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):
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<S> <C>
[ ] 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
</TABLE>
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).
<PAGE>
This filing is being made in order to add a Distribution Plan to the
Market Class Shares of each Portfolio of the Trust.
<PAGE>
THE CAPITOL MUTUAL FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A Item No. Location
PART A - Cash Reserves, Treasury Reserves,
Government Reserves and Municipal Reserves
- -- Market Class Shares
<S> <C> <C>
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
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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
</TABLE>
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(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
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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.
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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)
<TABLE>
<CAPTION>
Nations Nations Nations Nations
Cash Treasury Government Municipal
Reserves Reserves Reserves Reserves
<S> <C> <C> <C> <C>
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%
</TABLE>
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
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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
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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
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<PAGE>
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
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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.
<PAGE>
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.
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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-
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<PAGE>
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.
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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
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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-
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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
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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-
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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.
<PAGE>
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.
<PAGE>
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
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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
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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
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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.
<PAGE>
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.
<PAGE>
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,
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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
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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-
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Expenses
Fees Fees Fees Reimbursd
Fees Paid Waived Fees Paid Waived Fees Paid Waived by Adviser
1993 1993 1994 1994 1995 1995 1995*
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
* 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
<PAGE>
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:
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<PAGE>
<TABLE>
<CAPTION>
Fees Fees Fees
Fees Paid Waived Fees Paid Waived Fees Paid Waived
1993 1993 1994 1994 1995 1995
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Position Principal Occupation During Past 5 Years
Name and Address With Trust and Other Affiliations
<S> <C> <C>
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
<PAGE>
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
<PAGE>
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
</TABLE>
- --------------------
* A. Max Walker and Thomas S. Word, Jr. are considered "interested persons" of
the Trust for purposes of the 1940 Act.
13
<PAGE>
Remuneration of Trustees
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
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
</TABLE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Effective
Yield Yield Tax
Effective Without Without Equivalent
Yield Yield Fee Waivers Fee Waivers Yield
<S> <C> <C> <C> <C> <C>
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
</TABLE>
20
<PAGE>
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
<PAGE>
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
<PAGE>
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
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<PAGE>
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
<PAGE>
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:
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<PAGE>
<TABLE>
<CAPTION>
Funds Stephens NationsBank Total
<S> <C> <C> <C>
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
</TABLE>
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.
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<PAGE>
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
<PAGE>
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
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<PAGE>
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
<PAGE>
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
<PAGE>
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.
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<PAGE>
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
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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.
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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
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
OTHER ASSETS AND LIABILITIES (NET) 0.5%
MONEY MARKET FUNDS 1.3%
MUNICIPAL BONDS AND NOTES 98.2%
</TABLE>
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
<TABLE>
<CAPTION>
Principal Maturity Value
Amount CASH RESERVES Date (Note 1)
<S> <C> <C> <C>
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
</TABLE>
* 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
<TABLE>
<CAPTION>
Principal Maturity Value
Amount TREASURY RESERVES Date (Note 1)
<S> <C> <C> <C>
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
</TABLE>
* Aggregate cost for Federal tax purposes.
