<PAGE> 1
As filed with the Securities and Exchange Commission
on November 27, 1996
Registration Nos. 33-21660 and 811-5551
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 19 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / /
Amendment No. 20 / X /
AMSOUTH MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices)
(800) 451-8379
(Registrant's Telephone Number, Including Area Code)
Name and address
of agent for service: Copy to:
---------------------- --------
Mr. J. David Huber Alan G. Priest, Esq.
AmSouth Mutual Funds Ropes & Gray
3435 Stelzer Road 1301 K Street, N.W.
Columbus, Ohio 43219 Suite 800 East
Washington, D.C. 20005
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ X / on November 30, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
The Registrant has registered an indefinite number or amount of its
shares of beneficial interest under the Securities Act of 1933 pursuant to Rule
24f-2. The Registrant has filed a Rule 24f-2 Notice with respect to the
Registrant's fiscal year ended July 31, 1996 on September 25, 1996.
<PAGE> 2
CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
PROSPECTUS FOR AMSOUTH PRIME OBLIGATIONS
FUND, AMSOUTH U.S. TREASURY FUND AND
AMSOUTH TAX EXEMPT FUND
<TABLE>
<CAPTION>
<S> <C>
1. Cover Page .............................. Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial
Information ............................ Financial Highlights
4. General Description
of Registrant .......................... The Trust; Investment Objective and
Policies; Investment Restrictions; General
Information - Description of the Trust and
Its Shares
5. Management of the Fund .................. Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ....................... The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the Trust and
Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ........................... Valuation of Shares;
How to Purchase and
Redeem Shares
8. Redemption or Repurchase ................ How to Purchase and
Redeem Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 3
AMSOUTH MUTUAL FUNDS
MONEY MARKET FUNDS
<TABLE>
<S> <C>
3435 Stelzer Road For current yield, purchase, and redemption
Columbus, Ohio 43219 information, call (800) 451-8382
</TABLE>
The AmSouth Mutual Funds Money Market Funds (the "Money Market Funds") are
three of eleven series of units of beneficial interest ("Shares") each
representing interests in one of eleven separate investment funds (the "Funds")
of AmSouth Mutual Funds (the "Trust"), an open-end management investment
company. All securities or instruments in which the Money Market Funds invest
have remaining maturities of 397 days or less. Each Money Market Fund seeks to
maintain a constant net asset value of $1.00 per unit of beneficial interest,
but there can be no assurance that net asset value will not vary.
AMSOUTH PRIME OBLIGATIONS FUND (the "Prime Obligations Fund") seeks current
income with liquidity and stability of principal. The Prime Obligations Fund
invests in high quality United States dollar-denominated money market
instruments and other high-quality United States dollar-denominated instruments.
AMSOUTH U.S. TREASURY FUND (the "AmSouth U.S. Treasury Fund") seeks current
income with liquidity and stability of principal. The AmSouth U.S. Treasury Fund
invests exclusively in short-term obligations issued by the U.S. Treasury, some
of which may be subject to repurchase agreements collateralized by U.S. Treasury
obligation.
AMSOUTH TAX EXEMPT FUND (the "Tax Exempt Fund") seeks to produce as high a
level of current interest income exempt from federal income taxes as is
consistent with the preservation of capital and relative stability of principal.
The Tax Exempt Fund seeks to achieve this objective by investing in short-term
high-quality obligations. While the Tax Exempt Fund may invest in short-term
taxable obligations, under normal market conditions at least 80% of the Tax
Exempt Fund's total assets will be invested in obligations exempt from federal
income tax.
AmSouth Bank of Alabama, Birmingham, Alabama ("AmSouth"), acts as the
investment advisor to each Money Market Fund. BISYS Fund Services, Limited
Partnership ("BISYS Fund Services"), Columbus, Ohio, acts as distributor to each
Money Market Fund.
Each Money Market Fund has been divided into two classes of Shares
("Premier" Shares and "Classic" Shares). Premier and Classic Shares of a
particular Fund represent interests in the same investments and are identical in
all respects except that (i) Classic Shares bear the expense of the fee under
the Trust's Shareholder Servicing Plan (the "Plan"), which will cause the
Classic Shares to have a higher expense ratio and to pay lower dividends than
those of the Premier Shares, and (ii) Classic Shares have certain exclusive
voting rights with respect to the Plan. The following investors qualify to
purchase a Money Market Fund's Premier Shares: (i) investors for whom AmSouth
Bancorporation or one of its affiliates acts in a fiduciary, advisory,
custodial, agency or similar capacity through an account with the Trust
Department of AmSouth Bancorporation or one of its affiliates; (ii) investors
who purchase Shares of a Money Market Fund through a payroll deduction plan, a
401(k) plan or a 403(b) plan which by its terms permits purchases of Shares; and
(iii) orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies. All other investors are eligible to
purchase Classic Shares only. For further information concerning Premier Shares
and Classic Shares and the operation of the Plan, see "HOW TO PURCHASE AND
REDEEM SHARES" and "MANAGEMENT OF AMSOUTH MUTUAL FUNDS."
This Prospectus relates only to the Money Market Funds. Interested persons
who wish to obtain a copy of the prospectuses of the AmSouth Equity Fund, the
AmSouth Regional Equity Fund, and the AmSouth Balanced Fund (the "Capital
Appreciation Funds"); the AmSouth Bond Fund, the AmSouth Limited Maturity Fund,
the AmSouth Government Income Fund, the AmSouth Municipal Bond Fund, and the
AmSouth Florida Tax-Free Fund (the "Income Funds") may contact the Distributor
at the telephone number shown above. Additional information about the Money
Market Funds, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission and is available upon request
without charge by writing to the Trust at its address or by calling the Trust at
the telephone number shown above. The Statement of Additional Information bears
the same date as this Prospectus and is incorporated by reference in its
entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Money Market
Funds that a prospective investor ought to know before investing. Investors
should read this Prospectus and retain it for future reference.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY AMSOUTH OR ANY OF ITS AFFILIATES. THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR BY ANY OTHER AGENCY. AN INVESTMENT IN THE TRUST'S SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
------------------------
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00
PER SHARE
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION OF THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is November 30, 1996.
<PAGE> 4
FEE TABLE
<TABLE>
<CAPTION>
AMSOUTH
PRIME OBLIGATIONS U.S. TREASURY TAX
FUND FUND EXEMPT FUND
------------------- ------------------- -------------------
PREMIER CLASSIC PREMIER CLASSIC PREMIER CLASSIC
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................. 0% 0% 0% 0% 0% 0%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................. 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as
applicable).......................................... 0% 0% 0% 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed, if
applicable)(2)....................................... 0% 0% 0% 0% 0% 0%
Exchange Fee........................................... $0 $0 $0 $0 $0 $0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fees (After Voluntary Fee Reduction for the
Tax Exempt Fund)(3).................................. 0.40% 0.40% 0.40% 0.40% 0.20% 0.20%
12b-1 Fees............................................. 0% 0% 0% 0% 0% 0%
Shareholder Servicing Fees(4) (after voluntary fee
reductions
for the Classic Shares).............................. 0% 0.10% 0% 0.10% 0% 0.10%
Other Expenses......................................... 0.31% 0.31% 0.31% 0.32% 0.34% 0.38%
---- ---- ---- ---- ---- ----
Total Fund Operating Expenses (after voluntary fee
reductions).......................................... 0.71% 0.81%(5) 0.71% 0.82%(5) 0.54%(5) 0.68%(5)
---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ----
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period.
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Fund
Premier Shares................................................................. $7 $23 $40 $ 88
Classic Shares................................................................. $8 $26 $45 $100
AmSouth U.S. Treasury Fund
Premier Shares................................................................. $7 $23 $40 $ 88
Classic Shares................................................................. $8 $26 $46 $101
Tax Exempt Fund
Premier Shares................................................................. $6 $17 $30 $ 68
Classic Shares................................................................. $7 $22 $38 $ 85
</TABLE>
- ------------
(1) AmSouth Bank of Alabama and its correspondent or affiliated banks may charge
a Customer's (as defined in the Prospectus) account fees for automatic
investment and other cash management services provided in connection with
investment in a Money Market Fund. (See "HOW TO PURCHASE AND REDEEM
SHARES--Purchases of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a shareholder. (See "HOW TO PURCHASE AND
REDEEM SHARES--Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management Fees
as a percentage of average net assets would be .40% for the Tax Exempt Fund.
(See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS--INVESTMENT ADVISOR.")
(4) Absent the voluntary reduction of shareholder servicing fees, Shareholder
Servicing Fees as a percentage of average net assets would be .25% for the
Classic Shares of each Money Market Fund.
(5) In the absence of any voluntary reduction in Shareholder servicing and
investment advisory fees, Total Fund Operating Expenses for the Classic
Shares of the Prime Obligations Fund would be .96%, for the Classic Shares
of the AmSouth U.S. Treasury Fund would be .97%, and for Tax Exempt Fund
would be .74% for Premier Shares and 1.03% for Classic Shares.
The purpose of the table above is to assist an investor in the Fund in
understanding the various costs and expenses that an investor in a Money Market
Fund will bear directly or indirectly. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS"
for a more complete discussion of annual operating expenses of the Money Market
Funds. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE> 5
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information concerning the
investment results for each of the Money Market Funds for the periods indicated.
This information has been derived from financial statements audited by Coopers &
Lybrand L.L.P., independent accountants for the Trust, whose report thereon is
included in the Statement of Additional Information. Further financial data is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND
------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
1996 -------- -------- -------- -------- --------
--------------------------
CLASSIC(b) PREMIER(b)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- -------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment Income......... 0.050 0.016 0 .050 0.029 0.027 0.042 0.067
---------- ---------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income......... (0.050) (0.016) (0.050) (0.029) (0.027) (0.042) (0.067)
---------- ---------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== ============ ========= ========= ========= ========= =========
Total Return.................. 5.07%(e) 5.10% 5.14% 2.94% 2.76% 4.28% 6.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)....................... $125,075 $478,542 $617,673 $577,331 $456,428 $457,511 $307,873
Ratio of expenses to average
net assets.................. 0.81%(c) 0.71% 0.69% 0.70% 0.71% 0.71% 0.72%
Ratio of net investment income
to average net assets....... 4.61%(c) 5.00% 5.04% 2.92% 2.73% 4.08% 6.61%
Ratio of expenses to average
net assets*................. 0.96%(c) (d) (d) (d) (d) (d) (d)
Ratio of net investment income
to average net assets*...... 4.46%(c) (d) (d) (d) (d) (d) (d)
<CAPTION>
1988 TO
JULY 31,
1990 1989(a)
-------- ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 1.000 $ 1.000
-------- ---------
INVESTMENT ACTIVITIES
Net Investment Income......... 0.079 0.084
-------- ---------
DISTRIBUTIONS
Net Investment Income......... (0.079) (0.084)
-------- ---------
NET ASSET VALUE, END OF
PERIOD........................ $ 1.000 $ 1.000
========= ==========
Total Return.................. 8.16% 8.72%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)....................... $298,498 $293,749
Ratio of expenses to average
net assets.................. 0.70% 0.58%(b)
Ratio of net investment income
to average net assets....... 7.88% 8.69%(b)
Ratio of expenses to average
net assets*................. 0.72% 0.71%(b)
Ratio of net investment income
to average net assets*...... 7.86% 8.56%(b)
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized
(d) There were no waivers during the period.
(e) Represents total return for the Premier Shares for the period from August 1,
1995 to March 31, 1996 plus the total return for the Classic Shares for the
period from April 1, 1996 to July 31, 1996.
3
<PAGE> 6
<TABLE>
<CAPTION>
AMSOUTH U.S. TREASURY FUND
------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
1996 -------- -------- -------- -------- --------
--------------------------
CLASSIC(b) PREMIER(b)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- -------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment Income...... 0.048 0.015 0.048 0.028 0.027 0.041 0.064
---------- ---------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income...... (0.048) (0.015) (0.048) (0.028) (0.027) (0.041) (0.064)
---------- ---------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== ============ ========= ========= ========= ========= =========
Total Return............... 4.90%(e) 4.93% 4.90% 2.80% 2.69% 4.15% 6.58%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000).................... $ 12,263 $368,162 $322,939 $300,603 $404,473 $339,666 $343,967
Ratio of expenses to
average net assets....... 0.82%(c) 0.71% 0.70% 0.71% 0.72% 0.73% 0.72%
Ratio of net investment
income to average net
assets................... 4.44%(c) 4.82% 4.81% 2.77% 2.66% 4.08% 6.28%
Ratio of expenses to
average net assets*...... 0.97%(c) (d) (d) (d) (d) (d) (d)
Ratio of net investment
income to average net
assets*.................. 4.29%(c) (d) (d) (d) (d) (d) (d)
<CAPTION>
1988 TO
JULY 31,
1990 1989(a)
-------- ------------
<S> <C><C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 1.000 $ 1.000
-------- ------------
INVESTMENT ACTIVITIES
Net Investment Income...... 0.077 0.075
-------- ------------
DISTRIBUTIONS
Net Investment Income...... (0.077) (0.075)
-------- ------------
NET ASSET VALUE, END OF
PERIOD..................... $ 1.000 $ 1.000
========= =============
Total Return............... 8.04% 7.75%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000).................... $239,291 $131,956
Ratio of expenses to
average net assets....... 0.68% 0.61%(b)
Ratio of net investment
income to average net
assets................... 7.73% 8.31%(b)
Ratio of expenses to
average net assets*...... 0.73% 0.74%(b)
Ratio of net investment
income to average net
assets*.................. 7.68% 8.18%(b)
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized
(d) There were no waivers during the period.
(e) Represents total return for the Premier Shares for the period from August 1,
1995 to March 31, 1996 plus the total return for the Classic Shares for the
period from April 1, 1996 to July 31, 1996.
4
<PAGE> 7
<TABLE>
<CAPTION>
TAX EXEMPT FUND
-----------------------------------------------------------------------------------------------
JUNE 27,
YEAR ENDED JULY 31, 1988 TO
--------------------------------------------------------------------------------- JULY 31,
1995 1994 1993 1992 1991 1990(a)
1996 ------- ------- ------- ------- ------- --------
--------------------------
CLASSIC(b) PREMIER(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ------- ------- ------- ------- ------- --------
INVESTMENT ACTIVITIES
Net Investment Income......... 0.031 0.010 0.032 0.019 0.021 0.030 0.046 0.011
---------- ---------- ------- ------- ------- ------- ------- --------
DISTRIBUTIONS
Net Investment Income......... (0.031) (0.010) (0.032) (0.019) (0.021) (0.030) (0.046) (0.011)
---------- ---------- ------- ------- ------- ------- ------- --------
NET ASSET VALUE, END OF
PERIOD........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ========= ======= ======= ======= ======= ======= =======
Total Return.................. 3.12%(d) 3.15% 3.22% 1.95% 2.16% 3.12% 4.69% 0.54%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)....................... $ 17,116 $ 43,611 $57,640 $60,923 $48,151 $38,392 $25,400 $ 28,246
Ratio of expenses to average
net assets.................. 0.68%(c) 0.54% 0.54% 0.57% 0.49% 0.65% 0.52% 0.21%(b)
Ratio of net investment income
to average net assets....... 2.82%(c) 3.11% 3.15% 1.93% 2.12% 2.98% 4.59% 5.70%(b)
Ratio of expenses to average
net assets*................. 1.03%(c) 0.74% 0.74% 0.77% 0.78% 0.77% 0.77% 0.81%(b)
Ratio of net investment income
to average net assets*...... 2.47%(c) 2.91% 2.95% 1.73% 1.83% 2.86% 4.34% 5.10%(b)
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations
(b) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(c) Annualized
(d) Represents the total return for the Premier Shares for the period from
August 1, 1995 to March 31, 1996 plus the total return for the Classic
Shares for the period from April 1, 1996 to July 31, 1996.
5
<PAGE> 8
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Prime Obligations Fund and the AmSouth U.S.
Treasury Fund is to seek current income with liquidity and stability of
principal. The investment objective of the Tax Exempt Fund is to seek as high a
level of current interest income exempt from federal income taxes as is
consistent with the preservation of capital and relative stability of principal.
Although the Prime Obligations Fund and the AmSouth U.S. Treasury Fund have the
same investment advisor and the same investment objective, their particular
portfolio securities and yield will ordinarily differ due to differences in the
types of investments permitted, cash flow, and the availability of particular
portfolio investments. Market conditions and interest rates may affect the types
and yields of securities held in each Fund. The investment objective of each
Money Market Fund is fundamental and may not be changed without a vote of the
outstanding Shares of that Fund (as defined below under "GENERAL
INFORMATION--Miscellaneous.") There can be, of course, no assurance that any
Money Market Fund will achieve its investment objective.
Changes in prevailing interest rates may affect the yield, and possibly the
net asset value, of each Fund. Each of the Money Market Funds invests only in
those securities and instruments considered by AmSouth to present minimal credit
risks under guidelines established by the Trust's Board of Trustees. All
securities or instruments in which each of the Money Market Funds invest have
remaining maturities of 397 days or less, although instruments subject to
repurchase agreements (and, in the case of the Tax Exempt Fund, certain variable
rate and floating rate instruments subject to demand features) may bear longer
maturities. The dollar-weighted average maturity of the securities in each Money
Market Fund will not exceed 90 days.
The Tax Exempt Fund is not intended to constitute a balanced investment
program and is not designed for investors seeking capital appreciation.
Investment in the Tax Exempt Fund would not be appropriate for tax-deferred
plans, such as IRA and Keogh plans. Investors should consult a tax or other
financial adviser to determine whether investment in the Tax Exempt Fund would
be appropriate.
THE PRIME OBLIGATIONS FUND invests in U.S. dollar-denominated, high-quality
short-term debt instruments. Investments will be limited to those obligations
which, at the time of purchase, (i) possess the highest short-term rating from
at least two nationally recognized statistical rating organizations (an "NRSRO")
(for example, commercial paper rated "A-1" by Standard & Poor's Corporation and
"P-1" by Moody's Investors Service, Inc.) or (ii) do not possess a rating (i.e.,
are unrated) but are determined to be of comparable quality to the rated
instruments eligible for purchase by the Fund under the guidelines adopted by
the Trustees. The Statement of Additional Information contains further
information concerning the rating and other requirements governing the Prime
Obligation Fund's investments, including information relating to the treatment
of securities subject to a tender or demand feature and securities deemed to
possess a rating based on comparable rated securities of the same issuer. The
Statement also identifies the NRSROs that may be utilized by AmSouth with
respect to portfolio investments for the Fund and provides a description of the
relevant ratings assigned by each such NRSRO.
The Prime Obligations Fund will invest in a variety of U.S. Treasury
obligations, differing in their interest rates, maturities, and times of
issuance, and other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal National Mortgage Association, are supported by the right
of the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association, are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still others, such as
those of the
6
<PAGE> 9
Federal Farm Credit Bank or the Federal Home Loan Mortgage Corporation, are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law. The Prime Obligations Fund will invest in the obligations of such
agencies or instrumentalities only when AmSouth believes that the credit risk
with respect thereto is minimal.
The Prime Obligations Fund may invest in bankers' acceptances guaranteed by
domestic and foreign banks if at the time of investment the guarantor bank has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements). The Prime Obligations
Fund may invest in certificates of deposit and demand and time deposits of
domestic and foreign banks and savings and loan associations if (a) at the time
of investment the depository institution has capital, surplus, and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements) or (b) the principal amount of the instrument is
insured in full by the Federal Deposit Insurance Corporation.
The Prime Obligations Fund may also invest in Eurodollar Certificates of
Deposits ("ECDs") which are U.S. dollar denominated certificates of deposit
issued by offices of foreign and domestic banks located outside the United
States; Eurodollar Time Deposits ("ETDs") which are U.S. dollar denominated
deposits in a foreign branch of a U.S. bank or a foreign bank; Canadian Time
Deposits ("CTDs") which are essentially the same as ETDs except they are issued
by Canadian offices of major Canadian banks; and Yankee Certificates of Deposit
("Yankee CDs") which are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States.
The Prime Obligations Fund will not invest in excess of 10% of its net assets
in time deposits, including ETDs and CTDs but not including certificates of
deposit, with maturities in excess of seven days which are subject to penalties
upon early withdrawal.
The Prime Obligations Fund may invest in commercial paper (including variable
amount master demand notes) issued by U.S. or foreign corporations. The Prime
Obligations Fund may also invest in Canadian Commercial Paper ("CCP"), which is
commercial paper issued by a Canadian corporation or a Canadian counterpart of a
U.S. corporation, and in Europaper, which is U.S. dollar denominated commercial
paper of a foreign issuer.
Variable amount master demand notes in which the Prime Obligations Fund may
invest are unsecured demand notes that permit the indebtedness thereunder to
vary, and that provide for periodic adjustments in the interest rate according
to the terms of the instrument. Because master demand notes are direct lending
arrangements between the Prime Obligations Fund and the issuer, they are not
normally traded. Although there is no secondary market in the notes, the Prime
Obligations Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as to quality as set forth above for commercial paper. AmSouth will consider the
earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand. The period of time remaining until the principal
amount can be recovered under a variable master demand note may not exceed seven
days.
Investments in ECDs, ETDs, CTDs, Yankee CDs, CCP, and Europaper may subject
the Prime Obligations Fund to investment risks that differ in some respects from
those related to investments in obligations of U.S. domestic issuers. Such risks
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include future adverse political and economic developments, the possible
imposition of foreign withholding taxes on interest income, possible seizure,
currency blockage, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely effect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and record keeping standards than
those applicable to domestic branches of U.S. banks. The Prime Obligations Fund
will acquire securities issued by foreign branches of U.S. banks, foreign banks,
or other foreign issuers only when AmSouth believes that the risks associated
with such instruments are minimal and only when such instruments are denominated
and payable in United States dollars.
The Prime Obligations Fund may invest in funding agreements ("Funding
Agreements"), also known as guaranteed investment contracts, issued by insurance
companies. Pursuant to such agreements, the Prime Obligations Fund invests an
amount of cash with an insurance company and the insurance company credits such
investment on a monthly basis with guaranteed interest which is based on an
index. The Funding Agreements provide that this guaranteed interest will not be
less than a certain minimum rate. The Funding Agreements provide for adjustment
of the interest rate monthly and are considered variable rate instruments. The
Prime Obligations Fund will only purchase a Funding Agreement (i) when AmSouth
has determined, under guidelines established by the Board of Trustees, that the
Funding Agreement presents minimal credit risks to the Prime Obligations Fund
and is of comparable quality to instruments that are rated high quality by an
NRSRO that is not an affiliated person, as defined in the Investment Company Act
of 1940, of the issuer, or any insurer, guarantor, or provider of credit support
for the instrument and (ii) if it may receive all principal of and accrued
interest on a Funding Agreement at any time upon thirty days' written notice.
Because the Prime Obligations Fund may not receive the principal amount of a
Funding Agreement from the insurance company on seven days' notice or less, the
Funding Agreement is considered an illiquid investment, and, together with other
instruments in the Fund which are not readily marketable, may not exceed 10% of
the Fund's net assets. In determining average weighted portfolio maturity, a
Funding Agreement will be deemed to have a maturity equal to 30 days,
representing the period of time remaining until the principal amount can be
recovered through demand.
The Prime Obligations Fund may invest in the securities of other money market
funds that have similar policies and objectives, invest in securities of equal
or higher short-term ratings, and are in compliance with Rule 2a-7 under the
Investment Company Act of 1940.
The Prime Obligations Fund may also invest in short-term municipal
obligations.
ASSET-BACKED SECURITIES
The Prime Obligations Fund may invest in securities backed by automobile
receivables and credit-card receivables and other securities backed by other
types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are structured
either as flow-through grantor trusts or as pay-through notes. CARS structured
as flow-through instruments represent ownership interests in a fixed pool of
receivables. CARS structured as pay-through notes are debt instruments supported
by the cash flows from the underlying assets. CARS may also be structured as
securities with fixed payment schedules which are generally issued in
multiple-classes. Cash-flow from the underlying receivables is directed first to
paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every
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two or three years, leading to rising prepayment rates as a pool becomes more
seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent participation
in a fixed pool of credit card accounts. CARDS pay "interest only" for a
specified period. The CARDS principal balance remains constant during this
period, while any cardholder repayments or new borrowings flow to the issuer's
participation. Once the principal amortization phase begins, the balance
declines with paydowns on the underlying portfolio. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the underlying
assets or provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees (which are generally
provided by the issuer), senior-subordinated structures and over
collateralization. Asset-backed securities purchased by the Prime Obligations
Fund will be subject to the same quality requirements as other securities
purchased by the Fund.
THE AMSOUTH U.S. TREASURY FUND invests exclusively in short-term United States
dollar-denominated obligations issued by the U.S. Treasury. Such obligations may
include "stripped" U.S. Treasury obligations such as Treasury Receipts issued by
the U.S. Treasury representing either future interest or principal payments.
Stripped Treasury Securities are sold at a deep discount because the buyer of
those securities receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic interest payments on
the security. These securities may exhibit greater price volatility then
ordinary debt securities because of the manner in which their principal and
interest are returned to investors. Obligations purchased by the AmSouth U.S.
Treasury Fund may be subject to repurchase agreements collateralized by the
underlying U.S. Treasury obligation.
THE TAX EXEMPT FUND invests primarily in bonds and notes issued by or on
behalf of states (including the District of Columbia), territories, and
possessions of the United States and their respective authorities, agencies,
instrumentalities, and political subdivisions, the interest on which is both
exempt from federal income tax and not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Municipal Securities")
and which generally have remaining maturities of one year or less. The Tax
Exempt Fund may also invest up to 10% of the value of its total assets in the
securities of money market mutual funds which invest primarily in obligations
exempt from federal income tax. The Tax Exempt Fund will incur additional
expenses due to the duplication of expenses as a result of investing in
securities of such money market mutual funds. Additional restrictions on the Tax
Exempt Fund's investments in the securities of such money market funds are
contained in the Statement of Additional Information. As a fundamental policy,
under normal market conditions at least 80% of the Tax Exempt Fund's total
assets will be invested in Municipal Securities and in securities of money
market mutual funds which invest primarily in obligations exempt from federal
income tax.
It is a fundamental policy that, under normal market conditions, the Tax
Exempt Fund may invest up to 20% of its total assets in obligations, the
interest on which is either subject to regular federal income tax or treated as
a preference item for purposes of the federal alternative minimum tax for
individuals ("Taxable Obligations"). At times,
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AmSouth may determine that, because of unstable conditions in the markets for
Municipal Securities, pursuing the Tax Exempt Fund's investment objective is
inconsistent with the best interests of the Shareholders of the Tax Exempt Fund.
At such times, AmSouth may use temporary defensive strategies differing from
those designed to achieve the Tax Exempt Fund's investment objective, by
increasing the Tax Exempt Fund's holdings in short-term Taxable Obligations to
over 20% of the Tax Exempt Fund's total assets and by holding uninvested cash
reserves pending investment. Taxable Obligations may include obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities (some of
which may be subject to repurchase agreements), certificates of deposit and
bankers' acceptances of selected banks, and commercial paper meeting the Tax
Exempt Fund's quality standards (as described below) for tax-exempt commercial
paper. These obligations are described further in the Statement of Additional
Information.
The Tax Exempt Fund may also invest in private activity bonds ("industrial
development bonds" under prior law). Interest on private activity bonds (and
industrial development bonds) is fully tax-exempt only if the bonds fall within
certain defined categories of qualified private activity bonds and meet the
requirements specified in those respective categories. Regardless of whether
they qualify for tax-exempt status, private activity bonds may subject both
individual and corporate investors to tax liability under the alternative
minimum tax. However, private activity bonds will only be considered Municipal
Securities for the purposes of this Prospectus if they do not have this effect
regarding individuals. For additional information on the federal alternative
minimum tax see "DIVIDENDS AND TAXES" below.
The Tax Exempt Fund will invest only in those Municipal Securities and other
obligations in which the Fund may invest which are considered by AmSouth,
pursuant to guidelines approved by the Board of Trustees, to present minimal
credit risks. In addition, investments will be limited to those obligations
which, at the time of purchase, (i) possess one of the two highest short-term
ratings from an NRSRO in the case of single-rated securities or (ii) possess, in
the case of multiple-rated securities, one of the two highest short-term ratings
by at least two NRSROs; or (iii) do not possess a rating (i.e., are unrated) but
are determined by AmSouth to be of comparable quality to the rated instruments
eligible for purchase by the Fund under the guidelines adopted by the Trustees.
The Statement of Additional Information contains further information concerning
the rating and other requirements governing the Tax Exempt Fund's investments,
including information relating to the treatment of securities subject to a
tender or demand feature and securities deemed to possess a rating based on
comparable rated securities of the same issuer. The Statement of Additional
Information also identifies the NRSROs that may be utilized by AmSouth with
respect to portfolio investments for the Fund and provides a description of the
relevant ratings assigned by each such NRSRO.
The two principal classifications of Municipal Securities which may be held by
the Tax Exempt Fund are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Tax Exempt Fund are
in most cases revenue securities and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of private activity
bonds is usually directly related to the credit standing of the corporate user
of the facility involved.
Municipal Securities in which the Tax Exempt Fund may invest may also include
"moral obligation" bonds, which are normally issued by special purpose public
authorities. If the issuer of moral obligation bonds is unable to meet its debt
service obligations from current revenues, it may draw on a
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reserve fund, the restoration of which is a moral commitment but not a legal
obligation of the state or municipality that created the issuer.
Municipal Securities purchased by the Tax Exempt Fund may include rated and
unrated variable and floating rate tax-exempt notes, which may have a stated
maturity in excess of one year but which will, in such event, be subject to a
demand feature that will permit the Tax Exempt Fund to demand payment of the
principal of the note either (i) at any time upon not more than thirty days'
notice or (ii) at specified intervals not exceeding one year and upon no more
than thirty days' notice. There may be no active secondary market with respect
to a particular variable or floating rate note. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to the Tax
Exempt Fund will approximate their par value. The Tax Exempt Fund may acquire
zero coupon obligations, which have greater price volatility than coupon
obligations and which will not result in the payment of interest until maturity.
Opinions relating to the validity of Municipal Securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Tax Exempt Fund nor its
investment advisor will review the proceedings relating to the issuance of
Municipal Securities or the basis for such opinions.
Although the Tax Exempt Fund presently does not intend to do so on a regular
basis, it may invest more than 25% of its total assets in Municipal Securities
which are related in such a way that an economic, business, or political
development or change affecting one such security would likewise affect the
other Municipal Securities. Examples of such securities are obligations the
repayment of which is dependent upon similar types of projects or projects
located in the same state. Such investments would be made only if deemed
necessary or appropriate by the Tax Exempt Fund's investment advisor. To the
extent that the Tax Exempt Fund's assets are concentrated in Municipal
Securities that are so related, the Tax Exempt Fund will be subject to the
peculiar risks presented by such Municipal Securities, such as negative
developments in a particular industry or state, to a greater extent than it
would be if the Tax Exempt Fund's assets were not so concentrated.
The Tax Exempt Fund may also purchase Municipal Securities on a "when-issued"
basis. "When-issued" securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield thereby involving the risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. The Tax Exempt Fund will generally not pay
for such securities and no income accrues on the securities until they are
received. When the Tax Exempt Fund agrees to purchase securities on a
"when-issued" basis, the Trust's custodian will set aside cash or liquid
securities equal to the amount of the commitment in a segregated account.
Securities purchased on a "when-issued" basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Tax Exempt Fund expects that commitments to purchase "when-issued"
securities will not exceed 25% of the value of its total assets under normal
market conditions, and that a commitment by the Tax Exempt Fund to purchase
"when-issued" securities will not exceed 60 days. In the event its commitments
to purchase "when-issued" securities ever exceeded 25% of the value of its total
assets, the Tax Exempt Fund's liquidity and the investment advisor's ability to
manage it might be adversely affected. The Tax Exempt Fund does not intend to
purchase "when-issued" securities for speculative purposes but only for the
purpose of acquiring portfolio securities.
The Tax Exempt Fund may acquire "puts" with respect to Municipal Securities
held in its portfolio. Under a put, the Tax Exempt Fund would have the right to
sell a specified Municipal Security within a specified period of time at a
specified price to a third party. A put would be sold, transferred, or assigned
only with the underlying Municipal Security. The Tax Exempt Fund will acquire
puts solely to either facilitate portfolio liquidity, shorten the maturity of
the underlying Municipal Securities, or permit the
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investment of the Tax Exempt Fund's funds at a more favorable rate of return.
The aggregate price of a security subject to a put may be higher than the price
which otherwise would be paid for the security without such an option, thereby
increasing the security's cost and reducing its yield.
REPURCHASE AGREEMENTS
Securities held by the Money Market Funds may be subject to repurchase
agreements. If the seller under a repurchase agreement were to default on its
repurchase obligation or become insolvent, a Money Market Fund would suffer a
loss to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Money Market Fund were
delayed pending court action. Additionally, if the seller should be involved in
bankruptcy or insolvency proceedings, the Money Market Fund may incur delays and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Money Market Fund is treated as an unsecured creditor and
required to return the underlying security to the seller's estate. Except as
described below under "Investment Restrictions" there is no aggregate limitation
on the amount of any Money Market Fund's total assets that may be invested in
instruments which are subject to repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
Each Money Market Fund may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, a Money Market Fund
would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Money Market Fund may decline below the price at which
the Money Market Fund is obligated to repurchase the securities.
INVESTMENT RESTRICTIONS
Each of the Money Market Funds is subject to a number of investment
restrictions that may be changed only by a vote of a majority of the outstanding
Shares of that Fund (see "GENERAL INFORMATION--Miscellaneous" in this
prospectus).
PRIME OBLIGATIONS FUND
The Prime Obligations Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of the Prime
Obligations Fund's total assets would be invested in such issuer, except that
25% or less of the value of the Prime Obligations Fund's total assets may be
invested without regard to such 5% limitation. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of the
Prime Obligations Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, bank certificates of deposit or bankers' acceptances issued
by a domestic bank or by a U.S. branch of a foreign bank provided that such U.S.
branch is subject to the same regulation as United States banks, and repurchase
agreements secured by bank instruments or obligations of the U.S. Government or
its agencies or instrumentalities; (b) wholly owned finance companies will be
consid-
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ered to be in the industries of their parents if their activities are primarily
related to financing the activities of their parents; and (c) utilities will be
divided according to their services. For example, gas, gas transmission,
electric and gas, electric, and
telephone will each be considered a separate industry.
AMSOUTH U.S. TREASURY FUND
The AmSouth U.S. Treasury Fund may not purchase securities other than bills,
notes, and bonds issued by the U.S. Treasury, certain of which securities may be
subject to repurchase agreements collateralized by the underlying U.S. Treasury
obligation.
TAX EXEMPT FUND
The Tax Exempt Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the Tax
Exempt Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-government user, a security is considered to be
issued by such non-governmental user.
2. Purchase any securities which would cause 25% or more of the Tax Exempt
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Securities;
and provided, further, that for the purpose of this limitation only, private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
3. Acquire a put if, immediately after such acquisition, over 5% of the total
amortized cost value of the Tax Exempt Fund's assets would be subject to puts
from the same institution (except that (i) up to 25% of the value of the Tax
Exempt Fund's total assets may be subject to puts without regard to such 5%
limitation and (ii) the 5% limitation is inapplicable to puts that, by their
terms, would be readily exercisable in the event of a default in payment of
principal or interest on the underlying securities). For the purpose of this
investment restriction and investment restriction No. 4 below, a put will be
considered to be from the party to whom the Tax Exempt Fund will look for
payment of the exercise price.
4. Acquire a put that, by its terms would be readily exercisable in the event
of a default in payment of principal and interest on the underlying security or
securities if, immediately after that acquisition, the amortized cost value of
the security or securities underlying that put, when aggregated with the
amortized cost value of any other securities issued or guaranteed by the issuer
of the put, would exceed 10% of the total amortized cost value of the Tax Exempt
Fund's assets.
PRIME OBLIGATIONS FUND, AMSOUTH U.S. TREASURY FUND AND TAX EXEMPT FUND
The Prime Obligations Fund, the AmSouth U.S. Treasury Fund and the Tax Exempt
Fund may not:
1. Borrow money or issue senior securities, except that each Money Market Fund
may borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of its borrowing. A Money Market Fund will not purchase securities
while its borrowings (including reverse repurchase agreements) exceed 5% of its
total assets.
2. Make loans, except that each Money Market Fund may purchase or hold debt
instruments in
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accordance with its investment objective and policies, may lend portfolio
securities in accordance with its investment objective and policies, and may
enter into repurchase agreements.
VALUATION OF SHARES
The net asset value of each of the Prime Obligations Fund and the AmSouth U.S.
Treasury Fund is determined and its Shares are priced as of 1:00 p.m. and 4:00
p.m., Eastern Time (the "Valuation Times") on each Business Day of such Fund.
The net asset value of the Tax Exempt Fund is determined and its Shares are
priced as of 12:00 noon and 4:00 p.m., Eastern Time (the "Valuation Times") on
each Business Day of the Fund. As used herein a "Business Day" constitutes any
day on which the New York Stock Exchange (the "NYSE") is open for trading and
the Federal Reserve Bank of Atlanta is open, except days on which there are not
sufficient changes in the value of the Fund's portfolio securities that the
Fund's net asset value might be materially affected, or days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, either the NYSE or the Federal Reserve Bank of Atlanta is
closed on the customary national business holidays of New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
Net asset value per Share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets belonging to
a Money Market Fund, less the liabilities charged to that Fund, by the number of
the outstanding Shares of that Fund.
The assets in each Money Market Fund are valued based upon the amortized cost
method. Pursuant to rules and regulations of the Securities and Exchange
Commission regarding the use of the amortized cost method, each Money Market
Fund will maintain a dollar-weighted average portfolio maturity of 90 days or
less. Although the Trust seeks to maintain each Money Market Fund's net asset
value per share at $1.00, there can be no assurance that net asset value will
not vary.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Each Money Market Fund has been divided into two classes of Shares ("Premier"
Shares and "Classic" Shares). Premier and Classic Shares of a particular Fund
represent interests in the same investments and are identical in all respects
except that (i) Classic Shares bear the expense of the fee under the Trust's
Shareholder Servicing Plan (the "Plan"), which will cause the Classic Shares to
have a higher expense ratio and to pay lower dividends than those of the Premier
Shares, and (ii) Classic Shares have certain exclusive voting rights with
respect to the Plan. The following investors qualify to purchase a Money Market
Fund's Premier Shares: (i) investors for whom AmSouth Bancorporation or one of
its affiliates acts in a fiduciary, advisory, custodial, agency or similar
capacity through an account with the Trust Department of AmSouth Bancorporation
or one of its affiliates; (ii) investors who purchase Shares of a Money Market
Fund through a payroll deduction plan, a 401(k) plan or a 403(b) plan which by
its terms permits purchases of Shares; and (iii) orders placed on behalf of
other investment companies distributed by the Distributor and its affiliated
companies. All other investors are eligible to purchase Classic Shares only.
Premier and Classic Shares of the Money Market Funds are sold on a continuous
basis by the Trust's distributor, BISYS Fund Services (the "Distributor"). The
principal office of the Distributor is 3435 Stelzer Road, Columbus, Ohio 43219.
If you wish to purchase Shares, contact the Trust at (800) 451-8382.
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PURCHASES OF SHARES
Shares of the Money Market Funds may be purchased through procedures
established by the Distributor in connection with requirements of qualified
accounts maintained by or on behalf of certain persons ("Customers") by AmSouth
or its correspondent or affiliated banks (collectively, the "Banks"). These
procedures may include instructions under which a Customer's account is "swept"
automatically no less frequently than weekly and amounts in excess of a minimum
amount agreed upon by a Bank and its Customer are invested by the Distributor in
Shares of a Money Market Fund.
PREMIER SHARES
Premier Shares of the Money Market Funds sold to the Banks acting in a
fiduciary, advisory, custodial, or other similar capacity on behalf of Customers
will normally be held of record by the Banks. With respect to Shares so sold, it
is the responsibility of the particular Bank to transmit purchase or redemption
orders to the Distributor and to deliver federal funds for purchase on a timely
basis. Beneficial ownership of the Premier Shares will be recorded by the Banks
and reflected in the account statements provided by the Banks to Customers.
CLASSIC SHARES
Investors may also purchase Classic Shares of a Money Market Fund by
completing and signing an Account Registration Form and mailing it, together
with a check (or other negotiable bank draft or money order) in at least the
minimum initial purchase amount, payable to the Trust, in care of AmSouth Mutual
Funds, Department L 1304, Columbus, Ohio 43260-1304. Subsequent purchases of
Shares of a Money Market Fund may be made at any time by mailing a check (or
other negotiable bank draft or money order) payable to the Trust, to the above
address.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Shares either by telephone or by wiring
funds to the Trust's custodian. Telephone orders may be placed by calling the
Trust at (800) 451-8382. Payment for shares ordered by telephone may be made by
check or by wiring funds to the Trust's custodian. To make payment by wire,
investors must call the Trust at (800) 451-8382 to obtain instructions regarding
the bank account number into which the funds should be wired and other pertinent
information.
Investors may also purchase Shares by arranging systematic monthly, bi-monthly
or quarterly investments into the Funds with the Trust's Automatic Investment
Plan ("AIP"). The minimum investment amounts are $50 per transfer and the
maximum amount with respect to any transfer is $100,000. After investors give
the Trust proper authorization, their bank accounts, which must be with banks
that are members of the Automated Clearing House, will be debited accordingly to
purchase Shares. Investors will receive a confirmation from the Trust for every
transaction, and a withdrawal will appear on their bank statements.
To participate in AIP, investors must complete the appropriate sections of the
Account Registration form or call for instructions. This form may be obtained by
calling the Trust at (800) 451-8382. The amount investors specify will
automatically be invested in Shares at the specified Fund's net asset value per
Share next determined after the debit is made.
To change the frequency or amount invested, written instructions must be
received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
REDEMPTION BY MAIL below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or
15
<PAGE> 18
may refuse to honor the transfer instruction (in which case no Fund Shares will
be purchased).
Investors should check with their banks to determine whether they are members
of the Automated Clearing House and whether their banks charge a fee for
transferring funds through the Automated Clearing House. Expenses incurred by
the Funds related to AIP are borne by the Funds and therefore there is no direct
charge by the Funds to investors for use of these services.
The minimum investment is $1,000 for the initial purchase of Classic Shares of
a Money Market Fund by an investor. There is no minimum investment for
subsequent purchases; however, as described above, the minimum subsequent
investment when using AIP is $50 per transfer. The minimum initial investment
amount may be waived if purchases are made in connection with Individual
Retirement Accounts, Keogh plans or similar plans. For information on IRAs or
Keoghs or similar plans, contact AmSouth at (800) 444-4727.
GENERAL
Shares of the Money Market Funds are purchased at the appropriate net asset
value per Share (see "VALUATION OF SHARES") next determined after receipt by the
Distributor of an order in good form to purchase Shares. An order to purchase
Shares will be deemed to have been received by the Distributor only when federal
funds with respect thereto are available to the Trust's custodian for
investment. Federal funds are monies credited to a bank's account within a
Federal Reserve Bank. Payment for an order to purchase Shares which is
transmitted by federal funds wire will be available the same day for investment
by the Trust's custodian, if received prior to the last Valuation Time (see
"VALUATION OF SHARES"). Payments transmitted by other means (such as by check
drawn on a member of the Federal Reserve System) will normally be converted into
federal funds within two banking days after receipt. The Trust strongly
recommends that investors of substantial amounts use federal funds to purchase
Shares.
Purchases of Shares of a Money Market Fund will be effected only on a Business
Day (as defined in "VALUATION OF SHARES") of such Money Market Fund. An order
received prior to a Valuation Time on any Business Day will be executed at the
net asset value determined as of the next Valuation Time on the date of receipt.
An order received after the last Valuation Time on any Business Day will be
executed at the net asset value determined as of the next Valuation Time on the
next Business Day. Shares of the Prime Obligations Fund and the AmSouth U.S.
Treasury Fund purchased before 1:00 p.m., Eastern Time, begin earning dividends
on the same Business Day. Shares of the Tax Exempt Fund purchased before 12:00
noon, Eastern Time, begin earning dividends on the same Business Day. All Shares
of a Money Market Fund continue to earn dividends through the day before their
redemption.
There is no sales charge imposed by the Trust in connection with the purchase
of Shares in a Money Market Fund. Sales charges apply to purchases of the other
Funds of the Trust. Depending upon the terms of a particular Customer account,
the Banks may charge a Customer's account fees for automatic investment and
other cash management services provided in connection with investment in a Money
Market Fund. Information concerning these services and any charges can be
obtained from the Banks. This Prospectus should be read in conjunction with any
such information received from the Banks.
The Trust reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made with foreign and third
party checks.
Every Shareholder will receive a confirmation of each new transaction in his
or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. Reports of purchases and redemptions
of Shares by Banks on behalf of their Customers will be sent by the Banks to
their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
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<PAGE> 19
EXCHANGES
Shareholders may exchange Shares of any Money Market Fund for Shares of any
other Money Market Fund which they are eligible to purchase on the basis of the
relative net asset value of the Shares exchanged so long as they maintain the
respective minimum account balance in each Money Market Fund in which they own
Shares. Shareholders may also exchange Shares of a Money Market Fund for Shares
of any Fund of the Trust with a sales charge, by paying the applicable sales
charge, so long as they maintain the respective minimum account balances in each
Fund in which they own Shares. Shares of a Money Market Fund that were acquired
through an exchange of Shares of a Fund with respect to which a sales charge was
paid may be exchanged for Shares of a Fund with a sales charge without payment
of a sales charge provided that a Shareholder may only make such an exchange
once during each calendar year and only upon written request of such
Shareholder. Shareholders must at the time of purchase provide the Transfer
Agent or the Distributor with sufficient information to permit confirmation of
qualification.
An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss.
Before an exchange can be effected, a Shareholder must receive a current
prospectus of the Fund into which the Shares are exchanged. An exchange may be
made by calling the Trust at (800) 451-8382 or by mailing written instructions
to the Trust's transfer agent, BISYS Fund Services Ohio, Inc. ("Transfer
Agent"), 3435 Stelzer Road, Columbus, Ohio 43219. Exchange privileges may be
exercised only in those states where Shares of such other Funds of the Trust may
legally be sold, and may be amended or terminated at any time upon sixty (60)
days' notice.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed by mail or by telephone. However, with
respect to investments made on a customer's behalf by certain entities
(including the Banks), all or part of a Customer's Shares may be redeemed in
accordance with instructions and limitations pertaining to his or her account at
a Bank. For example, if a Customer has agreed with a Bank to maintain a minimum
balance in his or her account with the Bank, and the balance in that account
falls below that minimum, the Customer may be obliged to redeem, or the Bank may
redeem for and on behalf of the Customer, all or part of the Customer's Shares
of a Fund of the Trust to the extent necessary to maintain the required minimum
balance.
REDEMPTION BY MAIL
A written request for redemption must be received by the Transfer Agent in
order to constitute a valid tender for redemption. The Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. The Transfer Agent reserves the right
to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record; and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or the proceeds are either mailed or
wired to a financial institution account previously designated. There is no
charge for having redemption requests mailed to a designated bank account.
REDEMPTION BY TELEPHONE
A Shareholder may have the payment of redemption requests wired or mailed
directly to a domestic financial institution account previously designated by
the Shareholder on the Account Registration Form. Under most circumstances, such
payments
17
<PAGE> 20
will be transmitted on the next Business Day following receipt of a valid
request for redemption. Such wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The Transfer Agent may reduce
the amount of a wire redemption payment from the maximum wire redemption charge
of $15.00. Such charge is presently $7.00 for each wire redemption. There is no
charge for having payment of redemption requests mailed or sent via the
Automated Clearing House to a designated account. For telephone redemptions,
call the Trust at (800) 451-8382. The Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine; if these
procedures are not followed, the Trust may be liable for any losses due to
unauthorized or fraudulent instructions. These procedures include recording all
phone conversations, sending confirmations to Shareholders within 72 hours of
the telephone transaction, verifying the account name and a shareholder's
account number or tax identification number and sending redemption proceeds only
to the address of record or to a previously authorized account.
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of $1,000 in each Fund
into which he or she plans to reinvest dividends.
The Directed Dividend Option may be modified or terminated without notice. In
addition, the Trust may suspend a shareholder's Directed Dividend Option without
notice if the account balance is less than the minimum $1,000. Participation in
the Option may be terminated or changed by the shareholder at anytime by writing
the Distributor. The Directed Dividend Option is not available to participants
in an AmSouth Mutual Funds IRA.
CHECK WRITING SERVICE
A Shareholder may write checks on his or her Fund account for $1,000 or more.
Once a Shareholder has signed and returned a signature card, he or she will
receive a supply of checks drawn on Huntington National Bank. The check may be
made payable to any person, and the Shareholder's account will continue to earn
dividends until the check clears. Because of the difficulty of determining in
advance the exact value of a Fund account, a Shareholder should not use a check
to close his or her account. The Shareholder's account will be charged a fee on
stopping payment of a check upon the Shareholder's request or if the check
cannot be honored because of insufficient funds or other valid reasons.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Transfer Agent of the request for redemption. However,
to the greatest extent possible, the Trust will attempt to honor requests from
Shareholders for same day payments upon redemption of Shares if the request for
redemption is received by the Transfer Agent before 12:00 noon, Eastern Time, on
a Business Day or, if the request for redemption is received after 12:00 noon,
Eastern Time, to honor requests for payment on the next Business Day, unless it
would be disadvantageous to the Trust or the Shareholders of the particular
Money Market Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner.
At various times, the Trust may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Trust may delay the
forwarding of proceeds only until payment has been collected for the purchase of
such Shares which may take up to 15 days or more. To avoid delay in payment upon
redemption shortly after purchasing Shares, investors should purchase
18
<PAGE> 21
Shares by certified or bank check or by wire transfer. The Trust intends to pay
cash for all Shares redeemed, but under abnormal conditions which make payment
in cash unwise, the Trust may make payment wholly or partly in portfolio
securities at their then market value equal to the redemption price. In such
cases, an investor may incur brokerage costs in converting such securities to
cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder, the
account of such Shareholder in any Money Market Fund has a value of less than
$250. Accordingly, an investor purchasing Shares of a Money Market in only the
minimum investment amount may be subject to such involuntary redemption if he or
she thereafter redeems some of his or her Shares. Before the Trust exercises its
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares of a Money Market
Fund in his or her account is less than the minimum amount and will be allowed
60 days to make an additional investment in an amount which will increase the
value of the account to at least $250.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" and "VALUATION--Valuation
of the Money Market Funds" in the Statement of Additional Information for
examples of when the Trust may suspend the right of redemption or redeem Shares
involuntarily if it appears appropriate to do so in light of the Trust's
responsibilities under the Investment Company Act of 1940.
DIVIDENDS AND TAXES
The net income of each Money Market Fund is declared daily as a dividend to
Shareholders of record at the close of business on the day of declaration. The
net income attributable to a Fund's Classic Shares and the dividends payable on
Classic Shares will be reduced by the shareholder service fee assessed against
such Shares under the Shareholder Servicing Plan (see Administrator and
Distributor below). Dividends will generally be paid monthly. Distributable net
capital gains (if any) will be distributed at least annually. A Shareholder will
automatically receive all income dividends and capital gains distributions in
additional full and fractional Shares of the same class at net asset value as of
the date of payment unless the Shareholder elects to receive such dividends or
distributions in cash. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to the Transfer Agent at 3435 Stelzer Road, Columbus, Ohio 43219, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Dividends are paid in cash not
later than seven Business Days after a Shareholder's complete redemption of his
or her Shares. Dividends are generally taxable when received. However, dividends
declared in October, November, or December to Shareholders of record during
those months and paid during the following January are treated for tax purposes
as if they were received by each Shareholder on December 31 of the prior year.
Each Money Market Fund will be treated as a separate entity for federal income
tax purposes. Each Money Market Fund intends to qualify for treatment as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). If qualified, a Money Market Fund will not have to pay
federal taxes on amounts it distributes to Shareholders. Regulated investment
companies are subject to a federal excise tax if they do not distribute their
income on a timely basis. Each Money Market Fund intends to avoid paying federal
income and excise taxes by timely distributing all its net income and
substantially all its net capital gain income. Shareholders will be advised at
least annually as to the character for federal income tax purposes of
distributions made during the year.
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<PAGE> 22
PRIME OBLIGATIONS FUND AND AMSOUTH
U.S. TREASURY FUND
Dividends will generally be taxable to a Shareholder as ordinary income to the
extent of the Shareholder's ratable share of each Fund's earnings and profits as
determined for tax purposes. Because all of the net investment income of the
Prime Obligations Fund and the AmSouth U.S. Treasury Fund is expected to be
interest income, it is anticipated that no distributions will qualify for the
dividends received deduction for corporate shareholders. The Prime Obligations
Fund and the AmSouth U.S. Treasury Fund do not expect to realize any long-term
capital gains and, therefore, do not foresee paying any "capital gains
dividends" as described in the Code. Dividends received by a Shareholder that
are derived from the AmSouth U.S. Treasury Fund's investments in U.S. government
obligations may not be eligible for exemption from state and local taxes even
though the income on such investments would have been exempt from state and
local taxes if the Shareholder directly held such investments. In addition, the
state and local tax exemption for interest earned on U.S. government obligations
may not extend to income earned on U.S. government obligations that are subject
to a repurchase agreement. Shareholders are advised to consult their own tax
advisors concerning their own tax situation and the application of state and
local taxes.
TAX EXEMPT FUND
The Tax Exempt Fund's Shareholders may treat as exempt interest and exclude
from gross income for federal income tax purposes dividends derived from net
exempt-interest income and designated by the Tax-Exempt Fund as exempt-interest
dividends. However, such dividends may be taxable to Shareholders under state or
local law as ordinary income even though all or a portion of the amounts may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such taxes.
Dividends from the Tax Exempt Fund attributable to exempt-interest income may
cause the social security and railroad retirement benefits of individual
Shareholders to become taxable, or increase the amount that is taxable. Interest
on indebtedness incurred by a Shareholder to purchase or carry Shares is not
deductible for federal income tax purposes to the extent the Tax Exempt Fund
distributes exempt-interest dividends during the Shareholder's taxable year. It
is anticipated that distributions from the Tax Exempt Fund will not be eligible
for the dividends received deduction for corporate shareholders.
Gains on the sale of Shares in the Tax Exempt Fund will be subject to federal,
state and local taxes. If a Shareholder receives an exempt-interest dividend
with respect to any Share of the Fund and such Share is held for six months or
less, any loss on the sale or exchange of such Share will be disallowed to the
extent of the amount of such exempt-interest dividend.
To the extent dividends paid to Shareholders are derived from taxable income
(for example, from interest on certificates of deposit or repurchase agreements)
or from long-term or short-term capital gains, such dividends will be subject to
federal income tax and may be subject to state and local tax. A Shareholder
should consult his or her own tax advisor for any special advice.
Dividends attributable to interest on certain private activity bonds issued
after August 7, 1986 must be included in alternative minimum taxable income of
both individual and corporate Shareholders for the purpose of determining
liability (if any) for the applicable alternative minimum tax. All tax-exempt
interest dividends are required to be taken into account in calculating the
alternative minimum taxable income of corporations.
Additional information regarding federal taxes is contained in the Statement
of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION--Additional Tax Information" and "Additional Tax Information
Concerning the Tax Exempt Fund."
The foregoing discussion is limited to federal income tax consequences and is
based on tax laws and regulations which are in effect as of the date of
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<PAGE> 23
this Prospectus; such laws and regulations may be changed by legislative or
administrative actions. The foregoing is also intended only as a brief summary
of some of the important tax considerations generally affecting the Money Market
Funds and Shareholders. Potential investors are urged to consult their tax
advisors concerning their own tax situations and concerning the application of
state and local taxes which may differ from the federal income tax consequences
described above.
MANAGEMENT OF AMSOUTH MUTUAL FUNDS
TRUSTEES OF THE TRUST
Overall responsibility for management of the Trust rests with the Board of
Trustees of the Trust, who are elected by the Shareholders of the Trust. There
are currently six Trustees, two of whom are "interested persons" of the Trust
within the meaning of that term under the Investment Company Act of 1940. The
Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING THE PAST 5 YEARS
- ------------------------------ ------------------ -------------------------------------------
<S> <C> <C>
Dr. Dick D. Briggs, Jr. Trustee From 1981 to present, Professor and Vice
459 DER Building Chairman, Department of Medicine,
1808 7th Avenue South University of Alabama at Birmingham School
UAB Medical Center of Medicine; December 1995 to present,
Birmingham, Alabama 35294 Physician, University of Alabama Health
Services Foundation; from June 1988 to
October 1992, President, Chief Executive
Officer and Medical Director, University of
Alabama Health Services Foundation
Wendell D. Cleaver Trustee From September 3, 1993 to present, retired;
209 Lakewood Drive, West from December, 1988 to August, 1993,
Mobile, Alabama 36608 Executive Vice President, Chief Operating
Officer and Director, Mobile Gas Service
Corporation
J. David Huber* Chairman of the From June 1987 to present, employee of
Board of Trustees BISYS Fund Services, Limited Partnership
Sean M. Kelly* Trustee and From 1993 to present, Senior Vice President
150 2nd Avenue North, President of Client Services of BISYS Fund Services;
Suite 1170 prior to 1993, Senior Vice President of
St. Petersburg, Florida 33701 Concord Financial Group (now BISYS Fund
Services)
Homer H. Turner, Jr. Trustee From June 1991 to present, retired; until
729 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830 Division, Alabama Power Company
James H. Woodward, Jr. Trustee From 1996 to present, Trustee of The
The University of North Sessions Group; from July 1989 to present,
Carolina at Charlotte Chancellor, The University of North
Charlotte, North Carolina Carolina at Charlotte; until July 1989,
28223 Senior Vice President, University College,
University of Alabama at Birmingham
</TABLE>
- ------------
* Indicates an "interested person" of the Trust as defined in the Investment
Company Act of 1940.
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<PAGE> 24
The Trustees receive fees and are reimbursed for expenses in connection with
each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and for
providing fund accounting services to the Trust. Messrs. Huber and Kelly are
officers and employees of BISYS Fund Services.
INVESTMENT ADVISOR
AmSouth is the investment advisor of each Fund of the Trust. AmSouth is the
principal bank affiliate of AmSouth Bancorporation, one of the largest banking
institutions headquartered in the mid-south region. AmSouth Bancorporation
reported assets as of December 31, 1995 of $17.7 billion and operated 273
banking offices in Alabama, Florida, Georgia and Tennessee. AmSouth has provided
investment management services through its Trust Investment Department since
1915. As of December 31, 1995, AmSouth and its affiliates had over $6.8 billion
in assets under discretionary management and provided custody services for an
additional $12.5 billion in securities. AmSouth is the largest provider of trust
services in Alabama. AmSouth serves as administrator for over $12 billion in
bond issues, and its Trust Natural Resources and Real Estate Department is a
major manager of timberland, mineral, oil and gas properties and other real
estate interests.
Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the respective investment objectives and restrictions of the
Money Market Funds, AmSouth manages the Money Market Funds, makes decisions with
respect to and places orders for all purchases and sales of their investment
securities, and maintains their records relating to such purchases and sales.
Under an investment advisory agreement between the Trust and AmSouth, the fee
payable to AmSouth by each Money Market Fund for investment advisory services is
the lesser of (a) a fee computed daily and paid monthly at the annual rate of
forty one-hundredths of one percent (.40%) of such Money Market Fund's average
daily net assets or (b) such fee as may from time to time be agreed upon in
writing by the Trust and AmSouth. A fee agreed to in writing from time to time
by the Trust and AmSouth may be significantly lower than the fee calculated at
the annual rate and the effect of such lower fee would be to lower a Money
Market Fund's expenses and increase the net income of the Fund during the period
when such lower fee is in effect.
During the Trust's fiscal year ended July 31, 1996, AmSouth received
investment advisory fees amounting to .40% of the Prime Obligation Fund's
average net assets, .40% of the AmSouth U.S. Treasury Fund's average net assets
and .20% of the Tax Exempt Fund's average net assets, after voluntary fee
reductions with respect to the Tax Exempt Fund.
ADMINISTRATOR AND DISTRIBUTOR
ASO Services Company ("ASO") is the administrator for each Fund of the Trust,
and BISYS Fund Services ("BISYS") acts as the Trust's principal underwriter and
distributor (the "Administrator" and the "Distributor," respectively). ASO is a
wholly owned subsidiary of BISYS. BISYS is a subsidiary of The BISYS Group,
Inc., 150 Clove Road, Little Falls, New Jersey 07424, a publicly owned company
engaged in information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Money Market Funds'
administration and operation. Under a management and administration agreement
between the Trust and the Administrator, the fee payable by each Money Market
Fund to the Administrator for administration services is the lesser of (a) a fee
computed at the annual rate of
22
<PAGE> 25
twenty one-hundredths of one percent (.20%) of such Money Market Fund's average
daily net assets or (b) such fee as may from time to time be agreed upon by the
Trust and the Administrator. A fee agreed to from time to time by the Trust and
the Administrator may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower a Money Market
Fund's expenses and increase the net income of the Fund during the period when
such lower fee is in effect.
The Distributor, at its expense, will provide additional compensation to
dealers in connection with sales of Shares of any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Trust, and/or
other dealer-sponsored special events. In some instances, this compensation will
be made available only to certain dealers whose representatives have sold a
significant amount of such Shares. Compensation will include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to location within or
outside the United States for meetings or seminars of a business nature.
Compensation will also include the following types of non-cash compensation
offered through sales contests: (1) vacation trips, including the provision of
travel arrangements and lodging at luxury resorts at an exotic location, (2)
tickets for entertainment events (such as concerts, cruises and sporting events)
and (3) merchandise (such as clothing, trophies, clocks and pens). Dealers may
not use sales of a Fund's Shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by any Fund or its Shareholders.
ASO succeeded BISYS as Administrator on April 1, 1996. During the Trust's
fiscal year ended July 31, 1996, BISYS and ASO received administration fees
amounting to 0.20% of each Money Market Fund's average net assets.
The Trust has adopted a Shareholder Servicing Plan permitting payment of
compensation to financial institutions that agree to provide certain
administrative support services for their customers or account holders. Each
Money Market Fund has entered into a specific arrangement with BISYS for the
provision of such services by BISYS, and reimburses BISYS for its cost of
providing these services, subject to a maximum annual rate of twenty-five
one-hundredths of one percent (0.25%) of the average daily net assets of the
Classic Shares of each Money Market Fund.
SUB-ADMINISTRATORS
Effective August 1, 1995, AmSouth became the Sub-Administrator to the Trust.
Pursuant to its current agreement with the Administrator, AmSouth has assumed
certain of the Administrator's duties, for which AmSouth receives a fee, paid by
the Administrator, calculated at an annual rate of up to ten one-hundredths of
one percent (.10%) of each Fund's average net assets.
Effective April 1, 1996, BISYS Fund Services was retained by the Administrator
as Sub-Administrator to the Trust. Pursuant to its agreement with the
Administrator, BISYS is entitled to compensation as mutually agreed from time to
time by it and the Administrator.
EXPENSES
AmSouth and the Administrator each bear all expenses in connection with the
performance of their services as Investment Advisor and Administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Money Market Fund. No Money Market Fund
will bear, directly or indirectly, the cost of any activity primarily intended
to result in the distribution of Shares of such Money Market Fund; such costs
will be borne by the Distributor.
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<PAGE> 26
BANKING LAWS
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Money Market Funds contemplated by its
investment advisory agreement with the Trust and described in this Prospectus
without violation of applicable banking laws and regulations, and has so
represented in its investment advisory agreement with the Trust. Future changes
in federal or state statutes and regulations relating to permissible activities
of banks or bank holding companies and their subsidiaries and affiliates as well
as further judicial or administrative decisions or interpretations of present
and future statutes and regulations could change the manner in which AmSouth
could continue to perform such services for the Trust. See "MANAGEMENT OF THE
TRUST--Glass Steagall Act" in the Statement of Additional Information for
further discussion of applicable banking laws and regulations.
GENERAL INFORMATION
DESCRIPTION OF THE TRUST AND ITS SHARES
The Trust was organized as a Massachusetts business trust on October 1, 1987.
The Trust has an unlimited number of authorized shares of beneficial interest
which may, without shareholder approval, be divided into an unlimited number of
series of such shares, and which are presently divided into eleven series of
shares, one for each of the following Funds: the AmSouth Prime Obligations Fund,
the AmSouth U.S. Treasury Fund, the AmSouth Tax Exempt Fund, the AmSouth Equity
Fund, the AmSouth Regional Equity Fund, the AmSouth Bond Fund, the AmSouth
Municipal Bond Fund, the AmSouth Limited Maturity Fund, the AmSouth Balanced
Fund, the AmSouth Government Income Fund, and the AmSouth Florida Tax-Free Fund.
Each Fund, except the AmSouth Florida Tax-Free Fund, is a diversified fund under
the Investment Company Act of 1940, as amended. Each Share represents an equal
proportionate interest in a Fund with other Shares of the same series, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared at the discretion of the Trustees
(see "Miscellaneous" below).
Shares of the Trust are entitled to one vote per share (with proportional
voting for fractional shares) on such matters as Shareholders are entitled to
vote. Shareholders vote in the aggregate and not by series or class on all
matters except (i) when required by the 1940 Act, shares shall be voted by
individual series, (ii) when the Trustees have determined that the matter
affects only the interests of one or more series or class, then only
Shareholders of such series or class shall be entitled to vote thereon, and
(iii) only the holders of Classic Shares will be entitled to vote on matters
submitted to Shareholder vote with regard to the Shareholder Servicing Plan.
Overall responsibility for the management of the Trust is vested in the Board
of Trustees. See "MANAGEMENT OF AmSouth Mutual Funds-- Trustees of the Trust."
Individual Trustees are elected by the Shareholders and may be removed by the
Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Trust and Massachusetts law. See "ADDITIONAL INFORMATION--Miscellaneous" in
the Statement of Additional Information for further information.
The Trust believes that as of November 16, 1996, AmSouth Bank of Alabama, 1901
Sixth Avenue North, Birmingham, AL 35203, was the Shareholder of record of
92.56% of the outstanding shares of the Premier Class of the Prime Obligations
Fund, 97.56% of the outstanding shares of the Premier Class of AmSouth U.S.
Treasury Fund, and 98.46% of the outstanding shares of the Premier Class Tax
Exempt Fund. As of November 16, 1996, AmSouth was the beneficial owner of
approximately 59.83% of the outstanding shares of the Premier Class of the Prime
Obligations Fund, 72.76% of the outstanding Shares of the Premier Class of the
AmSouth U.S.
24
<PAGE> 27
Treasury Fund, and 74.73% of the outstanding shares of the Premier Class of the
Tax Exempt Fund, and may be deemed to be a "controlling person" of each of the
Prime Obligations Fund, AmSouth U.S. Treasury Fund and the Tax Exempt Fund
within the meaning of the Investment Company Act of 1940.
CUSTODIAN
It is expected that AmSouth Bank of Alabama will become custodian for the
Trust in the second calendar quarter of 1997. Until that time, Union Bank of
California, N.A. will serve as custodian for the Trust.
TRANSFER AGENT AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. serves as transfer agent for and provides fund
accounting services to the Trust.
PERFORMANCE INFORMATION
From time to time, the Money Market Funds' annualized "yield" and "effective
yield" and total return may be presented in advertisements and sales literature.
The "yield" of a Money Market Fund is based upon the income earned by the
Money Market Fund over a seven-day period and then annualized, i.e. the income
earned in the period is assumed to be earned every seven days over a 52-week
period and is stated as a percentage of the investment. The "effective yield" of
a Money Market Fund is calculated similarly but when annualized, the income
earned by the investment is assumed to be reinvested in Shares of the Fund and
thus compounded in the course of a 52-week period. The effective yield will be
higher than the yield because of the compounding effect of this assumed
reinvestment.
The Tax Exempt Fund may also present its "tax equivalent yield" and "tax
equivalent effective yield" which reflect the amount of income subject to
federal income taxation that a taxpayer in a stated tax bracket would have to
earn in order to obtain the same after-tax income as that derived from the yield
and effective yield, respectively, of the Tax Exempt Fund. The tax equivalent
yield and tax equivalent effective yield will be significantly higher than the
yield and effective yield of the Tax Exempt Fund.
Total return is calculated for the past year and the period since the
establishment of a Money Market Fund. Average annual total return is measured by
comparing the value of an investment in a Money Market Fund at the beginning of
the relevant period to the redemption value of the investment at the end of the
period (assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized.
Investors may also judge the performance of each Money Market Fund by
comparing its performance to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices and data such as that provided by Lipper Analytical Services,
Inc. and Donoghue's MONEY FUND REPORT. Comparisons may also be made to indices
or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, American Banker, Fortune, Institutional
Investor, Ibbotson Associates, Inc., Morningstar, Inc., CDA/Wiesenberger,
Pensions and Investments, U.S.A. Today and local newspapers and periodicals.
