As filed with the Securities and Exchange Commission on September 1, 1999.
1933 Act Registration No. 33-5435
1940 Act Registration No. 811-4658
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 15 [ X ]
(Check appropriate box or boxes)
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
(Exact name of registrant as specified in charter)
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
(Address of principal executive offices)
Registrant's telephone number, including area code:
(901) 524-4100
ALLEN B. MORGAN, JR.
Morgan Keegan Tower
Memphis, Tennessee 38103
(Name and address of Agent for Service)
Copies to:
ARTHUR J. BROWN, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D. C. 20036-1800
Telephone: (202) 778-9000
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph(b)
[ ] On ____________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ X ] On NOVEMBER 1, 1999 pursuant to paragraph(a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
<PAGE>
[ ] On ____________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
___ This Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
<PAGE>
Morgan Keegan Southern Capital Fund, Inc.
Contents of Registration Statement
This Registration Statement consists of the following papers and documents.
Table of Contents
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
<PAGE>
Morgan Keegan Southern Capital Fund
The fund seeks capital appreciation by investing principally in securities of
companies which are headquartered in the southern United States.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS
IS COMPLETE OR ACCURATE. TO STATE OTHERWISE IS A CRIME.
MORGAN KEEGAN & COMPANY, INC.
Fifty Front Street
Memphis, Tennessee 38103
(901) 524-4100
(800) 366-7426
Dated: November 1, 1999
<PAGE>
INVESTMENT OBJECTIVE
The fund seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The fund seeks to achieve its objective by investing at least 65% of its assets
in equity and debt securities of companies that are headquartered in the
southern United States. The fund may invest up to 35% of its assets in
securities of companies headquartered outside that region which offer attractive
opportunities for capital appreciation. For purposes of this Prospectus, a
company is "headquartered" in the southern United States if its principal
corporate offices are located in the southern United States or if (alone or on a
consolidated basis) it derives 50% or more of its total revenues from either
goods produced, sales made or services performed in Alabama, Arkansas, Florida,
Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma,
South Carolina, Tennessee, Texas, Virginia and West Virginia.
The fund's Adviser believes that the demographic and economic characteristics of
the region provide the basis of greater than average potential for capital
appreciation of companies headquartered there. These characteristics include
mild climate, lower state taxes, labor availability, government attitudes
generally favorable to business development and average annual pay below the
national average.
The fund's Adviser selects investments primarily based on a fundamental analysis
of specific companies. Analysis includes consideration of the overall financial
health and prospects of given companies, with attention to the following
factors: return on equity, rate of growth of earnings, and price to earnings
ratios, as compared to the company's historic performance and to the ratios of
the industry at large.
The fund will invest primarily in common stock, preferred stock and convertible
debt securities. Normally the fund would not expect to invest more than 35% of
its assets in non-convertible debt securities, including high quality money
market instruments (such as certificates of deposit), repurchase agreements and
cash. The fund will only invest in debt securities that are rated in the top
four credit categories by at least one NRSRO at the time of purchase or, if not
rated, that are considered by the Adviser to be of comparable quality.
For temporary defensive purposes, the fund may invest up to 100% of its assets
in money market instruments, repurchase agreements and cash. To the extent the
fund uses this strategy, it may not achieve its investment objective.
PRINCIPAL RISKS
An investment in the fund is not guaranteed. As with any mutual fund, the value
of the fund's shares will change and you could lose money by investing in the
fund. In addition, the performance of the fund depends on the Adviser's ability
to implement the investment strategy of the fund
A variety of factors may influence the fund's investment performance, such as:
o MARKET RISK. Because the fund invests primarily in U.S.-traded
equity securities, it is subject to stock market risk. Stock prices
typically fluctuate more than the values of other types of
securities, typically in response to changes in the particular
company's financial condition and factors affecting the market in
general. For example, unfavorable or unanticipated poor earnings
performance of the company may result in a decline in its stock's
price, and a broad-based market drop may also cause a stock's price
to fall.
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For bonds, market risk generally reflects credit risk and interest rate
risk. Credit risk is the actual or perceived risk that the issuer of
the bond will not pay the interest and principal payments when due.
Bond value typically declines if the issuer's credit quality
deteriorates. Interest rate risk is the risk that interest rates will
rise and the value of bonds will fall. A broad-based market drop may
also cause a bond's price to fall.
o GEOGRAPHICAL FOCUS RISK. Investment in a portfolio of securities of
companies headquartered in a specific geographical region such as
the southern United States in which the fund invests involves
greater risk of possible loss than investment in a portfolio of
securities which have headquarters throughout the United States. The
fund may be more affected by a common adverse factor than a fund
with a portfolio which is not geographically concentrated. There is
the risk that those economic and demographic factors that, in the
opinion of the Adviser, favor the growth of companies headquartered
in the southern United States might not result in the growth of such
companies or in their stock prices. There is further risk that other
factors, such as adverse economic conditions in Latin America, could
adversely affect the economic climate of the southern United States.
o YEAR 2000 RISK. Like other mutual funds, the fund could be affected by
problems relating to the ability of computer systems to recognize
the year 2000. The fund is taking steps to ensure that its computer
systems are compliant with Year 2000 issues and to determine that
the systems used by its major service providers are also compliant.
Issuers whose securities are held in the fund's portfolio may also
be adversely affected by the Year 2000 issue. At the same time, it
is impossible to know whether these problems, which could disrupt
the fund's operations and investments if uncorrected, have been
adequately addressed until the date in question arrives.
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PERFORMANCE
RISK/RETURN BAR CHART AND TABLE:
The following bar chart shows how the fund's performance has varied from year to
year. The chart does not reflect the effect of sales charges; if it did, the
total returns shown would be lower. The table that follows the chart shows the
average annual returns over several time periods for the fund's shares. That
table does reflect fund sales charges. The table compares fund returns to
returns on a broad-based market index that is unmanaged and that, therefore,
does not include any sales charges or expenses. The fund's past performance does
not necessarily indicate how the fund will perform in the future.
TOTAL RETURN
YEAR FUND
1989 3.69%
1990 3.23%
1991 17.60%
1992 13.32%
1993 0.42%
1994 13.81%
1995 28.30%
1996 26.32%
1997 25.32%
1998 5.20%
Year-to-date performance as of 6/30/99: 5.20%
Best quarter during years shown: ending December 31, 1998 : 24.11%
Worst quarter during years shown: ending September 30, 1990 : -19.69%
AVERAGE ANNUAL TOTAL RETURNS
(as of June 30, 1999)
SOUTHERN CAPITAL FUND S&P 500 INDEX*
ONE YEAR 5.20% 21.07%
FIVE YEARS 19.45% 25.31%
TEN YEARS 13.29% 15.75%
* The S&P 500 is an unmanaged index of U.S. stocks.
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FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES (fees paid directly from your investment)
- ----------------------------------------------------------
Maximum Sales Charge (Load) Imposed on
Purchases: (as a percentage of offering
price)......................................................... 3.0%
Maximum Deferred Sales Charge (Load) Imposed
on Reinvested Dividends (as a percentage of
the lesser of the offering price or net
asset value)................................................... None
Redemption Fee................................................. None
Exchange Fee................................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from fund assets)
- ----------------------------------------------------------
Management fee................................................. 1.00%
Distribution (12b-1) fees...................................... 0.50%
Other expenses ................................................ 0.20%
----------
Total annual fund operating expenses........................... 1.70%
==========
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This Example assumes that you invest $10,000 in the fund for the time periods
indicated, that your investment has a 5% return each year and that the fund's
operating expenses remain the same. As noted above the fund has no redemption
fee of any kind. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$ 47 $82 $120 $226
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SALES CHARGE
You may purchase shares at the net asset value next determined after receipt of
your order plus a sales charge equal to 3% of the public offering price (3.09%
of the net amount of the purchase price invested in shares of the fund). On
sales of $1 million or more, you may purchase shares at the net asset value next
determined after receipt of your order plus a sales charge equal to 1% of the
public offering price (1.01% of the net amount of the purchase price invested in
fund shares). If you intend to purchase at least $1 million of fund shares, you
may also purchase shares at a 1% sales charge pursuant to a letter of intention
program that permits purchases within a two-year period to be aggregated for
this purpose. The "letter of intent" allows you to count all investments in this
or other Morgan Keegan Funds over the next 24 months as if you were making them
all at once, for purposes of calculating sales charges In certain other
circumstances, the sales charge may be waived; please see the fund's Statement
of Additional Information.
- --------------------------------------------------------------------------------
Sales Charge
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Your investment As a % of offering price As a % of net
amount invested
- ------------------------------------------------------------------------------
up to $999,999 3.00 3.09
$1 million and over 1.00 1.01
- ------------------------------------------------------------------------------
YOUR ACCOUNT
BUYING SHARES If you are buying shares through a Morgan Keegan & Company, Inc.
("Morgan Keegan") investment broker, he or she can assist you with all phases of
your investment.
MINIMUM INITIAL INVESTMENT:
o $500
MINIMUM ADDITIONAL INVESTMENT:
o $250
Initial and subsequent investments in an IRA account established on behalf of a
non working spouse of a shareholder who has an IRA invested in the fund require
a minimum amount of only $250. In addition, once you have established an
account, the minimum amount for subsequent investments will be waived if an
investment in an IRA or similar plan is the maximum amount permitted under the
Internal Revenue Code of 1986, as amended (the "Code").
If you are investing through a large retirement plan or other special program,
follow the instructions in your program materials.
POLICIES FOR BUYING SHARES
TIMING OF REQUESTS. All requests received by the close of the New York Stock
Exchange ("NYSE") (normally 4:00 p.m. eastern time) will be executed the same
day, at that day's closing share price. Orders received after the closing of the
NYSE will be executed the following day, at that day's closing share price. To
purchase shares at the next computed net asset value you must submit an order to
Morgan Keegan by completing the enclosed purchase application and sending it
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along with a check to Morgan Keegan at the address listed in the application or
through a pre-authorized check or transfer plan offered by other financial
institutions.