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS THE CAPITOL MUTUAL FUNDS
April 30, 1995
<TABLE>
<CAPTION>
Principal Maturity Value
Amount GOVERNMENT RESERVES Date (Note 1)
<S> <C> <C> <C>
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
</TABLE>
* 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
<TABLE>
<CAPTION>
Principal Value
Amount TAX FREE RESERVES (Note 1)
<S> <C> <C>
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
</TABLE>
* 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
<TABLE>
<CAPTION>
CASH TREASURY GOVERNMENT TAX FREE
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES (continued) THE CAPITOL MUTUAL FUNDS
April 30, 1995
<TABLE>
<CAPTION>
CASH TREASURY GOVERNMENT TAX FREE
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF OPERATIONS THE CAPITOL MUTUAL FUNDS
For the Year Ended April 30, 1995
<TABLE>
<CAPTION>
CASH TREASURY GOVERNMENT TAX FREE
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS THE CAPITOL MUTUAL FUNDS
Year Ended April 30, 1995
<TABLE>
<CAPTION>
CASH TREASURY GOVERNMENT TAX FREE
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS THE CAPITOL MUTUAL FUNDS
Year Ended April 30, 1994
<TABLE>
<CAPTION>
CASH TREASURY GOVERNMENT TAX FREE
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS THE CAPITOL MUTUAL FUNDS
For a Class A Share outstanding throughout each year.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
CASH RESERVES
PERIOD ENDED
04/30/95*
<S> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
TREASURY RESERVES
PERIOD ENDED
04/30/95*
<S> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
GOVERNMENT RESERVES
PERIOD ENDED
04/30/95*
<S> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C>
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
</TABLE>
* 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.
<TABLE>
<CAPTION>
TAX FREE RESERVES
PERIOD ENDED
04/30/95*
<S> <C>
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
</TABLE>
* 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:
<TABLE>
<CAPTION>
INCREASE/
(DECREASE) IN INCREASE IN
(DECREASE) UNDISTRIBUTED ACCUMULATED
IN PAID-IN NET INVESTMENT REALIZED
CAPITAL INCOME GAIN/(LOSS)
<S> <C> <C> <C>
Treasury
Reserves $(439) $ 439 --
Government
Reserves (686) (103) $789
Tax Free
Reserves (491) 491 --
</TABLE>
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:
<TABLE>
<CAPTION>
FEES FEES
FEES WAIVED BY WAIVED BY EXPENSES
WAIVED ADMINISTRATOR/ TRANSFER REIMBURSED
BY ADVISER CO-ADMINISTRATOR AGENT BY ADVISER
<S> <C> <C> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
CLASS B
PLAN
<S> <C>
Cash Reserves $13,206
Treasury Reserves 9,486
Government Reserves 58,948
Tax Free Reserves 3,609
</TABLE>
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:
<TABLE>
<CAPTION>
CLASS C
SERVICING PLAN
<S> <C>
Cash Reserves $ 56,057
Treasury Reserves 68,443
Government Reserves 157,228
Tax Free Reserves 81,350
</TABLE>
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:
<TABLE>
<CAPTION>
CLASS B CLASS C
PLAN SERVICING PLAN
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30,
1995*
<S> <C>
Class C Shares:
Sold $ 167,716,490
Issued as rein-
vestment of div-
idends 65
Redeemed (120,033,155)
Net increase $ 47,683,400
</TABLE>
* The Cash Reserves Class C Shares commenced operations on September 22,
1994.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30,
1995*
<S> <C>
Class C Shares:
Sold $152,926,823
Issued as rein-
vestment of div-
idends 63
Redeemed (97,162,217)
Net increase $ 55,764,669
</TABLE>
* The Treasury Reserves Class C Shares commenced operations on September
22, 1994.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30,
1995*
<S> <C>
Class C Shares:
Sold $ 328,245,819
Issued as rein-
vestment of div-
idends 21
Redeemed (228,998,294)
Net increase $ 99,247,546
</TABLE>
* The Government Reserves Class C Shares commenced operations on September
22, 1994.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
1995 1994
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30,
1995*
<S> <C>
Class C Shares:
Sold $ 237,647,735
Issued as rein-
vestment of div-
idends 40
Redeemed (173,524,340)
Net increase $ 64,123,435
</TABLE>
* 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:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
IN 1998 IN 1999 IN 2000 IN 2001 IN 2002 IN 2003
<S> <C> <C> <C> <C> <C> <C>
Cash
Reserves -- $270 $2,594 $850 $ 574 --
Treasury
Reserves -- -- -- -- 9,255 $3,324
Government
Reserves -- -- -- -- -- 408
Tax Free
Reserves $72 -- -- -- -- 1,080
</TABLE>
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
<PAGE>
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*
<TABLE>
<CAPTION>
CASH INSTITUTIONAL
RESERVES A FIRST TIER
<S> <C> <C>
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.