Such publications may refer to Classic Shares as Class A Shares and Premier
Shares as Class Y Shares. In addition to performance information, general
information about these Funds that appears in a publication such as those
mentioned above may be included in advertisements, sales literature and in
reports to Shareholders. Additional performance information is contained in the
Trust's Annual Report, which is available free of charge by calling the number
on the front page of the prospectus.
Information about performance of a Money Market Fund is based on the Money
Market Fund's record up to a certain date and is not intended to
25
<PAGE> 28
indicate future performance. Yield and total return of any investment is
generally a function of portfolio quality and maturity, type of investments and
operating expenses. Yields and total return of each Money Market Fund will
fluctuate. Any fees charged by the Banks to their customers in connection with
investment in a Money Market Fund are not reflected in the Fund's performance
information.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Trust upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund in proportion to the relative net assets of
the respective Funds at the time of allocation. The timing of allocations of
general assets and general liabilities and expenses of the Trust to particular
Funds will be determined by the Board of Trustees of the Trust and will be in
accordance with generally accepted accounting principles. Determinations by the
Board of Trustees of the Trust as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Trust or a particular Fund
means the affirmative vote, at a meeting of Shareholders duly called, of the
lesser of (a) 67% or more of the votes of Shareholders of the Trust or such Fund
present at such meeting at which the holders of more than 50% of the votes
attributable to the Shareholders of record of the Trust or such Fund are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of Shareholders of the Trust or such Fund.
Under Massachusetts law, Shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims Shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in every
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of a Fund's
property for all loss and expense of any Shareholder of such Fund held liable on
account of being or having been a Shareholder. Thus, the risk of a Shareholder
incurring financial loss on account of Shareholder liability is limited to
circumstances in which a Fund would be unable to meet its obligations.
Inquiries regarding the Trust may be directed in writing to the Trust at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 451-8382.
26
<PAGE> 29
AMSOUTH MUTUAL FUNDS
[AMSOUTH LOGO]
AMSOUTH BANK OF ALABAMA
Investment Advisor
MONEY
MARKET
FUNDS
AMSOUTH
MUTUAL FUNDS
Not FDIC Insured
BISYS FUND SERVICES, DISTRIBUTOR
Prospectus dated November 30, 1996
<PAGE> 30
CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
PROSPECTUS FOR AMSOUTH EQUITY FUND
AMSOUTH REGIONAL EQUITY FUND AND AMSOUTH BALANCED FUND
<TABLE>
<CAPTION>
<S> <C>
1. Cover Page .............................. Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial Information ......... Financial Highlights
4. General Description of Registrant ....... The Trust; Investment Objective
and Policies; Investment
Restrictions; General Information -
Description of the Trust and Its
Shares
5. Management of the Fund .................. Management of AmSouth Mutual
Funds; General Information -
Custodian and Transfer Agent
6. Capital Stock and Other Securities ...... The Trust; How to Purchase and
Redeem Shares; Dividends and
Taxes; General Information -
Description of the Trust and Its
Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ........................... Valuation of Shares; How to
Purchase and Redeem Shares
8. Redemption or Repurchase ................ How to Purchase and Redeem
Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 31
AMSOUTH MUTUAL FUNDS
CAPITAL APPRECIATION FUNDS
<TABLE>
<S> <C>
3435 Stelzer Road For current yield, purchase, and redemption
Columbus, Ohio 43219 information, call (800) 451-8382
</TABLE>
The AmSouth Capital Appreciation Funds (the "Capital Appreciation Funds")
are three of eleven series of units of beneficial interest ("Shares") each
representing interests in one of eleven separate investment funds (the "Funds")
of AmSouth Mutual Funds (the "Trust"), an open-end management investment
company. Each of the Capital Appreciation Funds has a different investment
objective and the net asset value per share of each Capital Appreciation Fund
will fluctuate as the value of such Capital Appreciation Fund's investment
portfolio changes in response to changing market conditions and other factors.
AMSOUTH EQUITY FUND (the "Equity Fund") seeks growth of capital by investing
primarily in a diversified portfolio of common stocks and securities convertible
into common stocks such as convertible bonds and convertible preferred stocks.
The production of income is an incidental objective. AmSouth Bank of Alabama,
Birmingham, Alabama ("AmSouth"), the Capital Appreciation Funds' investment
advisor, will seek opportunities for the Equity Fund in securities that are
believed to represent investment value. (See "INVESTMENT OBJECTIVES AND
POLICIES.")
AMSOUTH REGIONAL EQUITY FUND (the "Regional Equity Fund") seeks growth of
capital by investing primarily in a diversified portfolio of common stocks and
securities convertible into common stocks, such as convertible bonds and
convertible preferred stocks, of companies headquartered in the Southern Region
of the United States. The Southern Region of the United States includes Alabama,
Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee and Virginia. The production of income is an incidental objective.
AmSouth will seek opportunities for the Regional Equity Fund in securities that
are believed to represent investment value. (See "INVESTMENT OBJECTIVES AND
POLICIES.")
AMSOUTH BALANCED FUND (the "Balanced Fund") seeks to obtain long-term
capital growth and produce a reasonable amount of current income through a
moderately aggressive investment strategy. The Balanced Fund seeks to achieve
this objective by investing in a broadly diversified portfolio of securities,
including common stocks, preferred stocks and bonds. AmSouth will seek
opportunities for the Balanced Fund in securities that are believed to represent
investment value. (See "INVESTMENT OBJECTIVES AND POLICIES.")
AmSouth Bank of Alabama, Birmingham, Alabama ("AmSouth"), acts as the
investment advisor to each Capital Appreciation Fund. BISYS Fund Services,
Limited Partnership ("BISYS Fund Services") Columbus, Ohio, acts as the Capital
Appreciation Funds' distributor.
This Prospectus relates only to the Capital Appreciation Funds. Interested
persons who wish to obtain a copy of the prospectuses of the AmSouth Prime
Obligations Fund, the AmSouth U.S. Treasury Fund, and the AmSouth Tax Exempt
Fund (the "Money Market Funds"); the AmSouth Bond Fund, the AmSouth Limited
Maturity Fund, and the AmSouth Government Income Fund, the AmSouth Municipal
Bond Fund, and the AmSouth Florida Tax-Free Fund (the "Income Funds") may
contact the Trust's distributor at the telephone number shown above. Additional
information about the Capital Appreciation Funds, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the Trust
at its address or by calling the Trust at the telephone number shown above. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Capital
Appreciation Funds that a prospective investor ought to know before investing.
Investors should read this Prospectus and retain it for future reference.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY AMSOUTH OR ANY OF ITS AFFILIATES. THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR BY ANY OTHER AGENCY. AN INVESTMENT IN THE TRUST'S SHARES INVOLVES
INVESTMENT RISKS, INCLUDING LOSS OF PRINCIPAL.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is November 30, 1996.
<PAGE> 32
FEE TABLE
<TABLE>
<CAPTION>
REGIONAL
EQUITY EQUITY BALANCED
FUND FUND FUND
------ -------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)...................................................................... 4.50% 4.50% 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)............................................................ 0% 0% 0%
Deferred Sales Load (as a percentage of original purchase price or redemption
proceeds, as applicable)................................................... 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed, if applicable)(2)....... 0% 0% 0%
Exchange Fee................................................................. $0 $0 $0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fees.............................................................. 0.80% 0.80% 0.80%(3)
12b-1 Fees................................................................... .00% .00% .00%
Other Expenses (After Voluntary Fee Reduction)(4)............................ 0.22% 0.25% 0.24%
------ ----- --------
Total Fund Operating Expenses (After Voluntary Fee Reductions)(5)............ 1.02% 1.05% 1.04%(3)
====== ======= ========
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund.............................................................. $55 $76 $ 99 $164
Regional Equity Fund..................................................... $55 $77 $ 100 $167
Balanced Fund............................................................ $55 $77 $ 100 $166
</TABLE>
- ------------
(1) AmSouth Bank of Alabama and its correspondent or affiliated banks may charge
a Customer's (as defined in the Prospectus) account fees for automatic
investment and other cash management services provided in connection with
investment in the Funds. (See "HOW TO PURCHASE AND REDEEM SHARES--Purchases
of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a shareholder. (See "HOW TO PURCHASE AND
REDEEM SHARES--Redemption by Telephone.")
(3) Amounts have been restated to reflect current fees.
(4) Absent the voluntary reduction of administration fees, Other Expenses would
be 0.31% for the Equity Fund, 0.33% for the Regional Equity Fund and 0.31%
for the Balanced Fund.
(5) Absent the voluntary reduction of administration fees, Total Fund Operating
Expenses would be 1.11% for the Equity Fund 1.13% for the Regional Equity
Fund, and 1.11% for the Balanced Fund.
The purpose of the table above is to assist an investor in the Fund in
understanding the various costs and expenses that an investor in a Capital
Appreciation Fund will bear directly or indirectly. See "MANAGEMENT OF AMSOUTH
MUTUAL FUNDS" for a more complete discussion of annual operating expenses of the
Capital Appreciation Funds. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
2
<PAGE> 33
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information concerning the
investment results for the Capital Appreciation Funds for the periods indicated.
This information has been derived from financial statements audited by Coopers &
Lybrand L.L.P., independent accountants for the Trust, whose report thereon is
included in the Statement of Additional Information. Further financial data is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
EQUITY FUND
----------------------------------------------------------------------------------------
DECEMBER 1,
YEAR ENDED JULY 31, 1988 TO
------------------------------------------------------------------------ JULY 31,
1996 1995 1994 1993 1992 1991 1990 1989(A)
-------- -------- -------- -------- -------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 16.75 $ 14.82 $ 14.38 $ 13.40 $ 12.57 $ 11.99 $ 12.18 $ 10.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment income............. 0.33 0.33 0.28 0.28 0.32 0.36 0.37 0.22
Net realized and unrealized gains
on investments.................. 1.48 2.39 0.83 1.48 1.20 0.61 (0.17) 2.16
-------- -------- -------- -------- --------
Total from Investment
Activities...................... 1.81 2.72 1.11 1.76 1.52 0.97 0.20 2.38
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income............. (0.33) (0.32) (0.28) (0.29) (0.33) (0.37) (0.35) (0.20)
Net realized gains................ (0.61) (0.47) (0.39) (0.49) (0.36) (0.02) (0.04)
-------- -------- -------- -------- --------
Total Distributions............... (0.94) (0.79) (0.67) (0.78) (0.69) (0.39) (0.39) (0.20)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...... $ 17.62 $ 16.75 $ 14.82 $ 14.38 $ 13.40 $ 12.57 $ 11.99 $ 12.18
======== ======== ======== ======== ========
Total Return (Excluding
Sales Charge)................... 11.09% 19.27% 7.90% 13.81% 12.94% 8.46% 1.66% 24.06%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)........................... $374,622 $275,757 $205,611 $153,074 $107,934 $32,406 $14,383 $ 5,476
Ratio of expenses to average
net assets...................... 1.02% 1.03% 0.94% 0.95% 1.01% 1.15% 1.11% 1.16%(b)
Ratio of net investment income to
average net assets.............. 1.86% 2.17% 1.93% 2.08% 2.50% 3.16% 3.16% 2.91%(b)
Ratio of expenses to average
net assets*..................... 1.11% 1.11% 1.11% 1.13% 1.15% 1.26% 1.41% 2.34%(b)
Ratio of net investment income to
average net assets*............. 1.77% 2.09% 1.76% 1.90% 2.36% 3.04% 2.86% 1.73%(b)
PORTFOLIO TURNOVER.................. 19.11% 19.46% 11.37% 15.12% 113.12% 15.78% 14.89% 4.03%
Average commission rate(c)........ $ 0.0700
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
3
<PAGE> 34
<TABLE>
<CAPTION>
REGIONAL EQUITY FUND
---------------------------------------------------------------------------------
DECEMBER 1,
YEAR ENDED JULY 31, 1988 TO
----------------------------------------------------------------- JULY 31,
1996 1995 1994 1993 1992 1991 1990 1989(A)
------- ------- ------- ------- ------- ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 18.94 $ 16.68 $ 16.74 $ 14.86 $ 13.44 $12.45 $11.64 $ 10.00
------- ------- ------- ------- ------- ------ ------ --------
INVESTMENT ACTIVITIES
Net Investment income.................... 0.26 0.23 0.23 0.19 0.23 0.26 0.23 0.14
Net realized and unrealized gains
on investments......................... 2.20 2.26 0.58 2.09 2.34 1.20 0.84 1.64
------- ------- ------- ------- ------- ------ ------ --------
Total from Investment Activities......... 2.46 2.49 0.81 2.28 2.57 1.46 1.07 1.78
------- ------- ------- ------- ------- ------ ------ --------
DISTRIBUTIONS
Net investment income.................... (0.26) (0.23) (0.23) (0.20) (0.23) (0.26) (0.22) (0.14)
Net realized gains....................... (0.19) -- (0.41) (0.20) (0.92) (0.21) (0.04)
In excess of net realized gains.......... (0.23)
------- ------- ------- ------- ------- ------ ------ --------
Total Distributions...................... (0.45) (0.23) (0.87) (0.40) (1.15) (0.47) (0.26) (0.14)
------- ------- ------- ------- ------- ------ ------ --------
NET ASSET VALUE, END OF PERIOD............. $ 20.95 $ 18.94 $ 16.68 $ 16.74 $ 14.86 $13.44 $12.45 $ 11.64
======= ======= ======= ======= ======= ====== ====== ========
Total Return (Excluding Sales Charge).... 13.10% 15.10% 4.87% 15.53% 20.66% 12.52% 9.41% 17.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)........ $93,584 $68,501 $54,744 $41,347 $15,707 $7,853 $3,161 $ 2,523
Ratio of expenses to average net
assets................................. 1.05% 1.07% 0.79% 0.80% 0.91% 0.79% 1.22% 1.41%(b)
Ratio of net investment income to average
net assets............................. 1.30% 1.35% 1.36% 1.17% 1.61% 2.21% 1.92% 1.98%(b)
Ratio of expenses to average net
assets*................................ 1.13% 1.15% 1.24% 1.28% 1.36% 1.58% 2.32% 2.65%(b)
Ratio of net investment income to average
net assets*............................ 1.22% 1.27% 0.90% 0.69% 1.16% 1.42% 0.82% 0.74%(b)
PORTFOLIO TURNOVER......................... 8.22% 14.25% 5.83% 10.22% 24.99% 14.41% 14.00% 1.13%
Average commission rate paid(c).......... $0.0827
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
4
<PAGE> 35
<TABLE>
<CAPTION>
BALANCED FUND
----------------------------------------------------------------
DECEMBER 19,
YEAR ENDED JULY 31, 1991 TO
----------------------------------------------- JULY 31,
1996 1995 1994 1993 1992(a)
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 12.76 $ 11.81 $ 11.86 $ 11.12 $ 10.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment income............................. 0.47 0.47 0.42 0.44 0.27
Net realized and unrealized gains on
investments..................................... 0.58 1.24 0.18 0.80 1.09
-------- -------- -------- -------- --------
Total from Investment Activities.................. 1.05 1.71 0.60 1.24 1.36
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income............................. (0.47) (0.46) (0.42) (0.45) (0.24)
Net realized gains................................ (0.31) (0.30) (0.23) (0.05)
-------- -------- -------- -------- --------
Total Distributions............................... (0.78) (0.76) (0.65) (0.50) (0.24)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...................... $ 13.03 $ 12.76 $ 11.81 $ 11.86 $ 11.12
======== ======== ======== ======== ========
Total Return (Excluding Sales Charge)............. 8.37% 15.27% 5.13% 11.47% 13.71%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)................. $338,425 $295,509 $236,306 $179,134 $143,813
Ratio of expenses to average net assets........... 0.98% 0.94% 0.84% 0.84% 0.83%(b)
Ratio of net investment income to average net
assets.......................................... 3.61% 3.91% 3.56% 3.90% 4.45%(b)
Ratio of expenses to average net assets*.......... 1.11% 1.12% 1.11% 1.12% 1.17%(b)
Ratio of net investment income to average net
assets*......................................... 3.48% 3.73% 3.28% 3.62% 4.10%(b)
PORTFOLIO TURNOVER.................................. 20.47% 16.97% 14.43% 11.09% 23.18%
Average commission rate paid(d)................... 0.0773
<FN>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
5
<PAGE> 36
INVESTMENT OBJECTIVES AND POLICIES
THE EQUITY FUND AND THE REGIONAL EQUITY FUND seek capital growth by investing
primarily in a diversified portfolio of common stock and securities convertible
into common stock, such as convertible bonds and convertible preferred stock. In
the case of the Regional Equity Fund, such securities must be issued by
companies headquartered in the Southern Region of the United States which
includes Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina,
South Carolina, Tennessee and Virginia. The production of current income is an
incidental objective of both the Equity Fund and the Regional Equity Fund.
THE BALANCED FUND seeks to obtain long-term capital growth and produce a
reasonable amount of current income through a moderately aggressive investment
strategy. The Balanced Fund seeks to achieve this objective by investing in a
broadly diversified portfolio of securities, including common stocks, preferred
stocks and bonds.
The investment objective of a Capital Appreciation Fund may not be changed
without a majority of the outstanding shares of that Fund (as defined in
"GENERAL INFORMATION--Miscellaneous"). There can be no assurance that the
investment objectives of any of the Capital Appreciation Funds will be achieved.
As investment advisor to the Equity, Regional Equity, and Balanced Funds,
AmSouth will seek to invest in equity securities which are believed to represent
investment value. Factors which AmSouth may consider in selecting equity
securities include industry and company fundamentals, historical price
relationships, and/or underlying asset value. The Equity Fund will invest
primarily in domestic and foreign companies, and the Regional Equity Fund and
the Balanced Fund will invest principally in domestic companies, in each case in
a variety of industries.
As investment adviser to the Equity, Regional Equity, and Balanced Funds,
AmSouth will use a variety of economic projections, technical analysis, and
earnings projections in formulating individual stock purchase and sale
decisions. AmSouth will select investments that it believes have basic
investment value which will eventually be recognized by other investors, thus
increasing their value to the Funds. In the selection of the investments for the
Equity, Regional Equity, and Balanced Funds, AmSouth may therefore be making
investment decisions which could be contrary to the present expectations of
other professional investors. These decisions may involve greater risks compared
to other mutual funds, of either (a) more accurate assessment by other
investors, in which case losses may be incurred by a Fund, or (b) long delay in
investor recognition of the accuracy of the investment decisions of a Fund, in
which case invested capital of a Capital Appreciation Fund in an individual
security or group of securities may not appreciate for an extended period.
The equity securities in which the Capital Appreciation Funds may invest may
be subject to wider fluctuations in value than some other forms of investment.
Depending upon the performance of a Capital Appreciation Fund's investments, the
net asset value per Share of such Fund may decrease instead of increase.
The portion of the Balanced Fund's assets invested in equity and debt
securities will vary in accordance with economic conditions, the general level
of common stock prices, interest rates and other relevant considerations,
including the risks associated with each investment medium. Although the
Balanced Fund seeks to reduce the risks associated with any one investment
medium by utilizing a variety of investments, performance will depend upon
additional factors such as timing and mix and the ability of AmSouth to judge
and react to changing market conditions.
Each Capital Appreciation Fund may provide current income. Because the
Balanced Fund will invest in both debt and equity securities, the Balanced Fund
is expected to produce a higher level of current income than the Equity Fund and
the Regional Equity Fund. The current income provided
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<PAGE> 37
by each of the Capital Appreciation Funds is likely to be less than income
produced by income funds.
Most companies in which the Equity, Regional Equity and Balanced Funds will
invest will be listed on national securities exchanges.
THE EQUITY FUND will normally invest at least 80% of the value of its total
assets in common stocks and securities convertible into common stocks, such as
convertible bonds and convertible preferred stocks, believed by AmSouth to be
undervalued. Under normal market conditions, the Equity Fund may also invest up
to 20% of the value of its total assets in preferred stocks, corporate bonds,
notes, and warrants, obligations with maturities of 12 months or less such as
commercial paper (including variable amount master demand notes), bankers'
acceptances, certificates of deposit, repurchase agreements, money market mutual
funds, obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, and demand and time deposits of domestic and foreign banks
and savings and loan associations. The Equity Fund will not invest more than 15%
of its net assets in time deposits with maturities in excess of seven days which
are subject to penalties upon early withdrawal. If deemed appropriate for
temporary defensive purposes, the Equity Fund may increase its holdings in
short-term obligations to over 20% of its total assets and may also hold
uninvested cash pending investment. The Fund may also write covered call
options. See "Options".
THE REGIONAL EQUITY FUND will normally invest at least 65% of the value of its
total assets in common stocks and securities convertible into common stocks
believed by AmSouth to be undervalued of companies headquartered in the Southern
Region as defined above. Under normal market conditions, the Regional Equity
Fund may also invest up to 35% of the value of its total assets in common stock
and securities convertible into common stock of companies headquartered outside
the Southern Region, preferred stocks, corporate bonds, notes, and warrants,
obligations with maturities of 12 months or less such as commercial paper
(including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, money market mutual funds,
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and demand and time deposits of domestic and foreign banks
and savings and loan associations. The Regional Equity Fund will not invest more
than 15% of its net assets in time deposits with maturities in excess of seven
days which are subject to penalties upon early withdrawal. If deemed appropriate
for temporary defensive purposes, the Regional Equity Fund may increase its
holdings in short-term obligations to over 35% of its total assets and may also
hold uninvested cash pending investment. The Regional Equity Fund may also write
covered call options. See "Options".
The Regional Equity Fund will normally invest at least 65% of the value of its
total assets in common stock and securities convertible into common stock of
companies headquartered in the Southern Region. There can be no assurance that
the economy of the Southern Region or the companies headquartered in the
Southern Region will grow in the future or that a company headquartered in the
Southern Region whose assets, revenues or employees are located substantially
outside of the Southern Region will share in any economic growth of the Southern
Region. Additionally, any localized negative economic factors or possible
physical disasters in the Southern Region area could have a much greater impact
on the Regional Equity Fund's assets than on similar funds whose investments are
geographically more diverse.
THE BALANCED FUND will normally invest in equity securities consisting of
common stocks but may also invest in other equity-type securities such as
warrants, preferred stocks and convertible debt instruments. The Fund's equity
investments will be in companies with a favorable outlook and believed by
AmSouth to be undervalued. The Balanced Fund's debt securities will consist of
securities such as bonds, notes, debentures and money market instruments. The
average dollar-weighted portfolio maturity of debt securities held by the
Balanced Fund will vary according to market conditions and interest rate cycles
and will range between 1 year and
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<PAGE> 38
30 years under normal market conditions. The Balanced Fund's debt securities
will consist of high grade securities, which are those securities rated in one
of the three highest rating categories by a nationally recognized statistical
rating organization (an "NRSRO") at the time of purchase, or if not rated, found
the by the investment advisor under guidelines established by the Trust's Board
of Trustees to be of comparable quality. (For a further description of these
bond ratings, see the Appendix to the Trust's Statement of Additional
Information.) In the event that the rating of any debt securities held by the
Balanced Fund falls below the third highest by an NRSRO the Fund will not be
obligated to dispose of such obligations and may continue to hold such
obligations if, in the opinion of AmSouth, such investment is considered
appropriate under the circumstances.
It is a fundamental policy of the Balanced Fund that it will invest at least
25% of its total assets in fixed-income securities. For this purpose, fixed-
income securities include debt securities, preferred stock and that portion of
the value of securities convertible into common stock, including convertible
preferred stock and convertible debt, which is attributable to the fixed-income
characteristics of those securities.
FOREIGN INVESTMENTS
Each of the Capital Appreciation Funds may invest in foreign securities
through the purchase of American Depository Receipts or the purchase of
securities on the Toronto Stock Exchange, but will not do so if immediately
after a purchase and as a result of the purchase the total value of such foreign
securities owned by such Fund would exceed 25% (20% for the Balanced Fund) of
the value of the total assets of such Fund. Each of the Capital Appreciation
Funds may also invest in securities issued by foreign branches of U.S. banks and
foreign banks and in Canadian Commercial Paper and Europaper. Investment in
foreign securities is subject to special risks, such as future adverse political
and economic developments, possible seizure, currency blockage, nationalization,
or expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source and
the adoption of other foreign governmental restrictions. Additional risks
include currency exchange risks, less publicly available information, the risk
that companies may not be subject to the accounting, auditing and financial
reporting standards and requirements of U.S. companies, the risk that foreign
securities markets may have less volume and therefore less liquidity and greater
price volatility than U.S. securities, and the risk that custodian and brokerage
costs may be higher.
WHEN-ISSUED SECURITIES
Each of the Capital Appreciation Funds may also purchase securities on a
"when-issued" basis. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield, and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. The Capital
Appreciation Funds will generally not pay for such securities or start earning
interest on them until they are received. When a Capital Appreciation Fund
agrees to purchase securities on a "when-issued" basis, the Trust's custodian
will set aside cash or liquid securities equal to the amount of the commitment
in a segregated account. Securities purchased on a "when-issued" basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. Each of the Capital Appreciation Funds
expects that commitments to purchase "when-issued" securities will not exceed
25% of the value of its total assets under normal market conditions, and that a
commitment to purchase "when-issued" securities will not exceed 60 days. In the
event its commitment to purchase "when-issued" securities ever exceeded 25% of
the value of its total assets, a Capital Appreciation Fund's liquidity and the
investment advisor's ability to manage it might be adversely affected. The
Capital Appreciation Funds do not intend to purchase "when-issued"
8
<PAGE> 39
securities for speculative purposes, but only for the purpose of acquiring
portfolio securities.
OPTIONS
Each of the Capital Appreciation Funds may engage in writing call options from
time to time as AmSouth deems to be appropriate. Options are written solely as
covered call options (options on securities owned by the Fund). Such options
must be listed on a national securities exchange and issued by the Options
Clearing Corporation. In order to close out an option position, a Capital
Appreciation Fund will enter into a "closing purchase transaction" --the
purchase of a call option on the same security with the same exercise price and
expiration date as any call option which it may previously have written on any
particular securities. When the portfolio security is sold, the Capital
Appreciation Fund effects a closing purchase transaction so as to close out any
existing call option on that security. If the Capital Appreciation Fund is
unable to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Capital Appreciation Fund
delivers the underlying security upon exercise. When writing a covered call
option, a Capital Appreciation Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security above
the exercise price, but retains the risk of loss should the price of the
security decline.
The Balanced Fund may purchase put options from time to time as AmSouth deems
to be appropriate. A put is a right to sell a specified security (or securities)
within a specified period of time at a specified exercise price. Puts may be
acquired by the Balanced Fund to facilitate the liquidity of the portfolio
assets. Puts may also be used to facilitate the reinvestment of assets at a rate
of return more favorable than that of the underlying security. The Balanced Fund
may sell, transfer, or assign a put only in conjunction with the sale, transfer,
or assignment of the underlying security or securities. The amount payable to
the Balanced Fund upon its exercise of a "put" is normally (i) the Balanced
Fund's acquisition cost of the securities subject to the put (excluding any
accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any accreted market or original issue discount during the
period the Balanced Fund owned the securities, plus (ii) all interest accrued on
the securities since the last interest payment date during that period. The
Balanced Fund will generally acquire puts only where the puts are available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for puts either separately in cash or
by paying a higher price for portfolio securities which are acquired subject to
the puts (thus reducing the yield to maturity otherwise available for the same
securities). The Balanced Fund intends to enter into puts only with dealers,
banks, and broker-dealers which, in the Investment Advisor's opinion, present
minimal credit risks.
REPURCHASE AGREEMENTS
Securities held by the Capital Appreciation Funds may be subject to repurchase
agreements. If the seller under a repurchase agreement were to default on its
repurchase obligation or become insolvent, the Capital Appreciation Fund would
suffer a loss to the extent that the proceeds from a sale of the underlying
portfolio securities were less than the repurchase price under the agreement, or
to the extent that the disposition of such securities by the Capital
Appreciation Fund were delayed pending court action. Additionally, if the seller
should be involved in bankruptcy or insolvency proceedings, the Capital
Appreciation Fund may incur delay and costs in selling the underlying security
or may suffer a loss of principal and interest if the Capital Appreciation Fund
is treated as an unsecured creditor and required to return the underlying
security to the seller's estate.
REVERSE REPURCHASE AGREEMENTS
Each of the Capital Appreciation Funds may borrow funds for temporary purposes
by entering into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, a Capital
Appreciation Fund would sell portfolio securities to financial
9
<PAGE> 40
institutions such as banks and broker-dealers, and agree to repurchase them at a
mutually agreed-upon date and price. Reverse repurchase agreements involve the
risk that the market value of the securities sold by a Capital Appreciation Fund
may decline below the price at which the Fund is obligated to repurchase the
securities.
OTHER INVESTMENT PRACTICES
Each Capital Appreciation Fund may invest up to 5% of the value of its total
assets in the securities of any one money market mutual fund including Shares of
the AmSouth Prime Obligations Fund and the AmSouth U.S. Treasury Fund (the
"AmSouth Money Market Funds"), provided that no more than 10% of a Capital
Appreciation Fund's total assets may be invested in the securities of money
market mutual funds in the aggregate. In order to avoid the imposition of
additional fees as a result of investments by the Capital Appreciation Funds in
the AmSouth Money Market Funds, the Investment Advisor and the Administrator
will reduce that portion of their usual service fees from each Capital
Appreciation Fund by an amount equal to their service fees from the AmSouth
Money Market Funds that are attributable to those Capital Appreciation Fund
investments. The Investment Advisor and the Administrator will promptly forward
such fees to the Capital Appreciation Funds. Each Capital Appreciation Fund will
incur additional expenses due to the duplication of expenses as a result of
investing in securities of other unaffiliated money market mutual funds.
Additional restrictions regarding the Capital Appreciation Funds' investments in
the securities of an unaffiliated money market fund and/or the AmSouth Prime
Obligations Fund and the AmSouth U.S. Treasury Fund are contained in the
Statement of Additional Information.
In order to generate additional income, each Capital Appreciation Fund may,
from time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject a Capital Appreciation Fund to certain risks, such as delays or the
inability to regain the securities in the event the borrower were to default on
its lending agreement or enter into bankruptcy, the Capital Appreciation Fund
will receive 100% collateral in the form of cash or U.S. Government securities.
This collateral will be valued daily by AmSouth and should the market value of
the loaned securities increase, the borrower will furnish additional collateral
to the Capital Appreciation Fund. During the time portfolio securities are on
loan, the borrower pays the Capital Appreciation Fund any dividends or interest
paid on such securities. Loans are subject to termination by the Capital
Appreciation Funds or the borrower at any time. While the Capital Appreciation
Funds do not have the right to vote securities on loan, the Capital Appreciation
Funds intend to terminate the loan and regain the right to vote if that is
considered important with respect to the investment. The Capital Appreciation
Funds will only enter into loan arrangements with broker-
dealers, banks or other institutions which AmSouth has determined are
creditworthy under guidelines established by the Trust's Board of Trustees.
Each Capital Appreciation Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such shortterm
trading is to increase the potential for capital appreciation and/or income of
the Capital Appreciation Fund in order to take advantage of what AmSouth
believes are changes in market, industry or individual company conditions or
outlook. Any such trading would increase the turnover rate of a Capital
Appreciation Fund and its transaction costs.
The portfolio turnover of each Capital Appreciation Fund may vary greatly from
year to year as well as within a particular year. High turnover rates will
generally result in higher transaction costs and higher levels of taxable
realized gains to the Fund's shareholders. The portfolio turnover rate for the
fiscal year ended July 31, 1996, was 19.11% for the Equity Fund; 8.22% for the
Regional Equity Fund; and for the Balanced Fund, 13.65% for the common stock
portion of its portfolio and 6.82% for the fixed income portion of its
portfolio.
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<PAGE> 41
INVESTMENT RESTRICTIONS
Each of the Capital Appreciation Funds is subject to a number of investment
restrictions that may be changed only by a vote of a majority of the outstanding
shares of that Fund (see "GENERAL INFORMATION--Miscellaneous" in this
prospectus).
No Capital Appreciation Fund may:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Capital
Appreciation Fund's total assets would be invested in such issuer, or such
Capital Appreciation Fund would hold more than 10% of any class of securities of
the issuer or more than 10% of the outstanding voting securities of the issuer,
except that up to 25% of the value of each Capital Appreciation Fund's total
assets may be invested without regard to such limitations. There is no limit to
the percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause 25% or more of the value of such
Capital Appreciation Fund's total assets at the time of purchase to be invested
in securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and repurchase agreements secured by obligations
of the U.S. Government or its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services. For
example, gas, gas transmission, electric and gas, electric, and telephone will
each be considered a separate industry.
3. Borrow money or issue senior securities, except that each Capital
Appreciation Fund may borrow from banks or enter into reverse repurchase
agreements for temporary purposes in amounts up to 10% of the value of its total
assets at the time of such borrowing; or mortgage, pledge, or hypothecate any
assets, except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of such
Capital Appreciation Fund's total assets at the time of its borrowing. A Capital
Appreciation Fund will not purchase securities while borrowings (including
reverse repurchase agreements) in excess of 5% of its total assets are
outstanding.
4. Make loans, except that each Capital Appreciation Fund may purchase or hold
debt securities and lend portfolio securities in accordance with its investment
objective and policies, and may enter into repurchase agreements.
VALUATION OF SHARES
The net asset value of each Capital Appreciation Fund is determined and its
Shares are priced as of 4:00 p.m., Eastern Time (the "Valuation Time") on each
Business Day of such Fund. As used herein a "Business Day" constitutes any day
on which the New York Stock Exchange (the "NYSE") is open for trading and the
Federal Reserve Bank of Atlanta is open, except days on which there are not
sufficient changes in the value of the Fund's portfolio securities that the
Fund's net asset value might be materially affected, or days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, either the NYSE or the Federal Reserve Bank of Atlanta is
closed on the customary national business holidays of New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
Net asset value per Share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets belonging to
a
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<PAGE> 42
Capital Appreciation Fund, less the liabilities charged to that Fund, by the
number of the outstanding Shares of that Fund. The net asset value per Share of
each Capital Appreciation Fund will fluctuate as the value of its investment
portfolio changes.
The securities in each Capital Appreciation Fund will be valued at market
value. If market quotations are not available, the securities will be valued by
a method which the Board of Trustees of the Trust believes accurately reflects
fair value. For further information about valuation of investments in the
Capital Appreciation Funds, see the Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each of the Capital Appreciation Funds are sold on a continuous
basis by the Trust's distributor, BISYS Fund Services (the "Distributor"). The
principal office of the Distributor is 3435 Stelzer Road, Columbus, Ohio 43219.
If you wish to purchase Shares, contact the Trust at
(800) 451-8382.
PURCHASES OF SHARES
Shares of the Capital Appreciation Funds may be purchased through procedures
established by the Distributor in connection with requirements of qualified
accounts maintained by or on behalf of certain persons ("Customers") by AmSouth
or its correspondent or affiliated banks (collectively, the "Banks"). These
procedures may include instructions under which a Customer's account is "swept"
automatically no less frequently than weekly and amounts in excess of a minimum
amount agreed upon by a Bank and its Customer are invested by the Distributor in
Shares of the Capital Appreciation Funds. These procedures may also include
transactions whereby AmSouth as agent purchases Shares of the Capital
Appreciation Funds in amounts that correspond to the market value of securities
sold to the Capital Appreciation Funds by AmSouth as agent.
Shares of the Trust sold to the Banks acting in a fiduciary, advisory,
custodial, agency, or other similar capacity on behalf of Customers will
normally be held of record by the Banks. With respect to Shares so sold, it is
the responsibility of the particular Bank to transmit purchase or redemption
orders to the Distributor and to deliver federal funds for purchase on a timely
basis. Beneficial ownership of the Shares will be recorded by the Banks and
reflected in the account statements provided by the Banks to Customers.
Investors may also purchase Shares of a Capital Appreciation Fund by
completing and signing an Account Registration Form and mailing it, together
with a check (or other negotiable bank draft or money order) in at least the
minimum initial purchase amount, payable to the Trust, in care of AmSouth Mutual
Funds, Department L1304,
Columbus, Ohio 43260-1304. Subsequent purchases of Shares of a Capital
Appreciation Fund may be made at any time by mailing a check (or other
negotiable bank draft or money order) payable to the Trust, to the above
address.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Shares either by telephone or by wiring
funds to the Trust's custodian. Telephone orders may be placed by calling the
Trust at
(800) 451-8382. Payment for Shares ordered by telephone may be made by check and
must be received by the Trust's custodian within seven days of the telephone
order. If payment is not received within seven days or a check timely received
does not clear, the purchase will be cancelled and the investor could be liable
for any losses or fees incurred. In the case of purchases of Shares effected by
wiring funds to the Trust's custodian, investors must call the Trust at (800)
451-8382 to obtain instructions regarding the bank account number
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<PAGE> 43
into which the funds should be wired and other pertinent information.
Investors may also purchase Shares by arranging systematic monthly, bi-monthly
or quarterly investments into the Funds with the Trust's Automatic Investment
Plan ("AIP"). The minimum investment amounts are $50 per transfer and the
maximum amount with respect to any transfer is $100,000. After investors give
the Trust proper authorization, their bank accounts, which must be with banks
that are members of the Automated Clearing House, will be debited accordingly to
purchase Shares. Investors will receive a confirmation from the Trust for every
transaction, and a withdrawal will appear on their bank statements.
To participate in AIP, investors must complete the appropriate sections of the
Account Registration form or call for instructions. This form may be obtained by
calling the Trust at (800) 451-8382. The amount investors specify will
automatically be invested in Shares at the specified Fund's public offering
price per Share next determined after the debit is made.
To change the frequency or amount invested, written instructions must be
received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
"REDEMPTION BY MAIL" below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or may refuse to honor the transfer
instruction (in which case no Fund Shares will be purchased).
Investors should check with their banks to determine whether they are members
of the Automated Clearing House and whether their banks charge a fee for
transferring funds through the Automated Clearing House. Expenses incurred by
the Funds related to AIP are borne by the Funds and therefore there is no direct
charge by the Funds to investors for use of these services.
Shares of each Capital Appreciation Fund are purchased at the public offering
price per Share, which is the net asset value per Share (see "VALUATION OF
SHARES") next determined after receipt by the Distributor of an order in good
form to purchase Shares plus the applicable sales charge as described below.
Purchases of Shares of a Capital Appreciation Fund will be effected only on a
Business Day (as defined in "VALUATION OF SHARES") of such Fund. An order
received prior to the Valuation Time on any Business Day will be executed based
on the net asset value determined as of the Valuation Time on the date of
receipt. An order received after the Valuation Time on any Business Day will be
executed based on the net asset value determined as of the next Business Day.
In case of orders for the purchase of Shares placed through a broker-dealer,
the applicable public offering price will be calculated with reference to the
net asset value as so determined, but only if the broker-dealer receives the
order prior to the Valuation Time for that day and transmits it to the
Distributor prior to its close of business that same day (normally 4:00 p.m.
Eastern Time). The broker-dealer is responsible for transmitting such orders by
4:00 p.m. If the broker-dealer fails to do so, the investor's right to that
day's closing price must be settled between the investor and the broker-dealer.
The minimum investment is $1,000 for the initial purchase of Shares of a
Capital Appreciation Fund by an investor. There is no minimum investment for
subsequent purchases; however, as described above, the minimum subsequent
investment when using AIP is $50 per transfer. The minimum initial investment
amount may be waived if purchases are made in connection with Individual
Retirement Accounts, Keogh plans or similar plans. For information on
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<PAGE> 44
IRAs or Keoghs or similar plans, contact AmSouth at (800) 444-4727.
Depending upon the terms of a particular Customer account, the Banks may
charge a Customer's account fees for automatic investment and other cash
management services provided in connection with investment in the Capital
Appreciation Funds. Information concerning these services and any charges can be
obtained from the Banks. This Prospectus should be read in conjunction with any
such information received from the Banks.
The Trust reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made with foreign and third
party checks.
Every Shareholder will receive a confirmation of each new transaction in his
or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. Reports of purchases and redemptions
of Shares by Banks on behalf of their Customers will be sent by the Banks to
their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
SALES CHARGE
The public offering price of a share of a Capital Appreciation Fund equals its
net asset value plus a sales charge. BISYS Fund Services receives this sales
charge as Distributor and may re-allow a portion of it as dealer discounts and
brokerage commissions. However, BISYS Fund Services, at its sole discretion, may
pay certain dealers all or part of the portion of the sales charges it receives.
A broker or dealer who receives a reallowance in excess of 90% of the sales
charge may be deemed to be an "underwriter" for purposes of the Securities Act
of 1933.
<TABLE>
<CAPTION>
SALES CHARGE AS DEALER
A PERCENTAGE OF SALES CHARGE AS ALLOWANCE
NET AMOUNT A PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE INVESTED OFFERING PRICE OF OFFERING PRICE
- ---------------------------------------------------- --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $50,000................................... 4.71% 4.50% 4.05%
$50,000 but less than $100,000...................... 4.17% 4.00% 3.60%
$100,000 but less than $250,000..................... 3.09% 3.00% 2.70%
$250,000 but less than $500,000..................... 2.04% 2.00% 1.80%
$500,000 but less than $1,000,000................... 1.01% 1.00% .90%
$1,000,000 or more.................................. -0- -0- -0-
</TABLE>
From time to time dealers who receive dealer discounts and broker commissions
from the Distributor may reallow all or a portion of such dealer discounts and
broker commissions to other dealers or brokers. The Distributor, at its expense,
will also provide additional compensation to dealers in connection with sales of
Shares of any of the Funds. Such compensation will include financial assistance
to dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or more
Funds of the Trust, and/or other dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to location within or outside the United States
for meetings or seminars of a business nature. Compensation will also include
the following types of non-cash compensation offered through sales contests: (1)
vacation trips, including the provision of travel arrangements and lodging at
luxury resorts at an exotic location, (2) tickets for entertainment events (such
as concerts, cruises and sporting events) and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of a Fund's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such
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<PAGE> 45
as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by any Fund or its Shareholders.
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which includes: (i) an
individual, his or her spouse and children under the age of 21; (ii) a trustee
or other fiduciary of a single trust estate or single fiduciary account; or
(iii) any other organized group of persons, whether incorporated or not,
provided that such organization has been in existence for at least six months
and has some purpose other than the purchase of redeemable securities of a
registered investment company. In order to qualify for a lower sales charge, all
orders from a Purchaser will have to be placed through a single investment
dealer and identified at the time of purchase as originating from the same
Purchaser, although such orders may be placed into more than one discrete
account which identifies the Purchasers.
SALES CHARGE WAIVERS
The following classes of investors may purchase Shares of a Capital
Appreciation Fund with no sales charge in the manner described below (which may
be changed or eliminated at any time by the Distributor):
(1) Existing Shareholders of a Capital Appreciation Fund upon the reinvestment
of dividend and capital gain distributions;
(2) Officers, trustees, directors, employees and retired employees of the
Trust, AmSouth Bancorporation and its affiliates, and BISYS Fund Services and
its affiliates (and spouses and children of each of the foregoing);
(3) Investors for whom AmSouth Bancorporation or one of its affiliates acts in
a fiduciary, advisory, custodial, agency or similar capacity through an account
with the Trust Department of AmSouth Bancorporation or one or its affiliates;
(4) Investors who purchase Shares of a Capital Appreciation Fund through a
401(k) plan or a 403(b) plan which by its terms permits purchases of Shares;
(5) Employees (and their spouses and children under the age of 21) of any
broker-dealer with which the Distributor enters into a dealer agreement to sell
Shares of the Funds;
(6) Orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies; and
(7) Investors who purchase Shares of a Capital Appreciation Fund through
certain broker-dealers, registered investment advisers and other financial
institutions that have entered into an agreement with the Distributor, which
includes a requirement that such shares be sold for the benefit of clients
participating in a "wrap account," asset allocation or a similar program under
which such clients pay a fee to such broker-dealer, registered investment
advisor or other financial institution.
From time to time, for special promotional purposes, the Distributor may offer
special concessions to enable investors to purchase shares of a Fund offered by
the Trust at net asset value without payment of a front-end charge. To qualify
for a net asset value purchase, the investor must pay for such purchase with the
proceeds from the redemption of shares of a non-affiliated mutual fund on which
a front-end sales charge was paid. A qualifying purchase of shares must occur
within 30 days of prior redemption and must be evidenced by a confirmation of
the redemption transaction. At the time of purchase, the investment
representative must notify the Distributor that the purchase qualifies for a
purchase at net asset value and provide sufficient information to permit
confirmation of qualification. Proceeds from the redemption of shares on which
no front-end sales charge was paid do not qualify for a purchase at net asset
value.
The Distributor may also periodically waive the sales charge for all investors
with respect to any Capital Appreciation Fund.
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<PAGE> 46
LETTER OF INTENT
By checking the Letter of Intent box on the account application, a shareholder
becomes eligible for reduced sales charges applicable to the total amount
invested in shares of a Capital Appreciation Fund over a 13-month period
(beginning up to 90 days prior to the date indicated on the account
application). The Trust's Transfer Agent will hold in escrow 5% of the amount
indicated for payment of the higher sales charge if a shareholder does not
purchase the full amount indicated on the account application. Upon completion
of the total minimum investment specified on the account application, the escrow
will be released, and an adjustment will be made to reflect any reduced sales
charge applicable to shares purchased during the 90-day period prior to
submission of the account application. Additionally, if the total purchases
within the 13-month period exceed the amount specified, an adjustment will be
made to reflect further reduced sales charges applicable to such purchases. All
such adjustments will be made at the conclusion of the 13-month period in the
form of additional shares credited to the shareholder's account at the then
current Public Offering Price applicable to a single purchase of the total
amount of the total purchases. If total purchases are less than the amount
specified, escrowed shares may be involuntarily redeemed to pay the additional
sales charge. Checking a Letter of Intent box does not bind an investor to
purchase, or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but an investor must complete the intended
purchase to obtain the reduced sales load.
For further information about Letters of Intent, interested investors should
contact the Trust at (800) 451-8382. This program, however, may be modified or
eliminated at any time or from time to time by the Distributor without notice.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Shares of a Capital Appreciation Fund and one or more of the other
Funds of the Trust sold with a sales charge or by combining a current purchase
of Shares of a Capital Appreciation Fund with prior purchases of Shares of any
Fund of the Trust sold subject to a sales charge. The applicable sales charge is
based on the sum of (i) the Purchaser's current purchase of shares of any Fund
sold with a sales charge plus (ii) the then current net asset value of all
Shares held by the Purchaser in any Fund sold with a sales charge. To receive
the applicable public offering price pursuant to the right of accumulation
Shareholders must at the time of purchase provide the Transfer Agent or the
Distributor with sufficient information to permit confirmation of qualification.
Accumulation privileges may be amended or terminated without notice at any time
by the Distributor.
EXCHANGE PRIVILEGE
Shareholders may exchange Shares of any Capital Appreciation Fund on the basis
of the relative net asset value of the Shares exchanged, without payment of a
sales charge, for Shares of any other Fund of the Trust so long as they maintain
the respective minimum account balance in each Fund in which they own Shares.
Shareholders may exchange Shares of a Fund without a sales charge for Shares of
a Fund with a sales charge, by paying the applicable sales charge, so long as
they maintain the respective minimum account balances in each Fund in which they
own Shares. Shares of a Fund without a sales charge that were acquired through
an exchange of Shares of a Fund with respect to which a sales charge was paid
may be exchanged for Shares of a Fund with a sales charge without payment of a
sales charge provided that such an exchange may only be made once during each
calendar year and only upon the written request of a Shareholder. Shareholders
must at the time of purchase provide the Transfer Agent or the Distributor with
sufficient information to permit confirmation of qualification.
An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss. In general,
if a Shareholder exchanges Capital Appreciation Fund Shares for Shares of
another Fund without paying a sales charge, the gain or loss on the sale of
16
<PAGE> 47
the Capital Appreciation Fund Shares will be calculated without taking into
account the sales charge paid on the Capital Appreciation Fund Shares if the
Shares were held less than 91 days. The sales charge will instead be added to
the basis of the Fund Shares acquired in the exchange. The application of this
rule will increase the gain or reduce the loss that the Shareholder would
otherwise recognize on the exchange of the Shares of the Capital Appreciation
Fund.
Before an exchange can be effected, a Shareholder must receive a current
prospectus of the Fund into which the Shares are exchanged. An exchange may be
made by calling the Trust at (800) 451-8382 or by mailing written instructions
to the Transfer Agent. Exchange privileges may be exercised only in those states
where Shares of such other Funds of the Trust may legally be sold, and may be
amended or terminated at any time upon sixty (60) days' notice.
The Trust's exchange privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Trust and increase transaction costs, the Trust has
established a policy of limiting excessive exchange activity. Exchange activity
will not be deemed excessive if limited to four substantive exchange redemptions
from a Fund during any calendar year.
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of $1,000 in each Fund
into which he or she plans to reinvest dividends.
The Directed Dividend Option may be modified or terminated without notice. In
addition, the Trust may suspend a shareholder's Directed Dividend Option without
notice if the account balance is less than the minimum $1,000. Participation in
the Option may be terminated or changed by the shareholder at anytime by writing
the Distributor. The Directed Dividend Option is not available to participants
in an AmSouth Mutual Funds IRA.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed by mail or by telephone. However, all or
part of a Customer's Shares may be redeemed in accordance with instructions and
limitations pertaining to his or her account at a Bank.
REDEMPTION BY MAIL
A written request for redemption must be received by the Transfer Agent in
order to constitute a valid tender for redemption. The Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. The Transfer Agent reserves the right
to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record; and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or the proceeds are either mailed or
wired to a financial institution account previously designated. There is no
charge for having redemption requests mailed to a designated bank account.
REDEMPTION BY TELEPHONE
A Shareholder may have the payment of redemption requests wired or mailed
directly to a domestic commercial bank account previously designated by
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<PAGE> 48
the Shareholder on the Account Registration Form. Under most circumstances, such
payments will be transmitted on the next Business Day following receipt of a
valid request for redemption. Such wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The Transfer Agent may reduce
the amount of a wire redemption payment from the maximum wire redemption charge
of $15.00. Such charge is presently $7.00 for each wire redemption. There is no
charge for having payment of redemption requests mailed or sent via Automated
Clearing House to a designated bank account. For telephone redemptions, call the
Trust at (800) 451-8382. The Trust will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine; if these procedures are
not followed, the Trust may be liable for any losses due to unauthorized or
fraudulent instructions. These procedures include recording all phone
conversations, sending confirmations to Shareholders within 72 hours of the
telephone transaction, verifying the account name and a shareholder's account
number or tax identification number and sending redemption proceeds only to the
address of record or to a previously authorized account.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. The proceeds paid upon redemption of Shares in a Capital Appreciation
Fund may be more or less than the amount invested. Payment to Shareholders for
Shares redeemed will be made within seven days after receipt by the Transfer
Agent of the request for redemption. However, to the greatest extent possible,
the Trust will attempt to honor requests from Shareholders for next Business Day
payments upon redemption of Shares if the request for redemption is received by
the Transfer Agent before 4:00 p.m., Eastern Time, on a Business Day or, if the
request for redemption is received after 4:00 p.m., Eastern Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Trust or the Shareholders of the particular Capital
Appreciation Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner.
At various times, the Trust may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Trust may delay the
forwarding of proceeds only until payment has been collected for the purchase of
such Shares which may take up to 15 days or more. To avoid delay in payment upon
redemption shortly after purchasing Shares, investors should purchase Shares by
certified or bank check or by wire transfer. The Trust intends to pay cash for
all Shares redeemed, but under abnormal conditions which make payment in cash
unwise, the Trust may make payment wholly or partly in portfolio securities at
their then market value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder, the
account of such Shareholder in any Capital Appreciation Fund has a value of less
than $250. Accordingly, an investor purchasing Shares of a Capital Appreciation
Fund in only the minimum investment amount may be subject to such involuntary
redemption if he or she thereafter redeems some of his or her Shares. Before the
Trust exercises its right to redeem such Shares and to send the proceeds to the
Shareholder, the Shareholder will be given notice that the value of the Shares
of a Capital Appreciation Fund in his or her account is less than the minimum
amount and will be allowed 60 days to make an additional investment in an amount
which will increase the value of the account to at least $250.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Trust may suspend the right of
redemption or redeem Shares involuntarily if it appears appropriate to do so in
light of the Trust's responsibilities under the Investment Company Act of 1940.
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<PAGE> 49
DIVIDENDS AND TAXES
The net income of each of the Capital Appreciation Funds will be declared
monthly as a dividend to Shareholders at the close of business on the day of
declaration. Dividends will generally be paid monthly. Distributable net
realized capital gains are distributed annually to Shareholders of record. A
Shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares unless the Shareholder
elects to receive such dividends or distributions in cash. Dividends and
distributions are reinvested without a sales charge as of the ex-dividend date
using the net asset value determined on that date and are credited to a
Shareholder's account on the payment date. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash. Dividends are generally taxable when received. However, dividends
declared in October, November, or December to Shareholders of record during
those months and paid during the following January are treated for tax purposes
as if they were received by each Shareholder on December 31 of the prior year.
Elections to receive dividends or distributions in cash, or any revocation
thereof, must be made in writing to the Transfer Agent at 3435 Stelzer Road,
Columbus, Ohio 43219, and will become effective with respect to dividends and
distributions having record dates after its receipt by the Transfer Agent.
Each of the Capital Appreciation Funds is treated as a separate entity for
Federal income tax purposes. Each of the Capital Appreciation Funds intends to
qualify as a "regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). If they so qualify, the Capital Appreciation
Funds will not have to pay federal income taxes on net income and net capital
gain income that they distribute to shareholders. Regulated investment companies
are also subject to a federal excise tax if they do not distribute their income
on a timely basis. The Capital Appreciation Funds intend to avoid paying federal
income and excise taxes by timely distributing substantially all their net
income and net investment capital gain income.
A distribution to a Shareholder of net investment income (generally the Fund's
ordinary income) and the excess, if any, of net short-term capital gain over net
long-term loss will be taxable to the Shareholder as ordinary income. The 70%
dividends-received deduction for corporations generally will apply to the Fund's
distributions to corporations to the extent such distributions represent amounts
that would qualify for the dividends-received deduction when received by the
Fund if the Fund were a regular corporation and are designated by the Fund as
qualifying for the dividends-received deduction.
A distribution by a Capital Appreciation Fund of the excess of net long-term
capital gain over net short-term capital loss designated by such Fund as a
capital gain dividend is taxable to Shareholders as long-term capital gain,
regardless of how long the Shareholder has held Shares in such Fund. Such
distributions are not eligible for the dividends-
received deduction.
Prior to purchasing Shares of a Capital Appreciation Fund, the impact of
dividends or capital gains distributions which are expected to be declared or
have been declared, but not paid, should be carefully considered. Dividends or
capital gains distributions paid after a purchase of Shares are subject to
federal income taxes, although in some circumstances the dividend or
distribution may be, as an economic matter, a return of capital. A Shareholder
should consult his or her own adviser for any special advice.
Dividends received by a Shareholder that are derived from a Capital
Appreciation Fund's investments in U.S. government obligations may not be
entitled to the exemptions from state and local income taxes that would be
available if the Shareholder had purchased U.S. government obligations directly.
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<PAGE> 50
A Shareholder will generally recognize capital gain or loss on the sale or
exchange of shares in a Capital Appreciation Fund. If a Shareholder receives a
capital gain dividend with respect to a Share of a Capital Appreciation Fund and
such Share is held for six months or less, any loss on the sale or exchange of
such Share shall be treated as a long-term capital loss to the extent of the
capital gain dividend.
The foregoing discussion is limited to federal income tax consequences and is
based on tax laws and regulations which are in effect as of the date of this
Prospectus; such laws and regulations may be changed by legislative or
administrative actions. The foregoing is also intended only as a brief summary
of some of the important tax considerations generally affecting the Capital
Appreciation Funds and their Shareholders. Potential investors in the Capital
Appreciation Funds are urged to consult their tax advisers concerning their own
tax situation and concerning the application of state and local taxes which may
differ from the federal income tax consequences described above.
Shareholders will be advised at least annually as to the character for federal
income tax purposes of distributions made during the year.
MANAGEMENT OF AMSOUTH MUTUAL FUNDS
TRUSTEES OF THE TRUST
Overall responsibility for management of the Trust rests with the Board of
Trustees of the Trust, who are elected by the Shareholders of the Trust. There
are currently six Trustees, two of whom are "interested persons" of the Trust
within the meaning of that term under the Investment Company Act of 1940. The
Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING THE PAST 5 YEARS
- ------------------------------ ------------------ -------------------------------------------
<S> <C> <C>
Dr. Dick D. Briggs, Jr. Trustee From 1981 to present, Professor and Vice
459 DER Building Chairman, Dept. of Medicine, Univ. of
1808 7th Avenue South Alabama at Birmingham School of Medicine;
UAB Medical Center December, 1995, to present, Physician,
Birmingham, Alabama 35294 University of Alabama Health Services
Foundation; from 1988 to 1992, President,
CEO and Medical Director, Univ. of Alabama
Health Services Foundation
Wendell D. Cleaver Trustee From September 3, 1993 to present, retired;
209 Lakewood Drive, West from December, 1988 to August, 1993,
Mobile, Alabama 36608 Executive Vice President, Chief Operating
Officer and Director, Mobile Gas Service
Corporation
J. David Huber* Chairman of the From June 1987 to present, employee of
Board of Trustees BISYS Fund Services, Limited Partnership
Sean M. Kelly* Trustee and From 1993 to present, Senior Vice President
150 2nd Avenue North, President of Client Services of BISYS Fund Services;
Suite 1170 prior to 1993, Senior Vice President of
St. Petersburg, Florida 33701 Concord Financial Group (now BISYS Fund
Services)
</TABLE>
20
<PAGE> 51
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING THE PAST 5 YEARS
- ------------------------------ ------------------ -------------------------------------------
<S> <C> <C>
Homer H. Turner, Jr. Trustee From June 1991 to present, retired; until
729 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830 Division, Alabama Power Company
James H. Woodward, Jr. Trustee From 1996 to present, Trustee of The
The University of North Sessions Group; from July 1989 to present,
Carolina at Charlotte Chancellor, The University of North
Charlotte, North Carolina Carolina at Charlotte; until July 1989,
28223 Senior Vice President, University College,
University of Alabama at Birmingham
</TABLE>
- ------------
* Indicates an "interested person" of the Trust as defined in the Investment
Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection with
each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and for
providing fund accounting services to the Trust. Messrs. Huber and Kelly are
officers and employees of BISYS Fund Services.
INVESTMENT ADVISOR
AmSouth is the investment advisor of each Fund of the Trust. AmSouth is the
principal bank affiliate of AmSouth Bancorporation, one of the largest banking
institutions headquartered in the mid-south region. AmSouth Bancorporation
reported assets as of December 31, 1995 of $17.7 billion and operated 273
banking offices in Alabama, Florida, Georgia and Tennessee. AmSouth has provided
investment management services through its Trust Investment Department since
1915. As of December 31, 1995, AmSouth and its affiliates had over $6.8 billion
in assets under discretionary management and provided custody services for an
additional $12.5 billion in securities. AmSouth is the largest provider of trust
services in Alabama. AmSouth serves as administrator for over $12 billion in
bond issues, and its Trust Natural Resources and Real Estate Department is a
major manager of timberland, mineral, oil and gas properties and other real
estate interests.
Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the respective investment objectives and restrictions of the
Capital Appreciation Funds, AmSouth manages the Capital Appreciation Funds,
makes decisions with respect to and places orders for all purchases and sales of
their investment securities, and maintains their records relating to such
purchases and sales. Pedro Verdu, CFA, is the portfolio manager for the Capital
Appreciation Funds and, as such, has had primary responsibility for the
day-to-day portfolio management of each of these Funds since their inception.
Mr. Verdu has had twenty-four years of experience as an analyst and portfolio
manager; he is currently the Director of Equity Investing at AmSouth.
Under an investment advisory agreement between the Trust and AmSouth, the fee
payable to AmSouth by each Capital Appreciation Fund for investment advisory
services is the lesser of (a) a fee computed daily and paid monthly at the
annual rate of eighty one-hundredths of one percent (.80%) of such Capital
Appreciation Fund's average daily net assets or (b) such fee as may from time to
time be agreed upon in writing by the Group and AmSouth. While this fee is
higher than the advisory fee paid by most mutual funds, it is believed to be
comparable to advisory fees paid by many funds having similar
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<PAGE> 52
objectives and policies. A fee agreed to in writing from time to time by the
Group and AmSouth may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower a Capital
Appreciation Fund's expenses and increase the net income of the Fund during the
period when such lower fee is in effect.
During the Trust's fiscal year ended July 31, 1996 AmSouth received investment
advisory fees amounting to 0.80% of the Equity Fund's average net assets, 0.80%
of the Regional Equity Fund's average net assets and 0.75% of the Balanced
Fund's average net assets, after voluntary fee reductions with respect to the
Balanced Fund.
ADMINISTRATOR AND DISTRIBUTOR
ASO Services Company ("ASO") is the administrator for each Fund of the Trust,
and BISYS Fund Services ("BISYS") acts as the Trust's principal underwriter and
distributor (the "Administrator" and the "Distributor," respectively). ASO is a
wholly-owned subsidiary of BISYS. BISYS is a subsidiary of The BISYS Group,
Inc., 150 Clove Road, Little Falls, New Jersey 07424, a publicly owned company
engaged in information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Capital Appreciation
Funds' administration and operation. Under a management and administration
agreement between the Trust and the Administrator, the fee payable by each
Capital Appreciation Fund to the Administrator for administration services is
the lesser of (a) a fee computed at the annual rate of twenty one-hundredths of
one percent (.20%) of such Capital Appreciation Fund's average daily net assets
or (b) such fee as may from time to time be agreed upon by the Trust and the
Administrator. A fee agreed to from time to time by the Trust and the
Administrator may be significantly lower than the fee calculated at the annual
rate and the effect of such lower fee would be to lower a Capital Appreciation
Fund's expenses and increase the net income of the Fund during the period when
such lower fee is in effect.
ASO succeeded BISYS Fund Services as Administrator on April 1, 1996. During
the Trust's fiscal year ended July 31, 1996, BISYS and ASO received
administration fees, after voluntary fee reductions, amounting to 0.11% of the
Equity Fund's average net assets, 0.12% of the Regional Equity Fund's average
net assets and 0.11% of the Balanced Fund's average net assets.
SUB-ADMINISTRATORS
Effective August 1, 1995, AmSouth became the Sub-Administrator to the Trust.
Pursuant to its current agreement with the Administrator, AmSouth has assumed
certain of the Administrator's duties, for which AmSouth receives a fee, paid by
the Administrator, calculated at an annual rate of up to ten one-hundredths of
one percent (.10%) of each Fund's average net assets.
Effective April 1, 1996, BISYS Fund Services was retained by the Administrator
as Sub-Administrator to the Trust. Pursuant to its agreement with the
Administrator, BISYS Fund Services is entitled to compensation as mutually
agreed from time to time by it and the Administrator.
EXPENSES
AmSouth and the Administrator each bear all expenses in connection with the
performance of their services as Investment Advisor and Administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Capital Appreciation Fund. No Capital
Appreciation Fund will bear, directly or indirectly, the cost of any activity
primarily intended to result in the distribution of Shares of such Capital
Appreciation Fund; such costs will be borne by the Distributor.
BANKING LAWS
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Capital Appreciation Funds contemplated by
its investment advisory agreement with the Trust and described in this
Prospectus without violation of applicable banking laws and regulations, and has
so represented in its investment advisory agreement
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<PAGE> 53
with the Trust. Future changes in federal or state statutes and regulations
relating to permissible activities of banks or bank holding companies and their
subsidiaries and affiliates as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations
could change the manner in which AmSouth could continue to perform such services
for the Trust. See "MANAGEMENT OF The Trust--Glass-Steagall Act" in the
Statement of Additional Information for further discussion of applicable banking
laws and regulations.
GENERAL INFORMATION
DESCRIPTION OF THE TRUST AND ITS SHARES
The Trust was organized as a Massachusetts business trust on October 1, 1987.
The Trust has an unlimited number of authorized shares of beneficial interest
which may, without shareholder approval, be divided into an unlimited number of
series of such shares, and which are presently divided into eleven series of
shares, one for each of the following Funds: the AmSouth Prime Obligations Fund,
the AmSouth U.S. Treasury Fund, the AmSouth Tax Exempt Fund, the AmSouth Equity
Fund, the AmSouth Regional Equity Fund, the AmSouth Balanced Fund, the AmSouth
Bond Fund, the AmSouth Limited Maturity Fund, the AmSouth Government Income
Fund, the AmSouth Municipal Bond Fund, and the AmSouth Florida Tax-Free Fund.
Each fund, except the AmSouth Florida Tax-Free Fund, is a diversified fund under
the Investment Company Act of 1940, as amended. Each Share represents an equal
proportionate interest in a Fund with other Shares of the same series, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared at the discretion of the Trustees
(see "Miscellaneous" below).
Shareholders are entitled to one vote per share (with proportional voting for
fractional shares) on such matters as Shareholders are entitled to vote.
Shareholders vote as a single class except (i) when required by the Investment
Company Act of 1940, shares shall be voted by individual series and (ii) when
the Trustees have determined that the matter affects only the interests of one
or more series, then only Shareholders of such series shall be entitled to vote
thereon.
Overall responsibility for the management of the Trust is vested in the Board
of Trustees. See "MANAGEMENT OF AmSouth Mutual Funds--Trustees of the Trust."
Individual Trustees are elected by the Shareholders and may be removed by the
Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Trust and Massachusetts law. See "ADDITIONAL INFORMATION--Miscellaneous" in
the Statement of Additional Information for further information.
As of November 16, 1996, AmSouth Bank of Alabama, 1901 Sixth Avenue North,
Birmingham, AL 35203, was the Shareholder of record of approximately 90.76% of
the outstanding shares of the Equity Fund, 66.88% of the outstanding shares of
the Regional Equity Fund, and 87.63% of the outstanding shares of the Balanced
Fund. AmSouth Bank of Alabama was the beneficial owner of approximately 42.68%
of the outstanding shares of the Equity Fund, 39.72% of the outstanding shares
of the Regional Equity Fund and 51.42% of the outstanding shares of the Balanced
Fund, and may be deemed to be a "controlling person" of each of the Equity Fund,
the Regional Equity Fund and the Balanced Fund within the meaning of the
Investment Company Act of 1940.
CUSTODIAN
It is expected that AmSouth Bank of Alabama will become custodian for the
Trust in the second calendar quarter of 1997. Until that time, Union Bank of
California, N.A. serves as custodian for the Trust.
23
<PAGE> 54
TRANSFER AGENT AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. serves as transfer agent for and provides fund
accounting services to the Trust.
PERFORMANCE INFORMATION
From time to time performance information for a Capital Appreciation Fund
showing its total return and/or yield may be presented in advertisements and
sales literature. Average annual total return will be calculated for the past
year and the period since the establishment of the Capital Appreciation Fund.
Total return is measured by comparing the value of an investment in the Capital
Appreciation Fund at the beginning of the relevant period to the redemption
value of the investment at the end of the period (assuming the investor paid the
maximum sales load on the investment and assuming immediate reinvestment of any
dividends or capital gains distributions). Aggregate total return is calculated
similarly to average total return except that the return figure is aggregated
over the relevant period instead of annualized. Yield will be computed by
dividing the Capital Appreciation Fund's net investment income per share earned
during a recent one-month period by the Capital Appreciation Fund's per share
maximum offering price (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last day of the period and annualizing the
result.
Investors may also judge the performance of each Capital Appreciation Fund by
comparing its performance to the performance of other mutual funds with
comparable investment objectives and policies through various mutual fund or
market indices and data such as that provided by Lipper Analytical Services,
Inc. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor, Ibbotson
Associates, Inc., Morning Star, Inc., CDA/Wiesenberger, Pensions and
Investments, U.S.A. Today, and local newspapers and periodicals. In addition to
performance information, general information about these Funds that appears in a
publication such as those mentioned above may be included in advertisements,
sales literature and in reports to Shareholders. Additional performance
information is contained in the Trust's Annual Report, which is available free
of charge by calling the number on the front page of the prospectus.
Information about the performance of a Capital Appreciation Fund is based on
the Capital Appreciation Fund's record up to a certain date and is not intended
to indicate future performance. Yield and total return are functions of the type
and quality of instruments held in a Capital Appreciation Fund, operating
expenses, and marketing conditions. Any fees charged by a Bank with respect to
customer accounts investing in Shares of a Capital Appreciation Fund will not be
included in performance calculations.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Trust upon
the issuance or sale of Shares in that Fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not
24
<PAGE> 55
readily identified as belonging to a particular Fund that are allocated to that
Fund in proportion to the relative net assets of the respective Funds at the
time of allocation. The timing of allocations of general assets and general
liabilities and expenses of the Trust to particular Funds will be determined by
the Board of Trustees of the Trust and will be in accordance with generally
accepted accounting principles. Determinations by the Board of Trustees of the
Trust as to the timing of the allocation of general liabilities and expenses and
as to the timing and allocable portion of any general assets with respect to a
particular Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Trust or a particular Fund
means the affirmative vote, at a meeting of Shareholders duly called, of the
lesser of (a) 67% or more of the votes of Shareholders of the Trust or such Fund
present at such meeting at which the holders of more than 50% of the votes
attributable to the Shareholders of record of the Trust or such Fund are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of Shareholders of the Trust or such Fund.
