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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-05536 |
Capital One Funds
(Exact name of registrant as specified in charter) |
3435 Stelzer Road; Columbus, Ohio | 43219 | |
(Address of principal executive offices) | (Zip code) |
Citi Fund Services Ohio, Inc., 3435 Stelzer Road; Columbus, Ohio 43219
(Name and address of agent for service) |
Registrant’s telephone number, including area code: 1-800-999-0426
Date of fiscal year end: August 31
Date of reporting period: August 31, 2007
Table of Contents
Item 1. | Reports to Stockholders. |
Table of Contents
ANNUAL REPORT
August 31, 2007
Capital One Capital Appreciation Fund
Class A Shares
Class B Shares
Capital One Louisiana Municipal Income Fund
Class A Shares
Class B Shares
Capital One Mid Cap Equity Fund
Class A Shares
Class B Shares
Capital One Total Return Bond Fund
Capital One U.S. Government Income Fund
Capital One Cash Reserve Fund
Class A Shares
Class B Shares
Capital One U.S. Treasury Money Market Fund
Not FDIC Insured • No Bank Guarantee • May Lose Value
Table of Contents
1
Management’s Discussion of Fund Performance
2
12
14
16
35
Combined Notes to Financial Statements
42
Report of Independent Registered Public Accounting Firm
50
51
Board of Trustees and Officers
52
Voting Proxies on Fund Portfolio Securities
Back Cover
Quarterly Portfolio Schedule
Back Cover
Table of Contents
This Page is Intentionally Left Blank
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Dear Shareholder:
We are pleased to provide you with the enclosed Annual Report for the Capital One Funds. This report covers the 12-month fiscal period from September 1, 2006 through August 31, 2007. It includes a discussion of factors affecting the Funds’ performance during the past fiscal year and a complete listing of each Fund’s portfolio holdings and audited financial statements.
Over the 12-month period, the domestic economy has shown somewhat erratic growth, with a general slowing trend. The second calendar quarter of 2007 was above trend at a 3.8% annual rate, and represented a snap-back from the sluggish first quarter. The housing market, which fueled healthy economic growth for several years, was a noticeable drag on growth over the last half of the period, as housing prices began to decline in many markets, delinquencies were on the rise and homebuilders saw their inventory of unsold homes increase. The consumer has continued to spend at a solid pace, consistent with strong employment trends, and business spending was relatively strong. During the latter portion of the reporting period, speculation increased that the Federal Reserve (the “Fed”) would begin to reduce short-term interest rates in support of the interest-sensitive U.S. housing market.
The U.S. financial markets performed well during the reporting period, particularly equities. The S&P 500 Index rose 15.13%, above its long-term historical average annual growth rate, while the S&P 400 Midcap Index increased 16.48%. The small cap market, represented by the S&P 600 Smallcap Index rose by a respectable 14.28%. The bulk of these gains were achieved in the first half of the reporting period. Thereafter sub-prime mortgage credit squeeze, the overriding concern in July and August, caused a correction in equity prices near the end of the reporting period.
The U.S. investment grade fixed income markets exhibited returns near the historical averages. The broad market, represented by the Lehman Brothers Aggregate Bond Index, rose 5.26%, indicating modest capital gains or losses over the period. The municipal market, according to the Lehman Brothers 7-Year Municipal Bond Index, increased 3.24% over the 12-month period.
For the 12-month period ended August 31, 2007 the Capital One equity funds, including the Capital One Capital Appreciation Fund and the Capital One Mid Cap Equity Fund produced positive returns1, in this strong market environment. The Capital One fixed income funds, the Capital One U.S. Government Income Fund, the Capital One Total Return Bond Fund and the Capital One Louisiana Municipal Income Fund also produced positive returns1, though lower than those of the equity funds. Bond funds provide a greater level of income and stability to investors’ portfolios and improve the diversification2 of a portfolio that already includes equities as its primary asset class.3
The Capital One Cash Reserve Fund and the Capital One U.S. Treasury Money Market Fund’s operating environment were benign through much of the reporting period. During the entire reporting period, the Fed maintained a federal funds rate of 5.25%. These Funds provide a safe haven for shareholders who wish to receive a competitive level of income on a daily basis and have funds available as needed without being subject to market fluctuations.
Thank you for investing through the Capital One Funds. We are committed to providing you with, professional investment management in the key financial markets with an emphasis on diversification2, and a high level of service.
Sincerely, |
![]() |
Richard L. Chauvin, Jr. CFA |
President |
September 25, 2007 |
Investment Considerations:
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
Mid-capitalization funds typically carry additional risks since smaller companies generally have a higher risk of failure.
Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return.
† | An investment in the Capital One money market funds is not insured or guaranteed by the FDIC or any other government agency. Although the funds seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. |
Past performance does not guarantee future results.
1 | No load returns. |
2 | Diversification does not assure a profit nor protect against loss. |
3 | For detailed information pertaining to the Funds’ performance please refer to the Management’s Discussion of Fund Performance section which begins on page 2 of this report. |
Annual Report
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Table of Contents
2007 Annual Report Management’s Discussion of Fund Performance
Capital One Capital Appreciation Fund
Market Review
The domestic equity markets performed well during the Fund’s fiscal year ended August 31, 2007, although it was a volatile climb upward.
The S&P 500 Index rose 15.13%, the S&P 400 Midcap Index increased 16.48%, and the S&P 600 Smallcap Index rose by 14.28%. During the first half of the fiscal year, stocks rose steadily as the U.S. economy grew at a subdued pace. During this time, corporate earnings growth slowed down, and in the first calendar quarter of 2007 earnings-per-share growth for the S&P 500 Index grew at less than a double-digit rate for the first time in 15 quarters. Earnings have grown faster in the second calendar quarter of 2007 than the first and this acceleration is expected to continue into the third and fourth quarters of 2007. We believe this acceleration, should it materialize, could be one of the major drivers of equity prices in the near-term.
The equity markets experienced a mild disruption in late February of 2007 as equity investors suddenly became cautious about global investment risks and global economic growth. These fears quickly abated and the rise in equity prices resumed until the late summer of 2007 when new worries about credit market risks disturbed equity investors’ comfort levels once more. Again, these fears were calmed and, after correcting by approximately 10 percentage points between mid-July and mid-August, the bull market resumed into the end of the Fund’s fiscal year.
Portfolio Performance
The Capital One Capital Appreciation Fund produced a total return of 14.81% (Class A Shares at net asset value) for the fiscal year ended August 31, 2007, while the S&P 500 Index returned 15.13%. The portfolio has been managed in close accordance with the Adviser’s risk-controlled core diversified1 process.
During the fiscal year, a number of stocks in the portfolio significantly outperformed the market thus contributing positively to performance. Phelps Dodge (copper mining; acquired by Freeport Copper), Apple (computers and consumer electronics), McDermott (energy services), MEMC Technologies (semiconductor supplier) and Paccar (heavy equipment manufacturer) were very strong contributors. Conversely, a few companies contributed negatively to portfolio performance. Tellabs (telecommunications equipment), Sandisk (computer equipment), Barr Laboratories (pharmaceuticals), and Archer Daniels Midland are notable underperformers that were sold during the fiscal year.†
Strategy
The risk-controlled core diversified process entails utilization of a multi-factor approach to identifying equity securities that are expected to outperform the market. This approach looks at earnings growth and quality indicators as well as valuation measures. Portfolio construction uses the results of that multi-factor approach in conjunction with a risk management process designed to limit equity portfolio exposure to certain identifiable risks that the Adviser believes do not add value in a risk/reward context. The Adviser controls for exposures to risks via proxies such as weighted average market capitalization, portfolio beta2, style (i.e., growth vs. value) exposure, and industry and sector weightings. The portfolio is compared to the benchmark in these respects, and exposure to these characteristics is kept closely in line with the benchmark characteristics.†
As a result of this process, factors that materially affected the Fund performance was security selection. Portfolio holdings are constantly evaluated in accordance with the Adviser’s equity ranking process and transactions made throughout the year are made in close accordance to that process.
Investment Considerations:
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
1 | Diversification does not assure a profit nor protect against loss. |
2 | Beta analyzes the market risk of a fund by showing how responsive the fund is to the market, which has a beta of 1.00. Usually, higher betas represent riskier investments. |
† | Portfolio composition is subject to change. |
Past performance does not guarantee future results. Performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. For performance data current to the most recent month end, visit our website at www.capitalone.com or call 1-800-999-0426 for after tax returns. |
Annual Report
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Capital One Capital Appreciation Fund
PERFORMANCE As of August 31, 2007
Assumes a $10,000 investment in the Class A Shares at net asset value
Performance data quoted represents past performance which is no guarantee of future results. The above graph assumes an initial hypothetical investment of $10,000 from 8/31/97 to 8/31/07 and includes changes in share price, reinvestment of dividends and capital gains. The calculation does not assume the 4.50% maximum sales charge applicable to Class A Shares. Performance has not been adjusted to reflect any applicable sales charges. If sales charges had been included, the Fund’s ending value would have been $17,578.
PERFORMANCE As of August 31, 2007
AVERAGE ANNUAL TOTAL RETURN | NET EXPENSE RATIO† | GROSS EXPENSE RATIO† | ||||||||||||||||||
Inception Date | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||||||||||
Class A Shares* | 10/14/88 | 9.65 | % | 9.99 | % | 9.65 | % | 5.80 | % | 1.20 | % | 1.20 | % | |||||||
Class B Shares** | 12/2/96 | 9.44 | % | 9.93 | % | 9.59 | % | 5.66 | % | 1.95 | % | 1.95 | % | |||||||
S&P 500 Index | 15.13 | % | 12.16 | % | 12.00 | % | 6.75 | % | ||||||||||||
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, and after-tax returns call 1-800-999-0426.
There are currently no waivers in effect for A & B Shares
* | Reflects 4.50% maximum sales charge. |
** | Reflects the applicable contingent derferred sales charge (CDSC), maximum of 5.50%. |
† | The above expense ratios are from the Fund’s prospectus dated December 31, 2006. Additional information pertaining to the Fund’s expense ratios as of August 31, 2007 can be found in the Financial Highlights. |
The Performance of the Capital One Appreciation Fund is measured against the Standard & Poor’s 500 Index (“S&P 500”) an unmanaged index of 500 selected common stocks most of which are listed of the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents two-thirds of the total market value of all domestic common stocks. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management, fund accounting fees and taxes. The Fund’s performance reflects the deduction of fees for these services. Investors cannot invest directly in an index.
The Capital One Funds are distributed by Foreside Distribution Services, L.P. Capital One Asset Management, LLC is the Investment Adviser and Capital One, N.A. is the custodian to the Capital One Funds and receives compensation for their services.
Annual Report
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Capital One Louisiana Municipal Income Fund
Market Review
The year ended August 31, 2007 was another year in which long taxable rates did not change much point to point but experienced significant volatility in the interim. The yields on Ten-year Treasury bonds declined 0.20% in the year, but also saw a sharp spike to higher yields last spring, as credit conditions tightened; and an equally steep decline last summer as fear of deteriorating credit conditions spurred strong demand for government securities. The municipal bond curve steepened with the 30 year AAA General Obligations yield rising 38 basis points (0.38%) and the one year increasing by only 12 basis points (0.12%).
The most significant development in the last year was the spread of illiquidity in the debt markets related to the sub-prime mortgage crisis, which caused a significant widening in credit spreads in most sectors including municipals. We have managed our Fund relatively neutral to the benchmarks in recent quarters, given these extreme crosscurrents, pending clarification of the economic outlook. It remains to be seen if the Federal Reserve’s (the “Fed”) actions to stabilize the credit markets and spur economic growth will be sufficient or if additional stimulus will be required. We believe the Fed could ultimately be successful in restoring order and growth to the U.S. economy and at some point a rising interest rate environment may likely re-emerge, but until that scenario comes into sharper focus we expect to continue relatively neutral duration.†
Portfolio Performance
The newly-adopted benchmark for the Fund, the Lehman Brothers 7-Year Insured Municipal Bond Index produced a 12 month total return of 3.24% for the period ended August 31, 2007.
The Capital One Louisiana Municipal Income Fund produced a 12-month total return of 2.61% (Class A Shares at net asset value). Lipper reported an average return of 2.05% among all Louisiana Municipal Debt Funds1 for the period ended August 31, 2007.
The Fund underperformed its benchmark index for the period due in part to the municipal bonds in the Fund’s portfolio that are shorter and longer than the Lehman 7-Year Insured Municipal Bond Index which primarily contains securities that are six to eight years in maturity. Recent dislocations in the global fixed income markets contributed to a disproportionate increase in longer municipal yields. This shift in the slope of the municipal yield curve caused several longer securities holdings to under perform. This had an impact on the Fund return relative to this index.
Strategy
The Fund strategy is focused on delivering enhanced performance while managing duration and credit risk within acceptable parameters that are consistent with the Fund’s objectives. Portfolio strategy is generally focused on delivering a high level of income, exempt from both Federal and Louisiana income taxes, consistent with the management of interest rate risk and credit risk. The current strategy is to maintain a neutral stance relative to benchmark duration and to take advantage of market opportunities in Louisiana municipal marketplace.†
Investment Considerations:
Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return.
Certain shareholders may be subject to the Alternative Minimum Tax (AMT). Federal income tax rules will apply to any capital gains distributions.
The Fund’s income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax.
1 | The Lipper Louisiana Municipal Debt Funds Average is an equally weighted average consisting of managed mutual funds that invest at least 65% of their assets in municipal debt issues that are exempt from taxation in Louisiana, with dollar-weighted average maturities of five to ten years. |
2 | Diversification does not assure a profit nor protect against loss. |
† | Portfolio composition is subject to change. |
Past performance does not guarantee future results. Performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. For performance data current to the most recent month end, visit our website at www.capitalone.com or call 1-800-999-0426 for after tax returns. |
Annual Report
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Capital One Louisiana Municipal Income Fund
PERFORMANCE As of August 31, 2007
Assumes a $10,000 investment in the Class A Shares at net asset value.
Performance data quoted represents past performance which is no guarantee of future results. The above graph assumes an initial hypothetical investment of $10,000 from 8/31/97 to 8/31/07 and includes changes in share price, reinvestment of dividends and capital gains. The calculation does not assume the 3.00% maximum sales charge applicable to Class A Shares. Performance has not been adjusted to reflect any applicable sales charges. If sales charges had been included, the Fund’s ending value would have been $15,267.
PERFORMANCE As of August 31, 2007
AVERAGE ANNUAL TOTAL RETURN | Since | NET EXPENSE RATIO† | GROSS EXPENSE RATIO† | ||||||||||||||||||||
Inception Date | 1-Year | 3-Year | 5-Year | 10-Year | |||||||||||||||||||
Class A Shares* | 10/14/88 | -0.44 | % | 1.73 | % | 2.87 | % | 4.32 | % | — | 0.69 | % | 1.05 | % | |||||||||
Class B Shares** | 11/15/01 | -3.68 | % | 0.68 | % | 2.30 | % | — | 2.76 | % | 1.54 | % | 1.80 | % | |||||||||
Lehman Brothers 7-Year Insured Municipal Bond Index | 3.24 | % | 2.92 | % | 3.72 | % | 5.01 | % | — | ||||||||||||||
Lehman Brothers 10-Year Insured Municipal Bond Index | 2.88 | % | 3.29 | % | 4.01 | % | 5.28 | % | — | ||||||||||||||
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, and after-tax returns call 1-800-999-0426.
The performance above reflects fee reductions in effect from September 1, 2006 through August 31, 2007. Voluntary fee reductions may be discontinued at any time. If such fee reductions had not occurred, the quoted performance would be lower.
* | Reflects 3.00% maximum sales charge. |
** | Reflects the applicable contingent derferred sales charge (CDSC), maximum of 5.50%. |
*** | Since inception performance is not shown for any class period greater than 10 years. |
† | The above expense ratios are from the Fund’s prospectus dated December 31, 2006. Additional information pertaining to the Fund’s expense ratios as of August 31, 2007 can be found in the Financial Highlights. |
The Capital One Louisiana Municipal Income Fund has changed its primary performance benchmark index from the Lehman Brothers 10-Year Insured Municipal Bond Index to the Lehman Brothers 7-Year Insured Municipal Bond Index to better reflect the market in which the Fund primarily invests. The Lehman Brothers 7-Year Insured Bond Index is a broad-based market index comprised of investment-grade municipal bonds with maturities close to seven years. The Lehman Brothers 10-Year Insured Bond Index is a broad-based market index comprised of investment-grade municipal bonds with maturities close to ten years. These indices are unmanaged and do not reflect the deduction of fees associated with a mutual fund, such as investment managed, fund accounting and taxes. The Fund’s performance reflects the deduction of fees for these services. Investors can invest directly in an index.
The Capital One Funds are distributed by Foreside Distribution Services, L.P. Capital One Asset Management, LLC is the Investment Adviser and Capital One, N.A. is the custodian to the Capital One Funds and receives compensation for their services.
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Capital One Mid Cap Equity Fund
Market Review
The domestic equity markets performed well during the Fund’s fiscal year ended August 31, 2007, although it was a volatile climb upward.
The S&P 500 Index rose 15.13%, the S&P 400 Midcap Index increased 16.48%, and the S&P 600 Smallcap Index rose by 14.28%. During the first half of the fiscal year, stocks rose steadily as the U.S. economy grew at a subdued pace. During this time, corporate earnings growth slowed down, and in the first calendar quarter of 2007 earnings-per-share growth for the S&P 500 Index grew at less than a double-digit rate for the first time in 15 quarters. Earnings have grown faster in the second calendar quarter of 2007 than the first and this acceleration is expected to continue into the third and fourth quarters of 2007. We believe this acceleration, should it materialize, could be one of the major drivers of equity prices in the near-term.
The equity markets experienced a mild disruption in late February of 2007 as equity investors suddenly became cautious about global investment risks and global economic growth. These fears quickly abated and the rise in equity prices resumed until the late summer of 1997 when new worries about credit market risks disturbed equity investors’ comfort levels once more. Again, these fears were calmed and, after correcting by approximately 10 percentage points between mid-July and mid-August, the bull market resumed into the end of the Fund’s fiscal year.
Portfolio Performance
The Capital One Mid Cap Equity Fund produced at total return of 13.69% (Class A Shares at net asset value) for the fiscal year ended August 31, 2007, while the S&P Midcap 400 Index returned 16.48%. The portfolio has been managed in close accordance with the Adviser’s risk-controlled core diversified1 process.
During the fund’s fiscal year, a number of stocks in the portfolio significantly outperformed the market thus contributing positively to performance. Cummins Inc (heavy equipment manufacturer), Celanese Corp (chemicals processor), and Avnet (electronics distributor) were all very strong performers and remain in the portfolio. Long-time fund holding Sequa (defense) was acquired during the fiscal year at a 75% premium to the then current market price. On the negative side, a couple of new positions in the fund underperformed thus inhibiting portfolio performance. RF Micro Device (telecommunications equipment), Family Dollar Stores (discount retailer), NBTY (nutritional products) and Cabot Oil & Gas (energy exploration) are a few examples of this. Portfolio underperformance versus the benchmark was also influenced by the funds slight exposure to Value (vs. Growth) stocks at a time when growth stocks significantly outperformed. This exposure is a by-product of the security selection process and not a strategy of the Advisor.
Strategy
The risk-controlled core diversified process entails utilization of a multi-factor approach to identifying equity securities that are expected to outperform the market. This approach looks at earnings growth and quality indicators as well as valuation measures. Portfolio construction uses the results of that multi-factor approach in conjunction with a risk management process designed to limit equity portfolio exposure to certain identifiable risks that the Adviser believes do not add value in a risk/reward context. The Adviser controls for exposures to risks via proxies such as weighted average market capitalization, portfolio beta2, style (i.e., growth vs. value) exposure, and industry and sector weightings. The portfolio is compared to the benchmark in these respects, and exposure to these characteristics is kept very closely in line with the benchmark characteristics.†
As a result of this process, factors that materially affected the Fund performance were limited almost exclusively to security selection. Portfolio holdings are constantly evaluated in accordance with the Adviser’s equity ranking process and transactions made throughout the year are made in close accordance to that process.
During the preceding 12-month period, portfolio underperformance was largely derived in two separate months—May and August, 2007. During this period portfolio exposures to aforementioned risks were minimal, thus security selection was the main contributor. During those months, factors that the Adviser views as good long-term indicators of stock performance underperformed the market overall and their own long-term track record. These factors are core components of the Adviser’s common stock evaluation process. The Adviser fully believes these are short term issues related to market expectations about risk and thus no adjustment to the factors is necessary.†
Investment Considerations:
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
Mid-capitalization funds typically carry additional risks since smaller companies generally have a higher risk of failure.
1 | Diversification does not assure a profit nor protect against loss. |
2 | Beta analyzes the market risk of a fund by showing how responsive the fund is to the market, which has a beta of 1.00. Usually, higher betas represent riskier investments. |
† | Portfolio composition is subject to change. |
Past performance does not guarantee future results. Performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. For performance data current to the most recent month end, visit our website at www.capitalone.com or call 1-800-999-0426 for after tax returns. |
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Capital One Mid Cap Equity Fund
PERFORMANCE As of August 31, 2007
Assumes a $10,000 investment in the Class A Shares at net asset value.
Performance data quoted represents past performance which is no guarantee of future results. The above graph assumes an initial hypothetical investment of $10,000 from 8/31/97 to 8/31/07 and includes changes in share price, reinvestment of dividends and capital gains. The calculation does not assume the 4.50% maximum sales charge applicable to Class A Shares. Performance has not been adjusted to reflect any applicable sales charges. If sales charges had been included, the Fund’s ending value would have been $27,980.
PERFORMANCE As of August 31, 2007
AVERAGE ANNUAL TOTAL RETURN | Since Inception*** | NET EXPENSE RATIO† | GROSS EXPENSE RATIO† | ||||||||||||||||||||
Inception Date | 1-Year | 3-Year | 5-Year | 10-Year | |||||||||||||||||||
Class A Shares* | 5/1/86 | 8.60 | % | 13.64 | % | 13.12 | % | 10.84 | % | — | 1.24 | % | 1.24 | % | |||||||||
Class B Shares** | 7/13/98 | 7.37 | % | 13.54 | % | 13.08 | % | — | 9.60 | % | 1.99 | % | 1.99 | % | |||||||||
S&P Midcap 400 Index | 16.48 | % | 15.75 | % | 15.60 | % | 11.93 | % | — | ||||||||||||||
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, and after-tax returns call 1-800-999-0426.