PURCHASES BY CHECK. Complete the enclosed purchase application. Forward your
application, with all appropriate sections completed, along with a check for
your initial investment payable to your Morgan Keegan investment broker or
Morgan Keegan at 50 North Front Street, Memphis, TN 38103.
Call your Morgan Keegan investment broker or Morgan Keegan at 800-366-7426 or
visit our Web site at www.morgankeegan.com.
BUYING SHARES THROUGH AN INVESTMENT BROKER
BY MAIL Send a completed purchase application to Morgan Keegan at the address at
the bottom of this page. Specify the account number and the dollar value or
number, if any, of shares. Be sure to include any necessary signatures and any
additional documents.
BY TELEPHONE As long as the transaction does not require a written request, you
or your investment broker can buy shares by calling Morgan Keegan at
800-366-7426. A confirmation will be mailed to you promptly. Purchase requests,
where you do not currently have an account with Morgan Keegan, must be made by
written application and be accompanied by a check to Morgan Keegan.
BY EXCHANGE Read the prospectus for the Fund into which you are exchanging. Call
Morgan Keegan at 800-366-7426 or visit our Web site at www.morgankeegan.com. All
exchanges may be made by telephone and mail.
BY SYSTEMATIC INVESTMENT See plan information on page 9.
MORGAN KEEGAN & CO., INC.
50 North Front Street, Memphis, TN 38103
Call toll-free: 1-800-366-7426
(8:30 a.m. - 4:30 p.m., business days, central time)
www.morgankeegan.com
TO ADD TO AN ACCOUNT
BY PHONE Contact Morgan Keegan at 800-366-7426.
BY CHECK Fill out the investment stub from an account statement, or indicate
the fund name and share class on your check. Make checks payable to "Morgan
Keegan." Mail the check and stub to Morgan Keegan at 50 North Front Street,
Memphis, TN 38103.
SYSTEMATIC INVESTMENT Call Morgan Keegan to verify that systematic investment
is in place on your account, or to request a form to add it. Investments are
automatic once this is in place.
Call your Morgan Keegan investment broker or Morgan Keegan at 800-366-7426 or
visit our Web site at www.morgankeegan.com.
SELLING SHARES
POLICIES FOR SELLING SHARES
CIRCUMSTANCES THAT REQUIRE WRITTEN REQUESTS Please submit instructions in
writing when any of the following apply:
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o You are selling more than $100,000 worth of shares
o The name or address on the account has changed within the last 30 days
o You want the proceeds to go to a name or address not on the account
registration
o You are transferring shares to an account with a different registration
o You are selling shares held in a corporate or fiduciary account; for
these accounts additional documents are required:
CORPORATE ACCOUNTS: certified copy of a corporate resolution
FIDUCIARY ACCOUNTS: copy of power of attorney or other governing document
To protect your account against fraud, all written requests must bear signature
guarantees. You may obtain a signature guarantee at most banks and securities
dealers. A notary public cannot provide a signature guarantee.
TIMING OF REQUESTS All requests received by Morgan Keegan before the close of
the NYSE (normally 4:00 p.m. eastern time) will be executed the same day, at
that day's closing price. Requests received after the close of the NYSE will be
executed the following day, at that day's closing share price.
SELLING RECENTLY PURCHASED SHARES If you sell shares before the payment for
those shares has been collected, you will not receive the proceeds until your
initial payment has cleared. This may take up to 15 days after your purchase
date. Any delay would occur only when it cannot be determined that payment has
cleared.
TO SELL SOME OR ALL OF YOUR SHARES
THROUGH AN INVESTMENT BROKER
BY MAIL Send a letter of instruction, an endorsed stock power or share
certificates (if you hold certificate shares) to Morgan Keegan at the address at
the bottom of this page. Specify the account number and the dollar value or
number of shares. Be sure to include any necessary signatures and any additional
documents.
BY TELEPHONE As long as the transaction does not require a written request (see
facing page), you or your financial professional can sell shares by calling
Morgan Keegan at 800-366-7426. A check will be mailed to you on the following
business day.
BY EXCHANGE Read the prospectus for the fund into which you are exchanging.
Call Morgan Keegan at 800-366-7426 or visit our Web site at
www.morgankeegan.com. All exchanges may be made by telephone and mail.
BY SYSTEMATIC WITHDRAWAL See plan information on page 9.
MORGAN KEEGAN & CO., INC.
50 North Front Street, Memphis, TN 38103
Call toll-free: 1-800-366-7426
(8:30 a.m. - 4:30 p.m., business days, central time)
www.morgankeegan.com
ACCOUNT POLICIES
THE FUND'S BUSINESS HOURS The fund is open the same days as the NYSE
(generally Monday through Friday). Representatives of the fund are available
normally from 8:30 a.m. to 4:30 p.m. central time on these days.
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CALCULATING SHARE PRICE The offering price of one share is its net asset value
plus a sales charge (currently a maximum of 3% of the offering price, or 3.09%
of the net amount invested). Net asset value per fund share will be determined
daily as of the close of the NYSE, on every day that the NYSE is open for
business, by dividing the value of the total assets of the fund, less
liabilities, by the total number of shares outstanding at such time. Securities
owned by the fund for which market quotations are readily available will be
valued at current market value, and other securities and assets will be valued
at fair value by or under the direction of the Board of Directors.
TELEPHONE REQUESTS When you open an account you automatically receive telephone
privileges, allowing you to place requests on your account by telephone. Your
investment broker can also use these privileges with your written permission, to
request redemptions.
As long as Morgan Keegan takes certain measures to authenticate telephone
requests on your account, you may be held responsible for unauthorized requests.
Unauthorized telephone requests are rare, but if you want to protect yourself
completely, you can decline the telephone privilege on your application. The
fund may suspend or eliminate the telephone privilege at any time. The fund will
provide 7 days' prior written notice before suspending or eliminating telephone
privileges.
EXCHANGE PRIVILEGES There is no fee to exchange shares of the Fund for Class A
shares of Morgan Keegan Select Fund. Your new Fund shares will be the same class
as your current shares. Any contingent deferred sales charges will continue to
be calculated from the date of your initial investment.
Frequent exchanges can interfere with Fund management and drive up costs for all
shareholders. Because of this, the Fund currently limits each account, or group
of accounts under common ownership or control, to six exchanges per calendar
year. The Fund may change or eliminate the exchange privilege at any time, may
limit or cancel any shareholder's exchange privilege and may refuse to accept
any exchange request. The Fund will provide 60 days' prior written notice before
suspending or eliminating exchange privileges.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $500, Morgan
Keegan may mail you a notice asking you to bring the account back up to $500 or
close it out. If you do not take action within 60 days, Morgan Keegan may sell
your shares and mail the proceeds to you at the address of record.
SUSPENSION At any time, the fund may suspend the sale of its shares.
INVESTOR SERVICES
SYSTEMATIC INVESTMENT PROGRAM (SIP) Use SIP to set up regular automatic
investments in the fund from your bank account. You determine the frequency and
the amount of your investments, and you can skip an investment with three days'
notice.
SYSTEMATIC WITHDRAWAL PLAN This plan is designated for retirees and other
investors who want regular withdrawals from their fund account. Certain
terms and minimums apply.
DIVIDEND ALLOCATION PLAN This plan automatically invests your distributions from
the fund into another fund of your choice, without any fees or sales charges.
AUTOMATIC BANK CONNECTION This plan lets you route any distributions or
Systematic Withdrawal Plan payments directly to your bank account.
AUTOMATED INVESTMENTS OR WITHDRAWALS Set up regular investments or withdrawals
to suit your needs and let Morgan Keegan do the work for you.
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MOVE MONEY BY PHONE Designate this on your application and you can move money
between your bank account and your Morgan Keegan account with a phone call.
DIVIDEND REINVESTMENT Have your dividends automatically reinvested at no sales
charge.
EXCHANGES It's easy to move money from the Fund to the Morgan Keegan Select
Fund, with no exchange fees. (Exchange privilege may be changed or discontinued
at any time.) Call 800-366-7426 or visit our Web site at www.morgankeegan.com.
OPENING a regular investment or a tax-deferred retirement account at Morgan
Keegan is easy. Your investment broker can help you determine if this fund is
right for you. He or she is trained to understand investments and can help speed
the application process.
TAKE ADVANTAGE of everything your investment broker and Morgan Keegan have to
offer. The services described on this page can make investing easy for you. And
your investment broker can be a valuable source of guidance and additional
services, for planning your investments and for keeping them on track with your
goals.
Morgan Keegan also offers a full range of prototype retirement plans for
individuals, sole proprietors, partnerships, corporations and employees. Call
800-366-7426 for information on retirement plans or any of the services
described above.
MANAGEMENT AND INVESTMENT ADVISER
The fund is managed by Morgan Asset Management, Inc. ("Adviser"), a wholly owned
subsidiary of Morgan Keegan, Inc. Subject to the supervision of the Board of
Directors, the Adviser manages the investment and other affairs of the fund and
directs the investments of the fund in accordance with its investment objective,
policies and limitations pursuant to an Investment Advisory and Management
Agreement between the fund and the Adviser. The Adviser's address is Morgan
Keegan Tower, Fifty Front Street, Memphis, Tennessee 38103.
The Adviser receives for its services a management fee, calculated daily and
payable quarterly, at an annual rate of 1% of the average daily net assets of
the fund for the first $100 million of average daily net assets and 0.75% of
average daily net assets exceeding $100 million. The advisory fee is higher than
fees paid by most other funds to their investment advisers. The Adviser has
agreed to waive its fee and to reimburse the fund to the extent its annual
expenses (excluding brokerage, interest, taxes, and extraordinary expenses)
exceed 2.0% of net assets. The net fee paid to the Adviser for the past fiscal
year was $877,482. The fund expects to use Morgan Keegan as broker for all
or a substantial portion of its agency transactions in listed securities at
commission rates and under circumstances consistent with the policy of best
execution. Morgan Keegan also provides accounting services to the fund and acts
as its transfer and dividend disbursing agent.