</TABLE>
<PAGE>
30-DAY YIELDS****
as of October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
CAPITAL LIQUIDITY ADVISER IBC/DONOGHUE PEER
SHARES SHARES SHARES GROUP AVERAGES*****
<S> <C> <C> <C> <C>
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%
</TABLE>
CURRENT 7-DAY YIELDS****
as of October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
CAPITAL LIQUIDITY ADVISER
SHARES SHARES SHARES
<S> <C> <C> <C>
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%
</TABLE>
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.
<PAGE>
STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES
October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT NATIONS CASH RESERVES DATE (NOTE 1)
<S> <C> <C> <C>
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,
<PAGE>
$ 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
<PAGE>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES
October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT NATIONS TREASURY RESERVES DATE (NOTE 1)
<S> <C> <C> <C>
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
<PAGE>
$ 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
<PAGE>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES
October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT NATIONS GOVERNMENT RESERVES DATE (NOTE 1)
<S> <C> <C> <C>
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
<PAGE>
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
<PAGE>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS NATIONS INSTITUTIONAL RESERVES
October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NATIONS MUNICIPAL RESERVES (NOTE 1)
<S> <C> <C>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF OPERATIONS NATIONS INSTITUTIONAL RESERVES
For the Six Months Ended October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
CASH TREASURY GOVERNMENT MUNICIPAL
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF CASH FLOWS NATIONS INSTITUTIONAL RESERVES
For the Six Months Ended October 31, 1995 (unaudited)
<TABLE>
<S> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS NATIONS INSTITUTIONAL RESERVES
Six Months Ended October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
CASH TREASURY GOVERNMENT MUNICIPAL
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS NATIONS INSTITUTIONAL RESERVES
Year Ended April 30, 1995
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
CASH TREASURY GOVERNMENT MUNICIPAL
RESERVES RESERVES RESERVES RESERVES
<S> <C> <C> <C> <C>
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
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Capital Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Liquidity Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For an Adviser Share outstanding throughout each period.
<TABLE>
<CAPTION>
NATIONS CASH RESERVES
SIX MONTHS
ENDED PERIOD
10/31/95 ENDED
(UNAUDITED) 04/30/95*
<S> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Capital Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Liquidity Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For an Adviser Share outstanding throughout each period.
<TABLE>
<CAPTION>
NATIONS TREASURY RESERVES
SIX MONTHS
ENDED PERIOD
10/31/95 ENDED
(UNAUDITED) 04/30/95*
<S> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Capital Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Liquidity Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For an Adviser Share outstanding throughout each period.
<TABLE>
<CAPTION>
NATIONS GOVERNMENT RESERVES
SIX MONTHS
ENDED PERIOD
10/31/95 ENDED
(UNAUDITED) 04/30/95*
<S> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Capital Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For a Liquidity Share outstanding throughout each period.
<TABLE>
<CAPTION>
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*
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS NATIONS INSTITUTIONAL RESERVES
For an Adviser Share outstanding throughout each period.
<TABLE>
<CAPTION>
NATIONS MUNICIPAL RESERVES
SIX MONTHS
ENDED PERIOD
10/31/95 ENDED
(UNAUDITED) 04/30/95*
<S> <C> <C>
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.
</TABLE>
See Notes to Financial Statements.
<PAGE>
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.