There are currently no waivers in effect for A & B Shares
* | Reflects 4.50% maximum sales charge. |
** | Reflects the applicable contingent derferred sales charge (CDSC), maximum of 5.50%. |
*** | Since inception performance is not shown for any class period greater than 10 years. |
† | The above expense ratios are from the Fund’s prospectus dated December 31, 2006. Additional information pertaining to the Fund’s expense ratios as of August 31, 2007 can be found in the Financial Highlights. |
The Performance of the Capital One Mid Cap Equity Fund is measured against the Standard & Poor’s Midcap 400 Index (“S&P Midcap 400”) which is an unmanaged index generally representative of 400 stocks in the mid-range sector of the domestic stock market, representing all major industries. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management, fund accounting fees, and taxes. The Fund’s performance reflects the deduction of fees for these services. It is not possible to invest directly in any index.
The Capital One Funds are distributed by Foreside Distribution Services, L.P. Capital One Asset Management, LLC is the Investment Adviser and Capital One, N.A. is the custodian to the Capital One Funds and receives compensation for their services.
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Capital One Total Return Bond Fund
Market Review
The year ended August 31, 2007 was another year in which long rates did not change much point to point, but experienced significant volatility in the interim. The yield on a Ten-year Treasury bond declined 0.20% in the year, but also saw a sharp spike to higher yields last spring, as credit conditions tightened; and an equally steep decline last summer as fear of deteriorating credit conditions spurred strong demand for U.S. Treasury securities, with the yield on Treasury bills declining 0.90% and two year notes declining 0.64%.
The most significant development in the last year was the spread of illiquidity in the debt markets related to the sub-prime mortgage crisis, which caused a significant widening in credit spreads in most sectors. We have managed the Fund relatively neutral to the benchmarks in recent quarters, given these extreme crosscurrents, pending clarification of the economic outlook. It remains to be seen if the Federal Reserve’s (the “Fed”) actions to stabilize the credit markets and spur economic growth will be sufficient or if additional stimulus will be required. We believe the Fed may ultimately be successful in restoring order and growth to the U.S. economy and at some point a rising interest rate environment could likely re-emerge, but until that scenario comes into sharper focus we expect to continue relatively neutral duration policies.†
Portfolio Performance
The Capital One Total Return Bond Fund produced a total return of 4.17% (Fund Shares at net asset value). Lipper, a well-known mutual fund evaluation service, reported the average return among Intermediate Investment Grade Debt Funds1 at 4.08% for the period.
The Lehman Brothers U.S. Aggregate Bond benchmark index produced a 5.25% total return for the year ended August 31, 2007.
The relative out-performance of U.S. Treasury securities and the under-performance of AAA Commercial Mortgage Backed securities held in the portfolio, contributed to performance levels that were below our target levels. Returns in the highly volatile credit sector closely matched the index returns, while an overweight in Agency securities contributed positively.†
Strategy
The portfolio is currently positioned with a duration that is neutral to the benchmark, with modest over-weight positions in Agency securities and Commercial Mortgage Backed Securities.†
Investment Considerations:
Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return.
1 | The Lipper Intermediate Investment Grade Debt Funds Average is an equally weighted average consisting of managed mutual funds that invest at least 65% of their assets in investment grade issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. |
† | Portfolio composition is subject to change. |
Past performance does not guarantee future results. Performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. For performance data current to the most recent month end, visit our website at www.capitalone.com or call 1-800-999-0426 for after tax returns. |
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Capital One Total Return Bond Fund
PERFORMANCE As of August 31, 2007
Assumes a $10,000 investment in the Fund at net asset value.
Performance data quoted represents past performance which is no guarantee of future results. The above graph assumes an initial hypothetical investment of $10,000 from 8/31/97 to 8/31/07 and includes changes in share price, reinvestment of dividends and capital gains. The calculation does not assume the 3.00% maximum sales charge applicable to the Fund. Performance has not been adjusted to reflect any applicable sales charges. If sales charges had been included, the Fund’s ending value would have been $15,345.
PERFORMANCE As of August 31, 2007
AVERAGE ANNUAL TOTAL RETURN | NET EXPENSE RATIO† | GROSS EXPENSE RATIO† | ||||||||||||||||||
Inception Date | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||||||||||
Total Return Bond Fund* | 11/2/92 | 1.05 | % | 1.58 | % | 2.38 | % | 4.37 | % | 0.80 | % | 1.07 | % | |||||||
Lehman Brothers U.S. Aggregate Bond Index | 5.25 | % | 3.69 | % | 4.31 | % | 6.04 | % | ||||||||||||
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, and after-tax returns call 1-800-999-0426.
The performance above reflects any fee reductions ineffect from September 1, 2006 through August 31, 2007. Voluntary fee reductions may be discontinued at any time. If such fee reductions had not occurred, the quoted performance would be lower.
* | Reflects 3.00% maximum sales charge. |
† | The above expense ratios are from the Fund’s prospectus dated December 31, 2006. Additional information pertaining to the Fund’s expense ratios as of August 31, 2007 can be found in the Financial Highlights. |
The performance of the Capital One Total Return Bond Fund is measured against the Lehman Brothers U.S. Aggregate Bond Index which is an unmanaged market value-weighted performance benchmark for investment-grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The index does not reflect the deduction of fees associated with a mutual fund, such as investment management, fund accounting fees, and taxes. The Fund’s performance reflects the deduction of fees for these services. It is not possible to invest directly in any index.
The Capital One Funds are distributed by Foreside Distribution Services, L.P. Capital One Asset Management, LLC is the Investment Adviser and Capital One, N.A. is the custodian to the Capital One Funds and receives compensation for their services.
Annual Report
9
Table of Contents
Capital One U.S. Government Income Fund
Market Review
The year ended August 31, 2007 was another year in which long rates did not change much point to point, but experienced significant volatility in the interim. The yield on a Ten-year Treasury bond declined 0.20% in the year, but also saw a sharp spike to higher yields last spring, as credit conditions tightened; and an equally steep decline last summer as fear of deteriorating credit conditions spurred strong demand for U.S. Treasury securities, with the yield on Treasury bills declining 0.90% and two year notes declining 0.64%.
The most significant development in the last year was the spread of illiquidity in the debt markets related to the sub-prime mortgage crisis, which caused a significant widening in credit spreads in most sectors. We have managed the Fund relatively neutral to the benchmarks in recent quarters, given these extreme crosscurrents, pending clarification of the economic outlook. It remains to be seen if the Federal Reserve’s (the “Fed”) action to stabilize the credit markets and spur economic growth will be sufficient or if additional stimulus could be required. We believe the Fed could ultimately be successful in restoring order and growth to the U.S. economy and at some point a rising interest rate environment may likely re-emerge, but until that scenario comes into sharper focus we expect to continue relatively neutral duration policies.
Portfolio Performance
The Capital One U.S. Government Income Fund produced a total return of 5.13% (Fund Shares at net asset value) for the 12-month period ended August 31, 2007. Lipper reported the average return among Intermediate U.S. Government Funds1 for the period at 4.68%. The Fund’s benchmarks, the Lehman Brothers Intermediate Government Index and the Lehman Brothers U.S. Government Income Blend Index2, produced total returns of 5.91% and 5.61%, respectively.
Performance has lagged in recent quarters due to our underweight in U.S. Treasury securities versus the Lehman U.S. Government Intermediate Index and due to our Agency overweight relative to the 50/50 blend of that index and the Lehman Mortgage Backed Index. While we have benefited from this strategy in the past, the flight to quality (i.e. Treasury securities) triggered by the sub-prime mortgage crisis, caused widening of all spread product3. Our Treasury allocation in the Fund is 21.6% versus the 66% allocation in the Lehman Government Intermediate Index, and the 50/50 blend allocation of 33%.†
Strategy
Portfolio strategy continues to focus on high quality, income-producing government or government sponsored Agency securities with occasional minor adjustments to duration risk. Going forward we expect to employ relatively neutral duration strategies in this Fund.†
Investment Considerations:
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.
1 | The Lipper Intermediate U.S. Government Funds is an equally weighted average consisting of managed mutual funds that invest at least 65% of their assets in securities issued or guaranteed by the U.S. government, its agencies, or its instrumentalities, with dollar-weighted average maturities of five to ten years. |
2 | The Lehman Brothers U.S. Government Income Blend Index is a blend of 50% of the Lehman Brothers Intermediate Government Fund and 50% of the Lehman Brothers Mortgage Index. |
3 | A spread product is a term used in referring to taxable bonds that are Treasury Securities (i.e. agency bonds, corporate bonds, asset-backed securities and mortgage-backed securities). The bonds are referred to as “spread product” because they are evaluated based on the difference between their yield and the yield of a comparable Treasury security. The difference in yield is the “spread”. |
† | Portfolio composition is subject to change. |
Past performance does not guarantee future results. Performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. For performance data current to the most recent month end, visit our website at www.capitalone.com or call 1-800-999-0426 for after tax returns. |
Annual Report
10
Table of Contents
Capital One U.S. Government Income Fund
PERFORMANCE As of August 31, 2007
Assumes a $10,000 investment in the Fund at net asset value.
Performance data quoted represents past performance which is no guarantee of future results. The above graph assumes an initial hypothetical investment of $10,000 from 8/31/97 to 8/31/07 and includes changes in share price, reinvestment of dividends and capital gains. The calculation does not assume the 3.00% maximum sales charge applicable to the Fund. Performance has not been adjusted to reflect any applicable sales charges. If sales charges had been included, the Fund’s ending value would have been $15,921.
PERFORMANCE As of August 31, 2007
AVERAGE ANNUAL TOTAL RETURN | NET EXPENSE RATIO† | GROSS EXPENSE RATIO† | ||||||||||||||||||
Inception Date | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||||||||||
U.S. Government Income Fund* | 10/14/88 | 2.02 | % | 2.04 | % | 2.65 | % | 4.76 | % | 0.60 | % | 0.94 | % | |||||||
Lehman Brothers Intermediate Government Index | 5.91 | % | 3.33 | % | 3.42 | % | 5.47 | % | ||||||||||||
Lehman Brothers U.S. Government Income Blend Index | 5.61 | % | 3.70 | % | 3.77 | % | 5.68 | % | ||||||||||||
Lehman Brothers Mortgage Index | 5.31 | % | 4.07 | % | 4.13 | % | 5.89 | % | ||||||||||||
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, and after-tax returns call 1-800-999-0426.
The performance above reflects any fee reductions ineffect from September 1, 2006 through August 31, 2007. Voluntary fee reductions may be discontinued at any time. If such fee reductions had not occurred, the quoted performance would be lower.
* | Reflects 3.00% maximum sales charge. |
† | The above expense ratios are from the Fund’s prospectus dated December 31, 2006. Additional information pertaining to the Fund’s expense ratios as of August 31, 2007 can be found in the Financial Highlights. |
The performance of the Capital One U.S. Government Income Fund is measured against the Lehman Brothers Intermediate Government Index, the Lehman Brothers U.S. Government Income Blend Index (which consists of a blend of 50% of the Lehman Brothers Intermediate Government Index and 50% of the Lehman Brothers Mortgage Index) and the Lehman Brothers Mortgage Index. The Lehman Brothers Intermediate Government Index is comprised of all publicly issued, non-convertible domestic debt of the U.S. government or any agency thereof, or any quasi-federal corporation and of corporate debt guaranteed by the U.S. government. Only notes and bonds with minimum outstanding principal of $1 million and minimum maturity of one year and maximum maturity of ten years are included. The Lehman Brothers Mortgage Index is a broad-based index that represents the general performance of fixed rate mortgage bonds. These indices are unmanaged and do not reflect the deduction of fees which are associated with a mutual fund, such as investment management and fund accounting fees and taxes. The Fund’s performance reflects the deduction of fees for these services. Investors cannot invest directly in an index.
The Capital One Funds are distributed by Foreside Distribution Services, L.P. Capital One Asset Management, LLC is the Investment Adviser and Capital One, N.A. is the custodian to the Capital One Funds and receives compensation for their services.
Annual Report
11
Table of Contents
Capital One Funds—Financial Highlights
(For a share outstanding throughout each period)
Ratios to Average Net Assets | |||||||||||||||||||||||||||||||||||||||||
Year | Net ning | Net Investment Income (Loss) | Net Realized and Unrealized Gain (Loss) on Investments | Total from Investment Operations | Distri- butions | Distri- butions ments | Total butions | Net Asset Value, End of Period | Total Return1 | Net Expenses | Net ment | Expense ursement2 | Net Assets, End of Period (000 omitted) | Portfolio Turnover Rate† | |||||||||||||||||||||||||||
Capital Appreciation Fund—Class A Shares |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 19.11 | 0.09 | 3 | 2.59 | 2.68 | (0.10 | ) | (5.50 | ) | (5.60 | ) | $ | 16.19 | 14.81 | % | 1.24 | % | 0.47 | % | — | $ | 171,380 | 42 | % | ||||||||||||||||
2006 | $ | 19.42 | 0.11 | 3 | 1.17 | 1.28 | (0.08 | ) | (1.51 | ) | (1.59 | ) | $ | 19.11 | 6.98 | % | 1.25 | % | 0.57 | % | — | $ | 224,576 | 51 | % | ||||||||||||||||
2005 | $ | 18.31 | 0.13 | 3 | 2.26 | 2.39 | (0.15 | ) | (1.13 | ) | (1.28 | ) | $ | 19.42 | 13.44 | % | 1.26 | % | 0.70 | % | — | $ | 240,297 | 32 | % | ||||||||||||||||
2004 | $ | 17.82 | 0.08 | 3 | 1.62 | 1.70 | (0.07 | ) | (1.14 | ) | (1.21 | ) | $ | 18.31 | 9.87 | % | 1.25 | % | 0.41 | % | — | $ | 239,871 | 22 | % | ||||||||||||||||
2003 | $ | 16.50 | 0.08 | 3 | 1.31 | 1.39 | (0.07 | ) | — | (0.07 | ) | $ | 17.82 | 8.46 | % | 1.27 | % | 0.48 | % | — | $ | 234,905 | 29 | % | |||||||||||||||||
Capital Appreciation Fund—Class B Shares |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 17.99 | (0.05 | )3 | 2.44 | 2.39 | (0.01 | ) | (5.50 | ) | (5.51 | ) | $ | 14.87 | 13.98 | % | 1.99 | % | (0.28 | )% | — | $ | 4,518 | 42 | % | ||||||||||||||||
2006 | $ | 18.42 | (0.03 | )3 | 1.11 | 1.08 | — | (1.51 | ) | (1.51 | ) | $ | 17.99 | 6.20 | % | 2.00 | % | (0.17 | )% | — | $ | 6,148 | 51 | % | |||||||||||||||||
2005 | $ | 17.42 | (0.01 | )3 | 2.14 | 2.13 | — | (1.13 | ) | (1.13 | ) | $ | 18.42 | 12.56 | % | 2.01 | % | (0.04 | )% | — | $ | 9,077 | 32 | % | |||||||||||||||||
2004 | $ | 17.06 | (0.06 | )3 | 1.56 | 1.50 | — | (1.14 | ) | (1.14 | ) | $ | 17.42 | 9.08 | % | 2.00 | % | (0.34 | )% | — | $ | 11,981 | 22 | % | |||||||||||||||||
2003 | $ | 15.85 | (0.04 | )3 | 1.25 | 1.21 | — | — | — | $ | 17.06 | 7.63 | % | 2.02 | % | (0.27 | )% | — | $ | 11,865 | 29 | % | |||||||||||||||||||
Louisiana Municipal Income Fund—Class A Shares |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 10.76 | 0.40 | (0.13 | ) | 0.27 | (0.38 | ) | (0.03 | ) | (0.41 | ) | $ | 10.62 | 2.61 | % | 0.80 | % | 3.68 | % | 0.33 | % | $ | 46,957 | 69 | % | |||||||||||||||
2006 | $ | 11.26 | 0.40 | (0.17 | ) | 0.23 | (0.40 | ) | (0.33 | ) | (0.73 | ) | $ | 10.76 | 2.19 | % | 0.77 | % | 3.64 | % | 0.36 | % | $ | 60,324 | 10 | % | |||||||||||||||
2005 | $ | 11.36 | 0.46 | (0.07 | ) | 0.39 | (0.46 | ) | (0.03 | ) | (0.49 | ) | $ | 11.26 | 3.49 | % | 0.76 | % | 3.98 | % | 0.34 | % | $ | 75,298 | 53 | % | |||||||||||||||
2004 | $ | 11.21 | 0.48 | 0.17 | 0.65 | (0.47 | ) | (0.03 | ) | (0.50 | ) | $ | 11.36 | 5.88 | % | 0.75 | % | 4.20 | % | 0.33 | % | $ | 78,288 | 11 | % | ||||||||||||||||
2003 | $ | 11.40 | 0.50 | (0.12 | ) | 0.38 | (0.50 | ) | (0.07 | ) | (0.57 | ) | $ | 11.21 | 3.33 | % | 0.74 | % | 4.36 | % | 0.33 | % | $ | 81,468 | 9 | % | |||||||||||||||
Louisiana Municipal Income Fund—Class B Shares |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 10.77 | 0.31 | (0.13 | ) | 0.18 | (0.29 | ) | (0.03 | ) | (0.32 | ) | $ | 10.63 | 1.75 | % | 1.65 | % | 2.83 | % | 0.23 | % | $ | 1,907 | 69 | % | |||||||||||||||
2006 | $ | 11.27 | 0.30 | (0.16 | ) | 0.14 | (0.31 | ) | (0.33 | ) | (0.64 | ) | $ | 10.77 | 1.32 | % | 1.62 | % | 2.79 | % | 0.26 | % | $ | 2,672 | 10 | % | |||||||||||||||
2005 | $ | 11.37 | 0.36 | (0.07 | ) | 0.29 | (0.36 | ) | (0.03 | ) | (0.39 | ) | $ | 11.27 | 2.60 | % | 1.61 | % | 3.13 | % | 0.24 | % | $ | 3,342 | 53 | % | |||||||||||||||
2004 | $ | 11.21 | 0.38 | 0.19 | 0.57 | (0.38 | ) | (0.03 | ) | (0.41 | ) | $ | 11.37 | 5.08 | % | 1.60 | % | 3.35 | % | 0.23 | % | $ | 3,569 | 11 | % | ||||||||||||||||
2003 | $ | 11.40 | 0.40 | (0.12 | ) | 0.28 | (0.40 | ) | (0.07 | ) | (0.47 | ) | $ | 11.21 | 2.47 | % | 1.59 | % | 3.51 | % | 0.23 | % | $ | 4,127 | 9 | % | |||||||||||||||
Mid Cap Equity Fund—Class A Shares |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 17.70 | 0.05 | 3 | 2.24 | 2.29 | (0.04 | ) | (1.94 | ) | (1.98 | ) | $ | 18.01 | 13.69 | % | 1.26 | % | 0.25 | % | — | $ | 157,805 | 54 | % | ||||||||||||||||
2006 | $ | 17.70 | 0.02 | 3 | 0.82 | 0.84 | (0.04 | ) | (0.80 | ) | (0.84 | ) | $ | 17.70 | 4.97 | % | 1.30 | % | 0.13 | % | — | $ | 132,247 | 50 | % | ||||||||||||||||
2005 | $ | 14.39 | 0.03 | 3 | 4.00 | 4.03 | — | (0.72 | ) | (0.72 | ) | $ | 17.70 | 28.80 | % | 1.36 | % | 0.20 | % | — | $ | 123,321 | 37 | % | |||||||||||||||||
2004 | $ | 12.92 | (0.02 | )3 | 1.56 | 1.54 | — | (0.07 | ) | (0.07 | ) | $ | 14.39 | 12.01 | % | 1.45 | % | (0.14 | )% | — | $ | 74,783 | 51 | % | |||||||||||||||||
2003 | $ | 11.46 | (0.05 | )3 | 1.51 | 1.46 | — | — | — | $ | 12.92 | 12.74 | % | 1.55 | % | (0.48 | )% | — | $ | 59,735 | 25 | % | |||||||||||||||||||
Mid Cap Equity Fund—Class B Shares |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 16.62 | (0.09 | )3 | 2.11 | 2.02 | — | (1.94 | ) | (1.94 | ) | $ | 16.70 | 12.87 | % | 2.01 | % | (0.50 | )% | — | $ | 3,152 | 54 | % | |||||||||||||||||
2006 | $ | 16.75 | (0.10 | )3 | 0.77 | 0.67 | — | (0.80 | ) | (0.80 | ) | $ | 16.62 | 4.19 | % | 2.05 | % | (0.62 | )% | — | $ | 4,112 | 50 | % | |||||||||||||||||
2005 | $ | 13.75 | (0.09 | )3 | 3.81 | 3.72 | — | (0.72 | ) | (0.72 | ) | $ | 16.75 | 27.85 | % | 2.11 | % | (0.56 | )% | — | $ | 5,025 | 37 | % | |||||||||||||||||
2004 | $ | 12.44 | (0.12 | )3 | 1.50 | 1.38 | — | (0.07 | ) | (0.07 | ) | $ | 13.75 | 11.19 | % | 2.20 | % | (0.89 | )% | — | $ | 4,321 | 51 | % | |||||||||||||||||
2003 | $ | 11.12 | (0.14 | )3 | 1.46 | 1.32 | — | — | — | $ | 12.44 | 11.87 | % | 2.30 | % | (1.23 | )% | — | $ | 3,795 | 25 | % | |||||||||||||||||||
Total Return Bond Fund |
| ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 9.38 | 0.43 | (0.05 | ) | 0.38 | (0.43 | ) | — | (0.43 | ) | $ | 9.33 | 4.17 | % | 0.82 | % | 4.51 | % | 0.40 | % | $ | 34,971 | 153 | % | ||||||||||||||||
2006 | $ | 9.78 | 0.41 | (0.38 | ) | 0.03 | (0.43 | ) | — | (0.43 | ) | $ | 9.38 | 0.37 | % | 0.91 | % | 4.33 | % | 0.27 | % | $ | 48,730 | 114 | % | ||||||||||||||||
2005 | $ | 9.89 | 0.38 | (0.05 | ) | 0.33 | (0.44 | ) | — | (0.44 | ) | $ | 9.78 | 3.39 | % | 0.98 | % | 3.92 | % | 0.41 | % | $ | 53,319 | 123 | % | ||||||||||||||||
2004 | $ | 9.98 | 0.41 | (0.05 | ) | 0.36 | (0.45 | ) | — | (0.45 | ) | $ | 9.89 | 3.72 | % | 1.01 | % | 4.08 | % | 0.40 | % | $ | 51,957 | 22 | % | ||||||||||||||||
2003 | $ | 10.15 | 0.45 | (0.11 | ) | 0.34 | (0.51 | ) | — | (0.51 | ) | $ | 9.98 | 3.38 | % | 1.01 | % | 4.38 | % | 0.40 | % | $ | 48,563 | 20 | % |
† | Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
1 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. |
2 | This expense decrease is reflected in both the net expense and net investment income (loss) ratios. |
3 | Based on average shares outstanding. |
4 | Represents less than $0.001. |
5 | Represents less than $0.01. |
(See Notes to Financial Statements)
Annual Report
12
Table of Contents
Capital One Funds—Financial Highlights (continued)
(For a share outstanding throughout each period)
Ratios to Average Net Assets | |||||||||||||||||||||||||||||||||||||
Year | Net ning | Net Investment Income (Loss) | Net Realized and Unrealized Gain (Loss) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Total Distributions | Net Asset Value, End of Period | Total Return1 | Net Expenses | Net Investment Income (Loss) | Expense ursement2 | Net Assets, End of Period (000 omitted) | Portfolio Turnover Rate† | ||||||||||||||||||||||||
U.S. Government Income Fund |
| ||||||||||||||||||||||||||||||||||||
2007 | $ | 9.82 | 0.45 | 0.04 | 0.49 | (0.45 | ) | (0.45 | ) | $ | 9.86 | 5.13 | % | 0.63 | % | 4.62 | % | 0.34 | % | $ | 90,214 | 76 | % | ||||||||||||||
2006 | $ | 10.07 | 0.44 | (0.25 | ) | 0.19 | (0.44 | ) | (0.44 | ) | $ | 9.82 | 2.01 | % | 0.73 | % | 4.52 | % | 0.34 | % | $ | 88,710 | 114 | % | |||||||||||||
2005 | $ | 10.30 | 0.38 | (0.16 | ) | 0.22 | (0.45 | ) | (0.45 | ) | $ | 10.07 | 2.14 | % | 0.74 | % | 3.74 | % | 0.33 | % | $ | 71,695 | 86 | % | |||||||||||||
2004 | $ | 10.30 | 0.38 | 0.03 | 0.41 | (0.41 | ) | (0.41 | ) | $ | 10.30 | 4.08 | % | 0.70 | % | 3.71 | % | 0.31 | % | $ | 82,231 | 29 | % | ||||||||||||||
2003 | $ | 10.48 | 0.42 | (0.11 | ) | 0.31 | (0.49 | ) | (0.49 | ) | $ | 10.30 | 3.01 | % | 0.70 | % | 3.97 | % | 0.31 | % | $ | 89,573 | 31 | % | |||||||||||||
Cash Reserve Fund—Class A Shares |
| ||||||||||||||||||||||||||||||||||||
2007 | $ | 1.00 | 0.047 | 0.000 | 4 | 0.047 | (0.047 | ) | (0.047 | ) | $ | 1.00 | 4.95 | % | 0.49 | % | 4.84 | % | 0.40 | % | $ | 222,375 | — | ||||||||||||||
2006 | $ | 1.00 | 0.040 | (0.000 | )4 | 0.040 | (0.040 | ) | (0.040 | ) | $ | 1.00 | 4.08 | % | 0.53 | % | 4.04 | % | 0.41 | % | $ | 179,836 | — | ||||||||||||||
2005 | $ | 1.00 | 0.019 | (0.000 | )4 | 0.019 | (0.019 | ) | (0.019 | ) | $ | 1.00 | 1.97 | % | 0.56 | % | 1.89 | % | 0.42 | % | $ | 134,356 | — | ||||||||||||||
2004 | $ | 1.00 | 0.005 | 0.000 | 4 | 0.005 | (0.005 | ) | (0.005 | ) | $ | 1.00 | 0.55 | % | 0.56 | % | 0.55 | % | 0.40 | % | $ | 166,616 | — | ||||||||||||||
2003 | $ | 1.00 | 0.01 | 0.00 | 5 | 0.01 | (0.01 | ) | (0.01 | ) | $ | 1.00 | 0.80 | % | 0.53 | % | 0.81 | % | 0.40 | % | $ | 182,575 | — | ||||||||||||||
Cash Reserve Fund—Class B Shares |
| ||||||||||||||||||||||||||||||||||||
2007 | $ | 1.00 | 0.047 | 0.000 | 4 | 0.047 | (0.047 | ) | (0.047 | ) | $ | 1.00 | 4.78 | % | 0.64 | % | 4.69 | % | 1.01 | % | $ | 400 | — | ||||||||||||||
2006 | $ | 1.00 | 0.039 | (0.000 | )4 | 0.039 | (0.039 | ) | (0.039 | ) | $ | 1.00 | 3.92 | % | 0.68 | % | 3.86 | % | 1.01 | % | $ | 395 | — | ||||||||||||||
2005 | $ | 1.00 | 0.018 | (0.000 | )4 | 0.018 | (0.018 | ) | (0.018 | ) | $ | 1.00 | 1.81 | % | 0.71 | % | 1.78 | % | 1.02 | % | $ | 387 | — | ||||||||||||||
2004 | $ | 1.00 | 0.003 | 0.001 | 0.004 | (0.004 | ) | (0.004 | ) | $ | 1.00 | 0.40 | % | 0.71 | % | 0.39 | % | 1.00 | % | $ | 417 | — | |||||||||||||||
2003 | $ | 1.00 | 0.01 | 0.00 | 5 | 0.01 | (0.01 | ) | (0.01 | ) | $ | 1.00 | 0.57 | % | 0.89 | % | 0.45 | % | 0.79 | % | $ | 677 | — | ||||||||||||||
U.S. Treasury Money Market Fund |
| ||||||||||||||||||||||||||||||||||||
2007 | $ | 1.00 | 0.048 | (0.000 | )4 | 0.048 | (0.048 | ) | (0.048 | ) | $ | 1.00 | 4.64 | % | 0.55 | % | 4.55 | % | 0.10 | % | $ | 104,496 | — | ||||||||||||||
2006 | $ | 1.00 | 0.036 | (0.000 | )4 | 0.036 | (0.036 | ) | (0.036 | ) | $ | 1.00 | 3.69 | % | 0.62 | % | 3.57 | % | 0.03 | % | $ | 156,318 | — | ||||||||||||||
2005 | $ | 1.00 | 0.017 | (0.000 | )4 | 0.017 | (0.017 | ) | (0.017 | ) | $ | 1.00 | 1.69 | % | 0.70 | % | 1.74 | % | — | $ | 204,027 | — | |||||||||||||||
2004 | $ | 1.00 | 0.003 | — | 0.003 | (0.003 | ) | (0.003 | ) | $ | 1.00 | 0.34 | % | 0.66 | % | 0.34 | % | — | $ | 152,264 | — | ||||||||||||||||
2003 | $ | 1.00 | 0.01 | — | 0.01 | (0.01 | ) | (0.01 | ) | $ | 1.00 | 0.62 | % | 0.65 | % | 0.61 | % | — | $ | 221,334 | — |
(See Notes to Financial Statements)
Annual Report
13
Table of Contents
Capital One Funds—Shareholder Expense Example (Unaudited)
As of August 31, 2007
As a shareholder of the Capital One Funds (“Funds”), you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees; to the extent applicable, distribution (12b-1) fees and/or shareholder services fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. They are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from March 1, 2007 to August 31, 2007.
