receipt of such notice. Until further notice to the other party, it is agreed that the address of the Trust shall be c/o Stephens Inc., 111 Center Street, Suite 300, Little Rock, Arkansas 72201 and that of the Adviser shall be One NationsBank Plaza, Charlotte, North Carolina 28255. 17. Questions of Interpretation. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Advisers Act shall be resolved by reference to such terms or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States Courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the Commission issued pursuant to the 1940 Act or the Advisers Act. In addition, where the effect of a requirement of the 1940 Act or the Advisers Act reflected in any provision of this Agreement is revised by rule, regulation or order of the Commission, such provision shall be deemed to incorporate the effect of such rule, regulation or order. 6 IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be executed in duplicate by their respective officers on the day and year first written above. NATIONS INSTITUTIONAL RESERVES on behalf of the Funds By: /s/ A. Max Walker A. Max Walker President NATIONSBANC ADVISORS, INC. By: /s/ Mark H. Williamson Mark H. Williamson President and Director 7 SCHEDULE I Fund Rate of Compensation Nations Cash Reserves 0.30% Nations Treasury Reserves 0.30% Nations Government Reserves 0.30% Nations Municipal Reserves 0.30% EX-99 15 EXHIBIT 99.B(5)(E) 99.B(5)(e) SUB-ADVISORY AGREEMENT THIS AGREEMENT is made as of this 1st day of January, 1996, by and among NationsBanc Advisors, Inc., a North Carolina corporation (the "Adviser"), TradeStreet Investment Associates, Inc., a Maryland corporation (the "Sub-Adviser"), and Nations Institutional Reserves, formerly known as The Capitol Mutual Funds, a Massachusetts business trust, (the "Trust"), consisting of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves, on behalf of those portfolios of the Trust now or hereafter identified on Schedule I hereto (each a "Fund" and collectively, the "Funds"). RECITALS WHEREAS, the Trust is registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end, series management investment company; and WHEREAS, the Adviser is registered with the Commission under the Investment Advisers Act of 1940, as amended (the "Advisers Act") and engages in the business of acting as an investment adviser; and WHEREAS, the Sub-Adviser also is registered with the Commission under the Advisers Act as an investment adviser; and WHEREAS, the Adviser and the Trust have entered into an Investment Advisory Agreement of even date herewith (the "Investment Advisory Agreement"), pursuant to which the Adviser shall act as investment adviser with respect to the Funds; and WHEREAS, pursuant such Investment Advisory Agreement, the Adviser, with the approval of the Trust, wishes to retain the Sub-Adviser for purposes of rendering advisory services to the Adviser and the Trust in connection with the Funds upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Appointment of Sub-Adviser. The Adviser hereby appoints, and the Trust hereby approves, the Sub-Adviser to render investment research and advisory services to the Adviser and the Trust with respect to the Funds, under the supervision of 1 the Adviser and subject to the policies and control of the Trust's Board of Trustees, and the Sub-Adviser hereby accepts such appointment, all subject to the terms and conditions contained herein. 2. Investment Services. The specific duties of the Adviser delegated to the Sub-Adviser shall be the following: (a) obtaining and evaluating pertinent information about significant developments and economic, statistical and financial data, domestic, foreign or otherwise, whether affecting the economy generally or the Funds specifically, and whether concerning the individual issuers whose securities are included in the Funds or the activities in which such issuers engage, or with respect to securities which the Adviser or Sub-Adviser considers desirable for inclusion in the Funds; (b) investing and reinvesting, on an ongoing basis, assets held in the Funds in strict accordance with the investment policies of the Funds as set forth in the registration statement of the Trust with respect to the Funds, as the same may be amended from time to time; (c) in accordance with policies and procedures established by the Board of Trustees of the Trust and the Adviser, selecting brokers and dealers to execute portfolio transactions for the Funds and selecting the markets on or in which the transactions will be executed; (d) voting, either in person or by general or limited proxy, or refraining from voting, any securities held in the Funds for any purposes; exercising or selling any subscription or conversion rights; consenting to and joining in or opposing any voting trusts, reorganizations, consolidations, mergers, foreclosures and liquidations and in connection therewith, depositing securities, and accepting other property received therefor; and (e) performing other acts necessary or appropriate in connection with the proper management of the Funds, consistent with its obligations hereunder, and as may be directed by the Adviser and/or the Trust's Board of Trustees. 