<PAGE>
At October 31, 1995, Nations Treasury Reserves had reverse repurchase
agreements outstanding as follows:
<TABLE>
<S> <C>
Maturity Amount $ 123,202,000
Maturity Date 07/01/96
Market Value of Assets Sold
Under Agreements $123,037,887
</TABLE>
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%,
<PAGE>
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:
<TABLE>
<CAPTION>
FEES FEES EXPENSES
WAIVED WAIVED BY REIMBURSED
BY ADVISER ADMINISTRATOR BY ADVISER
<S> <C> <C> <C>
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
</TABLE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
LIQUIDITY
SHARES PLAN
<S> <C>
Nations Cash Reserves $ 6,587
Nations Treasury Reserves 1,349
Nations Government Reserves 2
Nations Municipal Reserves 2,489
</TABLE>
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:
<TABLE>
<CAPTION>
ADVISER
SHARES
SERVICING
PLAN
<S> <C>
Nations Cash Reserves $ 61,809
Nations Treasury Reserves 75,114
Nations Government Reserves 129,378
Nations Municipal Reserves 86,974
</TABLE>
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:
<TABLE>
<CAPTION>
ADVISER
SHARES
LIQUIDITY SERVICING
SHARES PLAN PLAN
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
OCTOBER 31, APRIL 30,
1995 1995*
<S> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
OCTOBER 31, APRIL 30,
1995 1995*
<S> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
Liquidity Shares:
Sold -- $ 243,816,794
Issued as
reinvestment of dividends $ 58 424
Redeemed -- (503,652,300)
Net increase/(decrease) $ 58 $(259,835,082)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
OCTOBER 31, APRIL 30,
1995 1995*
<S> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
OCTOBER 31, APRIL 30,
1995 1995*
<S> <C> <C>
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.
</TABLE>
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.
<TABLE>
<CAPTION>
ACQUISITION VALUE 10/31/95 PERCENTAGE OF
SECURITY DATE PAR VALUE PER UNIT VALUE NET ASSETS COST
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
REPURCHASE ACQUISITION VALUE 10/31/95 PERCENTAGE OF
AGREEMENT DATE PAR VALUE PER UNIT VALUE NET ASSETS COST
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
IN 1998 IN 1999 IN 2000 IN 2001 IN 2002 IN 2003
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
9. Subsequent Event.
As of November 1, 1995, TSSG will be known as First Data Investor Services
Group, Inc.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
<S> <C>
(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
<PAGE>
(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
<PAGE>
(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
</TABLE>
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.;
<PAGE>
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:
<PAGE>
(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
<PAGE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
* 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)
<PAGE>
* Trustee January 17, 1996
- ----------------------------------
(Thomas S. Word)
/s/ RICHARD H. BLANK, JR.
Richard H. Blank, Jr.
*Attorney-in-Fact
</TABLE>
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> NATIONS CASH RESERVES CAPITAL
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 690,218,658
<INVESTMENTS-AT-VALUE> 690,218,658
<RECEIVABLES> 1,466,272
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 924,462
<TOTAL-ASSETS> 692,609,392
<PAYABLE-FOR-SECURITIES> 25,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,145,073
<TOTAL-LIABILITIES> 27,145,073
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 594,120,261
<SHARES-COMMON-STOCK> 594,120,261
<SHARES-COMMON-PRIOR> 134,066,893
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,288)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 594,116,432
<DIVIDEND-INCOME> 264,527
<INTEREST-INCOME> 6,655,240
<OTHER-INCOME> 0
<EXPENSES-NET> 296,599
<NET-INVESTMENT-INCOME> 6,623,168
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,623,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,956,085)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 493,400,903
<NUMBER-OF-SHARES-REDEEMED> (33,378,695)
<SHARES-REINVESTED> 31,160
<NET-CHANGE-IN-ASSETS> 483,716,248
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,288)
<GROSS-ADVISORY-FEES> 341,139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 676,767
<AVERAGE-NET-ASSETS> 167,931,417
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.030)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> NATIONS CASH RESERVES LIQUIDITY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 690,218,658
<INVESTMENTS-AT-VALUE> 690,218,658
<RECEIVABLES> 1,466,272
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 924,462
<TOTAL-ASSETS> 692,609,392
<PAYABLE-FOR-SECURITIES> 25,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,145,073