Actual Expenses
The first section of the table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your account during this period.
Hypothetical Example for Comparison Purposes
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Funds’ actual returns. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expense for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Funds with other funds. To do this, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchases or redemption payments. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning Account Value 3/1/07 | Ending Account Value 8/31/2007 | Expenses Paid During Period1 | |||||||
Capital One Capital Appreciation Fund | |||||||||
Actual | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,061.40 | $ | 6.55 | |||
Class B Shares | $ | 1,000.00 | $ | 1,058.00 | $ | 10.43 | |||
Hypothetical (assuming a 5% return before expenses) | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,018.85 | $ | 6.41 | |||
Class B Shares | $ | 1,000.00 | $ | 1,015.07 | $ | 10.21 | |||
Capital One Louisiana Municipal Income Fund | |||||||||
Actual | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,007.40 | $ | 4.15 | |||
Class B Shares | $ | 1,000.00 | $ | 1,003.10 | $ | 8.43 | |||
Hypothetical (assuming a 5% return before expenses) | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,021.07 | $ | 4.18 | |||
Class B Shares | $ | 1,000.00 | $ | 1,016.79 | $ | 8.49 | |||
Capital One Mid Cap Equity Fund | |||||||||
Actual | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,012.90 | $ | 6.34 | |||
Class B Shares | $ | 1,000.00 | $ | 1,009.10 | $ | 10.13 | |||
Hypothetical (assuming a 5% return before expenses) | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,018.90 | $ | 6.36 | |||
Class B Shares | $ | 1,000.00 | $ | 1,015.12 | $ | 10.16 | |||
Capital One Total Return Bond Fund | |||||||||
Actual | $ | 1,000.00 | $ | 1,009.40 | $ | 4.05 | |||
Hypothetical (assuming a 5% return before expenses) | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | |||
Capital One U.S. Government Income Fund | |||||||||
Actual | $ | 1,000.00 | $ | 1,020.20 | $ | 3.11 | |||
Hypothetical (assuming a 5% return before expenses) | $ | 1,000.00 | $ | 1,022.13 | $ | 3.11 | |||
Capital One Cash Reserve Fund | |||||||||
Actual | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,024.70 | $ | 2.45 | |||
Class B Shares | $ | 1,000.00 | $ | 1,023.80 | $ | 3.21 | |||
Hypothetical (assuming a 5% return before expenses) | |||||||||
Class A Shares | $ | 1,000.00 | $ | 1,022.79 | $ | 2.45 | |||
Class B Shares | $ | 1,000.00 | $ | 1,022.03 | $ | 3.21 | |||
Capital One U.S. Treasury Money Market Fund | |||||||||
Actual | $ | 1,000.00 | $ | 1,023.00 | $ | 2.75 | |||
Hypothetical (assuming a 5% return before expenses) | $ | 1,000.00 | $ | 1,022.48 | $ | 2.75 |
1 | Expenses are equal to the Funds’ annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The annualized net expense ratios were as follows: |
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Table of Contents
Capital One Funds—Shareholder Expense Example (Unaudited) (continued)
As of August 31, 2007
Funds Annualized Expense Ratio | |||
Capital One Capital Appreciation Fund | |||
Class A Shares | 1.26 | % | |
Class B Shares | 2.01 | % | |
Capital One Louisiana Municipal Income Fund | |||
Class A Shares | 0.82 | % | |
Class B Shares | 1.67 | % | |
Capital One Mid Cap Equity Fund | |||
Class A Shares | 1.25 | % | |
Class B Shares | 2.00 | % | |
Capital One Total Return Bond Fund | 0.80 | % | |
Capital One U.S. Government Income Fund | 0.61 | % | |
Capital One Cash Reserve Fund | |||
Class A Shares | 0.48 | % | |
Class B Shares | 0.63 | % | |
Capital One U.S. Treasury Money Market Fund | 0.54 | % |
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Capital One Capital Appreciation Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition was as follows:
Sector | Percentage of Total Net Assets | ||
Finance | 14.7 | % | |
Electronic Technology | 12.5 | % | |
Energy Minerals | 10.9 | % | |
Consumer Non-Durables | 7.4 | % | |
Health Technology | 7.3 | % | |
Producer Manufacturing | 7.3 | % | |
Technology Services | 5.5 | % | |
Retail Trade | 5.2 | % | |
Distribution Services | 5.0 | % | |
Insurance | 4.7 | % | |
Communications | 3.6 | % | |
Consumer Services | 3.6 | % | |
Industrial Services | 2.2 | % | |
Health Services | 1.9 | % | |
Transportation | 1.6 | % | |
Commercial Services | 1.3 | % | |
Non-Energy Minerals | 1.2 | % | |
Human Resources | 1.1 | % | |
Process Industries | 1.0 | % | |
Utilities | 1.0 | % | |
Consumer Durables | 0.7 | % | |
Cash Equivalents1 | 0.2 | % | |
Other Assets and Liabilities-Net2 | 0.1 | % | |
TOTAL | 100.0 | % |
1 | Cash Equivalents include any investments in money market mutual funds. |
2 | Assets, other than investments in securities, less liabilities. See Statements of Assets and Liabilities. |
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Capital One Capital Appreciation Fund—Portfolio of Investments
As of August 31, 2007
Shares | Security Description | Value($) | ||
COMMON STOCKS—99.7% | ||||
Commercial Services—1.3% | ||||
25,000 | Donnelley (R.R.) & Sons Co | 895,500 | ||
50,200 | Total System Services, Inc | 1,392,548 | ||
2,288,048 | ||||
Communications—3.6% | ||||
79,800 | AT&T, Inc. | 3,181,626 | ||
73,800 | Verizon Communications | 3,090,744 | ||
6,272,370 | ||||
Consumer Durables—0.7% | ||||
151,600 | Ford Motor Co.1 | 1,183,996 | ||
Consumer Non-Durables—7.4% | ||||
27,500 | Altria Group, Inc | 1,908,775 | ||
49,900 | Colgate-Palmolive Co. | 3,309,368 | ||
28,900 | Estee Lauder Cos., Inc., Class A | 1,201,951 | ||
80,400 | Kraft Foods, Inc | 2,577,624 | ||
75,480 | The Coca-Cola Co | 4,059,315 | ||
13,057,033 | ||||
Consumer Services—3.6% | ||||
9,999 | Citadel Broadcasting Corp. | 40,697 | ||
54,900 | McDonald’s Corp. | 2,703,825 | ||
108,000 | Walt Disney Co. | 3,628,800 | ||
6,373,322 | ||||
Distribution Services—5.0% | ||||
16,500 | Avnet, Inc.1 | 648,615 | ||
39,300 | Grainger (W.W.), Inc. | 3,600,273 | ||
80,400 | McKesson HBOC, Inc | 4,599,684 | ||
8,848,572 | ||||
Electronic Technology—12.5% | ||||
37,900 | Apple Computer, Inc.1 | 5,248,392 | ||
65,800 | Hewlett-Packard Co | 3,247,230 | ||
47,300 | MEMC Electronic Materials, Inc.1 | 2,905,166 | ||
53,600 | National Semiconductor Corp. | 1,410,752 | ||
118,500 | Nokia Corp. ADR | 3,896,280 | ||
45,000 | Northrop Grumman Corp. | 3,547,800 | ||
51,200 | Texas Instruments, Inc | 1,753,088 | ||
22,008,708 | ||||
Energy Minerals—10.9% | ||||
26,300 | Apache Corp. | 2,035,094 | ||
62,900 | ConocoPhillips | 5,150,881 | ||
62,900 | Exxon Mobil Corp. | 5,392,417 | ||
23,500 | ONEOK, Inc. | 1,100,975 | ||
44,900 | Public Service Enterprise Group, Inc | 3,816 ,051 | ||
25,200 | Valero Energy Minerals Corp. | 1,726 ,452 | ||
19,221,870 | ||||
Finance—14.7% | ||||
78,400 | Bank of America Corp. | 3,973,312 | ||
14,200 | Boston Properties, Inc | 1,420,994 | ||
79,400 | Citigroup, Inc. | 3,722 ,272 | ||
15,300 | Franklin Resources, Inc | 2,016 ,081 | ||
15,000 | Goldman Sachs Group, Inc. | 2,640,150 | ||
63,100 | J.P. Morgan Chase & Co | 2,809,212 | ||
39,000 | Merrill Lynch & Co., Inc | 2,874,300 | ||
29,700 | Prudential Financial, Inc | 2,666,466 | ||
47,000 | SunTrust Banks, Inc. | 3,701,250 | ||
25,824,037 | ||||
Health Services—1.9% | ||||
1,308 | PharMerica Corp.1 | 23,191 | ||
41,200 | Wellpoint, Inc.1 | 3,320,308 | ||
3,343,499 | ||||
Health Technology—7.3% | ||||
15,700 | AmerisourceBergen Corp. | 751,245 | ||
27,700 | Becton, Dickinson & Co | 2,131,238 | ||
27,000 | Genzyme Corp.1 | 1,685,070 | ||
6,400 | Invitrogen Corp.1 | 498,560 | ||
65,900 | Johnson & Johnson, Inc. | 4,071,961 | ||
74,400 | Merck & Co., Inc | 3,732 ,648 | ||
12,870,722 | ||||
Human Resources—1.1% | ||||
26,800 | Manpower, Inc | 1,882,968 | ||
Industrial Services—2.2% | ||||
39,300 | McDermott International, Inc.1 | 3,772,407 | ||
Insurance—4.7% | ||||
74,300 | Chubb Corp. | 3,798,959 | ||
37,500 | First American Corp. | 1,568,625 | ||
56,900 | Travelers Cos., Inc | 2,875,726 | ||
8,243,310 | ||||
Non-Energy Minerals—1.2% | ||||
13,000 | Freeport-McMoRan Copper & Gold, Inc. | 1,136,460 | ||
9,300 | Southern Copper Corp. | 978,825 | ||
2,115,285 | ||||
Process Industrials—1.0% | ||||
26,100 | Monsanto Co. | 1,820,214 | ||
Producer Manufacturing—7.3% | ||||
55,700 | General Electric Co | 2,165,059 | ||
11,600 | Genlyte Group, Inc.1 | 841,812 | ||
11,200 | Holly Corp | 746,480 | ||
54,500 | Honeywell International, Inc. | 3,060,175 | ||
26,000 | International Paper Co | 912 ,860 | ||
32,800 | PACCAR, Inc. | 2,806,040 | ||
24,900 | The Dow Chemical Co | 1,061 ,487 | ||
14,500 | VF Corp | 1,157,825 | ||
12,751,738 | ||||
Retail Trade—5.2% | ||||
56,400 | CVS Corp | 2,133,048 | ||
18,800 | Kohl’s Corp.1 | 1,114,840 | ||
23,640 | Mens Wearhouse, Inc | 1,198,075 | ||
36,000 | Penney (J.C.) Co., Inc. | 2,475,360 | ||
74,400 | TJX Cos., Inc | 2,268,456 | ||
9,189,779 | ||||
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Capital One Capital Appreciation Fund—Portfolio of Investments (continued)
As of August 31, 2007
Shares | Security Description | Value($) | |||
COMMON STOCKS—continued | |||||
Technology Services—5.5% | |||||
37,700 | Computer Sciences Corp.1 | 2,109,315 | |||
3,000 | Google, Inc.1 | 1,545,750 | |||
44,900 | Intuit, Inc.1 | 1,226,219 | |||
109,200 | Microsoft Corp | 3,137,316 | |||
77,700 | Oracle Corp.1 | 1,575,756 | |||
9,594,356 | |||||
Transportation—1.6% | |||||
17,200 | Norfolk Southern Corp. | 880,812 | |||
25,000 | United Parcel Service, Inc., Class B | 1,896,500 | |||
2,777,312 | |||||
Utilities—1.0% | |||||
29,700 | FirstEnergy Corp. | 1,824,768 | |||
TOTAL COMMON STOCKS (identified cost $122,839,348) | 175,264,314 | ||||
MUTUAL FUND—0.2% | |||||
409,693 | Fidelity Institutional Cash Treasury Money Market Fund–I Shares, 4.78%2 | 409,693 | |||
TOTAL MUTUAL FUND (identified cost $409,693) | 409,693 | ||||
TOTAL INVESTMENTS—99.9% (identified cost $123,249,041) | 175,674,007 | ||||
OTHER ASSETS AND LIABILITIES-NET—0.1% | 224,240 | ||||
TOTAL NET ASSETS—100.0% | $ | 175,898,247 | |||
1 | Non-income producing security |
2 | Rate disclosed is as of August 31, 2007. |
ADR—American Depositary Receipt
(See Notes to Financial Statements)
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Table of Contents
Capital One Louisiana Municipal Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition1 was as follows:
Sector | Percentage of Total Net Assets | ||
Local Government - Revenue | 33.0 | % | |
Public School | 17.0 | % | |
Housing | 9.0 | % | |
Environmental | 8.0 | % | |
Higher Education | 8.0 | % | |
Local Government - General Obligations | 8.0 | % | |
Municipal Utility | 8.0 | % | |
Transportation | 7.0 | % | |
Other | 3.4 | % | |
Cash Equivalents2 | 0.0 | % | |
Other Assets and Liabilities-Net3 | (1.4 | )% | |
TOTAL | 100.0 | % |
1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund’s adviser. For securities that have been enhanced by a third-party (other than a bond insurer), such as a guarantor, sector classifications are based upon economic sector and/or revenue source of the third-party as determined by the Fund’s adviser. Securities that are insured by a bond insurer are assigned to the “Insured” sector. Prerefunded securities are those whose debt service is paid from escrowed assets, usually U.S. government securities. |
2 | Cash Equivalents include any investments in money market mutual funds. |
3 | Assets, other than investments in securities, less liabilities. See Statements of Assets and Liabilities. |
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Capital One Louisiana Municipal Fund—Portfolio of Investments
As of August 31, 2007
Principal Amount($) | Security Description | Value($) | ||
MUNICIPAL BONDS—101.4% | ||||
Louisiana—101.4% | ||||
500,000 | Caddo Parish, LA, Parishwide School District, GO, 5.00%, (CIFG INS), (Original Issue Yield: 3.68%), 3/1/2012 | 526 ,400 | ||
555,000 | Caddo Parish, LA, Parishwide School District, GO, 5.00%, (CIFG INS), (Original Issue Yield: 3.77%), 3/1/2014 | 591,464 | ||
1,070,000 | Caddo Parish, LA, Parishwide School District, GO, (Series A), 5.25%, (FSA INS), (Original Issue Yield: 3.86%), 3/1/2015 | 1,156,798 | ||
1,000,000 | East Baton Rouge Parish, LA, Revenue Bonds, 4.50%, (MBIA INS), (Original Issue Yield: 4.50%), 2/1/2013 | 1,034,690 | ||
250,000 | East Baton Rouge Parish, LA, Sales Tax Revenue, Public Improvement, (Series ST-B), 5.00%, (AMBAC INS), (Original Issue Yield: 3.80%), 2/1/2014 | 265,515 | ||
1,265,000 | East Baton Rouge, LA, Sewer Commission, (Series A), 5.00%, (FSA INS), (Original Issue Yield: 4.05%), 2/1/2015 | 1,346,542 | ||
1,000,000 | Harahan, LA, Refunding Bonds, 6.10%, 6/1/2024 | 1,059,310 | ||
755,000 | Iberia Parish, LA, Parishwide School District, GO, 5.50%, (MBIA), (Original Issue Yield: 4.13%), 3/1/2013 | 817,189 | ||
875,000 | Iberia Parish, LA, Parishwide School District, GO, 5.00%, (MBIA), (Original Issue Yield: 4.25%), 3/1/2015 | 931 ,919 | ||
430,000 | Jefferson Davis Parish, LA, Registered Sales Tax District No 1, 5.00%, (CIFG INS), (Original Issue Yield: 3.72%), 2/1/2012 | 451,410 | ||
455,000 | Jefferson Davis Parish, LA, Registered Sales Tax District No 1, 5.00%, (CIFG INS), (Original Issue Yield: 3.75%), 2/1/2013 | 480,917 | ||
830,000 | Jefferson Parish, LA, Home Mortgage Authority, Refunding Revenue Bonds, (Series A), AMT, 6.15%, (FNMA/GNMA COLs), 6/1/20281 | 839,445 | ||
700,000 | Jefferson Parish, LA, School Board Sales & Use Tax Revenue, Refunding Bonds, (FSA INS), 0.00%, (Original Issue Yield: 5.10%), 3/1/2010 | 634,165 | ||
1,160,000 | Jefferson, LA, Sales Tax District, Special Sales Tax Revenue, 5.00%, (AMBAC INS), (Original Issue Yield: 3.94%), 12/1/2019 | 1,213,847 | ||
680,000 | Jefferson, LA, Sales Tax District Special Sales Tax Revenue, (Series B), 5.75%, (AMBAC INS), (Original Issue Yield: 5.20%), 12/1/2014 | 738,718 | ||
1,005,000 | Lafayette, LA Public Improvement Sales Tax, (Series C), 5.00%, (AMBAC INS), (Original Issue Yield: 3.74%), 5/1/2015 | 1,071,290 | ||
1,500,000 | Lafayette, LA Public Improvement Sales Tax, (Series A), 5.63%, (FGIC INS), (Original Issue Yield: 5.69%), 3/1/2025 | 1,589,805 | ||
1,000,000 | Lafayette, LA Public Power Authority Electric Revenue Bonds, (Series B), 5.00%, (AMBAC INS), (Original Issue Yield: 3.22%), 11/1/2011 | 1,048,340 | ||
1,000,000 | Lafourche Parish, LA, Consolidated School District, No. 1 Parish Wide, 5.00%, (MBIA INS), (Original Issue Yield: 3.99%), 2/1/2015 | 1,059,840 | ||
450,000 | Lafourche Parish, LA, Consolidated School District, No. 1 Parish Wide, 5.00%, (MBIA INS), (Original Issue Yield: 4.07%), 2/1/2016 | 474,278 | ||
1,500,000 | Louisiana Local Government Environmental Facilities Community Development Authority, Refunding Revenue Bonds, 5.00%, (MBIA INS), (Original Issue Yield: 5.04%), 12/1/2032 | 1,517,475 | ||
1,000,000 | Louisiana Local Government Environmental Facilities Community Development Authority, Revenue Bonds, 5.00%, (AMBAC GTD), (Original Issue Yield: 4.30%), 3/1/2015 | 1,065,050 | ||
1,000,000 | Louisiana Local Government Environmental Facilities Community Development Authority, Revenue Bonds, 5.00%, (Livingston Parish Road Project), (AMBAC GTD), (Original Issue Yield: 4.40%), 3/1/2017 | 1,059,770 | ||
1,000,000 | Louisiana Local Government Environmental Facilities Community Development Authority, Revenue Bonds, (Series A), 5.20%, (AMBAC INS), (Original Issue Yield: 5.30%), 6/1/2031 | 1,023,860 | ||
750,000 | Louisiana PFA, 4.50%, (Original Issue Yield: 3.65%), 10/15/2010 | 751,477 | ||
1,000,000 | Louisiana PFA, Revenue Bonds, (Series A), 5.00%, (Original Issue Yield: 4.49%), 5/15/20123 | 1,029,900 | ||
215,000 | Louisiana PFA, Hospital Revenue, Refunding Revenue Bonds, 5.00%, (Louisiana Health System Corporate Project), (FSA INS), (Original Issue Yield: 5.10%), 10/1/2013 | 221,493 | ||
1,000,000 | Louisiana PFA, Refunding Revenue Bonds, (Series A), 5.00%, (Tulane University, LA), (AMBAC INS), (Original Issue Yield: 5.15%), 7/1/2022 | 1,056,320 | ||
1,000,000 | Louisiana PFA, Revenue Bonds, 5.00%, (FSA INS), (Original Issue Yield: 5.38%), 8/1/2017 | 1,030,500 | ||
1,000,000 | Louisiana PFA, Revenue Refunding Bonds, 5.45%, (AMBAC INS), (Original Issue Yield: 5.45%), 2/1/2013 | 1,005,990 | ||
1,795,000 | Louisiana PFA, Revenue Refunding Bonds, (Series A), 6.75%, (Bethany Home Project), (FHA GTD), 8/1/2025 | 1,796,526 | ||
1,045,000 | Louisiana PFA, Revenue Refunding Bonds, (Series A), 5.13%, (Tulane University, LA), (Original Issue Yield: 5.25%), 7/1/2027 | 1,109,591 | ||