PORTFOLIO MANAGER
Since July 1, 1994, E. Elkan Scheidt, a managing director of Morgan Keegan
and an employee of Morgan Asset Management, Inc. has served as the portfolio
manager of the fund. From November 1990 to July 1, 1994, Mr. Scheidt served
as assistant to the portfolio manager of the fund. Mr. Scheidt joined Morgan
Keegan as an investment broker in 1985. He received a B.A. in Economics from
Tulane University in New Orleans, Louisiana.
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DISTRIBUTOR
Morgan Keegan acts as distributor of the fund's shares pursuant to a plan of
distribution ("Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and an Underwriting Agreement between it and the fund. Under the Plan, the
fund pays Morgan Keegan a service fee computed daily and paid monthly at the
annual rate of .25% of the fund's average daily net assets and a distribution
fee as compensation for its distribution services, computed daily and paid
monthly, at the annual rate of .25% of the fund's average daily net assets.
Because these fees are paid out of the fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
DISTRIBUTIONS
INCOME AND CAPITAL GAIN DISTRIBUTIONS. The fund distributes its net investment
income and net capital gain to shareholders. Using projections of its future
income, the fund declares dividends daily and pays them monthly.
Net capital gains, if any, are distributed annually.
You may have your distributions reinvested in shares of the fund or credited to
your brokerage account or mailed out by check. If you do not give Morgan Keegan
other instructions, your distributions will automatically be reinvested in
shares of the fund. Distributions to Keogh plans, 401(k) plans and other
qualified retirement plans are generally reinvested in fund shares (without a
sales charge).
TAX CONSIDERATIONS
TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS. Every year, your fund will send
you information detailing the amount of dividends and net capital gain
distributed to you for the previous year. In general, any dividends and net
short-term capital gain distributions you receive from the fund are taxable as
ordinary income. Distributions of other capital gains are generally taxable as
long-term capital gains. This is true no matter how long you have owned your
shares and whether you reinvest your distributions or take them in cash.
The sale of shares in your account may produce a gain or loss and is a taxable
event. For tax purposes, an exchange is the same as a sale.
Unless your investment is in a tax-deferred account, you may want to avoid:
o Investing a large amount in the fund close to a capital gains distribution
payment date (if the fund makes a capital gain distribution, you will receive
some of your investment back as a taxable distribution), or
o Selling shares of the fund at a loss for tax purposes and reinvesting in
shares of the fund 30 days before or after that sale (such a transaction is
usually considered a "wash sale," and you will not be allowed to deduct all
or part of the tax loss).
Your investment in the fund could have additional tax consequences. Please
consult your tax professional for assistance.
BACKUP WITHHOLDING. By law, the fund must withhold 31% of your distributions
and redemption proceeds if you have not provided complete, correct taxpayer
information and 31% of your distributions if you are otherwise subject to backup
withholding.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the fund (assuming reinvestment of all dividends and distributions). This
information has been audited by _______________, independent accountants, whose
report, along with the fund's' financial statement, is included in the fund's
Annual Report to Shareholders. Annual Reports may be obtained without charge by
calling 1-800-366-7426.
[--------------------]
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FOR ADDITIONAL INFORMATION
A Statement of Additional Information ("SAI"), dated November 1, 1999,
containing further information about the fund has been filed with the Securities
and Exchange Commission ("SEC") and, as amended or supplemented from time to
time, is incorporated by reference in this prospectus. A copy of the SAI may be
obtained, without charge:
o from your Morgan Keegan investment broker;
o by calling Morgan Keegan at 800-366-7426;
o by writing to Morgan Keegan at the address noted below; or
o by accessing the Web site maintained by the SEC (http://www.sec.gov).
Information about the fund (including the SAI) also can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. (call 800-SEC-0330 for
further information), or may be obtained upon payment of a duplicating fee by
writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
All shareholder inquiries can be made by contacting Morgan Keegan at the address
listed below:
Morgan Keegan & Company, Inc.
50 North Front Street
Memphis, TN 38103
Investment Company Act File No. 811-4658.
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MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
The Morgan Keegan Southern Capital Fund, Inc. is a diversified open-end
management investment company incorporated in Maryland on May 5, 1986. The fund
invests principally in securities, including common stock, preferred stock,
convertible and other debt securities, of companies which are headquartered in
the southern United States. For purposes of this Statement of Additional
Information, the "southern United States" consists of Alabama, Arkansas,
Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina,
Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia. A
company is "headquartered" in the southern United States if either its principal
corporate offices are located in the southern United States, or if (alone or on
a consolidated basis) it derives 50% or more of its total revenues from either
goods produced, sales made or services performed in the southern United States.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the fund's Prospectus, dated November 1, 1999, which
has been filed with the Securities and Exchange Commission. A copy of the
current Prospectus is available without charge from Morgan Keegan & Company,
Inc., the fund's distributor.
Morgan Keegan & Company, Inc.
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
(901) 524-4100
<PAGE>
TABLE OF CONTENTS
Page
----
ADDITIONAL INFORMATION ABOUT INVESTMENT LIMITATIONS AND POLICIES...............1
ADDITIONAL TAX INFORMATION.....................................................4
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.................................5
VALUATION OF SHARES............................................................7
PERFORMANCE INFORMATION........................................................7
TAX-DEFERRED RETIREMENT PLANS..................................................9
THE FUND'S DIRECTORS AND OFFICERS.............................................10
TABLE OF COMPENSATION.........................................................12
THE FUND'S PRINCIPAL SHAREHOLDERS.............................................13
THE FUND'S INVESTMENT ADVISER.................................................13
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................14
THE FUND'S DISTRIBUTOR........................................................16
DESCRIPTION OF THE FUND'S SHARES..............................................18
THE FUND'S CUSTODIAN, TRANSFER AGENT,.........................................19
THE FUND'S LEGAL COUNSEL......................................................19
THE FUND'S CERTIFIED PUBLIC ACCOUNTANTS.......................................19
FINANCIAL STATEMENTS..........................................................20
Dated: November 1, 1999
<PAGE>
ADDITIONAL INFORMATION ABOUT INVESTMENT LIMITATIONS AND POLICIES
In addition to the investment objectives in the Prospectus, the fund has
adopted certain investment limitations that cannot be changed except by vote of
the holders of a majority of the fund's outstanding voting securities. The fund
may not:
1. Issue senior securities, except as permitted under the 1940 Act;
2. Borrow money, including entry by the fund into reverse repurchase
agreements, except for temporary purposes in an aggregate amount not to
exceed 5% of the value of its total assets at the time of borrowing.
Although not a fundamental policy subject to shareholder approval, the
fund intends to repay any money borrowed before any additional portfolio
securities are purchased;
3. Mortgage, pledge or hypothecate any of its assets, except to secure
permitted borrowings up to 5% of the value of its total assets at the time
of borrowing, provided that the deposit in escrow of underlying securities
in connection with the writing of call options is not deemed to be a
pledge;
4. Purchase securities on "margin," make short sales of securities or
maintain a short position in any security;
5. Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization or
by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other
than a customary brokerage commission, is involved and only if immediately
thereafter not more than 10% of the fund's total assets (taken at market
value) would be invested in such securities;
6. Purchase or sell commodities and commodity contracts;
7. Underwrite the securities of other issuers, except that the fund may
invest in securities that are not readily marketable without registration
under the Securities Act of 1933, as amended, if immediately after the
making of such investment not more than 5% of the value of the fund's
total assets (taken at cost) would be so invested;
8. Make loans, except loans of portfolio securities and except to the
extent the purchase of a portion of an issue of publicly distributed
notes, bonds or other evidences of indebtedness or deposits with banks and
other financial institutions may be considered loans;
9. Write (sell) or purchase put, call, straddle or spread options except
that the fund may write covered call options with respect to its portfolio
securities listed on a national securities exchange and enter into closing
purchase transactions with respect to call options so listed or quoted;
<PAGE>
10. Purchase or sell real estate, except that the fund may invest in
securities collateralized by real estate or interests therein or in
securities issued by companies that invest in real estate or interests
therein;
11. Purchase or sell interests in oil or gas or other mineral exploration
or development programs;
12. Invest more than 25% of its total assets in securities of issuers in
the same industry; invest more than 5% of its total assets (taken at
market value) in securities of any one issuer, other than the U.S.
government, its agencies and instrumentalities, or buy more than 10% of
the of the voting securities or more than 10% of all the securities of any
one issuer; or
13. Invest more than 5% of its total assets (taken at market value) in
securities of companies that, including their predecessors, have been in
operation for less than three years.
As noted above, the investment limitations of the fund and the fund's
investment objective are fundamental and may not be changed without the vote of
the holders of a majority of the fund's outstanding voting securities. Under the
Investment Company Act of 1940 ("1940 Act"), a "vote of a majority of the
outstanding voting securities" of the fund means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the fund or (2) 67% or
more of the shares present at a shareholders' meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy.
Whenever an investment policy or limitation states a maximum percentage of the
fund's assets which may be invested in any security or other standard or
percentage limitation, such percentage shall be determined immediately after and
as a result of the acquisition of such security or other asset. Accordingly, any
later increase or decrease in percentage resulting from a change in values, net
assets or other circumstances will not be considered when determining whether
the investment complies with the fund's investment policies and limitations.
Illiquid Securities
- -------------------
Although not a fundamental policy subject to shareholder vote, the fund
will not invest more than 10% of its net assets in illiquid securities
(securities which, in the judgment of Morgan Asset Management, Inc. ("Adviser"),
could not be sold within seven business days without substantial adverse impact
on their market prices because of such sales), including repurchase agreements
of more than seven days' duration.
Warrants
- --------
Although not a fundamental policy subject to shareholder vote, as long as
the fund's shares are registered in certain states, the fund may not invest more
than 5% of the value of its net assets, taken at the lower of cost or market
value, in warrants or invest more than 2% of the value of such net assets in
warrants not listed on the New York or American Stock Exchanges.
2
<PAGE>
Options
- -------
The fund may from time to time write (sell) covered call options on
certain of its portfolio securities. The fund intends only to engage in
transactions in exchange-traded options. A covered call option is an option to
purchase a portfolio security owned by the fund. In such a transaction, the fund
obligates itself to sell the underlying security to the purchaser of the option
at a fixed price if the purchaser exercises the option during the option period.