Under Massachusetts law, Shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims Shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in every
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of a Fund's
property for all loss and expense of any Shareholder of such Fund held liable on
account of being or having been a Shareholder. Thus, the risk of a Shareholder
incurring financial loss on account of Shareholder liability is limited to
circumstances in which a Fund would be unable to meet its obligations.
Inquiries regarding the Trust may be directed in writing to the Trust at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 451-8382.
25
<PAGE> 56
A M S O U T H M U T U A L F U N D S
---------------------------------------
AMSOUTH(R)
AMSOUTH BANK OF ALABAMA
Investment Advisor
CAPITAL
APPRECIATION
FUNDS
AMSOUTH
MUTUAL FUNDS
Not FDIC Insured
BISYS FUND SERVICES, DISTRIBUTOR
Prospectus dated November 30, 1996
<PAGE> 57
CROSS REFERENCE SHEET
Part A
Form N-1A Item No. Prospectus Caption
PROSPECTUS FOR AMSOUTH BOND FUND,
AMSOUTH LIMITED MATURITY FUND,
AMSOUTH GOVERNMENT INCOME FUND,
AMSOUTH FLORIDA TAX-FREE FUND,
AND AMSOUTH MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C>
1. Cover Page .............................. Cover Page
2. Synopsis ................................ Fee Table
3. Condensed Financial
Information ............................ Financial Highlights
4. General Description
of Registrant .......................... The Trust; Investment Objective and
Policies; Investment Restrictions; General
Information - Description of the Trust and
Its Shares
5. Management of the Fund .................. Management of AmSouth Mutual Funds;
General Information - Custodian and
Transfer Agent
6. Capital Stock and
Other Securities ....................... The Trust; How to Purchase and Redeem
Shares; Dividends and Taxes; General
Information - Description of the Trust and
Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered ........................... Valuation of Shares;
How to Purchase and
Redeem Shares
8. Redemption or Repurchase ................ How to Purchase and
Redeem Shares
9. Legal Proceedings ....................... Inapplicable
</TABLE>
<PAGE> 58
AMSOUTH MUTUAL FUNDS
INCOME FUNDS
<TABLE>
<S> <C>
3435 Stelzer Road For current yield, purchase and redemption
Columbus, Ohio 43219 information call (800) 451-8382
</TABLE>
The AmSouth Bond Fund (the "Bond Fund"), the AmSouth Limited Maturity Fund
(the "Limited Maturity Fund"), the AmSouth Government Income Fund (the
"Government Income Fund"), the AmSouth Florida Tax-Free Fund (the "Florida
Fund"), and the AmSouth Municipal Bond Fund (the "Municipal Bond Fund")
(collectively, "the Income Funds" and the Florida Fund and Municipal Bond Fund
sometimes collectively referred to herein as "the Tax-Free Funds") are five of
eleven series of units of beneficial interest ("Shares") each representing
interests in one of eleven separate investment funds (the "Funds") of AmSouth
Mutual Funds (the "Trust"), an open-end management investment company.
The Bond Fund and the Limited Maturity Fund seek current income, consistent
with the preservation of capital. The Government Income Fund seeks to provide
shareholders with a high level of current income consistent with prudent
investment risk.
AMSOUTH BOND FUND invests in long-term bonds and other fixed-income
securities. These investments may include debt securities issued by United
States corporations and debt securities issued or guaranteed by the United
States Government or its agencies or instrumentalities as well as zero-coupon
obligations. The Bond Fund invests in fixed-income securities with a maturity in
excess of one year, although such securities can have maturities of thirty years
or longer.
AMSOUTH LIMITED MATURITY FUND invests in bonds (including debentures), notes
and other debt securities which have a stated or remaining maturity of five
years or less or which have an unconditional redemption feature that will permit
the Limited Maturity Fund to require the issuer of the security to redeem the
security within five years from the date of purchase or for which the Limited
Maturity Fund has acquired an unconditional "put" to sell the security within
five years from the date of purchase. These investments may include debt
securities issued by United States corporations and debt securities issued or
guaranteed by the United States Government or its agencies or instrumentalities
as well as zero-coupon obligations.
AMSOUTH GOVERNMENT INCOME FUND invests, under normal market conditions, at
least 65% of the value of its total assets in obligations issued or guaranteed
by the U.S. Government its agencies or instrumentalities.
AMSOUTH FLORIDA TAX-FREE FUND seeks to produce as high a level of current
interest income exempt from federal income taxes and Florida intangible taxes as
is consistent with the preservation of capital. The Florida Fund seeks to
achieve this objective by investing in high-grade obligations. While the Florida
Fund may invest in taxable obligations, under normal market conditions at least
80% of the Florida Fund's net assets will be invested in obligations exempt from
both federal personal income tax and, as at year-end, the Florida intangible
personal property tax. The Fund is nondiversified and therefore may invest more
than 5% of its total assets in the obligations of one issuer.
AMSOUTH MUNICIPAL BOND FUND seeks to produce as high a level of current
interest income exempt from federal income taxes as is consistent with the
preservation of capital. The Municipal Bond Fund seeks to achieve this objective
by investing in high-grade obligations. While the Municipal Bond Fund may invest
in taxable obligations, under normal market conditions at least 80% of the
Municipal Bond Fund's net assets will be invested in obligations exempt from
federal income tax. The Municipal Bond Fund is a diversified fund.
The net asset value per share of each Tax-Free Fund will fluctuate as the
value of such Fund's investment portfolio changes in response to changing market
interest rates and other factors. The Municipal Bond Fund has not commenced
operations.
AmSouth Bank of Alabama, Birmingham, Alabama ("AmSouth"), acts as the
investment advisor to each Fund of the Trust. BISYS Fund Services, Limited
Partnership ("BISYS Fund Services"), Columbus, Ohio, acts as the Trust's
distributor.
This Prospectus relates only to the Income Funds. Interested persons who
wish to obtain a copy of the prospectuses of the AmSouth Prime Obligations Fund,
the AmSouth U.S. Treasury Fund, and the AmSouth Tax Exempt Fund (the "Money
Market Funds") and the AmSouth Equity Fund, the AmSouth Regional Equity Fund,
and the AmSouth Balanced Fund (the "Capital Appreciation Funds") may contact the
Trust's distributor at the telephone number shown above. Additional information
about the Income Funds, contained in a Statement of Additional Information, has
been filed with the Securities and Exchange Commission and is available upon
request without charge by writing to the Trust at its address or by calling the
Trust at the telephone number shown above. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Income Funds
that a prospective investor ought to know before investing. Investors should
read this Prospectus and retain it for future reference.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY AMSOUTH OR ANY OF ITS AFFILIATES. THE TRUST'S SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR BY ANY OTHER AGENCY. AN INVESTMENT IN THE TRUST'S SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is November 30, 1996.
<PAGE> 59
FEE TABLE
<TABLE>
<CAPTION>
LIMITED GOVERNMENT
BOND MATURITY INCOME
FUND FUND FUND
---- -------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... 3.00% 3.00% 3.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................... 0% 0% 0%
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)........................................ 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed, if applicable)(2)...... 0% 0% 0%
Exchange Fee................................................................ $0 $0 $0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fees (After Voluntary Fee Reduction)(3).......................... 0.50% 0.50% 0.30%
12b-1 Fees.................................................................. .00% .00% .00%
Other Expenses (After Voluntary Fee Reduction)(4)........................... 0.25% 0.26% 0.35%
---- ---- ----
Total Fund Operating Expenses(5)............................................ 0.75% 0.76% 0.65%
==== ==== ====
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Bond Fund................................................................ $ 37 $53 $70 $120
Limited Maturity Fund.................................................... $ 38 $54 $71 $121
Government Income Fund................................................... $ 36 $50 $65 $109
</TABLE>
- ------------
(1) AmSouth Bank of Alabama and its correspondent or affiliated banks may charge
a Customer's (as defined in the Prospectus) account fees for automatic
investment and other cash management services provided in connection with
investment in the Fund. (See "HOW TO PURCHASE AND REDEEM SHARES--Purchases
of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a shareholder. (See "HOW TO PURCHASE AND
REDEEM SHARES--Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management Fees
as a percentage of average net assets would be .65% for each of the Bond
Fund, the Limited Maturity Fund, and the Government Income Fund. (See
"MANAGEMENT OF AMSOUTH MUTUAL FUNDS--Investment Advisor.")
(4) Absent the voluntary reduction of administration fees, Other Expenses as a
percentage of average net assets would be 0.33% for the Bond Fund, 0.34% for
the Limited Maturity Fund, and 0.45% for the Government Income Fund. (See
"MANAGEMENT OF AMSOUTH MUTUAL FUNDS--Administrator and Distributor.")
(5) In the absence of any voluntary reduction in investment advisory fees and
administration fees, Total Fund Operating Expenses would be 0.98% for the
Bond Fund, 0.99% for the Limited Maturity Fund, and 1.10% for the Government
Income Fund.
The purpose of the table above is to assist an investor in the Income Funds in
understanding the various costs and expenses that an investor in an Income Fund
will bear directly or indirectly. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS" for a
more complete discussion of annual operating expenses of the Income Funds. THE
FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE> 60
FEE TABLE
<TABLE>
<CAPTION>
FLORIDA MUNICIPAL
FUND BOND FUND
-------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)....... 3.00% 3.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price)........................................................................... 0% 0%
Deferred Sales Load (as a percentage of original purchase price or redemption
proceeds,
as applicable).................................................................. 0% 0%
Redemption Fees (as a percentage of amount redeemed, if applicable)(2)............ 0% 0%
Exchange Fee...................................................................... 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fees (After Voluntary Fee Reduction)(3)................................ 0.30% 0.50%
12b-1 Fees........................................................................ .00% .00%
Other Expenses (After Voluntary Fee Reduction).................................... 0.29%(4) 1.27%(5)
---- ----
Total Fund Operating Expenses(6) (After Voluntary Fee Reduction).................. 0.59% 1.77%
==== ====
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Florida Fund............................................................. $ 36 $48 $62 $102
Municipal Bond Fund...................................................... $ 47 $84 N/A N/A
</TABLE>
- ------------
(1) AmSouth Bank of Alabama and its correspondent or affiliated banks may charge
a Customer's (as defined in the Prospectus) account fees for automatic
investment and other cash management services provided in connection with
investments in the Funds. (See "HOW TO PURCHASE AND REDEEM SHARES--Purchases
of Shares.")
(2) A wire redemption charge is deducted from the amount of a wire redemption
payment made at the request of a shareholder. (See "HOW TO PURCHASE AND
REDEEM SHARES--Redemption by Telephone.")
(3) Absent the voluntary reduction of investment advisory fees, Management Fees
as a percentage of average net assets would be .65% for the Florida Fund and
the Municipal Bond Fund. (See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS--
Investment Advisor.")
(4) Absent the voluntary reduction of administration fees, Other Expenses as a
percentage of average net assets would be 0.39% for the Florida Fund. (See
"MANAGEMENT OF AMSOUTH MUTUAL FUNDS--Administrator and Distributor.")
(5) "Other expenses" for the Municipal Bond Fund are based on estimated amounts
for the current fiscal year.
(6) In the absence of any voluntary reduction in investment advisory fees and
administration fees, Total Fund Operating Expenses would be 1.04% for the
Florida Fund, and are estimated to be 1.92% for the Municipal Bond Fund.
The purpose of the table above is to assist an investor in the Tax-Free Funds
in understanding the various costs and expenses that an investor in the Tax-Free
Funds will bear directly or indirectly. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS"
for a more complete discussion of annual operating expenses of the Tax-Free
Funds.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE> 61
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information concerning the
investment results for each of the Income Funds for the periods indicated. The
Municipal Bond Fund had not commenced operations as of July 31, 1996. This
information has been derived from financial statements audited by Coopers &
Lybrand L.L.P., independent accountants for the Trust, whose report thereon is
included in the Statement of Additional Information. Further financial data is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
BOND FUND
--------------------------------------------------------------------------
YEAR ENDED JULY 31, DECEMBER 1, 1988
-------------------------------------------------------------------------- TO
1996 1995 1994 1993 1992 1991 1990 JULY 31, 1989(a)
-------- ------- ------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 10.83 $ 10.59 $ 11.29 $ 11.29 $ 10.42 $ 10.39 $ 10.61 $10.00
-------- ------- ------- ------- ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net Investment income............. 0.65 0.69 0.69 0.71 0.74 0.74 0.77 0.50
Net realized and unrealized gains
(losses) on investments......... (0.18) 0.28 (0.66) 0.33 0.91 0.05 (0.21) 0.56
-------- ------- ------- ------- ------- ------- ------- ------
Total from Investment
Activities...................... 0.47 0.97 0.03 1.04 1.65 0.79 0.56 1.06
-------- ------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS
Net investment income............. (0.65) (0.69) (0.70) (0.71) (0.73) (0.74) (0.75) (0.45)
Net realized gains................ -- (0.04) (0.03) (0.33) (0.05) (0.02) (0.03) --
In excess of net realized gains... (0.11) -- -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------- ------
Total Distributions............... (0.76) (0.73) (0.73) (1.04) (0.78) (0.76) (0.78) (0.45)
-------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD...... $ 10.54 $ 10.83 $ 10.59 $ 11.29 $ 11.29 $ 10.42 $ 10.39 $10.61
======== ======= ======= ======= ======= ======= ======= ======
Total Return (Excluding Sales
Charge)......................... 4.40% 9.70% 0.23% 9.80% 16.41% 7.99% 5.54% 10.91%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)........................... $132,737 $94,671 $79,472 $65,777 $60,156 $26,008 $17,518 $4,954
Ratio of expenses to average net
assets.......................... 0.75% 0.75% 0.78% 0.78% 0.82% 0.93% 0.84% 1.10%(b)
Ratio of net investment income to
average net assets.............. 6.12% 6.63% 6.31% 6.37% 6.94% 7.26% 7.82% 7.47%(b)
Ratio of expenses to average net
assets*......................... 0.98% 0.98% 1.01% 1.01% 1.01% 1.11% 1.21% 2.28%(b)
Ratio of net investment income to
average net assets*............. 5.89% 6.40% 6.08% 6.14% 6.75% 7.09% 7.45% 6.29%(b)
PORTFOLIO TURNOVER.................. 9.60% 17.70% 30.90% 14.98% 240.64% 181.77% 53.52% 0.00%
</TABLE>
<TABLE>
<CAPTION>
LIMITED MATURITY FUND
--------------------------------------------------------------------------
YEAR ENDED JULY 31, FEBRUARY 1, 1988
-------------------------------------------------------------------------- TO
1996 1995 1994 1993 1992 1991 1990 JULY 31, 1989(a)
-------- ------- ------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 10.41 $ 10.23 $ 10.81 $ 10.81 $ 10.44 $ 10.29 $ 10.35 $10.00
-------- ------- ------- ------- ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net Investment income............. 0.58 0.58 0.54 0.60 0.70 0.73 0.72 0.35
Net realized and unrealized gains
(losses) on investments......... (0.10) 0.17 (0.45) 0.09 0.45 0.17 (0.05) 0.32
-------- ------- ------- ------- ------- ------- ------- ------
Total from Investment
Activities...................... 0.48 0.75 0.09 0.69 1.15 0.90 0.67 0.67
-------- ------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS
Net investment income............. (0.57) (0.57) (0.54) (0.61) (0.69) (0.73) (0.70) (0.32)
In excess of net investment
income.......................... (0.01) -- -- -- -- -- -- --
Net realized gains................ -- -- -- (0.08) (0.09) (0.02) (0.03) --
In excess of net realized gains... -- -- (0.13) -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------- ------
Total Distributions............... (0.58) (0.57) (0.67) (0.69) (0.78) (0.75) (0.73) (0.32)
-------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD...... $ 10.31 $ 10.41 $ 10.23 $ 10.81 $ 10.81 $ 10.44 $ 10.29 $10.35
======== ======= ======= ======= ======= ======= ======= ======
Total Return (Excluding Sales
Charge)......................... 4.74% 7.65% 0.77% 6.72% 11.48% 9.06% 6.80% 6.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)........................... $ 46,005 $59,798 $51,660 $53,933 $38,206 $11,112 $ 5,983 $3,165
Ratio of expenses to average net
assets.......................... 0.76% 0.80% 0.79% 0.69% 0.68% 0.85% 1.02% 1.41%(b)
Ratio of net investment income to
average net assets.............. 5.48% 5.69% 5.05% 5.67% 6.78% 7.19% 7.23% 6.82%(b)
Ratio of expenses to average net
assets*......................... 0.99% 1.03% 1.02% 1.03% 1.03% 1.20% 1.45% 2.72%(b)
Ratio of net investment income to
average net assets*............. 5.25% 5.46% 4.82% 5.33% 6.43% 6.84% 6.80% 5.51%(b)
PORTFOLIO TURNOVER.................. 29.56% 38.11% 48.06% 141.27% 35.64% 85.08% 119,69% 28.28%
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
4
<PAGE> 62
<TABLE>
<CAPTION>
GOVERNMENT INCOME FUND
---------------------------------------
YEAR ENDED JULY 31, OCTOBER 1, 1993
------------------- TO JULY 31,
1996 1995 1994(a)
------- ------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIODS....................................... $ 9.54 $ 9.48 $ 10.00
------- ------- -------
INVESTMENT ACTIVITIES
Net investment income..................................................... 0.66 0.68 0.54
Net realized and unrealized gains (losses) on investments................. (0.20) 0.08 (0.57)
Total from Investment Activities.......................................... 0.46 0.76 (0.03)
------- ------- -------
DISTRIBUTIONS
Net investment income..................................................... (0.59) (0.70) (0.33)
Net realized gains........................................................ -- -- --
Tax return of capital..................................................... (0.01) (0.16)
------- ------- -------
Total Distributions....................................................... (0.60) (0.70) (0.49)
------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................................. $ 9.40 $ 9.54 $ 9.48
======= ======= =======
Total Return (Excluding Sales Charge)..................................... 4.91% 8.43% (0.26%)(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)......................................... $15,752 $16,679 $15,465
Ratio of expenses to average net assets................................... 0.65% 0.58% 0.37%(b)
Ratio of net investment income to average net assets...................... 6.81% 7.18% 6.56%(b)
Ratio of expenses to average net assets*.................................. 1.10% 1.19% 1.22%(b)
Ratio of net investment income to average net assets*..................... 6.36% 6.57% 5.71%(b)
PORTFOLIO TURNOVER.......................................................... 78.31% 27.32% 122.94%
</TABLE>
<TABLE>
<CAPTION>
FLORIDA FUND
------------------------------------------
YEAR ENDED SEPTEMBER 30, 1994
JULY 31, 1996 THROUGH JULY 31, 1995(a)
------------- ------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................................... $ 10.32 $ 10.00
------- -------
INVESTMENT ACTIVITIES
Net investment income................................................... 0.45 0.34
Net realized and unrealized gains (losses) on investments............... (0.01) 0.30
------- -------
Total from Investment Activities........................................ 0.44 0.64
------- -------
DISTRIBUTIONS
Net investment income................................................... (0.45) (0.32)
Net realized gains...................................................... (0.01)
------- -------
Total Distributions..................................................... (0.46) (0.32)
------- -------
NET ASSET VALUE, END OF PERIOD............................................ $ 10.30 $ 10.32
======= =======
Total Return (Excluding Sales Charge)................................... 4.24% 6.53%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Asset at end of period (000)........................................ $48,869 $ 48,333
Ratio of expenses to average net assets................................. 0.59% 0.70%(b)
Ratio of net investment income to average net assets.................... 4.33% 4.16%(b)
Ratio of expenses to average net assets*................................ 1.04% 1.01%(b)
Ratio of net investment income to average net assets*................... 3.88% 3.86%(b)
PORTFOLIO TURNOVER........................................................ 12.21% 2.33%
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been
as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
5
<PAGE> 63
INVESTMENT OBJECTIVE AND POLICIES
Each of the Bond Fund, Limited Maturity Fund, and Government Income Fund seeks
current income consistent with the preservation of capital. There can be, of
course, no assurance that any Fund will achieve its investment objective. The
investment objective of each Fund is fundamental and may not be changed without
a vote of a majority of the outstanding Shares of that Fund (as defined below
under "GENERAL INFORMATION-- Miscellaneous" in this prospectus).
THE BOND FUND AND THE
LIMITED MATURITY FUND
THE BOND FUND invests in long-term bonds and other fixed-income securities.
The Bond Fund's investments primarily consist of, but are not limited to, debt
obligations such as bonds, notes and debentures, which are issued by United
States corporations or issued or guaranteed by the United States Government or
its agencies or instrumentalities. The Bond Fund invests in debt securities only
if they are rated at time of purchase in one of the three highest rating
categories by a nationally recognized statistical rating organization (an
"NRSRO"), or including all subclassifications indicated by modifiers of such "A"
ratings. See "Appendix" to the Statement of Additional Information for an
explanation of these ratings.
The Bond Fund invests in fixed-income securities with a maturity in excess of
one year, except for amounts held in cash equivalents. Fixed-income securities
can have maturities of thirty years or more. The Bond Fund will invest at least
65% of the value of its total assets in bonds (including debentures), except
that, when market conditions indicate a temporary defensive investment strategy
as determined by AmSouth, more than 35% of the Bond Fund's total assets may be
held in cash and cash equivalents. "Cash equivalents" are short-term,
interest-bearing instruments or deposits. The purpose of cash equivalents is to
provide income at money market rates while minimizing the risk of decline in
value to the maximum extent possible. The instruments may include, but are not
limited to, commercial paper, certificates of deposit, repurchase agreements,
bankers' acceptances, United States Treasury Bills, bank money market deposit
accounts and money market mutual funds. The Bond Fund will purchase commercial
paper rated at the time of purchase in the highest rating category by an NRSRO
or, if not rated, found by the investment advisor under guidelines established
by the Trust's Board of Trustees to be of comparable quality. See "Appendix" to
the Statement of Additional Information for an explanation of these ratings.
THE LIMITED MATURITY FUND invests in bonds (including debentures), notes and
other debt securities which have a stated or remaining maturity of five years or
less or which have an unconditional redemption feature that will permit the
Limited Maturity Fund to require the issuer of the security to redeem the
security within five years from the date of purchase by the Limited Maturity
Fund or for which the Limited Maturity Fund has acquired an unconditional "put"
to sell the security within five years from the date of purchase by the Limited
Maturity Fund.
The Limited Maturity Fund's investments consist primarily of, but are not
limited to, debt securities such as bonds, notes and debentures, which are
issued by United States corporations or issued or guaranteed by the United
States Government or its agencies or instrumentalities. The Limited Maturity
Fund invests in debt securities only if they are rated at time of purchase in
one of the three highest rating categories by an NRSRO or, if not rated, found
by the investment advisor under guidelines established by the Trust's Board of
Trustees to be of comparable quality. See "Appendix" to the Statement of
Additional Information for an explanation of these ratings.
Under normal circumstances, the Limited Maturity Fund will invest at least 65%
of the value
6
<PAGE> 64
of its total assets in bonds (including debentures), notes and other debt
securities which have a stated or remaining maturity of five years or less or
which have an unconditional redemption feature that will permit the Limited
Maturity Fund to require the issuer of the security to redeem the security
within five years from the date of purchase by The Limited Maturity Fund or for
which the Limited Maturity Fund has acquired an unconditional "put" to sell the
security within five years from the date of purchase by the Limited Maturity
Fund. The remainder of the Limited Maturity Fund's assets will be invested in
cash, cash equivalents and government and corporate bonds, including without
limitation cash or money-market instruments, commercial paper, certificates of
deposit, repurchase agreements, bankers' acceptances, U.S. Treasury Bills,
obligations of the U.S. Government and its agencies, bank money market deposit
accounts and money market mutual funds. The Limited Maturity Fund will purchase
commercial paper rated at the time of purchase in the highest rating category by
an NRSRO or, if not rated, found by the investment advisor under guidelines
established by the Trust's Board of Trustees to be of comparable quality. See
"Appendix" to the Statement of Additional Information for an explanation of
these ratings. At times, AmSouth may determine that it is not in the best
interests of Shareholders of the Limited Maturity Fund to invest 65% of The
Limited Maturity Fund's total assets in bonds, debentures, notes and other debt
securities. At such times, the Fund may follow the temporary defensive
investment strategy of investing more than 35% of its total assets in cash, cash
equivalents and corporate bonds with remaining maturities of less than 1 year.
There is no way to predict when, or for how long, the Limited Maturity Fund may
pursue such a defensive investment strategy.
At the time of purchase of a debt security with a stated or remaining maturity
in excess of three years from the date of purchase by the Limited Maturity Fund,
the Limited Maturity Fund may acquire a "put" with respect to such debt
securities. Under a "put", the Limited Maturity Fund would have the right to
sell the debt security within a specified period of time at a specified minimum
price. The Limited Maturity Fund will only acquire puts from dealers, banks and
broker-dealers which AmSouth has determined are creditworthy under guidelines
established by the Trust's Board of Trustees. A put will be sold, transferred,
or assigned by the Limited Maturity Fund only with the underlying debt security.
The Limited Maturity Fund will acquire puts solely to shorten the maturity of
the underlying debt security. The aggregate price of a security subject to a put
may be higher than the price which otherwise would be paid for the security
without such an option, thereby increasing the security's cost and reducing its
yield.
MASTER DEMAND NOTES
The Bond and Limited Maturity Funds may also invest in master demand notes in
order to satisfy short-term needs or, if warranted, as part of their temporary
defensive investment strategy. Such notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a United States commercial bank acting as
agent for the payees of such notes. Master demand notes are callable on demand
by an Income Fund, but are not marketable to third parties. Master demand notes
are direct lending arrangements between an Income Fund and the issuer of such
notes. The quality of master demand notes will be reviewed by the investment
advisor of the Income Funds at least quarterly, which review will consider the
earning power, cash flow and debt-to-equity ratios indicating the borrower's
ability to pay principal together with accrued interest on demand. While master
demand notes are not typically rated by credit rating agencies, issuers of such
notes must satisfy the same criteria for the Bond Fund and the Limited Maturity
Fund set forth above for commercial paper.
VARIABLE AND FLOATING RATE NOTES
The Bond Fund and the Limited Maturity Fund may acquire rated and unrated
variable and floating rate notes. Variable and floating rate notes are
frequently not rated by credit rating agencies; how-
7
<PAGE> 65
ever, unrated variable and floating rate notes purchased by an Income Fund will
be determined by the Trust's investment advisor under guidelines established by
the Trust's Board of Trustees to be of comparable quality at the time of
purchase to rated instruments eligible for purchase under the Fund's investment
policies. There may be no active secondary market with respect to a particular
variable or floating rate note. Nevertheless, the periodic readjustments of
their interest rates tend to assure that their value to an Income Fund will
approximate their par value.
It is anticipated that the only non-income producing securities to be held in
the Bond Fund and Limited Maturity Fund will be zero-coupon obligations
evidencing ownership of future interest and principal payments on United States
Treasury Bonds. Such zero-coupon obligations pay no current interest and are
typically sold at prices greatly discounted from par value, with par value to be
paid to the holder at maturity. The return on a zero-coupon obligation, when
held to maturity, equals the difference between the par value and the original
purchase price. Zero-coupon obligations have greater price volatility than
coupon obligations and such obligations will be purchased when the yield spread,
in light of the obligation's duration, is considered advantageous. The Bond Fund
will only purchase zero-coupon obligations if, at the time of purchase, such
investments do not exceed 15% of the value of the Bond Fund's total assets, and
the Limited Maturity Fund will only purchase zero-coupon obligations if, at the
time of purchase, such investments do not exceed 25% of the value of the Limited
Maturity Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Income Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, AmSouth may purchase debt securities at a discount from face value,
which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, AmSouth will consider many
factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
FOREIGN INVESTMENTS
The Bond Fund may invest up to 20% of the value of its total assets and the
Limited Maturity Fund may invest up to 30% of its total assets in debt
securities of foreign issuers. Any investments by the Bond Fund and Limited
Maturity Fund in these securities will be in accordance with such Fund's
investment policies and restrictions. The Bond Fund and the Limited Maturity
Fund may also invest in securities issued by foreign branches of U.S. banks and
foreign banks and in Canadian Commercial Paper and Europaper. Investment in
securities of foreign issuers is subject to special risks, such as future
adverse political and economic developments, possible seizure, currency
blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. Additional risks include currency exchange risks,
less publicly available information, the risk that companies may not be subject
to the accounting, auditing and financial reporting standards and requirements
of U.S. companies, the risk that foreign securities markets may have less volume
and therefore less liquidity and greater price volatility than U.S. securities,
and the risk that custodian and brokerage costs may be higher. To the extent
that the Income Funds may invest in securities of foreign issuers which are not
traded on any exchange, there is a further risk that these securities may not be
readily marketable. The Income Funds will not hold foreign currency as a result
of such investments.
INSURANCE COMPANY FUNDING AGREEMENTS
The Bond Fund and the Limited Maturity Fund may invest in funding agreements
("Funding Agreements") issued by insurance companies. Pursuant to such
agreements, the Bond Fund and Limited Maturity Fund invests an amount of cash
with an insurance company and the insurance com-
8
<PAGE> 66
pany credits such investment on a monthly basis with guaranteed interest which
is based on an index. The Funding Agreements provide that this guaranteed
interest will not be less than a certain minimum rate. The Bond Fund and the
Limited Maturity Fund will only purchase a Funding Agreement when AmSouth has
determined, under guidelines established by the Board of Trustees, that the
Funding Agreement presents minimal credit risks to the Fund and is of comparable
quality to instruments that are rated high quality by a nationally recognized
statistical rating organization that is not an affiliated person, as defined in
the Investment Company Act of 1940, of the issuer, on any insurer, guarantor,
provider of credit support for the instrument. The Bond Fund and the Limited
Maturity Fund may receive all principal of and accrued interest on a Funding
Agreement at any time upon thirty days' written notice. Because the Bond Fund
and the Limited Maturity Fund may not receive the principal amount of a Funding
Agreement from the insurance company on seven days' notice or less, the Funding
Agreement is considered an illiquid investment, and, together with other
instruments in such Fund which are not readily marketable, will not exceed 15%
of such Fund's net assets.
ASSET-BACKED SECURITIES
The Bond Fund and the Limited Maturity Fund may invest in securities backed by
automobile receivables and credit-card receivables and other securities backed
by other types of receivables.
Offerings of Certificates for Automobile Receivables ("CARS") are structured
either as flow-through grantor trusts or as pay-through notes. CARS structured
as flow-through instruments represent ownership interests in a fixed pool of
receivables. CARS structured as pay-through notes are debt instruments supported
by the cash flows from the underlying assets. CARS may also be structured as
securities with fixed payment schedules which are generally issued in
multiple-classes. Cash-flow from the underlying receivables is directed first to
paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent participation
in a fixed pool of credit card accounts. CARDS pay "interest only" for a
specified period, typically 18 months. The CARD'S principal balance remains
constant during this period, while any cardholder repayments or new borrowings
flow to the issuer's participation. Once the principal amortization phase
begins, the balance declines with paydowns on the underlying portfolio. CARDS
have monthly payment schedules, weighted-average lives of 18-24 months and
stated final maturities ranging from 3 to 5 years. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the underlying
assets or provided by a third party. Credit enhancement techniques include
letters of credit, insurance bonds, limited guarantees (which are generally
provided by the issuer), senior-subordinated structures and over
collateralization. The Bond Fund and the Limited Maturity Fund will only
purchase an asset-backed security if it is rated at the time of purchase in one
of the three
9
<PAGE> 67
highest rating categories by an NRSRO or, if unrated, found by the investment
advisor under guidelines established by the Trust's Board of Trustees to be of
comparable quality.
THE GOVERNMENT INCOME FUND
THE GOVERNMENT INCOME FUND invests at least 65% of its total assets in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, although up to 35% of the value of its total assets may be
invested in other types of debt securities, preferred stocks and options.
Consistent with the foregoing, under normal market conditions, the Government
Income Fund will invest up to 80% of the value of its total assets in
mortgage-related securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), and in mortgage-related
securities issued by nongovernmental entities which are rated, at the time of
purchase, in one of the three highest rating categories by an NRSRO or, if
unrated, which AmSouth deems present attractive opportunities and are of
comparable quality. For a description of the rating symbols of each NRSRO, see
the Appendix to the Statement of Additional Information.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. Government obligations, including mortgage-related
securities, invested in by the Government Income Fund includes obligations
issued or guaranteed as to payment of principal and interest by the full faith
and credit of the U.S. Treasury, such as Treasury bills, notes, bonds and
certificates of indebtedness, and obligations issued or guaranteed by the
agencies or instrumentalities of the U.S. Government, but not supported by such
full faith and credit. Obligations of the U.S. Treasury include "stripped" U.S.
Treasury Obligations such as Treasury Receipts, representing either future
interest or principal payments. Stripped securities are issued at a discount to
their "face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as GNMA and the Export-Import Bank of the United States, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of FNMA,
are supported by the right of the issuer to borrow from the Treasury; others are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, such as those of the Federal Farm Credit
Banks or FHLMC, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law.
The principal governmental (i.e., backed by the full faith and credit of the
United States Government) guarantor of mortgage-related securities is GNMA. GNMA
is a wholly-owned United States Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
United States Government) guarantors include FNMA and FHLMC. FNMA and FHLMC are
government-sponsored corporations owned entirely by private stockholders. Pass-
through securities issued by FNMA and FHLMC are guaranteed as to timely payment
of principal and interest by FNMA and FHLMC but are not backed by the full faith
and credit of the U.S. Government.
10
<PAGE> 68
MORTGAGE-RELATED SECURITIES--IN GENERAL
Mortgage-related securities have mortgage obligations backing such securities,
including among others, conventional thirty year fixed rate mortgage
obligations, graduated payment mortgage obligations, fifteen year mortgage
obligations, and adjustable rate mortgage obligations. All of these mortgage
obligations can be used to create pass-through securities. A pass-through
security is created when mortgage obligations are pooled together and undivided
interests in the pool or pools are sold. The cash flow from the mortgage
obligations is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
Prepayments occur when the holder of an individual mortgage obligation prepays
the remaining principal before the mortgage obligation's scheduled maturity
date. As a result of the pass-through of prepayments of principal on the
underlying securities, mortgage-backed securities are often subject to more
rapid prepayment of principal than their stated maturity would indicate. Because
the prepayment characteristics of the underlying mortgage obligations vary, it
is not possible to predict accurately the realized yield or average life of a
particular issue of pass-through certificates. Prepayment rates are important
because of their effect on the yield and price of the securities. Accelerated
prepayments have an adverse impact on yields for pass-throughs purchased at a
premium (i.e., a price in excess of principal amount) and may involve additional
risk of loss of principal because the premium may not have been fully amortized
at the time the obligation is repaid. The opposite is true for pass-throughs
purchased at a discount. The Government Income Fund may purchase
mortgage-related securities at a premium or at a discount.
MORTGAGE-RELATED SECURITIES ISSUED BY
NONGOVERNMENTAL ENTITIES
The Government Income Fund may invest in mortgage-related securities issued by
nongovernmental entities. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issues also create pass-through pools of conventional residential
mortgage loans. Such issuers may also be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such nongovernmental issuers generally offer a higher rate of
interest than government and government-related pools because there are not
direct or indirect government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Government Income
Fund's investment quality standards. There can be no assurance that the private
insurers can meet their obligations under the policies. The Government Income
Fund may buy mortgage-related securities without insurance or guarantees if
through an examination of the loan experience and practices of the poolers
AmSouth determines that the securities meet the Government Income Fund's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. The Government Income Fund will not purchase mortgage-related
securities or any other assets which in AmSouth's opinion are illiquid, if as a
result, more than 15% of the value of the Government Income Fund's net assets
will be illiquid.
COLLATERALIZED MORTGAGE OBLIGATIONS
Mortgage-related securities in which the Government Income Fund may invest may
also include collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations issued generally by finance subsidiaries or trusts that are secured
by mortgage-backed certificates, including, in many cases, certificates issued
by government-related guarantors, including GNMA, FNMA and
11
<PAGE> 69
FHLMC, together with certain funds and other collateral. Although payment of the
principal of and interest on the mortgage-backed certificates pledged to secure
the CMOs may be guaranteed by GNMA, FNMA or FHLMC, the CMOs represent
obligations solely of the issuer and are not insured or guaranteed by GNMA,
FHLMC, FNMA or any other governmental agency, or by any other person or entity.
The issuers of the CMOs typically have no significant assets other than those
pledged as collateral for the obligations. The staff of the Securities and
Exchange Commission has determined that certain issuers of CMOs are investment
companies for purposes of the Investment Company Act of 1940, as amended (the
"1940 Act").
CMOs may include Stripped Mortgage Securities. Such securities are derivative
multiclass mortgage securities issued by agencies or instrumentalities of the
U.S. Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
Mortgage Securities are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of Stripped Mortgage Security will have one class
receiving all of the interest from the mortgage assets (the interest-only or
"IO" class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on the securities' yield to maturity. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment in these
securities even if the security is rated AAA or Aaa.
Although Stripped Mortgage Securities are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers,
these securities were only recently developed. As a result, established trading
markets have not fully developed. The Stripped Mortgage Securities held by the
Fund will be considered liquid securities only under guidelines established by
the Trust's Board of Trustees, and the Fund will not purchase a Stripped
Mortgage Security that is illiquid if, as a result thereof, more than 15% of the
value of the Fund's net assets would be invested in such securities and other
illiquid securities.
In reliance on a recent staff interpretation, the Government Income Fund's
investment in certain qualifying CMOs, including CMOs that have elected to be
treated as Real Estate Mortgage Investment Conduits (REMICs), are not subject to
the 1940 Act's limitation on acquiring interests in other investment companies.
In order to be able to rely on the staff's interpretation, the CMOs and REMICs
must be unmanaged, fixed-asset issuers, that (a) invest primarily in
mortgaged-backed securities, (b) do not issue redeemable securities, (c) operate
under general exemptive orders exempting them from all provisions of the 1940
Act, and (d) are not registered or regulated under the 1940 Act as investment
companies. To the extent that the Government Income Fund selects CMOs or REMICs
that do not meet the above requirements, the Government Income Fund's investment
in such securities will be subject to the limitations on its investment in
investment company securities as set forth under "INVESTMENT OBJECTIVES AND
POLICIES--Investment Restrictions" in the Statement of Additional Information.
The Government Income Fund expects that governmental, government-related or
private entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may be different from customary long-term fixed rate mortgages. As new
types of mortgage-related securities are developed and offered to investors,
AmSouth will, consistent with the Government Income Fund's investment objective,
policies and quality
12
<PAGE> 70
standards, consider making investments in such new types of securities.
FUTURES CONTRACTS
The Government Income Fund may (i) enter into contracts for the future
delivery of securities and futures contracts based on a specific security, class
of securities or an index, (ii) purchase or sell options on any such futures
contracts, and (iii) engage in related closing transactions. A futures contract
on a securities index is an agreement obligating either party to pay, and
entitling the other party to receive, while the contract is outstanding, cash
payments based on the level of a specified securities index.
The Government Income Fund may engage in such futures contracts in an effort
to hedge against market risks. For example, when interest rates are expected to
rise or market values of portfolio securities are expected to fall, the
Government Income Fund can seek through the sale of futures contracts to offset
a decline in the value of its portfolio securities. When interest rates are
expected to fall or market values are expected to rise, the Government Income
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Government Income Fund than might later be available in the
market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give the Government Income Fund the right (but not the
obligations), for a specified price, to sell or to purchase the underlying
futures contract, upon exercise of the option, at any time during the option
period.
Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed five percent of the Government Income Fund's
total assets, and the value of securities that are the subject of such futures
and options (both for receipt and delivery) may not exceed one-third of the
market value of the Government Income Fund's total assets. Futures transactions
will be limited to the extent necessary to maintain the Government Income Fund's
qualification as a regulated investment company.
Futures transactions involve brokerage costs and require the Government Income
Fund to segregate assets to cover contracts that would require it to purchase
securities. The Government Income Fund may lose the expected benefit of futures
transactions if interest rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Government Income Fund had not entered into any futures
transactions. In addition, the value of the Government Income Fund's futures
positions may not prove to be perfectly or even highly correlated with the value
of its portfolio securities, limiting the Government Income Fund's ability to
hedge effectively against interest rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.
For further information about the characteristics, risks and possible benefits
of futures, see "INVESTMENT OBJECTIVE AND POLICIES-- Additional Information on
Portfolio Instruments" in the Statement of Additional Information.
OTHER SECURITIES
The Government Income Fund may hold some short-term obligations (with
maturities of 12 months or less) consisting of domestic and foreign commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit and time deposits of domestic and foreign branches of
U.S. banks and foreign banks, and repurchase and reverse repurchase agreements.
The Government Income Fund may also invest in corporate debt securities that are
rated at the time of purchase in one of the three highest rating categories by
an NRSRO or, if not rated, found by the investment advisor under guidelines
established by the Trust's Board of Trustees to be of comparable quality.
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THE FLORIDA FUND AND MUNICIPAL BOND FUND
The Florida Fund seeks to produce as high a level of current interest income
exempt from federal income taxes and Florida intangibles taxes as is consistent
with the preservation of capital. The Municipal Bond Fund seeks to produce as
high a level of current federal tax-exempt income, as is consistent with the
preservation of capital. There can be, of course, no assurance that the Florida
Fund or the Municipal Bond Fund will achieve their investment objectives. The
investment objective of each Tax-Free Fund is fundamental and may not be changed
without a vote of a majority of the outstanding Shares of the Fund (as defined
below under "GENERAL INFORMATION--Miscellaneous" in this prospectus).
The Florida Fund invests primarily in bonds, notes and warrants generally
issued by or on behalf of the State of Florida and its political subdivisions,
the interest on which, in the opinion of the issuer's bond counsel at the time
of issuance, is exempt from federal income tax, is not treated as a preference
item for purposes of the federal alternative minimum tax for individuals, and is
exempt from the Florida Intangible Personal Property Tax ("Florida Municipal
Securities"). As a fundamental policy, under normal market conditions at least
80% of the Florida Fund's net assets will be invested in Florida Municipal
Securities.
The Municipal Bond Fund invests primarily in bonds and notes issued by or on
behalf of states (including the District of Columbia), territories, and
possessions of the United States and their respective authorities, agencies,
instrumentalities, and political subdivisions, the interest on which is both
exempt from federal income tax and not treated as a preference item for purposes
of the federal alternative minimum tax for individuals ("Municipal Securities").
As a fundamental policy, under normal market conditions at least 80% of the
Municipal Bond Funds' net assets will be invested in Municipal Securities and in
securities of money market mutual funds which invest primarily in obligations
exempt from federal income tax. Additionally, as a fundamental policy, under
normal market conditions at least 65% of the Municipal Bond Fund's total assets
will be invested in bonds.
Under normal market conditions, each Tax-Free Fund may invest up to 20% of net
assets in obligations, the interest on which is either subject to federal income
taxation or treated as a preference item for purposes of the federal alternative
minimum tax ("Taxable Obligations"). The Florida Fund may also invest in
Municipal Securities. At times, AmSouth may determine that, because of unstable
conditions in the markets for Municipal Securities or Florida Municipal
Securities (hereinafter referred to collectively as "Eligible Municipal
Securities"), pursuing the Funds' basic investment strategies is inconsistent
with the best interests of the Shareholders of the Funds. At such times, AmSouth
may use temporary defensive strategies differing from those designed to achieve
the Funds' investment objectives, such as by increasing the Funds' holdings in
Municipal Securities (in the case of the Florida Fund) and Taxable Obligations
to over 20% of the Funds' total assets and by holding uninvested cash reserves
pending investment. Taxable Obligations may include obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities (some of
which may be subject to repurchase agreements), certificates of deposit, demand
and time deposits, bankers' acceptances of selected banks, and commercial paper
meeting the Tax-Free Funds' quality standards (as described below) for
tax-exempt commercial paper. These obligations are described further in the
Statement of Additional Information.
The Tax-Free Funds may also invest in private activity bonds ("industrial
development bonds" under prior law). Interest on private activity bonds (and
industrial development bonds) is fully tax-exempt only if the bonds fall within
certain defined categories of qualified private activity bonds and meet the
requirements specified in those respective categories. Regardless of whether
they qualify for tax-exempt status, private activity bonds may subject both
individual and corporate investors to tax liability under the alternative
minimum tax. However, private activity bonds will only be considered
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Municipal Securities for the purposes of this Prospectus if they do not have
this effect regarding individuals. For additional information on the federal
alternative minimum tax, see "DIVIDENDS AND TAXES."
The Tax-Free Funds may invest in Eligible Municipal Securities that are rated
at the time of purchase within the three highest rating groups assigned by a
nationally recognized statistical rating organization (an "NRSRO"). The Funds
may also purchase Eligible Municipal Securities that are unrated at the time of
purchase but are determined to be of comparable quality by AmSouth pursuant to
guidelines approved by the Trust's Board of Trustees. Eligible Municipal
Securities may be purchased in reliance upon a rating only when the rating
organization is not affiliated with the issuer or guarantor of the securities.
The applicable ratings are described in the Appendix to the Statement of
Additional Information.
The two principal classifications of Eligible Municipal Securities that may be
held by the Tax-Free Funds are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Funds are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
Eligible Municipal Securities may also include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality that
created the issuer.
Opinions relating to the validity of Eligible Municipal Securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Tax-Free
Funds nor their investment advisor will review the proceedings relating to the
issuance of Eligible Municipal Securities or the basis for such opinions.
Although the Municipal Bond Fund does not presently intend to do so on a
regular basis, it may invest more than 25% of its total assets in Municipal
Securities that are related in such a way that an economic, business, or
political development or change affecting one such security would likewise
affect the other Municipal Securities. An example of such securities are
obligations the repayment of which is dependent upon similar types of projects.
Such investments would be made only if deemed necessary or appropriate by the
Fund's investment advisor. To the extent that the Fund's assets are concentrated
in Municipal Securities that are so related, the Fund will be subject to the
peculiar risks presented by such securities, such as negative developments in a
particular industry, to a greater extent than it would be if the Fund's assets
were not so concentrated.
The Tax-Free Funds may acquire "puts" with respect to Eligible Municipal
Securities held in their portfolios. Under a put, the Funds would have the right
to sell a specified Eligible Municipal Security within a specified period of
time at a specified price to a third party. A put would be sold, transferred, or
assigned only with the underlying Eligible Municipal Security. The Funds will
acquire puts solely to facilitate portfolio liquidity, shorten the maturity of
the underlying Eligible Municipal Securities, or permit the investment of the
Funds' at a more favorable rate of return. The Funds expect that they will
generally acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if necessary or advisable, the
Funds may pay for a put separately in cash. The aggregate price of a security
subject to a
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put may be higher than the price which otherwise would be paid for the security
without such an option, thereby increasing the security's cost and reducing its
yield.
The Tax-Free Funds may also invest in master demand notes in order to satisfy
short-term needs or, if warranted, as part of its temporary defensive investment
strategy. Such notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to arrangements
between the issuer and a United States commercial bank acting as agent for the
payees of such notes. Master demand notes are callable on demand by the Funds,
but are not marketable to third parties. Master demand notes are direct lending
arrangements between the Fund and the issuer of such notes. The investment
advisor of the Funds will review the quality of master demand notes at least
quarterly, and will consider the earning power, cash flow and debt-to-equity
ratios indicating the borrower's ability to pay principal together with accrued
interest on demand. While master demand notes are not typically rated by credit
rating agencies, issuers of such notes must satisfy the same criteria for the
Funds set forth above for commercial paper.
The Tax-Free Funds may acquire rated and unrated variable and floating rate
notes. Variable and floating rate notes are frequently not rated by credit
rating agencies; however, unrated variable and floating rate notes purchased by
the Funds will be determined by the Funds' investment advisor under guidelines
established by the Board of Trustees to be of comparable quality at the time of
purchase to rated instruments eligible for purchase under the Funds' investment
policies. There may be no active secondary market with respect to a particular
variable or floating rate note. Nevertheless, the periodic readjustments of
their interest rates tend to assure that their value to the Funds will
approximate their par value.
The Tax-Free Funds may acquire zero-coupon obligations. Such zero-coupon
obligations pay no current interest and are typically sold at prices greatly
discounted from par value, with par value to be paid to the holder at maturity.
The return on a zero-coupon obligation, when held to maturity, equals the
difference between the par value and the original purchase price. Zero-coupon
obligations have greater price volatility than coupon obligations and such
obligations will be purchased when the yield spread, in light of the
obligation's duration, is considered advantageous. The Funds will only purchase
zero-coupon obligations if, at the time of purchase, such investments do not
exceed 20% of the value of the Florida Fund's total assets and 25% of the
Municipal Bond Fund's total assets.
An increase in interest rates will generally reduce the value of the
investments in the Tax-Free Funds and a decline in interest rates will generally
increase the value of those investments. Depending upon prevailing market
conditions, AmSouth may purchase debt securities at a discount from face value,
which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, AmSouth will consider many
factors besides current yield, including the preservation of capital, maturity,
and yield to maturity.
THE FLORIDA FUND--DIVERSIFICATION AND
CONCENTRATION
The Florida Fund is a non-diversified fund under the Investment Company Act of
1940 (the "1940 Act") and may concentrate its investments in the securities of a
limited number of issuers. Under the Internal Revenue Code of 1986, as amended,
(the "Code")the Florida Fund generally may not invest more than 25% of its total
assets in securities of any one issuer (other than U.S. government securities)
at the end of each fiscal quarter and, with respect to 50% of its total assets,
the Fund may not invest more than 5% of its total assets in the securities of
any one issuer (other than U.S. government securities) at the end of each fiscal
quarter. Thus, the Florida Fund generally may each invest up to 25% of its total
assets in the securities of each of any two issuers. Because of the relatively
small number of issuers of Florida Municipal Securities, the Florida Fund is
more likely to invest a higher percentage of
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its assets in the securities of a single issuer than an
investment company that invests in a broad range of tax-exempt securities. This
concentration involves an increased risk of loss if the issuer is unable to make
interest or principal payments or if the market value of such securities were to
decline. Concentration of this nature may cause greater fluctuation in the net
asset value of the Florida Fund's shares.
INVESTMENT TECHNIQUES
Each Income Fund may invest up to 5% of the value of its total assets in the
securities of any one money market mutual fund including Shares of the AmSouth
Prime Obligations Fund, the AmSouth U.S. Treasury Fund (and, with respect to the
Tax-Free Funds, the AmSouth Tax Exempt Fund), provided that no more than 10% of
each Fund's total assets may be invested in the securities of money market
mutual funds in the aggregate. In order to avoid the imposition of additional
fees as a result of investments by the each Funds in the Prime Obligations Fund
and the AmSouth U.S. Treasury Fund (and, with respect to the Tax-Free Funds, the
AmSouth Tax Exempt Fund), the Investment Advisor and the Administrator will
reduce that portion of their usual service fees from each Fund by an amount
equal to their service fees from the AmSouth Money Market Funds that are
attributable to those Fund investments. The Investment Advisor and the
Administrator will promptly forward such fees to the Funds. Each Fund will incur
additional expenses due to the duplication of expenses as a result of investing
in securities of other unaffiliated money market mutual funds. Additional
restrictions regarding the Funds' investments in the securities of an
unaffiliated money market fund and/or the AmSouth Money Market Funds are
contained in the Statement of Additional Information.
OPTIONS
The Bond Fund, Limited Maturity Fund, and Government Income Fund may engage in
writing call options from time to time as AmSouth deems to be appropriate.
Options are written solely as covered call options (options on securities owned
by the Fund). Such options must be listed on a national securities exchange and
issued by the Options Clearing Corporation. In order to close out an option
position, the Fund will enter into a "closing purchase transaction"--the
purchase of a call option on the same security with the same exercise price and
expiration date as any call option which it may previously have written on any
particular securities. When the portfolio security is sold, the Fund effects a
closing purchase transactions so as to close out any existing call option on
that security. If the Fund is unable to effect a closing purchase transactions
so as to close out any existing call option on that security. If the Fund is
unable to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. When writing a covered call option, the Fund, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security above the exercise price, but retains the risk of loss
should the price of the security decline.
From time to time, the Bond Fund and the Limited Maturity Fund may also
purchase call options on any of the types of securities in which each Fund may
invest. A purchased call option gives a Fund the right to buy and obligates the
seller to sell the underlying security at a specified exercise price during the
option period. Purchasing call options is a specialized investment technique
that entails a substantial risk of a complete loss of the amounts paid as
premiums to writers of options.
From time to time, the Bond Fund may purchase put options. A put is a right to
sell a specified security (or securities) within a specified period of time at a
specified exercise price. Puts may be acquired by the Fund to facilitate the
liquidity of the portfolio assets. Puts may also be used to facilitate the
reinvestment of assets at a rate of return more favorable than that of the
underlying security. The Bond Fund may sell, transfer, or assign a put
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only in conjunction with the sale, transfer or assignment of the underlying
security or securities.
The amount payable to the Bond Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities). The Bond Fund intends to
enter into puts only with dealers, banks, and broker-dealers which, in AmSouth's
opinion, present minimal credit risks.
For discussion of the Tax-Free Funds' ability to acquire puts, see "The
Florida Fund and the Municipal Bond Fund" in this Prospectus.
WHEN-ISSUED SECURITIES
Each Income Fund may also purchase securities on a "when-issued" basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield and thereby involve a risk that the
yield obtained in the transaction will be less than that available in the market
when delivery takes place. The Income Funds will generally not pay for such
securities or start earning interest on them until they are received. When an
Income Fund agrees to purchase securities on a "when-issued" basis, the Trust's
custodian will set aside cash or liquid securities equal to the amount of the
commitment in a segregated account. Securities purchased on a "when-issued"
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. Each of the Income Funds expects
that commitments to purchase "when-issued" securities will not exceed 25% of the
value of its total assets under normal market conditions, and that a commitment
to purchase "when-issued" securities will not exceed 60 days. In the event that
its commitment to purchase "when-issued" securities ever exceeded 25% of the
value of its total assets, an Income Fund's liquidity and the investment
advisor's ability to manage it might be adversely affected. The Income Funds do
not intend to purchase "when-issued" securities for speculation purposes, but
only for the purpose of acquiring portfolio securities.
REPURCHASE AGREEMENTS
Securities held by the Income Funds may be subject to repurchase agreements.
If the seller under a repurchase agreement were to default on its repurchase
obligation or become insolvent, the Income Fund would suffer a loss to the
extent that the proceeds from a sale of the underlying portfolio securities were
less than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Income Fund were delayed pending court
action. Additionally, if the seller should be involved in bankruptcy or
insolvency proceedings, the Income Fund may incur delay and costs in selling the
underlying security or may suffer a loss of principal and interest if the Income
Fund is treated as an unsecured creditor and required to return the underlying
security to the seller's estate.
REVERSE REPURCHASE AGREEMENTS
Each Income Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements in accordance with the investment restrictions
described below. Pursuant to such agreements, an Income Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase them at a mutually agreed-upon date and price. Reverse
purchase agreements involve the risk that the market value of the securities
sold by an Income Fund may decline below the price at which the Fund is
obligated to repurchase the securities.
OTHER INVESTMENT PRACTICES
In order to generate additional income, the Bond Fund, Limited Maturity Fund,
and Government Income Fund may, from time to time, lend its securities to
broker-dealers, banks or institutional borrowers of securities which are not
affiliated di-
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rectly or indirectly with the Trust. While the lending of securities may subject
the Funds to certain risks, such as delays or an inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, each Fund will receive 100% collateral in the form of
cash or U.S. Government securities. This collateral will be valued daily by
AmSouth and should the market value of the loaned securities increase, the
borrower will furnish additional collateral to each Fund. During the time
securities of the Funds are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination by the Funds
or the borrower at any time. While the Funds do not have the right to vote
securities on loan, each Fund intends to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. The
Funds will only enter into loan arrangements with broker-dealers, banks or other
institutions which AmSouth has determined are creditworthy under guidelines
established by the Trust's Board of Trustees.
The Government Income Fund may engage in the technique of short-term trading.
Such trading involves the selling of securities held for a short time, ranging
from several months to less than a day. The object of such short-term trading is
to increase the potential for capital appreciation and/or income of the
Government Income Fund in order to take advantage of what AmSouth believes are
changes in market, industry or individual company conditions or outlook. Any
such trading would increase the turnover rate of the Government Income Fund and
its transaction costs. The Bond Fund and Limited Maturity Funds will not
purchase securities solely for the purpose of short-term trading.
INVESTMENT RESTRICTIONS
Each Income Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of that Fund. See
"GENERAL INFORMATION-- Miscellaneous" in this prospectus.
The Bond Fund, Limited Maturity Fund, Government Income Fund, and the
Municipal Bond Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in such issuer, or such Fund would hold more than 10%
of any class of securities of the issuer or more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of each
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities.
The Income Funds may not:
1. Purchase any securities which would cause more than 25% of the value of
such Income Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) for the Bond Fund, the
Limited Maturity Fund, the Florida Fund, and the Municipal Bond Fund there is no
limitation with respect to Municipal Securities, which, for purposes of this
limitation only, do not include private activity bonds that are backed only by
the assets and revenues of a nongovernmental user; (c) wholly-owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (d) utilities will be divided according to their services. For example, gas,
gas transmission, electric
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and gas, electric, and telephone will each be considered a separate industry.
2. Borrow money or issue senior securities, except that each Fund may borrow
from banks or enter into reverse repurchase agreements for temporary emergency
purposes in amounts up to 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of such Fund's total assets at
the time of its borrowing. A Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
3. Make loans, except that each Fund may purchase or hold debt instruments in
accordance with its investment objective and policies, may lend Fund securities
in accordance with its investment objective and policies, and may enter into
repurchase agreements.
The Tax-Free Funds may not:
1. Write or sell puts, calls, straddles, spreads, or combinations thereof
except that the Funds may acquire puts with respect to Eligible Municipal
Securities and sell those puts in conjunction with a sale of those Eligible
Municipal Securities.
VALUATION OF SHARES
The net asset value of each Income Fund is determined and its Shares are
priced as of 4:00 p.m., Eastern Time (the "Valuation Time") on each Business Day
of such Fund. As used herein a "Business Day" constitutes any day on which the
New York Stock Exchange (the "NYSE") is open for trading and the Federal Reserve
Bank of Atlanta is open, except days on which there are not sufficient changes
in the value of the Fund's portfolio securities that the Fund's net asset value
might be materially affected, or days during which no Shares are tendered for
redemption and no orders to purchase Shares are received. Currently, either the
NYSE or the Federal Reserve Bank of Atlanta is closed on the customary national
business holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran's Day, Thanksgiving Day and Christmas Day. Net asset value per Share for
purposes of pricing sales and redemptions is calculated by dividing the value of
all securities and other assets belonging to an Income Fund, less the
liabilities charged to that Fund, by the number of the outstanding Shares of
that Fund. The net asset value per Share of each Income Fund will fluctuate as
the value of its investment portfolio changes.
The securities in each Fund will be valued at market value. If market
quotations are not available, the securities will be valued by a method which
the Board of Trustees of the Trust believes accurately reflects fair value. For
further information about valuation of investments in the Income Funds, see the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Income Fund are sold on a continuous basis by the Trust's
distributor, BISYS Fund Services (the "Distributor"). The principal office of
the Distributor is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to
purchase Shares, contact the Trust at (800) 451-8382.
PURCHASES OF SHARES
Shares of the Income Funds may be purchased through procedures established by
the Distributor in connection with requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by AmSouth or its correspondent
or affiliated banks (collectively, the "Banks"). These
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procedures may include instructions under which a Customer's account is "swept"
automatically no less frequently than weekly and amounts in excess of a minimum
amount agreed upon by a Bank and its Customer are invested by the Distributor in
Shares of the Funds. These procedures may also include transactions whereby
AmSouth as agent purchases Shares of the Income Funds in amounts that correspond
to the market value of securities sold to the Funds by AmSouth as agent.
Shares of the Trust sold to the Banks acting in a fiduciary, advisory,
custodial, or other similar capacity on behalf of Customers will normally be
held of record by the Banks. With respect to Shares so sold, it is the
responsibility of the particular Bank to transmit purchase or redemption orders
to the Distributor and to deliver federal funds for purchase on a timely basis.
Beneficial ownership of the Shares will be recorded by the Banks and reflected
in the account statements provided by the Banks to Customers.
Investors may also purchase Shares of an Income Fund by completing and signing
an Account Registration Form and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum initial purchase
amount, payable to the Trust in care of AmSouth Mutual Funds, Department L1304,
Columbus, Ohio 43260-1304. Subsequent purchases of Shares of a Fund may be made
at any time by mailing a check (or other negotiable bank draft or money order)
payable to the Trust, to the above address.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Shares of an Income Fund either by
telephone or by wiring funds to the Trust's custodian. Telephone orders may be
placed by calling the Trust at (800) 451-8382. Payment for Shares ordered by
telephone may be made by check and must be received by the Trust's custodian
within seven days of the telephone order. If payment is not received within
seven days or a check timely received does not clear, the purchase will be
cancelled and the investor could be liable for any losses or fees incurred. In
the case of purchase of Shares effected by wiring funds to the Trust's
custodian, investors must call the Trust at (800) 451-8382 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Investors may also purchase Shares by arranging systematic monthly, bi-monthly
or quarterly investments into the Funds with the Trust's Automatic Investment
Plan ("AIP"). The minimum investment amounts are $50 per transfer and the
maximum amount with respect to any transfer is $100,000. After investors give
the Trust proper authorization, their bank accounts, which must be with banks
that are members of the Automated Clearing House, will be debited accordingly to
purchase Shares. Investors will receive a confirmation from the Trust for every
transaction, and a withdrawal will appear on their bank statements.
To participate in AIP, investors must complete the appropriate sections of the
Account Registration form or call for instructions. This form may be obtained by
calling the Trust at (800) 451-8382. The amount investors specify will
automatically be invested in Shares at the specified Fund's public offering
price per Share next determined after the debit is made.
To change the frequency or amount invested, written instructions must be
received by the Trust at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Trust at least 20 Business Days in advance. In order to change a
bank or bank account number, investors also must have their signature guaranteed
by a bank, broker, dealer, credit union, securities exchange, securities
association, clearing agency or savings association, as those terms are defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an "Eligible
Guarantor Institution"). Signature guarantees are described more fully under
"REDEMPTION BY MAIL" below. If there are insufficient funds in the investor's
designated bank account to cover the Shares purchased using AIP, the investor's
bank may charge the investor a fee or may refuse to honor the transfer
instruction (in which case no Fund Shares will be purchased).
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Investors should check with their banks to determine whether they are members
of the Automated Clearing House and whether their banks charge a fee for
transferring funds through the Automated Clearing House. Expenses incurred by
the Funds related to AIP are borne by the Funds and therefore there is no direct
charge by the Funds to investors for use of these services.
Shares of each Fund are purchased at the public offering price per Share,
which is the net asset value per Share (see "VALUATION OF SHARES") next
determined after receipt by the Distributor of an order in good form to purchase
Shares plus the applicable sales charge as described below. Purchases of Shares
of an Income Fund will be effected only on a Business Day (as defined in
"VALUATION OF SHARES") of such Fund. An order received prior to the Valuation
Time on any Business Day will be executed based on the net asset value
determined as of the Valuation Time on the date of receipt. An order received
after the Valuation Time on any Business Day will be executed based on the net
asset value determined as of the next Business Day.
In the case of orders for the purchase of Shares placed through a
broker-dealer, the applicable public offering price will be calculated with
reference to the net asset value as so determined, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Distributor prior to its close of business that same day (normally 4:00 p.m.
Eastern Time). The broker-dealer is responsible for transmitting such orders by
4:00 p.m. If the broker-dealer fails to do so, the investor's right to that
day's closing price must be settled between the investor and the broker-dealer.
The minimum investment is $1,000 for the initial purchase of Shares of a Fund
by an investor. There is no minimum investment for subsequent purchases;
however, as described above, the minimum subsequent investment when using AIP is
$50 per transfer. The minimum initial investment amount may be waived if
purchases are made in connection with Individual Retirement Accounts, Keogh
plans or similar plans. For information on IRAs or Keogh or similar plans,
contact AmSouth at (800) 444-4727.
Depending upon the terms of a particular Customer account, the Banks may
charge a Customer's account fees for automatic investment and other cash
management services provided in connection with investment in a Fund.
Information concerning these services and any charges can be obtained from the
Banks. This Prospectus should be read in conjunction with any such information
received from the Banks.
The Trust reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made with foreign and third
party drafts or checks.
Every Shareholder will receive a confirmation of each new transaction in his
or her account, which will also show the total number of Shares of the
particular Fund owned by the Shareholder. Reports of purchases and redemptions
of Shares by Banks on behalf of their Customers will be sent by the Banks to
their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
SALES CHARGE
The public offering price of a share of an Income Fund equals its net asset
value plus a sales charge. BISYS Fund Services receives this sales charge as
Distributor and will re-allow a portion of it as dealer discounts and brokerage
commissions. However, BISYS Fund Services, at its sole discretion, may pay
certain dealers all or part of the portion of the sales charge it receives. A
broker or dealer who receives a reallowance in excess of 90% of the sales charge
may be deemed to be an "underwriter" for purposes of the Securities Act of 1933.
22
<PAGE> 80
<TABLE>
<CAPTION>
SALES CHARGE AS DEALER
A PERCENTAGE OF SALES CHARGE AS ALLOWANCE
NET AMOUNT A PERCENTAGE OF AS A PERCENTAGE
AMOUNT OF PURCHASE INVESTED OFFERING PRICE OF OFFERING PRICE
- ---------------------------------------------------- --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $100,000.................................. 3.09% 3.00% 2.70%
$100,000 but less than $250,000..................... 2.04% 2.00% 1.80%
$250,000 but less than $1,000,000................... 1.01% 1.00% .90%
$1,000,000 or more.................................. -0- -0- -0-
</TABLE>
From time to time dealers who receive dealer discounts and broker commissions
from the Distributor may reallow all or a portion of such dealer discounts and
broker commissions to other dealers or brokers. The Distributor, at its expense,
will also provide additional compensation to dealers in connection with sales of
Shares of any of the Funds. Such compensation will include financial assistance
to dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or more
Funds of the Trust, and/or other dealer-sponsored special events. In some
instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Compensation will also
include the following types of non-cash compensation offered through sales
contests: (1) vacation trips, including the provision of travel arrangements and
lodging at luxury resorts at an exotic location, (2) tickets for entertainment
events (such as concerts, cruises and sporting events) and (3) merchandise (such
as clothing, trophies, clocks and pens). Dealers may not use sales of a Fund's
Shares to qualify for this compensation to the extent such may be prohibited by
the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by any Fund or its Shareholders.
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which includes: (i) an
individual, his or her spouse and children under the age of 21; (ii) a trustee
or other fiduciary of a single trust estate or single fiduciary account; or
(iii) any other organized group of persons, whether incorporated or not,
provided that such organization has been in existence for at least six months
and has some purpose other than the purchase of redeemable securities of a
registered investment company. In order to qualify for a lower sales charge, all
orders from a Purchaser will have to be placed through a single investment
dealer and identified at the time of purchase as originating from the same
Purchaser, although such orders may be placed into more than one discrete
account which identifies the Purchasers.
SALES CHARGE WAIVERS
The following classes of investors may purchase Shares of a Fund with no sales
charge in the manner described below (which may be changed or eliminated at any
time by the Distributor):
(1) Existing Shareholders of a Fund upon the reinvestment of dividend and
capital gain distributions;
(2) Officers, trustees, directors, employees and retired employees of the
Trust, AmSouth Bancorporation and its affiliates, and BISYS Fund Services and
its affiliates (and spouses and children of each of the foregoing);
(3) Investors for whom AmSouth Bancorporation or one of its affiliates acts in
a fiduciary, advisory, custodial, agency or similar capacity through an account
with the Trust Department of AmSouth Bancorporation or one of its affiliates;
(4) Investors who purchase Shares of a Fund through a payroll deduction plan,
a 401(k) plan, or a 403(b) plan which by its terms permits purchases of Shares;
23
<PAGE> 81
(5) Employees (and their spouses and children under the age of 21) of any
broker-dealer with which the Distributor enters into a dealer agreement to sell
shares of the Funds;
(6) Orders placed on behalf of other investment companies distributed by the
Distributor and its affiliated companies; and
(7) Investors who purchase Shares of a Fund through certain broker-dealers,
registered investment advisors and other financial institutions that have
entered into an agreement with the Distributor which includes a requirement that
such shares be sold for the benefit of clients participating in a "wrap
account," asset allocation or a similar program under which such clients pay a
fee to such broker-dealer, registered investment advisor or other financial
institution.