3. Control by Board of Trustees. As is the case with respect to the Adviser under the Investment Advisory Agreement, any investment activities undertaken by the Sub-Adviser pursuant to this Agreement, as well as any other activities undertaken by the Sub-Adviser with respect to the Funds, shall at all times be subject to any directives of the Board of Trustees of the Trust. 4. Compliance with Applicable Requirements. In carrying out its obligations under this Agreement, the Sub-Adviser shall at all times conform to: 2 (a) all applicable provisions of the 1940 Act, the Advisers Act and any rules and regulations adopted thereunder; (b) the provisions of the registration statement of the Trust applicable to the Funds, as the same may be amended from time to time, under the Securities Act of 1933 and the 1940 Act; (c) the provisions of the Declaration of Trust of the Trust, as the same may be amended from time to time; (d) the provisions of the By-Laws of the Trust, as the same may be amended from time to time; (e) any other applicable provisions of state or federal law. In addition, any code of ethics adopted by the Sub-Adviser pursuant to Rule 17j-1 under the 1940 Act shall include policies, prohibitions and procedures which substantially conform to the recommendations regarding personal investing approved by the Board of Governors of the Investment Company Institute on June 30, 1994, as such recommendations may be amended from time to time. 5. Broker-Dealer Relationships. The Sub-Adviser is responsible for the purchase and sale of securities for the Funds, broker-dealer selection, and negotiation of brokerage commission rates. The Sub-Adviser's primary consideration in effecting a security transaction will be to obtain the best price and execution. In selecting a broker-dealer to execute each particular transaction for a Fund, the Sub-Adviser will take the following into consideration: the best net price available, the reliability, integrity and financial condition of the broker-dealer; the size of and difficulty in executing the order; and the value of the expected contribution of the broker-dealer to the Fund on a continuing basis. Accordingly, the price to the Fund in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the portfolio execution services offered. Subject to such policies as the Adviser or the Trust's Board of Trustees may from time to time determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of having caused a Fund to pay a broker or dealer that provides brokerage and research services to the Sub-Adviser an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Sub-Adviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the overall responsibilities of the Sub-Adviser with respect to the Fund and to other clients of the Sub-Adviser. The Sub-Adviser is further authorized to allocate the orders placed by it on behalf of the Funds to brokers and dealers who also provide research or statistical 3 material, or other services to the Funds or to the Sub-Adviser. Such allocation shall be in such amounts and proportions as the Sub-Adviser shall determine and the Sub-Adviser will report on said allocations regularly to the Adviser and to the Board of Trustees of the Trust indicating the brokers to whom such allocations have been made and the basis therefor. 6. Compensation. The Adviser shall pay the Sub-Adviser, as compensation for services rendered hereunder, fees, payable monthly, at the annual rates indicated on Schedule I hereto, as such Schedule may be amended or supplemented from time to time. It is understood that the Adviser shall be responsible for the Sub-Adviser's fee for its services hereunder, and the Sub-Adviser agrees that it shall have no claim against the Trust or the Fund with respect to compensation under this Agreement. The average daily net asset value of the Funds shall be determined in the manner set forth in the Declaration of Trust and registration statement of the Trust, as amended from time to time. 7. Expenses of the Funds. All of the ordinary business expenses incurred by the Trust in the operations of the Funds and the offering of their shares shall be borne by the Funds unless specifically provided otherwise in this Agreement. These expenses borne by the Funds include but are not limited to brokerage commissions, taxes, legal, auditing, or governmental fees, the cost of preparing share certificates, custodian, transfer agent and shareholder service agent costs, expenses of issue, sale, redemption and repurchase of shares, directors and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Funds in connection with membership in investment company organizations and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders. 8. Expense Limitation. If, for any fiscal year of a Fund, the amount of the aggregate advisory fee which the Trust would otherwise be obligated to pay with respect to the Fund is reduced pursuant to expense limitation provisions of the Investment Advisory Agreement, the fee which the Sub-Adviser would otherwise receive pursuant to this Agreement shall be reduced proportionately. 