In return, the fund receives a premium from the purchaser. During the option
period, the fund foregoes the opportunity to profit from any increase in the
market price of the security above the exercise price of the option, but retains
the risk that the price of the security may decline.
The fund may seek to terminate its obligation as a writer of a call option
prior to its expiration by entering into a "closing purchase transactions."
There is no assurance that the fund will be able to effect a closing purchase
transaction, particularly with respect to thinly traded call options. The
selling of call options could result in an increase in the fund's portfolio
turnover rate, particularly in periods of appreciation in the market price of
the underlying securities. The fund would use such options only as a defensive
strategy and not as a primary investment technique. Although not a fundamental
policy subject to shareholder vote, the fund does not intend during the coming
year to write call options on portfolio securities exceeding 5% of its total
assets or to write options that are not traded on a national securities
exchange. Normally such options will be written only on those portfolio
securities which the Adviser does not expect to have significant short-term
capital appreciation.
Lending Portfolio Securities
- ----------------------------
The fund may lend portfolio securities to broker/dealers in corporate or
government securities, banks or other recognized institutional borrowers of
securities, provided that cash or equivalent collateral, equal to at least 100%
of the value of the securities loaned plus any accrued interest, "marked to
market" on a daily basis, is continuously maintained by the borrower with the
fund, and further provided that the Adviser determines that the borrower
presents minimal credit risk. The Adviser will monitor the credit status of the
borrower during the period of the loan.
During the time portfolio securities are on loan, the borrower will pay
the fund an amount equivalent to any dividends or interest paid on such
securities, and the fund may invest the cash collateral and earn additional
income, or it may receive an agreed upon fee from the borrower who has delivered
equivalent collateral. These loans are subject to termination at the option of
the fund or the borrower. The fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash collateral to the borrower or placing broker. The
fund does not have the right to vote securities on loan, but would terminate the
loan and regain the right to vote if such vote were considered important with
respect to the investment. The fund does not intend during the coming year to
loan more than 5% of its portfolio securities at any given time.
3
<PAGE>
Repurchase and Reverse Repurchase Agreements
- --------------------------------------------
Available cash may be invested by the fund in repurchase agreements. A
repurchase agreement is an agreement under which U.S. Government obligations are
acquired from a securities dealer or Bank subject to resale at a previously
agreed upon price and date. The resale price reflects an agreed upon interest
rate which is unrelated to the interest rate provided by the securities which
are transferred. The securities will be held for the fund by its custodian as
collateral until retransferred and will be supplemented by additional collateral
(without cost to the fund) if necessary to maintain a total value equal to or in
excess of the value of the repurchase agreement. Repurchase agreements are
usually for periods of one week or less, but may be for longer periods.
To the extent that proceeds from any sale upon a default of the obligation
to repurchase were less than the repurchase price, the fund might suffer a loss.
If bankruptcy proceedings are commenced with respect to the seller of the
security, realization upon the collateral by the fund would be delayed or
limited. However, the fund has adopted standards for the parties with whom it
may enter into repurchase agreements, including monitoring by the Adviser of the
creditworthiness of such parties, which the fund's Board of Directors believes
are reasonably designed to assure that each party presents no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase agreement.
As stated in the fund's investment limitations, the fund may enter into
reverse repurchase agreements for temporary purposes. Because such agreements
are considered to be borrowings, the agreements are subject to the limitation
that the fund may not borrow in an aggregate amount that exceeds 5% of the value
of the fund's total assets at the time of borrowing. Reverse repurchase
agreements involve the sale of securities held by the fund pursuant to the
fund's agreement to repurchase the securities at an agreed upon price, date and
rate of interest. While reverse repurchase transactions are outstanding, the
fund will maintain in a segregated account, cash, U.S. government securities or
other liquid, high grade debt securities of an amount at least equal to the
market value of the securities, plus accrued interests, subject to the
agreement.
ADDITIONAL TAX INFORMATION
The following is a general summary of certain federal income tax
considerations affecting the fund and its shareholders. Investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any state, local or foreign taxes that may be applicable to them.
General
- -------
The fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended ("Code"). In order to qualify for that treatment, the fund must
distribute annually to its shareholders at least 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) and must meet several additional requirements. Among these requirements
are the following: (1) at least 90% of the fund's gross income each taxable year
must be derived from dividends, interest, payments with respect to securities
4
<PAGE>
loans and gains from the sale or other disposition of securities, or other
income (including gains from options) derived with respect to its business of
investing in securities; (2) at the close of each quarter of the fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. government securities, securities of other RICs and other
securities, with such other securities limited, with respect to any one issuer,
to an amount that does not exceed 5% of the value of the fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. government securities or the securities of other RICs) of any
one issuer.
Dividends and Other Distributions
- ---------------------------------
A portion of the dividends from the fund's investment company taxable
income (whether paid in cash or reinvested in additional fund shares) is
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by the fund
from domestic corporations. However, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax. Distributions by the fund of
net capital gain (the excess of net long-term capital gain over net short-term
capital loss) do not qualify for the dividends-received deduction.
Dividends and other distributions declared by the fund in December of any
year and payable to shareholders of record on a date in that month will be
deemed to have been paid by the fund and received by the shareholders on
December 31 if they are paid by the fund during the following January.
Accordingly, such distributions will be taxed to the shareholders for the year
in which that December 31 falls.
Any loss on a sale or exchange of fund shares held for six months or less
will be treated as a long-term, instead of a short-term, capital loss to the
extent of any capital gain distributions received on those shares.
A dividend or capital gain distribution paid shortly after shares have
been purchased, although in effect a return of investment, is subject to federal
taxation. Accordingly, an investor should not purchase fund shares immediately
prior to a dividend or capital gain distribution record date solely for the
purpose of receiving the dividend or distribution.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Letter of Intention
- -------------------
The sales charge applicable to purchases is reduced to 1% pursuant to a
Letter of Intention that states that the purchaser intends to purchase shares
equal to at least $1,000,000 within a 24-month period. Investors may obtain a
form of a Letter of Intention ("Letter") from their Morgan Keegan investment
broker or the fund's transfer agent, Morgan Keegan & Company, Inc. ("Transfer
Agent"). Under a Letter, purchases of shares of the fund which are sold with a
sales charge made within a 24-month period starting with the first purchase
5
<PAGE>
pursuant to a Letter will be aggregated for purposes of calculating the sales
charges applicable to each purchase. To qualify under a Letter, a minimum
initial purchase of $50,000 must be made; purchases must be made for a single
account; and purchases made for related accounts may not be aggregated under a
single Letter. The Letter is not a binding obligation to purchase any amount of
shares, but its execution will result in paying a reduced sales charge for the
anticipated amount of the purchase. If the total amount of shares purchased does
not equal the amount stated in the Letter (minimum of $1,000,000), the investor
will be notified and must pay, within 20 days of the expiration of the Letter,
the difference between the sales charge on the shares purchased at the reduced
rate and the sales charge applicable to the shares actually purchased under the
Letter. Shares equal to 5% of the intended amount will be held in escrow during
the 24-month period (while remaining registered in the name of the purchaser)
for this purpose.
Sales Charge Waivers
- --------------------
The sales charge is waived on shares of the fund purchased (1) as a result
of reinvestment of dividends and capital gain distributions and (2) by officers,
directors and full-time employees (and their immediate families, which includes
their spouse, children, mother, father and siblings) of Morgan Keegan & Company,
Inc. (or its direct or indirect subsidiaries), or by directors or officers (and
their immediate families, which includes their spouse, children, mother, father
and siblings) of the fund. The sales charge also is waived on purchases of fund
shares in an initial amount of not less than $250,000, and thereafter for
subsequent purchases if the purchaser's fund account balance is at least
$250,000, by (1) common or collective trust funds maintained by a bank, (2)
stock bonus, pension or profit sharing plans qualified under section 401(a) of
the Code (including Koegh Plans and 401(k) Plans), and (3) organizations exempt
from taxation pursuant to section 501(a) of the Code. Also, shares of the fund
may be acquired without a sales charge if the purchase is made through a Morgan
Keegan representative who formerly was employed as a broker with another firm
registered as a broker-dealer with the Securities and Exchange Commission, if
the following conditions are met: (1) the purchaser was a client of the
investment executive at the other firm for which the investment executive
previously served as a broker; (2) within 90 days of the purchase of the fund's
shares, the purchaser redeemed shares of one or more mutual funds for which that
other firm or its affiliates served as principal underwriter, provided that
either the purchaser had paid a sales charge in connection with investment in
such funds or a contingent deferred sales charge upon redeeming shares in such
funds; and (3) the aggregate amount of the fund's shares purchased pursuant to
this sales charge waiver does not exceed the amount of the purchaser's
redemption proceeds from the shares of the mutual fund(s) for which the other
firm or its affiliates served as principal underwriter. The sales charge is also
waived on purchases through Morgan Keegan Mutual fund "Wrap Accounts." Investors
seeking to avail themselves of this waiver will be required to provide
satisfactory evidence that all the above-noted conditions are met and should
contact their Morgan Keegan representative for more information.
Additional Information on Redemptions
- -------------------------------------
Suspension of the right of redemption, or postponement of the date of
payment, may be made (1) for any periods when the Exchange is closed (other than
customary weekend and holiday closings); (2) when trading is restricted in
6
<PAGE>
markets normally utilized by the fund or when an emergency, as defined by the
rules and regulations of the Securities & Exchange Commission ("SEC") exists,
making disposal of the fund's investments or determination of its net asset
value not reasonably practicable; or (3) for such other periods as the SEC by
order may permit for protection of the fund's shareholders. In the case of any
such suspension, you may either withdraw your request for redemption or receive
payment based upon the net asset value next determined after the suspension is
lifted.
The fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part by securities valued in the same way as they would be valued for
purposes of computing the fund's per share net asset value. However, the fund
has committed itself to pay in cash all requests for redemption by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of (1) $250,000, or (2) 1% of the net asset
value of the fund at the beginning of such period. If payment is made in
securities, a shareholder will incur brokerage or transactional expenses in
converting those securities into cash, will be subject to fluctuation in the
market price of those securities until they are sold, and may realize taxable
gain or loss (depending on the value of the securities received and the
shareholder's adjusted basis of the redeemed shares).