<TOTAL-LIABILITIES> 27,145,073
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,630,822
<SHARES-COMMON-STOCK> 11,630,822
<SHARES-COMMON-PRIOR> 2,066
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,288)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,630,747
<DIVIDEND-INCOME> 264,527
<INTEREST-INCOME> 6,655,240
<OTHER-INCOME> 0
<EXPENSES-NET> 296,599
<NET-INVESTMENT-INCOME> 6,623,168
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,623,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (251,162)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 69,571,599
<NUMBER-OF-SHARES-REDEEMED> (58,151,279)
<SHARES-REINVESTED> 208,436
<NET-CHANGE-IN-ASSETS> 483,716,248
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,288)
<GROSS-ADVISORY-FEES> 341,139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 676,767
<AVERAGE-NET-ASSETS> 8,780,915
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.029)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> NATIONS CASH RESERVES ADVISER
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 690,218,658
<INVESTMENTS-AT-VALUE> 690,218,658
<RECEIVABLES> 1,466,272
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 924,462
<TOTAL-ASSETS> 692,609,392
<PAYABLE-FOR-SECURITIES> 25,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,145,073
<TOTAL-LIABILITIES> 27,145,073
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,717,524
<SHARES-COMMON-STOCK> 59,717,524
<SHARES-COMMON-PRIOR> 47,683,400
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,288)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 59,717,140
<DIVIDEND-INCOME> 264,527
<INTEREST-INCOME> 6,655,240
<OTHER-INCOME> 0
<EXPENSES-NET> 296,599
<NET-INVESTMENT-INCOME> 6,623,168
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,623,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,415,921)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 132,871,480
<NUMBER-OF-SHARES-REDEEMED> (120,837,416)
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> 483,716,248
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,288)
<GROSS-ADVISORY-FEES> 341,139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 676,767
<AVERAGE-NET-ASSETS> 49,477,535
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.029)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> NATIONS TREASURY RESERVES CAPITAL
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 628,303,091
<INVESTMENTS-AT-VALUE> 628,303,091
<RECEIVABLES> 884,728
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 46,588
<TOTAL-ASSETS> 629,234,407
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125,330,484
<TOTAL-LIABILITIES> 125,330,484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 446,267,996
<SHARES-COMMON-STOCK> 446,268,767
<SHARES-COMMON-PRIOR> 251,704,182
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,579)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 446,256,877
<DIVIDEND-INCOME> 459,060
<INTEREST-INCOME> 10,162,338
<OTHER-INCOME> 0
<EXPENSES-NET> 434,087
<NET-INVESTMENT-INCOME> 10,187,311
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,187,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,480,416)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 773,104,964
<NUMBER-OF-SHARES-REDEEMED> (578,540,379)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 195,774,296
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,579)
<GROSS-ADVISORY-FEES> 535,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,027,268
<AVERAGE-NET-ASSETS> 293,393,709
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.029)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> NATIONS TREASURY RESERVES LIQUIDITY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 628,303,091
<INVESTMENTS-AT-VALUE> 628,303,091
<RECEIVABLES> 884,728
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 46,588
<TOTAL-ASSETS> 629,234,407
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125,330,484
<TOTAL-LIABILITIES> 125,330,484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,720,528
<SHARES-COMMON-STOCK> 1,720,536
<SHARES-COMMON-PRIOR> 674,203
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,579)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,720,490
<DIVIDEND-INCOME> 459,060
<INTEREST-INCOME> 10,162,338
<OTHER-INCOME> 0
<EXPENSES-NET> 434,087
<NET-INVESTMENT-INCOME> 10,187,311
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,187,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (50,266)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,050,465
<NUMBER-OF-SHARES-REDEEMED> (1,053,748)
<SHARES-REINVESTED> 49,616
<NET-CHANGE-IN-ASSETS> 195,774,296
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,579)
<GROSS-ADVISORY-FEES> 535,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,027,268
<AVERAGE-NET-ASSETS> 1,784,315