From time to time, for special promotional purposes, the Distributor may offer
special concessions to enable investors to purchase shares of a Fund offered by
the Trust at net asset value without payment of a front-end charge. To qualify
for a net asset value purchase, the investor must pay for such purchase with the
proceeds from the redemption of shares of a non-affiliated mutual fund on which
a front-end sales charge was paid. A qualifying purchase of shares must occur
within 30 days of prior redemption and must be evidenced by a confirmation of
the redemption transaction. At the time of purchase, the investment
representative must notify the Distributor that the purchase qualifies for a
purchase at net asset value and provide sufficient information to permit
confirmation of qualification. Proceeds from the redemption of shares on which
no front-end sales charge was paid do not qualify for a purchase at net asset
value.
The Distributor may also periodically waive the sales charge for all investors
with respect to any Income Fund.
LETTER OF INTENT
By checking the Letter of Intent box on the account application, a shareholder
becomes eligible for reduced sales charges applicable to the total amount
invested in shares of an Income Fund in the load fund over a 13-month period
(beginning up to 90 days prior to the date indicated on the account
application). The Trust's Transfer Agent will hold in escrow 5% of the amount
indicated for payment of the higher sales charge if a shareholder does not
purchase the full amount indicated on the account application. Upon completion
of the total minimum investment specified on the account application, the escrow
will be released, and an adjustment will be made to reflect any reduced sales
charge applicable to shares purchased during the 90-day period prior to
submission of the account application. Additionally, if the total purchases
within the 13-month period exceed the amount specified, an adjustment will be
made to reflect further reduced sales charges applicable to such purchases. All
such adjustments will be made at the conclusion of the 13-month period in the
form of additional shares credited to the shareholder's account at the then
current Public Offering Price applicable to a single purchase of the total
amount of the total purchases. If total purchases are less than the amount
specified, escrowed shares may be involuntarily redeemed to pay the additional
sales charge. Checking a Letter of Intent box does not bind an investor to
purchase, or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but an investor must complete the intended
purchase to obtain the reduced sales load.
For further information about Letters of Intent, interested investors should
contact the Trust at (800) 451-8382. This program, however, may be modified or
eliminated at any time or from time to time by the Distributor without notice.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Shares of an Income Fund and one or more of the other Funds of the
Trust sold with a sales charge or by combining a current purchase of Shares of a
Fund with prior purchases of Shares of any Fund of the Trust sold subject to a
sales charge. The applicable sales charge is based on the sum of (i) the
24
<PAGE> 82
Purchaser's current purchase of shares of any Fund sold with a sales charge plus
(ii) the then current net asset value of all Shares held by the Purchaser in any
Fund sold with a sales charge. To receive the applicable public offering price
pursuant to the right of accumulation Shareholders must at the time of purchase
provide the Transfer Agent or the Distributor with sufficient information to
permit confirmation of qualification. Accumulation privileges may be amended or
terminated without notice at any time by the Distributor.
EXCHANGE PRIVILEGE
Shareholders may exchange Shares of an Income Fund for Shares of any other
Fund of the Trust so long as they maintain the respective minimum account
balance in each Fund in which they own Shares. Shareholders may exchange their
Shares for Shares of a Fund with the same or lower sales charge on the basis of
the relative net asset value of the Shares exchanged without the imposition of a
sales charge. Fund Shareholders may exchange their Shares for Shares of a Fund
with a higher sales charge by paying the difference between the two sales
charges; however, Shareholders of the Limited Maturity Fund who owned Shares of
that Fund as of March 15, 1992 may exchange Shares of that Fund for Shares of a
Fund with a higher sales charge without payment of an additional sales charge.
Shareholders may exchange Shares of a Fund without a sales charge for Shares of
a Fund with a sales charge, by paying the applicable sales charge, so long as
they maintain the respective minimum account balances in each Fund in which they
own Shares. Shares of a Fund without a sales charge that were acquired through
an exchange of Shares of a Fund with respect to which a sales charge was paid
may be exchanged for Shares of a Fund with a sales charge without payment of a
sales charge, provided that such an exchange may only be made once during each
calendar year and only upon the written request of a Shareholder. To receive the
applicable public offering price, shareholders must at the time of purchase
provide the Transfer Agent or the Distributor with sufficient information to
permit confirmation of qualification.
An exchange is considered to be a sale of Shares for federal income tax
purposes on which a Shareholder may realize a capital gain or loss. In general,
if a shareholder exchanges Income Fund shares for Shares of another Fund without
paying a sales charge, the gain or loss on the exchange of the Fund Shares will
be calculated without taking into account the sales charge paid on the Fund
Shares if the Fund Shares were held less than 91 days. The sales charge will
instead be added to the basis of the Fund Shares acquired in the exchange. The
application of this rule will increase the gain or reduce the loss that the
Shareholder would otherwise recognize on the exchange of the Shares of the Fund.
Before an exchange can be effected, a Shareholder must receive a current
prospectus of the Fund into which the Shares are exchanged. An exchange may be
made by calling the Trust at (800) 451-8382 or by mailing written instructions
to the Transfer Agent. Exchange privileges may be exercised only in those states
where Shares of such other Funds of the Trust may legally be sold, and may be
amended or terminated at any time upon sixty (60) days' notice.
The Trust's exchange privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Trust and increase transaction costs, the Trust has
established a policy of limiting excessive exchange activity. Exchange activity
will not be deemed excessive if limited to four substantive exchange redemptions
from a Fund during any calendar year.
DIRECTED DIVIDEND OPTION
Shareholders can elect to have dividend distributions (capital gains,
dividends, dividends and capital gains) paid by check or reinvested within the
Fund or reinvested in other AmSouth Mutual Funds of the same shareholder
registration without a sales charge. To participate in the Directed Dividend
Option, a shareholder must maintain a minimum balance of
25
<PAGE> 83
$1,000 in each Fund into which he or she plans to
reinvest dividends.
The Directed Dividend Option may be modified or terminated without notice. In
addition, the Trust may suspend a shareholder's Directed Dividend Option without
notice if the account balance is less than the minimum $1,000. Participation in
the Option may be terminated or changed by the shareholder at anytime by writing
the Distributor. The Directed Dividend Option is not available to participants
in an AmSouth Mutual Funds IRA.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed by mail or by telephone. However, all or
part of a Customer's Shares may be redeemed in accordance with instructions and
limitations pertaining to his or her account at a Bank.
REDEMPTION BY MAIL
A written request for redemption must be received by the Transfer Agent in
order to constitute a valid tender for redemption. The Transfer Agent will
require a signature guarantee by an eligible guarantor institution. For purposes
of this policy, the term "eligible guarantor institution" shall include banks,
brokers, dealers, credit unions, securities exchanges and associations, clearing
agencies and savings associations as those terms are defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. The Transfer Agent reserves the right
to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record; and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or the proceeds are either mailed or
wired to a financial institution account previously designated. There is no
charge for having redemption requests mailed to a designated bank account.
REDEMPTION BY TELEPHONE
A Shareholder may have the payment of redemption requests wired or mailed
directly to a domestic commercial bank account previously designated by the
Shareholder on the Account Registration Form. Under most circumstances, such
payments will be transmitted on the next Business Day following receipt of a
valid request for redemption. Such wire redemption requests may be made by the
Shareholder by telephone to the Transfer Agent. The Transfer Agent may reduce
the amount of a wire redemption payment from the maximum wire redemption charge
of $15.00. Such charge is presently $7.00 for each wire redemption. There is no
charge for having payment of redemption requests mailed or sent via the
Automated Clearing House to a designated bank account. For telephone
redemptions, call the Trust at (800) 451-8382. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if these procedures are not followed, the Trust may be liable for any losses due
to unauthorized or fraudulent instructions. These procedures include recording
all phone conversations, sending confirmations to Shareholders within 72 hours
of the telephone transaction, verifying the account name and a shareholder's
account number or tax identification number, and sending redemption proceeds
only to the address of record or to a previously authorized account.
During periods of significant economic or market change, telephone redemptions
may be difficult to complete. If a Shareholder is unable to contact the
Distributor by telephone, a Shareholder may also mail the redemption request to
the Distributor at the address listed above under "HOW TO REDEEM
SHARES--Redemption by Mail."
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
26
<PAGE> 84
above. The proceeds paid upon redemption of Shares in an Income Fund may be more
or less than the amount invested. Payment to Shareholders for Shares redeemed
will be made within seven days after receipt by the Transfer Agent of the
request for redemption. However, to the greatest extent possible, the Trust will
attempt to honor requests from Shareholders for next Business Day payments upon
redemption of Shares if the request for redemption is received by the Transfer
Agent before 4:00 p.m., Eastern Time, on a Business Day or, if the request for
redemption is received after 4:00 p.m., Eastern Time, to honor requests for
payment within two Business Days, unless it would be disadvantageous to the
Trust or the Shareholders of the particular Income Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, the Trust may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Trust may delay the
forwarding of proceeds only until payment has been collected for the purchase of
such Shares which may take up to 15 days or more. To avoid delay in payment upon
redemption shortly after purchasing Shares, investors should purchase Shares by
certified or bank check or by wire transfer. The Trust intends to pay cash for
all Shares redeemed, but under abnormal conditions which make payment in cash
unwise, the Trust may make payment wholly or partly in portfolio securities at
their then current market value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder, the
account of such Shareholder in any Income Fund has a value of less than $250.
Accordingly, an investor purchasing Shares of a Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems some of his or her Shares. Before the Trust exercises its
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $250.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Trust may suspend the right of
redemption or redeem Shares involuntarily if it appears appropriate to do so in
light of the Trust's responsibilities under the Investment Company Act of 1940.
DIVIDENDS AND TAXES
A dividend for each Income Fund will be declared monthly at the close of
business on the day of declaration consisting of an amount of accumulated
undistributed net income of the Fund as determined to be necessary or
appropriate by the appropriate officers of the Trust. Dividends will generally
be paid monthly. Distributable net realized capital gains are distributed
annually to Shareholders of record. A Shareholder will automatically receive all
income dividends and capital gains distributions in additional full and
fractional Shares unless the Shareholder elects to receive such dividends or
distributions in cash. Dividends and distributions are reinvested without a
sales charge as of the ex-dividend date using the net asset value determined on
that date and are credited to a Shareholder's account on the payment date.
Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash. Dividends are generally taxable when
received. However, dividends declared in October, November, or December to
Shareholders of record during those months and paid during the following January
are treated for tax purposes as if they were received by each Shareholder on
December 31 of the prior year. Elections to receive dividends or distributions
in
27
<PAGE> 85
cash, or any revocation thereof, must be made in writing to the Transfer Agent
at 3435 Stelzer Road, Columbus, Ohio 43219, and will become effective with
respect to dividends and distributions having record dates after its receipt by
the Transfer Agent.
Each of the Income Funds is treated as a separate entity for federal income
tax purposes. Each Income Fund intends to qualify for treatment as a "regulated
investment company" under the Code. If they so qualify, the Income Funds will
not have to pay federal income taxes on net income and net capital gain income
that they distribute to shareholders. Regulated investment companies are also
subject to a federal excise tax if they do not distribute their income on a
timely basis. Each Fund intends to avoid paying federal income and excise taxes
by timely distributing substantially all its net income and net capital gain
income.
BOND FUND, LIMITED MATURITY FUND, AND GOVERNMENT INCOME FUND
Distributions by the Bond Fund, Limited Maturity Fund, and Government Income
Fund of ordinary income and/or an excess of short-term capital gain over net
long-term loss are taxable to shareholders as ordinary income. It is not
expected that the dividends-received deduction for corporations will apply.
Distribution by the Bond Fund, Limited Maturity Fund, and Government Income
Fund of the excess of net long-term capital gain over net short-term capital
loss is taxable to Shareholders as long-term capital gain in the year in which
it is received, regardless of how long the Shareholder has held Shares in such
Fund. Such distributions are not eligible for the dividends-received deduction.
Prior to purchasing Shares of the Bond Fund, Limited Maturity Fund, and
Government Income Fund, the impact of dividends or capital gains distributions
which are expected to be declared or have been declared, but not paid, should be
carefully considered. Dividends or capital gains distributions paid after a
purchase of Shares are subject to federal income taxes, although in some
circumstances the dividends or distributions may be, as an economic matter, a
return of capital. A Shareholder should consult his or her own advisor for any
special advice.
Dividends received by a Shareholder that are derived from the Bond Fund,
Limited Maturity Fund, and Government Income Fund investments in U.S. Government
obligations may not be entitled to the exemptions from state and local income
taxes that would be available if the Shareholder had purchased U.S. Government
obligations directly.
A Shareholder will generally recognize long-term capital gain or loss on the
sale or exchange of shares in an Income Fund held by the Shareholder for more
than twelve months. If a Shareholder receives a capital gain dividend with
respect to a Share of the Bond Fund, Limited Maturity Fund, and Government
Income Fund and such Share is held for six months or less, any loss on the sale
or exchange of such Share shall be treated as a long-term capital loss to the
extent of the capital gain dividend.
The holder of a security issued with "original issue discount" (including a
zero-coupon United States Treasury security) is required to accrue as income
each year a portion of the discount at which the security was purchased, even
though the holder does not currently receive the interest payment in cash. A
security has original issue discount if its redemption price exceeds its issue
price by more than a de minimis amount. Accordingly, the Bond Fund, Limited
Maturity Fund, and Government Income Fund may be required to distribute each
year an amount which is greater than the total amount of cash interest the Fund
actually received. Such distributions may be made from the cash assets of the
Fund or by liquidation of its portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would have in the absence of such
transactions.
Additional information regarding federal taxes is contained in the Statement
of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION--Additional
28
<PAGE> 86
Tax Information" and "Additional Tax Information Concerning the Tax Exempt
Fund."
The foregoing discussion is limited to federal income tax consequences and is
based on tax laws and regulations which are in effect as of the date of this
Prospectus; such laws and regulations may be changed by legislative or
administrative actions. The foregoing is also intended only as a brief summary
of some of the important tax considerations generally affecting the Income Funds
and their Shareholders. Potential investors in the Bond Fund, Limited Maturity
Fund, and Government Income Fund are urged to consult their tax advisors
concerning their own tax situation and concerning the application of state and
local taxes which may differ from the federal income tax consequences described
above.
Shareholders will be advised at least annually as to the character for federal
income tax purposes of distributions made during the year.
FLORIDA FUND AND MUNICIPAL
BOND FUND
The Tax-Free Funds' Shareholders may treat as exempt interest and exclude from
gross income for federal income tax purposes dividends derived from net
exempt-interest income and designated by the Funds as exempt interest dividends.
However, such dividends may be taxable to shareholders under state or local law
as ordinary income even though all or a portion of the amounts may be derived
from interest on tax-exempt obligations which, if realized directly, would be
exempt from such taxes.
Dividends from the Tax-Free Funds attributable to exempt-interest dividends
may cause the social security and railroad retirement benefits of individual
shareholders to become taxable, or increase the amount that is taxable. Interest
on indebtedness incurred by a Shareholder to purchase or carry Shares is not
deductible for federal income tax purposes to the extent the Funds distribute
exempt-interest dividends during the Shareholder's taxable year. It is
anticipated that distributions from the Tax-Free Funds will not be eligible for
the dividends received deduction for corporate shareholders.
Gains on the sale of Shares in the Tax-Free Funds will be subject to federal,
state, and local taxes. If a Shareholder receives an exempt-interest dividend
with respect to any Share of the Fund and such Share is held for six months or
less, any loss on the sale or exchange of such Share will be disallowed to the
extent of the amount of such exempt-interest dividend.
A Tax-Free Fund may at times purchase Municipal Securities at a discount from
the price at which they were originally issued. For federal income tax purposes,
some or all of this market discount will be included in the Tax-Free Fund's
ordinary income and will be taxable to Shareholders as such when it is
distributed to them.
To the extent dividends paid to Shareholders are derived from taxable income
(for example, from interest on certificates of deposit, market discount or
repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax and may be subject to state and
local tax. A Shareholder should consult his or her own tax advisor for any
special advice.
Dividends attributable to interest on certain private activity bonds issued
after August 7, 1986 must be included in alternative minimum taxable income of
individual and corporate Shareholders for the purpose of determining liability
(if any) for the applicable alternative minimum tax. All tax-exempt interest
dividends will be required to be taken into account in calculating the
alternative minimum taxable income of corporate shareholders.
Additional information regarding federal taxes is contained in the Statement
of Additional Information under "ADDITIONAL PURCHASE AND REDEMPTION
INFORMATION--Additional Tax Information" and "Additional Tax Information
Concerning the Florida Fund."
The foregoing discussion is limited to federal income tax consequences and is
based on tax laws and regulations which are in effect as of the date of this
Prospectus; such laws and regulations may be
29
<PAGE> 87
changed by legislative or administrative actions. The foregoing is also intended
only as a brief summary of some of the important tax considerations generally
affecting the Tax-Free Funds and their Shareholders. Potential investors in the
Tax-Free Funds are urged to consult their tax advisers concerning their own tax
situation and concerning the application of state and local taxes which may
differ from the federal income tax consequences described above.
Shareholders will be advised at least annually as to the character for federal
income tax purposes of distributions made during the year.
FLORIDA TAXES
The State of Florida does not impose an income tax on individuals. Therefore,
distributions of the Florida Fund to individuals will not be subject to personal
income taxation in Florida. Corporations and other entities subject to the
Florida income tax will be subject to tax on distributions of investment income
and capital gains by the Fund. Distributions attributable to interest on
obligations of any state (including Florida), the District of Columbia, U.S.
possessions, or any political subdivision thereof, will be taxable to
corporations and other entities for Florida income tax purposes even though such
interest income is exempt from federal income tax. Similarly, distributions
attributable to interest on obligations of the United States and its territories
will be taxable to corporations and other entities under the Florida income tax.
For individuals and other entities subject to taxation in states and localities
other than Florida, distributions of the Fund will be subject to applicable
taxes imposed by such other states and localities.
In the opinion of special Florida tax counsel to the Fund, shareholders of the
Florida Fund who are subject to the Florida Intangible Personal Property Tax
(the "Intangible Tax") will not be subject to the Intangible Tax on shares of
the Florida Fund if, on the first day of the applicable calendar year, the
assets of the Florida Fund consist solely of obligations of Florida or its
political subdivisions; obligations of the United States, Puerto Rico, the
Virgin Islands or Guam; or bank deposits, cash or other assets which would be
exempt from the Intangible Tax if directly held by the shareholder. A ruling
confirming this tax treatment is being sought from the Florida Department of
Revenue. As described above, its is the Florida Fund's policy to invest at least
80% of its assets in Florida Municipal Securities exempt from the Intangible Tax
under normal market conditions. The Florida Fund intends to insure that, absent
abnormal market conditions, all of its assets held on January 1 of each year are
exempt from the Intangible Tax. Accordingly, the value of the Florida Fund
shares held by a shareholder should ordinarily be exempt from the Intangible
Tax. However, if on any January 1 the Florida Fund holds investments that are
not exempt from the Intangible Tax, the Florida Fund's shares could be wholly or
partially subject to the Intangible Tax for that year.
The foregoing discussion is intended only as a brief summary of the Florida
tax laws currently in effect which would generally affect the Florida Fund and
its shareholders. Potential investors are urged to consult with their Florida
tax counsel concerning their own tax situation.
MANAGEMENT OF AMSOUTH MUTUAL FUNDS
TRUSTEES OF THE TRUST
Overall responsibility for management of the Trust rests with the Board of
Trustees of the Trust, who are elected by the Shareholders of the Trust. There
are currently six Trustees, two of whom are "interested persons" of the Trust
within the meaning of that term under the Investment Company Act of 1940. The
Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations. The Trustees of the Trust, their current
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<PAGE> 88
addresses and principal occupations during the past five years are as follows
(if no address is listed, the
address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING THE PAST 5 YEARS
- ------------------------------ ------------------ -------------------------------------------
<S> <C> <C>
Dr. Dick D. Briggs, Jr. Trustee From 1981 to present, Professor and Vice
459 DER Building Chairman, Department of Medicine,
1808 7th Avenue South University of Alabama at Birmingham School
UAB Medical Center of Medicine; December 1995, to present,
Birmingham, Alabama 35294 Physician, University of Alabama Health
Services Foundation; from June 1988 to
October 1992, President, Chief Executive
Officer and Medical Director, University of
Alabama Health Services Foundation
Wendell D. Cleaver Trustee From September 3, 1993 to present, retired;
209 Lakewood Drive, West from December 1988 to August 1993,
Mobile, Alabama 36608 Executive Vice President, Chief Operating
Officer and Director, Mobile Gas Service
Corporation
J. David Huber* Chairman of the From June 1987 to present, employee of
BISYS Fund Services Board of Trustees BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
Homer H. Turner, Jr. Trustee From June 1991 to present, retired; until
729 Cary Drive June 1991, Vice President, Birmingham
Auburn, Alabama 36830 Division, Alabama Power Company
James H. Woodward, Jr. Trustee From 1996 to present, Trustee of The
The University of North Sessions Group; from July 1989 to present,
Carolina at Charlotte Chancellor, The University of North
Charlotte, North Carolina Carolina at Charlotte; until July 1989,
28223 Senior Vice President, University College,
University of Alabama at Birmingham
Sean M. Kelly* Trustee and From 1993 to present, Senior Vice President
150 2nd Avenue North, President of Client Services of BISYS Fund Services;
Suite 1170 prior to 1993, Senior Vice President of
St. Petersburg, Florida 33701 Concord Financial Group (now BISYS Fund
Services)
</TABLE>
- ------------
* Indicates an "interested person" of the Trust as defined in the Investment
Company Act of 1940.
The Trustees receive fees and are reimbursed for expenses in connection with
each meeting of the Board of Trustees they attend. However, no officer or
employee of BISYS Fund Services, or BISYS Fund Services Ohio, Inc. receives any
compensation from the Trust for acting as a Trustee. The officers of the Trust
(see the Statement of Additional Information) receive no compensation directly
from the Trust for performing the duties of their offices. BISYS Fund Services
receives fees from the Trust for acting as Administrator and BISYS Fund Services
Ohio, Inc. receives fees from the Trust for acting as Transfer Agent for and for
providing fund accounting services to the Trust. Messrs. Huber and
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<PAGE> 89
Kelly are employees and executive officers of BISYS Fund Services.
INVESTMENT ADVISOR
AmSouth is the investment advisor of each Fund of the Trust. AmSouth is the
principal bank affiliate of AmSouth Bancorporation, one of the largest banking
institutions headquartered in the mid-south region. AmSouth Bancorporation
reported assets as of December 31, 1995 of $17.7 billion and operated 273
banking offices in Alabama, Florida, Georgia and Tennessee. AmSouth has provided
investment management services through its Trust Investment Department since
1915. As of December 31, 1995, AmSouth and its affiliates had over $6.8 billion
in assets under discretionary management and provided custody services for an
additional $12.5 billion in securities. AmSouth is the largest provider of trust
services in Alabama. AmSouth serves as administrator for over $12 billion in
bond issues, and its Trust Natural Resources and Real Estate Department is a
major manager of timberland, mineral, oil and gas properties and other real
estate interests.
Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the respective investment objectives and restrictions of the
Funds, AmSouth manages the Funds, makes decisions with respect to and places
orders for all purchases and sales of their investment securities, and maintains
their records relating to such purchases and sales.
Brian B. Sullivan, CFA is the portfolio manager for the Bond Fund and, as
such, has had primary responsibility for the day-to-day portfolio management of
the Bond Fund since 1992. Mr. Sullivan has been a portfolio manager at AmSouth
since 1984, and is currently Senior Vice President and Trust Investment Officer
in charge of fixed income investments.
John P. Boston is the portfolio manager for the Limited Maturity Fund since
August, 1995, and of the Government Income Fund since inception and, as such,
has primary responsibility for the day-to-day portfolio management of the
Limited Maturity and Government Income Funds. Mr. Boston has been associated
with AmSouth's Trust Investment Group for over five years and is currently an
Assistant Vice President and Trust Investment Officer.
Dorothy E. Thomas is the portfolio manager for the Municipal Bond Fund, and as
such, has had primary responsibility for the day-to-day management of the Fund's
portfolio since its inception. Ms. Thomas has been associated with AmSouth's
Trust Investment Group for over ten years and is currently Vice President and
Trust Investment Officer.
Gerald E. Canopari is the portfolio manager for the Florida Tax-Free Fund, and
as such, has had primary responsibility for the day-to-day management of the
Fund's portfolio since its inception. Mr. Canopari has 23 years experience with
AmSouth and its affiliates in managing Florida Municipal Securities, and is
currently Vice President and Trust Investment Officer in the Clearwater office.
Under investment advisory agreements between the Trust and AmSouth, the fee
payable to AmSouth by each Fund for investment advisory services is the lesser
of (a) a fee computed daily and paid monthly at the annual rate of sixty-five
one-hundredths of one percent (.65%) of such Fund's average daily net assets or
(b) such fee as may from time to time be agreed upon in writing by the Trust and
AmSouth. A fee agreed to in writing from time to time by the Trust and AmSouth
may be significantly lower than the fee calculated at the annual rate and the
effect of such lower fee would be to lower a Fund's expenses and increase the
net income of the Fund during the period when such lower fee is in effect.
During the Trust's fiscal year ended July 31, 1996, AmSouth received
investment advisory fees amounting to 0.50% of the Bond Fund's average net
assets, .50% of the Limited Maturity Fund's average net assets, .30% of the
Government Income Fund's average net assets, and .30% of the Florida Fund's
average net assets. The Limited Maturity Fund had not commenced operations as of
July 31, 1996.
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<PAGE> 90
ADMINISTRATOR AND DISTRIBUTOR
ASO Service Company ("ASO") is the administrator for each Fund of the Trust,
and BISYS Fund Services ("BISYS") acts as the Trust's principal underwriter and
distributor (the "Administrator" and the "Distributor," respectively). ASO is a
wholly owned subsidiary of BISYS, which is a subsidiary of The BISYS Group,
Inc., 150 Clove Road, Little Falls, New Jersey 07424, a publicly owned company
engaged in information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Funds'
administration and operation. Under management and administration agreements
between the Trust, the fee payable by each Fund to the Administrator for
administration services is the lesser of (a) a fee computed at the annual rate
of twenty one-hundredths of one percent (.20%) of such Income Fund's average
daily net assets or (b) such fee as may from time to time be agreed upon by the
Trust and the Administrator. A fee agreed to from time to time by the Trust and
the Administrator may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower an Income Fund's
expenses and increase the net income of the Fund during the period when such
lower fee is in effect.
ASO succeeded BISYS Fund Services as Administrator on April 1, 1996. During
the Trust's fiscal year ended July 31, 1996, BISYS Fund and ASO received
administration fees, after voluntary fee reductions, amounting to 0.12% of the
Bond Fund's average net assets; 0.12% of the Limited Maturity Fund's average net
assets; 0.10% of the Government Income Fund's average net assets; and 0.10% of
the Florida Fund's average net assets.
SUB-ADMINISTRATORS
Effective August 1, 1995, AmSouth became the Sub-Administrator to the Trust.
Pursuant to its current agreement with the Administrator, AmSouth has assumed
certain of the Administrator's duties, for which AmSouth receives a fee, paid by
the Administrator, calculated at an annual rate of up to ten one-hundredths of
one percent (.10%) of each Fund's average net assets.
Effective April 1, 1996, BISYS Fund Services was retained by the Administrator
as Sub-Administrator to the Trust. Pursuant to its agreement with the
Administrator, BISYS is entitled to compensation as mutually agreed from time to
time by it and the Administrator.
EXPENSES
AmSouth and the Administrator each bear all expenses in connection with the
performance of their services as Investment Advisor and Administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for an Income Fund. No Fund will bear, directly
or indirectly, the cost of any activity primarily intended to result in the
distribution of Shares of such Fund; such costs will be borne by the
Distributor.
BANKING LAWS
AmSouth believes that it possesses the legal authority to perform the
investment advisory services for the Funds contemplated by its investment
advisory agreement with the Trust and described in this Prospectus without
violation of applicable banking laws and regulations, and has so represented in
its investment advisory agreement with the Trust. Future changes in federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which AmSouth could continue
to perform such services for the Trust. See "MANAGEMENT OF The
Trust--Glass-Steagall Act" in the Statement of Additional Information for
further discussion of applicable banking laws and regulations.
33
<PAGE> 91
INFORMATION RELATING TO THE FLORIDA FUND
GENERAL ECONOMIC CHARACTERISTICS OF FLORIDA
Florida ranks fourth in the nation in total population, with over 12.9 million
residents in 1990, and has been one of the fastest growing states in the nation.
Historically, tourism, agriculture, construction and manufacturing have
constituted the most important sectors of the state's economy. Construction
activity slows during periods of high interest rates or cyclical downturns. The
service sector employs the largest number of people in Florida. While wages in
the service sector tend to be lower than in manufacturing and other sectors of
the economy, the service sector traditionally has been less sensitive to
business cycles. Currently, Florida's general obligations are rated AA by both
Moody's and Standard and Poor's.
The southern and central portions of Florida's economy, in particular, rely
heavily on tourism and are sensitive to changes in the tourism industry. For
example, tourism in Florida has been adversely affected by publicity regarding
violent crimes against tourists, particularly tourists from abroad. Gasoline
price hikes and/or shortages from an oil embargo or other oil shortage could
severely affect U.S. tourism in the state, which is heavily dependent on
automobiles as the primary form of transportation.
South Florida also is susceptible to international trade and currency
imbalances due to its geographic location as the gateway to Latin America and
its involvement in foreign trade and investment. The central portion of the
state is affected by conditions in the phosphate and agriculture industries,
especially citrus and sugar. Northern Florida's economy is more heavily tied to
military bases, some of which are closing or scaling back as a result of Federal
budget cutbacks, and the lumber and paper industries.
The entire state can be affected by severe weather conditions including
hurricanes. The impact of severe hurricanes on the fiscal resources of the state
and local governments is difficult to assess.
SOURCES OF STATE AND LOCAL REVENUES
Florida's Constitution prohibits deficit spending by the state for
governmental operations. Florida does not have a personal income tax. An
amendment to the state's Constitution would be required in order to institute an
income tax, and passage of such an amendment is believed to be unlikely due to
the relatively large number of retirees living in the state as well as to the
general unpopularity of tax increases in the current political climate. A two-
thirds approval of voters voting in an election is now required for the addition
of any new taxes to the Florida Constitution. The principal sources of state
revenues are a 6% sales tax, state lottery, motor fuels tax, corporate income
tax, and miscellaneous other revenue sources, including beverage tax and
licenses, cigarette tax, documentary stamp taxes and an intangible tax.
Dependence on the sales tax may subject state revenues to more volatility than
would be the case if Florida had a personal income tax, with sales tax
collections adversely affected during recessions and periods when tourism
declines.
Taxation by units of government other than the state is permitted only to the
extent that Florida's legislature enacts enabling legislation. The principle
sources of county and municipal government revenues are ad valorem property
taxes, state revenue sharing, and miscellaneous other revenue sources, including
utilities services fees and local option fees. The principal sources of revenues
for Florida's school districts are ad valorem property taxes and state revenue
sharing, including revenues from a state lottery. The state Constitution imposes
millage limits, including a 10-mill limit each on county, municipal and school
ad valorem taxes. Effective January 1, 1995, Florida's voters amended the state
Constitution to limit annual increases in the assessed value of homestead
property to the lesser of 3% of the prior year's assessment or the percentage
change in the Consumer Price Index during the preceding calendar year. The
limitation on increases in assessment of homestead property could eventually
lead to ratings revisions that could have a
34
<PAGE> 92
negative impact on the prices of obligations funded with this source of
taxation. However, the effect of the limit will be tempered by reassessments of
homestead property at market value when sold.
Units of state and local government in Florida will continue to face spending
pressures due to infrastructure needs for an expanding population, especially in
view of growth management laws enacted by Florida's legislature. These laws
include concurrency requirements that impose building moratoriums unless roads
and other infrastructure are added concurrently with additional commercial or
residential developments.
TYPES OF INDEBTEDNESS
The two principal types of indebtedness issued by state or local units of
government in Florida are "general obligation bonds" and "revenue bonds."
General obligation bonds are secured by a pledge of the full faith, credit and
taxing power of the governmental entity issuing the bonds. They can be issued in
Florida only after a referendum in which the voters in the jurisdictional limits
of the jurisdiction issuing the bonds approve their issuance. Revenue bonds are
payable only from the revenues derived from a facility or class of facilities
or, in some cases, from the proceeds of a special tax or other specific revenue
source. Revenue bonds are not secured by the full faith, credit and taxing power
of the governmental issuer.
MARKET RISK CAUSED BY INTANGIBLE TAX
CONSIDERATIONS
As a normal policy, on January 1 of each calendar year the Florida Fund
intends to own only assets which are exempt from the Florida Intangible Tax.
Accordingly, it is possible that the Florida Fund, in disposing of non-exempt
assets to meet this policy objective, might sustain losses which might not
otherwise be incurred absent this policy of avoiding the Florida Intangible Tax.
GENERAL INFORMATION
DESCRIPTION OF THE TRUST AND ITS SHARES
The Trust was organized as a Massachusetts business trust on October 1, 1987.
The Trust has an unlimited number of authorized shares of beneficial interest
which may, without shareholder approval, be divided into an unlimited number of
series of such shares, and which are presently divided into eleven series of
shares, one for each of the following Funds: the AmSouth Prime Obligations Fund,
the AmSouth U.S. Treasury Fund, the AmSouth Tax Exempt Fund, the AmSouth Equity
Fund, the AmSouth Regional Equity Fund, the AmSouth Bond Fund, the AmSouth
Limited Maturity Fund, the AmSouth Municipal Bond Fund, the AmSouth Balanced
Fund, the AmSouth Government Income Fund and the AmSouth Florida Tax-Free Fund.
Each Fund, except the AmSouth Florida Tax-Free Fund, is diversified for purposes
of the 1940 Act. Each Share represents an equal proportionate interest in a Fund
with other Shares of the same series, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund as
are declared at the discretion of the Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote per share (with proportional voting for
fractional shares) on such matters as shareholders are entitled to vote.
Shareholders vote as a single class except (i) when required by the Investment
Company Act of 1940, shares shall be voted by individual series and (ii) when
the Trustees have determined that the matter affects only the interests of one
or more series, then only Shareholders of such series shall be entitled to vote
thereon.
Overall responsibility for the management of the Trust is vested in the Board
of Trustees. See "MANAGEMENT OF AMSOUTH MUTUAL FUNDS--Trustees of the Trust."
Individual Trustees are elected by the Shareholders and may be removed by the
Board of Trustees or Shareholders at a meeting held for such purpose in
accordance
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<PAGE> 93
with the provisions of the Declaration of Trust and
the By-laws of the Trust and Massachusetts law. See "ADDITIONAL INFORMATION--
Miscellaneous" in the Statement of Additional Information for further
information.
The Trust believes as of November 16, 1996, AmSouth Bank of Alabama, 1901
Sixth Avenue North, Birmingham, AL 35203, was the Shareholder of record of
95.13% of the outstanding shares of the Bond Fund, 91.02% of the outstanding
shares of the Limited Maturity Fund, and 88.38% of the outstanding shares of the
Florida Fund. As of November 16, 1996, AmSouth was the beneficial owner of
approximately 82.55% of the outstanding shares of the Bond Fund, 59.77% of the
outstanding shares of the Limited Maturity Fund, and 88.38% of the shares of the
Florida Fund and may be deemed to be a "controlling person" of each Fund within
the meaning of the Investment Company Act of 1940.
CUSTODIAN
It is expected that AmSouth Bank of Alabama will become custodian for the
Trust in the second quarter of 1997. Until then, Union Bank of California, N.A.
serves as custodian for the Trust.
TRANSFER AGENT AND FUND ACCOUNTING SERVICES
BISYS Funds Services Ohio, Inc. serves as transfer agent for and provides fund
accounting services to the Trust.
PERFORMANCE INFORMATION
From time to time performance information for a Fund showing its total return
and/or yield may be presented in advertisements, sales literature and
Shareholder reports. Total return will be calculated for the past year and the
period since the establishment of a Fund. Average annual total return is
measured by comparing the value of an investment in a Fund at the beginning of
the relevant period to the redemption value of the investment at the end of the
period (assuming the investor paid the maximum sales load on the investment and
assuming immediate reinvestment of any dividends or capital gains distributions)
and annualizing the difference. Aggregate total return is calculated similarly
to average annual total return except that the return figure is aggregated over
the relevant period instead of annualized. Yield will be computed by dividing a
Fund's net investment income per share earned during a recent one-month period
by the Fund's per share maximum offering price (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last day of the period
and annualizing the result. Each Fund may also present its total return and/or
yield excluding the effect of the sales charge.
The Tax-Free Funds may also present its "tax equivalent yield" which reflects
the amount of income subject to federal income taxation that a taxpayer in a
stated tax bracket would have to earn in order to obtain the same after-tax
income as that derived from the yield of the Funds. The tax equivalent yield
will be significantly higher than the yield of the Tax-Free Funds.
Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc. Comparisons may also
be made to indices or data published in Money Magazine, Forbes, Barron's, The
Wall Street Journal, The New York Times, Business Week, American Banker,
Fortune, Institutional Investor, Ibbotson Associates, Inc., Morningstar Inc.,
CDA/Wiesenberger, Pensions and Investments, U.S.A. Today, and local newspapers.
In addition to performance information, general information about these Funds
that appears in a publication such as those mentioned above may be included in
advertisements, sales literature and in reports to Shareholders. Additional
performance information is contained in the Trust's Annual Report, which is
available free of charge by calling the number on the front page of the
prospectus.
Information about each Fund's performance is based on the Fund's record up to
a certain date and is not intended to indicate future performance. Yield and
total return are functions of the type and
36
<PAGE> 94
quality of instruments held in Fund, operating expenses and market conditions.
Any fees charged by a Bank with respect to accounts investing in Shares of an
each Fund will not be included in performance calculations.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a Fund" means the consideration received by the Fund upon
the issuance or sale of Shares in that Group, together with all income,
earnings, profits, and proceeds derived from the investment thereof, including
any proceeds from the sale, exchange, or liquidation of such investments, and
any funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trust's Board of Trustees. The Board
of Trustees may allocate such general assets in any manner it deems fair and
equitable. It is anticipated that the factor that will be used by the Board of
Trustees in making allocations of general assets to particular Funds will be the
relative net assets of the respective Funds at the time of allocation. Assets
belonging to a particular Fund are charged with the direct liabilities and
expenses in respect of that Fund, and with a share of the general liabilities
and expenses of the Trust not readily identified as belonging to a particular
Fund that are allocated to that Fund in proportion to the relative net assets of
the respective Funds at the time of allocation. The timing of allocations of
general assets and general liabilities and expenses of the Trust to particular
Funds will be determined by the Board of Trustees of the Trust and will be in
accordance with generally accepted accounting principles. Determinations by the
Board of Trustees of the Trust as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Trust or a particular Fund
means the affirmative vote, at a meeting of Shareholders duly called, of the
lesser of (a) 67% or more of the votes of Shareholders of the Trust or such Fund
present at such meeting at which the holders of more than 50% of the votes
attributable to the Shareholders of record of the Trust or such Fund are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of Shareholders of the Trust or such Fund.
Under Massachusetts law, Shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims Shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in every
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of a Fund's
property for all loss and expense of any Shareholder of such Fund held liable on
account of being or having been a Shareholder. Thus, the risk of a Shareholder
incurring financial loss on account of Shareholder liability is limited to
circumstances in which a Fund would be unable to meet its obligations.
Inquiries regarding the Trust may be directed in writing to the Trust at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 451-8382.
37
<PAGE> 95
AMSOUTH MUTUAL FUNDS
INVESTMENT ADVISOR
[AMSOUTH LOGO]
AmSouth Bank of Alabama
1901 Sixth Avenue North
Birmingham, AL 35203
DISTRIBUTOR
BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, OH 43219
ADMINISTRATOR
ASO Services Company
3435 Stelzer Road
Columbus, OH 43219
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005-3333
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
AUDITORS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Fee Table................................. 2
Financial Highlights...................... 4
Investment Objectives and Policies........ 6
Investment Restrictions................... 19
Valuation of Shares....................... 20
How to Purchase and Redeem Shares......... 21
Dividends and Taxes....................... 27
Management of the AmSouth Mutual Funds.... 31
Information Relating to the Florida
Fund.................................... 34
General Information....................... 35
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
[ARTWORK TO COME FROM DESKTOP]
AS2P113096
<PAGE> 96
AMSOUTH MUTUAL FUNDS
[AmSouth Logo]
AmSouth Bank of Alabama
Investment Advisor
[Income Funds Logo]
[AmSouth Mutual Funds Logo]
Not FDIC Insured
Bisys Fund Services, Distributor
Prospectus dated November 30, 1996
<PAGE> 97
CROSS REFERENCE SHEET
Part B
Form N-1A Item No. Caption
- ------------------ -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and
History Additional Information - Description of
Shares
13. Investment Objectives
and Policies Investment objectives and policies
14. Management of the Trust Management of the Trust
15. Control Persons and Principal
Holders of Securities Miscellaneous
16. Investment Advisory and
Other Services Management of the Trust
17. Brokerage Allocation Management of the Trust
18. Capital Stock and Other
Securities Valuation; Additional Purchase and
Redemption Information; Management of the
Trust; Redemptions; Additional Information
19. Purchase, Redemption and
Pricing of Securities
Being Offered Valuation; Additional Purchase and
Redemption Information; Management of the
Trust
20. Tax Status Additional Purchase and Redemption
Information
21. Underwriters Management of the Trust
22. Calculation of Performance
Data Performance Information
23. Financial Statements Financial Statements
<PAGE> 98
AMSOUTH MUTUAL FUNDS
Statement of Additional Information
November 30, 1996
-----------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectuses of AmSouth Prime Obligations Fund, AmSouth
U.S. Treasury Fund, and AmSouth Tax Exempt Fund, AmSouth Equity Fund, AmSouth
Regional Equity Fund, AmSouth Balanced Fund, AmSouth Bond Fund, AmSouth Limited
Maturity Fund, AmSouth Government Income Fund, AmSouth Municipal Bond Fund, and
AmSouth Florida Tax-Free Fund, each dated as of the date hereof (the
"Prospectuses"). This Statement of Additional Information is incorporated by
reference in its entirety into those Prospectuses. Copies of the Prospectuses
may be obtained by writing AmSouth Mutual Funds at 3435 Stelzer Road, Columbus,
Ohio 43219, or by telephoning toll free (800) 451-8382.
<PAGE> 99
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AMSOUTH MUTUAL FUNDS............................................................................................. 1
INVESTMENT OBJECTIVES AND POLICIES............................................................................... 1
Additional Information on Portfolio Instruments.............................................................. 1
Investment Restrictions...................................................................................... 16
Additional Investment Restrictions........................................................................... 17
Portfolio Turnover........................................................................................... 18
VALUATION........................................................................................................ 19
Valuation of the Money Market Funds.......................................................................... 19
Valuation of the Capital Appreciation Funds and the Income Funds............................................. 20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................................................... 20
Purchase of Shares........................................................................................... 20
Matters Affecting Redemption................................................................................. 21
Additional Tax Information................................................................................... 21
Additional Tax Information Concerning the Tax Exempt Fund and Tax-Free Funds................................. 23
MANAGEMENT OF THE TRUST.......................................................................................... 25
Officers .................................................................................................... 25
Investment Advisor........................................................................................... 27
Portfolio Transactions....................................................................................... 31
Glass-Steagall Act........................................................................................... 32
Manager and Administrator.................................................................................... 33
Expenses..................................................................................................... 36
Sub-Administrators........................................................................................... 36
Distributor.................................................................................................. 37
Shareholder Servicing Plan................................................................................... 37
Custodian.................................................................................................... 38
Transfer Agent and Fund Accounting Services.................................................................. 38
Auditors .................................................................................................... 39
Legal Counsel................................................................................................ 39
PERFORMANCE INFORMATION.......................................................................................... 39
Yields of the Money Market Funds............................................................................. 40
Yields of the Capital Appreciation Funds and the Income Funds................................................ 41
Calculation of Total Return.................................................................................. 42
</TABLE>
B-i
<PAGE> 100
<TABLE>
<CAPTION>
<S> <C>
Performance Comparisons...................................................................................... 44
ADDITIONAL INFORMATION........................................................................................... 45
Organization and Description of Shares....................................................................... 45
Shareholder Liability........................................................................................ 46
APPENDIX......................................................................................................... 49
</TABLE>
B-ii
<PAGE> 101
STATEMENT OF ADDITIONAL INFORMATION
AMSOUTH MUTUAL FUNDS
AmSouth Mutual Funds (the "Trust") is an open-end management
investment company. The Trust consists of eleven series of units of beneficial
interest ("Shares"), each representing interests in one of eleven separate
investment portfolios: AmSouth Prime Obligations Fund (the "Prime Obligations
Fund"), AmSouth U.S. Treasury Fund (the "U.S. Treasury Fund"), AmSouth Tax
Exempt Fund (the "Tax Exempt Fund" and, collectively with the Prime Obligations
Fund and the U.S. Treasury Fund, the "Money Market Funds"), AmSouth Equity Fund
(the "Equity Fund"), AmSouth Regional Equity Fund (the "Regional Equity Fund"),
AmSouth Balanced Fund (the ("Balanced Fund" and, collectively, with the Equity
Fund and the Regional Equity Fund the "Capital Appreciation Funds"), AmSouth
Bond Fund (the "Bond Fund"), AmSouth Limited Maturity Fund (the "Limited
Maturity Fund"), AmSouth Government Income Fund (the "Government Income Fund")
AmSouth Municipal Bond Fund (the "Municipal Bond Fund"), and AmSouth Florida
Tax-Free Fund (the "Florida Fund" and, collectively, the "Income Funds," and the
Florida Fund and the Municipal Bond Fund sometimes collectively referred to
herein as the "Tax-Free Funds.") The Municipal Bond Fund is not currently
offering shares. The Money Market Funds offer to the public two classes of
shares: Premier Shares and Classic Shares. All other Funds offer only one class
of shares. Much of the information contained in this Statement of Additional
Information expands on subjects discussed in the Prospectuses. Capitalized terms
not defined herein are defined in the Prospectuses. No investment in Shares of a
Fund should be made without first reading that Fund's Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
The following policies supplement the investment objectives,
restrictions and policies of each Fund of the Trust as set forth in the
respective Prospectus for that Fund.
High Quality Investments With Regard to the Money Market Funds. As noted in the
Prospectuses for the Money Market Funds, each such Fund may invest only in
obligations determined by AmSouth to present minimal credit risks under
guidelines adopted by the Trust's Trustees.
With regard to the Prime Obligations Fund, investments will be limited
to those obligations which, at the time of purchase, (i) possess the highest
short-term ratings from at least two NRSROs; or (ii) do not possess a rating,
(i.e., are unrated) but are determined by the Investment Adviser, AmSouth Bank
of Alabama ("AmSouth") to be of comparable quality to the rated instruments
eligible for purchase by the Fund under guidelines adopted by the
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Trustees. With regard to the Tax Exempt Fund, investments will be limited to
those obligations which, at the time of purchase, (i) possess one of the two
highest short-term ratings from an NRSRO; or (ii) possess, in the case of
multiple-rated securities, one of the two highest short-term ratings by at least
two NRSROs; or (iii) do not possess a rating, (i.e., are unrated) but are
determined by AmSouth to be of comparable quality to the rated instruments
eligible for purchase by the Fund under the guidelines adopted by the Trustees.
For purposes of these investment limitations, a security that has not received a
rating will be deemed to possess the rating assigned to an outstanding class of
the issuer's short-term debt obligations if determined by AmSouth to be
comparable in priority and security to the obligation selected for purchase by a
Fund. (The above-described securities which may be purchased by the Prime
Obligations Fund and the Tax Exempt Fund are hereinafter referred to as
"Eligible Securities.")
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, (i.e., are
unrated) but are determined by AmSouth to be of comparable quality; provided,
however, that where the demand feature would be readily exercisable in the event
of a default in payment of principal or interest on the underlying security, the
obligation may be acquired based on the rating possessed by the demand feature
or, if the demand feature does not possess a rating, a determination of
comparable quality by AmSouth. A security which at the time of issuance had a
maturity exceeding 397 days but, at the same time of purchase, has a remaining
maturity of 397 days or less, is not considered an Eligible Security if it does
not possess a high quality rating and the long-term rating, if any, is not
within the two highest rating categories of an NRSRO.
The Prime Obligations Fund will not invest more than 5% of its total
assets in the securities of any one issuer, except that the Fund may invest up
to 25% of its total assets in the securities of a single issuer for a period of
up to three business days. If a percentage limitation is satisfied at the time
of purchase, a later increase in such percentage resulting from a change in the
Fund's net asset value or a subsequent change in a security's qualification as
an Eligible Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of the Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. Government, its
agencies, and instrumentalities and repurchase agreements fully collateralized
by such obligations.
Under the guidelines adopted by the Trust's Trustees and in accordance
with Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"),
AmSouth may be required promptly to dispose of an obligation held in a Fund's
portfolio in the event of certain developments that indicate a diminishment of
the instrument's credit quality, such as where an NRSRO downgrades an obligation
below the second highest rating category, or in the event of a default relating
to the financial condition of the issuer.
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The Appendix to this Statement of Additional Information identifies
each NRSRO that may be utilized by AmSouth with regard to portfolio investments
for the Funds and provides a description of relevant ratings assigned by each
such NRSRO. A rating by an NRSRO may be utilized only where the NRSRO is neither
controlling, controlled by, or under common control with the issuer of, or any
issuer, guarantor, or provider of credit support for, the instrument.
Bankers' Acceptances and Certificates of Deposit. All of the Funds of
the Trust except the U.S. Treasury Fund may invest in bankers' acceptances,
certificates of deposit, and demand and time deposits. Bankers' acceptances are
negotiable drafts or bills of exchange typically drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank or a savings
and loan association for a definite period of time and earning a specified
return.
Bankers' acceptances will be those guaranteed by domestic and foreign
banks, if at the time of purchase, such banks have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements). Certificates of deposit and demand and
time deposits will be those of domestic and foreign banks and savings and loan
associations, if (a) at the time of purchase they have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements) or (b) the principal amount of the
instrument is insured in full by the Federal Deposit Insurance Corporation.
Commercial Paper. Each Fund, except for the U.S. Treasury Fund, may
invest in commercial paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
Each Fund except the U.S. Treasury Fund, the Tax Exempt Fund, and the
Tax-Free Funds may invest in (i) Canadian Commercial Paper, which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and (ii) Europaper, which is U.S. dollar-denominated commercial
paper of an issue located in Europe.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Prime Obligations Fund, the Capital Appreciation Funds, and
the Income Funds may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic readjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because these notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, a Fund may demand
payment of principal and accrued interest at any time or during specified
periods not exceeding one year, depending upon the instrument involved, and may
resell the note at any time to a third party.
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The absence of such an active secondary market, however, could make it difficult
for the Funds to dispose of a variable amount master demand note if the issuer
defaulted on its payment obligations or during periods when the Funds are not
entitled to exercise their demand rights, and the Funds could, for this or other
reasons, suffer a loss to the extent of the default. While the notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes must satisfy the same criteria as set forth above for commercial
paper. AmSouth will consider the earning power, cash flow, and other liquidity
ratios of the issuers of such notes and will continuously monitor their
financial status and ability to meet payment on demand. Where necessary to
ensure that a note is of "high quality," a Fund will require that the issuer's
obligation to pay the principal of the note be backed by an unconditional bank
letter or line of credit, guarantee or commitment to lend. In determining the
dollar-weighted average portfolio maturity, a variable amount master demand note
will be deemed to have a maturity equal to the period of time remaining until
the principal amount can be recovered from the issuer through demand.
Foreign Investment. All of the Funds except the U.S. Treasury Fund and
the Tax-Free Funds may, subject to their investment objectives, restrictions and
policies, invest in certain obligations or securities of foreign issuers.
Permissible investments include Eurodollar Certificates of Deposit ("ECDs")
which are U.S. dollar denominated certificates of deposit issued by branches of
foreign and domestic banks located outside the United States, Yankee
Certificates of Deposit ("Yankee CTDs") which are certificates of deposit issued
by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the
United States, Eurodollar Time Deposits ("ETD's") which are U.S. dollar
denominated deposits in a foreign branch of a U.S. bank or a foreign bank, and
Canadian Time Deposits ("CTD's") which are U.S. dollar denominated certificates
of deposit issued by Canadian offices of major Canadian Banks. Investments in
securities issued by foreign branches of U.S. banks, foreign banks, or other
foreign issuers, including American Depository Receipts ("ADRs") and securities
purchased on foreign securities exchanges, may subject the Funds to investment
risks that differ in some respects from those related to investment in
obligations of U.S. domestic issuers or in U.S. securities markets. Such risks
include future adverse political and economic developments, possible seizure,
currency blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, and the adoption of other foreign
governmental restrictions. Additional risks include currency exchange risks,
less publicly available information, the risk that companies may not be subject
to the accounting, auditing and financial reporting standards and requirements
of U.S. companies, the risk that foreign securities markets may have less volume
and therefore many securities traded in these markets may be less liquid and
their prices more volatile than U.S. securities, and the risk that custodian and
brokerage costs may be higher. Foreign issuers of securities or obligations are
often subject to accounting treatment and engage in business practices different
from those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks.
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A Fund will acquire such securities only when AmSouth believes the risks
associated with such investments are minimal.
Repurchase Agreements. Securities held by each of the Trust's Funds may
be subject to repurchase agreements. Under the terms of a repurchase agreement,
a Fund would acquire securities from member banks of the Federal Deposit
Insurance Corporation with capital, surplus, and undivided profits of not less
than $100,000,000 (as of the date of their most recently published financial
statements) and from registered broker-dealers which AmSouth deems creditworthy
under guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest) and AmSouth will monitor the collateral's value to
ensure that it equals or exceeds the repurchase price (including accrued
interest). In addition, securities subject to repurchase agreements will be held
in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, the Fund holding such obligation would suffer a
loss to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to the
extent that the disposition of such securities by the Fund were delayed pending
court action. Additionally, if the seller should be involved in bankruptcy or
insolvency proceedings, a Fund may incur delay and costs in selling the
underlying security or may suffer a loss of principal and interest if the Fund
is treated as an unsecured creditor and required to return the underlying
security to the seller's estate. Securities subject to repurchase agreements
will be held by the Trust's custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are considered
to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectuses, each
of the Trust's Funds may borrow funds for temporary purposes by entering into
reverse repurchase agreements in accordance with the Fund's investment
restrictions. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase the securities at a mutually agreed-upon date and price. Each Fund
intends to enter into reverse repurchase agreements only to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions. At
the time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Such assets will include U.S. Government
securities or other liquid high quality debt securities in the case of the Money
Market Funds and the Income Funds or other liquid, high-grade debt securities,
in the case of the Capital Appreciation Funds. Reverse repurchase agreements
involve the risk that the market
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value of the securities sold by a Fund may decline below the price at which a
Fund is obligated to repurchase the securities. Reverse repurchase agreements
are considered to be borrowings by a Fund under the 1940 Act.
U.S. Government Obligations. The U.S. Treasury Fund will invest
exclusively in bills, notes and bonds issued by the U.S. Treasury. Such
obligations are supported by the full faith and credit of the U.S. Government.
Each of the other Funds may invest in such obligations and in other obligations
issued or guaranteed by the U.S. Government, its agencies and instrumentalities.
Such other obligations may include those which are supported by the full faith
and credit of the U.S. Government; others which are supported by the right of
the issuer to borrow from the Treasury; others which are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others which are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. A Fund will invest in
the obligations of such agencies and instrumentalities only when AmSouth
believes that the credit risk with respect thereto is minimal.
Variable and Floating Rate Notes. The Tax Exempt Fund, the Bond Fund,
the Limited Maturity Fund and the Tax-Free Funds may acquire variable and
floating rate notes, subject to each Fund's investment objective, policies and
restrictions. A variable rate note is one whose terms provide "for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate note is one whose terms provide for
the readjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by a Fund
will be determined by AmSouth under guidelines established by the Trust's Board
of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Fund's investment policies. In
making such determinations, AmSouth will consider the earning power, cash flow
and other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may resell the note at any time to a third party.
The absence of an active secondary market, however, could make it difficult for
the Fund to dispose of a variable or floating rate note in the event the issuer
of the note defaulted on its payment obligations and the Fund could, as a result
or for other reasons, suffer a loss to the extent of the default. Variable or
floating rate notes may be secured by bank letters of credit or drafts.
Variable or floating rate notes acquired by the Tax Exempt Fund may
have maturities of more than one year and variable or floating rate notes
acquired by the Limited Maturity Fund may have maturities of more than three
years, as follows:
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1. A note that is issued or guaranteed by the U.S. Government or any
agency thereof which has a variable rate of interest readjusted no less
frequently than annually will be deemed by a Fund to have a maturity equal to
the period remaining until the next readjustment of the interest rate.
2. A variable rate note, the principal amount of which is scheduled on
the face of the instrument to be paid in one year or less, will be deemed by a
Fund to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.
4. A floating rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the Fund
is entitled to receive the principal amount of the note either at any time on no
more than thirty days' notice or at specified intervals not exceeding one year
in the case of the Tax Exempt Fund and not exceeding three years in the case of
the Limited Maturity Fund and upon no more than 30 days' notice.
Municipal Securities. Under normal market conditions, the Tax Exempt
Fund and the Municipal Bond Fund will be primarily invested in bonds (and in the
case of the Tax Exempt Fund, notes) issued by or on behalf of states (including
the District of Columbia), territories, and possessions of the United States and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which is exempt from federal income tax
("Municipal Securities"). Under normal market conditions, the Tax Exempt Fund
and the Municipal Bond Fund will invest at least 80% of their total assets, and
the Florida Fund may invest up to 20% of its total assets, in Municipal
Securities, the interest on which is not treated as a preference item for
purposes of the federal alternative minimum tax.
Municipal Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from both federal income tax and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax.
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Municipal Securities may also include General Obligation Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project
Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
As described in the prospectuses of the Tax Exempt Fund and the
Tax-Free Funds, the two principal classifications of Municipal Securities
consist of "general obligation" and "revenue" issues. A Fund permitted to invest
in Municipal Securities may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities. There are, of course, variations
in the quality of Municipal Securities, both within a particular classification
and between classifications, and the yields on Municipal Securities depend upon
a variety of factors, including general money market conditions, the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of NRSROs represent their opinions as to the quality of
Municipal Securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and Municipal Securities with the
same maturity, interest rate and rating may have different yields, while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to purchases by the Tax Exempt Fund,
an issue of Municipal Securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Tax Exempt Fund.
Neither event would under all circumstances require the elimination of such an
obligation from the Fund's investment portfolio. However, the obligation
generally would be retained only if such retention was determined by the Board
of Trustees to be in the best interests of the Fund.
An issuer's obligations under its Municipal Securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal bankruptcy code, and laws, if
any, which may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon the enforcement of such obligations or upon the ability of municipalities
to levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
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When-Issued Securities. As discussed in the Prospectuses, each Fund
except the Prime Obligations Fund and the U.S. Treasury Fund may purchase
securities on a when-issued basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a when-issued basis, the Fund's custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or liquid portfolio securities to satisfy its purchase commitments in
the manner described above, a Fund's liquidity and the ability of AmSouth to
manage it might be affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its assets.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund incurring a loss or missing the opportunity to obtain a price considered to
be advantageous. No Fund intends to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
Calls. The Capital Appreciation Funds and the Bond Fund, Limited
Maturity Fund, and Government Income Fund may write (sell) "covered" call
options and purchase options to close out options previously written by it. Such
options must be listed on a National Securities Exchange and issued by the
Options Clearing Corporation. The purpose of writing covered call options is to
generate additional premium income for a Fund. This premium income will serve to
enhance the Fund's total return and will reduce the effect of any price decline
of the security involved in the option. Covered call options will generally be
written on securities which, in AmSouth's opinion, are not expected to make any
major price moves in the near future but which, over the long term, are deemed
to be attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he or she may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring him or her to deliver
the underlying security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure his or her obligation to deliver
the underlying security in the case of a call option, a writer is required to
deposit in escrow the underlying security or other assets in accordance with the
rules of the Options Clearing Corporation. The Capital Appreciation Funds and
the Bond Fund, Limited Maturity Fund, and Government Income Fund will
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write only covered call options. This means that the Fund will only write a call
option on a security which it already owns. (In order to comply with the
requirements of the securities laws in several states, each of the Capital
Appreciation Funds and the Bond Fund, Limited Maturity Fund, and Government
Income Fund will not write a covered call option if, as a result, the aggregate
market value of all portfolio securities covering call options or subject to put
options exceeds 25% of the market value of the its total assets.)
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which the Capital Appreciation Funds
and the Bond Fund, Limited Maturity Fund, and Government Income Fund will not
do), but capable of enhancing a Fund's total return. When writing a covered call
option, a Fund, in return for the premium, gives up the opportunity for profit
from a price increase in the underlying security above the exercise price, but
retains the risk of loss should the price of the security decline. Unlike one
who owns securities not subject to an option, neither the Capital Appreciation
Funds nor the Bond Fund, Limited Maturity Fund, and Government Income Fund have
any control over when they may be required to sell the underlying securities,
since they may be assigned an exercise notice at any time prior to the
expiration of their obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Fund will realize a gain or loss from the sale of the underlying security.
The security covering the call will be maintained in a segregated account of the
Fund's custodian. The Capital Appreciation Funds, the Bond Fund, Limited
Maturity Fund, and Government Income Fund will consider a security covered by a
call to be "pledged" as that term is used in its policy which limits the
pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium a
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, AmSouth, in determining whether a particular
call option should be written on a particular security, will consider the
reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options. The premium received by a Fund
for writing covered call options will be recorded as a liability in the Fund's
statement of assets and liabilities. This liability will be adjusted daily to
the option's current market value, which will be the latest sale price at the
time at which the net asset value per share of the Fund is computed (close of
the New York Stock Exchange), or, in the absence of such sale, the latest asked
price. The liability will be extinguished upon expiration of the option, the
purchase of an identical option in the closing transaction, or delivery of the
underlying security upon the exercise of the option.
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Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
or to permit the sale of the underlying security. Furthermore, effecting a
closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration date or
both. If a Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will seek to effect a closing transaction
prior to, or concurrently with, the sale of the security. There is, of course,
no assurance that the Fund will be able to effect such closing transactions at a
favorable price. If a Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case it
would continue to be at market risk on the security. This could result in higher
transaction costs. A Fund will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by the Capital Appreciation Funds, the Bond Fund,
Limited Maturity Fund, and Government Income Fund will normally have expiration
dates of less than nine months from the date written. The exercise price of the
options may be below, equal to, or above the current market values of the
underlying securities at the time the options are written. From time to time, a
Fund may purchase an underlying security for delivery in accordance with an
exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
Puts. The Tax Exempt Fund and the Tax-Free Funds may acquire "puts"
with respect to Municipal Securities held in their portfolios, and the Balanced
Fund, the Bond Fund, and the Limited Maturity Fund may acquire "puts" with
respect to debt securities held in their portfolios. A put is a right to sell a
specified security (or securities) within a specified period of time at a
specified exercise price. The Tax Exempt Fund, the Tax-Free Funds, the Bond
Fund, the Balanced Fund, and the Limited Maturity Fund may sell, transfer, or
assign a put only in conjunction with the sale, transfer, or assignment of the
underlying security or securities.
The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
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Puts may be acquired by a Fund to facilitate the liquidity of the
portfolio assets. Puts may also be used to facilitate the reinvestment of assets
at a rate of return more favorable than that of the underlying security. Puts
may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of the Tax Exempt Fund's assets pursuant to Rule 2a-7 under
the 1940 Act. See "Variable and Floating Rate Notes" and "Valuation of the Prime
Obligations Fund, the U.S. Treasury Fund and the Tax Exempt Fund" in this
Statement of Additional Information.
The Limited Maturity Fund will acquire puts solely to shorten the
maturity of the underlying debt security.
The Tax Exempt Fund, the Tax-Free Funds and the Limited Maturity Fund
will generally acquire puts only where the puts are available without the
payment of any direct or indirect consideration. However, if necessary or
advisable, a Fund may pay for puts either separately in cash or by paying a
higher price for portfolio securities which are acquired subject to the puts
(thus reducing the yield to maturity otherwise available for the same
securities).
The Tax Exempt Fund, the Tax-Free Funds and the Limited Maturity Fund
intend to enter into puts only with dealers, banks, and broker-dealers which, in
AmSouth's opinion, present minimal credit risks.
Futures Contracts. The Government Income Fund may enter into futures contracts
and options on futures contracts for the purposes of remaining fully invested
and reducing transaction costs. Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specific
security, class of securities, or an index at a specified future time and at a
specified price. A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of trading of the contracts and the price at which the
futures contract is originally struck. Futures contracts which are standardized
as to maturity date and underlying financial instrument are traded on national
futures exchanges. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"), a
U.S. Government Agency.
Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a
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specified securities index. The acquisition of put and call options on futures
contracts will, respectively, give the Fund the right (but not the obligation),
for a specified price, to sell or to purchase the underlying futures contract,
upon exercise of the option, at any time during the option period. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the contract
is marked-to-market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Government
Income Fund expects to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
the prices of underlying securities. The Government Income Fund intends to use
futures contracts only for bona fide hedging purposes.
When interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Government Income Fund can seek through the
sale of futures contracts to offset a decline in the value of its portfolio
securities. When interest rates are expected to fall or market values are
expected to rise, the Fund, through the purchase of such contracts, can attempt
to secure better rates or prices for the Fund than might later be available in
the market when it effects anticipated purchases.
Regulations of the CFTC applicable to the Government Income Fund
require that all of its futures transactions constitute bona fide hedging
transactions. The Government Income Fund will only sell futures contracts to
protect securities it owns against price declines or purchase contracts to
protect against an increase in the price of securities it intends to purchase.
As evidence of this hedging interest, the Government Income Fund expects that
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approximately 75% of its futures contract purchases will be "completed," that
is, equivalent amounts of related securities will have been purchased or are
being purchased by the Fund upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures
contracts could be used to control the Government Income Fund's exposure to
market fluctuations, the use of futures contracts may be a more effective means
of hedging this exposure. While the Government Income Fund will incur commission
expenses in both opening and closing out futures positions, these costs are
lower than transactions costs incurred in the purchase and sale of the
underlying securities.
Restrictions on the Use of Futures Contracts. The Government Income Fund will
not enter into futures contract transactions to the extent that, immediately
thereafter, the sum of its initial margin deposits on open contracts exceeds 5%
of the market value of the Fund's total assets. In addition, the Government
Income Fund will not enter into futures contracts to the extent that the value
of the futures contracts held would exceed 10% of the Fund's total assets.
Futures transactions will be limited to the extent necessary to maintain each
Portfolio's qualification as a regulated investment company.
The Government Income Fund has undertaken to restrict its futures
contract trading as follows: first, the Fund will not engage in transactions in
futures contracts for speculative purposes; second, the Fund will not market
itself to the public as a commodity pool or otherwise as a vehicle for trading
in the commodities futures or commodity options markets; third, the Fund will
disclose to all prospective shareholders (the "Shareholders") the purpose of and
limitations on its commodity futures trading; fourth, the Fund will submit to
the Commodity Futures Trading Commission ("CFTC") special calls for information.
Accordingly, registration as a commodities pool operator with the CFTC is not
required.
In addition to the margin restrictions discussed above, transactions in
futures contracts may involve the segregation of funds pursuant to requirements
imposed by the Securities and Exchange Commission. Under those requirements,
where the Government Income Fund has a long position in a futures contract, it
may be required to establish a segregated account (not with a futures commission
merchant or broker) containing cash or certain liquid assets equal to the
purchase price of the contract (less any margin on deposit). For a short
position in futures or forward contracts held by the Government Income Fund,
those requirements may mandate the establishment of a segregated account (not
with a futures commission merchant or broker) with cash or certain liquid assets
that, when added to the amounts deposited as margin, equal the market value of
the instruments underlying the futures contracts (but are not less than the
price at which the short positions were established). However, segregation of
assets is not required if the Government Income Fund "covers" a long position.
For example, instead of segregating assets, the Fund, when holding a long
position in a futures contract, could purchase a put option on the same futures
contract with a strike price as high or higher than the price of the contract
held by the Fund. In addition, where the Government Income Fund
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takes short positions, or engages in sales of call options, it need not
segregate assets if it "covers" these positions. For example, where the Fund
holds a short position in a futures contract, it may cover by owning the
instruments underlying the contract. The Fund may also cover such a position by
holding a call option permitting it to purchase the same futures contract at a
price no higher than the price at which the short position was established.
Where the Government Income Fund sells a call option on a futures contract, it
may cover either by entering into a long position in the same contract at a
price no higher than the strike price of the call option or by owning the
instruments underlying the futures contract. The Government Income Fund could
also cover this position by holding a separate call option permitting it to
purchase the same futures contract at a price no higher than the strike price of
the call option sold by the Fund.
Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an exchange that provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Government Income Fund would continue to be required to make
daily cash payments to maintain the required margin. In such situations, if the
Government Income Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Government Income Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge them. The Government Income
Fund will minimize the risk that it will be unable to close out a futures
contract by only entering into futures contracts that are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Government Income Fund are only for hedging
purposes, AmSouth does not believe that the Government Income Fund is subject to
the risks of loss frequently associated with futures transactions. The
Government Income Fund would presumably have sustained comparable losses if,
instead of
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the futures contract, it had invested in the underlying financial instrument and
sold it after the decline.
Utilization of futures transactions by the Government Income Fund does
involve the risk of imperfect or no correlation where the securities underlying
futures contract have different maturities than the portfolio securities being
hedged. It is also possible that the Government Income Fund could both lose
money on futures contracts and also experience a decline in value of its
portfolio securities. There is also the risk of loss by the Fund of margin
deposits in the event of bankruptcy of a broker with whom the Fund has an open
position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
Investment Restrictions
The following investment restrictions may be changed with respect to a
particular Fund only by a vote of a majority of the outstanding voting Shares of
that Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Prospectuses).
None of the Funds of the Trust may:
1. Purchase securities on margin, sell securities short, participate on
a joint or joint and several basis in any securities trading account, or
underwrite the securities of other issuers, except to the extent that a Fund may
be deemed to be an underwriter under certain securities laws in the disposition
of "restricted securities" acquired in accordance with such Fund's investment
objectives, restrictions and policies;
2. Purchase or sell commodities, commodity contracts (including futures
contracts), oil, gas or mineral exploration or development programs, or real
estate (although investments by all of the Funds except the U.S. Treasury Fund
in marketable securities of companies engaged in such activities and in
securities secured by real estate or interests therein are not hereby
precluded);
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3. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; provided, however, that the Capital Appreciation Funds
and the Income Funds may purchase securities of a money market fund, including
securities of both the Prime Obligations Fund and the U.S. Treasury Fund (and in
the case of the Tax-Free Funds, securities of the Tax Exempt Fund) and the Tax
Exempt Fund and Prime Obligations Fund may purchase securities of a money market
fund which invests primarily in high quality short-term obligations exempt from
federal income tax, if, with respect to each such Fund, immediately after such
purchase, the acquiring Fund, does not own in the aggregate (i) more than 3% of
the acquired company's outstanding voting securities, (ii) securities issued by
the acquired company having an aggregate value in excess of 5% of the value of
the total assets of the acquiring Fund, or (iii) securities issued by the
acquired company and all other investment companies (other than Treasury stock
of the acquiring Fund) having an aggregate value in excess of 10% of the value
of the acquiring Fund's total assets;
4. Invest in any issuer for purposes of exercising control or
management;
5. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the officers or directors of its investment adviser
owning beneficially more than one-half of 1% of the securities of such issuer
together own beneficially more than 5% of such securities; and
6. Invest more than 10% of total assets in the securities of issuers
which together with any predecessors have a record of less than three years of
continuous operation.
The Prime Obligations Fund and the U.S. Treasury Fund may not buy
common stocks or voting securities, or state, municipal, or private activity
bonds. The Money Market Funds and the Tax-Free Funds may not write or purchase
call options. None of the Funds may write put options. The Prime Obligations
Fund, the U.S. Treasury Fund, the Equity Fund and the Regional Equity Fund may
not purchase put options. The Tax Exempt Fund and the Tax-Free Funds may not
invest in private activity bonds where the payment of principal and interest are
the responsibility of a company (including its predecessors) with less than
three years of continuous operation.
If any percentage restriction described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
Additional Investment Restrictions
The following investment restriction is non-fundamental and may be
changed by a vote of the majority of the Board of Trustees: No Fund will invest
more than 15% of its net assets
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in securities that are restricted as to resale, or for which no readily
available market exists, including repurchase agreements providing for
settlement more than seven days after notice.
Portfolio Turnover
The portfolio turnover rate for each of the Trust's Funds is calculated
by dividing the lesser of a Fund's purchases or sales of portfolio securities
for the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose maturities at the time of acquisition
were one year or less. Portfolio turnover with respect to each of the Money
Market Funds is expected to be zero percent for regulatory purposes.
In the fiscal year ended July 31, 1996, portfolio turnover for the
Equity Fund, the Regional Equity Fund, the Limited Maturity Fund, the Government
Income Fund, the Bond Fund and the Florida Fund was 19.11%, 8.22%, 29.56%,
78.31%, 9.60% and 12.21%, respectively. In the fiscal year ended July 31, 1996,
the portfolio turnover rate for the Balanced Fund was 13.65% with respect to the
common stock portion of its portfolio and 6.82% with respect to the other
portion of its portfolio.
In the fiscal year ended July 31, 1995, portfolio turnover for the
Equity Fund, the Regional Equity Fund, the Limited Maturity Fund, the Government
Income Fund, the Bond Fund and the Florida Fund was 19.46%, 14.25%, 38.11%,
27.32%, 17.70% and 2.33%, respectively. In the fiscal year ended July 31, 1995,
the portfolio turnover rate for the Balanced Fund was 16.62% with respect to the
common stock portion of its portfolio and 10.07% with respect to the other
portion of its portfolio. The portfolio turnover rate may vary greatly from year
to year as well as within a particular year, and may also be affected by cash
requirements for redemptions of Shares and, in the case of the Tax Exempt Fund
and the Tax- Free Funds, by requirements which enable these Funds to receive
certain favorable tax treatments. A higher portfolio turnover rate may lead to
increased taxes and transaction costs. Portfolio turnover will not be a limiting
factor in making investment decisions.
The Tax-Free Funds will not purchase securities solely for the purpose
of short-term trading. The turnover rates for the Funds will not be a factor
preventing either the sale or the purchase of securities when the investment
advisor believes investment considerations warrant such sale or purchase. The
annual portfolio turnover rate of the Municipal Bond Fund is not expected to
exceed 50%. However, the portfolio turnover rate for each of the Tax-Free Funds
may vary greatly from year to year as well as within a particular year. High
turnover rates will generally result in higher transaction costs to the Funds
and may result in higher levels of taxable realized gains to the Funds'
Shareholders.
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VALUATION
As indicated in the Prospectuses, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of 4:00 p.m., Eastern Time
(the "Valuation Time") on each Business Day of the Fund. As used herein a
"Business Day" constitutes any day on which the New York Stock Exchange (the
"NYSE") is open for trading and the Federal Reserve Bank of Atlanta is open,
except days on which there are not sufficient changes in the value of the Fund's
portfolio securities that the Fund's net asset value might be materially
affected, or days during which no Shares are tendered for redemption and no
orders to purchase Shares are received. Currently, either the NYSE or the
Federal Reserve Bank of Atlanta is closed on the customary national business
holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day,
Thanksgiving Day and Christmas Day.
Valuation of the Money Market Funds
The Money Market Funds have elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument. The value of
securities in these Funds can be expected to vary inversely with changes in
prevailing interest rates.
Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that no Fund will
purchase any security with a remaining maturity of more than thirteen months
(securities subject to repurchase agreements may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Trust's Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objective, to stabilize the net asset value per Share of the Money
Market Funds for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires that the Board of Trustees promptly consider what action, if any,
should be initiated. If the Trustees believe that the extent of any deviation
from a Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the
dollar-weighted average portfolio maturity, withholding or
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reducing dividends, reducing the number of a Fund's outstanding Shares without
monetary consideration, or utilizing a net asset value per Share determined by
using available market quotations.
Valuation of the Capital Appreciation Funds and the Income Funds
The value of the portfolio securities held by each of the Capital
Appreciation Funds and the Income Funds for purposes of determining such Fund's
net asset value per Share will be established on the basis of current valuations
provided by Muller Data Corporation or Kenny S&P Evaluation Services, whose
procedures shall be monitored by the Administrator, and which valuations shall
be the fair market value of such securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in each of the Trust's Funds are sold on a continuous basis by
BISYS Fund Services, Limited Partnership ("BISYS"), and BISYS has agreed to use
appropriate efforts to solicit all purchase orders. In addition to purchasing
Shares directly from BISYS, Shares may be purchased through procedures
established by BISYS in connection with the requirements of accounts at AmSouth,
or AmSouth's affiliated or correspondent banks. Customers purchasing Shares of
the Trust may include officers, directors, or employees of AmSouth or AmSouth's
affiliated or correspondent banks.
Purchase of Shares
As stated in the relevant Prospectuses, the public offering price of
Shares of the Capital Appreciation Funds and the Income Funds is their net asset
value computed after the sale plus a sales charge which varies based upon the
quantity purchased. The public offering price of such Shares of the Trust is
calculated by dividing net asset value by the difference (expressed as a
decimal) between 100% and the sales charge percentage of the offering price
applicable to the purchase (see "How to Purchase and Redeem Shares" in the
relevant Prospectuses). The offering price is rounded to two decimal places each
time a computation is made. The sales charge scale set forth in a Fund's
Prospectus applies to purchases of Shares of such a Fund alone, by any person,
including members of a family unit (i.e., husband, wife and minor children) and
bona fide trustees and also applies to purchases made under a Rights of
Accumulation or a Letter of Intent.
Certain sales are made without a sales charge, as described in the
relevant Prospectuses under the caption "Sales Charge Waivers", to promote
goodwill with employees and others with whom BISYS, AmSouth and/or the Trust
have business relationships, and because the sales effort, if any, involved in
making such sales is negligible.
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As the Trust's principal underwriter, BISYS acts as principal in
selling shares of the Trust to dealers. BISYS re-allows a portion of the sales
charge as dealer discounts and brokerage commissions. Dealer allowances
expressed as a percentage of the offering price for all offering prices are set
forth in the relevant Prospectuses (see "How to Purchase and Redeem Shares").
From time to time, BISYS may make expense reimbursements for special training of
a dealer's registered representatives in group meetings or to help pay the
expenses of sales contests. In some instances, promotional incentives to dealers
may be offered only to certain dealers who have sold or may sell significant
amounts of Group shares. Neither BISYS nor dealers are permitted to delay the
placement of orders to benefit themselves by a price change.
Matters Affecting Redemption
The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists as
determined by the Securities and Exchange Commission.
The Trust may redeem Shares involuntarily if redemption appears
appropriate in light of the Trust's responsibilities under the 1940 Act. See
"Valuation of the Money Market Funds" above.
Additional Tax Information
It is the policy of each of the Trust's Funds to qualify for the
favorable tax treatment accorded regulated investment companies under Subchapter
M of the Code. By following such policy, the Trust's Funds expect to eliminate
or reduce to a nominal amount the federal income taxes to which such Fund may be
subject.
In order to qualify for the special tax treatment accorded regulated
investment companies and their Shareholders, a Fund must, among other things,
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale of stock,
securities, and foreign currencies, or other income (including but not limited
to gains from options, futures, or forward contracts) derived with respect to
its business of investing in such stock, securities, or currencies; (b) derive
less than 30% of its gross income from the sale or other disposition of certain
assets (including stocks and securities) held for less than three months; (c)
each year distribute at least 90% of its dividend, interest (including
tax-exempt interest), certain other income and the excess, if any, of its net
short-term capital gains over its net long-term capital losses; and (d)
diversify its holdings so that, at the end of each fiscal quarter (i) at least
50% of the market value of its assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated
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investment companies, and other securities, limited in respect of any one issuer
to a value not greater than 5% of the value of the Fund's total assets and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities (other than those of
the U.S. Government or other regulated investment companies) of any one issuer
or of two or more issuers which the Fund controls and which are engaged in the
same, similar, or related trades or businesses. The 30% of gross income test
described above may restrict a Fund's ability to sell certain assets held (or
considered under Code rules to have been held) for less than three months and to
engage in certain hedging transactions (including hedging transactions in
options and futures) that in some circumstances could cause certain Fund assets
to be treated as held for less than three months.
A non-deductible excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they have a non-calendar taxable year) an amount equal to 98% of their "ordinary
income" (as defined) for the calendar year plus 98% of their capital gain net
income for the 1-year period ending on October 31 of such calendar year plus any
undistributed amounts from the previous year. For the foregoing purposes, a Fund
is treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year. If distributions during a
calendar year by a Fund were less than the required amount, the Fund would be
subject to a non-deductible excise tax equal to 4% of the deficiency.
Each of the Trust's Funds will be required in certain cases to withhold
and remit to the United States Treasury 31% of taxable dividends and other
distributions paid to any Shareholder who has provided either an incorrect
taxpayer identification number or no number at all, who is subject to
withholding by the Internal Revenue Service for failure properly to report
payments of interest or dividends, or who fails to provide a certified statement
that he or she is not subject to "backup withholding."
A Fund's transactions in options, foreign-currency-denominated
securities, and certain other investment and hedging activities of the Fund,
will be subject to special tax rules (including "mark-to-market," "straddle,"
"wash sale," and "short sale" rules), the effect of which may be to accelerate
income to the Fund, defer losses to the Fund, cause adjustments in the holding
periods of the Fund's assets, convert short-term capital losses into long-term
capital losses, and otherwise affect the character of the Fund's income. These
rules could therefore affect the amount, timing, and character of distributions
to Shareholders. Income earned as a result of these transactions would, in
general, not be eligible for the dividends received deduction or for treatment
as exempt-interest dividends when distributed to Shareholders. The Funds will
endeavor to make any available elections pertaining to these transactions in a
manner believed to be in the best interest of the Funds.
Although the Funds each expect to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of their activities in states and localities in which
their offices are maintained, in which their agents or
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independent contractors are located, or in which they are otherwise deemed to be
conducting business, the Funds may be subject to the tax laws of such states or
localities. If for any taxable year the Funds do not qualify for the special
federal tax treatment afforded regulated investment companies, all of their
taxable income will be subject to federal income tax at regular corporate rates
at the Fund level (without any deduction for distributions to their
Shareholders). In addition, distributions to Shareholders will be taxed as
ordinary income even if the distributions are attributable to capital gains or
exempt interest earned by the Fund.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to Federal taxation is only a summary of
some of the important Federal tax considerations generally affecting purchasers
of Shares of the Trust's Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation. In addition,
the tax discussion in the Prospectuses and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the date
of the Prospectuses and this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
Additional Tax Information Concerning the Tax Exempt Fund and Tax-Free Funds
As indicated in the prospectuses of the Tax Exempt Fund and the
Tax-Free Funds, these Funds are designed to provide Shareholders with current
tax-exempt interest income. The Funds are not intended to constitute a balanced
investment program and are not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Tax Exempt Fund and the Tax-Free Funds would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, so-called Keogh or H.R. 10 plans,
and individual retirement accounts. Such plans and accounts are generally
tax-exempt and, therefore, would not gain any additional benefit from the
dividends of the Tax Exempt Fund and the Tax-Free Funds, being tax-exempt, and
such dividends would be ultimately taxable to the beneficiaries when distributed
to them.
In addition, the Tax Exempt Fund and the Tax-Free Funds may not be
appropriate investments for Shareholders that may be "substantial users" of
facilities financed by private activity bonds or "related persons" thereof.
"Substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person who regularly uses a part of such facilities in his trade or
business, and whose gross revenues derived with respect to the facilities
financed by the issuance of bonds represent more than 5% of the total revenues
derived by all users of such facilities, or who occupies more than 5% of the
usable area of such facilities, or for whom such facilities or a part thereof
were specifically constructed, reconstructed or acquired. "Related person"
includes certain related natural persons, affiliated corporations, a partnership
and its partners and an S Corporation and its Shareholders. Each Shareholder
that may be
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<PAGE> 124
considered a "substantial user" should consult a tax adviser with respect to
whether exempt- interest dividends would retain the exclusion under Section 103
of the Code if the Shareholder were treated as a "substantial user" or a
"related person."
The Code permits a regulated investment company which invests at least
50% of its assets in tax-free Municipal Securities to pass through to its
investors, tax-free, net Municipal Securities interest income. The policy of the
Tax Exempt Fund and the Tax-Free Funds is to pay each year as dividends
substantially all such Fund's Municipal Securities interest income net of
certain deductions. An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by the Tax Exempt Fund and the
Tax-Free Funds and designated as an exempt-interest dividend in a written notice
mailed to Shareholders after the close of such Fund's taxable year, but not to
exceed in the aggregate the net Municipal Securities interest received by the
Fund during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends from the Tax Exempt Fund and the
Tax-Free Funds during such year, regardless of the period for which the Shares
were held.
While the Tax Exempt Fund and the Tax-Free Funds do not expect to
realize any significant amount of long-term capital gains, any net realized
long-term capital gains will be distributed annually. The Tax Exempt Fund and
the Tax-Free Funds will have no tax liability with respect to such gains and the
distributions will be taxable to Shareholders as long-term capital gains,
regardless of how long a Shareholder has held the Shares of the Funds. Such
distributions will be designated as a capital gains dividend in a written notice
mailed by the Tax Exempt Fund and the Tax-Free Funds to Shareholders after the
close of the Fund's taxable year.
While the Tax Exempt Fund and the Tax-Free Funds do not expect to earn
any significant amount of investment company taxable income, taxable income
earned by the Funds will be distributed to Shareholders. In general, the
investment company taxable income will be the taxable income of the Fund (for
example, short-term capital gains) subject to certain adjustments and excluding
the excess of any net long-term capital gains for the taxable year over the net
short-term capital loss, if any, for such year. Any such income will be taxable
to Shareholders as ordinary income (whether paid in cash or additional Shares).
As indicated in the prospectuses of the Tax Exempt Fund and the
Tax-Free Funds, the Funds may acquire puts with respect to Municipal Securities
(and in the case of the Florida Fund, Florida Municipal Securities) held in
their portfolios. See "INVESTMENT OBJECTIVES AND POLICIES - Additional
Information on Portfolio Instruments - Puts" in this Statement of Additional
Information. The policy of the Tax Exempt Fund and the Tax- Free Funds is to
limit their acquisition of puts to those under which the Fund will be treated
for Federal income tax purposes as the owner of the Municipal Securities
acquired subject to the put and the interest on the Municipal Securities will be
tax-exempt to such Fund. Although the Internal Revenue Service has issued a
published ruling that provides some
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<PAGE> 125
guidance regarding the tax consequences of the purchase of puts, there is
currently no guidance available from the Internal Revenue Service that
definitively establishes the tax consequences of many of the types of puts that
the Tax Exempt Fund and the Tax-Free Funds could acquire under the 1940 Act.
Therefore, although the Tax Exempt Fund and the Tax- Free Funds will only
acquire a put after concluding that it will have the tax consequences described
above, the Internal Revenue Service could reach a different conclusion from that
of the Funds. If the Tax Exempt Fund and the Tax-Free Funds were not treated as
the owner of the Municipal Securities, income from such securities would
probably not be tax-exempt.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting purchasers of Shares of the Tax Exempt Fund
and the Tax-Free Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of the Tax Exempt Fund and the
Tax-Free Funds or their Shareholders and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential purchasers of Shares
of the Tax Exempt Fund and the Tax-Free Funds are urged to consult their tax
advisers with specific reference to their own tax situation. In addition, the
foregoing discussion is based on tax laws and regulations which are in effect on
the date of this Statement of Additional Information; such laws and regulations
may be changed by legislative or administrative action.
MANAGEMENT OF THE TRUST
Officers
The officers of each Fund of the Trust, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Trust During Past 5 Years
- ---------------- ---------------- -------------------
<S> <C> <C>
J. David Huber* Chairman of the From June 1987 to present, employee of BISYS
Board of Trustees Fund Services, Limited Partnership.
Sean M. Kelly* President, Trustee From 1993 to present, Senior Vice President
of Client Services of BISYS Fund Services;
prior to 1993, Senior Vice President of
Concord Financial Group (now BISYS Fund
Services)
George A. Landreth Vice President From December 1992 to present, employee of
BISYS Fund Services, Limited Partnership;
</TABLE>
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<PAGE> 126
<TABLE>
<CAPTION>
<S> <C> <C>
from July 1991 to December 1992,
employee of PNC Financial Corp.;
from October 1984 to July 1991,
employee of The Central Trust Co.,
N.A.
Walter B. Grimm Vice President From June, 1992 to present, employee
of BISYS Fund Services, Limited
Partnership; from 1990 to 1992,
President and CEO, Security
Bancshares; from July, 1981 to
present, President of Leigh
Investments Consulting (investments
firm).
Kevin Martin Treasurer From February 1996, to present,
employee of BISYS Fund Services,
Limited Partnership; from 1984 to
February 1996, Senior Manager,
Ernst & Young.
John F. Calvano Secretary From October, 1994 to present,
employee of BISYS Fund Services,
Limited Partnership; from July
1992, to August 1994, investment
representative, BA Investment
Services; and from October 1986
to July 1994, Marketing Manager,
Great Western Investment Management.
George O. Martinez Assistant Secretary From March, 1995 to present, Senior Vice
President and Director of Legal and Compliance
Services, BISYS Fund Services, Limited
Partnership; from June, 1989 to March, 1995,
Vice President and Associate General Counsel,
Alliance Capital Management.
Alaina V. Metz Assistant Secretary From June, 1995 to present, Chief
Administrator, Administrative and Regulatory
Services, BISYS Fund Services, Limited
Partnership; from May, 1989 to June, 1995,
Supervisor, Mutual Fund Legal Department,
Alliance Capital Management.
Scott A. Englehart Assistant Secretary From October, 1990 to present, employee of
BISYS Fund Services, Limited Partnership.
</TABLE>
* Messrs. Huber and Kelly, Trustees of the Trust, are "interested persons" of
the Trust as defined in the 1940 Act.
The officers of the Trust receive no compensation directly from the
Trust for performing the duties of their offices. BISYS receives fees from the
Trust for acting as Administrator and BISYS Fund Services Ohio, Inc. receives
fees from the Trust for acting as Transfer Agent for and for providing fund
accounting services to the Trust. Messrs. Huber, Calvano, Martin, Kelly,
Landreth, Grimm, Englehart, and Martinez and Mme. Metz are employees of BISYS
Fund Services, Limited Partnership.
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<PAGE> 127
COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Pension or
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued Annual from AmSouth
Name of from AmSouth As Part of Benefits Upon Mutual Funds
Position Mutual Funds Fund Expenses Retirement Paid to Trustee
- -------- ------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C>
J.. David
Huber None None None None
William J.
Tomko None None None None
James H.
Woodward, Jr. 11,250 None None 11,250
Homer H.
Turner 11,250 None None 11,250
Wendell D.
Cleaver 11,250 None None 11,250
Dick D.
Briggs, Jr. 11,250 None None 11,250
Sean M. Kelly NONE NONE NONE NONE
</TABLE>
(1) Figures are for the Trust's fiscal year ended July 31, 1996.
Investment Advisor
Investment advisory and management services are provided to the Money
Market Funds, the Capital Appreciation Funds and the Income Funds (except the
Limited Maturity Fund) by AmSouth pursuant to the Investment Advisory Agreement
dated as of August 1, 1988, as amended (the "First Investment Advisory
Agreement"). Investment advisory and management services are provided to the
Limited Maturity Fund by AmSouth pursuant to the Investment Advisory Agreement
dated as of January 20, 1989, as amended (the "Second Investment Advisory
Agreement" collectively with the First and Second Investment Advisory Agreement,
the "Advisory Agreements").
In selecting investments for each of the Capital Appreciation Funds,
AmSouth employs the "value investing" method. A primary theory of value
investing is that many
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<PAGE> 128
investors tend to exaggerate both prosperity and problems in market valuations.
This method, which may conflict with the prevailing mood of the market, involves
the use of independent judgment backed by careful analysis of market data.
AmSouth's approach when selecting investment for each of these Funds is to
attempt to buy and sell securities that are temporarily mispriced relative to
long-term value.
In selecting investments for each of the Income Funds and the Balanced
Fund, AmSouth attempts to anticipate interest rates, thereby capitalizing on
cyclical movements in the bond markets. AmSouth seeks to achieve this goal
through active management of the buying and selling of fixed-income securities
in anticipation of changes in yields.
Under the Advisory Agreements, the fee payable to AmSouth by the Funds
for investment advisory services is the lesser of (a) such fee as may from time
to time be agreed upon in writing by the Trust and AmSouth or (b) a fee computed
daily and paid monthly based on the average daily net assets of each Fund as
follows: the Prime Obligations Fund - forty one-hundredths of one percent (.40%)
annually; the Equity Fund - eighty one-hundredths of one percent (.80%)
annually; the Regional Equity Fund - eighty one-hundredths of one percent (.80%)
annually; the U.S. Treasury Fund - forty one-hundredths of one percent (.40%)
annually; the Tax Exempt Fund - forty one-hundredths of one percent (.40%)
annually; the Bond Fund - sixty-five one-hundredths of one percent (.65%)
annually; the Limited Maturity Fund - sixty-five one-hundredths of one percent
(.65%) annually; the Balanced Fund - eighty one-hundredths of one percent (.80%)
annually; the Government Income Fund - sixty-five one-hundredths of one percent
(.65%) annually; the Florida Fund - sixty-five one-hundredths of one percent
(.65%) annually; and the Municipal Bond Fund - sixty-five one-hundredths of one
percent (.65%) annually. A fee agreed to in writing from time to time by the
Trust and AmSouth may be significantly lower than the fee calculated at the
annual rate and the effect of such lower fee would be to lower a Fund's expenses
and increase the net income of such Fund during the period when such lower fee
is in effect.
For the fiscal years ended July 31, 1996, July 31, 1995, and July 31,
1994, AmSouth received $2,459,885, $2,184,158, and $1,976,523, respectively,
from the Prime Obligations Fund. For the fiscal years ended July 31, 1996, July
31, 1995, and July 31, 1994, AmSouth received $1,588,850, $1,245,378, and
$1,225,805, respectively, from the U.S. Treasury Fund. For the fiscal years
ended July 31, 1996, July 31, 1995, and July 31, 1994, AmSouth received
$133,336, $125,213, and $126,354 for the Tax Exempt Fund. For the fiscal years
ended July 31, 1996, July 31, 1995, and July 31, 1994, investment advisory fees
paid to AmSouth reflect voluntary reductions in investment advisory fees of
$133,340, $125,213, and $126,354, respectively, for the Tax Exempt Fund.
For the fiscal year ended July 31, 1996, AmSouth received $2,706,627,
$669,502, $547,123, $292,620, $2,429,049, $52,834, and $146,775 from the Equity
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<PAGE> 129
Fund, the Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the
Balanced Fund, the Government Income Fund, and Florida Fund, respectively. For
the fiscal year ended July 31, 1996, investment advisory fees paid to AmSouth
reflect voluntary fee reductions of $962, $165,186, $87,670, $169,405, $61,522,
and $171,316, for the Regional Equity Fund, the Bond Fund, the Limited Maturity
Fund, the Balanced Fund, the Government Income Fund, and Florida Fund,
respectively.
For the fiscal year ended July 31, 1995, AmSouth received $1,841,031,
$478,789, $461,002, $253,511, $1,807,557, and $29,835 from the Equity Fund, the
Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced
Fund and the Government Income Fund, respectively. For the fiscal year ended
July 31, 1995, investment advisory fees paid to AmSouth reflect voluntary fee
reductions of $3,057, $302, $138,571, $76,328, $259,520, and $66,952, for the
Equity Fund, the Regional Equity Fund, the Bond Fund, the Limited Maturity Fund,
the Balanced Fund and the Government Income Fund. For the period from
commencement of operations (September 30, 1994) through July 31, 1995, AmSouth
received $124,256 from the Florida Fund, which reflects a voluntary reduction in
fees of $111,697.
For the fiscal year ended July 31, 1994, AmSouth received $1,253,256,
$209,061, $352,480, $280,251, and $1,274,752 from the Equity Fund, the Regional
Equity Fund, the Bond Fund, the Limited Maturity Fund and the Balanced Fund,
respectively. For the fiscal year ended July 31, 1994, investment advisory fees
paid to AmSouth reflect voluntary fee reductions of $165,048, $184,505,
$105,953, $83,946, and $408,227, for the Equity Fund, the Regional Equity Fund,
the Bond Fund, the Limited Maturity Fund and the Balanced Fund. For the period
from commencement of operations October 1, 1993 through July 31, 1994, AmSouth
received $0 from the Government Income Fund, which reflects a voluntary
reduction in fees of $117,065.
Each of the Advisory Agreements provides that AmSouth shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of such Advisory Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of AmSouth in the performance of its
duties, or from reckless disregard by AmSouth of its duties and obligations
thereunder.
Unless sooner terminated, the First Investment Advisory Agreement will
continue in effect until January 31, 1998 as to each of the Money Market Funds,
the Capital Appreciation Funds, the Tax-Free Funds, the Bond Fund and the
Government Income Fund and for successive one-year periods if such continuance
is approved at least annually by the Trust's Board of Trustees or by vote of the
holders of a majority of the outstanding voting Shares of that Fund (as defined
under "GENERAL INFORMATION
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<PAGE> 130
- -Miscellaneous" in the respective Prospectus of the Money Market Funds, the
Capital Appreciation Funds and the Income Funds), and a majority of the Trustees
who are not parties to the First Investment Advisory Agreement or interested
persons (as defined in the 1940 Act) of any party to the First Investment
Advisory Agreement by votes cast in person at a meeting called for such purpose.
Unless sooner terminated, the Second Investment Advisory Agreement will
continue in effect as to the Limited Maturity Fund until January 31, 1998 and
for successive one-year periods thereafter if such continuance is approved at
least annually by the Trust's Board of Trustees or by vote of the holders of a
majority of the outstanding voting Shares of the Limited Maturity Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in the Prospectus of the
Income Funds), and a majority of the Trustees who are not parties to the Second
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Second Investment Advisory Agreement by votes cast in person
at a meeting called for such purpose. The Advisory Agreements are terminable as
to a particular Fund at any time on 60 days' written notice without penalty by
the Trustees, by vote of the holders of a majority of the outstanding voting
Shares of that Fund, or by AmSouth. The Advisory Agreements also terminate
automatically in the event of any assignment, as defined in the 1940 Act.
On December 5, 1990, the First Investment Advisory Agreement was
approved by the Shareholders of the Prime Obligations Fund, the U.S. Treasury
Fund, the Equity Fund, the Regional Equity Fund and the Bond Fund and the Second
Advisory Agreement was approved by the Shareholders of the Limited Maturity
Fund. On March 8, 1993, the First Investment Advisory Agreement was approved by
the Shareholders of the Prime Obligations Fund, the U.S. Treasury Fund, the Tax
Exempt Fund, the Equity Fund, the Regional Equity Fund, the Bond Fund, and the
Balanced Fund, and the Second Advisory Agreement was approved by the
Shareholders of the Limited Maturity Fund.
From time to time, advertisements, supplemental sales literature and
information furnished to present or prospective shareholders of the Funds may
include descriptions of the investment advisor including, but not limited to,
(i) descriptions of the advisor's operations; and (ii) descriptions of certain
personnel and their functions; and (iii) statistics and rankings related to the
advisor's operations.
AmSouth also serves as Sub-Administrator for the Trust. See "Sub-
Administrator" below.
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<PAGE> 131
Portfolio Transactions
Pursuant to the Advisory Agreements, AmSouth determines, subject to the
general supervision of the Board of Trustees of the Trust and in accordance with
each Fund's investment objective, policies and restrictions, which securities
are to be purchased and sold by a Fund, and which brokers are to be eligible to
execute such Fund's portfolio transactions. Purchases and sales of portfolio
securities with respect to the Money Market Funds, the Income Funds and the
Balanced Fund (with respect to its debt securities) usually are principal
transactions in which portfolio securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter and purchases from dealers serving as
market makers may include the spread between the bid and asked price.
Transactions on stock exchanges involve the payment of a negotiated brokerage
commissions. Transactions in over-the-counter market are generally principal
transactions with dealers. With respect to over-the-counter market, the Trust,
where possible, will deal directly with dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere. While AmSouth generally seeks competitive
spreads or commissions, the Trust may not necessarily pay the lowest spread or
commission available on each transaction, for reasons discussed below.
Allocation of transactions, including their frequency, to various
dealers is determined by AmSouth in its best judgment and in a manner deemed
fair and reasonable to Shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
AmSouth may receive orders for transactions on behalf of the Trust. Information
so received is in addition to and not in lieu of services required to be
performed by AmSouth and does not reduce the advisory fees payable to AmSouth by
the Trust. Such information may be useful to AmSouth in serving both the Trust
and other clients and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to AmSouth in carrying out
its obligations to the Trust.
The Trust will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with AmSouth, BISYS, or their
affiliates, and will not give preference to AmSouth's correspondents with
respect to such transactions, securities, savings deposits, repurchase
agreements, and reverse repurchase agreements.
Investment decisions for each Fund of the Trust are made independently
from those for the other Funds or any other investment company or account
managed by AmSouth. Any such other investment company or account may also invest
in the same securities as the Trust. When a purchase or sale of the same
security is made at
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<PAGE> 132
substantially the same time on behalf of a Fund and another Fund, investment
company or account, the transaction will be averaged as to price and available
investments will be allocated as to amount in a manner which AmSouth believes to
be equitable to the Fund(s) and such other investment company or account. In
some instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained by a Fund. To the extent
permitted by law, AmSouth may aggregate the securities to be sold or purchased
for a Fund with those to be sold or purchased for the other Funds or for other
investment companies or accounts in order to obtain best execution. As provided
by each of the Advisory Agreements, in making investment recommendations for the
Trust, AmSouth will not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Trust is a customer of AmSouth,
its parent or its subsidiaries or affiliates and, in dealing with its customers,
AmSouth, its parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of such customers are held by the Trust.
During the fiscal year ended July 31, 1996, the Equity Fund paid
aggregate brokerage commissions in the amount of $265,581.82.
During the fiscal year ended July 31, 1996, the Regional Equity Fund paid
aggregate brokerage commissions in the amount of $167,771.64. During the
fiscal year ended July 31, 1996, the Balanced Fund paid aggregate
brokerage commissions in the amount of $489,564.65.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment advisor,
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<PAGE> 133
transfer agent, and custodian to such an investment company. In 1981, the United
States Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisors to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisors to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
AmSouth believes that it possesses the legal authority to perform the
services for each Fund contemplated by the Advisory Agreements regarding that
Fund and described in the Prospectus of that Fund and this Statement of
Additional Information and has so represented in the Advisory Agreement
regarding that Fund. Future changes in either federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent or restrict AmSouth from
continuing to perform such services for the Trust. Depending upon the nature of
any changes in the services which could be provided by AmSouth, the Board of
Trustees of the Trust would review the Trust's relationship with AmSouth and
consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of AmSouth or its affiliated and
correspondent banks in connection with customer purchases of Shares of the
Trust, the Banks might be required to alter materially or discontinue the
services offered by them to customers. It is not anticipated, however, that any
change in the Trust's method of operations would affect its net asset value per
Share or result in financial losses to any customer.
Manager and Administrator
ASO Services Company serves as general manager and administrator (the
"Administrator") to each Fund of the Trust pursuant to the Management and
Administration Agreement dated as of April 1, 1996 (the "Administration
Agreement"). During the Trust's fiscal year ended July 31, 1996 ASO Services
Company succeeded BISYS Fund Services as Administrator on April 1. 1996. ASO
Services Company is a wholly-owned subsidiary of BISYS. The Administrator
assists in supervising all operations of each Fund (other than those performed
by AmSouth under the Advisory Agreements, those performed by Union Bank of
California, N.A. ("Union Bank of California") under its custodial services
agreement with the Trust and
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<PAGE> 134
those performed by BISYS Fund Services Ohio, Inc. under its transfer agency and
fund accounting agreements with the Trust).
On October 1, 1993, The Winsbury Company and its affiliated companies,
including the Winsbury Service Corporation, were acquired by The BISYS Group,
Inc. a publicly held company which is a provider of information processing, loan
servicing and 401(k) administration and record-keeping services to and through
banking and other financial organizations.
Under the Administration Agreement, the Administrator has agreed to
monitor the net asset value per Share of the Money Market Funds, to maintain
office facilities for the Trust, to maintain the Trust's financial accounts and
records, and to furnish the Trust statistical and research data and certain
bookkeeping services, and certain other services required by the Trust. The
Administrator prepares annual and semi-annual reports to the Securities and
Exchange Commission, prepares Federal and state tax returns, prepares filings
with state securities commissions, and generally assists in supervising all
aspects of the Trust's operations other than those performed by AmSouth under
the Advisory Agreements, those by Union Bank of California under its custodial
services agreement with the Trust and those performed by BISYS Fund Services
Ohio, Inc. under its transfer agency and fund accounting agreements with the
Trust. Under the Administration Agreement, the Administrator may delegate all or
any part of its responsibilities thereunder.
Under the Administration Agreement for expenses assumed and services
provided as manager and administrator, the Administrator receives a fee from
each Fund equal to the lesser of (a) a fee computed at the annual rate of twenty
one-hundredths of one percent (.20%) of such Fund's average daily net assets; or
(b) such fee as may from time to time be agreed upon in writing by the Trust and
the Administrator. A fee agreed to from time to time by the Trust and the
Adminstrator may be significantly lower than the fee calculated at the annual
rate and the effect of such lower fee would be to lower a Fund's expenses and
increase the net income of such Fund during the period when such lower fee is in
effect. Each Fund also bears expenses incurred in pricing securities owned by
the Fund.
For the fiscal years ended July 31, 1996, July 31, 1995 and July 31,
1994, BISYS and ASO Services Company received $1,229,842, $1,092,079 and
$988,262, respectively, from the Prime Obligations Fund. For the fiscal years
ended July 31, 1996, July 31, 1995 and July 31, 1994, BISYS and ASO Services
Company received $794,425, $622,689, AND $612,904, respectively, from the U.S.
Treasury Fund. For the fiscal years ended July 31, 1996, July 31, 1995 and July
31, 1994, BISYS and ASO Services Company received $133,336, $125,213 and
$126,354, respectively, from the Tax Exempt Fund. For the fiscal year ended
July, 1996,
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<PAGE> 135
management and administration fees reflect voluntary reductions in management
and administration fees of $1,000 for the Tax Exempt Fund.
For the fiscal year ended July 31, 1996, BISYS and ASO Services Company
received $406,464, $100,491, $131,382, $70,255, $389,624, $17,620 and $48,936
from the Equity Fund, the Regional Equity Fund, the Bond Fund, the Limited
Maturity Fund, the Balanced Fund and the Government Income Fund, and the Florida
Fund respectively. For the fiscal year ended July 31, 1996, management and
administration fees reflect voluntary fee reductions of $309,086, $67,125,
$87,790, $46,757, $259,990, $17,567, and $48,938 for the Equity Fund, the
Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced
Fund, Government Income Fund and the Florida Fund, respectively.
For the fiscal year ended July 31, 1995, BISYS received $276,383,
$71,818, $110,640, $60,867, $308,216, and $6,300 from the Equity Fund, the
Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced
Fund and the Government Income Fund, respectively. For the fiscal year ended
July 31, 1995, management and administration fees paid to BISYS reflect
voluntary fee reductions of $184,639, $47,954, $73,844, $40,622, $208,553, and
$23,481 for the Equity Fund, the Regional Equity Fund, the Bond Fund, the
Limited Maturity Fund, the Balanced Fund and the Government Income Fund,
respectively. For the period from commencement of operations (September 30,
1994) through July 31, 1995, BISYS received $50,848 from the Florida Fund, which
reflects a voluntary reduction in fees of $21,753.
For the fiscal year ended July 31, 1994, BISYS received $212,573,
$58,991, $84,589, $67,244, and $252,259 from the Equity Fund, the Regional
Equity Fund, the Bond Fund, the Limited Maturity Fund and the Balanced Fund,
respectively. For the fiscal year ended July 31, 1994, management and
administration fees paid to BISYS reflect voluntary fee reductions of $142,003,
$39,401, $56,467, $44,817 and $168,486 for the Equity Fund, the Regional Equity
Fund, the Bond Fund, the Limited Maturity Fund and the Balanced Fund,
respectively. For the period from commencement of operations (October 1, 1993)
through July 31, 1994, BISYS received $0 from the Government Income Fund, which
reflects a voluntary reduction in fees of $36,020.
The Administration Agreement shall, unless sooner terminated as
provided in the Administration Agreement (described below), continue until
December 31, 2000. Thereafter, the Administration Agreement shall be renewed
automatically for successive five-year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least 60 days' prior to
the expiration of the then-current term. The Administration Agreement is
terminable with respect to a particular Fund only upon mutual agreement of the
parties to the Administration Agreement and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Trust's Board of Trustees or by the Administrator.
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The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator of its obligations and duties
thereunder.
Expenses
Each Fund bears the following expenses relating to its operations:
taxes, interest, any brokerage fees and commissions, fees of the Trustees of the
Trust, Securities and Exchange Commission fees, state securities qualification
fees, costs of preparing and printing prospectuses for regulatory purposes and
for distribution to current Shareholders, outside auditing and legal expenses,
advisory and administration fees, fees and out-of-pocket expenses of the
custodian and the transfer agent, dividend disbursing agents fees, fees and
out-of-pocket expenses for fund accounting services, expenses incurred for
pricing securities owned by it, certain insurance premiums, costs of maintenance
of its existence, costs of Shareholders' and Trustees' reports and meetings, and
any extraordinary expenses incurred in its operation.
If total expenses incurred by any of the Funds in any fiscal year
exceed expense limitations imposed by applicable state securities regulations,
AmSouth and the Administrator will reduce their own fees by the amount of such
excess in proportion to their respective fees. As of the date of the
Prospectuses and this Statement of Additional Information, there are no state
expense limitations applicable to the Trust. Any fee reduction by AmSouth and
the Administrator will be estimated daily and reconciled on a monthly basis.
Fees imposed upon customer accounts by AmSouth or its affiliated or
correspondent banks for cash management services are not included within Trust
expenses for purposes of any such expense limitation.
Sub-Administrators
Effective August 1, 1995, AmSouth was retained by BISYS as the Sub-
Administrator to the Trust pursuant to an agreement between the Administrator
and AmSouth. On April 1, 1996, AmSouth entered into an agreement with AmSouth
Services Corporation as the Sub-Administrator of the Trust. Pursuant to this
agreement, AmSouth Bank of Alabama has assumed certain of the Administrator's
duties, for which AmSouth receives a fee, paid by the Administrator, calculated
at an annual rate of up to (.10%) ten one-hundredths of one percent of each
Fund's average net assets. For the fiscal year ended July 31, 1996, AmSouth
received $1,125,000 with respect to the Trust.
Effective April 1, 1996 BISYS Fund Services was retained by the
Administrator as the Sub-Administrator to the Trust. Pursuant to its agreement
with
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the Administrator, BISYS Fund Services is entitled to compensation as mutually
agreed upon from time to time by it and the Administrator.
Distributor
BISYS serves as distributor to each Fund of the Trust pursuant to the
Distribution Agreement dated as of October 1, 1993 (the "Distribution
Agreement"). The Distribution Agreement provides that, unless sooner terminated
it will continue in effect until January 31, 1998, and from year to year
thereafter if such continuance is approved at least annually (i) by the Trust's
Board of Trustees or by the vote of a majority of the outstanding Shares of the
Funds or Fund subject to such Distribution Agreement, and (ii) by the vote of a
majority of the Trustees of the Trust who are not parties to such Distribution
Agreement or interested persons (as defined in the Investment Company Act of
1940) of any party to such Distribution Agreement, cast in person at a meeting
called for the purpose of voting on such approval. The Distribution Agreement
may be terminated in the event of any assignment, as defined in the 1940 Act.
Shareholder Servicing Plan
A Shareholder Servicing Plan for the Trust was initially approved on
December 6, 1995 by the Trust's Board of Trustees, including a majority of the
trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the Shareholder
Servicing Plan (the "Independent Trustees"). The Shareholder Servicing Plan
reflects the creation of the Classic Shares, and provides for fees only upon
that Class. Currently, only the Money Market Funds offer Classic Shares.
The Shareholder Servicing Plan may be terminated with respect to any
Money Market Fund by a vote of a majority of the Independent Trustees, or by a
vote of a majority of the outstanding Classic Shares of that Money Market Fund.
The Shareholder Servicing Plan may be amended by vote of the Trust's Board of
Trustees, including a majority of the Independent Trustees, cast in person at a
meeting called for such purpose, except that any change in the Shareholder
Servicing Plan that would materially increase the shareholder servicing fee with
respect to a Money Market Fund requires the approval of the holders of that
Money Market Fund's Classic Class. The Trust's Board of Trustees will review on
a quarterly and annual basis written reports of the amounts received and
expended under the Shareholder Servicing Plan (including amounts expended by the
Distributor to Participating Organizations pursuant to the Servicing Agreements
entered into under the Shareholder Servicing Plan) indicating the purposes for
which such expenditures were made.
The fee of .25% of average daily net assets of the Classic Shares of
each Money Market Fund payable under the Trust's Shareholder Servicing Plan, to
which Classic
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Shares of each Money Market Fund of the Trust are subject, is described in the
Money Market Fund Prospectus.
For the fiscal year ended July 31, 1996 BISYS received $4,607 with
respect to the Classic Shares of the AmSouth U.S. Treasury Fund (which reflects
a fee reduction of $6,912); $41,777 with respect to the Classic Shares of
the Prime Obligations Fund (which reflects a fee reduction of $62,669); and
$4,960 with respect to the Classic Shares of the Tax-Exempt Fund (which reflects
a fee reduction of $7,440). For the fiscal year ended July 31, 1995 no fees
were paid by any Money Market Fund under the Shareholder Servicing Plan .
Custodian
Union Bank of California (the "Custodian") serves as custodian to each
Fund of the Trust pursuant to a Custodial Services Agreement with the Trust. The
Custodian's responsibilities include safeguarding and controlling the Trust's
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Trust's investments.
Transfer Agent and Fund Accounting Services.
BISYS Fund Services Ohio, Inc. ("BISYS Ohio") serves as transfer agent
to each Fund of the Trust pursuant to a Transfer Agency and Shareholder Service
Agreement with the Trust.
BISYS Ohio also provides fund accounting services to each of the Funds
pursuant to a Fund Accounting Agreement with the Trust. Under the Fund
Accounting Agreement, BISYS Ohio receives a fee from each Fund at the annual
rate of 0.03% of such Fund's average daily net assets, plus out-of-pocket
expenses, subject to a minimum annual fee of $40,000 for each tax exempt fund
and $30,000 for each taxable Fund and the Money Market Funds may be subject to
an additional fee of $10,000 for each Class. For the fiscal years ended July 31,
1996, July 31, 1995 and July 31, 1994, BISYS Ohio received $254,753 and $289,092
, respectively, from the Prime Obligations Fund. For the fiscal years ended July
31, 1996, July 31, 1995 and July 31, 1994, BISYS Ohio received $147,544 and
$179,572 , respectively, from the U.S. Treasury Fund. For the fiscal years ended
July 31, 1996, July 31, 1995 and July 31, 1994, BISYS Ohio received $32,145 and
$59,090 , respectively, from the Tax Exempt Fund. For the fiscal years ended
July 31, 1996, July 31, 1995, and July 31, 1994, BISYS Ohio received $145,583,
$114,437, and $120,225 respectively, from the Equity Fund. For the fiscal years
ended July 31, 1996, July 31, 1995, and July 31, 1994, BISYS Ohio received
$36,049, $30,766, and $79,071 , respectively, from the Regional Equity Fund. For
the fiscal years ended July 31, 1996, July 31, 1995, and July 31, 1994, BISYS
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Ohio received $46,931, $50,807, and $64,501 , respectively, from the Bond Fund.
For the fiscal years ended July 31, 1996, July 31, 1995, and July 31, 1994,
BISYS Ohio received $26,388, $28,353, and $58,805 , respectively, from the
Limited Maturity Fund. For the fiscal years ended July 31, 1996, July 31, 1995,
and July 31, 1994, BISYS Ohio received $141,803, $128,452, and $133,846 ,
respectively, from the Balanced Fund for fund accounting services and
reimbursement of expenses. For the fiscal year ended July 31, 1996, July 31,
1995 and for the period from commencement of operations (October 1, 1993)
through July 31, 1994, BISYS Ohio received $7,849, $12,846 and $28,546,
respectively, from the Government Income Fund for fund accounting services and
reimbursement of expenses. For the fiscal year ended July 31, 1996 and for the
period from commencement of operations (September 30, 1994) through July 31,
1995, BISYS Ohio received $21,614 and $22,258 from the Florida Fund for fund
accounting services and reimbursement of expenses.
Auditors
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Trust
appearing in this Statement of Additional Information which have been audited by
Coopers & Lybrand L.L.P., independent accountants, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report and on
the authority of such firm as experts in auditing and accounting. Coopers &
Lybrand L.L.P.'s address is 100 East Broad Street, Columbus, Ohio 43215.
Legal Counsel
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005-3333 are counsel to the Trust.
PERFORMANCE INFORMATION
General
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Trust; (5) descriptions of investment strategies for one or
more of such Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with
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relevant market or industry indices or other appropriate benchmarks; and (8)
discussions of fund rankings or ratings by recognized rating organizations.
Yields of the Money Market Funds
As summarized in the Prospectus of the Money Market Funds under the
heading "Performance Information," the "yield" of each of those Funds for a
seven-day period (a "base period") will be computed by determining the "net
change in value" (calculated as set forth below) of a hypothetical account
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by 365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include the value
of additional shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional shares,
but will not include realized gains or losses or unrealized appreciation or
depreciation on portfolio investments. Yield may also be calculated on a
compound basis (the "effective yield") which assumes that net income is
reinvested in Fund shares at the same rate as net income is earned for the base
period.
The Tax Exempt Fund may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of the Tax Exempt Fund's yield which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent effective yield for the Tax Exempt Fund is computed by dividing that
portion of the effective yield of the Tax Exempt Fund which is tax-exempt by the
difference between one and a stated income tax rate and adding the product to
that portion, if any, of the effective yield of the Fund that is not tax-exempt.
The yield and effective yield of each of the Money Market Funds and the
tax equivalent yield and the tax equivalent effective yield of the Tax Exempt
Fund will vary in response to fluctuations in interest rates and in the expenses
of the Fund. For comparative purposes the current and effective yields should be
compared to current and effective yields offered by competing financial
institutions for that base period only and calculated by the methods described
above.
For the seven-day period ended July 31, 1996, the yield and effective
yield of the Premier Class of each Money Market Fund calculated as described
above was as follows:
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Effective
Fund Yield Yield
---- ----- -----
Prime Obligations Fund 4.78% 4.89%
U.S. Treasury Fund 4.55% 4.66%
Tax Exempt Fund 3.00% 3.05%
For the 7-day period ending July 31, 1996, the tax equivalent yield and
the tax equivalent effective yield of the Premier Class of the Tax Exempt Fund
were 4.97% and 5.05% respectively, and the tax equivalent yield and the tax
equivalent effective yield of the Classic Class of the Tax Exempt Fund was
4.80% and 4.87%, respectively which reflect the amount of income subject to
federal income taxation that a taxpayer in a 39.6% tax bracket would have to
earn in order to obtain the same after-tax income as that derived from the
"yield" and "effective yield", respectively, of the Tax Exempt Fund.
For the seven-day period ended July 31, 1996, the yield and effective
yield of the Classic Class of each Money Market Fund calculated as described
above was as follows:
Effective
Fund Yield Yield
---- ----- -----
Prime Obligations Fund 4.68% 4.79%
U.S. Treasury Fund 4.45% 4.55%
Tax Exempt Fund 2.90% 2.94%
Yields of the Capital Appreciation Funds and the Income Funds
As summarized in the Prospectuses under the heading "Performance
Information," yields of the Capital Appreciation Funds, the Income Funds and the
Tax-Free Funds will be computed by annualizing net investment income per share
for a recent 30-day period and dividing that amount by the maximum offering
price per share (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last trading day of that period. Net investment
income will reflect amortization of any market value premium or discount of
fixed-income securities (except for obligations backed by mortgages or other
assets) and may include recognition of a pro rata portion of the stated dividend
rate of dividend paying portfolio securities. The yield of each of the Capital
Appreciation Funds and the Income Funds will vary from time to time depending
upon market conditions, the composition of the Fund's portfolios and operating
expenses of the
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Trust allocated to each Fund. These factors and possible differences in the
methods used in calculating yield should be considered when comparing a Fund's
yield to yields published for other investment companies and other investment
vehicles. Yield should also be considered relative to changes in the value of
the Fund's shares and to the relative risks associated with the investment
objectives and policies of the Capital Appreciation Funds and the Income Funds .
The Tax-Free Funds may also advertise a "tax equivalent yield" and a
"tax equivalent effective yield." Tax equivalent yield will be computed by
dividing that portion of each Fund's yield which is tax-exempt by the difference
between one and a stated income tax rate and adding the product to that portion,
if any, of the yield of the Fund that is not tax-exempt. The tax equivalent
effective yield for the Tax-Free Funds is computed by dividing that portion of
the effective yield of the Fund which is tax-exempt by the difference between
one and a stated income tax rate and adding the product to that portion, if any,
of the effective yield of the Fund that is not tax-exempt.
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no assurance that any historical results
will continue.
Investors in the Capital Appreciation Funds and the Income Funds are
specifically advised that share prices, expressed as the net asset values per
share, will vary just as yields will vary.
For the 30-day period ending July 31, 1996, the Equity Fund had a yield
of 1.70%, the Regional Equity Fund had a yield of 1.25%, the Balanced Fund had a
yield of 3.56%, the Bond Fund had a yield of 6.09%, the Limited Maturity Fund
had a yield of 5.63%, the Government Income Fund had a yield of 6.09% and the
Florida Fund had a yield of 4.05%.
Calculation of Total Return
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and
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annualizing the result for periods of less than one year.
For the fiscal year ended July 31, 1996, annual total return was 5.10%,
4.93% and 3.15% for the Premier Shares and Classic Shares of the Prime
Obligations Fund, the U.S. Treasury Fund, and the Tax Exempt Fund,
respectively.
For the fiscal year ended July 31, 1996, annual total return was
11.09%, 13.10%, 4.40%, 4.74%, 8.37%, 4.91% and 4.24% for the Equity Fund, the
Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced
Fund, Government Income Fund, and the Florida Fund respectively.
For the five-year period ended July 31, 1996 the average annual total
return was 4.04% for the Premier Shares and the Classic Shares of the Prime
Obligations Fund; 3.89% for the Premier Shares and the Classic Shares of the
U.S. Treasury Fund; and 2.72% for the Premier Shares and the Classic Shares of
the Tax Exempt Fund. For the five-year period ended July 31, 1996 the average
annual total return was 11.91%, 7.32%, 5.58%, and 12.70% the Equity Fund, the
Bond Fund, the Limited Maturity Fund, and the Regional Equity Fund,
respectively.
For the period from December 19, 1991 (commencement of operations)
through July 31, 1996, average annual total return for the Balanced Fund was
10.55%. For the period from October 1, 1993 (commencement of operations) through
July 31, 1996, average annual total return was 3.43% for the Government Income
Fund. For the period from September 30, 1994 (commencement of operations)
through July 31, 1996, average annual total return was 4.12% for the Florida
Fund.
For the period from December 1, 1988 (commencement of operations of the
Equity Fund, the Regional Equity Fund and the Bond Fund) through July 31, 1996,
average annual total return was 12.10%, 13.47% and 7.95% for the Equity Fund,
the Regional Equity Fund and the Bond Fund, respectively. For the period from
February 1, 1989 (commencement of operations) through July 31, 1996, the average
annual total return for the Limited Maturity Fund was 6.75%. For the period from
August 8, 1988 (commencement of operations) through July 31, 1996, average
annual total return was 5.48% for the Premier Shares and for the Classic
Shares of the Prime Obligations Fund. For the period from September 8, 1988
(commencement of operations) through July 31, 1996, average annual total
return was 5.28% for the Premier Shares and for the Classic Shares of the U.S.
Treasury Fund.
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For the period from June 27, 1990 (commencement of operations) through July 31,
1996, average annual total return was 3.08% for the Premier Shares and for the
Classic Shares of the Tax Exempt Fund.
Performance Comparisons
Yield and Total Return. From time to time, performance information for
the Funds showing their average annual total return and/or yield may be included
in advertisements or in information furnished to present or prospective
Shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may be included in advertisements.
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of approximately 3,500 stocks relative to the base measure of 100.00 on February
5, 1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1
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<PAGE> 145
million, have at least one year to maturity and be rated "Baa" or higher
("investment grade") by a nationally recognized statistical rating agency.
All Funds. Current yields or performance will fluctuate from time to time and
are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by AmSouth
or its affiliated or correspondent banks for cash management services will
reduce a Fund's effective yield to Customers.
ADDITIONAL INFORMATION
Organization and Description of Shares
The Trust was organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated October 1, 1987, under the name "Shelf
Registration Trust IV." The Trust's name was changed to "The ASO Outlook Group"
as of April 12, 1988 and to "AmSouth Mutual Funds" as of August 19, 1993 by
amendments to the Agreement and Declaration of Trust. A copy of the Trust's
Agreement and Declaration of Trust, as amended (the "Declaration of Trust") is
on file with the Secretary of State of The Commonwealth of Massachusetts. The
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest. The Trust presently
has eleven series of Shares which represent interests in the Prime Obligations
Fund, the AmSouth U.S. Treasury Fund, the Tax Exempt Fund, the Equity Fund, the
Regional Equity Fund, the Bond Fund, the Limited Maturity Fund, the Municipal
Bond Fund, the Government Income Fund, and the Florida Fund. The Trust's
Declaration of Trust authorizes the Board of Trustees to divide or redivide any
unissued Shares of the Trust into one or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
As described in the text of the Prospectuses following the caption
"GENERAL INFORMATION -- Description of the Trust and its Shares," Shares of the
Trust are entitled to one vote per share (with proportional voting for
fractional shares) on such
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matters as Shareholders are entitled to vote. Shareholders vote in the aggregate
and not by series or class on all matters except (i) when required by the 1940
Act, shares shall be voted by individual series, (ii) when the Trustees have
determined that the matter affects only the interests of one or more series or
class, then only Shareholders of such series or class shall be entitled to vote
thereon, and (iii) only the holders of Classic Shares will be entitled to vote
on matters submitted to Shareholder vote with regard to the Shareholder
Servicing Plan. There will normally be no meetings of Shareholders for the
purposes of electing Trustees unless and until such time as less than a majority
of the Trustees have been elected by the Shareholders, at which time the
Trustees then in office will call a Shareholders' meeting for the election of
Trustees. In addition, Trustees may be removed from office by a written consent
signed by the holders of two-thirds of the outstanding voting Shares of the
Trust and filed with the Trust's custodian or by vote of the holders of
two-thirds of the outstanding voting Shares of the Trust at a meeting duly
called for the purpose, which meeting shall be held upon the written request of
the holders of not less than 10% of the outstanding voting Shares of any Fund.
Except as set forth above, the Trustees shall continue to hold office and may
appoint their successors.
Shareholder Liability
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims Shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in every agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for indemnification
out of a Fund's property for all loss and expense of any Shareholder of such
Fund held liable on account of being or having been a Shareholder. Thus, the
risk of a Shareholder incurring financial loss on account of Shareholder
liability is limited to circumstances in which a Fund would be unable to meet
its obligations.
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Securities and Exchange Commission of the management or policies of the
Trust.
As of November 16, 1996, the trustees and officers of the Trust, as a
Group, owned less than 1% of the Premier Shares and of the Classic Shares of any
of the Prime Obligations Fund, the U.S. Treasury Fund and the Tax Exempt Fund,
and the Equity Fund, the Regional Equity Fund, the Tax Exempt Fund, the Bond
Fund, the Limited Maturity Fund, the Balanced Fund, the Municipal Bond Fund, the
Government Income Fund, and the Florida Fund. As of November 16, 1996, AmSouth,
1901 Sixth Avenue-North, Birmingham, Alabama, was the Shareholder of record of
92.56% of the outstanding voting Shares of the Premier Shares of the Prime
Obligations Fund, 97.56% of the outstanding voting Shares of the Premier Shares
of the U.S. Treasury Fund, 98.46% of the outstanding voting Shares of the
Premier Shares of the Tax
B-46
<PAGE> 147
Exempt Fund, 90.76% of the outstanding voting Shares of the Equity Fund, 66.89%
of the outstanding voting Shares of the Regional Equity Fund, 95.13% of the
outstanding voting Shares of the Bond Fund, 91.02% of the outstanding voting
Shares of the Limited Maturity Fund, 87.63% of the outstanding voting Shares of
the Balanced Fund, 2.09% of the outstanding voting Shares of the Government
Income Fund, and 88.38% of the outstanding voting Shares of the Florida Fund.
59.83% of the outstanding voting Shares of the Premier Class of the Prime
Obligations Fund. 72.76% of the outstanding voting Shares of the Premier Class
of the U.S. Treasury Fund, 74.73% of the outstanding voting Shares of the
Premier Class of the Tax Exempt Fund, 42.68% of the outstanding voting Shares
of the Equity Fund, 39.72% of the outstanding voting Shares of the Regional
Equity Fund, 82.55% of the Shares of the Bond Fund, 59.77% of the outstanding
voting Shares of the Limited Maturity Fund, 51.42% of the outstanding voting
Shares of the Balanced Fund, 2.096% of the outstanding voting Shares of the
Government Income Fund, and 88.38% of the outstanding voting Shares of the
Florida Fund were also owned beneficially by AmSouth because it possessed or
shared investment or voting power with respect to such Shares. Under the 1940
Act, AmSouth may be deemed to be a controlling person of the Premier Class of
the Prime Obligations Fund, the Premier Class of the AmSouth U.S. Treasury
Fund, the Premier Class of the Tax Exempt Fund, the Equity Fund, the Regional
Equity Fund, the Bond Fund, the Limited Maturity Fund, the Balanced Fund and
the Florida Fund. The ultimate parent of AmSouth is AmSouth Bancorporation.
As of November 16, 1996 National Financial Services Corporation, One
World Financial Center, 200 Liberty Street, New York, New York 10281, was the
Shareholder of record of 92.34% of the outstanding voting Shares of the Classic
Shares of the Prime Obligations Fund, 87.45% of the outstanding voting Shares of
the Classic Shares of the Tax Exempt Fund, and 25.45% of the Government Income
Fund.
The following table indicates each additional person known by the group
to own beneficially 5% or more of the Shares of a Fund of the Trust as of
November 16, 1996:
B-47
<PAGE> 148
Prime Obligations Fund -- Classic Shares
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
Wayne Killian 6,062,258.90 5.72%
403 Cagnouster North
Shoal Creek, AL 35242
U.S. Treasury Fund -- Classic Shares
Number of
Name and Address Shares Percentage
- ---------------- ------ ----------
Association of Edison 702,190.39 5.28%
Illumination
600 18th Street North
Birmingham, AL 35291
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
B-48
<PAGE> 149
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of AmSouth Mutual Funds
We have audited the accompanying statements of assets and liabilities of
AmSouth Mutual Funds (comprising, respectively, Prime Obligations Fund, U.S.
Treasury Fund, Tax-Exempt Fund, Bond Fund, Limited Maturity Fund, Government
Income Fund, Florida Tax-Free Fund, Equity Fund, Regional Equity Fund and
Balanced Fund), including the schedules of portfolio investments, as of July
31, 1996, and the related statements of operations, statements of changes in
net assets, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
AmSouth Mutual Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the custodian and brokers or other auditing
procedures where confirmations from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds comprising AmSouth Mutual Funds as of July 31, 1996,
and the results of their operations and the changes in their net assets and the
financial highlights for the periods referred to above in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.LP.
Columbus, Ohio
September 23, 1996
-11-
<PAGE> 150
AMSOUTH MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1996
(Amounts in Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
PRIME U.S. TAX-
OBLIGATIONS TREASURY EXEMPT
FUND FUND FUND
----------- -------- -------
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost................ $550,508 $288,046 $60,387
Repurchase agreements, at cost................ 53,872 92,610
-------- -------- -------
604,380 380,656 60,387
Interest receivable........................... 2,019 1,455 525
Prepaid expenses and other assets............. 12 7 2
-------- -------- -------
Total Assets.............................. 606,411 382,118 60,914
-------- -------- -------
LIABILITIES:
Cash overdraft................................ 14 1
Dividends payable............................. 2,424 1,473 144
Accrued expenses and other payables:
Investment advisory fees.................... 205 130 11
Administration fees......................... 26 17 3
Shareholder servicing fees.................. 10 1 1
Accounting and transfer agent fees.......... 55 20 12
Other....................................... 60 52 15
-------- -------- -------
Total Liabilities......................... 2,794 1,693 187
-------- -------- -------
NET ASSETS:
Capital....................................... 603,626 380,424 60,727
Accumulated undistributed net realized gains
(losses) from investment transactions........ (9) 1 --
-------- -------- -------
Net Assets................................ $603,617 $380,425 $60,727
======== ======== =======
Net Assets
Classic Shares.............................. 125,075 12,263 17,116
Premier Shares.............................. 478,542 368,162 43,611
-------- -------- -------
603,617 380,425 60,727
======== ======== =======
Outstanding units of beneficial interest
(shares)
Classic Shares.............................. 125,081 12,262 17,116
Premier Shares.............................. 478,560 368,161 43,611
-------- -------- -------
603,641 380,423 60,727
======== ======== =======
Net asset value--offering and redemption
Classic Shares.............................. $ 1.00 $ 1.00 $ 1.00
======== ======== =======
Premier Shares.............................. $ 1.00 $ 1.00 $ 1.00
======== ======== =======
</TABLE>
See notes to financial statements.
-12-
<PAGE> 151
AMSOUTH MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1996
(Amounts in Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
FLORIDA
LIMITED GOVERNMENT TAX-
BOND MATURITY INCOME FREE
FUND FUND FUND FUND
-------- -------- ---------- -------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $130,877;
$45,837; $15,971; and $47,077,
respectively)........................ $129,980 $45,265 $15,724 $48,257
Interest and dividends receivable..... 2,802 748 144 637
Receivable for capital shares issued.. 5 18 -- --
Prepaid expenses and other assets..... 2 2 2 1
-------- ------- ------- -------
Total Assets...................... 132,789 46,033 15,870 48,895
-------- ------- ------- -------
LIABILITIES:
Payable for capital shares redeemed... -- 1 104 --
Accrued expenses and other payables:
Investment advisory fees............ 40 14 3 9
Administration fees................. 3 1 -- 1
Accounting and transfer agent fees.. 3 4 3 2
Other............................... 6 8 8 14
-------- ------- ------- -------
Total Liabilities................. 52 28 118 26
-------- ------- ------- -------
NET ASSETS:
Capital............................... 133,287 47,893 16,591 47,495
Undistributed net investment income... 487 152 -- 124
Net unrealized appreciation
(depreciation) from investments...... (897) (572) (247) 1,180
Accumulated undistributed net realized
gains (losses) from investment
transactions......................... (140) (1,468) (592) 70
-------- ------- ------- -------
Net Assets........................ $132,737 $46,005 $15,752 $48,869
======== ======= ======= =======
Outstanding units of beneficial
interest (shares).................... 12,598 4,462 1,676 4,745
======== ======= ======= =======
Net asset value--redemption price per
share................................ $ 10.54 $ 10.31 $ 9.40 $ 10.30
======== ======= ======= =======
Maximum Sales Charge.................. 3.00% 3.00% 3.00% 3.00%
-------- ------- ------- -------
Maximum Offering Price (100%/(100%-
Maximum Sales Charge) of net asset
value rounded to the nearest cent)
per share............................ $ 10.87 $ 10.63 $ 9.69 $ 10.62
======== ======= ======= =======
</TABLE>
See notes to financial statements.
-13-
<PAGE> 152
AMSOUTH MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1996
(Amounts in Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
REGIONAL
EQUITY EQUITY BALANCED
FUND FUND FUND
-------- -------- --------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $320,099; $75,423; and
$302,295, respectively).......................... $374,192 $93,564 $334,850
Interest and dividends receivable................. 817 107 3,735
Receivable for capital shares issued.............. 247 18 87
Receivable from brokers for investments sold...... 1 -- --
Prepaid expenses and other assets................. 11 2 16
-------- ------- --------
Total Assets.................................. 375,268 93,691 338,688
-------- ------- --------
LIABILITIES:
Payable for capital shares redeemed............... 21 43 53
Payable to brokers for investments purchased...... 379
Accrued expenses and other payables:
Investment advisory fees........................ 181 45 162
Administration fees............................. 10 2 9
Accounting and transfer agent fees.............. 21 5 14
Other........................................... 34 12 25
-------- ------- --------
Total Liabilities............................. 646 107 263
-------- ------- --------
NET ASSETS:
Capital........................................... 303,678 74,248 293,043
Undistributed net investment income............... 260 20 659
Net unrealized appreciation from investments...... 54,093 18,141 32,555
Accumulated undistributed net realized gains from
investment transactions.......................... 16,591 1,175 12,168
-------- ------- --------
Net Assets.................................... $374,622 $93,584 $338,425
======== ======= ========
Outstanding units of beneficial interest (shares). 21,256 4,467 25,965
======== ======= ========
Net asset value--redemption price per share....... $ 17.62 $ 20.95 $ 13.03
======== ======= ========
Maximum Sales Charge.............................. 4.50% 4.50% 4.50%
-------- ------- --------
Maximum Offering Price (100%/(100%-Maximum Sales
Charge) of net asset value rounded to the nearest
cent) per share.................................. $ 18.45 $ 21.94 $ 13.64
======== ======= ========
</TABLE>
See notes to financial statements.