VALUATION OF SHARES
Net asset value of a fund share will be determined daily as of the close
of the Exchange, on every day that the Exchange is open for business, by
dividing the value of the total assets of the fund, less liabilities, by the
total number of shares outstanding at such time. Pricing will not be done on
days when the Exchange is closed. Currently, the Exchange is closed on weekends
and on certain days relating to the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving,
and Christmas. Securities owned by the fund for which market quotations are
readily available will be valued at current market value, or, in their absence,
at fair value as determined under procedures adopted by the fund's Board of
Directors. Securities traded on an exchange or NASD National Market System
securities (including debt securities) will normally be valued at their last
sale price. Other over-the-counter securities (including debt securities), and
securities traded on exchanges for which there is no sale on a particular day
(including debt securities), will be valued by a method which the fund's Board
of Directors believes accurately reflects fair value. Premiums received on the
sale of call options are included in the fund's net asset value, and the current
market value of options sold by the fund will be subtracted from net assets.
PERFORMANCE INFORMATION
The fund's performance information and quoted rankings used in advertising
and other promotional materials ("Performance Advertisements") are indicative
only of past performance and are not intended to and do not represent future
investment results. The fund's share price will fluctuate and your shares, when
7
<PAGE>
redeemed, may be worth more or less than you originally paid for them.
Total Return Calculations
- -------------------------
Average annual total return quotes ("Standardized Return") used in the
fund's Performance Advertisements are calculated according to the following
formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of that period
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated at least to
the last day of the most recent quarter prior to submission of the Performance
Advertisements for publication. Total return, or "T" in the formula above, is
computed by finding the average annual change in the value of an initial $1,000
investment over the period. In calculating the ending redeemable value, all
dividends and other distributions by the fund are assumed to have been
reinvested at net asset value.
The fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The fund calculates Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends and other distributions. The rate
of return is determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the initial value. Initial
sales charges are not taken into account in calculating Non-Standardized Return;
the inclusion of those charges would reduce the return.
Other Information
- -----------------
From time to time the fund may compare its performance in Performance
Advertisements to the performance of other mutual funds or various market
indices. One such market index is the S&P 500, a widely recognized unmanaged
index composed of the capitalization-weighted average of the prices of 500 of
the largest publicly traded stocks in the United States. The S&P 500 includes
reinvestment of all dividends. It takes no account of the costs of investing or
the tax consequences of distributions. The fund may invest in securities that
are not included in the Standard & Poor's 500 Composite Stock Price Index ("S&P
500").
The fund may also quote rankings and ratings, and compare the return of
the fund with data published by Lipper Analytical Services, Inc., IBC/Donaghue's
Money Market fund Report, CDA Investment Technologies, Inc., Wiesenberger
Investment Companies Service, Investment Company Data Inc., Morningstar Mutual
funds, Value Line and other services or publications that monitor, compare, rank
8
<PAGE>
and/or rate the performance of mutual funds. The fund may refer in such
materials to mutual fund performance rankings, ratings or comparisons with funds
having similar investment objectives, and other mutual funds reported in
independent periodicals, including, but not limited to, THE WALL STREET JOURNAL,
MONEY Magazine, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE
NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER
LETTERS.
The fund may also compare its performance with, or may otherwise discuss,
the performance of bank certificates of deposit ("CDs") and other bank deposits,
and may quote from organizations that track the rates offered on such deposits.
In comparing the fund or its performance to CDs investors should keep in mind
that bank CDs are insured up to specified limits by an agency of the U.S.
government. Shares of the fund are not insured or guaranteed by the U.S.
government, the value of fund shares will fluctuate and your shares, when
redeemed, may be worth more or less than you originally paid for them. Unlike
the interest paid on many CDs, which remains as a specified rate for a specified
period of time, the return on the fund's shares will vary.
The fund's Performance Advertisements may reference the history of the
fund's distributor and its affiliates or biographical information of key
investment and managerial personnel including the portfolio manager. The fund
may illustrate hypothetical investment plans designed to help investors meet
long-term financial goals, such as saving for a college education or for
retirement. The fund may discuss the advantages of saving through tax-deferred
retirement plans or accounts.
From time to time the fund may quote information including, but not
limited to, data regarding the southern region of the United States from sources
considered by Morgan Keegan to be reliable, including information relating to
economic and financial trends in the southern region. The fund may also quote or
discuss information or other data concerning the southern region reported in
independent periodicals, including, but not limited to, THE WALL STREET JOURNAL,
MONEY Magazine, FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE
NEW YORK TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST, THE KIPLINGER LETTERS
and THE ECONOMIST.
TAX-DEFERRED RETIREMENT PLANS
As noted in the fund's Prospectus, an investment in fund shares may be
appropriate for various types of tax-deferred retirement plans. In general,
income earned through the investment of assets of such a plan is not taxed to
the beneficiaries until the income is distributed to them. Investors who are
considering establishing such a plan may wish to consult their attorneys or
other tax advisers with respect to individual tax questions. Additional
information with respect to these plans is available upon request from any
Morgan Keegan broker.
Individual Retirement Accounts - IRAs
- -------------------------------------
If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
9
<PAGE>
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. You also may be able to make a
nondeductible contribution to an "education IRA" or "Roth IRA", distributions
from which are not taxable under certain circumstances.
An investment in fund shares through IRA contributions may be
advantageous, regardless of whether the contributions are deductible by you for
tax purposes, because all dividends and capital gain distributions on your fund
shares are not immediately taxable to you or the IRA; they become taxable only
when distributed to you except as noted above. To avoid penalties, your interest
in an IRA must be distributed, or start to be distributed, to you not later than
April 1 following the calendar year in which you attain age 70 1/2.
Distributions made before age 59 1/2, in addition to being taxable, generally
are subject to a penalty equal to 10% of the distribution, except in the case of
death or disability, where the distribution is rolled over into another
qualified plan, or in certain other situations.
Self-Employed Individual Retirement Plans - Keogh Plans
- -------------------------------------------------------
Morgan Keegan will assist self-employed individuals to set up a retirement
plan through which fund shares may be purchased. Morgan Keegan generally
arranges for a bank to serve as trustee for the plan and performs custodian
services for the trustee and the plan by holding and handling securities.
However, you have the right to use a bank of your choice to provide these
services at your cost. There are penalties for distributions from a Keogh Plan
prior to age 59 1/2, except in the case of death or disability.
Simplified Employee Pension Plans - SEPPS and Savings Incentive Match Plans for
- -------------------------------------------------------------------------------
Employees - SIMPLES
- -------------------
Morgan Keegan also will make available in a similar manner to corporate
and other employers a SEPP or SIMPLE for investment in fund shares.
THE FUND'S DIRECTORS AND OFFICERS
The fund's officers are responsible for the operation of the fund under
the direction of the Board of Directors. The officers and directors of the fund
and their principal occupations during the past five years are set forth below.
An asterisk (*) indicates officers and/or directors who are interested persons
of the fund as defined by the 1940 Act. The address of each officer and director
is Morgan Keegan Tower, 50 Front Street, Memphis, Tennessee 38103, unless
otherwise indicated.
10
<PAGE>
Position with the fund and
Name Principal Occupation During Past Five Years
- ---- -------------------------------------------
Allen B. Morgan, Jr.* President and Director Mr. Morgan is Chairman and
Age 57 Chief Executive Officer
and Executive Managing
Director of Morgan Keegan
& Company, Inc. He also is
a Chairman of Morgan
Keegan, Inc., a Director
of Morgan Asset
Management, Inc., and a
Director of Catherine's
Stores, Inc.
James D. Witherington, Jr. Director Mr. Witherington is
845 Crossover Lane, President of SSM Corp.
Suite 140 (management of venture
Memphis, Tennessee 38117 capital funds). He also
Age 50 serves as a Director
for several private
companies.
William F. Hughes, Jr. Director Mr. Hughes is a Managing
Age 56 Director of Morgan Keegan
& Company, Inc. He also
is President of Morgan
Asset Management, Inc.
William Jefferies Mann Director Mr. Mann is Chairman
675 Oakleaf Office Lane and President of Mann
Suite 100 Investments, Inc.
Memphis, Tennessee 38117 (hotel investments/
Age 67 consulting). He also
serves as a Director
for Heavy Machines, Inc.
James Stillman R. McFadden Director Mr. McFadden is Vice
845 Crossover Lane, President of Sterling
Suite 124 Equities, Inc. (private
Memphis, Tennessee 38117 equity financings). He is
Age 42 also President and
Director of 1703 Inc.
and a Director of
Staff Printing Co.
11
<PAGE>
Position with the fund and
Name Principal Occupation During Past Five Years
- ---- -------------------------------------------
Joseph C. Weller* Vice President, Mr. Weller is Executive
Age 60 Treasurer & Assistant Vice President and Chief
Secretary Financial Officer and
Executive Managing
Director of Morgan Keegan
& Company, Inc. He also is
a Director of Morgan Asset
Management, Inc.
Charles D. Maxwell* Secretary and Mr. Maxwell is a Managing
Age 45 Assistant Treasurer Director and Assistant
Treasurer of Morgan Keegan
& Company, Inc., and
Secretary/Treasurer of
Morgan Asset Management,
Inc. He was formerly a
senior manager with Ernst
& Young (accountants)
(1976-86).
TABLE OF COMPENSATION(1)
Total Compensation
Name and Position Aggregate Compensation in the Morgan Keegan funds
with the Company from the Company Complex Paid to Directors
---------------- ---------------- -------------------------
Allen B. Morgan, Jr. $0 $0
President and Director
James D. Witherington, Jr. $4,000 $8,000
Director
William F. Hughes, Jr. $0 $0
Director
William Jeffries Mann $4,000 $8,000
Director
James Stillman R. McFadden $4,000 $8,000
Director
Officers and directors of the fund who are interested persons of the fund
receive no salary or fees from the fund. Directors of the fund who are not
interested persons of the fund will receive a fee of $1,000 and reimbursement
12
<PAGE>
for related expenses for each meeting of the Board of Directors attended by
them.