650,000 | Louisiana Stadium & Expo District Revenue, Refunding Bonds, (Series C), 3.75%, (FGIC INS), 7/1/20362, 4 | 650,000 | ||
785,000 | Louisiana State Military Department, Revenue Bonds, 5.00%, (Original Issue Yield: 4.40%), 8/1/2012 | 813,205 | ||
1,000,000 | Louisiana State Office Facilities, Refunding Revenue Bonds, 4.70%, (MBIA INS), (Original Issue Yield: 4.79%), 11/1/2022 | 1,003,180 | ||
1,000,000 | Louisiana State Office Facilities, Refunding Revenue Bonds, 4.75%, (MBIA INS), (Original Issue Yield: 4.88%), 11/1/2023 | 1,003,920 | ||
1,500,000 | Louisiana State Offshore Term Authority Deepwater Port Revenue, Loop LLC Project, 5.00%, (Original Issue Yield 4.45%), 10/1/2020 | 1,522,035 | ||
1,655,000 | Louisiana State University and Agricultural and Mechanical College Board, (Auxiliary Series A), 5.00%, (AMBAC INS), (Original Issue Yield: 3.76%), 7/1/2015 | 1,765,835 | ||
600,000 | Louisiana State, GO, (Series A), 5.00%, (FGIC INS), (Original Issue Yield: 5.23%), 11/15/2015 | 623,802 | ||
1,000,000 | Louisiana State, GO, (Series B), 5.00%, (CIFG), (Original Issue Yield: 4.43%), 7/15/2018 | 1,055,660 | ||
970,000 | New Orleans, LA, Home Mortgage Authority, Special Obligation Revenue Bonds, 6.25%, (United States Treasury/REFCO Strips COL), (Original Issue Yield: 6.52%), 1/15/2011 | 1,034,379 | ||
790,000 | Ouachita Parish, LA, East Ouachita Parish School District, GO UT, 5.75%, (FGIC INS), (Original Issue Yield: 5.78%), 3/1/2020 | 828,813 | ||
780,000 | Ouachita Parish, LA, East Ouachita Parish School District, GO UT, 5.75%, (FGIC INS), (Original Issue Yield: 5.81%), 3/1/2021 | 818,321 |
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Table of Contents
Capital One Louisiana Municipal Fund—Portfolio of Investments (continued)
As of August 31, 2007
Principal Amount($) | Security Description | Value($) | ||||
MUNICIPAL BONDS—continued | ||||||
Louisiana—continued | ||||||
1,020,000 | Ouachita Parish, LA, East Ouachita Parish School District, GO UT, 5.75%, (FGIC INS), (Original Issue Yield: 5.85%), 3/1/2024 | 1,070,113 | ||||
2,500,000 | Rapides Parish, LA, Industrial Development, Refunding Revenue Bonds, 5.88%, (AMBAC INS), (Original Issue Yield: 5.95%), 9/1/2029 | 2,630,975 | ||||
1,000,000 | Shreveport LA, (Series B), 39,445.55%, (FSA INS), (Original Issue Yield: 3.96%), 3/1/2016 | 1,067,890 | ||||
1,000,000 | Shreveport LA, (Series A), 5.00%, (MBIA INS), (Original Issue Yield: 3.91%), 5/1/2018 | 1,052,720 | ||||
1,000,000 | Shreveport LA, GO UT Public Improvement Bonds, 5.00%, (FGIC INS), 3/1/2017 | 1,019,210 | ||||
500,000 | State Charles Parish, LA, Consolidated Waterworks & Wastewater District No 1, (Series A), 5.00%, (AMBAC INS), (Original Issue Yield: 4.07%), 7/1/2019 | 524,115 | ||||
1,000,000 | State Tammany Parish, LA, Sales Tax, Jail, 5.00%, (CIFG INS), (Original Issue Yield: 3.98%), 4/1/2018 | 1,064,500 | ||||
TOTAL MUNICIPAL BONDS (identified cost $48,930,375) | 49,548,507 | |||||
MUTUAL FUND—0.0% | ||||||
18,266 | Goldmam Sachs ILA Tax-Free Instruments, 3.77%2 | 18,266 | ||||
TOTAL MUTUAL FUND (identified cost $18,266) | 18,266 | |||||
TOTAL INVESTMENTS—101.4% (identified cost $48,948,641) | 49,566,773 | |||||
OTHER ASSETS AND LIABILITES-NET—(1.4)% | (702,892 | ) | ||||
NET ASSETS—100.0% | $ | 48,863,881 | ||||
1 | Securities that are subject to the federal alternative minimum tax (AMT) represent 1.69% of the Fund’s portfolio calculated based upon total market value. |
2 | Rate disclosed is as of August 31, 2007. |
3 | Represents a security purchased on a when-issued basis. At August 31, 2007, the total cost of investments purchased on a when-issued basis was $1,021,220. |
4 | Represents all or portion of the security was pledged as collateral for when-issued securities. |
AMBAC—American Municipal Bond Insurance Corp.
AMT—Subject to alternative minimum tax
CIFG—County IXIS Financial Guaranty
COL—Collateralized
FGIC—Financial Guaranty Insurance Co.
FHA—Federal Housing Administration
FNMA—Federal National Mortgage Association
FSA—Federal Security Assurance
GNMA—Government National Mortgage Association
GO—General Obligation
GTD—Guaranteed
INS—Insured
LLC—Limited Liability Co.
MBIA—Municipal Bond Insurance Organization
PFA—Public Facility Authority
UT—Unlimited Tax
(See Notes to Financial Statements)
Annual Report
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Table of Contents
Capital One Mid Cap Equity Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition was as follows:
Sector | Percentage of Total Net Assets | ||
Finance | 12.6 | % | |
Producer Manufacturing | 8.0 | % | |
Retail Trade | 7.4 | % | |
Utilities | 6.5 | % | |
Health Technology | 5.3 | % | |
Energy Minerals | 4.9 | % | |
Commercial Services | 4.6 | % | |
Industrial Services | 4.0 | % | |
Distribution Services | 3.4 | % | |
Communications | 3.3 | % | |
Process Industries | 3.3 | % | |
Technology Services | 3.3 | % | |
Electronic Technology | 3.0 | % | |
Transportation | 3.0 | % | |
Consumer Non-Durables | 2.9 | % | |
Consumer Services | 2.7 | % | |
Insurance | 2.6 | % | |
Non-Energy Minerals | 1.4 | % | |
Banks | 1.1 | % | |
Health Services | 0.9 | % | |
Airlines | 0.6 | % | |
Publishing | 0.6 | % | |
Cash Equivalents1 | 14.5 | % | |
Other Assets and Liabilities-Net2 | 0.1 | % | |
TOTAL | 100.0 | % |
1 | Cash Equivalents include any investments in money market mutual funds. |
2 | Assets, other than investments in securities, less liabilities. See Statements of Assets and Liabilities. |
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Table of Contents
Capital One Mid Cap Equity Fund—Portfolio of Investments
As of August 31, 2007
Shares | Security Description | Value($) | ||
COMMON STOCKS—85.4% | ||||
Airlines—0.6% | ||||
30,700 | Continental Airlines, Inc., Class B1 | 1,021,082 | ||
Banks—1.1% | ||||
30,700 | Comerica, Inc | 1,712,446 | ||
Commercial Services—4.6% | ||||
24,400 | Catalina Marketing Corp.1 | 761,768 | ||
14,700 | Dun & Bradstreet Corp | 1,433,985 | ||
104,200 | IKON Office Solutions, Inc | 1,462,968 | ||
146,900 | SEI Investments Co. | 3,726,853 | ||
7,385,574 | ||||
Communications—3.3% | ||||
6,400 | CenturyTel, Inc. | 307,072 | ||
60,000 | CommScope, Inc.1 | 3,396,000 | ||
180,000 | RF Micro Devices, Inc.1 | 1,071,000 | ||
8,200 | Telephone and Data System, Inc | 530,950 | ||
5,305,022 | ||||
Consumer Non-Durables—2.9% | ||||
36,800 | American Greetings Corp., Class A | 910,432 | ||
31,500 | Hormel Foods Corp | 1,122,345 | ||
20,400 | International Flavors & Fragrances, Inc | 1,024,692 | ||
3,800 | Molson Coors Brewing Co | 339,948 | ||
35,000 | NBTY, Inc.1 | 1,284,500 | ||
4,681,917 | ||||
Consumer Services—2.7% | ||||
44,800 | Bob Evans Farms, Inc | 1,494,976 | ||
227,000 | Service Corp. International | 2,773,940 | ||
4,268,916 | ||||
Distribution Services—3.4% | ||||
76,500 | Avnet, Inc.1 | 3,007,215 | ||
10,200 | Grainger (W.W.), Inc. | 934,422 | ||
79,500 | Ingram Micro, Inc., Class A1 | 1,561,380 | ||
5,503,017 | ||||
Electronic Technology—3.0% | ||||
33,800 | MEMC Electronic Materials, Inc.1 | 2,075,996 | ||
150,000 | Semtech Corp. | 2,676,000 | ||
4,751,996 | ||||
Energy Minerals—4.9% | ||||
75,000 | Cabot Oil & Gas Corp., Class A | 2,500,500 | ||
37,100 | Global Industries Ltd.1 | 897,078 | ||
70,000 | Tesoro Petroleum Corp. | 3,453,100 | ||
20,400 | Unit Corp.1 | 1,000,824 | ||
7,851,502 | ||||
Finance—12.6% | ||||
59,600 | American Capital Strategies Ltd. | 2,460,884 | ||
51,000 | Assurant, Inc. | 2,628,540 | ||
32,900 | Bank of Hawaii Corp | 1,691,389 | ||
91,900 | CB Richard Ellis Services, Inc.1 | 2,712,888 | ||
15,700 | Edwards (AG), Inc. | 1,312,206 | ||
43,900 | Hospitality Properties Trust, REIT | 1,732,294 | ||
154,600 | HRPT Properties Trust, REIT | 1,511,988 | ||
7,500 | Jones Lang LaSalle, Inc. | 837,600 | ||
51,000 | Plum Creek Timber Co., Inc. | 2,138,430 | ||
23,900 | PMI Group, Inc | 757,152 | ||
24,500 | Ryder System, Inc. | 1,341,375 | ||
30,100 | Wilmington Trust Corp | 1,207,010 | ||
20,331,756 | ||||
Health Services—0.9% | ||||
25,000 | Coventry Health Care, Inc.1 | 1,434,250 | ||
Health Technology—5.3% | ||||
71,200 | Applera Corp | 2,250,632 | ||
16,400 | Charles River Laboratories International, Inc.1 | 860,672 | ||
37,900 | Hillenbrand Industries, Inc. | 2,181,145 | ||
38,900 | ImClone Systems, Inc.1 | 1,324,934 | ||
30,700 | Techne Corp.1 | 1,934,407 | ||
8,551,790 | ||||
Industrial Services—4.0% | ||||
169,100 | Allied Waste Industries, Inc.1 | 2,159,407 | ||
7,100 | Fluor Corp | 902,765 | ||
62,000 | Granite Construction, Inc. | 3,375,280 | ||
6,437,452 | ||||
Insurance—2.6% | ||||
55,100 | American Financial Group, Inc. | 1,553,820 | ||
40,900 | Humana, Inc.1 | 2,621,281 | ||
4,175,101 | ||||
Non-Energy Minerals—1.4% | ||||
52,400 | Steel Dynamics, Inc | 2,273,112 | ||
Process Industrials—3.3% | ||||
49,700 | Airgas, Inc | 2,297,134 | ||
81,700 | Celanese Corp | 2,934,664 | ||
5,231,798 | ||||
Producer Manufacturing—8.0% | ||||
50,000 | Cooper Tire & Rubber Co | 1,222,000 | ||
40,000 | Cummins, Inc | 4,736,800 | ||
12,600 | Energizer Holdings, Inc.1 | 1,334,718 | ||
14,000 | Goodrich Corp. | 884,240 | ||
61,200 | Joy Global, Inc. | 2,655,468 | ||
37,100 | Pactiv Corp.1 | 1,085,175 | ||
33,600 | TRW Automotive Holdings Corp.1 | 1,026,816 | ||
12,945,217 | ||||
Publishing—0.6% | ||||
30,700 | Scholastic Corp.1 | 1,046,256 | ||
Retail Trade—7.4% | ||||
84,300 | American Eagle Outfitters, Inc. | 2,177,469 | ||
74,300 | Family Dollar Stores, Inc | 2,175,504 | ||
51,000 | Mattel, Inc. | 1,103,130 | ||
41,500 | Mens Wearhouse, Inc | 2,103,220 | ||
15,000 | Phillips-Van Heusen Corp | 873,450 | ||
78,300 | Ross Stores, Inc. | 2,179,089 | ||
18,000 | Ruddick Corp. | 586,440 |
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Table of Contents
Capital One Mid Cap Equity Fund—Portfolio of Investments (continued)
As of August 31, 2007
Shares | Security Description | Value($) | |||
COMMON STOCKS—continued | |||||
Retail Trade—continued | |||||
40,900 | Steelcase, Inc., Class A | 721,476 | |||
11,919,778 | |||||
Technology Services—3.3% | |||||
45,900 | BMC Software, Inc.1 | 1,405,458 | |||
28,700 | Computer Sciences Corp.1 | 1,605,765 | |||
98,300 | Sybase, Inc.1 | 2,265,815 | |||
5,277,038 | |||||
Transportation—3.0% | |||||
35,800 | Con-way, Inc. | 1,735,584 | |||
48,300 | Tidewater, Inc. | 3,161,235 | |||
4,896,819 | |||||
Utilities—6.5% | |||||
51,000 | Allete, Inc. | 2,147,610 | |||
50,300 | Energen Corp. | 2,701,110 | |||
87,200 | MDU Resources Group, Inc | 2,358,760 | |||
60,000 | Northeast Utilities | 1,659,000 | |||
40,700 | NRG Energy, Inc.1 | 1,550,263 | |||
10,416,743 | |||||
TOTAL COMMON STOCKS (identified cost $117,035,265) | 137,418,582 | ||||
MUTUAL FUND—0.2% | |||||
249,171 | Fidelity Institutional Cash Treasury Money Market Fund–I Shares, 4.78%2 | 249,171 | |||
TOTAL MUTUAL FUND (identified cost $249,171) | 249,171 | ||||
EXCHANGE TRADED FUNDS—10.0% | |||||
93,800 | iShares S&P MidCap 400 Index Fund | 8,062,110 | |||
51,400 | Standard & Poor’s MidCap 400 Depositary Receipts | 8,072,884 | |||
TOTAL EXCHANGE TRADED FUNDS (identified cost $16,134,994) | 16,134,994 | ||||
Principal Amount($) | Security Description | Value($) | |||
REPURCHASE AGREEMENT—4.3% | |||||
7,000,000 | Morgan Stanley & Co., 5.24%, 9/4/2007 (Proceeds at maturity $7,004,076, collaterized by a U.S. Government Agency security with a maturity of 11/13/2014, value $7,142,000). | 7,000,000 | |||
TOTAL REPURCHASE AGREEMENT (identified cost $7,000,000) | 7,000,000 | ||||
TOTAL INVESTMENTS—99.9% (identified cost $141,264,680) | 160,802,747 | ||||
OTHER ASSETS AND LIABILITIES-NET—0.1% | 154,037 | ||||
TOTAL NET ASSETS—100.0% | $ | 160,956,784 | |||
1 | Non-income producing security |
2 | Rate disclosed is as of August 31, 2007. |
REIT—Real Estate Investment Trust
(See Notes to Financial Statements)
Annual Report
24
Table of Contents
Capital One Total Return Bond Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition was as follows:
Sector | Percentage of Total Net Assets | ||
Mortgage Backed Securities1 | 35.6 | % | |
Corporate Bonds | 19.0 | % | |
Government Agencies | 17.3 | % | |
Commercial Mortgage Backed Securities | 15.5 | % | |
U.S. Treasury and Agency Securities | 10.0 | % | |
Cash Equivalents2 | 4.0 | % | |
Other Assets and Liabilities-Net3 | (1.4 | )% | |
TOTAL | 100.0 | % |
1 | For purposes of the table, mortgage-backed securities include mortgage-backed securities guaranteed by Government Sponsored Entities (GSEs) and adjustable rate mortgage-backed securities. |
2 | Cash Equivalents include any investments in money market mutual funds. |
3 | Assets, other than investments in securities, less liabilities. See Statements of Assets and Liabilities. |
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25
Table of Contents
Capital One Total Return Bond Fund—Portfolio of Investments
As of August 31, 2007
Principal Amount($) | Security Description | Value($) | ||
COMMERCIAL MORTGAGE BACKED SECURITIES—15.5% | ||||
Banks—11.4% | ||||
1,000,000 | Banc of America Commercial Mortgage, Inc. 2004-6, Class A2, 4.16%, 12/10/2042 | 976,667 | ||
1,000,000 | Banc of America Commercial Mortgage, Inc. 2006-1, Class A3A, 5.45%, 9/10/2045 | 993,460 | ||
2,000,000 | Citigroup/Deutsche Bank Commercial Mortgage Trust 2006-CD3, Class A2, 5.56%, 10/15/2048 | 2,004,454 | ||
3,974,581 | ||||
Finance—4.1% | ||||
1,517,573 | First Horizon Mortgage Pass-Through Trust 2004-3, Class 2A1, 4.56%, 6/25/2019 | 1,450,706 | ||
TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (identified cost $5,436,550) | 5,425,287 | |||
CORPORATE BONDS—19.0% | ||||
Airlines—1.5% | ||||
500,000 | Southwest Airlines Co., 6.50%, 3/1/2012 | 516,929 | ||
Banks—1.4% | ||||
500,000 | Bank of America Corp., 5.75%, 8/15/2016 | 497,537 | ||
Communications—1.7% | ||||
625,000 | Verizon Virginia, Inc., 4.63%, 3/15/2013 | 599,696 | ||
Consumer Non-Durables—1.8% | ||||
400,000 | Anheuser-Busch Cos., Inc., 4.95%, 1/15/2014 | 389,449 | ||
250,000 | Kimberly-Clark Corp., 5.00%, 8/15/2013 | 245,168 | ||
634,617 | ||||
Finance—5.9% | ||||
400,000 | American International Group, Inc., 5.05%, 10/1/2015 | 383,142 | ||
400,000 | CIT Group, Inc., 5.40%, 1/30/2016 | 347,222 | ||
400,000 | Citigroup, Inc., 5.00%, 9/15/2014 | 383,550 | ||
500,000 | HSBC Finance Corp., 5.00%, 6/30/2015 | 470,701 | ||
500,000 | Morgan Stanley, Sub. Note, 4.75%, 4/1/2014 | 468,056 | ||
2,052,671 | ||||
Health Services—0.7% | ||||
250,000 | Abbott Laboratories, 5.88%, 5/15/2016 | 254,743 | ||
Health Technology—1.4% | ||||
500,000 | Genentech, Inc., Note, 4.75%, 7/15/2015 | 477,393 | ||
Producer Manufacturing—1.4% | ||||
500,000 | Caterpillar, Inc., 5.70%, 8/15/2016 | 499,114 | ||
Retail Trade—1.1% | ||||
400,000 | Home Depot, Inc., 5.25%, 12/16 /2013 | 386,718 | ||
Technology Services—2.1% | ||||
250,000 | Hewlett-Packard Co., 5.40%, 3/1/2017 | 246,808 | ||
500,000 | Oracle Corp., 5.25%, 1/15/2016 | 488,897 | ||
735,705 | ||||
TOTAL CORPORATE BONDS (identified cost $6,758,256) | 6,655,123 | |||
GOVERNMENT AGENCIES—17.3% | ||||
Federal Farm Credit Bank—2.9% | ||||
1,000,000 | 5.10%, 8/5/2013 | 1,011,730 | ||
Federal Home Loan Mortgage Corporation—11.3% | ||||
500,000 | 5.00%, 4/18/2017 | 497,554 | ||
2,000,000 | 5.25%, 4/3/2012 | 2,010,538 | ||
1,400,000 | 5.50%, 8/20/2012 | 1,444,748 | ||
3,952,840 | ||||
Federal National Mortgage Association—3.1% | ||||
1,000,000 | 7.13%, 6/15/2010 | 1,062,287 | ||
TOTAL GOVERNMENT AGENCIES (identified cost $5,908,791) | 6,026,857 | |||
MORTGAGE BACKED SECURITIES—35.6% | ||||
Federal Home Loan Mortgage Corporation 15 Year—8.4% | ||||
2,008,359 | Pool G12410, 5.00%, 5/1/20211 | 1,962,124 | ||
992,699 | Pool G18195, 5.50%, 7/1/20221 | 987,120 | ||
2,949,244 | ||||
Federal Home Loan Mortgage Corporation 20 Year—3.5% | ||||
1,237,729 | Pool C91030, 5.50%, 5/1/20271 | 1,219,670 | ||
Federal Home Loan Mortgage Corporation 30 Year—8.6% | ||||
1,044,738 | Pool G03050, 5.00%, 7/1/20371 | 993,426 | ||
989,734 | Pool G08192, 5.50%, 4/1/20371 | 966,795 | ||
1,058,285 | Pool G08003, 6.00%, 7/1/20341 | 1,060,246 | ||
3,020,467 | ||||
Federal National Mortgage Association 30 Year—13.7% | ||||
997,685 | Pool 797659, 5.00%, 9/1/20351 | 949,995 | ||
500,000 | TBA, 5.00%, 9/15/20361, 3 | 475,235 | ||
2,057,466 | Pool 817423, 5.50%, 8/1/20351 | 2,011,676 | ||
911,462 | Pool 937392, 5.50%, 6/1/20371 | 890,338 | ||
451,123 | Pool 888021, 6.00%, 12/1/20361 | 450,811 | ||
755 | Pool 85131, 11.00%, 5/1/20171 | 821 | ||
4,778,876 | ||||
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Table of Contents
Capital One Total Return Bond Fund—Portfolio of Investments (continued)
As of August 31, 2007