-14-
<PAGE> 153
AMSOUTH MUTUAL FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRIME U.S. TAX
OBLIGATIONS TREASURY EXEMPT
FUND FUND FUND
----------- -------- ------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................................... $35,026 $21,946 $2,434
------- ------- ------
Total Income..................................... 35,026 21,946 2,434
------- ------- ------
EXPENSES:
Investment advisory fees........................... 2,460 1,589 267
Administration fees................................ 1,230 794 133
Shareholder servicing fees (Classic Shares)........ 105 11 12
Custodian and accounting fees...................... 308 209 34
Legal and audit fees............................... 99 59 12
Trustees' fees and expenses........................ 23 13 2
Transfer agent fees................................ 169 95 32
Registration and filing fees....................... 24 20 9
Printing fees...................................... 38 24 4
Other.............................................. 18 10 1
------- ------- ------
Total Expenses................................... 4,474 2,824 506
Expenses voluntarily reduced....................... (63) (7) (140)
------- ------- ------
Net Expenses..................................... 4,411 2,817 366
------- ------- ------
Net Investment Income.............................. 30,615 19,129 2,068
------- ------- ------
Change in net assets resulting from operations..... $30,615 $19,129 $2,068
======= ======= ======
</TABLE>
See notes to financial statements.
-15-
<PAGE> 154
AMSOUTH MUTUAL FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
LIMITED GOVERNMENT FLORIDA
BOND MATURITY INCOME TAX-FREE
FUND FUND FUND FUND
------- -------- ---------- --------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $ 7,522 $3,652 $1,312 $2,404
------- ------ ------ ------
Total Income........................... 7,522 3,652 1,312 2,404
------- ------ ------ ------
EXPENSES:
Investment advisory fees................. 712 380 114 318
Administration fees...................... 219 117 35 98
Custodian and accounting fees............ 57 31 14 32
Legal and audit fees..................... 14 9 3 8
Trustees' fees and expenses.............. 4 2 1 2
Transfer agent fees...................... 38 25 18 19
Registration and filing fees............. 12 9 6 13
Printing fees............................ 12 5 1 13
Other.................................... 2 2 1 4
------- ------ ------ ------
Total Expenses......................... 1,070 580 193 507
Expenses voluntarily reduced by
investment advisor and administrator.... (253) (134) (79) (220)
------- ------ ------ ------
Net Expenses........................... 817 446 114 287
------- ------ ------ ------
Net Investment Income.................... 6,705 3,206 1,198 2,117
------- ------ ------ ------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from
investment transactions................. (140) (229) (352) 97
Change in unrealized depreciation from
investments............................. (2,348) (275) (9) (169)
------- ------ ------ ------
Net realized/unrealized gains from
investments............................. (2,488) (504) (361) (72)
------- ------ ------ ------
Change in net assets resulting from
operations.............................. $ 4,217 $2,702 $ 837 $2,045
======= ====== ====== ======
</TABLE>
See notes to financial statements.
-16-
<PAGE> 155
AMSOUTH MUTUAL FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
REGIONAL
EQUITY EQUITY BALANCED
FUND FUND FUND
------- -------- --------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income..................................... $ 1,532 $ 387 $10,340
Dividend income..................................... 8,258 1,583 4,562
------- ------ -------
Total Income...................................... 9,790 1,970 14,902
------- ------ -------
EXPENSES:
Investment advisory fees............................ 2,707 671 2,598
Administration fees................................. 715 167 650
Custodian and accounting fees....................... 163 41 159
Legal and audit fees................................ 39 11 42
Trustees' fees and expenses......................... 10 2 9
Transfer agent fees................................. 98 42 94
Registration and filing fees........................ 21 8 23
Printing fees....................................... 20 4 19
Other............................................... 7 2 8
------- ------ -------
Total Expenses.................................... 3,780 948 3,602
Expenses voluntarily reduced by investment advisor
and administrator.................................. (309) (68) (429)
------- ------ -------
Net Expenses...................................... 3,471 880 3,173
------- ------ -------
Net Investment Income............................... 6,319 1,090 11,729
------- ------ -------
REALIZED/UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions..... 20,434 1,891 14,292
Change in unrealized appreciation (depreciation)
from investments................................... 6,857 6,486 (568)
------- ------ -------
Net realized/unrealized gains from investments...... 27,291 8,377 13,724
------- ------ -------
Change in net assets resulting from operations...... $33,610 $9,467 $25,453
======= ====== =======
</TABLE>
See notes to financial statements.
-17-
<PAGE> 156
AMSOUTH MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND U.S. TREASURY FUND TAX EXEMPT FUND
------------------------ ---------------------- --------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income. $ 30,615 $ 27,510 $ 19,129 $ 14,989 $ 2,068 $ 1,972
Net realized gains
from investment
transactions......... -- -- -- 1 -- --
----------- ----------- ----------- --------- --------- ---------
Change in net assets
resulting from
operations............. 30,615 27,510 19,129 14,990 2,068 1,972
----------- ----------- ----------- --------- --------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income:
Classic Shares (a).... (1,925) -- (204) -- (140) --
Premier Shares (a).... (28,690) (27,510) (18,925) (14,989) (1,928) (1,972)
----------- ----------- ----------- --------- --------- ---------
Change in net assets
from shareholder
distributions.......... (30,615) (27,510) (19,129) (14,989) (2,068) (1,972)
----------- ----------- ----------- --------- --------- ---------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 1,554,362 1,597,046 1,097,998 900,697 138,969 99,365
Dividends reinvested.. 7,423 5,036 1,973 2,103 531 311
Cost of shares
redeemed............. (1,575,841) (1,561,740) (1,042,485) (880,465) (136,413) (102,959)
----------- ----------- ----------- --------- --------- ---------
Change in net assets
from share
transactions........... (14,056) 40,342 57,486 22,335 3,087 (3,283)
----------- ----------- ----------- --------- --------- ---------
Change in net assets.... (14,056) 40,342 57,486 22,336 3,087 (3,283)
NET ASSETS:
Beginning of period... 617,673 577,331 322,939 300,603 57,640 60,923
----------- ----------- ----------- --------- --------- ---------
End of period......... $ 603,617 $ 617,673 $ 380,425 $ 322,939 $ 60,727 $ 57,640
=========== =========== =========== ========= ========= =========
SHARE TRANSACTIONS:
Issued................ 1,554,362 1,597,046 1,097,998 900,697 138,969 99,365
Reinvested............ 7,423 5,036 1,973 2,103 531 311
Redeemed.............. (1,575,841) (1,561,740) (1,042,485) (880,465) (136,413) (102,959)
----------- ----------- ----------- --------- --------- ---------
Change in shares........ (14,056) 40,342 57,486 22,335 3,087 (3,283)
=========== =========== =========== ========= ========= =========
</TABLE>
- --------
(a) Effective April 1, 1996 the Funds' existing shares, which were previously
unclassified, were designated Premier Shares and the Fund commenced
offering Classic Shares.
See notes to financial statements.
-18-
<PAGE> 157
AMSOUTH MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
BOND FUND LIMITED MATURITY FUND
--------------------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............ $ 6,705 $ 6,115 $ 3,206 $ 2,888
Net realized gains (losses) from
investment transactions......... (140) 993 (229) (730)
Net change in unrealized
appreciation (depreciation) from
investments..................... (2,348) 2,305 (275) 1,456
-------- -------- -------- --------
Change in net assets resulting from
operations........................ 4,217 9,413 2,702 3,614
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....... (6,517) (6,084) (3,206) (2,844)
In excess of net investment
income.......................... -- -- (63) --
From net realized gains from
investment transactions......... -- (328) -- --
In excess of net realized gains
from investment transactions.... (1,025) -- -- --
-------- -------- -------- --------
Change in net assets from
shareholder distributions......... (7,542) (6,412) (3,269) (2,844)
-------- -------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...... 57,993 38,646 16,713 23,917
Dividends reinvested............. 5,036 3,257 1,563 894
Cost of shares redeemed.......... (21,638) (29,705) (31,502) (17,443)
-------- -------- -------- --------
Change in net assets from share
transactions...................... 41,391 12,198 (13,226) 7,368
-------- -------- -------- --------
Change in net assets............... 38,066 15,199 (13,793) 8,138
NET ASSETS:
Beginning of period.............. 94,671 79,472 59,798 51,660
-------- -------- -------- --------
End of period.................... $132,737 $ 94,671 $ 46,005 $ 59,798
======== ======== ======== ========
SHARE TRANSACTIONS:
Issued........................... 5,396 3,719 1,602 2,327
Reinvested....................... 467 314 150 88
Redeemed......................... (2,005) (2,800) (3,036) (1,718)
-------- -------- -------- --------
Change in shares................... 3,858 1,233 (1,284) 697
======== ======== ======== ========
</TABLE>
See notes to financial statements.
-19-
<PAGE> 158
AMSOUTH MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
GOVERNMENT INCOME FUND FLORIDA TAX-FREE FUND
-------------------------- ------------------------
SEPTEMBER 30,
YEAR ENDED YEAR ENDED YEAR ENDED 1994 TO
JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995(a)
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 1,198 $ 1,069 $ 2,117 $ 1,511
Net realized gains
(losses) from
investment
transactions........... (352) (217) 97 (7)
Net change in unrealized
appreciation
(depreciation) from
investments............ (9) 354 (169) 1,350
----------- ----------- ------- -------
Change in net assets
resulting from
operations............... 837 1,206 2,045 2,854
----------- ----------- ------- -------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................. (1,089) (967) (2,107) (1,397)
From net realized gains
from investment
transactions........... -- -- (20) --
Tax return of capital... (10) (135) -- --
----------- ----------- ------- -------
Change in net assets from
shareholder
distributions............ (1,099) (1,102) (2,127) (1,397)
----------- ----------- ------- -------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 5,601 6,654 10,538 53,611
Dividends reinvested.... 574 723 134 40
Cost of shares redeemed. (6,840) (6,267) (10,054) (6,775)
----------- ----------- ------- -------
Change in net assets from
share transactions....... (665) 1,110 618 46,876
----------- ----------- ------- -------
Change in net assets...... (927) 1,214 536 48,333
NET ASSETS:
Beginning of period..... 16,679 15,465 48,333 --
----------- ----------- ------- -------
End of period........... $15,752 $16,679 $48,869 $48,333
=========== =========== ======= =======
SHARE TRANSACTIONS:
Issued.................. 584 711 1,023 5,353
Reinvested.............. 60 78 13 4
Redeemed................ (715) (672) (974) (674)
----------- ----------- ------- -------
Change in shares.......... (71) 117 62 4,683
=========== =========== ======= =======
</TABLE>
- --------
(a) Period from commencement of operations.
See notes to financial statements.
-20-
<PAGE> 159
AMSOUTH MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
EQUITY FUND REGIONAL EQUITY FUND BALANCED FUND
--------------------- --------------------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income. $ 6,319 $ 4,996 $ 1,090 $ 809 $ 11,729 $ 10,098
Net realized gains
from investment
transactions......... 20,434 11,383 1,891 904 14,292 8,851
Net change in
unrealized
appreciation
(depreciation)
from investments..... 6,857 26,642 6,486 7,072 (568) 19,475
-------- -------- ------- ------- -------- --------
Change in net assets
resulting from
operations............. 33,610 43,021 9,467 8,785 25,453 38,424
-------- -------- ------- ------- -------- --------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (6,319) (4,796) (1,069) (808) (11,648) (9,889)
In excess of net
investment income.... (7) -- -- -- -- --
From net realized
gains from investment
transactions......... (10,800) (6,679) (755) -- (7,455) (6,217)
-------- -------- ------- ------- -------- --------
Change in net assets
from shareholder
distributions.......... (17,126) (11,475) (1,824) (808) (19,103) (16,106)
-------- -------- ------- ------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 140,796 75,477 26,244 16,875 93,191 69,297
Dividends reinvested.. 10,225 6,461 1,130 454 14,962 10,838
Cost of shares
redeemed............. (68,640) (43,338) (9,934) (11,549) (71,587) (43,250)
-------- -------- ------- ------- -------- --------
Change in net assets
from share
transactions........... 82,381 38,600 17,440 5,780 36,566 36,885
-------- -------- ------- ------- -------- --------
Change in net assets.... 98,865 70,146 25,083 13,757 42,916 59,203
NET ASSETS:
Beginning of period... 275,757 205,611 68,501 54,744 295,509 236,306
-------- -------- ------- ------- -------- --------
End of period......... $374,622 $275,757 $93,584 $68,501 $338,425 $295,509
======== ======== ======= ======= ======== ========
SHARE TRANSACTIONS:
Issued................ 8,082 4,997 1,277 970 7,104 5,839
Reinvested............ 597 450 55 26 1,148 939
Redeemed.............. (3,888) (2,851) (482) (662) (5,449) (3,630)
-------- -------- ------- ------- -------- --------
Change in shares........ 4,791 2,596 850 334 2,803 3,148
======== ======== ======= ======= ======== ========
</TABLE>
See notes to financial statements.
-21-
<PAGE> 160
AMSOUTH MUTUAL FUNDS
PRIME OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------- ---------
<C> <S> <C>
CERTIFICATES OF DEPOSIT (1.7%):
Euro Certificate of Deposits (1.7%):
$10,000 Bank of Tokyo, Mitsubishi, Ltd., 5.62%, 10/30/96 $ 10,000
--------
Total Certificates of Deposit 10,000
--------
COMMERCIAL PAPER (64.5%):
Asset Backed (8.4%):
1,000 Cooper River Funding, Inc., 5.40%, 8/23/96............... 997
10,000 Greenwich Funding Corp., 5.34%, 9/3/96................... 9,951
10,000 Greenwich Funding Corp., 5.37%, 9/4/96................... 9,949
9,730 Redwood Receivables Corp., 5.37%, 8/28/96................ 9,691
5,000 Sigma Finance Inc., 5.38%, 8/9/96........................ 4,994
1,100 Sigma Finance Inc., 5.43%, 9/16/96....................... 1,092
9,000 Sigma Finance Inc., 5.45%, 10/8/96....................... 8,907
5,000 Sigma Finance Inc., 5.45%, 10/15/96...................... 4,943
--------
50,524
--------
Automotive (11.0%):
10,000 Daimler-Benz North America Corp., 5.38%, 9/10/96......... 9,940
10,000 Daimler-Benz North America Corp., 5.39%, 9/10/96......... 9,940
10,000 Ford Motor Credit Co., 5.45%, 10/9/96.................... 9,896
15,000 General Motors Acceptance Corp., 5.45%, 9/6/96........... 14,918
5,000 General Motors Acceptance Corp., 5.35%, 12/13/96......... 4,900
5,000 Mitsubishi Motors Credit of America, Inc., 5.45%, 8/5/96. 4,997
10,000 Mitsubishi Motors Credit of America, Inc., 5.50%,
10/17/96................................................ 9,882
1,750 Toyota Motor Credit Corp., 5.38%, 9/4/96................. 1,741
--------
66,214
--------
Beverages (1.6%):
10,000 The Coca-Cola Co., 5.45%, 10/4/96........................ 9,903
--------
Chemicals (2.5%):
10,000 Engelhard Corp., 5.43%, 10/16/96......................... 9,885
5,000 Monsanto Co., 5.40%, 10/16/96............................ 4,943
--------
14,828
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------- ---------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Domestic Banking (0.8%):
$5,000 Banc One Corp., 5.35%, 8/23/96........................... $ 4,984
--------
Financial Services (10.3%):
5,000 General Electric Capital Corp., 5.55%, 3/25/97........... 4,818
10,000 Island Finance Puerto Rico, Inc., 5.40%, 9/17/96......... 9,930
10,000 Island Finance Puerto Rico, Inc., 5.48%, 10/9/96......... 9,895
13,000 Norwest Corp., 5.44%, 10/11/96........................... 12,861
10,000 Pemex Capital, Inc., 5.45%, 10/10/96..................... 9,894
15,000 Queensland Treasury Corp., 5.49%, 10/7/96................ 14,847
--------
62,245
--------
Foreign Banking (4.3%):
11,000 ABN-Amro North America Finance Corp., 4.95%, 8/22/96..... 10,968
5,000 Abbey National N. A., 5.05%, 3/3/97...................... 4,988
10,000 Toronto Dominion Holdings, 5.40%, 10/8/96................ 9,898
--------
25,854
--------
Governments (Foreign) (3.2%):
10,000 Canadian Wheat Board, 5.35%, 9/13/96..................... 9,936
10,000 Province of British Columbia, 5.32%, 10/3/96............. 9,907
--------
19,843
--------
Health Care (2.1%):
10,000 Glaxo-Wellcome, PLC, 5.30%, 8/13/96...................... 9,982
3,000 Glaxo-Wellcome, PLC, 5.37%, 9/16/96...................... 2,979
--------
12,961
--------
Industrial Goods & Services (4.2%):
8,250 Cargill, Inc., 5.36%, 9/24/96............................ 8,184
10,000 Cargill, Inc., 5.43%, 10/10/96........................... 9,894
7,000 North Hill Finance, 5.32%, 8/6/96........................ 6,995
--------
25,073
--------
Insurance (2.6%):
5,000 Great West Life & Annuity Insurance Co., 5.37%, 8/9/96... 4,994
5,000 Great West Life & Annuity Insurance Co., 5.33%, 9/6/96... 4,973
6,000 Internationale Nederlanden U.S. Insurance Holdings, Inc.,
5.28%, 8/21/96.......................................... 5,982
--------
15,949
--------
</TABLE>
Continued
-22-
<PAGE> 161
AMSOUTH MUTUAL FUNDS
PRIME OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ---------------------------------------------------------- ---------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Leasing (3.3%):
$ 5,000 Hitachi Credit America Corp., 5.45%, 9/27/96.............. $ 4,957
5,000 Hitachi Credit America Corp., 5.47%, 11/14/96............. 4,920
10,000 International Lease Finance, 5.40%, 10/17/96.............. 9,885
--------
19,762
--------
Manufacturing--Miscellaneous (1.3%):
5,000 Mitsubishi International Corp., 5.33%, 8/30/96............ 4,979
2,625 Mitsubishi International Corp., 5.40%, 8/30/96............ 2,613
--------
7,592
--------
Security Brokers & Dealers (7.9%):
10,000 Bear Stearns & Co., Inc., 5.34%, 10/1/96.................. 9,910
10,000 C.S. First Boston, 5.49%, 4/1/97*......................... 10,000
10,000 Goldman Sachs Group, LP, 5.32%, 9/4/96.................... 9,950
5,000 Merrill Lynch & Co., Inc., 5.28%, 8/15/96................. 4,990
3,000 Merrill Lynch & Co., Inc., 5.40%, 9/3/96.................. 2,985
10,000 Merrill Lynch & Co., Inc., 5.49%, 1/15/97*................ 10,000
--------
47,835
--------
Telecommunications Equipment (0.8%):
5,000 Lucent Technologies, 5.34%, 9/23/96....................... 4,961
--------
Telecommunications (0.2%):
1,000 AT&T Corp., 5.40%, 8/27/96................................ 996
--------
Total Commercial Paper 389,524
--------
CORPORATE BONDS (2.7%):
Banking--Domestic (0.8%):
5,000 First Chicago NBD Corp., 7.88%, 1/21/97................... 5,046
--------
Financial Services (1.7%):
4,245 American General Finance Corp., 6.63%, 6/1/97............. 4,258
2,000 Paccar Financial Corp., 5.43%, 6/2/97..................... 1,989
3,000 American General Finance, 5.80%, 4/1/97................... 3,008
--------
6,247
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ---------------------------------------------------------- ---------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Utility--Electric (0.3%):
$ 2,000 Portland General Electric Co., 6.76%, 1/15/97............. $ 2,007
--------
Total Corporate Bonds 16,308
--------
GUARANTEED INSURANCE CONTRACTS (4.1%):
12,500 Commonwealth Life Insurance Co., 5.73%, 8/1/19* (b)....... 12,500
12,500 Peoples Security Life, 5.68%, 8/1/19* (b)................. 12,500
--------
Total Guaranteed Insurance Contracts 25,000
--------
MEDIUM TERM NOTES (14.7%):
Automotive (2.9%):
2,600 Ford Motor Credit Corp., 7.88%, 10/15/96.................. 2,611
5,100 Toyota Motor Credit Co., 6.88%, 10/15/96.................. 5,116
10,000 Toyota Motor Credit Co., 5.00%, 2/26/97................... 9,993
--------
17,720
--------
Banking (4.9%):
4,155 Bankers Trust, 7.25%, 11/1/96............................. 4,175
15,000 Comerica Bank of Detroit, 5.40%, 9/18/96*................. 14,999
5,000 PNC Bank, N.A., 5.42%, 1/6/97*............................ 4,999
975 Security Pacific Corp., 8.49%, 12/27/96................... 999
4,000 Wachovia Bank, 6.20%, 8/5/96.............................. 4,000
--------
29,172
--------
Farm Equipment (0.3%):
2,000 John Deere Capital Corp., 4.63%, 9/2/96................... 1,999
--------
Financial Services (4.9%):
10,000 General Electric Capital Corp., 5.49%, 8/1/96*............ 10,000
4,300 General Electric Capital Corp., 7.85%, 2/1/97............. 4,353
5,000 Norwest Financial Inc., 4.97%, 10/29/96................... 4,992
10,300 Norwest Corp., 7.88%, 1/30/97............................. 10,399
--------
29,744
--------
Insurance (0.9%):
5,000 ITT Hartford, 7.25%, 12/1/96.............................. 5,030
--------
Leasing (0.8%):
5,000 International Lease Finance, 5.88%, 2/1/97................ 5,013
--------
Total Medium Term Notes 89,678
--------
</TABLE>
Continued
-23-
<PAGE> 162
AMSOUTH MUTUAL FUNDS
PRIME OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ------------------------------------- ---------
<S> <C> <C>
MUNICIPAL BONDS (1.7%):
New York (1.7%):
$10,000 New York City, 5.34%, 8/20/96, FGIC*. $ 10,000
--------
Total Municipal Bonds 10,000
--------
U.S. GOVERNMENT AGENCIES (1.8%):
11,000 Federal National Mortgage Assoc.,
5.30%, 10/18/96*.................... 10,998
--------
Total U.S. Government Agencies 10,998
--------
Total Investments 550,508
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ------------------------------------- ---------
<S> <C> <C>
REPURCHASE AGREEMENTS (8.9%):
54,443 First Boston Corp., 5.75%, 8/1/96;
(Collateralized by 57,355
U.S. Government Agency Securities,
5.29%-5.51%, 8/5/96-11/4/96,
market value--$56,564)...............$ 53,872
--------
Total Repurchase Agreements 53,872
--------
Total (Cost--$604,380)(a) $604,380
========
<FN>
- -------
Percentages indicated are based on net assets of $603,617.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rates reflected on the Schedule of Portfolio
Investments is the rate in effect at July 31, 1996.
(b) Put and demand features exist allowing the Fund to require the repurchase
of the instrument quarterly.
FGIC--Insured by Financial Guaranty Insurance Corp.
</TABLE>
See notes to financial statements.
-24-
<PAGE> 163
AMSOUTH MUTUAL FUNDS
U.S. TREASURY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- --------------------------------------------------------- ---------
<C> <S> <C>
U.S. TREASURY BILLS (57.0%):
$25,000 4.99%, 8/1/96............................................ $ 25,000
5,000 5.04%, 8/8/96............................................ 4,995
25,000 5.14%, 8/15/96........................................... 24,951
5,000 5.08%, 8/22/96........................................... 4,986
10,000 5.13%, 9/5/96............................................ 9,951
25,000 5.11%, 9/12/96........................................... 24,851
10,000 5.11%, 9/19/96........................................... 9,930
20,000 5.18%, 10/3/96........................................... 19,822
5,000 5.18%, 10/10/96.......................................... 4,950
25,000 5.19%, 10/17/96.......................................... 24,725
20,000 5.14%, 10/31/96.......................................... 19,740
10,000 5.07%, 11/14/96.......................................... 9,858
5,000 5.11%, 11/14/96.......................................... 4,929
5,000 5.33%, 12/5/96........................................... 4,909
6,000 4.65%, 12/12/96.......................................... 5,899
6,000 4.90%, 1/9/97............................................ 5,875
6,000 5.48%, 5/29/97........................................... 5,725
6,000 5.54%, 6/26/97........................................... 5,701
--------
Total U.S. Treasury Bills 216,797
--------
U.S. TREASURY NOTES (18.7%):
20,000 6.25%, 8/31/96........................................... 20,010
5,000 6.50%, 9/30/96........................................... 5,006
6,000 8.00%, 10/15/96.......................................... 6,033
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- -------------------------------------------------------- ---------
<C> <S> <C>
U.S. TREASURY NOTES, CONTINUED :
$ 6,000 4.38%, 11/15/96......................................... $ 5,988
6,000 7.25%, 11/15/96......................................... 6,034
5,000 7.50%, 1/31/97.......................................... 5,045
6,000 4.75%, 2/15/97.......................................... 5,997
6,000 6.88%, 2/28/97.......................................... 6,053
5,000 6.88%, 3/31/97.......................................... 5,045
6,000 6.50%, 4/30/97.......................................... 6,038
--------
Total U.S. Treasury Notes 71,249
--------
Total Investments 288,046
--------
REPURCHASE AGREEMENTS (24.3%):
46,305 First Boston Corp., 5.60%, 8/1/96, (Collateralized by
46,685 U.S. Treasury Notes, 7.50%, 12/31/96, market
value - $47,345)....................................... 46,305
46,305 Merrill Lynch & Co., 5.60%, 8/1/96, (Collateralized by
35,794 U.S. Treasury Bonds, 10.75%-12.38%, 5/15/03-
5/15/04, market value-- $47,232)....................... 46,305
--------
Total Repurchase Agreements 92,610
--------
Total (Cost--$380,656)(a) $380,656
========
</TABLE>
- --------
Percentages indicated are based on net assets of $380,425.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
-25-
<PAGE> 164
AMSOUTH MUTUAL FUNDS
TAX EXEMPT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- -------------------------------------------------------- ---------
<C> <S> <C>
ANTICIPATION NOTES (17.3%):
Alabama (0.5%):
$ 325 Mobile, Water & Sewer Revenue Bonds, 4.00%, 1/1/97,
FGIC................................................... $ 326
-------
Colorado (2.5%):
1,500 Colorado General Fund Tax, RANs, 4.50%, 6/27/97......... 1,509
-------
Connecticut (0.5%):
305 Connecticut State Development, 3.75%, 12/15/96.......... 305
-------
Georgia (0.7%):
425 Dekalb, GO, 3.45%, 10/1/96.............................. 425
-------
Hawaii (0.7%):
500 Hawaii State, GO, 3.40%, 11/1/96........................ 499
-------
Illinois (2.5%):
500 Du Page County, 6.80%, 1/1/97........................... 516
1,000 Illinois School District, 6.30%, 1/1/97, FGIC........... 1,011
-------
1,527
-------
Massachusetts (0.4%):
250 Massachusetts State, GO, 7.13%, 10/1/05, Pre-refunded on
10/1/96 @102........................................... 257
-------
Minnesota (1.2%):
705 Minneapolis & St. Paul Housing Authority, 3.85%,
8/15/96, CGIC.......................................... 705
-------
Missouri (0.6%):
340 University of Missouri, 9.50%, 11/9/09, Pre-refunded on
11/1/96 @103........................................... 355
-------
New Jersey (0.2%):
100 Union County, 6.00%, 8/1/96............................. 100
-------
Oregon (0.6%):
330 Oregon State, 12.54%, 9/1/07**.......................... 339
-------
Tennessee (3.6%):
1,600 Tennessee State School Board Authority Higher Education,
Bonds Anticipation Notes, Series B, 3.55%, 3/1/98, LOC:
Swiss Bank*............................................ 1,600
600 Tennessee State School Board Authority Higher
Educational Facilities, Bond Anticipation Notes, 3.55%,
3/1/98, LOC: Swiss Bank*............................... 600
-------
2,200
-------
Texas (3.3%):
465 Lubbock, GO, 6.30%, 2/15/97............................. 472
1,500 Texas State Tax & Revenue, Series A, 4.75%, 8/30/96..... 1,501
-------
1,973
-------
Total Anticipation Notes 10,520
-------
</TABLE>
Continued
-26-
<PAGE> 165
AMSOUTH MUTUAL FUNDS
TAX EXEMPT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- -------------------------------------------------------- ---------
<C> <S> <C>
DEMAND NOTES (39.9%):
Alabama (14.2%):
$ 150 Arab Revenue Bonds, 3.75%, 8/1/00, LOC: Bank of Tokyo*.. $ 150
2,000 City of Birmingham, GO, 3.62%, 5/1/19, LOC: First
Alabama Bank*.......................................... 2,000
1,000 Columbia Industrial Development Board, 3.60%, 10/1/22,
LOC: Alabama Power*.................................... 1,000
2,000 Mobile, Industrial Development Board, PCR, Series B,
3.70%, 8/1/17*......................................... 2,000
1,800 North Alabama Environmental Improvement Authority, PCR,
3.65%, 12/1/00*........................................ 1,800
1,665 Stevenson, Industrial Development Board, Environmental
Improvement Revenue Refunding, Series 1986, 3.65%,
11/1/16, LOC: Credit Suisse*........................... 1,665
-------
8,615
-------
California (0.8%):
500 La Regional Airport Improvement Corp., 3.65%, 12/1/24*.. 500
-------
Colorado (0.3%):
200 Adams County, Individual Development Revenue, 3.65%,
12/1/15, LOC: Barclays Bank*........................... 200
-------
Delaware (0.3%):
200 Wilmington, Franciscan Health System, Series 1986B,
3.65%, 7/1/11, LOC: Toronto Dominion*.................. 200
-------
Georgia (3.4%):
1,100 Cobb County Housing Authority, MFH Revenue, 3.65%,
6/1/23 LOC: Societe Generale*.......................... 1,100
500 Savannah, Downtown Development Authority, 3.65%, 9/1/97,
LOC: National West*.................................... 500
350 Savannah, Downtown Development Authority, 3.65%, 9/1/98,
LOC: National West*.................................... 350
100 Turner County Development Authority, Industrial
Development Revenue, Coats & Clark, Inc., 3.65%,
10/1/98, LOC: Wachovia Bank*........................... 100
-------
2,050
-------
Illinois (2.4%):
965 Health Facility Revenue, Franciscan Nuns, 3.65%,
5/15/19*............................................... 965
500 O'Hare International Airport, 3.60%, 1/1/15*............ 500
-------
1,465
-------
Missouri (5.2%):
535 Missouri State Industrial Development Board, Lot 2,
Series F, 3.75%, 2/1/04*............................... 535
585 Missouri State Industrial Development Board, Series 2,
3.75%, 2/1/00 LOC: Union Bank of Switzerland*.......... 585
2,000 St. Charles County, Industrial Development Authority,
3.65%, 12/1/07 LOC: Bank of America*................... 2,000
-------
3,120
-------
Nebraska (2.3%):
1,400 Nebraska Educational Facility Authority, 3.75%,
12/1/00*............................................... 1,400
-------
North Carolina (0.2%):
100 Alamance Industrial Facility, PCR, 3.70%, 4/1/15, LOC:
PNC KY*................................................ 100
-------
Ohio (1.5%):
900 Hamilton County Health Care Facilities, 3.62%, 7/1/17,
LOC: Fifth Third*...................................... 900
-------
</TABLE>
Continued
-27-
<PAGE> 166
AMSOUTH MUTUAL FUNDS
TAX EXEMPT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- -------------------------------------------------------- ---------
<C> <S> <C>
DEMAND NOTES, CONTINUED
Oregon (1.9%):
$ 500 Franciscan Health, Series 1985A, 3.65%, 12/1/24*........ $ 500
100 Oregon State, Series 73E, 3.50%, 12/1/16*............... 100
550 Oregon State, Series 73, 3.50%, 12/1/17*................ 550
-------
1,150
-------
Tennessee (3.6%):
1,200 Metropolitan Nashville Airport, 3.40%, 10/1/12*......... 1,200
1,000 Tennessee State School Bond Authority, 3.55%, 3/1/98,
LOC: Swiss Bank*....................................... 1,000
-------
2,200
-------
Texas (2.6%):
500 Grapevine, 3.65%, 12/1/24*.............................. 500
500 Lone Star Airport Improvement Authority, 3.85%, 12/1/14
LOC: Royal Bank of Canada*............................. 500
600 Lone Star Airport Improvement Authority 5, 3.65%,
12/1/14 LOC: Royal Bank of Canada*..................... 600
-------
1,600
-------
West Virginia (1.2%):
700 Putnam County, Industrial Revenue, 3.55%, 11/1/12 LOC:
Union Bank of Switzerland*............................. 700
-------
Total Demand Notes 24,200
-------
MUNICIPAL BONDS (26.7%):
Alabama (1.7%):
1,000 Jacksonville, 3.65%, 9/1/12, LOC: Wachovia Bank*........ 1,000
-------
Arizona (3.2%):
500 Arizona Health Facility Authority Revenue, 3.65%,
10/1/15*............................................... 500
900 Phoenix, GO, 3.65%, 6/1/20, LOC: Morgan Guaranty*....... 900
500 Scottsdale, Certificates, 7.70%, 11/1/00, Pre-refunded
on 11/1/96 @102, FGIC.................................. 515
-------
1,915
-------
Connecticut (1.2%):
745 Connecticut State Tax Obligation Revenue, 3.60%,
10/1/96, FGIC.......................................... 745
-------
Georgia (2.2%):
1,000 Georgia State, Preferred, 6.75%, 9/1/96................. 1,023
310 Georgia State, GO, 7.50%, 5/1/05, Pre-refunded on 5/1/97
@102**................................................. 324
-------
1,347
-------
Hawaii (1.6%):
970 Kauai County, 6.70%, 2/1/06, Pre-refunded on 2/1/97
@100, MBIA............................................. 985
-------
Illinois (3.6%):
700 Chicago, GO, 3.65%, 10/31/96, LOC: Morgan Guaranty*..... 700
1,400 Du Page Water Revenue, 6.88%, 5/1/14.................... 1,458
-------
2,158
-------
</TABLE>
Continued
-28-
<PAGE> 167
AMSOUTH MUTUAL FUNDS
TAX EXEMPT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- -------------------------------------------------------- ---------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Iowa (1.0%):
$ 585 Ottumwa Hospital Facility, 9.63%, 11/1/10, Pre-refunded
on 11/1/96 @103........................................ $ 611
-------
Kansas (1.7%):
500 Topeka, GO, 7.50%, 10/1/05, Pre-refunded on 10/1/96
@100................................................... 503
100 Wichita, GO, 3.50%, 9/1/96.............................. 100
200 Wichita, GO, 6.80%, 9/1/96.............................. 200
215 Wichita, GO, 6.75%, 12/1/96............................. 217
-------
1,020
-------
Massachusetts (0.5%):
300 Worcester, GO, 6.80%, 9/4/96............................ 307
-------
Michigan (1.7%):
1,000 Detroit Sewer District Revenue, 6.75%, 7/1/01........... 1,044
-------
Nevada (0.5%):
300 Nevada State, GO, 5.00%, 9/1/96......................... 300
-------
New Jersey (0.3%):
205 Essex County, Law Improvement, 5.88%, 10/1/96........... 206
-------
New York (2.7%):
500 New York City, GO, 3.65%, 8/1/23, LOC: Morgan Guaranty*. 500
1,100 New York State Dorm Authority Revenue, 6.30%, 11/1/96... 1,107
-------
1,607
-------
Ohio (0.3%):
200 North Royalton City Schools, GO, 4.35%, 12/1/96, MBIA... 200
-------
Pennsylvania (1.7%):
1,000 Pennsylvania State Revenue, Series A, 7.88%, 12/1/06,
Pre-refunded on 12/1/96 @102**......................... 1,033
-------
South Carolina (0.8%):
500 South Carolina State Capital Improvement, 6.70%, 8/1/98,
Pre-refunded on 8/1/96 @102............................ 510
-------
Texas (2.0%):
100 Dallas County Revenue Bond, 5.00%, 5/15/97, AMBAC....... 101
105 Lewisville Water & Sewer Revenue Bond, 7.65%, 2/15/97... 107
1,000 San Antonio, GO, 5.10%, 8/1/96.......................... 1,000
-------
1,208
-------
Total Municipal Bonds 16,196
-------
SHORT TERM PUTS (3.3%):
Connecticut (3.3%):
2,000 State Special Assessment Unemployment Compensation,
Series C, 3.90%, 11/15/01**............................ 2,000
-------
Total Short Term Puts 2,000
-------
</TABLE>
Continued
-29-
<PAGE> 168
AMSOUTH MUTUAL FUNDS
TAX EXEMPT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- -------------------------------------------------------- ---------
<C> <S> <C>
TAX FREE COMMERCIAL PAPER (9.2%):
Louisiana (1.8%):
$1,100 Louisiana, Pollution Facility Authority, 3.35%,
1/1/15**............................................... $ 1,100
-------
Missouri (3.3%):
2,000 Missouri State Environmental Improvement & Energy
Resources Authority, PCR, 3.35%, 6/1/15, LOC: Union
Bank of Switzerland.................................... 2,000
-------
Texas (1.6%):
1,000 Texas A&M Board of Regents, University Fund Subordinate
Notes, Series B, 3.40%, 7/1/17**....................... 1,000
-------
Washington (2.5%):
1,500 Seattle Municipal Light & Power, 3.70%, 2/4/97, LOC:
Morgan Guaranty........................................ 1,500
-------
Total Tax Free Commercial Paper 5,600
-------
INVESTMENT COMPANIES (3.1%):
394 Federated Tax Free Trust Mutual Fund.................... 394
1,477 Goldman Sachs Tax Free Fund............................. 1,477
-------
Total Investment Companies 1,871
-------
Total (Cost--$60,387)(a) $60,387
=======
<FN>
- --------
Percentages indicated are based on net assets of $60,727.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate,
which will change periodically, is based upon bank prime rates or an index
of market interest rates. The rate reflected on the Schedule of Portfolio
Investments is the rate in effect at July 31, 1996.
** Put and demand features exist allowing the Fund to require the repurchase
of the instrument within variable time periods including daily, weekly,
monthly, or semiannually.
AMBAC--Insured by AMBAC Indemnity Corporation
CGIC--Insured by Capital Guaranty Insurance Company
FGIC--Insured by Financial Guaranty Insurance Corporation
GO--General Obligation
LOC--Letter of Credit
MBIA--Insured by Municipal Bond Insurance Association
MFH--Multi-Family Housing
PCR--Pollution Control Revenue
RANs--Revenue Anticipation Notes
</TABLE>
See notes to financial statements.
-30-
<PAGE> 169
AMSOUTH MUTUAL FUNDS
BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
CORPORATE BONDS (31.5%):
Appliances (0.4%):
$ 500 Whirlpool Corp., 9.50%, 6/15/00........................... $ 543
--------
Automotive (1.9%):
1,570 Ford Capital, 9.13%, 5/1/98............................... 1,637
800 General Motors Corp., 9.63%, 12/1/00...................... 875
--------
2,512
--------
Banking (4.1%):
1,070 Bank of America, 9.50%, 4/1/01............................ 1,170
1,000 Bankers Trust Co., 9.50%, 6/14/00......................... 1,076
2,306 NationsBank Corp., 5.38%, 4/15/00......................... 2,194
1,000 SunTrust Banks, Inc., 7.38%, 7/1/06....................... 999
--------
5,439
--------
Brokerage Services (2.9%):
1,000 Bear Stearns & Co., Inc., 6.50%, 6/15/00.................. 981
1,000 Merrill Lynch & Co., Inc., 9.00%, 5/1/98.................. 1,041
750 Merrill Lynch & Co., Inc., 8.25%, 11/15/99................ 780
1,000 Morgan Stanley Group, Inc., 9.25%, 3/1/98................. 1,040
--------
3,842
--------
Entertainment (0.8%):
1,000 Columbia Picture Entertainment, Inc., 9.88%, 2/1/98....... 1,038
--------
Financial Services (5.0%):
500 Associates Corp., 8.63%, 6/15/97.......................... 510
1,000 Associates Corp., 6.25%, 3/15/99.......................... 991
2,000 Avco Financial, 5.50%, 4/1/00............................. 1,913
500 Beneficial Corp., 9.90%, 11/17/97......................... 521
1,300 British Telcom Finance, Inc., 9.38%, 2/15/99.............. 1,383
300 CIT Group Holdings, Inc., 8.75%, 7/1/97................... 307
1,000 Margaretten Financial, 6.75%, 6/15/00..................... 990
--------
6,615
--------
Industrial Goods & Services (1.6%):
1,050 Browning Ferris International, 6.10%, 1/15/03............. 995
1,156 Rockwell International, 6.63%, 6/1/05..................... 1,113
--------
2,108
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Insurance (3.6%):
$ 1,000 AON Corp., 6.88%, 10/1/99................................. $ 1,000
1,600 Capital Holding Corp., 9.20%, 4/17/01..................... 1,732
640 Chubb Corp., 8.75%, 11/15/99.............................. 674
1,300 Torchmark Corp., 9.63%, 5/1/98............................ 1,360
--------
4,766
--------
Oil & Gas Exploration & Production Services (1.2%):
1,450 BP America, 9.38%, 11/1/00 ............................... 1,582
--------
Pharmaceuticals (0.8%):
1,000 McKesson Corp., 8.63%, 2/1/98 ............................ 1,030
--------
Railroads (1.9%):
1,500 Union Pacific Corp., 6.25%, 3/15/99....................... 1,479
1,000 Union Pacific Corp., 7.00%, 6/15/00....................... 1,000
--------
2,479
--------
Utility--Electric (4.5%):
1,000 Con Edison, 6.63%, 2/1/02................................. 984
470 National Rural, 9.50%, 5/15/97............................ 481
1,500 Northern States Power, 7.88%, 10/1/01..................... 1,551
1,000 Oklahoma Gas & Electric, 6.25%, 10/15/00.................. 974
1,000 Southern California Edison, 5.60%, 12/15/98............... 979
1,000 Virginia Electric & Power, 7.25%, 3/1/97.................. 1,006
--------
5,975
--------
Utility--Telephone (2.8%):
1,000 General Telephone & Electric, 5.82%, 12/1/99.............. 972
2,000 General Telephone & Electric-California, 5.63%, 2/1/01.... 1,898
1,000 BellSouth Telecommunications, 6.25%, 5/15/03.............. 964
--------
3,834
--------
Total Corporate Bonds 41,763
--------
U.S. GOVERNMENT AGENCIES (2.2%):
Federal Home Loan Mortgage Corp.:
2,000 5.40%, 11/1/00............................................ 1,901
</TABLE>
Continued
-31-
<PAGE> 170
AMSOUTH MUTUAL FUNDS
BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc.:
$ 1,000 6.40%, 5/2/01............................................. $ 985
--------
Total U.S. Government Agencies 2,886
--------
U.S. TREASURY BONDS (18.5%):
4,500 7.50%, 11/15/16........................................... 4,698
22,000 6.25%, 8/15/23............................................ 19,823
--------
Total U.S. Treasury Bonds 24,521
--------
U.S. TREASURY NOTES (39.9%):
3,000 6.38%, 1/15/99............................................ 3,004
11,000 7.50%, 11/15/01........................................... 11,432
17,000 6.38%, 8/15/02............................................ 16,784
13,000 5.75%, 8/15/03............................................ 12,314
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
U.S. TREASURY NOTES, CONTINUED:
$10,000 5.88%, 11/15/05........................................... $ 9,376
--------
Total U.S. Treasury Notes 52,910
--------
U.S. TREASURY STRIPS (5.0%):
11,000 5.30%, 2/15/04............................................ 6,659
--------
Total U.S. Treasury Strips 6,659
--------
INVESTMENT COMPANIES (0.9%):
1,238 AmSouth Prime Obligations Fund............................ 1,238
3 AmSouth U.S. Treasury Fund................................ 3
--------
Total Investment Companies 1,241
--------
Total (Cost--$130,877)(a) $129,980
========
<FN>
- --------
Percentages indicated are based on net assets of $132,737.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $1,553
Unrealized depreciation (2,450)
-------
Net unrealized depreciation $ (897)
=======
</TABLE>
See notes to financial statements.
-32-
<PAGE> 171
AMSOUTH MUTUAL FUNDS
LIMITED MATURITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------- -------
<C> <S> <C>
CORPORATE BONDS (85.1%):
Banking (24.1%):
500 Chemical Banking, 6.63%, 1/15/98........................... $ 501
1,000 Comerica, 5.95%, 9/15/97................................... 995
2,000 First Union Corp., 6.75%, 1/15/98.......................... 2,010
1,000 Huntington National Bank, 4.48%, 10/14/96.................. 997
2,000 Mellon Financial, 6.50%, 12/1/97........................... 2,000
2,540 NationsBank Corp., 6.63%, 1/15/98.......................... 2,550
2,000 Security Pacific Corp., 8.49%, 12/27/96.................... 2,015
-------
11,068
-------
Beverages (3.2%):
1,500 PepsiCo., Inc., 5.46%, 7/1/98.............................. 1,472
-------
Brokerage Services (4.3%):
2,000 Dean Witter Discover & Co., 6.00%, 3/1/98 1,988
-------
Chemicals (4.3%):
2,000 Dow Capital, 5.75%, 9/15/97................................ 1,995
-------
Electric Utility (8.5%):
2,000 Florida Power & Light, 5.70%, 3/5/98....................... 1,978
1,950 Georgia Power, 6.13%, 9/1/99............................... 1,917
-------
3,895
-------
Electrical & Electronic (4.4%):
2,000 Sony Capital Corp., 6.98%, 7/2/97.......................... 2,022
-------
Financial Services (17.9%):
1,200 Associates Corp. of North America, 7.50%, 5/15/99.......... 1,224
2,000 Beneficial Corp., 7.32%, 11/17/99.......................... 2,030
500 Commercial Credit Co., 6.75%, 1/15/97...................... 502
1,500 Ford Motor Credit Corp., 6.00%, 3/24/98.................... 1,491
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------- -------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Financial Services, continued:
2,000 Norwest Financial, Inc., 5.20%, 4/29/97.................... $ 1,991
1,000 American General Finance, 5.80%, 4/1/97.................... 998
-------
8,236
-------
Food Products (9.5%):
2,500 General Mills, 7.13%, 10/3/97.............................. 2,524
1,850 Grand Metro Investment, 6.50%, 9/15/99..................... 1,833
-------
4,357
-------
Insurance (4.5%):
2,000 American General Corp., 7.70%, 10/15/99.................... 2,053
-------
Leasing (4.5%):
2,000 USL Capital Corp., 8.13%, 2/15/00.......................... 2,067
-------
Total Corporate Bonds 39,153
-------
U.S. GOVERNMENT AGENCIES (2.1%):
1,000 Federal Home Loan Mortgage Corp., 5.75%, 11/16/98.......... 984
-------
Total U.S. Government Agencies 984
-------
U.S. TREASURY NOTES (10.5%):
5,000 5.63%, 11/30/00............................................ 4,828
-------
Total U.S. Treasury Notes 4,828
-------
INVESTMENT COMPANIES (0.7%):
300 AmSouth Prime Obligations Fund............................. 300
-------
Total Investment Companies 300
-------
Total (Cost--$45,837)(a) $45,265
=======
<FN>
- --------
Percentages indicated are based on net assets of $46,005.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 373
Unrealized depreciation (945)
-----
Net unrealized appreciation $(572)
=====
</TABLE>
See notes to financial statements.
-33-
<PAGE> 172
AMSOUTH MUTUAL FUNDS
GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------------ -------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (67.2%):
Government National Mortgage Assoc.:
$ 66 9.50%, 5/15/18.............................................. $ 70
93 9.00%, 6/15/18.............................................. 97
116 9.00%, 8/15/18.............................................. 122
132 9.50%, 2/15/19.............................................. 141
196 9.50%, 6/15/19.............................................. 208
21 9.50%, 7/15/19.............................................. 22
343 9.00%, 10/15/19............................................. 357
145 9.00%, 12/15/19............................................. 151
74 8.50%, 12/15/19............................................. 75
153 9.00%, 1/15/20.............................................. 160
78 9.00%, 3/15/20.............................................. 81
118 9.00%, 5/15/20.............................................. 123
74 9.50%, 5/15/20.............................................. 79
394 9.50%, 9/15/20.............................................. 418
159 8.50%, 11/15/20............................................. 163
75 9.00%, 11/15/20............................................. 78
456 9.50%, 11/15/20............................................. 484
86 9.50%, 12/15/20............................................. 91
22 9.50%, 1/15/21.............................................. 24
458 9.00%, 2/15/21.............................................. 477
243 8.50%, 8/15/21.............................................. 248
267 9.50%, 8/15/21.............................................. 284
197 9.00%, 9/15/21.............................................. 206
90 8.50%, 10/15/21............................................. 92
175 9.00%, 10/15/21............................................. 183
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------- -------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 153 9.00%, 1/15/22............................................. $ 160
26 9.00%, 4/15/22............................................. 27
104 9.00%, 6/15/22............................................. 108
25 9.00%, 9/15/22............................................. 26
17 8.50%, 2/15/23............................................. 17
221 7.50%, 6/15/24............................................. 218
1,001 7.50%, 7/15/25............................................. 984
495 7.50%, 8/15/25............................................. 487
3,226 7.50%, 9/15/25............................................. 3,171
470 7.50%, 12/15/25............................................ 462
495 8.00%, 7/15/26............................................. 498
-------
Total U.S. Government Agencies 10,592
-------
U.S. TREASURY BONDS (9.9%):
1,500 7.50%, 11/15/16............................................ 1,566
-------
Total U.S. Treasury Bonds 1,566
-------
U.S. TREASURY NOTES (21.2%):
3,400 6.50%, 5/15/05............................................. 3,340
-------
Total U.S. Treasury Notes 3,340
-------
INVESTMENT COMPANIES (1.4%):
226 AmSouth U.S. Treasury Fund................................. 226
-------
Total Investment Companies 226
-------
Total (Cost--$15,971)(a) $15,724
=======
<FN>
- --------
Percentages indicated are based on net assets of $15,752.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
Unrealized appreciation $ 93
Unrealized depreciation (340)
-----
Net unrealized depreciation $(247)
=====
</TABLE>
See notes to financial statements.
-34-
<PAGE> 173
AMSOUTH MUTUAL FUNDS
FLORIDA TAX-FREE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------------ ------
<C> <S> <C>
FLORIDA MUNICIPAL BONDS (92.7%):
$ 545 Altamonte Springs, Health Facility, 5.60%, 10/1/10.......... $ 556
500 Board of Education, Series H, 6.90%, 5/1/98................. 524
655 Brevard County, Solid Waste Disposal System, 5.63%, 4/1/08.. 652
1,000 Broward County Expressway Authority, Series A, 6.50%,
7/1/04..................................................... 1,022
1,000 Cape Coral, Special Obligation, 5.50%, 7/1/99............... 1,032
1,000 Clearwater, Water & Sewer Revenue, 4.75%, 12/1/00........... 1,012
1,000 Dade County, Aviation Authority, Series 1994 B, 6.25%,
10/1/04, AMBAC............................................. 1,092
725 Dade County, School Board, Series A, 5.20%, 5/1/06.......... 729
1,000 Davie, Water & Sewer Revenue, 5.20%, 10/1/99................ 1,023
1,000 Department of Natural Resources, Preservation 2000, 6.30%,
7/1/04, MBIA............................................... 1,071
1,000 Division of Bond Finance, Natural Reserve Preservation 2000,
Series A, 5.40%, 7/1/07, MBIA.............................. 1,011
1,000 Dunes, Community Development District, 5.00%, 10/1/98....... 1,004
1,000 Dunes, Community Development District, 5.50%, 10/1/07....... 991
500 Gulf Breeze, Local Government, 5.90%, 12/10/10.............. 506
470 Hernando County, Water & Sewer Revenue, 5.10%, 6/1/98....... 479
1,000 Hillsborough County, Board, 4.60%, 7/1/97................... 1,007
750 Hillsborough County, Environmental Land, 6.00%, 7/1/03*..... 805
1,000 Hillsborough County, Solid Waste, 5.30%, 10/1/03............ 1,033
1,000 Homestead, Special Insurance Assessment, 4.90%, 9/1/00...... 1,016
1,000 Housing Finance Agency, 6.63%, 2/1/08*...................... 1,002
810 Housing Finance Agency, Series 1995 A-1, 5.65%, 1/1/09...... 803
1,000 Jacksonville, District Water & Sewer, 5.20%, 10/1/02........ 1,030
500 Jacksonville, Electric Authority, 6.95%, 10/1/04............ 536
1,000 Lake County, Sales Revenue, 5.13%, 12/1/98.................. 1,023
1,000 Lee County, Capital Improvements Revenue, Series B, 4.75%,
10/1/00.................................................... 1,012
1,000 Lee County, Local Option Gas Tax Revenue, 4.50%, 10/1/01.... 998
500 Manatee County School Board, 5.75%, 7/1/09.................. 517
1,000 Martin County, 3.80%, 8/1/98................................ 994
1,000 Miami Beach, Water & Sewer Revenue, 5.38%, 9/1/08........... 1,009
955 Miramar, Wastewater Improvement, Series 1994, 6.25%,
10/1/05.................................................... 1,041
595 Miramar, Water Improvement, 4.50%, 10/1/01.................. 594
1,000 Orange County, Sales Tax, Series A, 4.38%, 1/1/01........... 994
1,000 Orlando & Orange County Expressway Authority, 4.80%, 7/1/01. 1,011
1,000 Orlando Utilities, Community Water & Electric, 5.00%, 1,021
10/1/99....................................................
1,000 Ormond Beach, Water & Sewer, 5.60%, 9/1/99.................. 1,038
1,000 Pasco County, Water & Sewer Revenue, Series A, 5.50%,
10/1/03, FGIC.............................................. 1,042
1,000 Pembroke Pines, Public Improvement, 4.63%, 10/1/00.......... 1,007
1,000 Polk County, Capital Improvement, 4.30%, 12/1/02............ 973
1,000 Port of Palm Beach, Revenue Bonds, 6.25%, 9/1/08............ 1,065
910 Punta Gorda, Utilities, 5.00%, 1/1/98....................... 922
</TABLE>
Continued
-35-
<PAGE> 174
AMSOUTH MUTUAL FUNDS
FLORIDA TAX-FREE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------- -------
<C> <S> <C>
FLORIDA MUNICIPAL BONDS CONTINUED:
$ 455 St. Johns County, Road Development, 5.20%, 10/1/99......... $ 467
1,000 St. Johns River, Water, 5.10%, 7/1/09...................... 977
600 St. Lucie County, Sales Tax, 4.20%, 10/1/01................ 587
800 St. Lucie County, Sales Tax, 4.30%, 10/1/02................ 776
625 St. Lucie County, Special Assessment, 5.10%, 11/1/04....... 621
1,000 Seminole County, Local Option Gas Tax, 5.00%, 10/1/02...... 1,019
1,000 Seminole County, School District, GO, 5.20%, 8/1/97........ 1,013
1,000 State Sunshine Skyway, 6.60%, 7/1/08* 1,061
1,000 Tallahassee, Utility System Revenue, 5.80%, 10/1/08........ 1,041
550 Tampa, Solid Waste Revenue, 4.90%, 10/1/02, FGIC........... 556
1,000 Volusia County, Sales Tax, 5.00%, 10/1/96.................. 1,002
-------
Total Florida Municipal Bonds....................................... 45,317
-------
INVESTMENT COMPANIES (6.0%):
547 AmSouth Tax Exempt Money Market Fund....................... 547
2,393 Dreyfus Florida Money Market Fund.......................... 2,393
-------
Total Investment Companies.......................................... 2,940
-------
Total (Cost--$47,077)(a)............................................ $48,257
=======
<FN>
- --------
Percentages indicated are based on net assets of $48,869.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation............................................. $ 1,236
Unrealized depreciation............................................. (56)
-------
Net unrealized appreciation......................................... $ 1,180
=======
* Put and demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods including daily, weekly, monthly,
or semiannually.
AMBAC--Insured by AMBAC Indemnity Corporation
FGIC--Insured by Financial Guaranty Insurance Corporation
GO--General Obligation
MBIA--Insured by Municipal Bond Insurance Association
</TABLE>
See notes to financial statements.
-36-
<PAGE> 175
AMSOUTH MUTUAL FUNDS
EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands, except Shares or Principal Amounts)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ --------
<C> <S> <C>
COMMERCIAL PAPER (1.4%):
$5,085,000 IBM Credit Corp., 5.32%, 8/14/96...................... $ 5,075
--------
Total Commercial Paper 5,075
--------
COMMON STOCKS (92.2%):
Aerospace/Defense (1.3%):
53,000 TRW, Inc.............................................. 4,790
--------
Aluminum (0.8%):
96,000 Alcan Aluminum, Ltd................................... 2,856
--------
Apparel (0.9%):
320,000 Phillips Van Heusen................................... 3,440
--------
Automobiles (1.8%):
205,000 Ford Motor Co......................................... 6,662
--------
Automotive Parts (1.1%):
195,000 Arvin Industries, Inc................................. 4,217
--------
Banking (5.4%):
330,000 Great Western Financial Corp.......................... 7,837
80,000 J.P. Morgan & Co., Inc................................ 6,880
65,000 NationsBank Corp...................................... 5,582
--------
20,299
--------
Chemicals--Specialty (1.2%):
220,000 Engelhard Corp........................................ 4,510
--------
Computers & Peripherals (1.9%):
65,000 IBM Corp.............................................. 7,012
--------
Construction (0.4%):
110,000 Ryland Group.......................................... 1,636
--------
Electronic & Electrical (2.9%):
210,000 AMP, Inc.............................................. 8,111
61,000 Avnet, Inc............................................ 2,661
--------
10,772
--------
Financial Services (2.7%):
82,000 American Express Co................................... 3,588
116,000 Dun & Bradstreet Corp................................. 6,670
--------
10,258
--------
Food Processing & Packaging (4.5%):
323,280 Grand Metropolitan, ADR............................... 8,809
250,000 Sara Lee Corp......................................... 8,000
--------
16,809
--------
Forest Products--Lumber, Paper (2.0%):
180,000 Weyerhauser Co........................................ 7,515
--------
Gold & Silver Mining (1.0%)
220,000 Homestake Mining...................................... 3,603
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Health Care (2.8%):
121,583 Aetna Services, Inc.....................................$ 7,067
105,000 United Healthcare Corp.................................. 3,544
--------
10,611
--------
Industrial Services (1.0%):
130,000 Measurex Corp........................................... 3,591
--------
Insurance--Broker (2.8%):
220,000 Alexander & Alexander Services, Inc..................... 3,630
76,000 Marsh & McLennan Cos., Inc.............................. 6,888
--------
10,518
--------
Insurance--Property, Casualty Health & Other (2.5%):
180,000 St. Paul Cos., Inc...................................... 9,315
--------
Manufacturing--Capital Goods (0.4%):
48,800 Kennametal, Inc......................................... 1,513
--------
Medical Supplies (2.0%):
185,000 Baxter International, Inc............................... 7,701
--------
Newspapers (4.6%):
215,000 Dow Jones & Co., Inc.................................... 8,412
137,000 Gannett Co., Inc........................................ 8,991
--------
17,403
--------
Oil & Gas Exploration, Production & Services (8.5%):
200,000 Burlington Resources.................................... 8,550
300,000 Sun Company, Inc........................................ 7,762
101,000 Texaco, Inc............................................. 8,585
330,000 USX--Marathon Group..................................... 6,765
--------
31,662
--------
Oilfield Equipment & Services (3.6%):
130,000 Dresser Industries, Inc................................. 3,510
170,000 McDermott International, Inc............................ 3,081
85,000 Schlumberger, Limited................................... 6,800
--------
13,391
--------
Pharmaceuticals (6.9%):
150,000 American Home Products Corp............................. 8,513
76,000 Bristol-Myers Squibb Co................................. 6,583
120,000 Johnson & Johnson, Inc.................................. 5,730
120,000 Pharmacia & Upjohn, Inc................................. 4,950
--------
25,776
--------
Photography (0.7%):
33,000 Eastman Kodak Co........................................ 2,462
--------
Pollution Control Services & Equipment (2.2%):
275,000 WMX Technologies, Inc................................... 8,147
--------
</TABLE>
Continued
-37-
<PAGE> 176
AMSOUTH MUTUAL FUNDS
EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands, except Shares or Principal Amounts)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------- --------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Railroad (1.8%):
$142,000 CSX Corp................................................... $ 6,852
--------
Retail (11.6%):
195,000 Dayton Hudson Corp......................................... 5,899
230,000 Dillard Department Stores, Inc............................. 7,216
200,000 Hechinger Co............................................... 700
150,000 May Department Stores...................................... 6,731
215,000 Melville Corp.............................................. 8,412
250,000 The Gap.................................................... 7,438
300,000 Wal-Mart Stores, Inc....................................... 7,200
--------
43,596
--------
Services (Non-Financial) (0.6%):
105,000 Rollins, Inc............................................... 2,205
--------
Telecommunications (0.3%):
50,333 360 Communications Co.(b).................................. 1,164
--------
Transportation--Marine (0.3%):
65,000 Kirby Corp.(b)............................................. 1,040
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Transportation Leasing & Trucking (2.2%):
$215,000 Ryder Systems, Inc........................................ $ 5,724
148,000 US Freightways Corp....................................... 2,618
--------
8,342
--------
Utilities--Electric & Gas (2.7%):
180,000 Baltimore Gas & Electric.................................. 4,635
250,000 Southern Co............................................... 5,656
--------
10,291
--------
Utilities--Telecommunications (6.8%):
120,000 AT&T Corp................................................. 6,255
170,000 BellSouth Corp............................................ 6,970
131,000 Nynex Corp................................................ 5,879
170,000 Sprint Corp............................................... 6,226
--------
25,330
--------
Total Common Stocks 345,289
--------
INVESTMENT COMPANIES (6.4%):
16,331,461 AmSouth Prime Obligations Fund............................ 16,331
7,497,161 AmSouth U.S. Treasury Fund................................ 7,497
--------
Total Investment Companies 23,828
--------
Total (Cost--$320,099)(a) $374,192
========
<FN>
- --------
Percentages indicated are based on net assets of $374,622.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax reporting purposes by the amount of losses
recognized for financial reporting purposes in excess of federal income
tax reporting of approximately $487. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows:
Unrealized appreciation........ $62,989
Unrealized depreciation........ (9,383)
-------
Net unrealized appreciation.... $53,606
=======
(b) Represents non-income producing securities.
ADR--American Depository Receipt
</TABLE>
See notes to financial statements.
-38-
<PAGE> 177
AMSOUTH MUTUAL FUNDS
REGIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ ----------------------------------------------------------- -------
<C> <S> <C>
COMMON STOCKS (90.3%):
Air Freight (1.7%):
20,000 Federal Express(b)......................................... $ 1,555
-------
Apparel (2.6%):
80,000 Delta Woodside Industries.................................. 380
60,000 Russell Corp............................................... 2,010
-------
2,390
-------
Automotive Parts (3.9%):
75,000 Discount Auto Parts, Inc.(b)............................... 1,781
45,000 Genuine Parts Co........................................... 1,907
-------
3,688
-------
Banking (10.0%):
35,000 Deposit Guaranty Corp...................................... 1,601
50,000 First Commerce Corp........................................ 1,737
60,000 First Tennessee National Corp.............................. 1,770
35,000 First Union Corp........................................... 2,223
24,000 NationsBank Corp........................................... 2,061
-------
9,392
-------
Building Materials (1.8%):
110,000 Interface, Inc............................................. 1,664
-------
Chemicals--Specialty (2.0%):
210,000 Ethyl Corp................................................. 1,890
-------
Electronic & Electrical (2.1%):
150,000 Scientific Atlanta, Inc.................................... 2,006
-------
Food Processing & Packaging (5.0%):
145,000 Flowers Industries, Inc.................................... 2,483
130,000 Lance, Inc................................................. 2,178
-------
4,661
-------
Forest Products--Lumber, Paper (4.1%):
80,000 Carauster Industries, Inc.................................. 2,210
65,000 James River Corp........................................... 1,641
-------
3,851
-------
Furniture (0.7%):
105,000 Winsloew Furniture, Inc.(b)................................ 628
-------
Insurance (5.3%):
100,000 Equifax, Inc............................................... 2,513
80,000 First Colony Corp.......................................... 2,450
-------
4,963
-------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ ----------------------------------------------------------- -------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Manufacturing (2.5%):
65,000 Wolverine Tube, Inc.(b).................................... $ 2,308
-------
Medical Services (11.7%):
100,000 Coventry Corp.(b).......................................... 1,250
220,000 HEALTHSOUTH Rehabilitation Corp.(b)........................ 6,683
151,875 Health Management Assoc., Inc.............................. 3,056
-------
10,989
-------
Oil & Gas Exploration, Production & Services (5.8%):
40,000 Louisiana Land & Exploration Co............................ 2,160
13,000 Mobil Corp................................................. 1,435
60,000 Production Operators....................................... 1,875
-------
5,470
-------
Oilfield Equipment & Services (2.8%):
60,000 McDermott International, Inc............................... 1,088
120,000 Offshore Logistics(b)...................................... 1,500
-------
2,588
-------
Printing (2.6%):
100,000 John H. Harland Co......................................... 2,425
-------
Railroad (2.2%):
25,000 Norfolk & Southern Co...................................... 2,022
-------
Restaurants (2.5%):
110,000 Cracker Barrel Old Country Store, Inc...................... 2,337
-------
Retail (8.0%):
170,000 Big B., Inc................................................ 1,636
150,000 Books A Million(b)......................................... 975
170,000 Hancock Fabrics............................................ 1,445
160,000 Stein Mart, Inc.(b)........................................ 3,400
-------
7,456
-------
Services (Non-Financial) (1.0%):
45,000 Rollins, Inc............................................... 945
-------
Steel (3.0%):
115,000 Birmingham Steel Corp...................................... 1,869
20,000 Nucor Corp................................................. 937
-------
2,806
-------
Transportation Leasing & Trucking (2.3%):
80,000 Ryder Systems, Inc......................................... 2,130
-------
</TABLE>
Continued
-39-
<PAGE> 178
AMSOUTH MUTUAL FUNDS
REGIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ ----------------------------------------------------------- -------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Electric (4.4%):
55,000 Florida Progress Corp...................................... $ 1,842
100,000 Southern Co................................................ 2,263
-------
4,105
-------
Utilities--Telecommunications (2.4%):
55,000 BellSouth Corp............................................. 2,255
-------
Total Common Stocks 84,524
-------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ ----------------------------------------------------------- -------
<C> <S> <C>
INVESTMENT COMPANIES (9.7%):
4,680,576 AmSouth Prime Obligations Fund............................. $ 4,680
4,360,002 AmSouth U.S. Treasury Fund................................. 4,360
-------
Total Investment Companies 9,040
-------
Total (Cost--$75,423)(a) $93,564
=======
<FN>
- --------
Percentages indicated are based on net assets of $93,584.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation....... $22,680
Unrealized depreciation....... (4,539)
-------
Net unrealized appreciation... $18,141
=======
(b) Represents non-income producing securities.
</TABLE>
See notes to financial statements.