(1) These numbers are based on the compensation schedule adopted by the Company
for its operation. The Morgan Keegan funds' Complex consists of one other
investment company with multiple series.
THE FUND'S PRINCIPAL SHAREHOLDERS
On June 30, 1999 there were 3,538,983 shares of the fund outstanding of
which all the officers and directors of the fund as a group (7 persons) owned
approximately 69,869 shares. Management of the fund is not aware of any
shareholder who owned of record or beneficially 5% or more of the fund's
outstanding common stock as of that date.
THE FUND'S INVESTMENT ADVISER
Morgan Asset Management, Inc., formerly Southern Capital Advisors, Inc.,
("Adviser"), an affiliate of Morgan Keegan, serves as the fund's investment
adviser and manager under an Investment Advisory and Management Agreement
("Advisory Agreement"). The Advisory Agreement originally became effective as of
August 14, 1986 and was most recently approved by the shareholders of the fund
on October 20, 1987. The Advisory Agreement provides that, subject to overall
supervision by the Board of Directors of the fund, the Adviser manages the
investment and other affairs of the fund. The Adviser is responsible for
managing the fund's portfolio securities and for making purchases and sales of
portfolio securities consistent with the fund's investment objective, policies
and limitations described in the Prospectus and this Statement of Additional
Information. The Adviser is obligated to furnish the fund with office space as
well as with executive and other personnel necessary for the operation of the
fund. In addition, the Adviser is obligated to supply the Board of Directors and
officers of the fund with certain statistical information and reports, to
oversee the maintenance of various books and records and to arrange for the
preservation of records in accordance with applicable federal law and
regulations. The Adviser and its affiliates also are responsible for the
compensation of directors and officers of the fund who are employees of the
Adviser and/or its affiliates.
The fund bears all its other expenses which are not assumed by the
Adviser. These expenses include, among others: legal and audit expense;
organizational expenses; interest; taxes; governmental fees; membership fees for
investment company organizations: the cost(including brokerage commissions or
charges, if any) of securities purchased or sold by the fund and any losses
incurred in connection therewith; fees of custodians, transfer agents,
registrars or other agents; distribution fees; expenses of preparing share
certificates; expenses relating to the redemption of the fund's shares; expenses
of registering and qualifying fund shares for sale under applicable federal and
state laws and maintaining such registrations and qualifications; expenses of
preparing, setting in print, printing and distributing prospectuses, proxy
statements, reports, notices and dividends to fund shareholders; costs of
stationery; costs of shareholders' and other meetings of the fund; compensation
and expenses of the independent directors; and insurance covering the fund and
its officers and directors. The fund also is liable for such nonrecurring
expenses as may arise, including litigation to which the fund may be party. The
13
<PAGE>
fund also may have an obligation to indemnify its directors and officers with
respect to any such litigation.
The Adviser receives for its services a management fee, calculated daily
and payable quarterly, at an annual rate of 1% of the average daily net assets
of the fund for the first $100 million of average daily net assets and 0.75% of
average daily net assets exceeding $100 million. The advisory fee is higher than
fees paid by most other funds to their investment advisers, but is not
significantly different, in the Adviser's opinion, from the fees of advisers to
mutual funds with similar specialized policies. The Adviser has agreed to
reimburse the fund for certain expenses, including waiving the advisory fees
received by it, in any fiscal year in which the fund's annual expenses
(excluding interest, taxes, brokerage fees and commissions, and certain
extraordinary charges), exceed 2.0% of the fund's average net assets. For the
fiscal year ended June 30, 1997, the advisory fee was $427,360 and the Advisor
waived and reimbursed the fund $8,384. For the fiscal year ended June 30, 1998,
the advisory fee was $695,785. For the fiscal year ended June 30, 1999, the
advisory fee was $877,482 .
The Advisory Agreement will remain in effect from year to year, provided
such continuance is approved by a majority of the Board of Directors or by vote
of the holders of a majority of the outstanding voting securities of the fund.
Additionally, the Advisory Agreement must be approved annually by vote of a
majority of the directors of the fund who are not parties to the Agreement or
"interested persons" of such parties as that term is defined in the 1940 Act.
The Advisory Agreement may be terminated by the Adviser or the fund, without
penalty, on 60 days' written notice to the other, and will terminate
automatically in the event of its assignment.
Under the Advisory Agreement, the fund will have the non-exclusive right
to use the name "Morgan Keegan" until the Agreement is terminated, or until the
right is withdrawn in writing by the Adviser.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser is responsible for the execution
of the fund's portfolio transactions and must seek the most favorable price and
execution for such transactions, subject to the possible payment, as described
below, of higher commissions to brokers who provide research and analysis. The
fund may not always pay the lowest commission or spread available. Rather, the
fund also will take into account such factors as size of the order, difficulty
of execution, efficiency of the executing brokers facilities (including the
services described below) and any risk assumed by the executing broker.
The Adviser may give consideration to research, statistical and other
services furnished by broker/dealers to the Adviser for its use, may place
orders with broker/dealers who provide supplemental investment and market
research and securities and economic analysis, and may pay to those brokers a
higher brokerage commission or spread than may be charged by other brokers. Such
research and analysis may be useful to the Adviser in connection with services
to clients other than the fund. The Adviser's fee is not reduced by reason of
its receipt of such brokerage and research services. During the fiscal year
14
<PAGE>
ended June 30, 1999, the fund paid brokerage commissions of $22,541 to brokers
who provided research services.
From time to time the fund may use Morgan Keegan & Company, Inc. ("Morgan
Keegan") as broker for agency transactions in listed and over-the-counter
securities at commission rates and under circumstances consistent with the
policy of best execution. The Adviser will not cause the fund to pay Morgan
Keegan any commission for effecting a securities transaction for the fund in
excess of the usual and customary amount other broker/dealers would have charged
for the transaction. Rule 17e-1 under the 1940 Act defines "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time."
The Adviser may also select other brokers to execute portfolio
transactions. In the over-the-counter market, the fund generally deals with
responsible primary market-makers unless a more favorable execution can
otherwise be obtained through brokers. For the fiscal year ended June 30, 1999,
brokerage commissions paid to Morgan Keegan constituted approximately 8 % of all
brokerage commissions paid by the fund in connection with 7 % of the aggregate
dollar amount of transactions involving the payment of commissions effected by
the fund in that year. Brokerage commissions paid to Morgan Keegan & Company,
Inc. were $3,425, $8,100 and $9,200 for the fiscal years ended June 30, 1999,
1998 and 1997.
The fund may not buy securities from, or sell securities to, Morgan Keegan
as principal. The fund's Board of Directors has adopted procedures in conformity
with Rule 10f-3 under the 1940 Act whereby the fund may purchase securities that
are offered in underwritings in which Morgan Keegan is a participant.
Section 11(a) of the Securities Exchange Act of 1934 prohibits Morgan
Keegan from executing transactions on an exchange for the fund except pursuant
to the provisions of Rule 11a2-2(T) thereunder. That rule permits Morgan Keegan,
as a member of a national securities exchange, to perform functions other than
execution in connection with a securities transaction for the fund on that
exchange only if the fund expressly consents by written contract. The Advisory
Agreement expressly provides such consent in accordance with Rule 11a2-2(T).
Investment decisions for the fund are made independently from those of
other accounts advised by the Adviser. However, the same security may be held in
the portfolios of more that one account. When two or more accounts
simultaneously engage in the purchase or sale of the same security, the prices
and amounts will be equitably allocated among the accounts. In some cases, this
procedure may adversely affect the price or quantity of the security available
to a particular account. In other cases, however, an account's ability to
participate in large volume transactions may produce better executions and
prices.
Morgan Keegan personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders by all Morgan Keegan directors, officers and employees, establishes
procedures for personal investing and restricts certain transactions. For
15
<PAGE>
example, personal trading in most securities requires pre-clearance. In
addition, the code of ethics places restrictions on the timing of personal
investing in relation to trades by the fund.
THE FUND'S DISTRIBUTOR
Morgan Keegan acts as distributor of the fund's shares pursuant to an
Underwriting Agreement between the fund and Morgan Keegan dated August 14, 1986
and amended on February 12, 1987 and July 7, 1993 ("Underwriting Agreement").
The shares of the fund are offered continuously. The Underwriting Agreement
obligates Morgan Keegan to provide certain services and to bear certain expenses
in connection with the offering of fund shares, including, but not limited to:
printing and distribution of prospectuses and reports to prospective
shareholders; preparation and distribution of sales literature, and advertising;
administrative and overhead cost of distribution such as the allocable costs of
executive office time expended on developing, managing and operating the
distribution program; operating expenses of branch offices, sales training
expenses, and telephone and other communication expenses. Morgan Keegan also
compensates investment brokers of Morgan Keegan and other persons who engage in
or support distribution of shares and shareholder service based on the sales for
which they are responsible and the average daily net asset value of fund shares
in accounts of their clients.
Pursuant to the Underwriting Agreement, as currently in effect, Morgan
Keegan will receive as compensation for its services a 3% sales charge on
purchased shares. The sales charge is reduced to 1% on sales of $1 million or
more, and is waived on certain purchases of fund shares. In addition, Morgan
Keegan will receive an annual distribution fee equivalent up to .25% of the
fund's average daily net assets and an annual service fee equivalent to up to
.25% of the fund's average net assets, in accordance with the Distribution Plan
described below. The distribution fee is computed daily and paid monthly.
The fund has adopted a Distribution Plan ("Plan") which, among other
things, permits it to pay Morgan Keegan a service fee and a distribution fee out
of its net assets. The Plan was approved by the initial shareholder of the fund
on August 14, 1986, and, as required by Rule 12b-1 under the 1940 Act, by the
Board of Directors on the same date, including a majority of the directors who
are not "interested persons" of the fund as that term is defined in the 1940 Act
and who have no direct or indirect financial interest in the operation of the
Plan or the Underwriting Agreement ("Qualified Directors"). The Plan was amended
on February 12, 1987, to reduce the annual distribution fee from an equivalent
of 1.0% of the fund's average daily net assets to an equivalent of .50% of the
fund's average daily net assets. The Plan also was amended on July 7, 1993 to
reflect compliance with National Association of Securities Dealers, Inc. rule
regarding "asset-based" sales charges. The continuation of the Plan was approved
by a majority of the Board of Directors, including a majority of the Qualified
Directors on August 18, 1999.