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 023
<NAME> NATIONS TREASURY RESERVES ADVISER
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 628,303,091
<INVESTMENTS-AT-VALUE> 628,303,091
<RECEIVABLES> 884,728
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 46,588
<TOTAL-ASSETS> 629,234,407
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125,330,484
<TOTAL-LIABILITIES> 125,330,484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,927,978
<SHARES-COMMON-STOCK> 55,928,047
<SHARES-COMMON-PRIOR> 55,764,669
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,579)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 55,926,556
<DIVIDEND-INCOME> 459,060
<INTEREST-INCOME> 10,162,338
<OTHER-INCOME> 0
<EXPENSES-NET> 434,087
<NET-INVESTMENT-INCOME> 10,187,311
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,187,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,656,629)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 94,099,253
<NUMBER-OF-SHARES-REDEEMED> (93,935,933)
<SHARES-REINVESTED> 58
<NET-CHANGE-IN-ASSETS> 195,774,296
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,579)
<GROSS-ADVISORY-FEES> 535,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,027,268
<AVERAGE-NET-ASSETS> 59,831,094
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> NATIONS GOVT RESERVES CAPITAL
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 154,413,785
<INVESTMENTS-AT-VALUE> 154,413,785
<RECEIVABLES> 504,672
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,668
<TOTAL-ASSETS> 154,930,125
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 639,460
<TOTAL-LIABILITIES> 639,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,559,813
<SHARES-COMMON-STOCK> 40,559,830
<SHARES-COMMON-PRIOR> 2,011
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3,083)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 40,558,812
<DIVIDEND-INCOME> 86,495
<INTEREST-INCOME> 3,105,568
<OTHER-INCOME> 0
<EXPENSES-NET> 238,588
<NET-INVESTMENT-INCOME> 2,953,475
<REALIZED-GAINS-CURRENT> (2,675)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,950,800
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (117,132)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59,202,777
<NUMBER-OF-SHARES-REDEEMED> (18,645,018)
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> 55,040,242
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (408)
<GROSS-ADVISORY-FEES> 162,308
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 397,572
<AVERAGE-NET-ASSETS> 4,154,345
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> (0.000)
<PER-SHARE-DIVIDEND> (0.029)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> NATIONS GOVT RESERVES LIQUIDITY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 154,413,785
<INVESTMENTS-AT-VALUE> 154,413,785
<RECEIVABLES> 504,672
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,668
<TOTAL-ASSETS> 154,930,125
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 639,460
<TOTAL-LIABILITIES> 639,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,695
<SHARES-COMMON-STOCK> 2,121
<SHARES-COMMON-PRIOR> 2,063
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3,083)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,121
<DIVIDEND-INCOME> 86,495
<INTEREST-INCOME> 3,105,568
<OTHER-INCOME> 0
<EXPENSES-NET> 238,588
<NET-INVESTMENT-INCOME> 2,953,475
<REALIZED-GAINS-CURRENT> (2,675)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,950,800
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (58)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 58
<NET-CHANGE-IN-ASSETS> 55,040,242
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (408)
<GROSS-ADVISORY-FEES> 162,308
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 397,572
<AVERAGE-NET-ASSETS> 2,087
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> (0.000)
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 033
<NAME> NATIONS GOVT RESERVES ADVISER
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 154,413,785
<INVESTMENTS-AT-VALUE> 154,413,785
<RECEIVABLES> 504,672
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,668
<TOTAL-ASSETS> 154,930,125
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 639,460
<TOTAL-LIABILITIES> 639,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113,732,240
<SHARES-COMMON-STOCK> 113,732,586
<SHARES-COMMON-PRIOR> 99,247,546
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3,083)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 113,729,732
<DIVIDEND-INCOME> 86,495
<INTEREST-INCOME> 3,105,568
<OTHER-INCOME> 0
<EXPENSES-NET> 238,588
<NET-INVESTMENT-INCOME> 2,953,475
<REALIZED-GAINS-CURRENT> (2,675)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,950,800
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,836,285)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 165,425,713