Principal Amount($) or Shares | Security Description | Value($) | ||||
MORTGAGE BACKED SECURITIES—continued | ||||||
Government National Mortgage Association 15 Year—0.1% | ||||||
41,325 | Pool 420153, 7.00%, 9/15/20101 | 42,304 | ||||
Government National Mortgage Association 30 Year—1.3% | ||||||
22,540 | Pool 345031, 7.00%, 10/15/20231 | 23,527 | ||||
29,336 | Pool 345090, 7.00%, 11/15/20231 | 30,621 | ||||
20,208 | Pool 360772, 7.00%, 2/15/20241 | 21,091 | ||||
18,061 | Pool 302101, 7.00%, 6/15/20241 | 18,850 | ||||
11,796 | Pool 404653, 7.00%, 9/15/20251 | 12,320 | ||||
21,819 | Pool 408884, 7.00%, 9/15/20251 | 22,790 | ||||
10,527 | Pool 410108, 7.00%, 9/15/20251 | 10,996 | ||||
21,425 | Pool 415865, 7.00%, 9/15/20251 | 22,379 | ||||
65,480 | Pool 418781, 7.00%, 9/15/20251 | 68,394 | ||||
50,758 | Pool 420157, 7.00%, 10/15/20251 | 53,016 | ||||
90,156 | Pool 415427, 7.50%, 8/15/20251 | 94,621 | ||||
11,090 | Pool 168511, 8.00%, 7/15/20161 | 11,668 | ||||
1,746 | Pool 174673, 8.00%, 8/15/20161 | 1,837 | ||||
6,563 | Pool 177145, 8.00%, 1/15/20171 | 6,918 | ||||
3,876 | Pool 212660, 8.00%, 4/15/20171 | 4,086 | ||||
2,827 | Pool 217533, 8.00%, 5/15/20171 | 2,980 | ||||
20,219 | Pool 216950, 8.00%, 6/15/20171 | 21,314 | ||||
5,566 | Pool 291100, 9.00%, 5/15/20201 | 6,003 | ||||
2,729 | Pool 147875, 10.00%, 3/15/20161 | 3,073 | ||||
2,235 | Pool 253449, 10.00%, 10/15/20181 | 2,525 | ||||
373 | Pool 279619, 10.00%, 9/15/20191 | 423 | ||||
439,432 | ||||||
TOTAL MORTGAGE BACKED SECURITIES (identified cost $12,566,402) | 12,449,993 | |||||
U.S. TREASURY OBLIGATIONS—10.0% | ||||||
U.S. Treasury Bonds—0.6% | ||||||
225,000 | 4.50%, 2/15/2036 | 213,346 | ||||
U.S. Treasury Notes—9.4% | ||||||
500,000 | 4.63%, 7/31/2012 | 508,164 | ||||
2,000,000 | 4.63%, 11/15/2016 | 2,013,438 | ||||
750,000 | 4.75%, 5/15/2014 | 767,227 | ||||
3,288,829 | ||||||
TOTAL U.S. TREASURY OBLIGATIONS (identified cost $3,460,718) | 3,502,175 | |||||
MUTUAL FUND—1.3% | ||||||
452,772 | Fidelity Institutional Cash Treasury Money Market Fund–I Shares, 4.78%2 | 452,772 | ||||
TOTAL MUTUAL FUND (identified cost $452,772) | 452,772 | |||||
Principal Amount($) | Security Description | Value($) | ||||
REPURCHASE AGREEMENT—2.7% | ||||||
950,000 | Morgan Stanley & Co., 5.20%, 9/13/2007 (Proceeds at maturity $952,058, collaterized by a U.S. Government Agency security with a maturity of 7/21/2025, value $972,000)4. | 950,000 | ||||
TOTAL REPURCHASE AGREEMENT (identified cost $950,000) | 950,000 | |||||
TOTAL INVESTMENTS—101.4% (identified cost $35,533,489) | 35,462,207 | |||||
OTHER ASSETS AND LIABILITIES-NET—(1.4)% | (491,646 | ) | ||||
NET ASSETS—100.0% | $ | 34,970,561 | ||||
1 | Because of monthly principal payments, the average lives of certain government securities are less than the indicated periods. |
2 | Rate disclosed is as of August 31, 2007. |
3 | Represents a security purchased on a when-issued basis. At August 31, 2007, the total cost of investments purchased on a when-issued basis was $475,664. |
4 | Represents all or portion of the security was pledged as collateral for when-issued securities. |
TBA — | Securities purchased on a forward commitment basis with an appropriate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. |
(See Notes to Financial Statements)
Annual Report
27
Table of Contents
Capital One U.S. Government Income Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition was as follows:
Sector | Percentage of Total Net Assets | ||
U.S. Government Agency Securities | 36.6 | % | |
Mortgage Backed Securities1 | 28.7 | % | |
U.S. Treasury Notes | 21.6 | % | |
Commercial Mortgage Backed Securities | 9.4 | % | |
Corporate Bonds | 2.5 | % | |
Other Assets and Liabilities-Net3 | 0.8 | % | |
Cash Equivalents2 | 0.4 | % | |
TOTAL | 100.0 | % |
1 | For purposes of the table, mortgage-backed securities include mortgage-backed securities guaranteed by Government Sponsored Entities (GSEs) and adjustable rate mortgage-backed securities. |
2 | Cash Equivalents include any investments in money market mutual funds. |
3 | Assets, other than investments in securities, less liabilities. See Statements of Assets and Liabilities. |
Annual Report
28
Table of Contents
Capital One U.S. Government Income Fund—Portfolio of Investments
As of August 31, 2007
Principal Amount($) | Security Description | Value($) | ||
COMMERCIAL MORTGAGE BACKED SECURITIES—9.4% | ||||
1,000,000 | Banc of America Commercial Mortgage, Inc. 2004-6, Class A2, 4.16%, 12/10/2042 | 976,667 | ||
1,000,000 | Citigroup/Deutsche Bank Commercial Mortgage 2006- CD2, Class A4, 5.54% , 1/15/20461 | 984,593 | ||
1,000,000 | GE Capital Commercial Mortgage Corp. 2005-C1, Class A2, 4.35%, 6/10/2048 | 977,697 | ||
2,500,000 | Merrill Lynch Mortgage Investors Trust 1998-C1, Class A3, 6.72%, 11/15/2026 | 2,616,613 | ||
2,000,000 | Morgan Stanley Capital I 2005-HQ6, Class A4A, 4.99%, 8/13/2042 | 1,927,951 | ||
1,000,000 | Morgan Stanley Capital I 2006-HQ9, Class A4, 5.73%, 7/12/2044 | 1,004,947 | ||
COMMERCIAL MORTGAGE BACKED SECURITIES (identified cost $8,440,860) | 8,488,468 | |||
CORPORATE BONDS—2.5% | ||||
Finance—2.5% | ||||
2,250,000 | General Electric Capital Corp., (Series A), MTN, 5.50%, 11/15/2011 | 2,247,151 | ||
TOTAL CORPORATE BONDS (identified cost $2,250,000) | 2,247,151 | |||
GOVERNMENT AGENCIES—36.6% | ||||
Federal Farm Credit Bank—1.1% | ||||
500,000 | 5.38%, 12/5/2013 | 499,018 | ||
500,000 | 6.63%, 8/8/2022 | 500,749 | ||
999,767 | ||||
Federal Home Loan Bank—4.5% | ||||
1,500,000 | 5.30%, 11/16/2009 | 1,501,515 | ||
500,000 | 5.50%, 11/3/2009 | 500,506 | ||
500,000 | 5.50%, 4/30/2012 | 500,024 | ||
1,500,000 | 5.80%, 9/2/2008 | 1,512,874 | ||
4,014,919 | ||||
Federal Home Loan Mortgage Corporation—15.5% | ||||
231,000 | 5.13%, 7/15/2012 | 234,923 | ||
1,000,000 | 5.25%, 11/20/2009 | 1,001,037 | ||
1,250,000 | 5.25%, 12/14/2011 | 1,251,920 | ||
1,000,000 | 5.38%, 2/8/2010 | 1,002,355 | ||
1,000,000 | 5.40%, 2/2/2012 | 1,007,397 | ||
1,000,000 | 5.45%, 11/21/2013 | 1,003,246 | ||
1,000,000 | 5.50%, 11/16/2011 | 1,001,595 | ||
1,000,000 | 5.50%, 11/28/2011 | 1,001,566 | ||
1,000,000 | 5.50%, 12/27/2011 | 1,001,494 | ||
2,000,000 | 5.55%, 1/9/2012 | 2,004,854 | ||
1,000,000 | 6.00%, 6/21/2012 | 1,000,621 | ||
1,000,000 | 6.00%, 6/5/2015 | 1,005,031 | ||
500,000 | 6.00%, 1/4/2017 | 500,747 | ||
1,000,000 | 6.00%, 6/5/2017 | 1,003,297 | ||
14,020,083 | ||||
Federal National Mortgage Association—15.5% | ||||
500,000 | 5.38%, 6/12/2017 | 510,576 | ||
500,000 | 5.50%, 1/23/2012 | 501,395 | ||
1,000,000 | 5.55%, 2/16/2017 | 1,002,016 | ||
2,000,000 | 5.60%, 2/8/2016 | 2,005,032 | ||
Federal National Mortgage Association—continued | ||||
170,000 | 5.60%, 2/1/2017 | 170,660 | ||
1,000,000 | 5.68%, 11/27/2015 | 1,001,829 | ||
3,200,000 | 5.75%, 2/15/2008 | 3,206,682 | ||
1,000,000 | 5.80%, 9/8/2016 | 1,004,448 | ||
2,118,000 | 6.00%, 5/15/2011 | 2,208,720 | ||
850,000 | 6.00%, 8/29/2016 | 852,313 | ||
1,000,000 | 6.00%, 3/15/2017 | 1,001,221 | ||
500,000 | 6.38%, 6/15/2009 | 513,775 | ||
13,978,667 | ||||
TOTAL GOVERNMENT AGENCIES (identified cost $32,933,940) | 33,013,436 | |||
MORTGAGE BACKED SECURITIES—28.7% | ||||
Federal Home Loan Mortgage Corporation 15 Year—4.7% | ||||
564,360 | Pool B14297, 5.00%, 12/1/20192 | 552,057 | ||
389,603 | Pool G18150, 5.00%, 9/1/20212 | 380,590 | ||
894,570 | Pool J02868, 5.50%, 7/1/20212 | 889,510 | ||
275,643 | Pool J03253, 6.00%, 8/1/20212 | 278,538 | ||
2,038,273 | Pool G12397, 6.00%, 9/1/20212 | 2,059,677 | ||
44,505 | Pool 294383, 8.75%, 2/1/20172 | 46,649 | ||
2,409 | Pool 170170, 9.00%, 6/1/20162 | 2,575 | ||
69 | Pool 170193, 9.00%, 9/1/20162 | 74 | ||
343 | Pool 170196, 9.00%, 10/1/20162 | 367 | ||
2,916 | Pool 170210, 9.00%, 1/1/20172 | 3,129 | ||
8,925 | Pool 360029, 10.00%, 6/1/2018 2 | 9,961 | ||
4,223,127 | ||||
Federal Home Loan Mortgage Corporation 30 Year—2.9% | ||||
529,143 | Pool G08003, 6.00%, 7/1/20342 | 530,123 | ||
982,237 | Pool A49495, 6.00%, 6/1/20362 | 981,845 | ||
662,317 | Pool A52051, 6.00%, 9/1/20362 | 662,053 | ||
441,887 | Pool A54588, 6.50%, 5/1/20362 | 448,657 | ||
2,622,678 | ||||
Federal National Mortgage Association 15 Year—12.9% | ||||
80,196 | Pool 254325, 5.00%, 4/1/20092 | 80,093 | ||
82,637 | Pool 689624, 5.00%, 6/1/20182 | 80,967 | ||
497,245 | Pool 697947, 5.00%, 12/1/20182 | 487,198 | ||
66,912 | Pool 750523, 5.00%, 1/1/20192 | 65,560 | ||
101,852 | Pool 777337, 5.00%, 4/1/20192 | 99,641 | ||
103,342 | Pool 786153, 5.00%, 7/1/20192 | 101,098 | ||
76,971 | Pool 802009, 5.00%, 11/1/20192 | 75,300 | ||
96,899 | Pool 810968, 5.00%, 4/1/20202 | 94,672 | ||
488,932 | Pool 825344, 5.00%, 5/1/20202 | 477,698 | ||
58,791 | Pool 813971, 5.00%, 5/1/20202 | 57,440 | ||
4,539,640 | Pool 829075, 5.00%, 9/1/20202 | 4,435,332 | ||
130,795 | Pool 601180, 5.50%, 10/1/20162 | 130,555 | ||
111,268 | Pool 631364, 5.50%, 2/1/20172 | 111,065 | ||
153,860 | Pool 254473, 5.50%, 10/1/20172 | 153,465 | ||
83,400 | Pool 675251, 5.50%, 12/1/20172 | 83,186 | ||
93,646 | Pool 688784, 5.50%, 3/1/20182 | 93,406 | ||
123,684 | Pool 725068, 5.50%, 1/1/20192 | 123,366 | ||
4,030,783 | Pool 745562, 5.50%, 4/1/20212 | 4,009,827 | ||
78,466 | Pool 887245, 5.50%, 7/1/20212 | 78,023 | ||
385,854 | Pool 256297, 6.00%, 6/1/20162 | 390,562 | ||
394,213 | Pool 845502, 6.00%, 6/1/20212 | 398,586 | ||
20,940 | Pool 313707, 7.00%, 8/1/20122 | 21,633 | ||
11,648,673 | ||||
Annual Report
29
Table of Contents
Capital One U.S. Government Income Fund—Portfolio of Investments (continued)
As of August 31, 2007
Principal Amount($) | Security Description | Value($) | |||
MORTGAGE BACKED SECURITIES—continued | |||||
Federal National Mortgage Association 30 Year—5.0% | |||||
976,767 | Pool 725690, 6.00%, 8/1/20342 | 978,241 | |||
795,951 | Pool 735503, 6.00%, 4/1/20352 | 798,211 | |||
379,700 | Pool 896530, 6.00%, 8/1/20362 | 379,437 | |||
368,620 | Pool 887836, 6.00%, 9/1/20362 | 368,365 | |||
979,479 | Pool 888421, 6.00%, 6/1/20372 | 978,612 | |||
58,662 | Pool 253662, 6.50%, 1/1/20082 | 59,131 | |||
425,966 | Pool 771178, 6.50%, 3/1/20342 | 433,943 | |||
303,644 | Pool 255673, 6.50%, 3/1/20352 | 308,751 | |||
75,804 | Pool 254093, 7.00%, 12/1/20312 | 78,655 | |||
81,518 | Pool 591249, 7.50%, 7/1/20312 | 85,607 | |||
15,327 | Pool 102873, 9.50%, 8/1/20202 | 16,788 | |||
4,485,741 | |||||
Government National Mortgage Association 15 Year—0.1% | |||||
16,506 | Pool 427552, 6.50%, 2/15/20172 | 16,886 | |||
110,315 | Pool 780052, 7.00%, 12/15/20082 | 111,106 | |||
3,206 | Pool 405378, 7.00%, 11/15/20092 | 3,259 | |||
18,832 | Pool 405476, 7.00%, 9/15/20102 | 19,278 | |||
150,529 | |||||
Government National Mortgage Association 30 Year—3.1% | |||||
1,168,141 | Pool 615486, 5.50%, 7/15/20342 | 1,149,410 | |||
37,178 | Pool 609007, 5.50%, 8/15/20362 | 36,552 | |||
458,148 | Pool 630826, 6.00%, 8/15/20342 | 461,017 | |||
27,989 | Pool 634338, 6.00%, 8/15/20342 | 28,164 | |||
42,164 | Pool 654911, 6.00%, 5/15/20362 | 42,381 | |||
51,593 | Pool 502638, 6.50%, 4/15/20292 | 52,785 | |||
152,416 | Pool 357260, 7.00%, 9/15/20232 | 159,090 | |||
108,857 | Pool 2933, 7.00%, 6/20/20302 | 113,298 | |||
65,191 | Pool 569622, 7.00%, 2/15/20322 | 67,987 | |||
59,674 | Pool 552475, 7.00%, 3/15/20322 | 62,234 | |||
38,831 | Pool 329790, 7.50%, 10/15/20222 | 40,679 | |||
35,027 | Pool 345096, 7.50%, 3/15/20262 | 36,761 | |||
61,629 | Pool 424000, 7.50%, 9/15/20262 | 64,680 | |||
29,378 | Pool 2839, 7.50%, 11/20/20292 | 30,695 | |||
37,417 | Pool 2853, 7.50%, 12/20/20292 | 39,093 | |||
25,359 | Pool 3011, 7.50%, 12/20/20302 | 26,486 | |||
70,401 | Pool 297829, 8.00%, 1/15/20222 | 74,586 | |||
58,779 | Pool 319358, 8.00%, 4/15/20222 | 62,274 | |||
46,675 | Pool 328183, 8.00%, 8/15/20222 | 49,450 | |||
48,625 | Pool 422007, 8.00%, 10/15/20292 | 51,666 | |||
20,175 | Pool 2868, 8.00%, 1/20/20302 | 21,367 | |||
23,031 | Pool 2884, 8.00%, 2/20/20302 | 24,391 | |||
26,862 | Pool 2897, 8.00%, 3/20/20302 | 28,449 | |||
9,989 | Pool 1956, 8.50%, 2/20/20252 | 10,767 | |||
16,705 | Pool 288103, 9.00%, 2/15/20202 | 18,015 | |||
17,844 | Pool 290127, 9.50%, 6/15/20202 | 19,515 | |||
2,771,792 | |||||
TOTAL MORTGAGE BACKED SECURITIES (identified cost $26,080,907) | 25,902,540 | ||||
Principal Amount or | Security Description | Value($) | |||
U.S. TREASURY OBLIGATIONS—21.6% | |||||
U.S. Treasury Bond—1.3% | |||||
1,000,000 | 7.50%, 11/15/2016 | 1,216,172 | |||
U.S. Treasury Notes—20.3% | |||||
1,000,000 | 4.50%, 11/15/2015 | 1,001,329 | |||
1,500,000 | 4.63%, 2/15/2017 | 1,509,024 | |||
5,000,000 | 4.75%, 5/15/2014 | 5,114,845 | |||
1,000,000 | 4.88%, 1/31/2009 | 1,008,985 | |||
500,000 | 4.88%, 4/30/2011 | 511,250 | |||
1,500,000 | 4.88%, 7/31/2011 | 1,534,923 | |||
3,500,000 | 5.13%, 5/15/2016 | 3,650,941 | |||
2,804,000 | 6.50%, 2/15/2010 | 2,952,744 | |||
1,000,000 | 10.38%, 11/15/2012 | 1,012,344 | |||
18,296,385 | |||||
TOTAL U.S. TREASURY OBLIGATIONS (identified cost $19,320,366) | 19,512,557 | ||||
MUTUAL FUND—0.4% | |||||
Fidelity Institutional Cash Treasury | |||||
311,725 | Money Market Fund–I Shares, 4.78%1 | 311,725 | |||
TOTAL MUTUAL FUND (identified cost $ 311,725) | 311,725 | ||||
TOTAL INVESTMENTS—99.2% (identified cost $ 89,337,798) | 89,475,877 | ||||
OTHER ASSETS AND LIABILITIES-NET—0.8% | 738,207 | ||||
NET ASSETS—100.0% | $ | 90,214,084 | |||
1 | Rate disclosed is as of August 31, 2007. |
2 | Because of monthly principal payments, the average lives of certain government securities are less than the indicated periods. |
MTN—Medium Term Note
(See Notes to Financial Statements)
Annual Report
30
Table of Contents
Capital One Cash Reserve Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition was as follows:
Sector | Percentage of Total Net Assets | ||
Commercial Paper | 81.6 | % | |
Cash Equivalents1 | 18.6 | % | |
Other Assets and Liabilities-Net2 | (0.2 | )% | |
TOTAL | 100.0 | % | |
1 | Cash Equivalents include any investments in money market mutual funds. |
2 | Assets, other than investments in securities, less liabilities. See Statements of Assets and Liabilities. |
Annual Report
31
Table of Contents
Capital One Cash Reserve Fund—Portfolio of Investments
As of August 31, 2007
Principal Amount($) | Security Description | Value($) | ||||
COMMERCIAL PAPER—81.6% | ||||||
Consumer Durables—4.0% | ||||||
9,000,000 | Toyota Motor Credit Corp., 5.29%, 9/13/20071 | 8,984,280 | ||||
Finance—77.6% | ||||||
9,500,000 | American Express Co., 5.30%, 10/19/2007 1 | 9,433 ,500 | ||||
11,000,000 | American General Investment Co., 5.33%, 10/12/20071 | 10,933 ,603 | ||||
9,000,000 | Beta Finance, 5.31%, 9/20/20071 | 8,975,015 | ||||
10,000,000 | Cargill Financial Services, 5.47%, 11/20/20071 | 9,880,000 | ||||
10,500,000 | Ciesco LLC, 6.07%, 9/17/20071 | 10,471,767 | ||||
9,500,000 | CIT Group, Inc., 6.07%, 11/2/20071 | 9,401,833 | ||||
9,000,000 | Citigroup Funding, Inc., 5.34%, 11/7/2007 1 | 8,912 ,063 | ||||
9,500,000 | CRC Funding, 5.90%, 10/9/20071 | 9,441,337 | ||||
9,000,000 | General Electric Capital Corp., 5.28%, 9/17/20071 | 8,979,000 | ||||
9,000,000 | GOVCO LLC, 5.34%, 11/2/20071 | 8,918,315 | ||||
11,000,000 | HSBC Finance Corp., 5.43%, 12/5/20071 | 10,844,701 | ||||
9,500,000 | Jupiter Securitization Corp., 6.03%, 9/20/20071 | 9,469,917 | ||||
9,500,000 | PACCAR Financial, 5.32%, 11/26/20071 | 9,380,854 | ||||
9,000,000 | Prudential Funding LLC, 5.28%, 9/6/20071 | 8,993,437 | ||||
9,500,000 | Rabobank USA, 5.35% , 9/20/20071 | 9,473,677 | ||||
10,500,000 | Societe General North America, Inc., 5.44%, 12/6/20071 | 10,349,920 | ||||
9,000,000 | Three Rivers Funding Corp., 5.34%, 9/5/20071 | 8,994,690 | ||||
10,000,000 | Wells Fargo & Co., 5.34%, 9/17/20071 | 9,976,356 | ||||
172,829,985 | ||||||
TOTAL COMMERCIAL PAPER (identified cost $181,814,265) | 181,814,265 | |||||
Principal Amount($) or Shares | Security Description | Value($) | ||||
MUTUAL FUND—3.2% | ||||||
7,085,953 | Fidelity Institutional Cash Treasury Money Market Fund–I Shares, 4.78%2 | 7,085,953 | ||||
TOTAL MUTUAL FUND (identified cost $7,085,953) | 7,085,953 | |||||
REPURCHASE AGREEMENT—15.4% | ||||||
34,210,000 | Morgan Stanley & Co., 5.24%, 9/4/2007 (Proceeds at maturity $34,229,918, collaterized by a U.S. Government Agency security with a maturity of 3/28/2017, value $34,895,000). | 34,210,000 | ||||
TOTAL REPURCHASE AGREEMENT (identified cost $34,210,000) | 34,210,000 | |||||
TOTAL INVESTMENTS —100.2% (identified cost $223,110,218) | 223,110,218 | |||||
OTHER ASSETS AND LIABILITIES-NET—(0.2)% | (335,553 | ) | ||||
NET ASSETS—100.0% | $ | 222,774,665 | ||||
1 | Rate shown represents yield to maturity. |
2 | Rate disclosed is as of August 31, 2007. |
LLC—Limited Liability Co.