Service fees and distribution fees paid by the fund to Morgan Keegan under
the Plan may exceed or be less than Morgan Keegan's expenses thereunder. For the
fiscal year ended June 30, 1999, the fund paid service fees and distribution
fees to Morgan Keegan pursuant to the Plan of $438,740. For the fiscal year
16
<PAGE>
ended June 30, 1999, expenses paid for by Morgan Keegan included $263,245 for
commissions and other compensation to employees, $97,297 for printing and
mailing, and $29,940 for promotional materials. No interested person of the fund
or non-interested director had a direct or indirect interest in the Plan or
related agreements. The fund benefits from the Plan by virtue of the broker's
ongoing involvement with individual customers as well as the benefit from
continued promotion. For the fiscal year ended June 30, 1997, Morgan Keegan
retained sales charges for $250,000 received on sales of the fund's shares; for
the fiscal year ended June 30, 1998, Morgan Keegan retained sales charges for
$624,000 received on sales of the fund's shares; and for the fiscal year ended
June 30, 1999, Morgan Keegan retained sales charges for $224,000 received on
sales of the fund's shares.
In approving the Plan and the amendments to the Plan, in accordance with
the requirements of Rule 12b-1, the Directors considered various factors,
including the amount of the service and distribution fees. In connection with
its consideration of this factor, the Board considered at the time of the
amendment the effect of the institution of a 3% sales charge by the distributor.
The Board determined that the service and distribution fees were reasonable in
view of the compensation Morgan Keegan investment brokers can receive relative
to the compensation offered by competing equity funds sold with front-end sales
loads, with or without distribution fees. The Plan permits the fund's shares to
be sold to investors with a front-end sales load of 3%, while some competing
equity funds traditionally have been sold with front-end sales loads in an
amount up to 8 1/2% of the purchase price (9.29% of the net amount invested).
The Board also determined that the fees are reasonable in light of the service
and distribution fees paid by other similar funds. Finally, the Directors
determined that there was a reasonable likelihood that the Plan, and the
amendments to the Plan, would benefit the fund and its shareholders. This
determination was based, in part, on the belief that the Plan enables the fund
to have Morgan Keegan investment brokers available to promote and sell the fund,
thereby assisting the fund to attract assets. Growth of assets is expected to
benefit both the fund and the Adviser. The fund is expected to benefit from the
potential for economies of scale in its operations that can arise from growth in
assets, as well as from the increased potential for flexibility in portfolio
management resulting from a net inflow of assets, as opposed to net redemptions.
Shareholders of the fund are expected to benefit from continuing services
provided by investment brokers and other staff members of Morgan Keegan as
distributor. The Adviser and Morgan Keegan are expected to benefit from the fact
that their advisory, service and distribution fees, which are based on a
percentage of assets, increase as fund assets grow and that their brokerage
commissions and transfer fees will also increase as assets grow. The Directors
acknowledged, however, that there is no assurance that benefits to the fund will
be realized as a result to the Plan. In considering whether to continue the
Plan, the Directors, among other things, also reviewed the expenses of the Plan,
alternative methods of distributing fund shares and the overall expected costs
and benefits to the fund.
The Plan may be terminated by vote of a majority of the Qualified
Directors or by vote of a majority of the outstanding voting securities of the
fund. Termination of the Plan terminates any obligation of the fund to pay
service and distribution fees to Morgan Keegan, other than service and
distribution fees that may have accrued but that have not been paid as of the
date of termination. Any change in the Plan that would materially increase the
service and distribution costs to the fund requires shareholder approval;
17
<PAGE>
otherwise the Plan may be amended by the Directors, including a majority of the
Qualified Directors, as described above.
The Plan, as currently in effect, will continue for successive one-year
periods, provided that each such continuance specifically is approved by (1) the
vote of a majority of the Qualified Directors and (2) the vote of a majority of
the entire Board of Directors.
Rule 12b-1 requires that any person authorized to direct the disposition
of monies paid or payable by the fund pursuant to the Plan or any related
agreement shall provide to the fund's Board of Directors, and the Directors
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which expenditures were made. Rule 12b-1 also provides that
the fund may rely on that rule only if the selection and nomination of the
fund's independent directors are committed to the discretion of such independent
directors.
The current Underwriting Agreement was approved initially by vote of the
Board and the Qualified Directors on February 9, 1987, and its continuance was
most recently approved by vote of the Board and the Qualified Directors on
August 16, 1999. The Underwriting Agreement is subject to the same provisions
for annual renewal as the Plan. In addition, the Underwriting Agreement will
terminate upon assignment or upon 60 days' notice from Morgan Keegan. The fund
may terminate the Underwriting Agreement, without penalty, upon 60 days' notice,
by a majority vote of either its Board of Directors, the Qualified Directors, or
the outstanding voting securities of the fund.
DESCRIPTION OF THE FUND'S SHARES
The fund is a diversified open-end management investment company
incorporated in Maryland on May 5, 1986. The fund has authorized capital of 100
million shares of common stock, par value $0.001. All shares are the same class,
and each share is entitled to one vote for the election of Directors and on any
other matter submitted to a shareholder vote. The Directors may create
additional series of shares from time to time although they have no present
intention to do so. Fractional shares will have fractional voting rights. Voting
rights are not cumulative. All shares of the fund are fully paid and
non-assessable and have no preemptive or conversion rights.
The fund does not hold annual meetings of shareholders. There will
normally be no meeting of shareholders for the purpose of electing Directors
unless and until such time as less than a majority of the Directors holding
office have been elected by shareholders, at which time the Directors then in
office will call a shareholders' meeting for the election of Directors. The
fund's by-laws require the Directors to call a meeting of record of not less
than 25% of the fund's outstanding shares.
18
<PAGE>
THE FUND'S CUSTODIAN, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT
AND
PORTFOLIO ACCOUNTING SERVICE AGENT
Morgan Keegan & Company, Inc., Morgan Keegan Tower, Fifty Front Street,
Memphis, Tennessee 38103, serves as the transfer and dividend disbursing agent
of the fund. For these services, Morgan Keegan, the fund's distributor, receives
from the fund a fee of $5,000 per month, or $60,000 per year.
Morgan Keegan also provides accounting services to the fund. For these
services, which include portfolio accounting, expense accrual and payment, fund
valuation and financial reporting, tax accounting, and compliance control
services, Morgan Keegan receives from the fund a fee of $2,500 per month, or
$30,000 per year.
Shareholders who request an historical transcript of their account will be
charged a fee based on the number of years researched. The fund reserves the
right, upon 60 days' written notice, to make other charges to investors to cover
administrative costs.
State Street Bank and Trust Company, National Association, 108 Myrtle
Street, Quincy, Massachusetts, 02171, serves as the fund's custodian.
THE FUND'S LEGAL COUNSEL
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington,
D.C. 20036-1800, serves as counsel to the fund and has passed upon certain
matters in connection with this offering.
THE FUND'S CERTIFIED PUBLIC ACCOUNTANTS
___________________, are the fund's independent certified public
accountants. The financial information under the caption "Financial Highlights"
in the Prospectus has been derived from the fund's financial statements
contained in the fund's Annual Report to shareholders for the period ended June
30, 1999 ("Annual Report"). Those financial statements have been examined by
___________, whose report thereon also appears in the Annual Report and have
been incorporated by reference in this Statement of Additional Information.
_______________, performs an audit of the fund's financial statements and
reviews the fund's federal and state income tax returns.
19
<PAGE>
FINANCIAL STATEMENTS
The fund's Annual Report to Shareholders for the fiscal year ended June
30, 1999 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes, and the report of
independent certified public accountants appearing therein are incorporated by
reference in this Statement of Additional Information.
20
<PAGE>
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
Item 23. Exhibits:
(a) Articles of Incorporation dated May 5, 1986 (1)
(b) By-laws as amended August 24, 1987 (1)
(c) Instruments defining the Rights of Shareholders
(1) Articles of Incorporation (1)
(2) By-laws (1)
(d) Investment Advisory and Management Agreement (1)
(e) Underwriting Agreement (1)
(f) Bonus, profit sharing or pension plans - none
(g) Custodian Agreement (1)
(h) (1) Agency Agreement (1)
(2) Fund Accounting Service Agreement (1)
(i) Legal Opinion (1)
(j) Accountants' Consent (to be filed)
(k) Financial statements omitted from Statement of
Additional Information - none
(l) Letter of investment intent (1)
(m) Amended Distribution Plan pursuant to Rule 12b-1 (1)
(n) Plan pursuant to Rule 18f-3 (not applicable)
(1) Incorporated by reference to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A previously filed on October 28, 1998.
Item 24. Persons controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
Item 25. Indemnification
---------------
Section 10.1 of the Corporation's By-Laws provides that:
Section 10.1 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS. The Corporation shall indemnify its present and past Directors,
officers, employees and agents, and any persons who are serving or have
served at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, or enterprise, to the full extent provided and allowed by Section
2-418 of the Corporations and Associations Code of Maryland, as amended
from time to time or any other applicable provisions of laws, against
any judgments, penalties, fines, settlements, or reasonable expenses
(including attorney's fees) actually incurred by any such persons in
connection with any threatened, pending, or completed actions, suite or
proceedings. Notwithstanding anything herein to the contrary, no
Director, officer, investment adviser or principal underwriter of the
corporation shall be indemnified in violation of Sections 17(h) and (i)
of the Investment Company Act of 1940, as amended.