<NUMBER-OF-SHARES-REDEEMED> (150,940,730)
<SHARES-REINVESTED> 57
<NET-CHANGE-IN-ASSETS> 55,040,242
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (408)
<GROSS-ADVISORY-FEES> 162,308
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 397,572
<AVERAGE-NET-ASSETS> 103,460,750
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.027
<PER-SHARE-GAIN-APPREC> (0.000)
<PER-SHARE-DIVIDEND> (0.027)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> NATIONS MUNICIPAL RESERVES CAPITAL
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 103,809,753
<INVESTMENTS-AT-VALUE> 103,809,753
<RECEIVABLES> 892,348
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 35,030
<TOTAL-ASSETS> 104,737,131
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,489,974
<TOTAL-LIABILITIES> 1,489,974
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,982,197
<SHARES-COMMON-STOCK> 34,982,197
<SHARES-COMMON-PRIOR> 32,353,465
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,152)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 34,981,801
<DIVIDEND-INCOME> 50,142
<INTEREST-INCOME> 2,034,626
<OTHER-INCOME> 0
<EXPENSES-NET> 195,673
<NET-INVESTMENT-INCOME> 1,889,095
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,889,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (614,282)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,842,781
<NUMBER-OF-SHARES-REDEEMED> (17,214,049)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,180,341
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,152)
<GROSS-ADVISORY-FEES> 158,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 385,170
<AVERAGE-NET-ASSETS> 32,630,868
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.019
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.019)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> NATIONS MUNICIPAL RESERVES LIQUIDITY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 103,809,753
<INVESTMENTS-AT-VALUE> 103,809,753
<RECEIVABLES> 892,348
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 35,030
<TOTAL-ASSETS> 104,737,131
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,489,974
<TOTAL-LIABILITIES> 1,489,974
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,265,079
<SHARES-COMMON-STOCK> 2,265,079
<SHARES-COMMON-PRIOR> 2,591,068
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,152)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,265,054
<DIVIDEND-INCOME> 50,142
<INTEREST-INCOME> 2,034,626
<OTHER-INCOME> 0
<EXPENSES-NET> 195,673
<NET-INVESTMENT-INCOME> 1,889,095
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,889,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (60,014)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,251,036
<NUMBER-OF-SHARES-REDEEMED> (26,627,863)
<SHARES-REINVESTED> 50,838
<NET-CHANGE-IN-ASSETS> 4,180,341
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,152)
<GROSS-ADVISORY-FEES> 158,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 385,170
<AVERAGE-NET-ASSETS> 3,291,333
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.018
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.018)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 043
<NAME> NATIONS MUNICIPAL RESERVES ADVISER
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 103,809,753
<INVESTMENTS-AT-VALUE> 103,809,753
<RECEIVABLES> 892,348
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 35,030
<TOTAL-ASSETS> 104,737,131
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,489,974
<TOTAL-LIABILITIES> 1,489,974
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,001,033
<SHARES-COMMON-STOCK> 66,001,033
<SHARES-COMMON-PRIOR> 64,123,435
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,152)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 66,000,302
<DIVIDEND-INCOME> 50,142
<INTEREST-INCOME> 2,034,626
<OTHER-INCOME> 0
<EXPENSES-NET> 195,673
<NET-INVESTMENT-INCOME> 1,889,095
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,889,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,214,799)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 136,769,203
<NUMBER-OF-SHARES-REDEEMED> (134,891,642)
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 4,180,341
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,152)
<GROSS-ADVISORY-FEES> 158,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 385,170
<AVERAGE-NET-ASSETS> 69,304,409
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.018
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.018)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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%
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.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
<PAGE>
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
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