(See Notes to Financial Statements)
Annual Report
32
Table of Contents
Capital One U.S. Treasury Money Market Fund—Portfolio of Investments Summary Table (Unaudited)
At August 31, 2007, the Fund’s sector composition was as follows:
Sector | Percentage of Total Net Assets | ||
Cash Equivalents1 | 61.2 | % | |
U.S. Treasury Obligations | 38.4 | % | |
Other Assets and Liabilities-Net2 | 0.4 | % | |
TOTAL | 100.0 | % |
1 | Cash Equivalents include any investments in money market mutual funds. |
2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Annual Report
33
Table of Contents
Capital One U.S. Treasury Money Market Fund—Portfolio of Investments
As of August 31, 2007
Principal Amount($) or Shares | Security Description | Value($) | |||
U.S. TREASURY OBLIGATIONS—38.4% | |||||
U.S. Treasury Notes—38.4% | |||||
20,000,000 | 4.25%, 10/31/2007 | 19,976,202 | |||
10,000,000 | 4.88%, 4/30/2008 | 10,056,794 | |||
10,000,000 | 5.63%, 5/15/2008 | 10,107,882 | |||
TOTAL U.S. TREASURY OBLIGATIONS (identified cost $40,140,878) | 40,140,878 | ||||
MUTUAL FUNDS—5.7% | |||||
922,456 | Federated Treasury Obligation Fund, 4.75%1 | 922,456 | |||
5,000,000 | Fidelity Institutional Cash Treasury Money Market Fund–I Shares, 4.78%1 | 5,000,000 | |||
TOTAL MUTUAL FUNDS (identified cost $5,922,456) | 5,922,456 | ||||
REPURCHASE AGREEMENT—55.5% | |||||
58,039,000 | Morgan Stanley & Co., 5.02%, 9/4/2007 (Proceeds at maturity $58,071,373, collaterized by a U.S. Government Agency security with a maturity of 2/15/2019, value $59,203,000). | 58,039,000 | |||
TOTAL REPURCHASE AGREEMENT (identified cost $58,039,000) | 58,039,000 | ||||
TOTAL INVESTMENTS —99.6% (identified cost $104,102,334) | 104,102,334 | ||||
OTHER ASSETS AND LIABILITIES-NET—0.4% | 393,325 | ||||
NET ASSETS—100.0% | $ | 104,495,659 | |||
1 | Rate disclosed is as of August 31, 2007. |
(See Notes to Financial Statements)
Annual Report
34
Table of Contents
Capital One Funds—Statements of Assets and Liabilities
As of August 31, 2007
Capital Appreciation Fund | Louisiana Municipal Income Fund | Mid Cap Equity Fund | Total Return Bond Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in repurchase agreements | $ | — | $ | — | $ | 7,000,000 | $ | 950,000 | ||||||||
Investments in securities | 175,674,007 | 49,566 ,773 | 153,802,747 | 34,512,207 | ||||||||||||
Total investments in securities, at value | 175,674,007 | 49,566 ,773 | 160,802,747 | 35,462,207 | ||||||||||||
Cash | — | — | 1 | — | ||||||||||||
Income receivable | 218,796 | 675,709 | 147,587 | 301,533 | ||||||||||||
Receivable for investments sold | 656,493 | — | — | 488,828 | ||||||||||||
Receivable for shares sold | 91,686 | — | 63,752 | 279 | ||||||||||||
Prepaid and other expenses | 6,818 | 3,117 | 4,765 | 2,725 | ||||||||||||
Total assets | 176,647,800 | 50,245,599 | 161,018,852 | 36,255,572 | ||||||||||||
Liabilities: | ||||||||||||||||
Payable for investments purchased | — | 1,021,220 | — | 1,212,778 | ||||||||||||
Payable for shares redeemed | 725,698 | 340,729 | 42,078 | 51,168 | ||||||||||||
Payable for master services fees (Note 5) | 10,799 | 6,881 | 7,405 | 3,701 | ||||||||||||
Payable for compliance services fees | 1,143 | 292 | 1,160 | 212 | ||||||||||||
Payable for trustees’ fees | 1,500 | 912 | 1,260 | 858 | ||||||||||||
Accrued expenses | 10,413 | 11,684 | 10,165 | 16,294 | ||||||||||||
Total liabilities | 749,553 | 1,381,718 | 62,068 | 1,285,011 | ||||||||||||
Net Assets Consist of: | ||||||||||||||||
Paid-in capital | 114,675,214 | 48,053,962 | 123,524,671 | 38,273,245 | ||||||||||||
Accumulated net investment income (loss) | 95,471 | 41,092 | 15,224 | 34,173 | ||||||||||||
Accumulated net realized gain (loss) on investments | 8,702,596 | 150,695 | 17,878,822 | (3,265,575 | ) | |||||||||||
Net unrealized appreciation (depreciation) of investments | 52,424,966 | 618,132 | 19,538,067 | (71,282 | ) | |||||||||||
Total Net Assets | $ | 175,898,247 | $ | 48,863,881 | $ | 160,956,784 | $ | 34,970,561 | ||||||||
Net Assets: | ||||||||||||||||
$ | 171,380,098 | 1 | $ | 46,956,644 | 1 | $ | 157,805,225 | 1 | $ | 34,970,561 | ||||||
$ | 4,518,149 | 2 | $ | 1,907,237 | 2 | $ | 3,151,559 | 2 | $ | — | ||||||
Shares Outstanding, No Par Value, Unlimited Shares Authorized: | ||||||||||||||||
10,583,017 | 1 | 4,422 ,227 | 1 | 8,761,606 | 1 | 3,746,551 | ||||||||||
303,815 | 2 | 179,504 | 2 | 188,738 | 2 | — | ||||||||||
Total Shares Outstanding | 10,886,832 | 4,601,731 | 8,950,344 | 3,746,551 | ||||||||||||
Net Asset Value Per Share | ||||||||||||||||
$ | 16.19 | 1 | $ | 10.62 | 1 | $ | 18.01 | 1 | $ | 9.33 | ||||||
$ | 14.87 | 2 | $ | 10.63 | 2 | $ | 16.70 | 2 | $ | — | ||||||
Offering Price Per Share3 | ||||||||||||||||
$ | 16.95 | 1,4 | $ | 10.95 | 1,5 | $ | 18.86 | 1, 4 | $ | 9.62 | 5 | |||||
$ | 14.87 | 2 | $ | 10.63 | 2 | $ | 16.70 | 2 | $ | — | ||||||
Redemption Proceeds Per Share6 | ||||||||||||||||
$ | 16.19 | 1 | $ | 10.62 | 1 | $ | 18.01 | 1 | $ | 9.33 | ||||||
$ | 14.05 | 2,7 | $ | 10.05 | 2,7 | $ | 15.78 | 2,7 | $ | — | ||||||
Investments, at identified cost | $ | 123,249,041 | $ | 48,948,641 | $ | 141,264,680 | $ | 35,533,489 | ||||||||
1 | Represents Class A Shares. |
2 | Represents Class B Shares. |
3 | See “What Do Shares Cost” in the Prospectus. |
4 | Computation of Offering Price: 100/95.50 of net asset value. |
5 | Computation of Offering Price: 100/97 of net asset value. |
6 | See “How to Redeem and Exchange Shares” in the Prospectus. |
7 | Computation of Redemption Proceeds (assumes maximum contingent deferred sales charge): 94.50/100 of net asset value. |
(See Notes to Financial Statements)
Annual Report
35
Table of Contents
Capital One Funds—Statements of Assets and Liabilities (continued)
As of August 31, 2007
U.S. Government Income Fund | Cash Reserve Fund | U.S. Treasury Money Market Fund | ||||||||||
Assets: | ||||||||||||
Investments in repurchase agreements | $ | — | $ | 34,210,000 | $ | 58,039,000 | ||||||
Investments in securities | 89,475,877 | 188,900,218 | 46,063,334 | |||||||||
Total investments in securities, at value | 89,475,877 | 223,110,218 | 104,102,334 | |||||||||
Cash | 1 | — | — | |||||||||
Income receivable | 812,724 | 30,843 | 641,405 | |||||||||
Receivable for investments sold | 541 | — | — | |||||||||
Receivable for shares sold | 717 | — | — | |||||||||
Prepaid and other expenses | 3,117 | 11,517 | 4,257 | |||||||||
Total assets | 90,292,977 | 223,152,578 | 104,747,996 | |||||||||
Liabilities: | ||||||||||||
Payable for shares redeemed | 58,297 | — | — | |||||||||
Income distribution payable | — | 357,134 | 231,119 | |||||||||
Payable for investment adviser fees (Note 5) | — | 4 | 1 | |||||||||
Payable for master services fees (Note 5) | 3,948 | 6,496 | 3,941 | |||||||||
Payable for distribution services fees (Note 5) | — | 3 | — | |||||||||
Payable for compliance services fees | 538 | 1,092 | 582 | |||||||||
Payable for trustees’ fees | 1,026 | 1,366 | 1,190 | |||||||||
Accrued expenses | 15,084 | 11,818 | 15,504 | |||||||||
Total liabilities | 78,893 | 377,913 | 252,337 | |||||||||
Net Assets Consist of: | ||||||||||||
Paid-in capital | 91,818,188 | 222,886,820 | 104,523,255 | |||||||||
Accumulated net investment income (loss) | 165,280 | (58 | ) | 33,670 | ||||||||
Accumulated net realized gain (loss) on investments | (1,907,463 | ) | (112,097 | ) | (61,266 | ) | ||||||
Net unrealized appreciation (depreciation) of investments | 138,079 | — | — | |||||||||
Total Net Assets | $ | 90,214,084 | $ | 222,774,665 | $ | 104,495,659 | ||||||
Net Assets: | ||||||||||||
$ | 90,214,084 | $ | 222,375,163 | 1 | $ | 104,495,659 | ||||||
$ | — | $ | 399,502 | 2 | $ | — | ||||||
Shares Outstanding, No Par Value, Unlimited Shares Authorized: | ||||||||||||
9,153,718 | 222,485,955 | 1 | 104,523,264 | |||||||||
— | 400,865 | 2 | — | |||||||||
Total Shares Outstanding | 9,153,718 | 222,886,820 | 104,523,264 | |||||||||
Net Asset Value Per Share | ||||||||||||
$ | 9.86 | $ | 1.00 | 1 | $ | 1.00 | ||||||
$ | — | $ | 1.00 | 2 | $ | — | ||||||
Offering Price Per Share3 | ||||||||||||
$ | 10.16 | 5 | $ | 1.00 | 1 | $ | 1.00 | |||||
$ | — | $ | 1.00 | 2 | $ | — | ||||||
Redemption Proceeds Per Share6 | ||||||||||||
$ | 9.86 | $ | 1.00 | 1 | $ | 1.00 | ||||||
$ | — | $ | 0.95 | 2,7 | $ | — | ||||||
Investments, at identified cost | $ | 89,337,798 | $ | 223,110,218 | $ | 104,102,334 | ||||||
(See Notes to Financial Statements)
Annual Report
36
Table of Contents
Capital One Funds—Statements of Operations
For the Year Ended August 31, 2007
Capital Appreciation Fund | Louisiana Municipal Income Fund | Mid Cap Equity Fund | Total Return Bond Fund | |||||||||||||
Investment Income: | ||||||||||||||||
Dividends | $ | 3,766,362 | $ | 21,847 | $ | 2,208,548 | $ | 37,103 | ||||||||
Interest | 11,924 | 2,511,992 | 31,429 | 2,149,666 | ||||||||||||
Total income | 3,778,286 | 2,533,839 | 2,239,977 | 2,186,769 | ||||||||||||
Expenses: | ||||||||||||||||
Investment adviser fees (Note 5) | 1,657,964 | 254,476 | 1,115,098 | 204,968 | ||||||||||||
Master services fees (Note 5) | 155,368 | 67,881 | 105,059 | 38,952 | ||||||||||||
Administrative personnel and services fees (Note 5) | 40,427 | 10,677 | 24,056 | 8,458 | ||||||||||||
Custodian fees (Note 5) | 48,237 | 14,696 | 34,708 | 15,000 | ||||||||||||
Transfer and dividend disbursing agent fees (Note 5) | 16,601 | 10,715 | 16,093 | 8,887 | ||||||||||||
Trustees’ fees (Note 5) | 41,484 | 10,974 | 26,482 | 8,229 | ||||||||||||
Professional fees | 43,267 | 42,774 | 42,915 | 42,460 | ||||||||||||
Portfolio accounting fees (Note 5) | 14,875 | 13,671 | 12,070 | 13,970 | ||||||||||||
Distribution services fees (Note 5) | 580,719 | 1 | 153,775 | 2 | 390,111 | 3 | 102,484 | |||||||||
Shareholder services fees (Note 5) | 14,033 | 5 | 6,200 | 5 | 9,206 | 5 | — | |||||||||
Compliance services fees (Note 5) | 12,997 | 3,271 | 9,150 | 2,317 | ||||||||||||
Miscellaneous expenses | 164,249 | 66,118 | 111,721 | 53,771 | ||||||||||||
Total expenses | 2,790,221 | 655,228 | 1,896,669 | 499,496 | ||||||||||||
Waivers (Note 5): | ||||||||||||||||
Waiver of investment adviser fees | — | (129,286 | ) | — | (130,715 | ) | ||||||||||
Waiver of distribution services fees | — | (54,070 | )6 | — | (31,238 | ) | ||||||||||
Net expenses | 2,790,221 | 471,872 | 1,896,669 | 337,543 | ||||||||||||
Net investment income | 988,065 | 2,061,967 | 343,308 | 1,849,226 | ||||||||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||||||||||
Net realized gain (loss) on investments | 44,587,985 | 99,838 | 17,908,614 | (376,789 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) of investments | (12,234,525 | ) | (690,515 | ) | (1,292,210 | ) | 259,519 | |||||||||
Net realized and unrealized gain (loss) on investments | 32,353,460 | (590,677 | ) | 16,616,404 | (117,270 | ) | ||||||||||
Change in net assets resulting from operations | $ | 33,341,525 | $ | 1,471,290 | $ | 16,959,712 | $ | 1,731,956 | ||||||||
1 | Represents distribution services fees of $538,622 and $42,097 for Class A Shares and Class B Shares, respectively. |
2 | Represents distribution services fee of $135,175 and $18,600 for Class A Shares and Class B Shares, respectively. |
3 | Represents distribution services fee of $362,491 and $27,620 for Class A Shares and Class B Shares, respectively. |
4 | Represents distribution services fees of $494,331 and $2,985 for Class A Shares and Class B Shares, respectively. |
5 | Represents shareholder services fees for Class B Shares. |
6 | Represents distribution services fee waiver for Class A Shares. |
7 | Represents distribution services fee waiver of $296,599 and $2,985 for Class A Shares and Class B Shares, respectively. |
(See Notes to Financial Statements)
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Table of Contents
Capital One Funds—Statements of Operations (continued)
For the Year Ended August 31, 2007
U.S. Government Income Fund | Cash Reserve Fund | U.S. Treasury Money Market Fund | ||||||||||
Investment Income: | ||||||||||||
Dividends | $ | 51,105 | $ | 248,248 | $ | 174,148 | ||||||
Interest | 4,735,110 | 10,305,787 | 6,115,971 | |||||||||
Total income | 4,786,215 | 10,554,035 | 6,290,119 | |||||||||
Expenses: | ||||||||||||
Investment adviser fees (Note 5) | 410,205 | 792,522 | 492,852 | |||||||||
Master services fees (Note 5) | 69,252 | 114,183 | 66,790 | |||||||||
Administrative personnel and services fees (Note 5) | 15,331 | 31,310 | 25,519 | |||||||||
Custodian fees (Note 5) | 22,772 | 44,955 | 29,679 | |||||||||
Transfer and dividend disbursing agent fees (Note 5) | 5,942 | 20,983 | 15,247 | |||||||||
Trustees’ fees (Note 5) | 15,009 | 37,265 | 20,567 | |||||||||
Professional fees | 41,096 | 42,686 | 42,237 | |||||||||
Portfolio accounting fees (Note 5) | 13,545 | 11,268 | 8,713 | |||||||||
Distribution services fees (Note 5) | 227,890 | 497,316 | 4 | — | ||||||||
Shareholder services fees (Note 5) | — | 796 | 5 | — | ||||||||
Compliance services fees (Note 5) | 5,427 | 11,848 | 6,904 | |||||||||
Miscellaneous expenses | 61,621 | 161,900 | 98,872 | |||||||||
Total expenses | 888,090 | 1,767,032 | 807,380 | |||||||||
Waivers (Note 5): | ||||||||||||
Waiver of investment adviser fees | (219,472 | ) | (501,563 | ) | (124,378 | ) | ||||||
Waiver of distribution services fees | (91,155 | ) | (299,584 | )7 | — | |||||||
Net expenses | 577,463 | 965,885 | 683,002 | |||||||||
Net investment income | 4,208,752 | 9,588,150 | 5,607,117 | |||||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||||||
Net realized gain (loss) on investments | (165,583 | ) | 92 | (27,107 | ) | |||||||
Net change in unrealized appreciation (depreciation) of investments | 496,124 | — | — | |||||||||
Net realized and unrealized gain (loss) on investments | 330,541 | 92 | (27,107 | ) | ||||||||
Change in net assets resulting from operations | $ | 4,539,293 | $ | 9,588,242 | $ | 5,580,010 | ||||||
(See Notes to Financial Statements)
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Table of Contents
Capital One Funds—Statements of Changes in Net Assets
Capital Appreciation Fund | Louisiana Municipal Income Fund | Mid Cap Equity Fund | ||||||||||||||||||||||
Year Ended 2007 | Year Ended 2006 | Year Ended August 31, 2007 | Year Ended August 31, 2006 | Year Ended 2007 | Year Ended 2006 | |||||||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 988,065 | $ | 1,351,684 | $ | 2,061,967 | $ | 2,535,945 | $ | 343,308 | $ | 144,071 | ||||||||||||
Net realized gain (loss) on investments | 44,587,985 | 30,490,643 | 99,838 | 182,428 | 17,908,614 | 15,840,769 | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investments | (12,234,525 | ) | (15,302,059 | ) | (690,515 | ) | (1,445,201 | ) | (1,292,210 | ) | (9,722,533 | ) | ||||||||||||
Change in net assets resulting from operations | 33,341,525 | 16,540,268 | 1,471,290 | 1,273,172 | 16,959,712 | 6,262,307 | ||||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
Distributions from net investment income | (1,240,052 | ) 1 | (1,059,278 | ) 3 | (1,983,748 | ) 5 | (2,571,933 | ) 7 | (352,227 | ) 3 | (299,371 | ) 3 | ||||||||||||
Distributions from net realized gain on investments | (64,372,071 | ) 2 | (19,195,912 | ) 4 | (182,907 | ) 6 | (2,174,360 | ) 8 | (14,716,872 | ) 9 | (5,830,605 | ) 10 | ||||||||||||
Change in net assets from distributions to shareholders | (65,612,123 | ) | (20,255,190 | ) | (2,166,655 | ) | (4,746,293 | ) | (15,069,099 | ) | (6,129,976 | ) | ||||||||||||
Capital Transactions: | ||||||||||||||||||||||||
Proceeds from sales of shares | 17,750,985 | 18,192,466 | 4,102,069 | 4,410,181 | 49,931,250 | 27,795,912 | ||||||||||||||||||
Net asset value of shares issued to shareholders in payment of distributions declared | 53,492,508 | 15,131,260 | 822,386 | 2,536,213 | 10,169,565 | 4,212,723 | ||||||||||||||||||
Value of shares redeemed | (93,798,361 | ) | (48,259,160 | ) | (18,360,444 | ) | (19,117,948 | ) | (37,393,566 | ) | (24,131,196 | ) | ||||||||||||
Change in net assets from share transactions | (22,554,868 | ) | (14,935,434 | ) | (13,435,989 | ) | (12,171,554 | ) | 22,707,249 | 7,877,439 | ||||||||||||||
Change in net assets | (54,825,466 | ) | (18,650,356 | ) | (14,131,354 | ) | (15,644,675 | ) | 24,597,862 | 8,009,770 | ||||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of period | 230,723,713 | 249,374,069 | 62,995,235 | 78,639,910 | 136,358,922 | 128,349,152 | ||||||||||||||||||
End of period | $ | 175,898,247 | $ | 230,723,713 | $ | 48,863,881 | $ | 62,995,235 | $ | 160,956,784 | $ | 136,358,922 | ||||||||||||
Accumulated net investment income (loss) | $ | 95,471 | $ | 347,458 | $ | 41,092 | $ | 11,110 | $ | 15,224 | $ | 24,143 | ||||||||||||
1 | Represents income distributions of $1,234,863 and $5,189 for Class A Shares and Class B Shares, respectively. |
2 | Represents gain distributions of $62,763,926 and $1,608,145 for Class A Shares and Class B Shares, respectively. |
3 | Represents income distributions for Class A Shares. |
4 | Represents gain distributions of $18,491,565 and $704,347 for Class A Shares and Class B Shares, respectively. |
5 | Represents income distributions of $1,916,220 and $67,528 for Class A Shares and Class B Shares, respectively. |
6 | Represents gain distributions of $174,861 and $8,046 for Class A Shares and Class B Shares, respectively. |
7 | Represents income distributions of $2,489,284 and $82,649 for Class A Shares and Class B Shares, respectively. |
8 | Represents gain distributions of $2,083,572 and $90,788 for Class A Shares and Class B Shares, respectively. |
9 | Represents gain distributions of $14,297,687 and $419,185 for Class A Shares and Class B Shares, respectively. |
10 | Represents gain distributions of $5,612,365 and $218,240 for Class A Shares and Class B Shares, respectively. |
(See Notes to Financial Statements)
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Table of Contents
Capital One Funds—Statements of Changes in Net Assets (continued)
Total Return Bond Fund | U.S. Government Income Fund | |||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 1,849,226 | $ | 2,208,371 | $ | 4,208,752 | $ | 3,382,110 | ||||||||
Net realized gain (loss) on investments | (376,789 | ) | (766,233 | ) | (165,583 | ) | (1,406,693 | ) | ||||||||
Net change in unrealized appreciation (depreciation) on investments | 259,519 | (1,295,950 | ) | 496,124 | (205,095 | ) | ||||||||||
Change in net assets resulting from operations | 1,731,956 | 146,188 | 4,539,293 | 1,770,322 | ||||||||||||
Distributions to Shareholders: | ||||||||||||||||
Distributions from net investment income | (1,872,723 | ) | (2,312,132 | ) | (4,210,421 | ) | (3,376,027 | ) | ||||||||
Change in net assets from distributions to shareholders | (1,872,723 | ) | (2,312,132 | ) | (4,210,421 | ) | (3,376,027 | ) | ||||||||
Capital Transactions: | ||||||||||||||||
Proceeds from sales of shares | 7,662,965 | 5,516,561 | 27,039,910 | 32,336,741 | ||||||||||||
Net asset value of shares issued to shareholders in payment of distributions declared | 1,171,275 | 1,618,317 | 1,083,174 | 1,100,471 | ||||||||||||
Value of shares redeemed | (22,452,541 | ) | (9,558,455 | ) | (26,947,748 | ) | (14,816,670 | ) | ||||||||