Paragraphs 7 and 8 of the Underwriting Agreement state:
<PAGE>
7. The Fund agrees to indemnify, defend and hold the Distributor, its
several officers and directors, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Distributor, its officers or directors, or any such
controlling person may incur, under the 1933 Act or under common law or
otherwise, arising out of or based upon any alleged untrue statement of
a material fact contained in the Registration Statement or arising out
of or based upon any alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided, however, that this indemnification provision shall
not inure to the benefit of any person who is an officer or director of
the Fund or who controls the Fund within the meaning of Section 15 of
the 1933 Act, as amended, unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling precedent,
that such result would not be against public policy as expressed in the
1933 Act, as amended, and further provided that in no event shall
anything contained in this Agreement be construed so as to protect the
Distributor against any liability to the Fund or its shareholders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement.
8. The Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls the Fund
within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers or directors, or any such controlling
person may incur, under the 1933 Act or under common law or otherwise,
arising out of or based upon any alleged untrue statement of a material
fact contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or arising out of or
based upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration
Statement or necessary to make such information not misleading.
Paragraph E.3. of the Accounting Services Agreement states:
Responsibility of Morgan Keegan & Company, Inc. Morgan Keegan shall be
held to the exercise of reasonable care in carrying out the provisions
of this Agreement, but shall be indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in good
faith without negligence or willful misconduct. Morgan Keegan shall be
entitled to rely on and may act upon the reasonable advice of the Fund's
auditors or of counsel (who may be counsel of the Fund) on all matters,
and shall not be liable for any action reasonably taken or omitted
pursuant to such advice.
In addition, Morgan Keegan shall not be liable for any loss of data or
any delay in its performance under this Agreement to the extent such
loss or delay is due to causes beyond its control, including but not
limited to: acts of God, interruption in, loss of or malfunction in
power, significant computer hardware or systems software or telephone
communication service; acts of civil or military authority; sabotage;
war or civil commotion; fire; explosion; or strike beyond delivery of
minimum critical services. Morgan Keegan shall use its best efforts to
minimize any such loss or delay by all practical means and to replace
any lost data promptly. Morgan Keegan agrees not to discriminate against
the Fund in favor of any other customer of Morgan Keegan in making
computer time and its personnel available to input and process the
transactions hereunder when a loss or delay occurs.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Morgan Asset Management, Inc., a Tennessee corporation, is a registered
investment adviser and offers investment management services to investment
companies and other types of investors. Information as to its officers and
directors is included in its Form ADV filed on October 21, 1998 with the
Securities and Exchange Commission (registration number 801-27629) and is
incorporated herein by reference.
<PAGE>
Item 27. Principal Underwriter
---------------------
(a) Bedford Money Market Fund
Morgan Keegan Select Fund, Inc.
(b) Morgan Keegan & Company, Inc.
Name and Positions and Positions and
Principal Business Offices With Offices With
Address Underwriter Registrant
- ------------------ ------------- -------------
(Principal Business Address,
unless otherwise noted, is:
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103)
Allen B. Morgan, Jr. Chairman and Director,
Chief Executive President
Officer, Executive
Managing Director
Joseph C. Weller Chief Financial Vice President,
Officer, Executive Treasurer and
Managing Director, Assistant Secretary
Executive Vice President,
Secretary and Treasurer
John W. Stokes, Jr. Vice Chairman, None
Executive Managing
Director
Robert A. Baird Executive None
Managing Director
G. Douglas Edwards Executive Managing None
Director
James H. Ganier Executive Managing None
Director
Stephen P. Laffey Executive Managing None
Director
Thomas V. Orr Executive Managing None
Director
James A. Parish, Jr. Executive Managing None
Director
<PAGE>
Allen B. Adler Managing Director None
Franklin P. Allen III Managing Director None
George E. Arras, Jr. Managing Director None
James M. Augustine Managing Director None
Joseph K. Ayers Managing Director None
Rodney D. Baber Managing Director None
George E. Bagwell Managing Director None
Woodley H. Bagwell Managing Director None
Charles E. Bailey Managing Director None
Milton A. Barber Managing Director None
Joseph C. Barkley Managing Director None
Reginald E. Barnes Managing Director None
Glen E. Bascom Managing Director None
W. Preston Battle Managing Director None
Robert C. Berry Managing Director None
Cristan K. Blackman Managing Director None
John D. Brewer Managing Director None
Paul S. Burd Managing Director None
John B. Carr, Jr. Managing Director None
John C. Carson, Jr. Managing Director None
Ted H. Cashion Managing Director None
Marshall A. Clark Managing Director None
William F. Clay Managing Director None
Robert E. Cope Managing Director None
Mark W. Crowl Managing Director None
Harold L. Deaton Managing Director None
<PAGE>
William W. Deupree, Jr. Managing Director None
Robert H. Dudley, Jr. Managing Director None
Richard H. Eckels Managing Director None
Richard S. Ferguson Managing Director None
Robert M. Fockler Managing Director None
Wilmer J. Freiberg Managing Director None
Graham D.S. Fulton Managing Director None
John H. Geary Managing Director None
Robert D. Gooch, Jr. Managing Director None
James F. Gould Managing Director None
Terry C. Graves Managing Director None
John H. Grayson, Jr. Managing Director None
Gary W. Guinn Managing Director None
David M. Guthrie Managing Director None
Jan L. Gwin Managing Director None
Thomas M. Hahn Managing Director None
Thomas V. Harkins Managing Director None
Michael J. Harris Managing Director None
Haywood Henderson Managing Director None
Roderick E. Hennek Managing Director None
Edwin L. Hoopes, III Managing Director None
R. Davis Howe Managing Director None
William F. Hughes, Jr. Managing Director Director
Joe R. Jennings Managing Director None
Robert Jetmundsen Managing Director None
Ram P. Kasargod Managing Director None
<PAGE>
Peter R. Klyce Managing Director None
Peter Stephen Knoop Managing Director None
W. Lawrence M. Knox, Jr. Managing Director None
E. Carl Krausnick, Jr. Managing Director None
James R. Ladyman Managing Director None
A. Welling LaGrone, Jr. Managing Director None
Benton G. Landers Managing Director None
William M. Lellyett, Jr. Managing Director None
W. G. Logan, Jr. Managing Director None
Wiley H. Malden Managing Director None
John Henry Martin Managing Director None
William D. Mathis, III Managing Director None
John Fox Matthews Managing Director None
Francis J. Maus Managing Director None
Charles D. Maxwell Managing Director Secretary and
Assistant Treasurer
John Welsh Mayer Managing Director None
W. Neal McAtee Managing Director None
Harris L. McCraw III Managing Director None
Edward S. Michelson Managing Director None
G. Rolfe Miller Managing Director None
Gary C. Mills Managing Director None
David Montague Managing Director None
Robert M. Montague Managing Director None
K. Brooks Monypeny Managing Director None
John G. Moss Managing Director None
Lewis A. Moyse Managing Director None
<PAGE>
William G. Mueller Managing Director None
Mortimer S. Neblett Managing Director None
Philip G. Nichols Managing Director None
Michael O'Keefe Managing Director None
Jack A. Paratore Managing Director None
William T. Patterson Managing Director None
J. Christopher Perkins Managing Director None
Minor Perkins Managing Director None
Logan B. Phillips, Jr. Managing Director None
L. Jack Powell Managing Director None
S. Mark Powell Managing Director None
Richard L. Preis Managing Director None
C. David Ramsey Managing Director None
Hedi H. Reynolds Managing Director None
Donna L. Richardson Managing Director None
R. Michael Ricketts Managing Director None
Thomas E. Robinson, Sr. Managing Director None
Darien M. Roche Managing Director None
Kenneth L. Rowland Managing Director None
W. Wendell Sanders Managing Director None
E. Elkan Scheidt Managing Director None
Ronald J. Schuberth Managing Director None
Lynn T. Shaw Managing Director None
Fred B. Smith Managing Director None
Richard J. Smith Managing Director None
Robert L. Snider Managing Director None
<PAGE>
John B. Snowden, IV Managing Director None
Thomas A. Snyder Managing Director None
Richard A. Spell Managing Director None
John W. Stokes, III Managing Director None
John Burke Strange Managing Director None
James M. Tait, III Managing Director None
J. Crosby Taylor, Jr. Managing Director None
Phillip C. Taylor Managing Director None
John D. Threadgill Managing Director None
P. Gibbs Vestal Managing Director None
Edmund J. Wall Managing Director None
W. Charles Warner Managing Director None
Richard E. Watson Managing Director None
Craig T. Weichmann Managing Director None
John S. Wilson Managing Director None
J. William Wyker III Managing Director None
John J. Zollinger, III Managing Director None
(c) None
Item 28. Location of Accounts and Records
--------------------------------
The books and other documents required by paragraphs (b)(4), (c) and (d)
of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Registrant's adviser, Morgan Asset Management, Inc.,
Morgan Keegan Tower, Fifty Front Street, Memphis, Tennessee 38103. All other
accounts, books and other documents required by Rule 31a-1 are maintained in the
physical possession of Registrant's transfer agent and portfolio accounting
service provider, Morgan Keegan & Co., Morgan Keegan Tower, Fifty Front Street,
Memphis, Tennessee 38103.
Item 29. Management Services
-------------------
Not applicable
Item 30. Undertakings
------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Morgan Keegan Southern Capital
Fund, Inc., has duly caused this Post-Effective Amendment No. 14 to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Memphis and State of
Tennessee, on the 16th day of August, 1999.
MORGAN KEEGAN SOUTHERN CAPITAL FUND, INC.
By: /s/ Allen B. Morgan, Jr.
-------------------------------
Allen B. Morgan, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Allen B. Morgan, Jr. Director and President August 16, 1999
- -------------------------- (Chief Executive
Allen B. Morgan, Jr. Officer)
/s/ Joseph C. Weller Vice President and August 16, 1999
- -------------------------- Treasurer (Chief
Joseph C. Weller Financial Officer)
/s/ James D. Witherington, Jr. Director August 16, 1999
- ------------------------------
James D. Witherington, Jr.
/s/ William F. Hughes, Jr. Director August 16, 1999
- --------------------------
William F. Hughes, Jr.
/s/ William Jefferies Mann Director August 16, 1999
- --------------------------
William Jefferies Mann
/s/ James Stillman McFadden Director August 16, 1999
- ---------------------------
James Stillman McFadden