-40-
<PAGE> 179
AMSOUTH MUTUAL FUNDS
BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
July 31, 1996
(Amounts in Thousands, except Shares and Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
COMMON STOCKS (49.1%):
Aerospace/Defense (0.9%):
35,000 TRW, Inc.................................................. $ 3,163
--------
Aluminum (0.5%):
55,000 Alcan Aluminum Limited.................................... 1,636
--------
Apparel (0.4%):
140,000 Phillips Van Heusen....................................... 1,505
--------
Automobiles (1.1%):
120,000 Ford Motor Co............................................. 3,900
--------
Automotive Parts (0.6%):
101,000 Arvin Industries, Inc..................................... 2,148
--------
Banking (3.3%):
150,000 Great Western Financial Corp.............................. 3,562
40,000 J.P. Morgan & Co., Inc. .................................. 3,440
49,000 NationsBank Corp. ........................................ 4,208
--------
11,210
--------
Chemicals--Specialty (0.6%):
100,000 Engelhard Corp............................................ 2,050
--------
Computers & Peripherals (0.9%):
27,000 IBM Corp.................................................. 2,913
--------
Construction (0.3%):
76,000 Ryland Group.............................................. 1,130
--------
Electronic & Electrical (1.6%):
103,000 AMP, Inc. ................................................ 3,978
32,000 Avnet, Inc. .............................................. 1,396
--------
5,374
--------
Financial Services (1.4%):
45,000 American Express Co....................................... 1,969
48,000 Dun & Bradstreet Corp..................................... 2,760
--------
4,729
--------
Food Processing & Packaging (2.2%):
129,189 Grand Metropolitan ADR.................................... 3,520
120,000 Sara Lee Corp............................................. 3,840
--------
7,360
--------
Forest Products--Lumber, Paper (1.0%):
80,000 Weyerhauser Co. .......................................... 3,340
--------
Gold & Silver Mining (0.5%):
95,000 Homestake Mining.......................................... 1,556
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Health Care (1.3%):
57,182 Aetna, Inc.(b)............................................ $ 3,324
35,000 United Healthcare Corp.................................... 1,181
--------
4,505
--------
Industrial Services (0.8%):
100,000 Measurex Corp. ........................................... 2,762
--------
Insurance--Broker (1.4%):
132,000 Alexander & Alexander Services, Inc. ..................... 2,178
30,000 Marsh & McLennan Cos., Inc. .............................. 2,719
--------
4,897
--------
Insurance--Property, Casualty, Health & Other (1.1%):
75,000 St. Paul Cos., Inc........................................ 3,881
--------
Manufacturing--Capital Goods (0.3%):
31,000 Kennametal, Inc........................................... 961
--------
Medical Supplies (1.4%):
110,000 Baxter International, Inc................................. 4,579
--------
Newspapers (2.1%):
77,000 Dow Jones & Co., Inc...................................... 3,013
63,000 Gannett Co., Inc.......................................... 4,134
--------
7,147
--------
Oil & Gas Exploration, Production, & Services (5.0%):
120,000 Burlington Resources...................................... 5,130
145,000 Sun Company, Inc.......................................... 3,752
59,000 Texaco, Inc............................................... 5,015
150,000 USX--Marathon Group....................................... 3,075
--------
16,972
--------
Oilfield Equipment & Services (2.3%):
100,000 Dresser Industries, Inc................................... 2,700
60,000 McDermott International, Inc.............................. 1,088
50,000 Schlumberger, Limited..................................... 4,000
--------
7,788
--------
Pharmaceuticals (3.6%):
81,000 American Home Products Corp............................... 4,597
40,000 Bristol-Myers Squibb Co. ................................. 3,465
52,000 Johnson & Johnson, Inc. .................................. 2,483
40,000 Pharmacia & Upjohn, Inc................................... 1,650
--------
12,195
--------
</TABLE>
Continued
-41-
<PAGE> 180
AMSOUTH MUTUAL FUNDS
BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands, except Shares and Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Photography (0.4%):
18,000 Eastman Kodak Co.......................................... $ 1,343
--------
Pollution Control Services & Equipment (1.0%):
115,000 WMX Technologies, Inc..................................... 3,407
--------
Railroads (1.1%):
80,000 CSX Corp. ................................................ 3,860
--------
Retail (5.2%):
54,000 Dayton Hudson Corp........................................ 1,633
85,000 Dillard Department Stores, Inc............................ 2,667
170,000 Hechinger Co.............................................. 595
60,000 May Department Stores..................................... 2,692
100,000 Melville Corp............................................. 3,913
135,000 The Gap................................................... 4,016
81,000 Wal-Mart Stores, Inc...................................... 1,944
--------
17,460
--------
Services (Non-Financial) (0.2%):
25,000 Rollins, Inc.............................................. 525
--------
Telecommunications (0.2%):
26,666 360 Communications Co.(b)................................. 617
--------
Transportation Leasing & Trucking (0.9%):
70,000 Ryder Systems, Inc........................................ 1,864
63,000 US Freightways Corp....................................... 1,114
--------
2,978
--------
Transportation--Marine (0.1%):
30,000 Kirby Corp.(b)............................................ 480
--------
Utilities--Electric (1.2%):
73,000 Baltimore Gas & Electric.................................. 1,880
100,000 Southern Co............................................... 2,263
--------
4,143
--------
Utilities--Telecommunications (4.0%):
55,000 AT&T Corp................................................. 2,867
90,000 BellSouth Corp............................................ 3,690
90,000 Nynex Corp................................................ 4,039
80,000 Sprint Corp............................................... 2,930
--------
13,526
--------
Total Common Stocks................................................. 166,076
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------------- -------
<C> <S> <C>
CORPORATE BONDS (16.2%):
Appliances (0.2%):
500,000 Whirlpool Corp., 9.50%, 6/15/00............................ $ 543
-------
Automotive (1.0%):
1,430,000 Ford Capital, 9.13%, 5/1/98................................ 1,491
1,000,000 Ford Motor Credit Corp., 5.63%, 1/15/99.................... 977
700,000 General Motors Corp., 9.63%, 12/1/00....................... 766
-------
3,234
-------
Banking (3.4%):
930,000 Bank of America, 9.50%, 4/1/01............................. 1,017
1,000,000 Bankers Trust Co., 7.25%, 11/1/96.......................... 1,002
1,000,000 Bankers Trust Co., 9.50%, 6/14/00.......................... 1,076
2,500,000 Mellon Corporation, 6.30%, 6/1/00.......................... 2,447
4,185,000 NationsBank Corp., 5.38%, 4/15/00.......................... 3,981
2,000,000 SunTrust Banks, Inc., 7.38%, 7/1/06........................ 1,998
-------
11,521
-------
Brokerage Services (2.0%):
4,000,000 Dean Witter Discover & Co., 6.00%, 3/1/98.................. 3,975
2,000,000 Merrill Lynch, 6.0%, 3/1/01................................ 1,918
1,000,000 Morgan Stanley Group, Inc., 9.25%, 3/1/98.................. 1,040
-------
6,933
-------
Entertainment (0.3%):
1,000,000 Columbia Picture Entertainment, Inc., 9.88%, 2/1/98........ 1,037
-------
Financial--Commercial (1.2%):
4,000,000 Associates Corp. N.A., 6.75%, 7/15/01...................... 3,950
-------
Financial Services (2.0%):
1,000,000 American General Finance, 7.70%, 11/15/97.................. 1,016
500,000 Associates Corp., 8.63%, 6/15/97........................... 510
500,000 Beneficial Corp., 9.90%, 11/17/97.......................... 521
1,200,000 British Telcom Finance, Inc., 9.38%, 2/15/99............... 1,227
200,000 CIT Group Holdings, Inc., 8.75%, 7/1/97.................... 205
1,000,000 Commercial Credit Co., 7.88%, 7/15/04...................... 1,035
</TABLE>
Continued
-42-
<PAGE> 181
AMSOUTH MUTUAL FUNDS
BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
July 31, 1996
(Amounts in Thousands, except Shares and Principal Amount)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------------- --------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Financial Services, continued:
2,000,000 Morgan Stanley Group, Inc., 8.10%, 6/24/02................ $ 2,092
--------
6,656
--------
Food Products (0.3%):
1,000,000 H.J. Heinz Co., 6.75%, 10/15/99........................... 999
--------
Industrial Goods & Services (1.3%):
500,000 Browning Ferris International, 6.10%, 1/15/03............. 474
1,000,000 Dresser Industries, Inc., 6.25%, 6/1/00................... 979
2,000,000 Waste Management, 7.70%, 10/1/02.......................... 2,065
1,000,000 WMX Technologies, Inc., 8.25%, 11/15/99................... 1,043
--------
4,561
--------
Insurance (1.3%):
1,000,000 Allstate Corp., 5.88%, 6/15/98............................ 987
1,400,000 Capital Holding Corp., 9.20%, 4/17/01..................... 1,516
560,000 Chubb Corp., 8.75%, 11/15/99.............................. 590
1,200,000 Torchmark Corp., 9.63%, 5/1/98............................ 1,256
--------
4,349
--------
Oil & Gas Exploration & Production Services (0.5%):
1,550,000 BP America, 9.38%, 11/1/00................................ 1,691
--------
Pharmaceuticals (0.3%):
1,000,000 McKesson Corp., 8.63%, 2/1/98............................. 1,030
--------
Retail Stores (0.6%):
4,000,000 Wal-Mart Stores, Inc., 6.75%, 5/15/02..................... 1,980
--------
Technology (0.5%):
1,730,000 Lucent Technologies, Inc., 6.90%, 7/15/01................. 1,723
--------
Utility--Electric (1.3%):
530,000 National Rural, 9.50%, 5/15/97............................ 543
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- --------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Utility--Electric, continued:
2,000,000 Oklahoma Gas & Electric, 6.25%, 10/15/00................. $ 1,947
900,000 Pennsylvania Power & Light, 6.00%, 6/1/00................ 872
1,200,000 Virginia Electric & Power, 7.25%, 3/1/97................. 1,207
--------
4,569
--------
Total Corporate Bonds 54,776
--------
U.S. TREASURY BONDS (7.6%):
11,000,000 7.50%, 11/15/16.......................................... 11,484
16,000,000 6.25%, 8/15/23........................................... 14,417
--------
Total U.S. Treasury Bonds 25,901
--------
U.S. TREASURY NOTES (20.7%):
3,000,000 6.38%, 6/30/97........................................... 3,013
5,100,000 7.88%, 4/15/98........................................... 5,240
1,800,000 9.25%, 8/15/98........................................... 1,903
3,400,000 6.38%, 1/15/99........................................... 3,406
1,000,000 7.13%, 2/29/00........................................... 1,020
4,000,000 7.75%, 2/15/01........................................... 4,186
25,000,000 6.38%, 8/15/02........................................... 24,682
18,300,000 5.75%, 8/15/03........................................... 17,334
10,000,000 5.88%, 11/15/05.......................................... 9,376
--------
Total U.S. Treasury Notes 70,160
--------
U.S. TREASURY STRIPS (2.1%):
12,000,000 7.01%, 2/15/04........................................... 7,264
--------
Total U.S. Treasury Strips 7,264
--------
INVESTMENT COMPANIES (3.2%):
10,667,552 AmSouth Prime Obligations Fund........................... 10,668
5,005 AmSouth U.S. Treasury Fund............................... 5
--------
Total Investment Companies 10,673
--------
Total (Cost--$302,295)(a) $334,850
========
<FN>
- --------
Percentages indicated are based on net assets of $338,425.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation........ $39,738
Unrealized depreciation........ (7,183)
-------
Net unrealized appreciation.... $32,555
=======
(b) Represents non-income producing securities.
ADR--American Depository Receipt
</TABLE>
See notes to financial statements.
-43-
<PAGE> 182
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
1. ORGANIZATION:
AmSouth Mutual Funds (the "Trust") was organized on August 5, 1988, and is
registered under the Investment Company Act of 1940, as amended, ("the 1940
Act") as a diversified, open-end investment company established as a
Massachusetts business trust.
The Trust is authorized to issue an unlimited number of shares (units of
beneficial interest) without par value. The Trust currently offers shares of
the AmSouth Prime Obligations Fund, the AmSouth U.S. Treasury Fund, the
AmSouth Tax-Exempt Fund, the AmSouth Bond Fund, the AmSouth Limited Maturity
Fund, the AmSouth Government Income Fund, the AmSouth Florida Tax-Free Fund,
the AmSouth Equity Fund, the AmSouth Regional Equity Fund, and the AmSouth
Balanced Fund (collectively, "the Funds" and individually "a Fund"). The
AmSouth Alabama Tax-Free Fund and the AmSouth Municipal Bond Fund have not
yet commenced operations. Sales of shares of the Funds may be made to
customers of AmSouth Bank of Alabama, ("AmSouth") and its affiliates, to all
accounts of correspondent banks of AmSouth and to the general public.
The Prime Obligations Fund, the U.S. Treasury Fund and the Tax Exempt Fund
(the "money market funds") each offer two classes of shares: Classic Shares
and Premier Shares. Effective April 1, 1996, the existing shares of the money
market funds, which were previously unclassified, were designated Premier
Shares, and the money market funds commenced offering Classic Shares. Shares
of the Bond Fund, Limited Maturity Fund, the Government Income Fund, the
Florida Tax-Free Fund, the Equity Fund, the Regional Equity Fund and the
Balanced Fund (the "variable net asset value funds") are not classified.
The Prime Obligations Fund and the U.S. Treasury Fund seek current income
with liquidity and stability of principal. The Tax Exempt Fund seeks to
produce as high a level of current interest income exempt from federal income
taxes as is consistent with the preservation of capital and relative
stability of principal. The Bond Fund and the Limited Maturity Fund seek
current income, consistent with the preservation of capital. The Government
Income Fund seeks to provide a high level of current income consistent with
prudent investment risk. The Florida Tax-Free Fund seeks to produce as high a
level of current interest income exempt from federal income taxes and Florida
intangibles taxes as is consistent with the preservation of capital. The
Equity Fund and the Regional Equity Fund seek growth of capital. The Balanced
Fund seeks to obtain long-term capital growth and current income.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the money market funds are valued at either amortized cost,
which approximates market value, or at original cost which, combined with
accrued interest, approximates market value. Under the
Continued
-44-
<PAGE> 183
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
July 31, 1996
amortized cost method, discount or premium is amortized on a constant basis
to the maturity of the security. In addition, the money market funds may
not (a) purchase any instrument with a remaining maturity greater than
thirteen months unless such instrument is subject to a demand feature, or
(b) maintain a dollar-weighted average maturity which exceeds 90 days.
Investments in common stocks, corporate bonds, municipal bonds, commercial
paper and U.S. Government securities of the variable net asset value funds
are valued at their market values determined on the basis of the mean
between the latest available bid and asked prices in the principal market
(closing sales prices if the principal market is an exchange) in which such
securities are normally traded. Investments in investment companies are
valued at their net asset values as reported by such companies. The
differences between cost and market values of such investments are
reflected as unrealized appreciation or depreciation.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from member banks of the
Federal Deposit Insurance Corporation and from registered broker/dealers
which AmSouth deems creditworthy under guidelines approved by the Board of
Trustees, subject to the seller's agreement to repurchase such securities
at a mutually agreed-upon date and price. The repurchase price generally
equals the price paid by the Funds plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller, under a repurchase agreement,
is required to maintain the value of collateral held pursuant to the
agreement at not less than the repurchase price (including accrued
interest). Securities subject to repurchase agreements are held by the
Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by a Fund under the 1940 Act.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS:
Each Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal
settlement date at a stated price and/or yield obtained may be more or less
than those available in the market when delivery takes place. Securities
purchased on a when-issued basis are recorded as an asset and are subject
to changes in value based upon changes in the general level of interest
rates. A segregated account is established and the Funds maintain cash and
marketable securities at least equal in value to commitments for when-
issued securities. Securities purchased on a when-issued basis do not earn
income until the settlement date.
Continued
-45-
<PAGE> 184
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
July 31, 1996
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market funds. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized gains, if any, are declared and distributed
annually.
Dividends from net investment income and from net realized capital gains
are determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for mortgage-backed securities,
expiring capital loss carryforwards and deferrals of certain losses.
Permanent book and tax basis differences are reflected in the components of
net assets.
FEDERAL INCOME TAXES:
It is the policy of each Fund to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or substantially
all, federal income taxes.
OTHER:
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Other operating expenses for the Trust are prorated to the
Funds on the basis of relative net assets.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended July 31, 1996:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -----------
<S> <C> <C>
Bond Fund.......................................... $ 50,913,891 $10,050,508
Limited Maturity Fund.............................. 16,463,380 27,907,166
Government Income Fund............................. 13,416,678 13,263,486
Florida Tax-Free Fund.............................. 7,971,931 5,619,012
Equity Fund........................................ 123,289,431 59,379,724
Regional Equity Fund............................... 17,947,105 6,293,543
Balanced Fund...................................... 97,603,876 62,732,272
</TABLE>
Continued
-46-
<PAGE> 185
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
July 31, 1996
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Funds which offer multiple classes of
shares for the years ended July 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
PRIME TAX EXEMPT
OBLIGATIONS FUND U.S. TREASURY FUND FUND
---------------------- ---------------------- ------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
For the period April 1,
1996 through July 31, 1996:
Classic Shares (a):
Shares issued ........ $ 165,419 165,419 $ 9,207 9,207 $ 9,803 9,803
Dividends reinvested.. 1,963 1,963 222 222 143 143
Shares redeemed....... (191,139) (191,139) (13,986) (13,986) (9,019) (9,019)
---------- ---------- ---------- ---------- -------- --------
Net increase.......... $ (23,757) (23,757) $ (4,557) (4,557) $ 927 927
========== ========== ========== ========== ======== ========
For the year ended July
31, 1996:
Premier Shares (a):
Shares issued......... $1,388,943 1,388,943 $1,088,791 1,088,791 $129,166 129,166
Dividends reinvested.. 5,460 5,460 1,751 1,751 388 388
Shares redeemed....... (1,384,702) (1,384,702) (1,028,499) (1,028,499) (127,394) (127,394)
---------- ---------- ---------- ---------- -------- --------
Net decrease.......... $ 9,701 9,701 $ 62,043 62,043 $ 2,160 2,160
========== ========== ========== ========== ======== ========
For the year ended July
31, 1995:
Shares issued......... $1,597,046 1,597,046 $ 900,697 900,697 $ 99,365 99,365
Dividends reinvested.. 5,036 5,036 2,103 2,103 311 311
Shares redeemed....... (1,561,740) (1,561,740) (880,465) (880,465) (102,959) (102,959)
---------- ---------- ---------- ---------- -------- --------
Net increase
(decrease)........... $ 40,342 40,342 $ 22,335 22,335 $ (3,283) (3,283)
========== ========== ========== ========== ======== ========
<FN>
- --------
(a) Effective April 1, 1996, the Funds' existing shares, which were previously
unclassified, were designated Premier Shares, and the Fund commenced
offering Classic Shares.
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to each of the Funds by AmSouth.
Under the terms of the investment advisory agreement, AmSouth is entitled to
receive fees based on a percentage of the average net assets of each of the
Funds.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc. ("BISYS
Ohio") are subsidiaries of the BISYS Group, Inc.
ASO Services Company, a wholly-owned subsidiary of The BISYS Group, Inc.,
serves the Funds as administrator. BISYS, with whom certain officers and
trustees of the Trust are affiliated, serves the Funds as sub-administrator.
Such officers and trustees are paid no fees directly by the Funds for serving
as officers and
Continued
-47-
<PAGE> 186
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
July 31, 1996
trustees of the Trust. Prior to April 1, 1996, BISYS served the Funds as
administrator. Under the terms of the administration agreement, ASO Services
Company's fees are computed daily as 0.20% of the average net assets of each
of the Funds. The terms of the current administration agreement are
substantially the same as the former administration agreement. BISYS also
serves as the Funds' distributor and is entitled to receive commissions on
sales of shares of the variable net asset value funds. For the year ended
July 31, 1996, BISYS received $1,093,457 from commissions earned on sales of
shares of the Funds' variable net asset value funds of which $1,071,932 was
reallowed to AmSouth, an investment dealer of the Funds' shares and other
dealers of the Funds' shares. BISYS receives no fees from the Funds for
providing distribution services to money market funds. BISYS Ohio serves the
Funds as Transfer Agent and Mutual Fund Accountant. Under the terms of the
Transfer Agent and Accounting Agreement, the Company's fees are based on the
number of shareholders and as a percentage of average net assets,
respectively.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios. Information regarding these transactions is as
follows for the year ended July 31, 1996 (amounts in thousands):
<TABLE>
<CAPTION>
INVESTMENT ADVISORY FEES
--------------------------------
ANNUAL FEE AS SHAREHOLDER
A PERCENTAGE OF ADMINISTRATION SERVICING FEES TRANSFER AGENT
AVERAGE DAILY FEES VOLUNTARILY FEES VOLUNTARILY VOLUNTARILY AND MUTUAL FUND
NET ASSETS REDUCED REDUCED REDUCED ACCOUNTANT FEES
--------------- ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund.. 0.40% $ -- $ -- $63 $440
U.S. Treasury Fund...... 0.40% -- -- 7 272
Tax-Exempt Fund......... 0.40% 133 -- 7 67
Bond Fund............... 0.65% 165 88 -- 89
Limited Maturity Fund... 0.65% 87 47 -- 54
Government Income Fund.. 0.65% 61 18 -- 31
Florida Tax-Free Fund... 0.65% 171 49 -- 48
Equity Fund............. 0.80% -- 309 -- 244
Regional Equity Fund.... 0.80% 1 67 -- 78
Balanced Fund........... 0.80% 169 260 -- 237
</TABLE>
6. ELIGIBLE DISTRIBUTIONS: (UNAUDITED)
The AmSouth Mutual Funds designate the following eligible distributions for
the dividends received deductions for corporations for the year ended July
31, 1996:
<TABLE>
<CAPTION>
REGIONAL
EQUITY EQUITY BALANCED
FUND FUND FUND
------ -------- --------
<S> <C> <C> <C>
Dividend Income (000)................................ $8,258 $1,583 $4,562
Dividend Income Per Share............................ $0.281 $0.213 $0.145
</TABLE>
Continued
-48-
<PAGE> 187
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
July 31, 1996
7. EXEMPT-INTEREST INCOME DESIGNATIONS (UNAUDITED):
The AmSouth Mutual Funds designate the following exempt-interest dividends
for the taxable year ended July 31, 1996:
<TABLE>
<CAPTION>
FLORIDA TAX
TAX-FREE EXEMPT
FUND FUND
-------- ------
<S> <C> <C>
Exempt-Interest Dividends (000).............................. $2,107 $2,065
Exempt-Interest Dividends Per Share.......................... 0.449 --
Exempt-Interest Dividends Per Share--Classic Shares.......... -- 0.031
Exempt-Interest Dividends Per Share--Premier Shares.......... -- 0.010
</TABLE>
The percentage break-down of the exempt-interest income by state for the Tax
Exempt Fund's taxable year ended July 31, 1996 was as follows:
<TABLE>
<S> <C>
Alabama.................................................................. 9.2%
Arizona.................................................................. 3.5
California............................................................... 0.6
Colorado................................................................. 1.7
Connecticut.............................................................. 4.0
Delaware................................................................. 2.7
District of Columbia..................................................... 0.3
Florida.................................................................. 5.4
Georgia.................................................................. 6.5
Hawaii................................................................... 1.4
Illinois................................................................. 7.2
Indiana.................................................................. 0.2
Iowa..................................................................... 1.6
Kansas................................................................... 0.4
Louisiana................................................................ 3.2
Maryland................................................................. 0.2
Massachusetts............................................................ 0.5
Michigan................................................................. 0.9
Minnesota................................................................ 0.7
Mississippi.............................................................. 0.2
Missouri................................................................. 8.1
Nebraska................................................................. 3.1
Nevada................................................................... 0.3
New Jersey............................................................... 0.4
New York................................................................. 3.6
North Carolina........................................................... 0.4
Ohio..................................................................... 0.1
</TABLE>
Continued
-49-
<PAGE> 188
AMSOUTH MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
<TABLE>
<S> <C>
Oregon................................................................. 2.3%
Pennsylvania........................................................... 2.1
South Carolina......................................................... 1.8
Tennessee.............................................................. 6.1
Texas.................................................................. 16.0
Utah................................................................... 0.9
Virginia............................................................... 1.0
Washington............................................................. 2.3
West Virginia.......................................................... 1.0
Wisconsin.............................................................. 0.1
-----
Total.................................................................. 100.0%
=====
</TABLE>
8. FEDERAL INCOME TAX INFORMATION:
The following table presents capital gain dividend distributions from long-
term capital gains for the following Funds for the year ended July 31, 1996
(amounts in thousands):
<TABLE>
<S> <C>
Bond Fund.............................................................. $ 173
Florida Tax-Free Fund.................................................. 20
Equity Fund............................................................ 9,256
Regional Equity Fund................................................... 756
Balanced Fund.......................................................... 6,408
</TABLE>
At July 31, 1996, the following Funds have capital loss carryforwards which
are available to offset future capital gains, if any (amounts in thousands):
<TABLE>
<CAPTION>
AMOUNT EXPIRES
------ -------
<S> <C> <C>
Prime Obligations Fund........................................ $ 9 2001
Bond Fund..................................................... 28 2004
Limited Maturity Fund......................................... 478 2002
Limited Maturity Fund......................................... 730 2003
Limited Maturity Fund......................................... 4 2004
Government Income Fund........................................ 165 2003
Government Income Fund........................................ 239 2004
</TABLE>
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the fiscal year ended
July 31, 1997. The following Funds had such losses (amounts in thousands):
<TABLE>
<S> <C>
Bond Fund................................................................ $112
Limited Maturity Fund.................................................... 241
Government Income Fund................................................... 188
</TABLE>
-50-
<PAGE> 189
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND
--------------------------------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------- -------- -------- -------- --------
CLASSIC (A) PREMIER (A)
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income.. 0.050 0.016 0.050 0.029 0.027 0.042
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.. (0.050) (0.016) (0.050) (0.029) (0.027) (0.042)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return............ 5.07%(d) 5.10% 5.14% 2.94% 2.76% 4.28%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets at end of
period (000).......... $125,075 $478,542 $617,673 $577,331 $456,428 $457,511
Ratio of expenses to
average net assets.... 0.72% 0.71%(b) 0.69% 0.70% 0.71% 0.71%
Ratio of net investment
income to average net
assets................ 5.08% 4.71%(b) 5.04% 2.92% 2.73% 4.08%
Ratio of expenses to
average net assets*... 0.87% (c) (c) (c) (c) (c)
Ratio of net investment
income to average net
assets*............... 4.93% (c) (c) (c) (c) (c)
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(b) Annualized.
(c) There were no waivers during the period.
(d) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1995 plus the total return for the Classic Shares for
the period from April 1, 1996 to July 31, 1996.
</TABLE>
See notes to financial statements.
-51-
<PAGE> 190
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. TREASURY FUND
-------------------------------------------------------------------
YEAR ENDED JULY 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------- -------- -------- -------- --------
CLASSIC (A) PREMIER (A)
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income.. 0.048 0.015 0.048 0.028 0.027 0.041
------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.. (0.048) (0.015) (0.048) (0.028) (0.027) (0.041)
------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======== ======== ======== ========
Total Return............ 4.90%(d) 4.93% 4.90% 2.80% 2.69% 4.15%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets at end of
period (000).......... $12,263 $368,162 $322,939 $300,603 $404,473 $339,666
Ratio of expenses to
average net assets.... 0.71% 0.72%(b) 0.70% 0.71% 0.72% 0.73%
Ratio of net investment
income to average net
assets................ 4.94% 4.54%(b) 4.81% 2.77% 2.66% 4.08%
Ratio of expenses to
average net assets*... 0.86% (c) (c) (c) (c) (c)
Ratio of net investment
income to average net
assets*............... 4.79% (c) (c) (c) (c) (c)
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(b) Annualized.
(c) There were no waivers during the period.
(d) Represents total return for the Premier Shares for the period from August
1, 1995 to March 31, 1995 plus the total return for the Classic Shares for
the period from April 1, 1996 to July 31, 1996.
</TABLE>
See notes to financial statements.
-52-
<PAGE> 191
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TAX EXEMPT FUND
--------------------------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------- ------- ------- ------- -------
CLASSIC (a) PREMIER (a)
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.031 0.010 0.032 0.019 0.021 0.030
------- ------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.031) (0.010) (0.032) (0.019) (0.021) (0.030)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total Return............ 3.12%(c) 3.15% 3.22% 1.95% 2.16% 3.12%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets at end of
period (000).......... $17,116 $43,611 $57,640 $60,923 $48,151 $38,392
Ratio of expenses to
average net assets.... 0.54% 0.58%(b) 0.54% 0.57% 0.49% 0.65%
Ratio of net investment
income to average net
assets................ 3.16% 2.93%(b) 3.15% 1.93% 2.12% 2.98%
Ratio of expenses to
average net assets*... 0.69% 0.78%(b) 0.74% 0.77% 0.78% 0.77%
Ratio of net investment
income to average net
assets*............... 3.01% 2.73%(b) 2.95% 1.73% 1.83% 2.86%
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective April 1, 1996, the Fund's existing shares, which were previously
unclassified, were designated as Premier Shares, and the Fund commenced
offering Classic Shares.
(b) Annualized.
(c) Represents the total return for the Premier Shares for the period from
August 1, 1995 to March 31, 1995 plus the total return for the Classic
Shares for the period from April 1, 1996 to July 31, 1996.
</TABLE>
See notes to financial statements.
-53-
<PAGE> 192
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
BOND FUND
--------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 10.83 $ 10.59 $ 11.29 $ 11.29 $ 10.42
-------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income........... 0.65 0.69 0.69 0.71 0.74
Net realized and unrealized
gains (losses) from
investments.................... (0.18) 0.28 (0.66) 0.33 0.91
-------- ------- ------- ------- -------
Total from Investment
Activities.................... 0.47 0.97 0.03 1.04 1.65
-------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income........... (0.65) (0.69) (0.70) (0.71) (0.73)
Net realized gains.............. -- (0.04) (0.03) (0.33) (0.05)
In excess of net realized gains. (0.11) -- -- -- --
-------- ------- ------- ------- -------
Total Distributions............ (0.76) (0.73) (0.73) (1.04) (0.78)
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD... $ 10.54 $ 10.83 $ 10.59 $ 11.29 $ 11.29
======== ======= ======= ======= =======
Total Return (excludes sales
charge)......................... 4.40% 9.70% 0.23% 9.80% 16.41%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000).......................... $132,737 $94,671 $79,472 $65,777 $60,156
Ratio of expenses to average net
assets......................... 0.75% 0.75% 0.78% 0.78% 0.82%
Ratio of net investment income
to average
net assets..................... 6.12% 6.63% 6.31% 6.37% 6.94%
Ratio of expenses to average net
assets*........................ 0.98% 0.98% 1.01% 1.01% 1.01%
Ratio of net investment income
to average
net assets*.................... 5.89% 6.40% 6.08% 6.14% 6.75%
Portfolio turnover............... 9.60% 17.70% 30.90% 14.98% 240.64%
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
</TABLE>
See notes to financial statements.
-54-
<PAGE> 193
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LIMITED MATURITY FUND
-------------------------------------------
YEAR ENDED JULY 31,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 10.41 $ 10.23 $ 10.81 $ 10.81 $ 10.44
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income............ 0.58 0.58 0.54 0.60 0.70
Net realized and unrealized gains
(losses) from investments....... (0.10) 0.17 (0.45) 0.09 0.45
------- ------- ------- ------- -------
Total from Investment
Activities..................... 0.48 0.75 0.09 0.69 1.15
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income............ (0.57) (0.57) (0.54) (0.61) (0.69)
In excess of net investment
income.......................... (0.01) -- -- -- --
Net realized gains............... -- -- -- (0.08) (0.09)
In excess of net realized gains.. -- -- (0.13) -- --
------- ------- ------- ------- -------
Total Distributions............. (0.58) (0.57) (0.67) (0.69) (0.78)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 10.31 $ 10.41 $ 10.23 $ 10.81 $ 10.81
======= ======= ======= ======= =======
Total Return (excludes sales
charge).......................... 4.74% 7.65% 0.77% 6.72% 11.48%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)........................... $46,005 $59,798 $51,660 $53,933 $38,206
Ratio of expenses to average net
assets.......................... 0.76% 0.80% 0.79% 0.69% 0.68%
Ratio of net investment income to
average net assets.............. 5.48% 5.69% 5.05% 5.67% 6.78%
Ratio of expenses to average net
assets*......................... 0.99% 1.03% 1.02% 1.03% 1.03%
Ratio of net investment income to
average net assets*............. 5.25% 5.46% 4.82% 5.33% 6.43%
Portfolio turnover................ 29.56% 38.11% 48.06% 141.27% 35.64%
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
</TABLE>
See notes to financial statements.
-55-
<PAGE> 194
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GOVERNMENT INCOME FUND FLORIDA TAX-FREE FUND
------------------------------------- -----------------------------
YEAR ENDED YEAR ENDED OCTOBER 1, 1993 YEAR ENDED SEPTEMBER 30, 1994
JULY 31, JULY 31, TO JULY 31, JULY 31, TO JULY 31,
1996 1995 1994(a) 1996 1995(a)
---------- ---------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 9.54 $ 9.48 $ 10.00 $ 10.32 $ 10.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.66 0.68 0.54 0.45 0.34
Net realized and
unrealized gains
(losses) from invest-
ments................. (0.20) 0.08 (0.57) (0.01) 0.30
------- ------- ------- ------- -------
Total from Investment
Activities........... 0.46 0.76 (0.03) 0.44 0.64
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.59) (0.70) (0.33) (0.45) (0.32)
Net realized gains..... -- -- -- (0.01) --
Tax return of capital.. (0.01) -- (0.16) -- --
------- ------- ------- ------- -------
Total Distributions... (0.60) (0.70) (0.49) (0.46) (0.32)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 9.40 $ 9.54 $ 9.48 $ 10.30 $ 10.32
======= ======= ======= ======= =======
Total Return (excludes
sales charge).......... 4.91% 8.43% (0.26%)(c) 4.24% 6.53%(c)
RATIOS/SUPPLEMENTAL DA-
TA:
Net Assets at end of
period (000).......... $15,752 $16,679 $15,465 $48,869 $48,333
Ratio of expenses to
average net assets.... 0.65% 0.58% 0.37%(b) 0.59% 0.70%(b)
Ratio of net investment
income to average net
assets................ 6.81% 7.18% 6.56%(b) 4.33% 4.16%(b)
Ratio of expenses to
average net assets*... 1.10% 1.19% 1.22%(b) 1.04% 1.01%(b)
Ratio of net investment
income to average net
assets*............... 6.36% 6.57% 5.71%(b) 3.88% 3.86%(b)
Portfolio turnover...... 78.31% 27.32% 122.94% 12.21% 2.33%
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
</TABLE>
See notes to financial statements.
-56-
<PAGE> 195
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
EQUITY FUND
------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 16.75 $ 14.82 $ 14.38 $ 13.40 $ 12.57
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income....... 0.33 0.33 0.28 0.28 0.32
Net realized and unrealized
gains from investments..... 1.48 2.39 0.83 1.48 1.20
-------- -------- -------- -------- --------
Total from Investment
Activities................ 1.81 2.72 1.11 1.76 1.52
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income....... (0.33) (0.32) (0.28) (0.29) (0.33)
Net realized gains.......... (0.61) (0.47) (0.39) (0.49) (0.36)
-------- -------- -------- -------- --------
Total Distributions........ (0.94) (0.79) (0.67) (0.78) (0.69)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD...................... $ 17.62 $ 16.75 $ 14.82 $ 14.38 $ 13.40
======== ======== ======== ======== ========
Total Return (excludes sales
charge)..................... 11.09% 19.27% 7.90% 13.81% 12.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)...................... $374,622 $275,757 $205,611 $153,074 $107,934
Ratio of expenses to average
net assets................. 1.02% 1.03% 0.94% 0.95% 1.01%
Ratio of net investment
income to average
net assets................. 1.86% 2.17% 1.93% 2.08% 2.50%
Ratio of expenses to average
net assets*................ 1.11% 1.11% 1.11% 1.13% 1.15%
Ratio of net investment
income to average
net assets*................ 1.77% 2.09% 1.76% 1.90% 2.36%
Portfolio turnover........... 19.11% 19.46% 11.37% 15.12% 113.12%
Average commission rate (a).. $ 0.0700 -- -- -- --
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
See notes to financial statements.
-57-
<PAGE> 196
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
REGIONAL EQUITY FUND
-------------------------------------------
YEAR ENDED JULY 31,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 18.94 $ 16.68 $ 16.74 $ 14.86 $ 13.44
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income............ 0.26 0.23 0.23 0.19 0.23
Net realized and unrealized gains
from investments................ 2.20 2.26 0.58 2.09 2.34
------- ------- ------- ------- -------
Total from Investment
Activities..................... 2.46 2.49 0.81 2.28 2.57
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income............ (0.26) (0.23) (0.23) (0.20) (0.23)
Net realized gains............... (0.19) -- (0.41) (0.20) (0.92)
In excess of net realized gains.. -- -- (0.23) -- --
------- ------- ------- ------- -------
Total Distributions............. (0.45) (0.23) (0.87) (0.40) (1.15)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 20.95 $ 18.94 $ 16.68 $ 16.74 $ 14.86
======= ======= ======= ======= =======
Total Return (excludes sales
charge).......................... 13.10% 15.10% 4.87% 15.53% 20.66%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)........................... $93,584 $68,501 $54,744 $41,347 $15,707
Ratio of expenses to average net
assets.......................... 1.05% 1.07% 0.79% 0.80% 0.91%
Ratio of net investment income to
average net assets.............. 1.30% 1.35% 1.36% 1.17% 1.61%
Ratio of expenses to average net
assets*......................... 1.13% 1.15% 1.24% 1.28% 1.36%
Ratio of net investment income to
average net assets*............. 1.22% 1.27% 0.90% 0.69% 1.16%
Portfolio turnover................ 8.22% 14.25% 5.83% 10.22% 24.99%
Average commission rate paid (a).. $0.0827 -- -- -- --
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
See notes to financial statements.
-58-
<PAGE> 197
AMSOUTH MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
BALANCED FUND
---------------------------------------------------------
YEAR ENDED JULY 31, DECEMBER 19, 1991
-------------------------------------- TO JULY 31,
1996 1995 1994 1993 1992(a)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 12.76 $ 11.81 $ 11.86 $ 11.12 $ 10.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income.. 0.47 0.47 0.42 0.44 0.27
Net realized and
unrealized gains from
investments........... 0.58 1.24 0.18 0.80 1.09
-------- -------- -------- -------- --------
Total from Investment
Activities........... 1.05 1.71 0.60 1.24 1.36
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.. (0.47) (0.46) (0.42) (0.45) (0.24)
Net realized gains..... (0.31) (0.30) (0.23) (0.05) --
-------- -------- -------- -------- --------
Total Distributions... (0.78) (0.76) (0.65) (0.50) (0.24)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 13.03 $ 12.76 $ 11.81 $ 11.86 $ 11.12
======== ======== ======== ======== ========
Total Return (excludes
sales charge).......... 8.37% 15.27% 5.13% 11.47% 13.71%(c)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets at end of
period (000).......... $338,425 $295,509 $236,306 $179,134 $143,813
Ratio of expenses to
average net assets.... 0.98% 0.94% 0.84% 0.84% 0.83%(b)
Ratio of net investment
income to average net
assets................ 3.61% 3.91% 3.56% 3.90% 4.45%(b)
Ratio of expenses to
average net assets*... 1.11% 1.12% 1.11% 1.12% 1.17%(b)
Ratio of net investment
income to average net
assets*............... 3.48% 3.73% 3.28% 3.62% 4.10%(b)
Portfolio turnover...... 20.47% 16.97% 14.43% 11.09% 23.18%
Average commission rate
paid (d)............... $0.7727 -- -- -- --
<FN>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Not annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
See notes to financial statements.
-59-
<PAGE> 198
APPENDIX
Commercial Paper Ratings. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debts having original maturities of no more than 365 days. Commercial paper
rated A-1 by S&P indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted A-1+. Commercial paper rated A-2
by S&P indicates that capacity for timely payment on issues is strong. However,
the relative degree of safety is not as high as for issues designated A-1.
Commercial paper rated A-3 indicates capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations. Commercial
paper rated B is regarded as having only an adequate capacity for timely
payment. However, such capacity may be damaged by changing conditions or
short-term adversities. Commercial paper rated D represents an issue either in
default or expected to be in default upon maturity.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of Prime-1 rated issuers, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variations.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained. Issuers rated
Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. The effect of industry characteristics and market composition may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and the requirement for
relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
Commercial paper rated F-1 by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-2 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, i.e., F-1. Commercial
paper rated F-3 has a satisfactory degree of assurance for timely payment but
the margin of safety is not as great as the two higher categories. Issues rated
F-4 have characteristics suggesting that the degree of assurance for timely
payment is minimal and is susceptible to near term adverse change due to less
favorable financial or economic conditions. The plus (+) sign is used after a
rating symbol to designate the relative position of an issuer within the rating
category.
B-49
<PAGE> 199
Corporate Debt and State and Municipal Bond Ratings.
Standard & Poor's Corporation. Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and to repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas, it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
the higher rated categories.
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
Moody's Investor Services. Bonds that are rated Aaa by Moody's are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa are considered
medium grade obligations; they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa, A or Baa. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
B-50
<PAGE> 200
Other Ratings of Municipal Obligations
The following summarizes the two highest ratings used by Moody's
ratings for state and municipal short-term obligations. Obligations bearing
MIG-1 and VMIG-1 designations are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
Obligations rated "MIG-2" or "VMIG-2" denote high quality with ample margins of
protection although not so large as in the preceding rating group.
S&P SP-1 and SP-2 municipal note rating (the two highest ratings
assigned) are described as follows:
"SP-1" Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
"SP-2" Satisfactory capacity to pay principal and interest.
Preferred Stock Ratings
The following summarizes the three highest ratings used by Moody's for
preferred stock:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in
the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
The following summarizes the three highest ratings used by Standard &
Poor's for preferred stock:
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
B-51
<PAGE> 201
"AA" A preferred stock issue rated "AA" also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA".
"A" An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
B-52
<PAGE> 202
Part C of Post-Effective Amendment No. 19
to
Registration Statement
of
AMSOUTH MUTUAL FUNDS
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
All required financial statements are included in Parts A
and B hereof.
(b) Exhibits:
(1) Amended Declaration of Trust, dated as of June 25,
1993 and filed on August 19, 1993 -- incorporated by
reference to Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(2) (a) By-laws -- incorporated by reference to the
Registrant's initial Registration Statement on
Form N-1A (File No. 33-21660).
(b) Amendment No. 1 to By-laws -- incorporated
by reference to Post-Effective Amendment No.
3 to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(3) None.
(4) (a) Article III, Sections 4 and 5; Article IV,
Sections 1 and 6; Article V; Article VIII,
Section 4; and Article IX, Sections 1, 4 and 7
of the Amended Declaration of Trust --
incorporated by reference to Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(b) Article 11 of The By-laws -- incorporated by
reference to the Registrant's initial
Registration Statement on Form N-1A (File
No. 33-21660).
C-1
<PAGE> 203
(c) Amendment No. 1 to By-laws -- incorporated
by reference to Post-Effective Amendment No.
3 to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(5) (a) Investment Advisory Agreement dated as of
August 1, 1988 between the Registrant and
AmSouth Bank N.A. -- incorporated by
reference to Post-Effective Amendment No. 1
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(b) Amendment No. 1 dated as of December 5, 1989
to Investment Advisory Agreement dated as of
August 1, 1988 between the Registrant and
AmSouth Bank N.A. --incorporated by
reference to Post-Effective Amendment No. 4
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(c) Amended Schedule to the Investment Advisory
Agreement between the Registrant and AmSouth
Bank N.A. with respect to the Florida
Tax-Free Fund -- incorporated by reference
to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(d) Investment Advisory Agreement between the
Group and AmSouth Bank N.A. dated as of
January 20, 1989 with respect to the ASO
Outlook Group Limited Maturity Fund
--incorporated by reference to
Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(e) Amendment No. 1 dated as of December 5, 1989
to the Investment Advisory Agreement dated
as of January 20, 1989 between the
Registrant and AmSouth Bank, N.A. --
incorporated by reference to Post-Effective
Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(6) (a) Distribution Agreement dated as of October
1, 1993 between the Registrant and The
Winsbury Company) -- incorporated by
reference to Post-Effective Amendment No. 12
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
C-2
<PAGE> 204
(b) Amended Schedule to the Distribution
Agreement between the Registrant and The
Winsbury Company with respect to the
Florida Tax-Free Fund -- incorporated by
reference to Post- Effective Amendment No.
14 to the Registrant's Registration
Statement on Form N-1A (File No. 33-21660).
(c) Dealer Agreement between The Winsbury
Company and AmSouth Investment Services,
Inc. -- incorporated by reference to
Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(d) Dealer Agreement between The Winsbury
Company and National Financial Services
Corporation -- incorporated by reference to
Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(e) Dealer Agreement between The Winsbury
Company and AmSouth Bank N.A. --
incorporated by reference to Post- Effective
Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(7) None.
(8) (a) Custodial Services Agreement dated as of May
25, 1995 between the Registrant and Bank of
California, N.A. -- incorporated by
reference to Post-Effective Amendment No. 17
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(b) Form of Custodian Agreement between the
Registrant and AmSouth Bank of Alabama is
filed herewith.
(9) (a) Management and Administration Agreement
dated as of April 1, 1996 between the
Registrant and ASO Services Company is filed
herewith.
(b) Sub-Administration Agreement between ASO
Services Company and AmSouth Bank of Alabama
is filed herewith.
C-3
<PAGE> 205
(c) Sub-Administration Agreement between ASO
Services Company and BISYS is filed
herewith.
(d) Transfer Agency and Shareholder Service
Agreement dated as of January 16, 1989
between the Registrant and The Winsbury
Service Corporation) -- incorporated by
reference to Post- Effective Amendment No. 3
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(e) Amended Schedule D dated as of April 5, 1993
to the Transfer Agency and Shareholder
Services Agreement between the Registrant
and The Winsbury Service Corporation --
incorporated by reference to Post-Effective
Amendment No. 13 to the Registrant's
Registration Statement on Form N-1A (File
No. 33-21660).
(f) Amended Schedule to the Transfer Agency and
Shareholder Services Agreement between the
Registrant and The Winsbury Service
Corporation with respect to the Florida Tax-
Free Fund -- incorporated by reference to
Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(g) Fund Accounting Agreement dated as of April
1, 1996 between the Registrant and BISYS
Fund Services is filed herewith.
(10) Opinion of Ropes & Gray -- incorporated by reference
to Pre- Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No.
33-21660).
(11) (a) Consent of Coopers & Lybrand L.L.P. is filed
herewith.
(b) Consent of Ropes & Gray is filed herewith.
(12) None.
(13) (a) Purchase Agreement between the Registrant
and Winsbury Associates incorporated by
reference to Post-Effective Amendment No. 1
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
C-4
<PAGE> 206
(b) Purchase Agreement between the Registrant
and Winsbury Associates dated October 31,
1991 incorporated by reference to
Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(c) Purchase Agreement between the Registrant
and Winsbury Associates relating to the
Alabama Tax-Free Fund and the Government
Income Fund is incorporated by reference to
Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(d) Purchase Agreement between the Registrant
and Winsbury Service Corporation relating to
the Florida Tax-Free Fund is incorporated by
reference to Post-Effective Amendment No. 13
to the Registrant's Registration Statement
on Form N-1A (File No. 33-21660).
(14) None.
(15) None.
(16) Performance Calculation Schedules are incorporated by
reference to Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-21660).
(17) (a) Financial Data Schedule for the AmSouth
Prime Obligations Fund - Premier Shares
(b) Financial Data Schedule for the AmSouth U.S.
Treasury Fund - Premier Shares
(c) Financial Data Schedule for the AmSouth Tax
Exempt Fund - Premier Shares
(d) Financial Data Schedule for the AmSouth
Prime Obligations Fund -- Classic Shares
(e) Financial Data Schedule for the AmSouth U.S.
Treasury Fund -- Classic Shares
(f) Financial Data Schedule for the AmSouth
Tax-Exempt Fund -- Classic Shares
C-5
<PAGE> 207
(g) Financial Data Schedule for the AmSouth
Equity Fund
(h) Financial Data Schedule for the AmSouth
Regional Equity Fund
(i) Financial Data Schedule for the AmSouth
Balanced Fund
(j) Financial Data Schedule for the AmSouth Bond
Fund
(k) Financial Data Schedule for the AmSouth
Limited Maturity Fund
(l) Financial Data Schedule for the AmSouth
Government Income Fund
(m) Financial Data Schedule for the AmSouth
Florida Tax-Free Fund
(18) (a) Multiple Class Plan for the AmSouth Prime
Obligations Fund, the AmSouth U.S. Treasury
Fund and the AmSouth Tax Exempt Fund is
incorporated by reference to Exhibit 18(a)
to Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(b) Shareholder Servicing Plan for AmSouth
Mutual Funds adopted by the Board of
Trustees on December 6, 1995 is incorporated
by reference to Exhibit 18(b) to
Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
(c) Model Shareholder Servicing Agreement for
AmSouth Mutual Funds adopted by the Board of
Trustees on December 6, 1995 is incorporated
by reference to Exhibit 18(c) to Post-
Effective Amendment No. 18 to the
Registrant's Registration Statement on Form
N-1A (File No. 33-21660).
C-6
<PAGE> 208
- -------------
Item 25. Persons Controlled By or Under Common Control with
Registrant
As of the effective date of this Registration Statement,
there are no persons controlled by or under common control
with the Registrant's Prime Obligations Fund, Equity Fund,
Regional Equity Fund, U.S. Treasury Fund, Tax Exempt Fund,
Bond Fund, Limited Maturity Fund, Municipal Bond Fund,
Government Income Fund, Florida Tax-Free Fund, or Balanced
Fund.
Item 26. Number of Holders of Securities
As of November 1, 1996, the number of record holders of
the Registrant's respective series of shares were as
follows:
Number of
Title of Series Record Holders
--------------- --------------
Prime Obligations Fund -- Premier Shares 8
U.S. Treasury Fund -- Premier Shares 9
Tax Exempt Fund -- Premier Shares 4
Prime Obligations Fund -- Classic Shares 26
U.S. Treasury Fund -- Classic Shares 13
Tax-Exempt Fund -- Classic Shares 16
Equity Fund 2,874
Regional Equity Fund 3,163
Bond Fund 378
Limited Maturity Fund 164
Municipal Bond Fund 10,031
Balanced Fund 2,783
Government Income Fund 534
C-7
<PAGE> 209
Florida Tax-Free Fund 59
Item 27. Indemnification
Article VIII, Sections 1 and 2 of the Registrant's Declaration
of Trust provides as follows:
"Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person except with respect
to any matter as to which such Covered Person shall have been
finally adjudicated in any such action, suit or other
proceeding to be liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
such Covered Person's office. Expenses, including counsel fees
so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), shall be paid from time to time by the Trust in
advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of
such Covered Person to repay amounts so paid to the Trust if
it is ultimately determined that indemnification of such
expenses is not authorized under this Article, provided,
however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the
Trust shall be insured against losses arising from any such
advance payments or (c) either a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as
opposed to a
C-8
<PAGE> 210
full trial type inquiry) that there is reason to believe that
such Covered Person will be found entitled to indemnification
under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body
before which the proceeding was brought, that such Covered
Person either (a) did not act in good faith in the reasonable
belief that his action was in the best interests of the Trust
or (b) is liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office, indemnification shall be provided if (a) approved as
in the best interests of the Trust, after notice that it
involves such indemnification, by at least a majority of the
disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on
the matter) upon a determination, based upon a review of
readily available facts (as opposed to a full trial type
inquiry) that such Covered Person acted in good faith in the
reasonable belief that his action was in the best interests of
the Trust and is not liable to the Trust or its Shareholders
by reasons of wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of
his or her office, or (b) there has been obtained an opinion
in writing of independent legal counsel, based upon a review
of readily available facts (as opposed to a full trial type
inquiry) to the effect that such Covered Person appears to
have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust and that such
indemnification would not protect such Person against any
liability to the Trust to which he would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of
his office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered
Person's action was in the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such
C-9
<PAGE> 211
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is
asserted by such trustee, officer, or controlling person in
connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Indemnification for the Group's principal underwriter is
provided for in the Distribution Agreement incorporated herein
by reference as Exhibits 6(a).
In addition, the Trust maintains a directors and officer
liability insurance policy with a maximum coverage of
$3,000,000.
Item 28. Business and Other Connections of Investment Advisor.
AmSouth Bank of Alabama ("AmSouth") is the investment advisor
of each Fund of the Trust. AmSouth is the principal bank
affiliate of AmSouth Bancorporation, one of the largest
banking institutions headquartered in the mid-south region.
AmSouth Bancorporation reported assets as of December 31, 1995
of $17.7 billion and operated 273 banking offices in Alabama,
Florida, Georgia and Tennessee. AmSouth has provided
investment management services through its Trust Investment
Department since 1915. As of December 31, 1995, AmSouth and
its affiliates had over $6.8 billion in assets under
discretionary management and provided custody services for an
additional $12.5 billion in securities. AmSouth is the largest
provider of trust services in Alabama. AmSouth serves as
administrator for over $12 billion in bond issues, and its
Trust Natural Resources and Real Estate Department is a major
manager of timberland, mineral, oil and gas properties and
other real estate interests.
There is set forth below information as to any other business,
vocation or employment of a substantial nature (other than
service in wholly-owned subsidiaries or the parent corporation
of AmSouth Bank) in which each director or senior officer of
the Registrant's investment adviser is, or at any time during
the past two fiscal years has been, engaged for his own
account or in the capacity of director, officer, employee,
partner or trustee.
C-10
<PAGE> 212
Name and Position with Other business, profession,
AmSouth Bank of Alabama AmSouth Bank vocation, or employment
- ----------------------- ------------------------------------
George W. Barber, Jr. Chairman of the Board, Barber Dairies, Inc.,
Director 39 Barber Ct., Birmingham, Alabama
William D. Biggs, Sr. Partner, Carillon Beach, Panama City, Florida
Director
William J. Cabaniss, Jr. President, Precision Grinding Inc.,
Director P.O. Box 19925, Birmingham, Alabama
M. Miller Gorrie Chairman, Brasfield and Gorrie General
Director Contractor Inc., 7916 2nd Avenue South,
Birmingham, Alabama
James I. Harrison, Jr. Chairman and Chief Executive Officer, Harco,
Director Inc., 3925 Rice Mine Road, Tuscaloosa,
Alabama
Mrs. H. Taylor Morrisette Chairman, HTM Investment & Development,
Director Inc., Mobile, Alabama
C. Dowd Ritter None
Director, and Chief Operating
Officer of the Board
Carl Albright, Jr. None
Executive Vice President
and Regional Executive
Michael C. Baker None
Senior Executive Vice President
Marie A. Bone None
Senior Vice President
and Regional Executive
Dennis J. Dill None
Executive Vice President
and Chief Accounting Officer
C-11
<PAGE> 213
David B. Edmonds None
Executive Vice President
James W. Emison None
Executive Vice President
Sloan D. Gibson, IV None
Senior Executive Vice President
O.B. Grayson Hall, Jr. None
Executive Vice President
W. Charles Mayer, III None
Director and Senior Executive Vice
President
R. Craig Holley None
Senior Vice President
and Regional Executive
Item 29. Principal Underwriter.
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund Services"),
formerly The Winsbury Company, acts as distributor for the Registrant.
BISYS Fund Services also distributes the securities of The HighMark
Group, The Parkstone Group of Funds, The Victory Portfolios, The
Sessions Group, the Conestoga Family of Funds, the American Performance
Funds, The Arch Fund, Inc., the BB&T Mutual Funds Group, the
Marketwatch Funds, The Coventry Group, The Pacific Capital Funds, the
MMA Praxis Mutual Funds, The Riverfront Funds, Inc., the Qualivest
Funds and the Summit Investment Trust, each of which is a management
investment company. The parent of BISYS Fund Services is The BISYS
Group, Inc.
(b) Partners of BISYS Fund Services as of the date of this filing are
as follows:
C-12
<PAGE> 214
<TABLE>
<CAPTION>
Positions and Offices with Positions and
Name and Principal BISYS Fund Services, Offices with
Business Addresses Limited Partnership The Registrant
- ------------------ ------------------- --------------
<S> <C> <C>
BISYS Fund Services, Sole General None
Limited Partnership Partner
3435 Stelzer Road
Columbus, OH 43219
WC Subsidiary Sole Limited None
Corporation Partner
150 Clove Road
Little Falls, NJ 07424
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and
other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated
thereunder are as follows:
(1) AmSouth Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
Attention: Secretary
(Registrant)
(2) AmSouth Bank of Alabama
1901 Sixth Avenue - North
Birmingham, Alabama 35203
Attention: Trust Investments
(Investment Advisor)
(3) BISYS Fund Services, Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
(Distributor)
C-13
<PAGE> 215
(4) ASO Services Company
3435 Stelzer Road
Columbus, Ohio 43219
(Administrator)
(5) Union Bank of California, N.A.
475 Sansome Street
San Francisco, CA 94111
(Custodian)
(6) BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
(Transfer and Shareholder Servicing Agent, Provider of Fund
Accounting Services)
Item 31. Management Services
None.
Item 32. Undertakings
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question
of removal of one or more trustees when requested to do so
by the holders of at least 10% of the outstanding voting
shares of any series of the Trust and will assist in
shareholder communication in connection with calling a
meeting for the purpose of removing one or more trustees.
The Registrant undertakes to furnish to each person to
whom a prospectus is delivered a copy of the Registrant's
latest annual report to shareholders upon request and
without charge.
C-14
<PAGE> 216
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the 1933 Act and has duly caused this Amendment No. 19 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Washington, District of
Columbia on the 27TH day of November, 1996.
AMSOUTH MUTUAL FUNDS,
Registrant
*/s/ Sean M. Kelly
--------------------------------
Sean M. Kelly
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
19 to the Registration Statement of AmSouth Mutual Funds has been signed below
by the following persons in the capacities indicated on the 27th day of
November, 1996.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*/s/ J. David Huber Chairman of the Board November 27, 1996
-------------------------- of Trustees
J. David Huber
*/s/ Sean M. Kelly Trustee, President November 27, 1996
--------------------------
Sean M. Kelly
*/s/ Kevin Martin Treasurer November 27, 1996
--------------------------
Kevin Martin
*/s/ James H. Woodward, Jr. Trustee November 27, 1996
--------------------------
James H. Woodward, Jr.
*/s/ Homer H. Turner, Jr. Trustee November 27, 1996
--------------------------
Homer H. Turner, Jr.
*/s/ Wendell D. Cleaver Trustee November 27, 1996
--------------------------
Wendell D. Cleaver
*/s/ Dick D. Briggs, Jr. Trustee November 27, 1996
--------------------------
Dick D. Briggs, Jr.
* By /s/ Alan G. Priest November 27, 1996
---------------------
Alan G. Priest,
Attorney-in-fact, pursuant to Powers of Attorney filed herewith
</TABLE>
C-15
<PAGE> 217
POWER OF ATTORNEY
Dick D. Briggs, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Dick D. Briggs, Jr. and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 12 October 1993 /s/ Dick D. Briggs, Jr.
---------------------- -----------------------
Dick D. Briggs, Jr.
<PAGE> 218
POWER OF ATTORNEY
Wendell D. Cleaver whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Wendell D. Cleaver and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: October 7, 1993 /s/ Wendell Cleaver
---------------------- ---------------------------
Wendell D. Cleaver
<PAGE> 219
POWER OF ATTORNEY
J. David Huber whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee J. David Huber and/or officer of the Trust any and all
such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ J. David Huber
------------- ---------------------------
J. David Huber
<PAGE> 220
POWER OF ATTORNEY
William J. Tomko whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A. Sheehan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee William J. Tomko and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ William J. Tomko
------------- ----------------------------
William J. Tomko
<PAGE> 221
POWER OF ATTORNEY
James H. Woodward, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee James H. Woodward, Jr. and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 9/25/92 /s/ James H. Woodward, Jr.
------------- --------------------------
James H. Woodward, Jr.
<PAGE> 222
POWER OF ATTORNEY
Homer H. Turner, Jr. whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Margaret A.
Sheehan, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
AmSouth Mutual Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Homer H. Turner, Jr. and/or officer of the Trust any
and all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 25, 1992 /s/ Homer H. Turner, Jr.
------------------------ ------------------------
Homer H. Turner, Jr.
<PAGE> 223
POWER OF ATTORNEY
Sean M. Kelly whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Francoise M. Haan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee Sean M. Kelly and/or officer of the Trust any and all
such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 10/1/96 /s/ Sean M. Kelly
------------- --------------------------
Sean M. Kelly
<PAGE> 224
POWER OF ATTORNEY
Kevin Martin whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Francoise M. Haan, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable AmSouth Mutual
Funds (the "Trust"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments to the Trust's Registration Statement on Form N-1A pursuant to said
Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
Dated: 11/18/96 /s/ Kevin Martin
------------- --------------------------
Kevin Martin
<PAGE> 225
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
8(b) Form of Custodian Agreement between the Registrant and
AmSouth Bank of Alabama
9(a) Management and Administration Agreement dated as of
April 1, 1996 between the Registrant and ASO Services
Company
9(b) Sub-Administration Agreement dated as of April 1, 1996
between ASO Services Company and AmSouth Bank of
Alabama
9(c) Sub-Administration Agreement dated as of April 1, 1996
between ASO Services Company and BISYS Fund Services
9(g) Fund Accounting Agreement dated as of April 1, 1996 between
the Registrant and BISYS Fund Services Ohio, Inc.
11(a) Consent of Coopers & Lybrand L.L.P.
11(b) Consent of Ropes & Gray
27(a) Financial Data Schedule for the AmSouth Prime Obligations
Fund -- Premier Shares
(b) Financial Data Schedule for the AmSouth U.S. Treasury Fund --
Premier Shares
(c) Financial Data Schedule for the AmSouth Tax Exempt Fund --
Premier Shares
(d) Financial Data Schedule for the AmSouth Prime Obligations
Fund -- Classic Shares
(e) Financial Data Schedule for the AmSouth U.S. Treasury
Fund -- Classic Shares
(f) Financial Data Schedule for the AmSouth Tax-Exempt
Fund -- Classic Shares
(g) Financial Data Schedule for the AmSouth Equity Fund
(h) Financial Data Schedule for the AmSouth Regional Equity Fund
(i) Financial Data Schedule for the AmSouth Balanced Fund
<PAGE> 226
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
(j) Financial Data Schedule for the AmSouth Bond Fund
(k) Financial Data Schedule for the AmSouth Limited Maturity Fund
(l) Financial Data Schedule for the AmSouth Government Income
Fund
(m) Financial Data Schedule for the AmSouth Florida Tax-Free Fund
-2-
<PAGE> 1
EXHIBIT 8(b)
Form of Custodian Agreement between the Registrant
and AmSouth Bank of Alabama
<PAGE> 2
FORM OF
CUSTODY AGREEMENT
This Agreement is entered into as of _____________, 1996 between the
AmSouth Mutual Funds (the "Fund"), a Massachusetts business trust, having its
principal office and place of business at 3435 Stelzer Road, Columbus, Ohio
43219 and AmSouth Bank of Alabama (the "Bank"), a state-chartered bank organized
under the laws of the United States with its principal place of business at 1901
6th Avenue, North, Birmingham, Alabama 35203.
In consideration of the mutual promises set forth below, the Fund and the Bank
agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement,
the words and phrases set forth below shall have the following meanings, unless
the context otherwise requires:
1.1 "Authorized Person" shall be deemed to include the President, and
any Vice President, the Secretary, the Assistant Secretary, the Treasurer and
any Assistant Treasurer of the Fund, or any other person, including persons
employed by the Investment Manager, whether or not any such person is an officer
of the Fund, duly authorized by the Board of Trustees of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund and listed in the
certification annexed hereto as Appendix A or such other certification as may be
received by the Bank from time to time.
1.2 "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
1.3 "Declaration of Trust" shall mean the Declaration of Trust of the
Fund as now in effect and as the same may be amended from time to time.
1.4 "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Bank is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in Written Instructions authorized
to act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees.
1.5 "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United
<PAGE> 3
States or agencies or instrumentalities thereof, and repurchase and reverse
repurchase agreements with respect to any of the foregoing types of securities,
commercial paper, bank certificates of deposit, bankers' acceptances and
short-term corporate obligations, where the purchase or sale of such securities
normally requires settlement in federal funds on the same day as such purchase
or sale.
1.6 "Prospectus" shall mean the Series' current prospectuses and
statement of additional information relating to the registration of the Series'
Shares under the Securities Act of 1933, as amended.
1.7 "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by each Series.
1.8 "Shares" refers to the shares of beneficial interest of a Series of
the Trust.
1.9 "Series" refers to Funds shown on Schedule A, attached hereto and
made a part hereof by this reference, and any such other Series as may from time
to time be created and designated in accordance with the provisions of the
Declaration of Trust.
1.10 "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Fund.
1.11 "Written Instructions" shall mean a written or electronic
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telex or
any other such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.
1.12 The "1940 Act" refers to the Investment Company Act of 1940, and
the rules and regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
2.1 The Fund hereby constitutes and appoints the Bank as custodian of
all the securities and moneys owned by or in the possession of the Fund during
the period of this Agreement.
2.2 The Bank hereby accepts appointment as custodian for the Fund and
agrees to perform the duties thereof as hereinafter set forth.
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3. Compensation.
3.1 The Fund will compensate the Bank for its services rendered under this
Agreement in accordance with the fees set forth in the Fee Schedule attached as
Schedule B and made a part of this Agreement by this reference.
3.2 The parties to this Agreement will agree upon the compensation for
acting as Custodian for any Series hereafter established and designated, and at
the time that the Bank commences serving as such for said Series, such agreement
shall be reflected in a Fee Schedule for the Fund, which shall be attached to
Schedule B of this Agreement.
3.3 Any compensation agreed to hereunder may be adjusted from time to time
by not less than 90 days advance written notice of such fee increase from Bank
to Fund. Any such increase shall take effect upon approval of the Board of
Trustees of the Fund.
3.4 The Bank will bill the Fund as soon as practicable after the end of
the month, and said billings will be detailed in accordance with the Fee
Schedule. The Fund will pay to the Bank the amount of such billing within 45
days after receipt. In the event such bill is not promptly paid, the Bank may
charge against any money specifically allocated to the Fund such compensation
and any expenses incurred by the Bank in the performance of its duties pursuant
to such agreement. The Bank shall also be entitled to charge against any money
held by it and specifically allocated to the Fund the amount of any loss,
damage, liability or expense incurred with respect to such Fund, including
counsel fees, for which it shall be entitled to reimbursement under provision
10.4 of this Agreement.
The expenses which the Bank may charge against such account include, but
are not limited to, the expenses of Sub-Custodians and foreign branches of the
Bank incurred in settling transactions outside of Birmingham or New York City
involving the purchase and sale of Securities of the Fund.
4. Custody of Cash and Securities.
4.1 Receipt and Holding of Assets. The Fund will deliver or cause to be
delivered to the Bank all securities and moneys owned by it, including cash
received from the issuances of its Shares, at any time during the period of this
Agreement and shall specify the Series to which the Securities and moneys are to
be specifically allocated. The Bank shall physically segregate and keep apart on
its books, the assets of each Series, including separate identification of
securities held in the Book-Entry System. The Bank will not be responsible for
such securities and moneys until actually received by it. The Fund shall
instruct the Bank from time to time in its sole discretion, by means of Written
Instructions as to the manner in which and in what amounts Securities and moneys
of a Series are to be deposited on behalf of such Series in the Book-Entry
System or the Depository and specifically allocated on the books of the Bank to
such Series. Securities and moneys of the Fund deposited in the Book-Entry
System or the
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<PAGE> 5
Depository will be represented in accounts which include only assets held by the
Bank for customers, including but not limited to accounts in which the Bank acts
in a fiduciary or representative capacity.
4.2 Accounts and Disbursement. The Bank shall establish and maintain a
separate account for each Series and shall credit to the separate account of
each Series all moneys received by it for the account of such Series and shall
disburse the same only:
4.2.1 In payment for securities purchased for such Series, as
provided in Section 5 hereof;
4.2.2 In payment of dividends or distributions with respect to the
Shares of such Series;
4.2.3 In payment of original issue or other taxes with respect to
the Shares of such Series;
4.2.4 In payment for Shares which have been redeemed by such
Series;
4.2.5 Pursuant to Written Instructions, setting forth the name of
such Series, the name and address of the person to whom the payment is to be
made, the amount to be paid and the purpose for which payment is to be made; or
4.2.6 In payment of fees and in reimbursement of the expenses and
liabilities of the Bank attributable to such Series.
4.3 Confirmations and Statements. Promptly after the close of business
each day, the Bank shall make available to the Fund information with respect to
all transfers to and from the account of a Series during that day. The Bank need
not send written confirmation or a summary of all such transfers to or from the
account of each Series. Provided, however, that upon the written request of
Fund, Bank shall provide within 5 business days of such written request a copy
of any confirmations which include transactions of the Fund. Where securities
purchased by a Series are in a fungible bulk of Securities registered in the
name of the Bank (or its nominee) or shown on the Bank's account on the books of
the Depository or the Book- Entry System, the Bank shall by book entry or
otherwise identify the quantity of those securities belonging to such Series. At
least monthly, the Bank shall furnish the Fund with a detailed statement of the
Securities and moneys held for each Series under this Agreement.
4.4 Registration of Securities and Physical Separation.
All Securities held for a Series which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Bank in that form; all other Securities held for a Series may be
registered, in the name of any duly appointed
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<PAGE> 6
registered nominee of the Bank as the Bank may from time to time determine, or
in the name of the Book-Entry System or the Depository of their successor or
successors, or their nominee or nominees. When a reference is made in this
Agreement to an action to be taken by Bank it is understood by the parties that
the action may be taken directly or, in the case of book-entry securities,
through the appropriate depository. The Fund agrees to furnish to the Bank
appropriate instruments to enable the Bank to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository, any Securities which it may hold for
the account of a Series. The Bank (or its sub-custodians) shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or the Depository in a separate account for such series in the
name of such Series physically segregated at all times from those of any other
person or persons.