Change in net assets from share transactions | (13,618,301 | ) | (2,423,577 | ) | 1,175,336 | 18,620,542 | ||||||||||
Change in net assets | (13,759,068 | ) | (4,589,521 | ) | 1,504,208 | 17,014,837 | ||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 48,729,629 | 53,319,150 | 88,709,876 | 71,695,039 | ||||||||||||
End of period | $ | 34,970,561 | $ | 48,729,629 | $ | 90,214,084 | $ | 88,709,876 | ||||||||
Accumulated net investment income (loss) | $ | 34,173 | $ | 35,482 | $ | 165,280 | $ | 23,607 | ||||||||
(See Notes to Financial Statements)
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Table of Contents
Capital One Funds—Statements of Changes in Net Assets (continued)
Cash Reserve Fund | U.S. Treasury Money Market Fund | |||||||||||||||
Year Ended 2007 | Year Ended 2006 | Year Ended 2007 | Year Ended 2006 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 9,588,150 | $ | 7,240,599 | $ | 5,607,117 | $ | 5,944,835 | ||||||||
Net realized gain (loss) on investments | 92 | (62,946 | ) | (27,107 | ) | (33,766 | ) | |||||||||
Change in net assets resulting from operations | 9,588,242 | 7,177,653 | 5,580,010 | 5,911,069 | ||||||||||||
Distributions to Shareholders: | ||||||||||||||||
Distributions from net investment income | (9,589,442 | ) 1 | (7,239,594 | ) 2 | (5,607,085 | ) | (5,912,942 | ) | ||||||||
Change in net assets from distributions to shareholders | (9,589,442 | ) | (7,239,594 | ) | (5,607,085 | ) | (5,912,942 | ) | ||||||||
Capital Transactions: | ||||||||||||||||
Proceeds from sales of shares | 410,299,629 | 417,351,463 | 330,451,925 | 968,660,552 | ||||||||||||
Net asset value of shares issued to shareholders in payment of distributions declared | 5,261,002 | 3,940,554 | 1,591,142 | 1,750,792 | ||||||||||||
Value of shares redeemed | (373,015,649 | ) | (375,742,312 | ) | (383,838,222 | ) | (1,018,118,120 | ) | ||||||||
Change in net assets from share transactions | 42,544,982 | 45,549,705 | (51,795,155 | ) | (47,706,776 | ) | ||||||||||
Change in net assets | 42,543,782 | 45,487,764 | (51,822,230 | ) | (47,708,649 | ) | ||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 180,230,883 | 134,743,119 | 156,317,889 | 204,026,538 | ||||||||||||
End of period | $ | 222,774,665 | $ | 180,230,883 | $ | 104,495,659 | $ | 156,317,889 | ||||||||
Accumulated net investment income (loss) | $ | (58 | ) | $ | 1,234 | $ | 33,670 | $ | 33,638 | |||||||
1 | Represents income distributions of $9,570,824 and $18,618 for Class A Shares and Class B Shares, respectively. |
2 | Represents income distributions of $7,224,338 and $15,256 for Class A Shares and Class B Shares, respectively. |
(See Notes to Financial Statements)
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41
Table of Contents
Capital One Funds—Combined Notes to Financial Statements
As of August 31, 2007
(1) | ORGANIZATION |
Capital One Funds (the “Trust”), organized as a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of seven portfolios (individually referred to as the “Fund”, or collectively as the “Funds”) which are presented herein:
Portfolio Name | Diversification | Investment Objective | ||
Capital One Capital Appreciation Fund (“Capital Appreciation Fund”)” | diversified | provide growth of capital and income | ||
Capital One Louisiana Municipal Income Fund (“Louisiana Municipal Income Fund”) | non-diversified | provide current income which is generally exempt from federal income tax and personal income taxes imposed by the state of Louisiana | ||
Capital One Mid Cap Equity Fund (“Mid Cap Equity Fund”) | diversified | total return | ||
Capital One Total Return Bond Fund (“Total Return Bond Fund”) | diversified | maximize total return | ||
Capital One U.S. Government Income Fund (“U.S. Government Income Fund”) | diversified | provide current income | ||
Capital One Cash Reserve Fund (“Cash Reserve Fund”) | diversified | provide current income consistent with stability of principal | ||
Capital One U.S. Treasury Money Market Fund (“U.S. Treasury Money Market Fund”) | diversified | provide current income consistent with stability of principal and liquidity |
The assets of each Fund are segregated and a shareholder’s interest is limited to the Fund in which shares are held. The Trust is authorized to issue an unlimited amount of shares without par value. Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund offer two classes of shares: Class A Shares and Class B Shares. All shares of Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund have identical rights and privilege except with respect to the fees paid under the Distribution Plan, Shareholder Services Fees, voting rights on matters affecting a single class of shares and sales charges. The Class A Shares of the Capital Appreciation Fund and the Mid Cap Equity Fund have a maximum sales charge of 4.50% as a percentage of the original purchase price. The Class A Shares of the Louisiana Municipal Income Fund has a maximum sales charge of 3.00% as a percentage of the original purchase price. The Total Return Bond Fund and the U.S. Government Income Fund have a maximum front-end sales charge of 3.00% as a percentage of the original price. The Class B Shares of the Capital Appreciation Fund, the Mid Cap Equity Fund and the Louisiana Municipal Income Fund are offered without any front-end sales charge but will be subject to a Contingent Deferred Sales Charge (“CDSC”) ranging from a maximum of 5.50% if redeemed less than one year after purchase to 0.00% if redeemed more than six years after purchase.
Under the Funds’ organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds may enter into contracts with their vendors and others that provide for general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.
(2) | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with generally accepted accounting principles (“GAAP”) in the United States of America.
Investment Valuations:
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue and any other factors or market data the pricing service deems relevant. Total Return Bond Fund and U.S. Government Income Fund generally value fixed income securities according to prices furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost, which approximates fair market value. Listed equity securities are valued at the last sale price or official closing price reported on a national securities exchange, if available. If unavailable, the security is generally valued at the mean between the last closing bid and asked prices. Cash Reserve Fund and U.S. Treasury Money Market Fund use the amortized cost method to value portfolio securities in accordance with Rule 2a-7 under the Act. Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund, Total Return Bond Fund, and U.S. Government Income Fund generally value short-term securities according to prices furnished by an independent pricing service, except that short-term securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost, which approximates fair market value. Fixed income and short-term security prices furnished by an independent pricing service are intended to be indicative of the mean between the bid and asked prices currently offered to institutional investors for the securities. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the “Trustees”). As of August 31, 2007, there were no securities which were fair valued.
Annual Report
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Table of Contents
Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
Repurchase Agreements:
It is the policy of the Funds to require the other party to a repurchase agreement to transfer to the Fund’s Custodian or Sub-Custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the Custodian or Sub-Custodian in which the Funds hold “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Funds have established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
With respect to agreements to repurchase U.S. government securities and cash items, the Funds treat the repurchase agreement as an investment in the underlying securities and not as an obligation of the other party to the repurchase agreement. Other repurchase agreements are treated as obligations of the other party secured by the underlying securities. Nevertheless, the insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Funds to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Funds in excess of the repurchase price and related transaction costs must be remitted to the other party.
Investment Income, Gains and Losses, Expenses and Distributions:
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly for Cash Reserve Fund and U.S. Treasury Money Market Fund. Distributions of net investment income are declared and paid quarterly for Capital Appreciation Fund and Mid Cap Equity Fund. Distributions of net investment income are declared and paid monthly for Louisiana Municipal Income Fund, Total Return Bond Fund and U.S. Government Income Fund. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as distribution and shareholder services fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
The character of income and gains distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (e.g. reclass of market discounts, net operating loss, gain/loss, paydowns and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences (e.g. wash sales) do not require reclassification. Dividends to shareholders which exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.
Premium and Discount Amortization/Paydown Gains and Losses:
All premiums and discounts on fixed income securities are amortized/accreted for financial statement purposes. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.
Federal Taxes:
It is the Funds’ policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of their income. Accordingly, no provision for federal income tax is necessary.
Withholding taxes, and where appropriate, deferred withholding taxes, on foreign interest, dividends and capital gains has been provided for in accordance with the applicable country’s tax rules and rates.
In July 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required no later than the last business day of the first financial statement reporting period for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has not completed their analysis on whether the adoption of FIN 48 will have an impact to the financial statements once adopted.
When-Issued and Delayed Delivery Transactions:
The Funds may engage in when-issued or delayed delivery transactions. The Funds record when-issued securities no later than one business day after trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counter parties to perform under the contract.
Use of Estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
Other:
Investment transactions are recorded no later than one business day after trade date throughout the period. For financial reporting purposes, investment transactions are recorded on trade date on the last business day of the reporting period. Realized gains and losses from investment transactions are recorded on an identified basis.
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Table of Contents
Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
Real Estate Investment Trusts:
The Fund may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. Certain distributions received from REITs during the year, which are known to be a return of capital, are recorded as a reduction to the cost of the individual REIT.
New Accounting Standards:
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of August 31, 2007, the Funds do not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures will be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
(3) | SHARES OF BENEFICIAL INTEREST |
The following tables summarize share activity:
EQUITY AND INCOME FUNDS
Capital Appreciation Fund | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Class A Shares | Shares | Dollars | Shares | Dollars | ||||||||||
Shares sold | 950,881 | $ | 17,637,272 | 953,687 | $ | 18,089,013 | ||||||||
Shares issued to shareholders in payment of distributions declared | 3,044,326 | 51,904,521 | 788,742 | 14,449,109 | ||||||||||
Shares redeemed | (5,166,156 | ) | (91,286,316 | ) | (2,365,142 | ) | (44,756,474 | ) | ||||||
Net change resulting from Class A Share transactions | (1,170,949 | ) | $ | (21,744,523 | ) | (622,713 | ) | $ | (12,218,352 | ) | ||||
Class B Shares | ||||||||||||||
Shares sold | 6,600 | $ | 113,713 | 5,762 | $ | 103,453 | ||||||||
Shares issued to shareholders in payment of distributions declared | 100,178 | 1,587,987 | 39,522 | 682,151 | ||||||||||
Shares redeemed | (144,734 | ) | (2,512,045 | ) | (196,283 | ) | (3,502,686 | ) | ||||||
Net change resulting from Class B Share transactions | (37,956 | ) | $ | (810,345 | ) | 150,999 | $ | (2,717,082 | ) | |||||
Net change resulting from Fund Share transactions | (1,208,905 | ) | $ | (22,554,868 | ) | (773,712 | ) | $ | (14,935,434 | ) | ||||
Louisiana Municipal Income Fund | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Class A Shares | Shares | Dollars | Shares | Dollars | ||||||||||
Shares sold | 385,210 | $ | 4,102,069 | 406,205 | $ | 4,370,281 | ||||||||
Shares issued to shareholders in payment of distributions declared | 71,751 | 767,349 | 223,864 | 2,404,097 | ||||||||||
Shares redeemed | (1,642,877 | ) | (17,572,848 | ) | (1,708,313 | ) | (18,421,550 | ) | ||||||
Net change resulting from Class A Share transactions | (1,185,916 | ) | $ | (12,703,430 | ) | (1,078,244 | ) | $ | 11,647,172 | |||||
Class B Shares | ||||||||||||||
Shares sold | — | $ | — | 3,701 | $ | 39,900 | ||||||||
Shares issued to shareholders in payment of distributions declared | 5,142 | 55,037 | 12,284 | 132,116 | ||||||||||
Shares redeemed | (73,813 | ) | (787,596 | ) | (64,342 | ) | (696,398 | ) | ||||||
Net change resulting from Class B Share transactions | (68,671 | ) | $ | (732,559 | ) | (48,357 | ) | $ | (524,382 | ) | ||||
Net change resulting from Fund Share transactions | (1,254,587 | ) | $ | (13,435,989 | ) | (1,126,601 | ) | $ | (12,171,554 | ) | ||||
Mid Cap Equity | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Class A Shares | Shares | Dollars | Shares | Dollars | ||||||||||
Shares sold | 2,674,401 | $ | 49,836,961 | 1,533,396 | $ | 27,343,755 | ||||||||
Shares issued to shareholders in payment of distributions declared | 577,628 | 9,776,760 | 237,655 | 4,013,365 | ||||||||||
Shares redeemed | (1,960,508 | ) | (35,863,514 | ) | (1,267,939 | ) | (22,622,571 | ) | ||||||
Net change resulting from Class A Share transactions | 1,291,521 | $ | 23,750,207 | 503,112 | $ | 8,734,549 | ||||||||
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Table of Contents
Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
Mid Cap Equity (continued) | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Class B Shares | ||||||||||||||
Shares sold | 5,471 | $ | 94,289 | 26,691 | $ | 452,157 | ||||||||
Shares issued to shareholders in payment of distributions declared | 24,988 | 392,805 | 12,538 | 199,358 | ||||||||||
Shares redeemed | (89,041 | ) | (1,530,052 | ) | (91,846 | ) | (1,508,625 | ) | ||||||
Net change resulting from Class B Share transactions | (58,582 | ) | $ | (1,042,958 | ) | (52,617 | ) | $ | (857,110 | ) | ||||
Net change resulting from Fund Share transactions | 1,232,939 | $ | 22,707,249 | 450,495 | $ | 7,877,439 | ||||||||
Total Return Bond Fund | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Shares sold | 814,696 | $ | 7,662,965 | 585,470 | $ | 5,516,561 | ||||||||
Shares issued to shareholders in payment of distributions declared | 124,936 | 1,171,275 | 172,233 | 1,618,317 | ||||||||||
Shares redeemed | (2,387,521 | ) | (22,452,541 | ) | (1,017,878 | ) | (9,558,455 | ) | ||||||
Net change resulting from Fund Share transactions | (1,447,889 | ) | $ | (13,618,301 | ) | (260,175 | ) | $ | (2,423,577 | ) | ||||
U.S. Government Income Fund | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Shares sold | 2,748,401 | $ | 27,039,910 | 3,316,047 | $ | 32,336,741 | ||||||||
Shares issued to shareholders in payment of distributions declared | 110,120 | 1,083,174 | 112,044 | 1,100,471 | ||||||||||
Shares redeemed | (2,741,571 | ) | (26,947,748 | ) | (1,509,253 | ) | (14,816,670 | ) | ||||||
Net change resulting from Fund Share transactions | 116,950 | $ | 1,175,336 | 1,918,838 | $ | 18,620,542 | ||||||||
MONEY MARKET FUNDS | ||||||||||||||
Cash Reserve Fund | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Class A Shares | Shares | Dollars | Shares | Dollars | ||||||||||
Shares sold | 410,247,819 | $ | 410,247,819 | 417,281,440 | $ | 417,281,440 | ||||||||
Shares issued to shareholders in payment of distributions declared | 5,242,525 | 5,242,525 | 3,926,406 | 3,926,406 | ||||||||||
Shares redeemed | (372,949,721 | ) | (372,949,721 | ) | (375,666,289 | ) | (375,666,289 | ) | ||||||
Net change resulting from Class A Share transactions | 42,540,623 | $ | 42,540,623 | 45,541,557 | $ | 45,541,557 | ||||||||
Class B Shares | ||||||||||||||
Shares sold | 51,810 | $ | 51,810 | 70,023 | $ | 70,023 | ||||||||
Shares issued to shareholders in payment of distributions declared | 18,477 | 18,477 | 14,148 | 14,148 | ||||||||||
Shares redeemed | (65,928 | ) | (65,928 | ) | (76,023 | ) | (76,023 | ) | ||||||
Net change resulting from Class B Share transactions | 4,359 | $ | 4,359 | 8,148 | $ | 8,148 | ||||||||
Net change resulting from Fund Share transactions | 42,544,982 | $ | 42,544,982 | 45,549,705 | $ | 45,549,705 | ||||||||
U.S. Treasury Money Market Fund | ||||||||||||||
Year Ended August 31, 2007 | Year Ended August 31, 2006 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Shares sold | 330,451,925 | $ | 330,451,925 | 968,660,552 | $ | 968,660,552 | ||||||||
Shares issued to shareholders in payment of distributions declared | 1,591,142 | 1,591,142 | 1,750,792 | 1,750,792 | ||||||||||
Shares redeemed | (383,838,222 | ) | (383,838,222 | ) | (1,018,118,120 | ) | (1,018,118,120 | ) | ||||||
Net change resulting from Fund Share transactions | (51,795,155 | ) | $ | (51,795,155 | ) | (47,706,776 | ) | $ | (47,706,776 | ) | ||||
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Table of Contents
Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
(4) | FEDERAL TAX INFORMATION |
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due in part to differing treatments for Real Estate Investment Trust reclasses and discount accretion/premium amortization on debt securities.
As of the tax year ended August 31, 2007, permanent differences identified and reclassified among the components of net assets were as follows:
Fund | Paid In Capital | Undistributed Net Investment Income | Accumulated Net Realized Gains (Losses) | ||||||||
Louisiana Municipal Income Fund | $ | 13,144 | $ | (48,237 | ) | $ | 35,093 | ||||
Mid Cap Equity Fund | 14 | — | (14 | ) | |||||||
Total Return Bond Fund | — | 22,188 | (22,188 | ) | |||||||
U.S. Government Income Fund | — | 143,342 | (143,342 | ) |
Net investment income, net realized gains (losses), and net assets were not affected by this reclassification.