9. Non-Exclusivity. The services of the Sub-Adviser to the Adviser and the Trust with respect to the Fund are not to be deemed to be exclusive, and the Sub-Adviser shall be free to render investment advisory and administrative or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that the officers and directors of the Sub-Adviser are not prohibited from engaging in any other business activity or from rendering services to any the person, or from serving as partners, officers, directors or trustees of any other firm or trust, including other investment advisory companies. 4 10. Records. The Sub-Adviser shall provide to the Adviser, with respect to the orders the Sub-Adviser places for the purchases and sales of portfolio securities of the Funds, the documents and records required pursuant to Rule 31a-1 under the 1940 Act as well as such records as the Funds' administrator reasonably requests to be maintained, including, but not limited to, trade tickets and confirmations for portfolio trades. All such records shall be maintained in a form acceptable to the Funds and in compliance with the provisions of Rule 31a-1. All such records will be the property of the Funds and will be available for inspection and use by the Funds. The Sub-Adviser will promptly notify the Adviser and the Fund's administrator if it experiences any difficulty in providing the records in an accurate and complete manner. 11. Term and Approval. This Agreement shall become effective with respect to each Fund as of the date first set forth above and shall thereafter continue in force and effect for one year, and may be continued from year to year with respect to each Fund thereafter, provided that the continuation of the Agreement is specifically approved at least annually: (a) (i) by the Trust's Board of Trustees or (ii) by the vote of "a majority of the outstanding voting securities" of the Fund (as defined in Section 2(a)(42) of the 1940 Act); and (b) by the affirmative vote of a majority of the Trustees of the Trust who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as Trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose. 12. Termination. This Agreement may be terminated at any time with respect to a Fund, without the payment of any penalty, by vote of the Trust's Board of Trustees or by vote of a majority of the Fund's outstanding voting securities, or by the Adviser, or by the Sub-Adviser on sixty (60) days' written notice to the other parties to this Agreement. Any party entitled to notice may waive the notice provided for herein. This Agreement shall automatically terminate in the event of its assignment, the term "assignment" for purposes of this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act. 13. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith, negligence or reckless disregard of obligations or duties hereunder on the part of the Sub-Adviser or any of its officers, directors, employees or agents, the Sub-Adviser shall not be subject to liability to the Adviser or to the Trust for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 14. Indemnification. In the absence of willful misfeasance, bad faith, negligence or reckless disregard of duties hereunder on the part of the Sub-Adviser, or 5 any officers, directors, employees or agents thereof, the Trust hereby agrees to indemnify and hold harmless the Sub-Adviser against all claims, actions, suits or proceedings at law or in equity whether brought by a private party or a governmental department, commission, board, bureau, agency or instrumentality of any kind, arising from the advertising, solicitation, sale, purchase or pledge of securities, whether of the Funds or other securities, undertaken by the Funds, their officers, directors, employees, agents or affiliates, resulting from any violations of the securities laws, rules, regulations, statutes and codes, whether federal or of any state, by the Funds, their officers, directors, employees or affiliates. Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and nothing herein shall constitute a waiver or limitation of any rights which a Fund may have and which may not be waived under any applicable federal and state securities laws. 15. Notices. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to such address as may be designated for the receipt of such notice, with a copy to the Trust. Until further notice, it is agreed that the address of the Trust shall be 111 Center Street, Little Rock, Arkansas 72201; that of the Sub-Adviser shall be One NationsBank Plaza, Charlotte, North Carolina 28255; and that of the Adviser shall be One NationsBank Plaza, Charlotte, North Carolina 28255. 16. Questions of Interpretation. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Advisers Act shall be resolved by reference to such term or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the Commission issued pursuant to the 1940 Act or the Advisers Act. In addition, where the effect of a requirement of the 1940 Act or the Advisers Act reflected in any provision of this Agreement is revised by rule, regulation or order of the Commission, such provision shall be deemed to incorporate the effect of such rule, regulation or order. 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in triplicate by their respective officers on the day and year first written above. NATIONS INSTITUTIONAL RESERVES, on behalf of the Funds Attest: By: A. Max Walker Name: A. Max Walker President NATIONSBANC ADVISORS, INC. Attest: /s/ Mark H. Williamson By: Mark H. Williamson Name: Mark H. Williamson President and Director TRADESTREET INVESTMENT ASSOCIATES, INC. Attest: By: /s/Andrew M.Silton Name: Andrew Michael Silton President and Director 7 SCHEDULE I Fund Rate of Compensation Nations Cash Reserves 0.033% Nations Treasury Reserves 0.033% Nations Government Reserves 0.033% Nations Municipal Reserves 0.033% 8 EX-99 16 EXHIBIT 99.B-10 EX 99.B-10 [MORRISON & FOERSTER LLP LETTERHEAD] January 18, 1996 The Capitol Mutual Funds 111 Center Street Little Rock, Arkansas 72201 Re: Units of Beneficial Interest in the Funds of The Capitol Mutual Funds Gentlemen: We refer to Post-Effective Amendment No. 17 and Amendment No. 18 to the Registration Statement on Form N-1A (SEC File Nos. 33-33144; 811-6030) (the "Registration Statement") of The Capitol Mutual Funds (the "Trust") relating to the registration of an indefinite number of units of Beneficial Interest in the Portfolios of the Trust (collectively, the "Shares"). We have been requested by the Trust to furnish this opinion as Exhibit 10 to the Registration Statement. We have examined such records, documents, instruments, and certificates of public officials and of the Trust, made such inquiries of the Trust, and examined such questions of law as we have deemed necessary for the purpose of rendering the opinion set forth herein. We have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity with originals of all items submitted to us as copies. Based upon and subject to the foregoing, we are of the opinion that: The issuance and sale of the Shares by the Trust have been duly and validly authorized by all appropriate action, and assuming delivery by sale or in accord with The Capitol Mutual Funds January 17 1996 Page Two each Portfolio's dividend reinvestment plan in accordance with the description set forth in the Registration Statement, as amended, the Shares will be validly issued, fully paid and nonassessable by the Trust. We consent to the inclusion of this opinion as an exhibit to the Registration Statement. In addition, we consent to the use of our name and to the reference to our Firm under the heading "Counsel" in the Statement of Additional Information and the description of advice rendered by our Firm under the heading "The Adviser" in the Prospectus, both of which are included as part of the Registration Statement. Very truly yours, /s/ MORRISON & FOERSTER LLP MORRISON & FOERSTER LLP EX-99 17 EXHIBIT 99.B11 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses and Statement of Additional Information constituting parts of this Post-Effective Amendment No. 17 under the Securities Act of 1933 to the registration statement on Form N-1A (the "Registration Statement") of our report dated June 20, 1995, relating to the financial statements and financial highlights appearing in the April 30, 1995 Annual Report to Shareholders of the Nations Municipal Reserves (formerly Tax Free Money Market), Nations Cash Reserves (formerly Cash Reserves), Nations Treasury Reserves (formerly Treasury Reserves), and Nations Government Reserves (formerly Government Reserves) of Nations Institutional Reserves (formerly known as The Capitol Mutual Funds), which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Independent Accountants, Custodian and Transfer Agent" in the Prospectuses and under the heading "Experts and Financial Information" in the Statement of Additional Information. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Boston, Massachusetts January 12, 1996 -----END PRIVACY-ENHANCED MESSAGE-----