4.5 Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by Written Instructions, the Bank shall
with respect to all Securities held for a Series in accordance with this
Agreement:
4.5.1 Collect all income due or payable and credit such income
promptly on the contractual settlement date, whether or not actually received,
to the account of the appropriate Series, except for income from foreign issues.
Income which has not been collected after reasonable effort, within a time
agreed upon between the parties, shall be repaid to the Bank pending final
collection at such date as may be mutually agreed upon by the Trust and the
Bank;
4.5.2 Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired, or otherwise
become payable. Bank shall make a good faith effort to inform Fund of any call,
redemption or retirement date with respect to securities which are owned by a
Series and held by the Bank or its nominee. Notwithstanding the foregoing, the
Bank shall have no responsibility to the Fund or a Series for monitoring or
ascertaining of any call, redemption or retirement date with respect to
securities which are held by a Series and held by Bank or its nominee. Nor shall
the Bank have any responsibility or liability to the Fund or to a Series for any
loss by a Series for any missed payment or other default resulting therefrom
unless the Bank received timely general notification, which shall not be less
than 5 business days, from the Fund or the Series specifying the time, place and
manner for the presentment of any put bond owned by a Series and held by the
Bank or its nominee. The Bank shall not be responsible and assumes no liability
to the Fund or a Series for the accuracy or completeness of any notification the
Bank shall provide to the Fund or a series with respect to put securities;
4.5.3 Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
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<PAGE> 7
4.5.4 Hold for the account of each Series all rights and other
Securities issued with respect to any Securities held by the Bank hereunder for
such Series.
4.6 Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions, the Bank shall:
4.6.1 Execute and deliver or cause to be executed and delivered to
such persons as may be designated in such Written Instructions, proxies,
consents, authorization, and any other instruments whereby the authority of the
Fund as owner of any Securities may be exercised;
4.6.2 Deliver or cause to be delivered any Securities held for a
Series in exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
4.6.3 Deliver or cause to be delivered any Securities held for a
Series to any protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate (bookkeeping) account for each
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
4.6.4 Make or cause to be made such transfers or exchanges of the
assets and take such steps as shall be stated in said Written Instructions to be
for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
4.6.5 Deliver Securities owned by any Series upon sale of such
Securities for the account of such Series pursuant to Section 5;
4.6.6 Deliver Securities owned by any Series upon the receipt of
payment in connection with any repurchase agreement related to such Securities
entered into by such Series;
4.6.7 Deliver Securities owned by any Series to the issuer thereof
or its agent when such Securities are called, redeemed, retired or otherwise
become payable; provided, however, that in any such case the cash or other
consideration is be delivered to the Bank.
4.6.8 Deliver Securities owned by any Series in connection with
any loans of Securities made by such Series but only against receipt of adequate
collateral as agreed upon from time to time by the Bank and the Fund which may
be in any form permitted under the 1940 Act or any interpretations thereof
issued by the Securities and Exchange Commission or its staff;
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<PAGE> 8
4.6.9 Deliver Securities owned by any Series for delivery as
security in connection with any borrowings by such Series requiring a pledge of
Series assets, but only against receipt of amount borrowed;
4.6.10 Deliver Securities owned by any Series upon receipt of
instructions from such Series for delivery to the Transfer Agent or to the
holders of Shares of such Series in connection with distributions in kind, as
may be described from time to time in the Series' Prospectus, in satisfaction of
requests by holders of Shares for repurchase or redemption; and
4.6.11 Deliver Securities owned by any Series for any other proper
business purpose, but only upon receipt of, in addition to Written Instructions,
a certified copy of a resolution of the Board of Trustees signed by an
Authorized Person and certified by the Secretary or Assistant Secretary of the
Fund, specifying the Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such Purpose to be a proper
business purpose, and naming the person or persons to whom delivery of such
Securities shall be made.
4.7 Endorsement and Collection of Checks, Etc. The Bank is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of a Series.
5. Purchase and Sale of Investments of the Series.
5.1 Promptly after each purchase of Securities for a Series, the Fund
shall deliver to the Bank Written Instructions specifying with respect to each
purchase: (1) the name of the Series to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or the principal amount purchased and
accrued interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such purchase; (7)
the name of the person from whom or the broker through whom the purchase was
made, if any; (8) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and (9) whether the Securities purchased
are to be deposited in the Book-Entry System or the Depository. The Bank shall
receive all Securities purchased by or for a Series and upon receipt of such
Securities shall pay out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Written Instructions.
5.2 Promptly after each sale of Securities of a Series, the Fund shall
deliver to the Bank Written Instructions specifying with respect to such sale:
(1) the name of the Series to which the Securities sold were specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or principal amount sold, and accrued interest, if any; (4) the
date of sale; (5) the sale price per unit; (6) the total amount payable to the
Series upon such sale; (7) the name of the broker through whom or the person to
whom the sale was made;
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<PAGE> 9
and (8) whether or not such sale is to be settled through the Book-Entry System
or the Depository. The Bank shall deliver or cause to be delivered the
Securities to the broker or other person designated by the Fund upon receipt of
the total amount payable to such Series upon such sale, provided that the same
conforms to the total amount payable to such Series as set forth in such Written
Instructions. Subject to the foregoing, the Bank may accept payment in such form
as shall be reasonably satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing among dealers in
Securities.
6. Payment of Dividends or Distributions.
6.1 The Fund shall furnish to the Bank the resolution of the Board of
Trustees of the Fund certified by the Secretary or Assistant Secretary (i)
authorizing the declaration of dividends or distribution with respect to a
Series on a specified periodic basis and authorizing the Bank to rely on Written
Instructions specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the total amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Series, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to the shareholders of
record as of the record date and the total amount payable to the Transfer Agent
on the payment date.
6.2 Upon the payment date specified in such resolution or Written
Instructions the Bank shall pay out the moneys specifically allocated to and
held for the account of the appropriate Series the total amount payable to the
Transfer Agent of the Fund.
7. Sale and Redemption of Shares of a Series.
7.1 Whenever the Fund shall sell or redeem any Shares of a Series, the
Fund shall deliver or cause to be delivered to the Bank Written Instructions
duly specifying:
7.1.1 The name of the Series whose Shares were sold or redeemed;
7.1.2 The number of Shares sold or redeemed, trade date, and price;
and
7.1.3 The amount of money to be received or paid by the Bank for
the sale or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the Bank shall
credit such money to the separate account of the Series.
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<PAGE> 10
7.3 Upon issuance of any Shares of a Series in accordance with the
foregoing provisions of this Section 7, the Bank shall pay, out of the moneys
specifically allocated and held for the account of such Series, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of Written Instructions specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting forth the
number of Shares of a Series received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the Bank shall make
payment to the Transfer Agent out of the moneys specifically allocated to and
held for the account of the Series.
8. Indebtedness.
8.1 The Fund will cause to be delivered to the Bank by any bank
(excluding the Bank) from which the Fund borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Bank Written Instructions stating with respect to each such borrowing: (1)
the name of the Series for which the borrowing is to be made; (2) the name of
the bank; (3) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement; (4) the time and date, if known, on which the
loan is to be entered into (the "borrowing date"); (5) the date on which the
loan becomes due and payable; (6) the total amount payable to the Fund for the
separate account of the Series on the borrowing date; (7) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities; (8) whether the Bank is to deliver such collateral
through the Book-Entry System or the Depository; and (9) a statement that such
loan is in conformance with the 1940 Act and the Series' Prospectus.
8.2 Upon receipt of the Written Instructions referred to above, the
Bank shall deliver on the borrowing date the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Written Instructions. The Bank may, at the
option of the lending bank keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the lending bank by
virtue of any promissory note or loan agreement. The Bank shall deliver as
additional collateral in the manner directed by the Fund from time to time such
Securities specifically allocated to such Series as may be specified in Written
Instructions to collateralize further any transaction described in this Section
8. The Fund shall cause all Securities released from collateral status to be
returned directly to the Bank, and the Bank shall receive from time to time such
return of collateral as may be tendered to it. In the event that the Fund fails
to specify in Written Instructions all of the information required by this
Section 8, the Bank shall not be under any obligation to deliver
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<PAGE> 11
any Securities. Collateral returned to the Bank shall be held hereunder as it
was prior to being used as collateral.
9. Persons Having Access to Assets of the Series.
9.1 No Trustee, officer, employee or agent of the Fund, and no officer,
director, employee or agent of the Advisor, shall have physical access to the
assets of the Fund held by the Bank or be authorized or permitted to withdraw
any investments of the Fund, nor shall the Bank deliver any assets of the Fund
to any such person. No officer, director, employee or agent of the Bank who
holds any similar position with the Fund, the Advisor shall have access to the
assets of the Fund.
9.2 The individual employees of the Bank initially duly authorized by
the Board of Directors of the Bank to have access to the assets of the Fund are
listed on Schedule C, Part I, which is attached and made a part of this
Agreement by this reference. The Bank shall advise the Fund of any change in the
individuals authorized to have access to the assets of the Fund by written
notice to the Fund.
9.3 Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Fund, or any officer, director, employee or agent of the Advisor,
from giving Written Instructions to the Bank so long as it does not result in
delivery of or access to assets of the Fund prohibited by this Section 9.
10. Concerning the Bank.
10.1 Standard of Conduct. The Bank shall not be responsible for the
title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement and reasonably
believed by it to be valid or genuine and shall be held harmless in acting upon
proper instructions, resolutions, any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties and shall be entitled to receive as conclusive proof of
any fact or matter required to be ascertained by it hereunder, a certificate
signed by the President, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of the Fund. The Bank may receive and accept a resolution as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the Board of Trustees
pursuant to the Declaration of Trust as described in such vote, and such vote
may be considered as in full force and effect until receipt by the Bank of
written notice from the Secretary or an Assistant Secretary to the contrary.
The Bank shall be entitled to rely on and may act upon advice of
counsel (who shall either be counsel for the Fund, or other counsel selected by
the Bank with expertise in the 1940 Act) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Provided, however, that if such reliance involves a potential
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<PAGE> 12
material loss to the Fund, the Bank shall advise the Fund of any such actions to
be taken in accordance with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying
out the provisions of this Agreement but shall be liable only for its own
negligent or bad faith acts, wilful misconduct, or negligent or wilful failures
to act by the Bank and its agents or Employees. Bank shall have no
responsibility for reviewing or questioning the acts or records of any prior
custodian. The Fund shall indemnify the Bank and hold it harmless from and
against all losses, liabilities, demands, claims, actions, expenses, attorneys'
fees, and taxes with respect to each Series which the Bank may suffer or incur
on account of being Bank hereunder except to the extent that such losses,
liabilities, demands, claims, actions, expenses, attorneys fees or taxes arise
from the Bank's own negligence or bad faith. Notwithstanding the foregoing the
Bank shall be liable to the Fund for any loss or damage resulting from the use
of the Book- Entry System or the Depository arising by reason of any negligence,
misfeasance or misconduct on the part of the Bank or any of its employees or
agents.
If a Series requires the Bank to take any action with respect to
Securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to such
Series being liable for the payment of money or incurring liability of some
other form, such Series, as a prerequisite to requiring the Bank to take such
action, shall, prior to the Bank taking such action, provide indemnity in
writing to the Bank in an amount and form reasonably satisfactory to it.
10.2 Limit of Duties. Without limiting the generality of the foregoing,
the Bank shall be under no duty or obligation to inquire into, and shall not be
liable for:
10.2.1 The validity of the issue of any Securities purchased by any
Series, the legality of the purchase thereof, the permissibility of the purchase
thereof under the Fund's governing documents, or the propriety of the amount
paid therefor;
10.2.2 The legality of the sale of any Securities by any Series,
the permissibility of such sale under the fund's governing documents, or the
propriety of the amount for which the same are sold;
10.2.3 The legality of the issue or the sale of any Shares, or the
sufficiency of the amount to be received therefor;
10.2.4 The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
10.2.5 The legality of the declaration or payment of any dividend
or other distribution of any Series;
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10.2.6 The legality of any borrowing for temporary or emergency
administrative purposes.
10.3 No Liability until Receipt. The Bank shall not be liable for, or
considered to be the custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of any Series until the Bank actually receives and collects such money
directly or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
10.4 Collection Where Payment Refused. The Bank shall not be under any
duty or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by Written Instructions and (b) it shall be assured
to its satisfaction of reimbursement of its costs and expenses in connection
with any such action.
10.5 Appointment of Agents and Sub-Custodians. The Bank may appoint one
or more banking institutions, including but not limited to banking institutions
located in foreign countries, to act as Depository or Depositories or as
Sub-Custodian or as Sub-Custodians of Securities and moneys at any time owned by
any Series, upon terms and conditions specified in Written Instructions. The
Bank shall use reasonable care in selecting a Depository and/or Sub-Custodian
located in a country other than the United States ("Foreign Sub-Custodian"), and
shall oversee the maintenance of any Securities or moneys of the Trust by any
Foreign Sub-Custodian in accordance with the provisions of Rule 17f-5 of the
Act.
10.6 No Duty to Ascertain: Authority. The Bank shall not be under any
duty or obligation to ascertain whether any Securities at any time delivered to
or held by it for the Fund and specifically allocated to a Series are such as
may properly be held by the Series and specifically allocated to such Series
under the provisions of the Declaration of Trust and the Series' Prospectus.
10.7 Reliance on Certificates and Instructions. The Bank shall be
entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Bank pursuant to the applicable Sections of this Agreement and
reasonably believed by the Bank to be genuine and to be given by an Authorized
Person. The Fund agrees to forward to the Bank Written Instructions from an
Authorized Person confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Bank, whether by hand delivery, telex,
or otherwise, by the close of business on the same day that such Oral
Instructions are given to the Bank. The Fund agrees that the fact that such
confirming instructions are not received by the Bank shall in no way affect the
validity for the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Bank shall incur no liability
to the Fund in acting upon Oral Instructions given to the Bank hereunder
concerning such
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<PAGE> 14
transactions provided such instructions reasonably appear to have been received
from a duly Authorized Person.
10.8 Inspection of Books and Records. The books and records of the Bank
regarding the Fund shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Fund and by employees of the Securities
and Exchange Commission. The Bank shall provide the Fund, upon request, with any
report obtained by the Bank on the system of internal accounting control of the
Book-Entry System or the Depository and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time. Provided, however, that in the event that the Fund shall require a report
of internal accounting control produced by the auditors of the Series rather
than of the Bank, then such report shall be prepared at the expense of the
Series, and the Series agrees to pay for the time expended by Bank on such audit
and report at the hourly rate set forth on the Fee agreement.
11. Term and Termination.
11.1 This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
11.2 The Bank may terminate this Agreement with respect to the Fund and
the Fund may terminate this Agreement with respect to any Series by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than 90 days after the date of receipt of such notice.
In the event such notice is given by the Fund, it shall designate a successor
custodian or custodians, which shall be a person qualified to so act under the
1940 Act. In the event such notice is given by the Bank, the Fund shall, on or
before the termination date, deliver to the Bank, Written Instructions
designating a successor Custodian or Custodians. In the absence of such
designation by the Fund, the Bank may designate a successor Custodian, which
shall be a person qualified to so act under the 1940 Act. If the Fund fails to
designate a successor Custodian for any Series, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Bank of all Securities (other than Securities held in the Book-Entry
Systems which cannot be delivered to the Trust) and moneys then owned by such
Series, be deemed to be its own Custodian and the Bank shall thereby be relieved
of all duties and responsibilities pursuant to this Agreement, other than the
duty with respect to Securities held in the Book-Entry system which cannot be
delivered to the Trust.
11.3 Upon the date set forth in such notice under paragraph (2) of this
Section, this Agreement shall terminate to the extent specified in such notice,
and the Bank shall upon receipt of a notice of acceptance by the successor
Custodian on that date deliver directly to the successor Custodian all
Securities and moneys then held by the Bank and specifically allocated to the
Series specified, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled with respect to such
Series.
-13-
<PAGE> 15
12. Additional Services by Bank.
12.1 If allowed by the prospectus, the investment adviser of each
Series may direct that the assets of that Series be invested in deposits in the
Bank or its affiliates bearing a reasonable rate of interest.
12.2 Other Bank Services. Any authorized person may direct the Bank to
utilize other services or facilities provided by the Bank or its affiliates.
Such services shall include, but not be limited to (1) the placing of orders for
the purchase, sale exchange, investment or reinvestment of securities through
any brokerage service conducted by the Bank or its affiliates, or (2) the
purchase of units of any investment company managed or advised by the Bank or
its affililiates and/or for which the Bank or its affiliates act as custodian or
provide investment advice or other services for a fee. The Fund hereby
acknowledges that the Bank or its affiliates will receive fees for such services
in addition to the fees payable under this Agreement. Fee Schedules for such
additional directed services shall be delivered to the Authorized Person before
provision of such services.
13. Miscellaneous.
13.1 Annexed hereto as Schedule C, Part II, is a certification signed
by two of the present Trustees of the Fund setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Bank a new certification in similar form in the event that any such present
Authorized Person ceases to be such an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered certification.
13.2 Annexed hereto as Schedule C, Part III, is a certification signed
by two of the present Trustees of the Fund setting forth the names and the
signatures of the present Trustees of the Fund. The Fund agrees to furnish to
the Bank a new certification in similar form in the event any such present
Trustee ceases to be a Trustee of the Fund or in the event that other or
additional Trustees are elected or appointed. Until such new certification shall
be received, the Bank shall be fully protected in acting under the provisions of
this Agreement upon the signature of the officers as set forth in the last
delivered certification.
13.3 Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Bank, shall be sufficiently given if
addressed to the Bank and mailed or delivered to it at its offices at:
AmSouth Bank of Alabama
1901 6th Avenue, North
Birmingham, Alabama 35203
-14-
<PAGE> 16
or such other place as the Bank may from time to time designate in writing.
13.4 Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund, shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its offices at 3435
Stelzer Road, Columbus, Ohio 43219 or at such other place as the Fund may from
time to time designate in writing.
13.5 This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement, and as may be permitted or required by the 1940 Act.
13.6 This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the Bank, or by the Bank without the written consent of the Fund
authorized or approved by a resolution of the Board of Trustees of the Fund, and
any attempted assignment without such written consent shall be null and void.
13.7 This Agreement shall be construed in accordance with the laws of
the State of Massachusetts.
13.8 It is expressly agreed to that the obligations of the Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Fund, personally, but bind only the
property of the Fund, as provided in the Declaration of Trust of the Fund. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Fund and signed by an authorized officer of the Fund, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Fund as provided in its Declaration of Trust.
13.9 The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
-15-
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
The AmSouth Mutual Funds
By: _________________________________
Title: _____________________________
Date: ______________________________
AmSouth Bank of Alabama
By: ________________________________
Title: _____________________________
Date: ______________________________
-16-
<PAGE> 18
Schedule A - Funds
001 Prime Obligations (PO)
002 U.S. Treasury (UST)
003 Tax Exempt (TE)
004 Bond (B)
005 Limited Maturity (LM)
006 Equity (E)
007 Regional Equity (RE)
008 Government Income (GI)
009 Balanced (BAL)
010 Municipal Bond (MB)
011 Alabama Tax-Free (ATF)
012 Florida Tax-Free (FTF)
The AmSouth Mutual Funds
By: _________________________________
Title: _____________________________
Date: ______________________________
AmSouth Bank of Alabama
By: ________________________________
Title: _____________________________
Date: ______________________________
A-1
<PAGE> 19
Schedule B
Mutual Fund Services
Schedule of Fees
Custody
For custody services the Bank will charge for the first year of services
hereunder a fee equal to .60 b.p (.0060%) of net asset value per annum. This
charge will be reviewed thereafter, but will continue in effect until a
modification of this Schedule B is mutually agreed upon.
The AmSouth Mutual Funds
By: _________________________________
Title: _____________________________
Date: ______________________________
AmSouth Bank of Alabama
By: ________________________________
Title: _____________________________
Date: ______________________________
B-1
<PAGE> 20
Schedule C
Authorized Persons
Part I - Access Persons of Bank
Mary E. Fowler
Charles Casillas
Audrey Bough
Mark Peterson
Part II - Authorized Persons of the Fund
Refer to the current resolution of the Board of Directors of the Fund.
Part III - Trustees
Homer M. Turner, Jr.
James H. Woodward, Jr.
Dick D. Briggs, Jr.
Wendell D. Cleaver
Sean Kelly
J. David Huber
The AmSouth Mutual Funds
By: _________________________________
Title: _____________________________
Date: ______________________________
AmSouth Bank of Alabama
By: ________________________________
Title: _____________________________
Date: ______________________________
C-1
<PAGE> 1
EXHIBIT 9(a)
Management and Administration Agreement
dated as of April 1, 1996
between the Registrant and ASO Services Company
<PAGE> 2
MANAGEMENT AND ADMINISTRATION AGREEMENT
AS OF APRIL 1, 1996
ASO SERVICES COMPANY
3435 STELZER ROAD
COLUMBUS, OHIO 43219
Gentlemen:
AmSouth Mutual Funds, a Massachusetts business trust (the "Trust"),
herewith confirms its Agreement with the ASO Services Company ("Administrator")
as follows:
The Trust desires to employ a portion of its capital by investing and
reinvesting the same in investments of the type and in accordance with the
limitations specified in its Declaration of Trust and in the Prospectuses and
Statement of Additional Information relating to each of the investment
portfolios and any additional investment portfolios of the Trust, as each are or
will be identified on Schedule A hereto (such investment portfolios and any
additional investment portfolios together called the "Funds"), copies of which
have been or will be submitted to Administrator, and in resolutions of the
Trust's Board of Trustees. The Trust desires to engage Administrator to serve as
the manager and administrator for the Funds upon the following terms and
conditions.
1. Services as Manager and Administrator
Subject to the direction and control of the Board of Trustees of the
Trust, Administrator will assist in supervising all aspects of the operations of
the Funds except those performed by the investment adviser for the Funds under
its Investment Advisory Agreements, the custodian for the Funds under its
Custodial Services Agreement, the transfer agent for the Funds under its
Transfer Agency Agreement and the fund accountant for the Funds under its Fund
Accounting Agreement.
Administrator will maintain office facilities (which may be in the
office of Administrator or an affiliate but shall be in such location as the
Trust shall reasonably determine); furnish statistical and research data,
clerical and certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Securities and Exchange Commission (the
"Commission") on Form N-SAR or any replacement forms therefor; compile data for,
assist the Trust or its designee in the preparation of, and file all the Funds'
federal and state tax returns and required tax filings other than those required
to be made by the Funds' custodian and transfer agent; prepare compliance
filings pursuant to state securities laws with the advice of the Trust's
counsel; respond to fund audits from both independent accountants and regulatory
agencies and coordinate Commission inspections; provide support and review of
certain periodic Commission and Internal Revenue Service qualification and
compliance measurement tests; assist to the extent requested by the Trust with
the Trust's
<PAGE> 3
preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statements (on Form N-1A or any replacement therefor); maintain
fund and director insurance as directed by the Trust; assist to the extent
requested by the Trust in the Trust's Shareholder Meeting and proxy solicitation
process; compile data for, prepare and file timely Notices to the Commission
required pursuant to Rule 24f-2 under the Investment Company Act of 1940 (the
"1940 Act"); keep and maintain Fund agreements with service providers and
broker-dealers; review and file all Fund advertising and sales material; keep
and maintain the financial accounts and records of the Funds, including
calculation of daily expense accruals; in the case of money market funds,
periodically review the amount of deviation, if any, of the current net asset
value per share (calculated using available market quotations or an appropriate
substitute that reflects current market conditions) from each money market
fund's amortized cost price per share; and generally assist in all aspects of
the operations of the Funds. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
Administrator further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act. Administrator may delegate some or all of its
responsibilities under this Agreement.
Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Administrator shall be responsible, to the extent
provided in Section 4 hereof, for all acts of such subcontractor as if such acts
were its own.
2. Fees; Expenses; Expense Reimbursement
In consideration of services rendered and expenses assumed pursuant to
this Agreement, each of the Funds will pay Administrator on the first business
day of each month, or at such time(s) as Administrator shall request and the
parties hereto shall agree, a fee computed daily and paid as specified below
equal to the lesser of (a) the fee calculated at the applicable annual rate set
forth on Schedule A hereto. The fee for the period from the day of the month
this Agreement is entered into until the end of that month shall be prorated
according to the proportion which such period bears to the full monthly period.
Upon any termination of this Agreement before the end of any month, the fee for
such part of a month shall be prorated according to the proportion which such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
For the purpose of determining fees payable to Administrator, the value
of the net assets of a particular Fund shall be computed in the manner described
in the Trust's Declaration of Trust or in the Prospectus or Statement of
Additional Information respecting that Fund as from time to time is in effect
for the computation of the value of such net assets in connection with the
determination of the liquidating value of the shares of such Fund.
-2-
<PAGE> 4
Administrator will from time to time employ or associate with itself
such person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both Administrator and the
Trust. The compensation of such person or persons shall be paid by Administrator
and no obligation may be incurred on behalf of the Funds in such respect. Other
expenses to be incurred in the operation of the Funds including taxes, interest,
brokerage fees and commissions, if any, fees of Trustees who are not partners,
officers, directors, shareholders or employees of Administrator or the
investment adviser or distributor for the Funds, commission fees and state Blue
Sky qualification and renewal fees and expenses, investment advisory fees,
custodian fees, transfer and dividend disbursing agents' fees, fund accounting
fees including pricing of portfolio securities, certain insurance premiums,
outside auditing and legal expenses, costs of maintenance of corporate
existence, typesetting and printing prospectuses for regulatory purposes and for
distribution to current Shareholders of the Funds, costs of Shareholders' and
Trustees' reports and meetings and any extraordinary expenses will be borne by
the Funds; provided, however, that the Funds will not bear, directly or
indirectly, the costs of any activity which is primarily intended to result in
the distribution of shares of the Funds.
If in any fiscal year the aggregate expenses of a particular Fund (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, Administrator will
reimburse such Fund for a portion of such excess expenses equal to such excess
times the ratio of the fees respecting such Fund otherwise payable to
Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to Administrator hereunder and to AmSouth Bank of Alabama, formerly
AmSouth Bank, N.A., under the Investment Advisory Agreements between AmSouth
Bank, N.A. and the Trust. The expense reimbursement obligation of Administrator
is limited to the amount of its fees hereunder for such fiscal year, provided,
however, that notwithstanding the foregoing, Administrator shall reimburse a
particular Fund for such proportion of such excess expenses regardless of the
amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the Trust so
require. Such expense reimbursement, if any, will be estimated daily and
reconciled and paid on a monthly basis.
3. Proprietary and Confidential Information
Administrator agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and prior, present, or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where Administrator may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
-3-
<PAGE> 5
4. Limitation of Liability
Administrator shall not be liable for any loss suffered by the Funds in
connection with the matters to which this Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also partner, employee,
or agent of Administrator, who may be or become an officer, Trustee, employee,
or agent of the Trust or the Funds shall be deemed, when rendering services to
the Trust or the Funds, or acting on any business of that party, to be rendering
such services to or acting solely for that party and not as a partner, employee,
or agent or one under the control or direction of Administrator even though paid
by it.
5. Term
This Agreement shall become effective as of the date first written
above (or, if a particular Fund is not in existence on the date, on the date an
amendment to Schedule A to this Agreement relating to that Fund is executed) and
shall continue until December 31, 2000, and unless sooner terminated as provided
herein, thereafter shall be renewed automatically for successive five-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term; provided, however, that after such termination for so long as
Administrator, with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Administrator shall be entitled to collect from the Trust, in
addition to the compensation described under paragraph 2 hereof, the amount of
all Administrator's cash disbursements for services in connection with
Administrator's activities in effecting such termination, including without
limitation, the delivery to the Trust, and/or its designee, of the Trust's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination for a reasonable fee to be paid by the Trust, Administrator
will provide the Trust with reasonable access to any Trust documents or records
remaining in its possession.
This Agreement shall be reviewed under the "cause" provisions of this
paragraph at least annually by the Trust's Board of Trustees, provided that this
Agreement is also reviewed and ratified by the majority of the Trust's Trustees
who are not parties to the Agreement or interested persons (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of reviewing and ratifying this Agreement, and provided
further that the scope of such review shall include whether there is any "cause"
(as defined below) that would justify terminating this Agreement. This Agreement
is terminable with respect to a particular Fund only through a failure to renew
(upon submission of timely written notice not to renew), upon mutual agreement
of the parties hereto or for "cause" (as
-4-
<PAGE> 6
defined below) by the party alleging "cause," in any case on not less than 60
days notice by the Trust's Board of Trustees or by Administrator.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, negligence or reckless disregard on the part of the
party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) the dissolution or
liquidation of either party or other cessation of business other than a
reorganization or recapitalization of such party as an ongoing business; (d)
financial difficulties on the part of the party to be terminated which is
evidenced by the authorization or commencement of, or involvement by way of
pleading, answer, consent, or acquiescence in, a voluntary or involuntary case
under Title 11 of the United States Code, as from time to time is in effect, or
any applicable law, other than said Title 11, of any jurisdiction relating to
the liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors; or (e) any circumstance which does nor
may substantially impair the performance of the obligations and duties of the
party to be terminated, or the ability to perform those obligations and duties,
as contemplated herein.
If, for any reason other than "cause" as defined above, Administrator
is replaced as fund manager and administrator, or if a third party is added to
perform all or a part of the services provided by Administrator under this
Agreement (excluding any sub-administrator appointed by Administrator as
provided in Section 1 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages, to Administrator equal to the balance due
Administrator for (i) the remainder of the term of this Agreement, or (ii) two
years, whichever is shorter, assuming for purposes of calculation of the payment
that the asset level of the Trust on the date Administrator is replaced, or a
third party is added, will remain constant for the balance of the contract term.
6. Representations of the Trust.
The Trust certifies to Administrator that this Agreement has been duly
authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
7. Representations of Administrator.
Administrator represents and warrants that: (1) the various procedures
and systems which Administrator has implemented with regard to safeguarding from
loss or damage attributable to fire, theft, or any other cause of the records
and other data of the Trust and Administrator's records, data, equipment
facilities and other property used in the performance
-5-
<PAGE> 7
of its obligations hereunder are adequate and that it will make such changes
therein from time to time as are required for the secure performance of it
obligations hereunder, and (2) this Agreement has been duly authorized by
Administrator and, when executed and delivered by Administrator, will constitute
a legal, valid and binding obligation of Administrator, enforceable against
Administrator in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
8. Insurance.
Administrator shall notify the Trust should any of its insurance
coverage be cancelled or reduced. Such notification shall include the date of
change and the reasons therefor. Administrator shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Administrator under its insurance coverage.
9. Governing Law and Matters Relating to the Trust as a
Massachusetts Business Trust
This Agreement shall be governed by the law of the Commonwealth of
Massachusetts. The names "AmSouth Mutual Funds" and "Trustees of AmSouth Mutual
Funds" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under the Declaration
of Trust dated as of October 1, 1987, as amended June 25, 1993, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of the Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of "AmSouth Mutual Funds" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with any series of shares of
the Trust must look solely to the assets of the Trust belonging to such series
for the enforcement of any claims against the Trust.
-6-
<PAGE> 8
If the foregoing is in accordance with your understanding, kindly so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
AMSOUTH MUTUAL FUNDS
By: /s/ Sean M. Kelly
---------------------------
Title: President
-------------------------
Accepted:
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
------------------------------
Title: President
---------------------------
-7-
<PAGE> 9
Dated: As of April 1, 1996
Schedule A
to the
Management and Administration Agreement
between AmSouth Mutual Funds and
ASO Services Company
dated as of April 1, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
AmSouth Prime Annual Rate of twenty As of April 1, 1996
Obligations, U.S. hundredths of one-percent
Treasury, Tax Exempt, (.20%) of each such
Equity, Regional Equity, Fund's average daily net
Balanced, Bond, Limited assets
Maturity, Municipal
Bond, Government
Income, Alabama Tax-
Free, and Florida Tax-
Free Funds.
</TABLE>
AMSOUTH MUTUAL FUNDS
By: /s/ Sean M. Kelly
-----------------------
Title: President
---------------------
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
-----------------------
Title: President
---------------------
- ------------------
*All fees are computed daily and paid periodically.
A-1
<PAGE> 1
EXHIBIT 9(b)
Sub-Administration Agreement dated as of April 1, 1996 between
ASO Services Company and AmSouth Bank of Alabama
<PAGE> 2
SUB-ADMINISTRATION AGREEMENT
AGREEMENT made this 1st day of April, 1996, between ASO SERVICES
COMPANY ("ASC"), a corporation organized under the laws of the State of Delaware
and having its principal place of business at 3435 Stelzer Road, Columbus, Ohio
43219, and AMSOUTH BANK OF ALABAMA (the "Sub-Administrator"), a state-chartered
bank having its main office at 1901 Sixth Avenue, North, Birmingham, Alabama
35203.
WHEREAS, ASC has entered into a Management and Administration
Agreement, dated as of April 1, 1996, (the "Management and Administration
Agreement"), with AmSouth Mutual Funds (the "Trust"), a Massachusetts business
trust having its principal place of business at 3435 Stelzer Road, Columbus,
Ohio 43219, concerning the provision of management and administrative services
for the investment portfolios of the Trust identified on Schedule A hereto, as
such Schedule shall be amended from time to time (individually referred to
herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, ASC desires to retain the Sub-Administrator to assist it in
performing administrative services with respect to each Fund and the
Sub-Administrator is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Sub-Administrator. The Sub-Administrator will assist ASC in
providing mutually agreed upon administrative services with respect to
each Fund as may be reasonably requested by ASC from time to time. Such
services may include, but are in no way limited to, such clerical,
recordkeeping, accounting, stenographic, and administrative services as
will enable ASC to more efficiently perform its obligations under the
Management and Administration Agreement. Specific assignments with
which the Sub-Administrator may be asked to assist ASC include:
(i) Compliance
a. Assist in response to examination letters received from the
Securities and Exchange Commission
b. Assist in response to audit requests from the Trust's
independent accountants
c. Coordinate with legal staff for the provision of compliance
consulting and advice to portfolio managers
(ii) Operational Matters
-1-
<PAGE> 3
a. Review calendar and files of all Board and shareholder meeting
materials
b. Review and supplement annual regulatory filing calendar
c. Review prospectuses as prepared by counsel to the Trust
d. Review periodic supplements to prospectuses, as prepared by
counsel to the Trust
e. Review and supplement operating manual of the Trust
f. Communicate all income breakdowns data to Trust Department and
shareholders, and coordinate the printing and mailing of state
income letters to such shareholders
g. Review all regulatory filings
h. Distribute prospectuses to Trust Department shareholders
i. Coordinate distribution of proxy statements and tabulation of
proxies to Trust Department shareholders
j. Review Form N-SARs
k. Review 24f-2 filings
l. Review 17f-2 audits
m. Coordinate all Adviser NRSRO rating meetings
n. Review authorized signors list, and Trust compliance calendars
o. Advise on product development issues
(iii) Board Process and Meetings
a. Assist in preparation of Board meeting materials
b. Review Board agendas and administrative sections of Board
materials
c. Participate at Board meetings
d. Review all Board minutes
(iv) Legal Services
a. Assist in preparing for and complying with any regulatory
examinations of or involving the Trust
b. Respond to state securities agency comment letters
c. Respond to regulatory agency inquiries
(v) Blue Sky
a. Assist in determining appropriate states and amounts for state
blue sky authorities
b. Review and monitor the sale of shares in the Trust Department
in individual states
c. Conduct requested blue sky fee analyses
(vi) Shareholder Services
-2-
<PAGE> 4
a. Respond to inquiries from Trust or employee benefits
shareholders
b. Provide performance information/updates to Trust
c. Provide to Trust upon request: prospectuses,
annual/semi-annual reports, statements of additional
information, and marketing material
(vii) Miscellaneous
a. Assist with implementation and management of DDA Sweep
b. Provide a designated project manager for routine ongoing
projects
c. Assist with institutional trades
d. Provide assistance with asset-related conversions
e. Provide fulfillment services
2. Compensation; Reimbursement of Expenses. ASC shall pay the Sub-
Administrator for the services to be provided by the Sub-Administrator
under this Agreement in accordance with, and in the manner set forth
in, Schedule B hereto. In addition, ASC agrees to reimburse the
Sub-Administrator for the Sub-Administrator's reasonable out-of-pocket
expenses in providing services hereunder.
3. Effective Date. This Agreement shall become effective with respect to a
Fund as of the date first written above (or, if a particular Fund is
not in existence on that date, on the date specified in the amendment
to Schedule A to this Agreement relating to such Fund or, if no date is
specified, the date on which such amendment is executed) (the
"Effective Date").
4. Term. This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder,
until December 31, 2000; and thereafter shall be renewed automatically
for successive five-year terms unless written notice not to renew is
given by the non-renewing party to the other party at least 60 days
prior to the expiration of the then-current term; provided, however,
that after such termination for so long as the Sub-Administrator, with
the written consent of ASC, in fact continues to perform any one or
more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue
in full force and effect. Either party to this Agreement may terminate
such Agreement prior to the expiration of the initial term set forth
above by providing the other party with written notice of such
termination at least 60 days prior to the date upon which such
termination shall become effective. Compensation due the
Sub-Administrator and unpaid by ASC upon such termination shall be
immediately due and payable upon and notwithstanding such termination.
The Sub- Administrator shall be entitled to collect from ASC, in
addition to the compensation described under paragraph 2 hereof, the
amount of all the Sub-Administrator's cash disbursements for services
in connection with the Sub-Administrator's activities in
-3-
<PAGE> 5
effecting such termination, including without limitation, the delivery
to ASC, the Trust, and/or their respective designees of the Trust's
property, records, instruments and documents, or any copies thereof.
Subsequent to such termination for a reasonable fee to be paid by ASC,
the Sub-Administrator will provide ASC and/or the Trust with reasonable
access to any Trust documents or records remaining in its possession.
5. Standard of Care; Reliance on Records and Instructions;
Indemnification. The Sub-Administrator shall use its best efforts to
insure the accuracy of all services performed under this Agreement, but
shall not be liable to ASC or the Trust for any action taken or omitted
by the Sub-Administrator in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its
obligations and duties. ASC agrees to indemnify and hold harmless the
Sub-Administrator, its employees, agents, directors, officers and
nominees from and against any and all claims, demands, actions and
suits, whether groundless or otherwise, and from and against any and
all judgments, liabilities, losses, damages, costs, charges, counsel
fees and other expenses of every nature and character arising out of or
in any way relating to the Sub- Administrator's actions taken or
nonactions with respect to the performance of services under this
Agreement with respect to a Fund or based, if applicable, upon
reasonable reliance on information, records, instructions or requests
with respect to such Fund given or made to the Sub-Administrator by a
duly authorized representative of ASC; provided that this
indemnification shall not apply to actions or omissions of the Sub-
Administrator in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against
it which may be the subject of this indemnification, the
Sub-Administrator shall give ASC written notice of and reasonable
opportunity to defend against said claim in its own name or in the name
of the Sub-Administrator.
The Sub-Administrator agrees to indemnify and hold harmless the
Administrator, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to the Sub-Administrator's bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, with respect to the performance of services under this
Agreement.
6. Record Retention and Confidentiality. The Sub-Administrator shall
keep and maintain on behalf of the Trust all books and records which
the Trust and the Sub- Administrator are, or may be, required to keep
and maintain in connection with the services to be provided hereunder
pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the 1940 Act. The
Sub-Administrator further agrees that all such books and records shall
be the property of the Trust and to make such books and records
available for inspection by the Trust, by ASC, or by the Securities and
Exchange Commission at reasonable times
-4-
<PAGE> 6
and otherwise to keep confidential all books and records and other
information relative to the Trust and its shareholders; except when
requested to divulge such information by duly-constituted authorities
or court process.
7. Uncontrollable Events. The Sub-Administrator assumes no
responsibility hereunder, and shall not be liable, for any damage, loss
of data, delay or any other loss whatsoever caused by events beyond its
reasonable control.
8. Rights of Ownership. All computer programs and procedures
developed to perform the services to be provided by the
Sub-Administrator under this Agreement are the property of the
Sub-Administrator. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all
such other records and data will be furnished to ASC and/or the Trust
in appropriate form as soon as practicable after termination of this
Agreement for any reason.
9. Return of Records. The Sub-Administrator may at its option at
any time, and shall promptly upon the demand of ASC and/or the Trust,
turn over to ASC and/or the Trust and cease to retain the
Sub-Administrator's files, records and documents created and maintained
by the Sub-Administrator pursuant to this Agreement which are no longer
needed by the Sub-Administrator in the performance of its services or
for its legal protection. If not so turned over to ASC and/or the
Trust, such documents and records will be retained by the
Sub-Administrator for six years from the year of creation. At the end
of such six-year period, such records and documents will be turned over
to ASC and/or the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
10. Representations of ASC. ASC certifies to the Sub-Administrator
that this Agreement has been duly authorized by ASC and, when executed
and delivered by ASC, will constitute a legal, valid and binding
obligation of ASC, enforceable against ASC in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies
of creditors and secured parties.
11. Representations of the Sub-Administrator. The Sub-Administrator
represents and warrants that: (1) the various procedures and systems
which the Sub-Administrator has implemented with regard to safeguarding
from loss or damage attributable to fire, theft, or any other cause of
the records and other data of the Trust and the Sub- Administrator's
records, data, equipment facilities and other property used in the
performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as are required for the
secure performance of it obligations hereunder, and (2) this Agreement
has been duly authorized by the Sub- Administrator and, when executed
and delivered by the Sub-Administrator, will constitute a legal, valid
and binding obligation of the Sub-Administrator, enforceable
-5-
<PAGE> 7
against the Sub-Administrator in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and
secured parties.
12. Insurance. The Sub-Administrator shall notify ASC should any of
its insurance coverage with respect to services performed under this
Agreement be cancelled or reduced. Such notification shall include the
date of change and the reasons therefor. The Sub-Administrator shall
notify ASC of any material claims against it with respect to services
performed under this Agreement, whether or not they may be covered by
insurance, and shall notify ASC from time to time as may be appropriate
of the total outstanding claims made by the Sub-Administrator under its
insurance coverage.
13. Notices. Any notice provided hereunder shall be sufficiently
given when sent by registered or certified mail to ASC at the following
address: 3435 Stelzer Road, Columbus, Ohio 43219, and to the
Sub-Administrator at the following address: 1901 Sixth Avenue, North,
Birmingham, Alabama 35203 or at such other address as either party may
from time to time specify in writing to the other party pursuant to
this Section.
14. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this
Agreement.
15. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable with respect to a Fund by either of the parties
hereto except by the specific written consent of the other party and
with the specific written consent of the Trust.
16. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
-6-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
[SEAL] ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
---------------------------------
Title: Executive Vice President
-----------------------------
AMSOUTH BANK OF ALABAMA
By: /s/
---------------------------------
Title: Sr. Executive Vice President
-----------------------------
-7-
<PAGE> 9
Dated: April 1, 1996
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK OF ALABAMA
NAME OF FUND
- ------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Alabama Tax-Free Fund
AmSouth Florida Tax-Free Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
--------------------------------
Title: Executive Vice President
------------------------------
AMSOUTH BANK OF ALABAMA
By: /s/
--------------------------------
Title: Sr. Executive Vice President
------------------------------
A-1
<PAGE> 10
Dated: April 1, 1996
SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
AMSOUTH BANK OF ALABAMA
Name of Fund Compensation*
- ------------ -------------
AmSouth Prime Obligations Fund Such percentage of ASC's compensation
AmSouth U.S. Treasury Fund received pursuant to the Management
AmSouth Tax Exempt Fund and Administration Agreement with the Trust
AmSouth Equity Fund as shall be agreed upon from time to time
AmSouth Regional Equity Fund between the parties, but in no event to
AmSouth Balanced Fund exceed an annual rate of ten one-hundredths
AmSouth Bond Fund of one percent (.10%) of each such Fund's
AmSouth Municipal Bond Fund average daily net assets.
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Alabama Tax-Free Fund
AmSouth Florida Tax-Free Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
---------------------------------
Title: Executive Vice President
-------------------------------
AMSOUTH BANK OF ALABAMA
By: /s/
----------------------------------
Title: Sr. Executive Vice President
-------------------------------
- ------------------
*All fees are computed daily and paid periodically
A-1
<PAGE> 1
EXHIBIT 9(c)
Sub-Administration Agreement dated as of April 1, 1996 between
ASO Services Company and BISYS Fund Services
<PAGE> 2
SUB-ADMINISTRATION AGREEMENT
AGREEMENT made this 1st day of April, 1996, between the ASO Services
Company ("ASC"), a corporation organized under the laws of the State of Delaware
and having its principal place of business at 3435 Stelzer Road, Columbus, Ohio
43219, and BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
(the "Sub-Administrator"), a limited partnership having its main office at 3435
Stelzer Road, Columbus, Ohio 43219.
WHEREAS, ASC has entered into a Management and Administration
Agreement, dated as of April 1, 1996, (the "Management and Administration
Agreement"), with AmSouth Mutual Funds (the "Trust"), a Massachusetts business
trust having its principal place of business at 3435 Stelzer Road, Columbus,
Ohio 43219, concerning the provision of management and administrative services
for the investment portfolios of the Trust identified on Schedule A hereto, as
such Schedule shall be amended from time to time (individually referred to
herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, ASC desires to retain the Sub-Administrator to assist it in
performing administrative services with respect to each Fund and the
Sub-Administrator is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
17. Services as Sub-Administrator. Subject to the direction and
control of ASC, the Sub-Administrator will assist in supervising all
aspects of the operations of the Funds except those performed by the
investment adviser for the Funds under its Investment Advisory
Agreements, the custodian for the Funds under its Custodial Services
Agreement, the transfer agent for the Funds under its Transfer Agency
Agreement and the fund accountant for the Funds under its Fund
Accounting Agreement.
The Sub-Administrator will maintain office facilities (which may be in
the office of the Sub-Administrator or an affiliate but shall be in such
location as the Trust shall reasonably determine); furnish statistical and
research data, clerical and certain bookkeeping services and stationery and
office supplies; prepare the periodic reports to the Securities and Exchange
Commission (the "Commission") on Form N-SAR or any replacement forms therefor;
compile data for, assist the Trust or its designee in the preparation of, and
file all the Funds' federal and state tax returns and required tax filings other
than those required to be made by the Funds' custodian and transfer agent;
prepare compliance filings pursuant to state securities laws with the advice of
the Trust's counsel; respond to fund audits from both independent accountants
and regulatory agencies and coordinate Commission inspections; provide support
and review of certain periodic Commission and Internal Revenue Service
qualification and
<PAGE> 3
compliance measurement tests; assist to the extent requested by the Trust with
the Trust's preparation of its Annual and Semi-Annual Reports to Shareholders
and its Registration Statements (on Form N-1A or any replacement therefor);
maintain fund and director insurance as directed by the Trust; assist to the
extent requested by the Trust in the Trust's Shareholder Meeting and proxy
solicitation process; compile data for, prepare and file timely Notices to the
Commission required pursuant to Rule 24f-2 under the Investment Company Act of
1940 (the "1940 Act"); keep and maintain the financial accounts and records of
the Funds, including calculation of daily expense accruals; in the case of money
market funds, periodically review the amount of deviation, if any, of the
current net asset value per share (calculated using available market quotations
or an appropriate substitute that reflects current market conditions) from each
money market fund's amortized cost price per share; and generally assist in all
aspects of the operations of the Funds. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Administrator hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Sub-Administrator further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act. Administrator may delegate some or
all of its responsibilities under this Agreement.
18. Compensation; Reimbursement of Expenses. ASC shall pay the Sub-
Administrator for the services to be provided by the Sub-Administrator
under this Agreement in accordance with, and in the manner set forth
in, Schedule B hereto. In addition, ASC agrees to reimburse the
Sub-Administrator for the Sub-Administrator's reasonable out-of-pocket
expenses in providing services hereunder.
19. Effective Date. This Agreement shall become effective with
respect to a Fund as of the date first written above (or, if a
particular Fund is not in existence on that date, on the date specified
in the amendment to Schedule A to this Agreement relating to such Fund
or, if no date is specified, the date on which such amendment is
executed) (the "Effective Date").
20. Term. This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided
hereunder, until December 31, 2000; and thereafter shall be renewed
automatically for successive five-year terms unless written notice not
to renew is given by the non-renewing party to the other party at least
60 days prior to the expiration of the then-current term; provided,
however, that after such termination for so long as the
Sub-Administrator, with the written consent of ASC, in fact continues
to perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of this
Agreement, including without limitation the provisions dealing with
indemnification, shall continue in full force and effect. Either party
to this Agreement may terminate such Agreement prior to the expiration
of the initial term set forth above by providing the other party with
written notice of such termination at least 60 days
-2-
<PAGE> 4
prior to the date upon which such termination shall become effective.
Compensation due the Sub-Administrator and unpaid by ASC upon such
termination shall be immediately due and payable upon and
notwithstanding such termination. The Sub- Administrator shall be
entitled to collect from ASC, in addition to the compensation described
under paragraph 2 hereof, the amount of all the Sub-Administrator's
cash disbursements for services in connection with the
Sub-Administrator's activities in effecting such termination, including
without limitation, the delivery to ASC, the Trust, and/or their
respective designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination for a
reasonable fee to be paid by ASC, the Sub-Administrator will provide
ASC and/or the Trust with reasonable access to any Trust documents or
records remaining in its possession.
21. Standard of Care; Reliance on Records and Instructions;
Indemnification. The Sub-Administrator shall use its best efforts to
insure the accuracy of all services performed under this Agreement, but
shall not be liable to ASC or the Trust for any action taken or omitted
by the Sub-Administrator in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its
obligations and duties. ASC agrees to indemnify and hold harmless the
Sub-Administrator, its employees, agents, directors, officers and
nominees from and against any and all claims, demands, actions and
suits, whether groundless or otherwise, and from and against any and
all judgments, liabilities, losses, damages, costs, charges, counsel
fees and other expenses of every nature and character arising out of or
in any way relating to the Sub- Administrator's actions taken or
nonactions with respect to the performance of services under this
Agreement with respect to a Fund or based, if applicable, upon
reasonable reliance on information, records, instructions or requests
with respect to such Fund given or made to the Sub-Administrator by a
duly authorized representative of ASC; provided that this
indemnification shall not apply to actions or omissions of the Sub-
Administrator in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against
it which may be the subject of this indemnification, the
Sub-Administrator shall give ASC written notice of and reasonable
opportunity to defend against said claim in its own name or in the name
of the Sub-Administrator.
The Sub-Administrator agrees to indemnify and hold harmless the
Administrator, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to the Sub-Administrator's bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, with respect to the performance of services under this
Agreement.
22. Record Retention and Confidentiality. The Sub-Administrator shall
keep and maintain on behalf of the Trust all books and records which
the Trust and the Sub-
-3-
<PAGE> 5
Administrator are, or may be, required to keep and maintain in
connection with the services to be provided hereunder pursuant to any
applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the 1940 Act. The
Sub-Administrator further agrees that all such books and records shall
be the property of the Trust and to make such books and records
available for inspection by the Trust, by ASC, or by the Securities and
Exchange Commission at reasonable times and otherwise to keep
confidential all books and records and other information relative to
the Trust and its shareholders; except when requested to divulge such
information by duly-constituted authorities or court process.
23. Uncontrollable Events. The Sub-Administrator assumes no
responsibility hereunder, and shall not be liable, for any damage, loss
of data, delay or any other loss whatsoever caused by events beyond its
reasonable control.
24. Rights of Ownership. All computer programs and procedures
developed to perform the services to be provided by the
Sub-Administrator under this Agreement are the property of the
Sub-Administrator. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all
such other records and data will be furnished to ASC and/or the Trust
in appropriate form as soon as practicable after termination of this
Agreement for any reason.
25. Return of Records. The Sub-Administrator may at its option at any
time, and shall promptly upon the demand of ASC and/or the Trust, turn
over to ASC and/or the Trust and cease to retain the
Sub-Administrator's files, records and documents created and maintained
by the Sub-Administrator pursuant to this Agreement which are no longer
needed by the Sub-Administrator in the performance of its services or
for its legal protection. If not so turned over to ASC and/or the
Trust, such documents and records will be retained by the
Sub-Administrator for six years from the year of creation. At the end
of such six-year period, such records and documents will be turned over
to ASC and/or the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
26. Representations of ASC. ASC certifies to the Sub-Administrator
that this Agreement has been duly authorized by ASC and, when executed
and delivered by ASC, will constitute a legal, valid and binding
obligation of ASC, enforceable against ASC in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies
of creditors and secured parties.
27. Representations of the Sub-Administrator. The Sub-Administrator
represents and warrants that: (1) the various procedures and systems
which the Sub-
-4-
<PAGE> 6
Administrator has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause of the records
and other data of the Trust and the Sub- Administrator's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes
therein from time to time as are required for the secure performance of
it obligations hereunder, and (2) this Agreement has been duly
authorized by the Sub- Administrator and, when executed and delivered
by the Sub-Administrator, will constitute a legal, valid and binding
obligation of the Sub-Administrator, enforceable against the
Sub-Administrator in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured
parties.
28. Insurance. The Sub-Administrator shall notify ASC should any of
its insurance coverage be cancelled or reduced. Such notification shall
include the date of change and the reasons therefor. The
Sub-Administrator shall notify ASC of any material claims against it
with respect to services performed under this Agreement, whether or not
they may be covered by insurance, and shall notify ASC from time to
time as may be appropriate of the total outstanding claims made by the
Sub-Administrator under its insurance coverage.
29. Notices. Any notice provided hereunder shall be sufficiently
given when sent by registered or certified mail to ASC at the following
address: 3435 Stelzer Road, Columbus, Ohio 43219, and to the
Sub-Administrator at the following address: 3435 Stelzer Road,
Columbus, Ohio 43219 or at such other address as either party may from
time to time specify in writing to the other party pursuant to this
Section.
30. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this
Agreement.
31. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable with respect to a Fund by either of the parties
hereto except by the specific written consent of the other party and
with the specific written consent of the Trust.
32. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
-3-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
[SEAL] ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
-----------------------------
Title: President
----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By: /s/ J. David Huber
-----------------------------
Title: Executive Vice President
----------------------------
-4-
<PAGE> 8
Dated: April 1, 1996
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
BISYS FUND SERVICES
NAME OF FUND
- ------------
AmSouth Prime Obligations Fund
AmSouth U.S. Treasury Fund
AmSouth Tax Exempt Fund
AmSouth Equity Fund
AmSouth Regional Equity Fund
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Alabama Tax-Free Fund
AmSouth Florida Tax-Free Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
--------------------------------
Title: President
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By: /s/ J. David Huber
--------------------------------
Title: Executive Vice President
-----------------------------
A-1
<PAGE> 9
Dated: April 1, 1996
SCHEDULE B
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
ASO SERVICES COMPANY
AND
BISYS FUND SERVICES
Name of Fund Compensation*
- ------------ -------------
AmSouth Prime Obligations Fund Such percentage of ASC's compensation
AmSouth U.S. Treasury Fund received pursuant to the Management and
AmSouth Tax Exempt Fund Administration Agreement with the Trust
AmSouth Equity Fund as shall be agreed upon from time to time
AmSouth Regional Equity Fund between the parties.
AmSouth Balanced Fund
AmSouth Bond Fund
AmSouth Municipal Bond Fund
AmSouth Limited Maturity Fund
AmSouth Government Income Fund
AmSouth Alabama Tax-Free Fund
AmSouth Florida Tax-Free Fund
ASO SERVICES COMPANY
By: /s/ Stephen G. Mintos
------------------------------------
Title: President
---------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
By: /s/ J. David Huber
------------------------------------
Title: Executive Vice President
---------------------------------
- ------------------
*All fees are computed daily and paid periodically
B-1
<PAGE> 1
EXHIBIT 9(g)
Fund Accounting Agreement dated as of April 1, 1996
between the Registrant and BISYS Fund Services Ohio, Inc.
<PAGE> 2
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of April, 1996, between AMSOUTH MUTUAL
FUNDS (the "Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES,
INC. ("Fund Accountant"), a corporation organized under the laws of the State of
Delaware and having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. Fund Accountant
will keep and maintain the following books and
records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record
in detail of all purchases and sales of
securities, all receipts and disbursements
of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income
and expense accounts, including interest
accrued and interest received, as required
by subsection (b)(2)(I) of the Rule;
(iii) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the Rule;
and
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
<PAGE> 3
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, Fund Accountant shall perform the following
accounting services daily for each Fund:
(i) Calculate the net asset value per share
utilizing prices obtained from the sources
described in subsection 1(b)(ii) below;
(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
each Fund's investment adviser or its
designee, as approved by the Trust's Board
of Trustees;
(iii) Verify and reconcile with the Funds'
custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net
income and capital gains, dividend payables,
dividend factors, 7-day yields, 7-day
effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation
and dividend factor (if any) for each Fund
prior to release to shareholders, check and
confirm the net asset values and dividend
factors for reasonableness and deviations,
and distribute net asset values and yields
to NASDAQ;
(vi) Report to the Trust the daily market pricing
of securities in any money market Funds,
with the comparison to the amortized cost
basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable
net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Trust;
(ix) Update fund accounting system to reflect
rate changes, as received from a Fund's
investment adviser, on variable interest
rate instruments;
(x) Post Fund transactions to appropriate
categories;
-2-
<PAGE> 4
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2)
Fund share transactions and (3) income and
expense accounts;
(xiii) Provide accounting reports in connection
with the Trust's regular annual audit and
other audits and examinations by regulatory
agencies; and
(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional
special reports upon the request of the
Trust or a Fund's investment adviser, which
may result in an additional charge, the
amount of which shall be agreed upon between
the parties.
(ii) Fund Accountant may provide such other
similar services with respect to a Fund as
may be reasonably requested by the Trust,
which may result in an additional charge,
the amount of which shall be agreed upon
between the parties.
(d) Additional Accounting Services. Fund Accountant shall
also perform the following additional accounting
services for each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the Trust.
The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax
returns and federal excise tax
returns;
-3-
<PAGE> 5
(B) the Trust's semi-annual reports
with the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and
quarterly (if any) shareholder
reports;
(D) registration statements on Form
N-1A and other filings relating to
the registration of shares;
(E) the Administrator's monitoring of
the Trust's status as a regulated
investment company under Subchapter
M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's
auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
Fund Accountant may, at its expense, subcontract with any
entity or person concerning the provision of the services contemplated
hereunder; provided, however, that Fund Accountant shall not be relieved of any
of its obligations under this Agreement by the appointment of such subcontractor
and provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 7 hereof, for all acts of such subcontractor as if such acts
were its own.
3. Compensation.
The Trust shall pay Fund Accountant for the services to be
provided by Fund Accountant under this Agreement in accordance with, and in the
manner set forth in, Schedule A hereto, as such Schedule may be amended from
time to time.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in
Section 3 hereof, the Trust agrees to reimburse Fund Accountant for its
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
(a) All freight and other delivery and bonding charges incurred by
Fund Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Fund
Accountant in communication with the Trust, the Trust's
investment advisor or custodian, dealers or others as required
for Fund Accountant to perform the services to be provided
hereunder;
-4-
<PAGE> 6
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Trust thereunto duly
authorized.
5. Effective Date.
This Agreement shall become effective with respect to a Fund
as of the date first written above (or, if a particular Fund is not in existence
on that date, on the date such Fund commences operation) (the "Effective Date").
6. Term.
This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until December 31, 2000 and thereafter shall be renewed automatically for
successive two-year terms unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term; provided, however, that after such termination for so
long as Fund Accountant, with the written consent of the Trust, in fact
continues to perform any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the provisions of this Agreement,
including without limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due Fund Accountant and unpaid
by the Trust upon such termination shall be immediately due and payable upon and
notwithstanding such termination. Fund Accountant shall be entitled to collect
from the Trust, in addition to the compensation described under Section 3
hereof, the amount of all of Fund Accountant's cash disbursements for services
in connection with Fund Accountant's activities in effecting such termination,
including without limitation, the delivery to the Trust and/or its designees of
the Trust's property, records, instruments and documents, or any copies thereof.
Subsequent to such termination, for a reasonable fee, Fund Accountant will
provide the Trust with reasonable access to any Trust documents or records
remaining in its possession.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to the Trust for any action taken or omitted by Fund Accountant in the absence
of bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund
-5-
<PAGE> 7
Accountant's actions taken or nonactions with respect to the performance of
services under this Agreement with respect to such Fund or based, if applicable,
upon reasonable reliance on information, records, instructions or requests with
respect to such Fund given or made to Fund Accountant by a duly authorized
representative of the Trust; provided that this indemnification shall not apply
to actions or omissions of Fund Accountant in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, Fund Accountant
shall give the Trust written notice of and reasonable opportunity to defend
against said claim in its own name or in the name of Fund Accountant.
8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Trust
all books and records which the Trust and Fund Accountant is, or may be,
required to keep and maintain pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a- 1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), relating to the
maintenance of books and records in connection with the services to be provided
hereunder. Fund Accountant further agrees that all such books and records shall
be the property of the Trust and to make such books and records available for
inspection by the Trust or by the Securities and Exchange Commission at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Trust and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process.
9. Uncontrollable Events.
Fund Accountant assumes no responsibility hereunder, and shall
not be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. Reports.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Trust agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein no
later than three business days from the receipt thereof. In the event that
errors or discrepancies, except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient within ten days after
conducting a diligent examination, are not so reported within the aforesaid
period of time, a report will for all purposes be accepted by and binding upon
the Trust and any other recipient, and, except as provided in Section 7 hereof,
Fund Accountant shall have no liability for
-6-
<PAGE> 8
errors or discrepancies therein and shall have no further responsibility with
respect to such report except to perform reasonable corrections of such errors
and discrepancies within a reasonable time after requested to do so by the
Trust.
11. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by Fund Accountant under this Agreement are the
property of Fund Accountant. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable after termination of this Agreement for any reason.
12. Return of Records.
Fund Accountant may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Fund Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Trust, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Trust
unless the Trust authorizes in writing the destruction of such records and
documents.
13. Representations of the Trust.
The Trust certifies to Fund Accountant that: (1) as of the
close of business on the Effective Date, each Fund that is in existence as of
the Effective Date has authorized unlimited shares, and (2) this Agreement has
been duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant,
-7-
<PAGE> 9
enforceable against Fund Accountant in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
15. Insurance.
Fund Accountant shall notify the Trust should any of its
insurance coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. Fund Accountant shall notify the Trust
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. Information to be Furnished by the Trust and Funds.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and
of any amendments thereto, certified by the proper
official of the state in which such document has been
filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments
thereto; and
(ii) Certified copies of resolutions of the Board
of Trustees covering the approval of this
Agreement, authorization of a specified
officer of the Trust to execute and deliver
this Agreement and authorization for
specified officers of the Trust to instruct
Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together
with specimen signatures of those officers who are
authorized to instruct Fund Accountant in all
matters.
(d) Two copies of the Prospectuses and Statements of
Additional Information for each Fund.
17. Information Furnished by Fund Accountant.
(a) Fund Accountant has furnished to the Trust the
following:
(i) Fund Accountant's Articles of Incorporation;
and
-8-
<PAGE> 10
(ii) Fund Accountant's Bylaws and any amendments
thereto.
(b) Fund Accountant shall, upon request, furnish
certified copies of corporate actions covering the
following matters:
(i) Approval of this Agreement, and
authorization of a specified officer of Fund
Accountant to execute and deliver this
Agreement; and
(ii) Authorization of Fund Accountant to act as
fund accountant for the Trust and to provide
accounting services for the Trust.
18. Amendments to Documents.
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 17 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
19. Compliance with Law.
Except for the obligations of Fund Accountant set forth in
Section 8 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to compliance with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
-9-
<PAGE> 11
21. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
22. Assignment.
This Agreement and the rights and duties hereunder shall not
be assignable with respect to a Fund by either of the parties hereto except by
the specific written consent of the other party.
23. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
24. Limitation of Liability of the Trustees and Shareholders.
The names "AmSouth Mutual Funds" and "Trustees of AmSouth
Mutual Funds" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated as of October 1, 1987, as amended June 25, 1993, to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of the Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "AmSouth Mutual Funds" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with any series of shares of
the Trust must look solely to the assets of the Trust belonging to such series
for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
AMSOUTH MUTUAL FUNDS
By: /s/ Sean M. Kelly
--------------------------
BISYS FUND SERVICES, INC.
By: /s/ Stephen G. Mintos
--------------------------
-10-
<PAGE> 12
Dated: April 1, 1996
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
AMSOUTH MUTUAL FUNDS
AND
BISYS FUND SERVICES, INC..
FEES
BISYS Ohio shall be entitled to receive a fee from each Fund at the
annual rate of three one-hundredths of one percent (.03%) of each Fund's average
daily net assets plus BISYS Ohio's reasonable out-of-pocket expenses incurred in
the performance of its services as provided in Section 4 of the Fund Accounting
Agreement to which this Schedule A is attached. In its sole discretion, BISYS
may impose a minimum annual fee of up to $30,000 per taxable Fund and $40,000
per tax-exempt Fund. Funds that have two or more classes of shares each having
different net asset values or paying different daily dividends may be subject to
an additional annual fee of $10,000 per additional class.
AMSOUTH MUTUAL FUNDS BISYS FUND SERVICES, INC.
By: /s/ Sean M. Kelly By: /s/ Stephen G. Mintos
----------------------------- -------------------------------
A-1
<PAGE> 1
EXHIBIT 11(a)
Consent of Coopers & Lybrand L.L.P.
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A (File No. 33-21660) of AmSouth Mutual Funds
of our report dated September 23, 1996 on our audits of the financial statements
and financial highlights of the Prime Obligations Fund, the U.S. Treasury Fund,
the Tax-Exempt Fund, the Bond Fund, the Limited Maturity Fund, the Government
Income Fund, the Florida Tax-Free Fund, the Equity Fund, the Regional Equity
Fund, and the Balanced Fund constituting the AmSouth Mutual Funds as of July 31,
1996 and for the periods then ended referred to in our report included in the
Statement of Additional Information. We also consent to the references to our
firm under the caption "Financial Highlights" in the Prospectuses for the Income
Funds relating to the Bond Fund, the Limited Maturity Fund, the Government
Income Fund, the Florida Tax-Free Fund and the Municipal Bond Fund; the
Prospectus for the Capital Appreciation Funds relating to the Equity Fund, the
Regional Equity Fund and the Balanced Fund; and the Prospectus for the Money
Market Funds relating to the Prime Obligations Fund, the U.S. Treasury Fund and
the Tax Exempt Fund, and under the caption "Auditors" in the Statement of
Additional Information of AmSouth Mutual Funds in Post-Effective Amendment No.
19 to the Registration Statement on Form N-1A (File No. 33-21660).
/s/ COOPERS & LYBRAND L.L.P.
Columbus, Ohio
November 27, 1996
<PAGE> 1
EXHIBIT 11(b)
Consent of Ropes & Gray
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
firm under the caption "Legal Counsel" included in or made a part of the
Post-Effective Amendment No. 19 to the Registration Statement of AmSouth Mutual
Funds on Form N-1A under the Securities Act of 1933, as amended.
/s/ ROPES & GRAY
Washington, D.C.
November 27, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<INVESTMENTS-AT-VALUE> 550508
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<ASSETS-OTHER> 12
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<TOTAL-ASSETS> 606411
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<TOTAL-LIABILITIES> 2794
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 603626
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<SHARES-COMMON-PRIOR> 617696<F1>
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<SHARES-REINVESTED> 5460<F1>
<NET-CHANGE-IN-ASSETS> (14056)
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<PER-SHARE-NII> .016<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
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<INVESTMENTS-AT-VALUE> 48257
<RECEIVABLES> 637
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<TOTAL-ASSETS> 48895
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<ACCUMULATED-NET-GAINS> 70
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1693
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<FN>
<F1>Classic Shares
</FN>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS U.S. TREASURY FUND
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<S> <C>
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<FN>
<F1>Premier Shares
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNS BOND FUND
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<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
<SERIES>
<NUMBER> 4
<NAME> AMSOUTH MUTUAL FUNDS EQUITY FUND
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<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NAME> AMSOUTH MUTUAL FUNDS REGIONAL EQUITY
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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<NUMBER> 6
<NAME> AMSOUTH MUTUAL FUND LIMITED MATURITY
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUND
<SERIES>
<NUMBER> 7
<NAME> AMSOUTH MUTUAL FUND TAX EXEMPT
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<S> <C>
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<FN>
<F1>Classic Shares
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<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUND
<SERIES>
<NUMBER> 7
<NAME> AMSOUTH MUTUAL FUND TAX EXEMPT
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<S> <C>
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<F1>Premier Shares
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<TABLE> <S> <C>
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<CIK> 0000832544
<NAME> AMSOUTH MUTUAL FUNDS
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