The tax character of distributions reported on the Statements of Changes in Net Assets for the years ended August 31, 2007 and 2006 were as follows:
2007 | 2006 | |||||||||||||||||
Fund | Tax-Exempt Income | Ordinary Income* | Long-Term Capital Gains | Tax-Exempt Income | Ordinary Income* | Long-Term Capital Gains | ||||||||||||
Capital Appreciation Fund | $ | — | $ | 3,260,951 | $ | 62,351,172 | $ | — | $ | 1,526,353 | $ | 18,728,837 | ||||||
Louisiana Municipal Income Fund | 1,981,756 | 1,992 | 182,907 | 2,571,519 | 414 | 2,174,360 | ||||||||||||
Mid Cap Equity Fund | — | 424,111 | 14,644,988 | — | 873,786 | 5,256,190 | ||||||||||||
Total Return Bond Fund | — | 1,872,723 | — | — | 2,312,132 | — | ||||||||||||
U.S. Government Income Fund | — | 4,210,421 | — | — | 3,376,027 | — | ||||||||||||
Cash Reserve Fund | — | 9,589,442 | — | — | 7,239,594 | — | ||||||||||||
U.S. Treasury Money Market Fund | — | 5,607,085 | — | — | 5,912,942 | — |
* | For tax purposes short-term capital gain distributions are considered ordinary income. |
As of the tax year ended August 31, 2007, the components of distributable earnings on a tax basis were as follows:
Fund | Undistributed Tax-Exempt Income | Undistributed Ordinary Income* | Undistributed Long-Term Capital Gains | Net Unrealized | Capital/Loss Carryforwards | Dividend Payable | |||||||||||||||
Capital Appreciation Fund | $ | — | $ | 1,934,836 | $ | 6,863,231 | $ | 52,424,966 | $ | — | $ | — | |||||||||
Louisiana Municipal Income Fund | 41,092 | — | 105,661 | 663,166 | — | — | |||||||||||||||
Mid Cap Equity Fund | — | 374,037 | 17,547,165 | 19,510,911 | — | — | |||||||||||||||
Total Return Bond Fund | — | 34,173 | — | (101,775 | ) | (3,235,082 | ) | — | |||||||||||||
U.S. Government Income Fund | — | 165,281 | — | 80,577 | (1,849,962 | ) | — | ||||||||||||||
Cash Reserve Fund | — | 833,436 | — | — | (112,097 | ) | (833,494 | ) | |||||||||||||
U.S. Treasury Money Market Fund | — | 394,216 | — | (18,107 | ) | (43,159 | ) | (360,546 | ) |
* | For tax purposes short-term capital gain distributions are considered ordinary income. |
For federal income tax purposes income tax purposes, the following amounts apply as of August 31, 2007:
Fund | Cost of Investments | Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | ||||||||||
Capital Appreciation Fund | $ | 123,249,041 | $ | 53,946,509 | $ | (1,521,543 | ) | $ | 52,424,966 | |||||
Louisiana Municipal Income Fund | 48,903,607 | 853,209 | (190,043 | ) | 663,166 | |||||||||
Mid Cap Equity Fund | 141,291,836 | 25,092,320 | (5,581,409 | ) | 19,510,911 | |||||||||
Total Return Bond Fund | 35,563,982 | 233,142 | (334,917 | ) | (101,775 | ) | ||||||||
U.S. Government Income Fund | 89,395,300 | 446,588 | (366,011 | ) | 80,577 | |||||||||
Cash Reserve Fund* | 223,110,218 | — | — | — | ||||||||||
U.S. Treasury Money Market Fund* | 104,120,441 | — | (18,107 | ) | (18,107 | ) |
* | at amortized cost. |
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Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
The difference between book-basis and tax-basis unrealized appreciation/depreciation is due in part to differing treatments for tax deferral of losses on wash sales and discount accretion/premium amortization on debt securities.
As of the year ended August 31, 2007, Total Return Bond Fund, U.S. Government Income Fund, Cash Reserve Fund and U.S. Treasury Money Market Fund had capital loss carryforwards, as noted below, which will reduce each Fund’s taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve each Fund of any liability for federal income tax. Pursuant to the Code, such capital loss carryforwards will expire as follows:
Expiration Years | |||||||||||||||||||||
Fund | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Total | ||||||||||||||
Total Return Bond Fund | $ | 51,198 | $ | 1,926,558 | $ | — | $ | — | $ | 916 | $ | 935,052 | $ | 2,913,724 | |||||||
U.S. Government Income Fund | — | 90,023 | 180,486 | — | 61,397 | 1,343,372 | 1,675,278 | ||||||||||||||
Cash Reserve Fund | 931 | 44,663 | 3,035 | — | 614 | 62,854 | 112,097 | ||||||||||||||
U.S. Treasury Money Market Fund | — | — | — | 393 | — | 33,766 | 34,159 |
Under current tax regulations, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of the tax year ended August 31, 2007, for federal income tax purposes, Total Return Bond Fund, U.S. Government Income Fund, and U.S. Treasury Money Market Fund had post October losses as follows which were deferred to September 1, 2007.
Fund | |||
Total Return Bond Fund | $ | 321,358 | |
U.S. Government Income Fund | 174,684 | ||
U.S. Treasury Money Market Fund | 9,000 |
(5) | INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Adviser Fee:
Capital One Asset Management LLC, the Funds’ investment adviser (the “Adviser”), receives for its services an annual investment adviser fee based on a percentage of each Fund’s average daily net assets. Expenses incurred by the Funds’ are included on the Statements of Operations as “Investment adviser fees.” Information regarding these transactions is as follows for the year ended August 31, 2007:
Fund | Annual Rate | ||
Capital Appreciation Fund | 0.75 | % | |
Louisiana Municipal Income Fund | 0.45 | % | |
Mid Cap Equity Fund | 0.75 | % | |
Total Return Bond Fund | 0.50 | % | |
U.S. Government Income Fund | 0.45 | % | |
Cash Reserve Fund | 0.40 | % | |
U.S. Treasury Money Market Fund | 0.40 | % |
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended August 31, 2007, the Adviser voluntarily waived a portion of its fee for the following Funds:
Fees waived by Adviser
Fund | |||
Louisiana Municipal Income Fund | $ | 129,286 | |
Total Return Bond Fund | 130,715 | ||
U.S. Government Income Fund | 219,472 | ||
Cash Reserve Fund | 501,563 | ||
U.S. Treasury Money Market Fund | 124,378 |
Master Services Fees:
The Funds and Citi Fund Services Ohio, Inc. (formerly BISYS Fund Services Ohio, Inc.) (the “Administrator”) are parties to a Master Services Agreement effective November 11, 2006. The Administrator is a subsidiary of Citi Investor Services, Inc. (formerly The BISYS Group, Inc.). The Administrator provides administration, fund accounting and transfer agency services pursuant to this agreement and, in consideration of these services, receives a fee based on the average aggregate daily net assets and a base fee for the Form N-Q plus out-of-pocket expenses of the Funds. Expenses incurred by the Funds are reflected on the Statements of Operations as “Master services fees.” Information regarding these transactions is as follows for the year ended August 31, 2007:
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Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
Maximum Administrative Fee | Average Aggregate Daily Net Assets of the Trust | |||
0.050% | on the first $900 million | |||
0.040% | on the next $1.1 billion | |||
0.035% | on the next $3 billion | |||
0.030% | on assets in excess of $5 billion |
For the year ended August 31, 2007, the net fee paid to the Administrator was 0.05% of average aggregate net assets of the Funds.
Prior to November 11, 2006, Federated Administrative Services served as the Fund’s administrator. Fees paid for these services provided were based on the average aggregate daily net assets of the Trust and are reflected on the Statements of Operations as “Administrative personal and services fees.”
Portfolio Accounting Fee:
Prior to November 11, 2006, Federated Services Company (FServ) maintained the funds accounting records for which it received a fee. The fee was based on the level of each Fund’s average daily net assets for the reporting period, plus out-of-pocket expenses. Expenses incurred by the Funds’ are reflected on the Statements of Operations as “Portfolio accounting fees.”
Transfer Agent and Dividend Disbursing Fee:
Prior to November 11, 2006, Boston Financial Data Services, Inc. maintained all necessary shareholder accounts for which it received a fee. Expenses incurred by the Funds’ are reflected on the Statements of Operations as “Transfer and dividend disbursing agent fees.”
Shareholder Services Fee:
Capital One Capital Appreciation Fund, Capital One Louisiana Municipal Income Fund, Capital One Mid Cap Equity Fund and Capital One Cash Reserve Fund may pay fees (service fees) up to 0.25% of the average daily net assets of each Fund’s Class B Shares to financial intermediaries for providing services to shareholders and maintaining shareholder accounts. Under certain agreements, rather than paying financial intermediaries directly, a Fund may pay Service Fees to the Administrator and they will use the fees to compensate financial intermediaries. The Administrator or these financial institutions may voluntarily choose to waive any portion of their fee. This voluntary waiver can be modified or terminated at any time. For the year ended August 31, 2007, the Administrator did not retain any fees paid by the Funds.
Compliance Services Fee:
Under a compliance services agreement between the Funds and the Administrator (the “Agreement”), the administrator provides infrastructure and support in implementing the written policies and procedures comprising the Funds’ compliance program, including support services to the Chief Compliance Officer. For the services provided under the Agreement, the Funds will pay $65,000 for a 12-month period, plus certain out of pocket expenses. Expenses incurred by the Funds’ are reflected on the Statements of Operations as “Compliance services fees.” The Administrator pays the salary and other compensation earned by any such individuals as employees of the Administrator.
Distribution Services Fee:
The Funds have adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Funds will reimburse the distributor, Foreside Distribution services, LP (the “Distributor”), from the net assets of the Funds to finance activities intended to result in the sale of each Fund’s shares. The Distributor is a subsidiary of the Foreside Financial Group, LLC. The Plan provides that the Funds, except for Class B Shares of Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund, may incur distribution expenses up to 0.25% of the average daily net assets of the Funds, annually, to compensate the Distributor. Class B Shares of Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund may incur distribution expenses of up to 0.75% of average daily net assets of the Class B Shares, annually, to reimburse the Distributor. Expenses incurred under the terms of the Plan are reflected on the Statements of Operations as “Distribution services fees.” The Distributor receives an annual fixed fee for providing distribution services to the Funds. It is contemplated by the Distributor that the Adviser shall pay the annual fee to the Distributor pursuant to a separate agreement between the Adviser and the Distributor. The Distributor may voluntarily choose to waive any portion of its fee.
The distributor can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended August 31, 2007, the Distributors voluntarily waived a portion of its distribution services expense for the following Funds:
Distribution Service Fees
Fund | |||
Louisiana Municipal Income Fund | $ | 54,070 | |
Total Return Bond Fund | 31,238 | ||
U.S. Government Income Fund | 91,155 | ||
Cash Reserve Fund | 299,584 |
For the year ended August 31, 2007, U.S. Treasury Money Market Fund did not incur a distribution services fee. When the Distributor receives fees, it may pay some or all of them to financial intermediaries whose customers purchase Shares. For the year ended August 31, 2007, the Distributor did not retain any distribution fees paid by the Funds.
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Table of Contents
Capital One Funds—Combined Notes to Financial Statements (continued)
As of August 31, 2007
Prior to November 11, 2006, the Funds’ distributor was Edgewood Services, Inc. During the period November 11, 2006 through July 31, 2007, BISYS Fund Services Limited Partnership served the funds as distributor. Effective August 1, 2007, Foreside Distribution Services, LP serves as the funds distributor.
Sales Charges:
For the year ended August 31, 2007, the Distributor did not retain sales charges from the sale of Class A Shares.
Custodian Fees:
Capital One National Association is the Funds’ custodian for which it receives a fee. The fee is based on the level of each Fund’s average daily net assets for the reporting period, plus out-of-pocket expenses. Expenses incurred by the Funds’ are reflected on the Statements of Operations as “Custodian fees.”
General:
Certain Officers of the Funds are affiliated with the Adviser or the Administrator. Such Officers receive no compensation from the Funds for serving in their respective roles. Each of the five non-interested Trustees who serve on both the Board and the Audit Committee are compensated $4,500 per quarter and $2,000 for each regularly scheduled meeting, plus reimbursement for certain expenses.
(6) | INVESTMENT TRANSACTIONS |
The cost of investment purchases and the proceeds from the sale of securities (excluding long-term U.S. Government securities and securities maturing less than one year from acquisition), for the year ended August 31, 2007 were as follows:
Fund | Purchases | Sales | ||||
Capital Appreciation Fund | $ | 91,573,792 | $ | 146,521,011 | ||
Louisiana Municipal Income Fund | 36,182,167 | 44,305,977 | ||||
Mid Cap Equity Fund | 81,285,237 | 76,825,745 | ||||
Total Return Bond Fund | 30,635,128 | 43,684,868 | ||||
U.S. Government Income Fund | 43,854,566 | 33,697,912 |
Purchases and sales of U.S. Government Securities (excluding securities maturing less than one year from acquisition) for the year ended August 31, 2007 were as follows:
Purchases | Sales | |||||
Louisiana Municipal Income Fund | $ | 1,989,599 | $ | 2,545,010 | ||
Total Return Bond Fund | 30,483,483 | 28,987,756 | ||||
U.S. Government Income Fund | 26,892,368 | 33,019,731 |
(7) | CONCENTRATION OF CREDIT RISK |
Since Louisiana Municipal Income Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at August 31, 2007, 70.0% of the securities in the portfolio of investments were backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The largest percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency was 27.1% of total investments.
Annual Report
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Table of Contents
Capital One Funds—Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of Capital One Funds:
We have audited the accompanying statements of assets and liabilities of the Capital One Funds (comprised of the Capital One Capital Appreciation Fund, Capital One Louisiana Municipal Income Fund, Capital One Mid Cap Equity Fund, Capital One Total Return Bond Fund, Capital One U.S. Government Income Fund, Capital One Cash Reserve Fund, and Capital One U.S. Treasury Money Market Fund) (the Funds), including the portfolios of investments, as of August 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds constituting the Capital One Funds at August 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Columbus, Ohio
October 26, 2007
Annual Report
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Table of Contents
Capital One Funds—Federal Tax Information (Unaudited)
As of August 31, 2007
For the year ended August 31, 2007, the amount of long-term capital gain designated by the Funds was as follows:
Fund | ||||
Capital Appreciation Fund | $ | 62,351,172 | ||
Louisiana Municipal Income Fund | 182,907 | |||
Mid Cap Equity Fund | 14,645,002 | |||
At August 31, 2007, the following percentages represent the portion of distributions from net investment income which are exempt from federal income tax, other than AMT: | ||||
Fund | ||||
Louisiana Municipal Income Fund | $ | 1,981,756 | ||
Of the ordinary income (including short-term capital gain) distributions made by the Funds during the year ended August 31, 2007, the following percentages qualify for the dividend received deduction available to corporate shareholders: | ||||
Fund | ||||
Capital Appreciation Fund | 67.59 | % | ||
Mid Cap Equity Fund | 93.73 | % | ||
For the fiscal year ended August 31, 2007, the following percentages of total ordinary dividends paid by the Funds are qualifying dividends which may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Act of 2003. Complete information is reported in conjunction with the reporting of your distributions on Form 1099-DIV. The percentages were as follows: | ||||
Fund | ||||
Capital Appreciation Fund | 66.44 | % | ||
Mid Cap Equity Fund | 93.73 | % |
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Capital One Funds—Board of Trustees and Trust Officers (Unaudited)
As of August 31, 2007
The following tables give information about the Independent Trustees (i.e., those Trustees who are not “interested persons” of the Trust, as defined in the 1940 Act) and the senior officers of the Trust. As of August 31, 2007, the Capital One Fund Complex consisted of seven portfolios. Each Officer is elected annually. Unless otherwise noted, each Board member oversees all portfolios in the Capital One Fund Complex and serves for an indefinite term. The Funds’ Statement of Additional Information includes additional information about the Funds’ Trustees and is available, without charge and upon request, by calling 1-800-999-0426.
Name, Address and Date of Birth | Positions Held | Length of Time Served | Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s) | |||
INDEPENDENT TRUSTEE | ||||||
Arthur Rhew Dooley, Jr. c/o Citi Fund Services 3435 Stelzer Road Columbus, Ohio 43219 DOB: December 17, 1942 | Trustee | Began Serving: July 1999 | Principal Occupation: Chairman, Dooley Tackaberry, Inc. (distributors and fabricators of fire protection and safety equipment), 1967 to Present; Registered Professional Engineer (Inactive). | |||
Other Directorships Held: Director, Loop Cold Storage Company. | ||||||
Teri G. Fontenot c/o Citi Fund Services 3435 Stelzer Road Columbus, Ohio 43219 DOB: June 16, 1953 | Trustee | Began Serving: June 2001 | Principal Occupation: President and Chief Executive Officer of Woman’s Hospital, Baton Rouge, LA.
Other Directorships Held: Federal Reserve Bank of Atlanta, Director; Committee of 100; Immediate past Chair of Hospital Billing and Collection Services Board; National Institutes of Health, Advisory Committee on Research on Women’s Health; Louisiana Research and Technology Foundation Executive Committee; American Hospital Association Executive Committee. | |||
Joe N. Averett, Jr. c/o Citi Fund Services 3435 Stelzer Road Columbus, Ohio 43219 DOB: February 4, 1943 | Trustee | Began Serving: June 2001 | Principal Occupation: Retired.
Previous Position: President and Chief Executive Officer of Crystal Gas Storage, Inc., a wholly owned subsidiary of El Paso Corporation (NYSE:EP). | |||
Other Directorships Held: Penn Virginia Corporation, past director; Sci Port Discovery Center, Past Chairman and Current Director; Sci-Port Foundation, Director; Community Foundation of Shreveport-Bossier, Chairman and Director; Committee of 100, Director; Louisiana State University in Shreveport Foundation, Past President and Current Director; Petroleum Club of Shreveport, Past President and Director; Caddo Public Education Foundation, past Chairman and Director; Red River Radio Network (affiliate of National Public Radio), past Director; First United Methodist Church of Shreveport, Past Member of Administrative Board and Finance Committee. | ||||||
Ernest E. Howard III c/o Citi Fund Services 3435 Stelzer Road Columbus, Ohio 43219 DOB: March 26, 1943 | Trustee | Began Serving: March 2003 | Principal Occupation: Retired.
Previous Positions: President and Chief Executive Officer of FM Properties, predecessor to Stratus Properties, Inc. (NASDAQ:STRS) and Senior Vice President of Freeport- McMoRan Inc. and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). | |||
Other Directorships Held: Director, Superior Energy Services, Inc. |
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Capital One Funds—Board of Trustees and Trust Officers (Unaudited)
As of August 31, 2007
Name, Address and Date of Birth | Positions Held with Trust | Length of Time Served | Principal Occupation(s) for Past Five Years and Previous Position(s) | |||
EXECUTIVE OFFICERS | ||||||
Richard L. Chauvin 440 Third Street, 4th Floor Baton Rouge, LA 70802 DOB: November 16, 1954 | President | Began Serving: November 2006 | Principal Occupation: Chief Investment Officer, Capital One Asset Management
Previous Positions: Senior Portfolio Manager, Hibernia National Bank, Private Client Group, 2001-2003; Strategist and Senior Portfolio Manager, Commonwealth Advisors, Inc., 1997-2001; State Director of Portfolio Management, Bank One Investment Advisors, Inc., 1996-1997. | |||
Donald P. Lee 313 Carondelet Street, 3rd Floor New Orleans, LA 70130 DOB: December 6, 1959 | Chief Compliance Officer | Began Serving: June 2004 | Principal Occupation: Director, Private Client Group Risk Management, Capital One, N.A
Previous Positions: Corporate Counsel, Hibernia National Bank 2002-2003; General Counsel and Corporate Secretary Hibernia Bank, 1997-2001. | |||
Linda A. Durkin 3435 Stelzer Road Columbus, OH 43219 DOB: November 1, 1960 | Treasurer | Began Serving: November 2006 | Principal Occupation: Vice President, Citi Fund Services
Previous Positions: Investors Bank & Trust 2006, RR Donnelley 2003-2006; Vice President Fund Administration, Mercantile-Safe Deposit and Trust Co, 1993-2002. | |||
Daniel J. Igo 100 Summer Street, Suite 1500 Boston, MA 02110 DOB: September 25, 1970 | Secretary | Began Serving: July 2007 | Principal Occupation: Manager, Citi Fund Services
Previous Positions: Compliance Manager, Citi CCO Compliance Services, 7/2006-3/2007; Legal Services Manager, Citi Fund Services, 2004–2006; Manager, State Street Research and Management Company, 2003-2004; Senior Manager, Columbia Management Group, Inc., 2002-2003. |
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Mutual funds are not bank deposits, or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. An investment in Capital One Cash Reserve Fund and Capital One U.S. Treasury Money Market Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Money Market Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these Funds.
This report is authorized for distribution to prospective investors only when preceded or accompanied by the Funds’ prospectus, which contains facts concerning their objectives and policies, management fees, expenses and other information.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to securities held in a Fund’s portfolio is available, without change and upon request, by calling 1-800-562-9007, Ext. 2-0937. A report of how the Funds voted any such proxies during the most recent 12-month period ended June 30 is available through the Capital One Funds website. Go to www.capitalone.com; select “Investments”, “Mutual Funds”, Proxy Voting Record; then select a Fund. This report on “Form N-PX” is also available from the EDGAR database on the SEC’s website at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
The Funds file with the SEC a complete schedule of their portfolio holdings, as of the close of the first and third quarters of their fiscal year, on “Form N-Q.” These filings are available from the EDGAR database on the SEC’s website at www.sec.gov; and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room).
This report has been prepared for the general information of Capital One Funds shareholders. It is not authorized for distribution to prospective investors unless accompanied or preceded by an effective Capital One Funds prospectus. The prospectus contains more complete information about Capital One Funds’ investment objectives, management fees and expenses, risks and operating policies. Please read the prospectus carefully before investing or sending money.
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, and after-tax returns call 1-800-999-0426.
Capital One Asset Management, LLC is the investment adviser and Capital One, N.A. is the custodian to the Capital One Funds and receives compensation for these services.
Foreside Distribution Services, L.P. is distributor of the Capital One Funds.
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Item 2. | Code of Ethics. |
(a) The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is included as an Exhibit.
(b) During the period covered by the report, with respect to the registrant’s code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2.
Item 3. | Audit Committee Financial Expert. |
3(a)(1) The registrant’s board of directors has determined that each member of the Board’s Audit Committee is an “audit committee financial expert,” and that each such member is “independent,” for purposes of this Item. The Audit Committee consists of the following Board members: Joe N. Averett, Jr., Arthur Rhew Dooley, Jr., Teri G. Fontenot and Ernest E. Howard, III.
Item 4. | Principal Accountant Fees and Services. |
Fiscal Year 2006 | Fiscal Year 2007 | |||||
(a) Audit Fees | $ | 149,100 | $ | 149,100 | ||
(b) Audit-Related Fees | 0 | 0 | ||||
(c) Tax Fees | 0 | 0 | ||||
(d) All Other Fees | 0 | 0 |
(e) The Audit Committee is required to pre-approve services to certain entities defined by SEC rules to the extent that the services are determined to have a direct impact on the operations of financial reporting of the registrant (Funds). There were no Audit-Related Fees, Tax services or All Other services to these entities subject to pre-approval during fiscal 2007.
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(f) Not applicable.
(g) The aggregate non-audit fees for Capital One Funds and certain entities, totaled $0 in fiscal 2006 and $26,300 in fiscal 2007, related to SAS 70 services and FHLB reports for Capital One N.A.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Schedule of Investments. |
Not applicable.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
Not applicable.
Item 11. | Controls and Procedures. |
(a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. | Exhibits. |
(a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Capital One Funds |
By (Signature and Title)* | /s/ Richard L. Chauvin | |
Richard L. Chauvin, President |
Date November 2, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Richard L. Chauvin | |
Richard L. Chauvin, President |
Date November 2, 2007
By (Signature and Title)* | /s/ Linda A. Durkin | |
Linda A. Durkin, Treasurer |
Date November 2, 2007
* | Print the name and title of each signing officer under his or her signature. |